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- [00:00]
Will Smith
After serving as CEO of an HR firm that she grew and helped shepherd to a nice exit, today's guest was looking for her next thing. Investors and bankers were now eager to work with Marcy laroche, wanting her to come run other HR platforms for them.
- [00:17]
Marcy LaRoche
And do it all over again.
- [00:19]
Will Smith
But Marcy now had money in the bank and more importantly, a desire to do something at her own pace, by her own rules. So she set out on a search to buy her own business in the HR space. Ultimately, what she bought might surprise you. An HR consulting firm that was quite small at less than a million in revenue with but a single full time employee beyond the owner. The rest 1099s listen for our discussion as to why buying this business made sense to Marcy. After all, at that small size and with Marcy's own deep network and comprehensive knowledge of the industry, is this not a case where starting something from scratch instead could have made sense?
- [01:04]
Marcy LaRoche
Spoiler no.
- [01:06]
Will Smith
Lots of themes informed her decision, including wanting to work on not in the business when time is more valuable than money, the power of buying a business at a low multiple and at great terms, and the value of certain contracts that Marcy believes hold the key to accelerated growth. Okay, please enjoy this conversation with Marcy laroche, owner of chr. There are a handful of legal diligence issues that arise again and again for.
- [01:40]
Marcy LaRoche
Entrepreneurs buying a business.
- [01:42]
Will Smith
What are they? Attorneys James David Williams and Bill Barlow return for an office hours to walk you through them and of course how you business buyer should address them to protect yourself while still getting your deal.
- [01:56]
Marcy LaRoche
Across the finish line.
- [01:58]
Will Smith
That is this Thursday, July 17, noon Eastern. The webinar is common Legal Diligence issues and how to handle them Link to register for the webinar is right at the top of this episode's show notes or right on the homepage of Acquiring Minds Acquiring Minds co See you Thursday 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.
- [02:40]
Marcy LaRoche
Podcast I talk to the people who.
- [02:41]
Will Smith
Do it 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 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 pioneer capital advisory.com or click the link in the notes. Marci LaRoche welcome to acquiring Minds.
- [03:54]
Cissy
Thank you Marcy.
- [03:56]
Will Smith
You bought an HR consulting firm.
- [03:59]
Marcy LaRoche
This is a story of very strong business buyer fit.
- [04:04]
Will Smith
But even for those of us who.
- [04:05]
Marcy LaRoche
Don'T come from the world of hr, there's much to learn.
- [04:09]
Will Smith
Start us off please Marcy, with a.
- [04:11]
Marcy LaRoche
Little background on you and where and how buying a business ended up on your radar.
- [04:18]
Cissy
Sure, thanks. Will really appreciate this opportunity. So I grew up in the Midwest, went to school in Chicago and kind of fell into HR in about 2006 here in Orlando, Florida and at a PEO so a professional employee organization so doing call employment like workers, comp, payroll, healthcare etc for small businesses. Most mostly here in central Florida but a little bit across the country. And it was a very quickly growing PEO here called CO Advantage and had a great experience four years, didn't know, didn't know anything about HR when I got there and and knew a little bit more by the time I left and I was actually recruited to go out to Hawaii to Honolulu to another PEO there called Pro Service. And this is where I first learned. I always thought even growing up I was like I'm going to be a business owner. I didn't really know what that meant but that was just, there was just something about that that was appealing but both my parents were teachers but my mom had a side hustle of a screen printing business which was a legit small business in our town where she would do screen printing for all the like local volleyball and basketball teams and 5Ks and all that stuff. And she would actually hand design this before you know, the computers, everything. She would hand design every design, create the screens in a dark room. I mean it was a whole extraordinary thing to be exposed to at a young age. But that paid for all of my summer camps, all of our vacations as a family.
- [05:35]
Sandy
Right.
- [05:36]
Cissy
So I could see, see how that was a beneficial thing but it wasn't her full time gig. And so I go out to Hawaii and it turns out that I am with some of the kind of the OGs of traditional search fund in that Ben Godsey and Dustin Sellers were the. Had, had done a traditional search fund about 20 years ago and had acquired this PEO out in Hawaii and were growing it rapidly. And so Dustin hired me there and that was kind of my first time of hearing about, you know, buying a business to become an owner. I just didn't, just didn't even know that was a possibility. And so learned about it there and had a great experience at Pro Service, was there for about four years, came back to the mainland, was in Chicago for a few years, worked at a few different startups in the HR and fintech space. And while I was there, Dustin was speaking at the Kellogg booth ETA conference. So he invited me to come and listen to his fireside chat. And then I started to kind of meet these. So I'm probably in my early mid-30s at this point. I start to meet these like grad school grads. I'm like, well if they can do it, I could probably do this.
- [06:38]
Sandy
Right.
- [06:38]
Cissy
It just kind of gave me a little bit of confidence of I have more actual leadership experience. So I just have came from a little bit bit of different background. I didn't have an mba, but I was like, I think I can hang with these conversations. I think I could do this. Fast forward a few more years and I was hired to go back out to Hawaii in a hired gun situation by Dustin Sellers to lead Mai HR through a stage of growth and professionalizing and getting it ready to sell. And we exited that business in 2023 and I was the CEO of Makai HR. And it was an extraordinary experience and gave me a full understanding of actually selling a business. So then I said, all right, I've got a little bit of capital and I've had this great experience leading these prior organizations and being CEO of this HR company, wanted to come back to the mainland to be closer to family. And I said, all right, this is it. I'm going to do my search. I'm going to actually search to buy a business.
- [07:34]
Marcy LaRoche
And okay, that was fantastic. Marcy, A couple follow ups. So just to be clear, Ben and Dustin bought a PEO in Hawaii as a traditional search fund 20 years ago. Right, or 20 years ago then. So now 25, 30 years ago.
- [07:51]
Cissy
I, I don't know the exact date, but I would say it's been at least 20 years. It's between 20 and 25 years. That's why I say they were, they were really on the cutting ed of like there were no ETA clubs at universities or anything like that. Like they were very much on the early days of traditional search fund model and.
- [08:07]
Marcy LaRoche
But they were still in the business at that point. So they. Because typically in a traditional search fund model you're working toward an exit at you know, year seven call it. But they had been in it for much longer than that. It sounds like. Just curious. I should, you know, get them on here.
- [08:21]
Cissy
They were doing what they were, you know, what you consider taking multiple bites of the apple.
- [08:25]
Sandy
Right.
- [08:25]
Cissy
So continuing to go through private equity rounds and doing that. Dustin did eventually exit which allowed him then to found Mai Hr that we were that he hired me to come out and be the CEO of.
- [08:38]
Marcy LaRoche
So Dustin exits, fully exits the search fund business that he acquired that you were working at in Hawaii and then starts another1 Mai HR, I guess waiting for his non compete to expire or somehow getting around the non compete or. Yeah, or waiting it out.
- [08:56]
Cissy
Yep. Waited for it to expire. Yeah.
- [08:57]
Marcy LaRoche
Yeah. And started another one. He must have really liked the business model and we're going to get into why it's a great business model even though what you bought is not a peo. And then he brought you to be CEO. So they must have really liked you and brought you to run as CEO mackay. And then mackay, I don't think you said this but I recall from the, from the pre call actually sells to their original search fund business.
- [09:23]
Cissy
Yes. So they have the Playbook dialed in. Yes, yes, very much so. So yeah, we, we sold in 2023 back to Pro Service and it was a really great experience of going through that because the gentleman who was leading the sale on their side or the buying process, Jordan Conley, I had worked with actually here in Orlando. So I'd known him for over 15 years and, and so you know, we had a lot of trust. He knew I was running a good, good solid business and so yeah, so we went through the diligence process, all the pieces together but yeah, we eventually had a successful exit to you know, it's considered a strategic but is you know, in the, in the small Hawaii market. We sold back to. To Pro service.
- [10:04]
Marcy LaRoche
And this exit was meaningful for you personally?
- [10:07]
Cissy
Yes, yeah, very much so. So you know, very, very low seven figures but the most money I ever seen in my life at a single in a single, you know, transaction. And but it was a, I would say it was bittersweet overall. And I, and I, you know, I've heard this for other folks that have been on your podcast and from others and, and I had only been there for a few years so it wasn't Like I had, you know, built this company for last 40 years like some of our buyer or sellers that we work with in, in, you know, in the search side. But I still was it. I was an emotional wreck. I mean first, the diligence is really, really hard to sell a business. There's no way around it. But you know, I get this big deposit into my bank account and it was, you know, life changing from that perspective. But I, I cried because I was, I loved, I loved running that business. I, I loved being the, the. I loved the team that I got to work with. I loved our clients. I loved being a part of the community there. It was, it was life changing in a lot of ways. But it wasn't the kind of money where I then, oh, I don't ever after work again or I can become a philanthropist or something like that.
- [11:07]
Sandy
Right.
- [11:07]
Cissy
Like I still needed to and still had desire in me to continue to be a part of a business and really felt like that gave me the Runway of actually buying my own business at that time.
- [11:20]
Marcy LaRoche
Yeah, absolutely. Well. And you have incredible leadership experience. So that's something many searchers lack. They have not yet ever been managers necessarily, let alone CEOs. How big was Makai? How many people?
- [11:34]
Cissy
I had about 50 people reporting to me and it was distributed. So we had a big chunk in Hawaii. We had a lot of people on the mainland and we had a team in the Philippines as well. So you know a great, a great amount of experience there with all kinds of challenges that come up with, you know, very fast growing business and a very specific market being Hawaii with a very complicated business model with the peo. So yeah, just really learned a lot. But fortunately I had great mentorship with you know, folks like Dustin. Another person that was really pivotal. My time there was also was Ben and Cheddar and he, he and I worked together at Pro service before and then he had actually gone out and bought an executive recruiting firm there in Hawaii, Incanin. And he was so helpful and not only eventually me buying, but also the sale process. And he's the one who actually gave me the HBR how to how to buy a Small Business book. But it was in the context of learning how to sell my business, selling Makai and just realizing that it's all the same steps. It doesn't matter if it's a 500 billion dollar deal or if it's a 500, 000 deal. Like you're gonna go through the same steps in the process. And so that's actually how I started to get the playbook of like, oh, okay. It taught me how to, how to understand what was happening when I was selling the business. But also it got me revved up of like, okay, I can really buy something now too. So I've had the money, the capital, the experience and you know, had, you know, had some mentorship to help me to get there. And I felt like that gave me some serious unfair advantage, which I'm very grateful for.
- [12:59]
Marcy LaRoche
Yeah, no, well, exactly. Well, you, but you, you jumped for it. A lot of people have all of this. I mean you, you had some alignment of the stars, but, but you also. Sorry Marissa, my, my headset just told me I have a low battery, so I couldn't hear myself. You had all the alignment of the stars, but you jumped and a lot of people don't. So you took the initiative. So that's wonderful. Just curious, where was it decided in your own mind that you would search? Was it sometime in your Makai tenure or was it afterwards you got the low seven figures in your bank account? You're like, what to do now? Oh, that search thing, like what, when was it that it crystallized into the next thing?
- [13:35]
Cissy
It was after we sold Makai. I was, I was very committed to Makai. I had no reason not to be. There was a lot of opportunity there and we were doing some really great work. And like I said, I had just an incredible team once that door, that chapter was, you know, was written and, and closed. You know, that's when it opened up and I was like, okay, I'm doing it now. I'm going to take. And I gave myself two years to search and I'm going to be pretty serious about this. And, and that meant, you know, that I was going to have to move from Hawaii. My non compete is only in the state of Hawaii. And So I had 49 other states by which to, to do a search in. And, and, and I wanted to be closer to family here in Florida and Michigan as well. And so, so that was it all just kind timing perspective of like the right time in my life, the right financial time that I, that I had the ability to relocate and that I could give myself some, you know, the ample space that I needed in order to actually commit to a search full time, which is what I did.
- [14:31]
Marcy LaRoche
Yeah. And I hear you mention a non compete in Hawaii or that it only, it was only relevant in Hawaii or, or cover Hawaii. So that's to say that you were going to buy something in hr.
- [14:42]
Cissy
Again, that was my intention. So I was looking at another, you know, a peo was kind of the first time I list was finding a small peo and kind of running a similar playbook to Makai. Growing it, professionalizing it, potentially selling it at some point. I did not want to be on this like every five year wheel. That was something that was really intentional in, in my search. But say more about that.
- [15:06]
Marcy LaRoche
Say more about that, Marcy. What do you mean?
- [15:09]
Cissy
Well, I, the, the sale of Makai took a lot out of me. It was, it was, it was hard. It was really, really hard and we had a great smooth deal. Like, I just, you know, like I had a wonderful experience all the way around. It was just really hard and I, and I felt like I did not want to be in a position where I had to do that every four to five years. I, it just, I want, like I wanted to be in something longer term at this next stage. Like there were times in my career where that was really fun and really interesting and, and I was at a number of private equity and VC backed companies. So like I've had a lot of that experience. I just felt like at this stage in my life it was like, you know, I want to have something long term and that I can make the choices of when the right time is to exit it or you know, step out from the day to day or whatever that looks like for me. And not feeling like I had that I was on somebody else's timeline. So it wasn't anything like the model is great and I, and obviously you can make a lot of money going that route. I just felt like for me, I had taken that. I'd been on that treadmill and, and then going through a successful exit, a very successful exit that was actually very smooth. I still felt like, I think, I think I want to take a different. Be intentional and take a different path as far as what this next business that I own looks like.
- [16:23]
Marcy LaRoche
And so, so it's kind of two things there. The first is just like the process of going through a transaction, a sale really takes it out of you and consumes a year of your life. Thing one, that was unpleasant even though you had a relatively smooth transaction. And then thing two was just like the. Your own time horizon and being able to decide what that was. So not being kind of on some, like you said, on somebody else's clock to sell after a certain number of years.
- [16:50]
Sandy
Right.
- [16:51]
Cissy
And, and you know, as we talk more about my search, like there was, there was a lot of intentionality about what I wanted to be doing. The time I Wanted to be spend doing it where I wanted to live. What? You know, a lot of it was a lifestyle play. Not necessarily like I was looking for a quote unquote, you know, lifestyle business because I think they get a bad rap and I would, I could argue on that how, why that's not a bad rap, but. Or they shouldn't have a bad rap. But that was really intentional for me. And so again, that meant that for me, going out and raising money and gosh, I had so many offers. I mean, we made a lot of people a lot of money at mackay, right? And so a lot of those folks were like, what are you doing next? And then I had investment bankers, like, would you, you know, do you want to do a platform play? Like, you know, we can, you know, there's all these different methods that we can go about it, right? And I was just like, so, so.
- [17:36]
Marcy LaRoche
You really did have the option of doing some sort of roll up, some sort of private equity related buy and build, you know, what have you.
- [17:46]
Cissy
Absolutely. There are not many specifically in the PEO space, to be very clear. Like, it wasn't like it was getting, you know, blank check to do whatever. I think I could have raised a traditional search fund and search for something, you know, because of my previous CEO experience and the successful exit. I think I could have parlayed that into a, a number of different paths. But the offers that I was, that were proactively coming to me after we sold Makai was in the PEO space, which was, you know, it's hard to walk away. You know, it's hard, you know, like it's enticing from a financial standpoint. And you know, there's some things that were a lot of fun about that, but I just knew in my heart that that wasn'. Now. And maybe, maybe we'll like five, ten years from now, I'll get bored and I'll be like, all right, I'm ready, you know, like, let's go and do this again. But at this stage right now, I was like, that was a great experience. I am so grateful for it and I learned a ton. I don't want to redo that playbook right away. And, and so yeah, those offers came and I, you know, I just said like, that's just not what I'm searching for right now. But if, you know, a small PEO that's looking to sell to an individual, you know, keep me in mind. Right? So that was always the pitch.
- [18:48]
Will Smith
If you ask owners in the ETA and search community, which insurance broker Provides highest quality work, great outcomes and has a practice dedicated to searchers and acquisition entrepreneurs. One name comes up again and again. Oberle. Oberly Risk Strategies has worked with hundreds of searchers over nearly a decade and is in fact led by a two time successful searcher, August Felker, which makes Oberle a specialty insurance brokerage for searchers by a former searcher. And if you've got a business under loi, Oberle will provide complimentary due diligence on that business's insurance and benefits program. An easy, no risk way to get to know August and the team at Oberly to take advantage. Check out oberly-risk.com that's O B E R L E hyphen risk.com link in the notes. And so what were some of these.
- [19:50]
Marcy LaRoche
Lifestyle criteria that you were optimizing for?
- [19:54]
Cissy
Yeah, I was really hoping for, you know, a smaller team, a smaller book of business overall. I know I can grow it. I know that I can do a lot of different things but, but I didn't want to walk into something that was as that has had as many complications as we had at mackay and that was our doing their own doing.
- [20:13]
Sandy
Right.
- [20:13]
Cissy
Like as we grew we had to go that direction. But I kind of want to start a little bit smaller, ideally remote first and having a team that was established and independent enough that they didn't need me to babysit them day to day, that was really important with the search was that I just didn't want to have folks that really didn't know what they were doing. Now I get that there's a, you got to pay for that experience.
- [20:37]
Sandy
Right?
- [20:38]
Cissy
But that was something that was really important to me was that I wasn't inheriting, you know, a group of very junior employees. I was going to have to manage intently day to day.
- [20:50]
Marcy LaRoche
And what of the PEO model? Tell us a little bit about that, how it works, why it's appealing as a business model. Why was it Dustin who when he went back to do a second business, went back to the very same business model? For those who don't know what a PEO is, I guess start with define peo, please and then explain to us why it makes it an appealing search business.
- [21:15]
Cissy
Yeah, PEO professional employer organization is. It's an opportunity for small businesses to take advantage of HR expertise. Hr, technology, benefits, workers compensation, epli, employment practices, liability insurance, all of these things as part of a large group function so that as small business owners, now I'm a small business owner, I can relate to it.
- [21:40]
Sandy
Right.
- [21:40]
Cissy
Where you're trying to figure these things out on your own. You can work with a peo. They figured it out for you. And so it's really appealing as far as being able to not only get that kind of level of expertise and that someone else is managing those things for you, but you also get the advantage of being part of a much larger group from a healthcare perspective as far as cost savings are concerned. Same with workers comp insurance. So you know, it's, it's, it's an ability to have a really high level of expertise from an HR perspective, not only for you, but also for your employees to call in and ask questions. But also that benefit support and those cost savings that come along with that. So a lot of small business owners take advantage of it. Probably not as many as they should.
- [22:18]
Sandy
Right.
- [22:18]
Cissy
Like I do think there is some hesitancy because you do have to really educate people on what PEO is but. And then people say oh I don't want to co employ right, because your PEO is paying your taxes for you. And so that is a big advantage for you as a small business. But it does mean that they're going to get paid under the PEO's Fein number, not yours. It's not as complex as it sounds. It's really quite straightforward and really easy to navigate. A lot of small business owners get a little bit nervous about that and kind of shy away because they don't understand it. But it's a great model. Now from a ownership perspective and a search perspective, it's also a great model. There is a lot of opportunities to have really sticky client relationships. If you take good care of them and you give them competitive pricing like they will stick around. These small business owners will stick around for a very, very long time. They, you know, they pay a premium, which is called the admin fee to for you to do this work for them. And then right now they are trading at incredibly high multiples. So you know, typically double digits, EBITDA is what peos are being sold for right now. And so there's a real desire in the PE market is really interested. There's a lot of PEOs in the country that are consolidating by buying smaller ones and they're using that as a growth strategy and they're really heavily backed financially and able to do that. And so, you know, there, I think that's part of it too is that there, there is this buzz in the market that if you know how to run one, manage one because it takes a lot of managing because you're doing a lot of things with a lot of different partners, right. Your healthcare provider, your, your work comp provider, your HRS system, the technology that you're using, you can manage those really well. If you can have a really good team that's taking care of your clients and, and you can get competitive pricing for things like, you know, and you can grow that. That's where it gets really appealing for investors and larger PEOs to start to, to buy you.
- [24:10]
Marcy LaRoche
So it's extremely sticky revenue. They. You really, I mean there's a, there's a. The switching cost of a client is enormous because they really, that, that co. What is it? Co employed, co employment thing. Plus their, you know, their knowledge of all of, you know, your organization and all the benefits that they're transferring to you. Just once you've got a client, they probably stick around forever. So obviously that's really appealing. And recurring revenue, which usually is kind of one and the same. And, and it's quite scalable too, right?
- [24:43]
Cissy
Yes, yes, very much so.
- [24:45]
Marcy LaRoche
Okay. And all that you describe that a PEO does. How is it different than. Well, spoiler, the HR consulting firm that you bought, which is not a peo. How, how is a kind of an HR consulting firm different from a peo? Because it sounds like they're similar or there's overlap or, you know.
- [25:04]
Cissy
Sure, sure, yeah, you know, there is some, there is some overlap. But where we are not similar is we at chr. My company, we are not doing any payroll, workers, comp, health care insurance. Like we're not touching any of that. What we are doing is providing incredibly high level of guidance and support for you as a small business owner with your HR compliance strategy. You know, day to day we're looking at processes, documents, handbooks, you know, helping you navigate through challenging HR situations. We have a handful of clients that are actually with peos and still hire us because they want a high touch HR service. And, and that is not all peos. I will say there are definitely peos like here locally are, you know, Aspen hr. I know Mark there, right. I know he's a advertiser. Like they take really good care of their clients. So we don't have any of theirs. It's, it's some of the larger ones, some of the ones that have maybe grown incredibly quickly and they haven't kept the model as well. From a scaling perspective, from an HR high touch perspective, those are the ones that still will pay for us as well on top of what they're paying the peo because they want to have somebody who's a little bit more in depth and actually knows their business and like more of a direct relationship, person to person on our side and their side, to help them navigate things through that they're not completely experiencing, but they are still getting all the other benefits of being a part of peo. So it's important for them to stay with it, but they're willing to pay extra to work with us and as well. But that's the big difference is that we're not, you know, we're no co employment. It's very different. And so oftentimes we get those business owners that are hesitant about the co employment model and they're like, but I just want the HR side. Can you just do that for. Yeah, that's all we do. We're very focused from that perspective. And so that's, I would say, the biggest difference between what we're doing at CHR and as a PEO. A lot of PEOs call themselves HR outsourcing. I think, I think it, I think we all just get kind of lumped into this big giant bucket that is saying a business owner or business leader saying, I don't want to do hr. Someone else take that from me. And that owner has options. They can go down the path of a peo. They can go down a path of a payroll company that has a little bit more of what they call aso, Administrative Services outsourcing. We're starting to get a lot of acronyms in our space here. Will. But then, then you can do HR consulting. You know, just strict HR consulting, like what we're doing, they're staffing hr, staffing companies. Like there's just a, if you, as a business owner, you're probably not an HR expert. That's just not what you started your business or acquired your business or grew up in your business to, to learn, you know, the basics, you know, generally what not to do. But when it starts to get, you know, especially in our current climate where states are changing regulations, the Federal Fed is changing regulations, they're changing what they're enforcing versus what they're not. Like almost on a weekly basis. Like, that's not, that's not what, you know, a guy who owns a tire company or a gal who owns a, you know, a grocery store, like that's not what they care. Like that's not what their focus is. But they have to follow those things. So there's all these different paths that you can take. HR consulting being one of those of, of helping them manage their day to day hr. But I would say that, you know, PEO would say we're also HR consult, HR outsourcing. ASO would also say we're also HR outsourcing. There's just all these different paths that depending on what the business owner needs or is interested in, that they can go down and get the kind of help that we can give as an industry.
- [28:17]
Marcy LaRoche
Great. That. That was great. Thank you, Marcy. And an HR consulting business now putting on our, our investor searcher hat. How does its business model contrast in terms of appeal compared to a peo?
- [28:31]
Cissy
Yeah, there's not. I mean, there's definitely. It's a very profitable business, but it's not, you know, you don't have all these different levers like you do in the CEO with regards to profitability in the HR consulting world, you know, kind of, I would say to simplify it, we have two buckets. We have fractional clients that pay us on a monthly recurring revenue basis. So that's very appealing, obviously.
- [28:51]
Sandy
Right.
- [28:52]
Cissy
But then we also have project work. And I think, you know, my, my good friend Iris Levine has been on here before, right, with the Porch Company, and she talked about project work. You've had other people have come on that bought pure project work. Companies like, I think as searchers, I agree with them. Like, we need to be more open to the project stuff because that, like, there's a lot to be said around what that looks like from, from a revenue and profitability standpoint. And so, you know, we're, we're about 60, 40, 60% recurring revenue, 40% project work. And that's where I want to continue to kind of stay at that level. I don't, I don't want to go heavily one way or the other on that. I really like the, the mix that we have right now. But that might not be, you know, the search war, the traditional search world, Right. Like, that might be. Not be as appealing for folks. And so, yeah, so I think that, you know, that's the, the difference between us and a PEO from a. Strictly from a searcher's lens is that there's not as many levers to pull on profitability. There's not. It's not. Whereas, I mean, in the po, it's, it's all recurring, right? Like you're, you, you pull and you have everybody's bank accounts. It's wild how easy it is. Like, you, you give them their bank account because you have to pull payroll as a peo, and they pull the admin fees at the same time.
- [29:57]
Sandy
Right.
- [29:58]
Cissy
Like, it's not, you know, like you're not waiting for anybody to pay your invoice. You just pull it all every week or bi weekly or whatever their payroll cycle is. So, you know, it's really nice, very predictable revenue on, on the recurring revenue on the PEO side. Whereas, you know, I got a little bit of ar. Like, it's nothing crazy, but, you know, we've got 30 day terms mostly, some around zero, some around 30, some aren't 45, because that's their, like, corporate policy or whatever. But so, you know, I'm waiting for a little bit to get paid, but, you know, it's not nothing crazy from that perspective. So it's still, it's still great. It's still a very appealing process. And I think my experience in HR made this incredibly appealing to me because I just felt like I, you know, I have a really high shot of being successful at this versus going out and buying. You know, like, I looked at a sandbag company right up in, I can't remember, I think Indiana, somewhere in the Midwest. And they like, manufacture sandbags, fill sandbags, and. But like the giant ones that they use for like, flooding and stuff.
- [30:50]
Sandy
Right.
- [30:50]
Cissy
Or construction sites or whatever. And I'm like, I'm gonna have to learn manufacturing, delivery, like transport, like, just, just stick to what I know I'm gonna like. I could probably be successful at that because of my just general willingness and grit and. And you know, just. I'm just gonna push forward and make things happen. But why not stay in the lane that I know, and I've got a lot of experience and I've been a CEO already in a company that's in this space. So that's what. Where, you know, I was like, let's just focus on hr.
- [31:14]
Marcy LaRoche
Great. Well, we're gonna come back to the attributes of this industry and of the business you bought. But let's get back to the plot for a minute. I've. I've taken as far afield, so. So your search, you come back to Orlando.
- [31:27]
Cissy
Yes.
- [31:28]
Marcy LaRoche
Okay. And you decide to look for an HR consulting firm or something in hr.
- [31:34]
Cissy
It was, it was. I was still. I was looking at PEOs, payroll companies, HR consulting, background checks. Like I was. It was, but it was within the HR realm. But there's a lot of niches within that as far as actual service providers. So. Any of those. Yeah.
- [31:46]
Marcy LaRoche
And what about size? You said that you didn't want it to be too big. Everybody, which is a little counterintuitive, everybody wants to buy as Big as they can. Not you. Because you didn't want to babysit.
- [31:56]
Cissy
Yeah, I wanted under a million dollars. And you know, typically at the size of the SDE, so 250 to a million dollars in SDE. I didn't want to go any bigger than that because again, I didn't want to fundraise. I just, I didn't want. I didn't want to have investors. I wanted to fully own this thing, even if it meant going a lot smaller and growing it. I. And SBA was on the table, of course, but, like, I didn't, I didn't, you know, I didn't want to have to go out and get investors. So.
- [32:19]
Marcy LaRoche
And that. And that's for the reason that we've already just to talked about that you didn't want to be on anybody else's timeline or not yet.
- [32:25]
Cissy
Not yet. Yeah, maybe eventually, but now.
- [32:28]
Marcy LaRoche
Fair enough. And so SBA was on the table, but it also sounds like from your balance sheet, you might have been able to buy something without the benefit of sba.
- [32:38]
Cissy
I think it came to a point where I was. So I was in a searchers group. This where I know Iris Levine and Ben Miller. They started a search group just within search funder.com and so they just put out a request to say, hey, you know, we're looking to start a group. And I started to join. I was. We were having these bi weekly calls. There was like, I think eight of us at the time that we're searching. Amazingly, four of us bought, which was like, within six months. It was pretty. It's a pretty incredible group. And. And a few of them are still searching and getting very, very close. So we're really excited for them as well. I started to hear, like, what the SBA stuff was, what they were kind of the hurdles, the challenges, and I think it's worth it. And again, if I went bigger, I would have absolutely gone through that. But I found an opportunity that was small enough that I said, I'm not gonna swear on your podcast, Will. But I was like, eff it. I'm just, I'm just, I'm just doing it. Like, I'm gonna invest in myself. Like, I have the money to do it. I don't. You know, I'm just investing it right now. Like, I. I live alone, you know, it's just me. I have no other mouths to feed. I've got a ton of flexibility. The car's paid off.
- [33:37]
Sandy
Right.
- [33:37]
Cissy
Like, it's like, you know, it's like I'm just gonna spend My money on me and I'm gonna do this and make this investment in me. And so. And ended up being something where I didn't need to go down the SBA row. And frankly, the size I bought there was just all these really strange hurdles. Like, you know, because I did talk to a few of the lenders, either I was looking for too small of a loan because I want to put in money and I want to do seller financing. So I ended up looking was like, all right, you know, it's going to be a pretty small loan. And they're like still six figures, but like low six figures. And they're like, well, you know, we have these minimums that are. And then it'd be like, well, we can't do home based businesses. Well, we're all remote, so I guess we're a homey business. Right. Like, it was just these different hurdles where I was like, I just don't want to mess with this. I want to get this deal done. I, I believe in myself. I know I'm going to get my money back very quickly. I'm just going to spend my money.
- [34:18]
Marcy LaRoche
This conclusion to not use the SBA that you're talking about, this sort of effort, I'm doing it alone. Thing was, after seeing this particular opportunity.
- [34:26]
Cissy
That's correct, yeah. So when I first went into the search, it was very much like sba. And I know if I find something bigger that I like, I can get investors. I felt very confident. So I had my own money. I knew I, I could get sba and, and that I could get investors if I needed to. That was my plan. Like, those are, those are my, those are my levers that I was gonna pull.
- [34:46]
Marcy LaRoche
And tell us the name of the.
- [34:48]
Will Smith
Business that you did buy.
- [34:50]
Marcy LaRoche
Chr spelled S, E, A, Y, H, R. Correct. And. Okay, so tell us how you found.
- [34:58]
Cissy
C. So, so I, you know, I did all the, I did all the things you're supposed to do. I made the calls, I was going to industry conferences. I was working my network because I'm super networked in the PEO space, in the HR space. I was working with all of the attorneys that work in that space, the medical, the healthcare brokers, the work comp brokers, the investment bankers. Like everybody was in the space. I was networking the heck out of it, reaching out directly to business owners, was going down the line with some of them, you know, had had a few really meaningful conversations, started to get into some diligence, and I went to lunch with a prior colleague of mine here in Orlando, a gentleman by the name of Scott Milson, he had recently retired. He had put LinkedIn that he wrote a book. And I was just like, you know, we had a great time working together. I was like, hey, would you mind, you know, grabbing lunch sometime? Literally nothing to do with my search at all. It was just a totally casual, friendly meetup. And in, in the, in the conversation, he said, hey, would you be interested in a HR consulting firm? I know a guy here in town. I was like, yeah, absolutely. Tell me more. And he was like, he's got to be close to 80. And I know a few people have taken a turn to try and buy this thing. I don't know, you know, but I would wonder if he'd be ready now at this stage in his life. And I was like, sure, absolutely. So. So that's how I found it. After doing all of the actual stuff that you're supposed to do in search, it ended up being just a friend and former colleague here that we're having a social lunch. But it just came up now. I think you still got to do all those things. Will, I'm not saying, like, you know, ditch the, the ETA model.
- [36:31]
Marcy LaRoche
Marcy, let me, let me interrupt you really quickly because it mentioned to how you had the list of all the peos.
- [36:37]
Cissy
Yes. Yeah, I mean, I had a full, I had the full list of every P.E.O. in the United States, including their C.E.O. name, email address, and that was gifted to me by another former colleague of mine that was really supportive of my search. And he was in the space and in a consulting model and so he would consult with peo. So he built this list over many, many years and he just said, here, have it. And, and you know, I hope this, you know, I hope you can find the right PEO through doing this. So I had all of the, I had all these crazy advantages and then ended up being going to lunch with a friend that got that. So. But I still think those are really important steps to take of doing the reach outs, doing the cold calling. I wrote, I had letter campaigns going. I had, I had letter campaigns going. I did all the cold reach out, which gave me a lot of at bats.
- [37:29]
Sandy
Right.
- [37:29]
Cissy
So by the time that actually got to Sandy C, which is the gentleman I bought the business from, I had had 20 or 30 at least. That's probably a low estimate initial conversation with business owners. So that by the time that I'd gotten to him, I kind of had a little like, I had it honed in. So I'm glad I had that Experience and went and did those reps and did that work because it gave me. Gave me a lot of access to people's balance sheets and PNLs to kind of start to see what I wanted to look for specifically in our industry. It gave me a lot of conversation. Dress rehearsals.
- [38:02]
Sandy
Right.
- [38:03]
Cissy
And so by the time I got to the main event of this guy, I was pretty honed in and it was a pretty smooth process. But we'll get. But he also was very, very ready to sell, which we can talk about in a second. But yeah, so I'm not. I'm still in favor of doing those things. I think they're important and it must happen. But I just happen to find it through. Through a mutual.
- [38:21]
Marcy LaRoche
Well, you wouldn't be the first mercy to have gone through the whole rigmarole of proprietary outreach and then to have just, you know, it fell in your lap from, you know, somebody down the block or whatever.
- [38:31]
Cissy
And I think that's part of it too, Will, is just to. To like, you know, to encourage listeners that are searching of, like, do those. Do the reps. Do the things everybody says to you, but, like, tell everybody and their mother, right? Like, bring it up in every cocktail conversation at every, you know, t ball game. Like, just tell everyone that you're looking and be on social media. But like, in real life, when you're having conversations with anybody, because you never know. I was just on a call with a client of mine and they're looking to sell, like, and I connected him with another gentleman here in town. Like, you just never know. I mean, brokers are important. Like, I. There's, you know, there's the whole industry around buying and selling businesses, obviously, but just put it out there because I think that can, you know, that can just only increase your odds. And so that's my encouragement, encouraging thought.
- [39:17]
Marcy LaRoche
Great, Marcy. And so now you tell us about C and Sandy.
- [39:22]
Cissy
Sure, sure. So Sandy was about to turn 80. He had owned this business for about 44 years. He had bought it from another gentleman in the 70s. So I'm actually the third generation owner of this HR consulting firm. So we'll be 60 years old next year and based here in Orlando, Florida. We do not have an office anymore. He had given it up during the pandemic. And so we all work remotely and we serve clients here in Central Florida and also in about 20, over 20 states. We're national and HR consulting business. And when. When he and I first met, we had a number of mutual connections. Central Florida is a small area. It's a bit, you know, a big, small town in that regard. So he had reached out to my former CEO here in Orlando and said, hey, Marcy's interested in buying my business. Should I talk to her? Is she legit? And thankfully his name is Dane Williams. Thankfully. He immediately said, yeah, yes, absolutely. Like, like if you're gonna sell your business, sell it to her. And so I had that good connection and network here that when I got on that first call with Sandy, it was like immediately, immediate trust. Immediate, let's get this done. He was getting at an age where he had really taken his foot off the accelerator. But the business was still holding strong. It wasn't growing, but it was still holding strong because of the recurring clients. Our average client tenure is over 10 years old. We've got some clients been here for over 40 years, which is just incredible. But there was just so much opportunity and that's what really drew me to this business was not, I mean the, the current clients and everything is great, but like we were delivering and are delivering really, really high quality service. He was undercharging. So we, we, we needed up that. But we had these really great relationships. And what I, what really drew me to this business was he had these kind of channel partners with associations with healthcare brokers, PNC brokers that I felt like that was really the, the, an interesting part of this business that yes, of course it's the direct relationship that we have with small business owners, medium sized business owners that work with us for recurring, you know, fractional hr, but also for project work. But there was also this component of these partnerships that I said, okay, that's where I feel like there's a lot of untapped value within this organization to really, to really help grow it without having to build out a giant sales organization or something along that line. So that's one of the things that really drew me to this will. In addition to it being here in central Florida, because my search was national, I was looking at Texas, Nevada, Illinois. I mean, anywhere that there was a PEO or an HR company for sale, I was having that call. But then this was right in my backyard. I lived here before. It's been 12 years, but I lived here before. I've got friends and family here. My mom is here, my aunt is here. Like, there was just a lot of things that were like, okay, the stars are aligning here. Let's, let's pursue this.
- [42:12]
Will Smith
The team at Aspen HR recently published a short white paper targeted at searchers Entitled A New CEO's Guide to Human resources. It lays out the key items you should be thinking about as you transition into CEO and owner of the business you bought. The link to download it is in the show notes. Aspen is a professional employer organization or peo run by a searcher for searchers Search fund veteran Mark Sinatra runs the company which provides HR compliance, flawless payroll, Fortune 500 caliber benefits and HR due diligence support for your acquisition, all for.
- [42:52]
Marcy LaRoche
A fraction of the cost.
- [42:54]
Will Smith
Go to aspenhr.com or contact Mark directly@markspenhr.com.
- [43:03]
Marcy LaRoche
Give us a sense of size of business here.
- [43:05]
Cissy
Sure. So we have about 85 clients that pay us recurring and then we probably got about another 100 or so that we do reoccurring projects with every year, every two years. And then there's a handful that we do project work on top of that. So a little under a million in revenue and. But a lot of room for, for growth and opportunity. He was, he was working with a lot of 1099s. I switched that now to W2s as far as the team is concerned.
- [43:33]
Marcy LaRoche
So his whole team was contractors aside from him.
- [43:36]
Cissy
He had one W? Yeah, he had one W2. Sissy, who is still with us, she just celebrated her 21st anniversary with the organization and it's fantastic. And the others were 1099. And you know, I, I think knowing that, right, I knew that that was a bit of a risk, but I was like, okay, I think, I think I can find a good team. I've built a great team at mackay. I've built great teams in the past. I feel confident in my ability to do that. And so that felt like I could mitigate that risk. The other thing that was that some of your listeners might scare them off a little bit, but like he had, he didn't really have contracts with his clients and they, there were contracts but they had no teeth to them whatsoever. They weren't actual legal agreements. They were people signing saying, here's how much I'm going to pay you per month. And it was like great, you know, like there was no terms to it. There was no actual what it's going to be, how long it is. And these have been. Most of them were 10 plus years old. So I knew that I was buying a business that on day two everybody could walk away. But again, I felt like I had the chops and the industry knowledge and Sandy was willing to stay on for a period of time. Cissy was staying. I felt like we were going to be like that was a risk I was willing to take. That was probably the biggest risk in this entire thing that I took.
- [44:50]
Marcy LaRoche
That the contracts were good, weren't they.
- [44:53]
Cissy
Were super loose, that anybody could walk. But you know, being a small business owner myself, whatever, like, you know, you just, you do business with people you like, you trust them, you build relationships. Like if they want to screw us over, sure they can, right? But like these folks weren't going anywhere. As long as we continue to deliver the high quality of HR consulting that we have been for the last 60 years, they would have no reason to leave. Or if I, and I wasn't going to go in and like triple their rates or something like that like that. I'm not, I'm not stupid about it.
- [45:20]
Marcy LaRoche
And of these 85, how was their customer concentration or was it pretty evenly distributed across these 85?
- [45:25]
Cissy
It was extraordinarily.
- [45:27]
Marcy LaRoche
So there was no threat that you would lose some big contract if you lost a handful, you can build them back.
- [45:33]
Cissy
Exactly. Yep, that was it. That was that, that felt very, very much that that risk was also being mitigated through that route.
- [45:39]
Marcy LaRoche
And say more about the, the partnerships that the business had with these associations. Say that. Describe that in more detail and mention the pest control thing.
- [45:49]
Cissy
Yeah, yeah. So there's about 15 associations or healthcare PNC brokers that partner with us at CHR and what they do is they, they pay us a monthly or, you know, certain cadence of fee to be an HR hotline for their members. So, so a great example of that is the National Pest Management association or the NPMA. They've been a 10 year plus partner, really great partner. And so they pay us for an HR consulting hotline that then is passed on to their members. And they've got like, you know, a few thousand members across the country of mostly family owned pest control companies. And so as a member benefit, as a member of the association, you can, can call us and get up to an hour of complimentary HR consulting each year. And, and so that is a great channel for us because you know, they call in, they have a great experience, they say, hey, we, you know, I don't have anybody in hr. Can you help us?
- [46:43]
Sandy
Right.
- [46:43]
Cissy
Can you be our HR person? Can you be our HR team? Absolutely. Or no one's looked at our handbook in 15 years. We should probably take a look at that, right? Yes, absolutely. We can help you with that. Or an employee investigation or a challenging situation, things along that nature. So it's an opportunity for us to offer these HR services to a, you know, a captive audience that the association is trust. Trust with us, we are able to be in their magazine. We provide them content for their magazine, content for their members, webinars, things along that nature. I've spoke at two of their conferences. I'm going to be at their Pest World conference this fall. You know, it's just a really great relationship of, you know, starting to build for me, these pest control owners. But they've had this relationship with C. Manager for many, many years or chr for many years. And, you know, just building on that.
- [47:32]
Sandy
Right.
- [47:32]
Cissy
Of Sandy, in his later years of owning the business just wasn't, you know, he. He would give them, you know, things here and there. But, like, I'm like, proactively going at it with them and. And, you know, you know, to build collaboration of what can we provide to you that's going to be valuable for your membership.
- [47:45]
Sandy
Right.
- [47:46]
Cissy
Because if their membership grows or retains and grows, like that's an additive for us. Right. So I'm very willing to support the. The association in a really meaningful way. And they're very supportive of us and they use us for HR stuff too. That as the actual nonprofit is the association. So at the headquarters there. So, yeah. So we've got a great. And so, you know, multiply that over the number of relationships that we have in these association world, and it's a really great way for us to get our foot in the door in a trust as a trusted provider for folks within that industry.
- [48:18]
Marcy LaRoche
I mean, it just seems like an amazingly valuable relationship to have. And so you have multiple of them, not just with a pest control association.
- [48:29]
Cissy
Yeah, we have about 15 of them. And that. That was. They were all. I think I brought in one since I've joined. So 14 of them were here when I acquired the business. And that was the real key of. There's something really here, Will.
- [48:42]
Sandy
Right.
- [48:42]
Cissy
Like, there's some. There's some real untapped. We just need to put some fuel on this fire and. And start to gain in activities with them, in recognition with them. It's interesting because I'll go to. I was just at the National Pest Management Women's Forum. So it's only women in the pest control industry. There's over 400 attendees. It was in Austin. I was on a couple of panels there, and I was talking to a woman. We were going to dinner that evening, and she was saying, like, gosh, I think your service is one of the, like, the most, you know, the hidden gems of being an NPMA member. And I was like, I don't want. I want to be like the flashy. I don't want to be the hidden gem.
- [49:19]
Sandy
Right.
- [49:19]
Cissy
But we're gonna get there.
- [49:20]
Sandy
Right.
- [49:21]
Cissy
And so all these things that we're doing is like the. Because. And my point in saying that is the folks that do utilize us within the MPMA membership love us and are willing to talk to their peers and are willing to do testimonials.
- [49:32]
Sandy
Right.
- [49:32]
Cissy
Like, so I'm not like, fighting or like pulling teeth to try and get anybody to help us in there. It's like, here's a great opportunity for us to deliver these really great HR services that we're showing value to the members. And, you know, just being able to do that for more of them as they need it is really important and is a great purpose for us as a company. And our team loves them. And they love.
- [49:52]
Will Smith
It's a remarkable structure too, because as.
- [49:54]
Marcy LaRoche
You said, you're basically getting. Being given, you know, trusted vendor status exclusive. So assume there's no other HR provider who's being.
- [50:03]
Cissy
That's correct.
- [50:04]
Marcy LaRoche
To this whole targeted channel and you're doing webinars for them. So you're getting all this promotion and you're being paid by the association. I mean, now understanding that, you know, you're providing a certain block of hours to the association.
- [50:18]
Cissy
Sure.
- [50:19]
Marcy LaRoche
Um, but. But that's something that you would do for, you know, for new business anyway is provide a first free call or whatever.
- [50:26]
Will Smith
So in other words, you're basically.
- [50:28]
Marcy LaRoche
Not only are you not paying for amazing marketing, we call this negative customer acquisition cost. It's almost like a negative cac. You're being paid to acquire customers. I may be taking that a little bit far, but you understand my point. I mean, you would probably pay for this.
- [50:46]
Cissy
I, I think so. I, I will say that they pay us. They don't pay us a ton. So I don't want to over inflate that. You know, that. I. We are, we are not profitable on. What if we just take what they pay us for the member hotline? We lose money on that. It's not a ton, but we do.
- [51:04]
Sandy
Right.
- [51:05]
Cissy
So. So there is, There is a cost to us for, for doing that. It's. It's mitigated a bit. You know, it's. It's, you know, it's made less by the fact that they pay us on it, but, you know, we. The more. And that's interesting. I, I was, I was kind of challenged on somebody when I was buying the business, and they were like, well, but you don't want too many of them to call you Right. Because then you lose more money. And it was like, no, no, that's not, I want them all to call us because if, if, if I'm spending like that's only going to lead to 10, 15 pest control companies becoming clients of ours.
- [51:35]
Sandy
Right?
- [51:35]
Cissy
Like they're, they're, you know, sure, there's going to be the ones that call us and never do anything more with us. And that's fine. I'm, I'm okay with that. But like we, we deliver at such a high quality of, of work and at such a great value that one, we should probably raise our rates even more. But besides that, like it, you know, it is, it is meaningful for their purpose and what they're doing and it does create an opportunity for us. Now we still have to, we still have to convert those clients.
- [52:01]
Sandy
Right?
- [52:01]
Cissy
But I want, I want all that activity. I want like just bombard us with calls from control companies because we will, well, we do such a good job that they, a lot of them naturally convert without having to really sell them on much. They're like, oh, we, we were thinking about, you know, do we need to hire somebody for full time hr? We don't really need that quite yet. Maybe someday we will. But right now could you help us on a part time basis? Yes, absolutely. That's our lane. Let's do it. And then when they grow, we can support that new person. That's great too.
- [52:27]
Marcy LaRoche
And to your point about perceiving real value from these relationships or these, these agreements that you have with the Pest Control association and others, because, and I'm going to press you on this Marcy, because this is a small enough business where, and given your own expertise that you might say, why not start something from scratch? You might say, no, I, I don't actually believe that. But let's steel man this because the revenue isn't so high that you're buying tons of revenue. You said it's sub million dollar business. It's this gentleman, Sandy C1W2 and the rest contractors. So you could. So contractors come and go. You can find other contractors pretty easily, I presume. And so there's one. So in terms of headcount or organization, it's a pretty thin frankly organization. You are already very well networked in the HR world. So you could probably bring your own people along with you on this journey. So, so did you. So yeah, is it small enough that you said to yourself what am I, what am I buying here? Should I just build this? I could rebuild this organization in a year or something. I mean, and we know that those relationships you have associations is part of the answer. That's a big part of the answer. Did you there.
- [53:50]
Cissy
That's a huge part of the answer.
- [53:51]
Marcy LaRoche
And is there more or is that, is that the answer?
- [53:55]
Cissy
Yeah, I will, I will take it like way back to the beginning of, you know, in my career was that, that mindset of like, I wanted to be a business owner and I thought the only way to accomplish that was to start something from scratch. And being a part of a couple successful startups in Chicago, I was like, that's not the 0 to 10, not me. Like, it could I do it? Could, could I fight through it and make it? I find no joy in that whatsoever. And will, part of this is about like creating a joy and continuing the joy in my life and a lifestyle that I want to do. Like the, the reoccurring revenue and the re, the recurring and reoccurring revenue that we, that I bought in this business in addition to those partnerships, like, gives me the cushion to do some fun stuff, right? I can, I can test out some marketing I can play right? Like, I didn't have to start from the square one where it's like, how do I forward my first employee? When do I pay? You know, Like, I didn't, like, I got to skip that whole piece. And for me personally, yeah, if like for other people, they might say, Marcy, that was stupid of you, right? Like, what are you thinking?
- [54:58]
Sandy
Right?
- [54:58]
Cissy
Like, but like for me, for knowing what. And thank God I had all of these experiences in my life where I got to try out being at a startup multiple times, where I got to be at a VC back or I got to be at a PE backed firm, like, like I got all these exposures and to be able to really kind of get to a point now where I'm like, I kind of know what I want and what I don't want. What I don't want to do is be the 0 to 10 person. I want to be the 10 to 100. And that's what I did at Makai. That's what I'm doing here. And so you're right, it's a small business. Could I have done it? Maybe. I don't know, but I wouldn't have. I would, I probably wouldn't, wouldn't have loved it. I probably would have been mad. I probably, I wouldn't be where I am right now in the year that I've been at this business.
- [55:39]
Will Smith
And also, Marcy, I said it's worth it.
- [55:41]
Cissy
For me to buy.
- [55:41]
Will Smith
Well, I said, Marcy, a year.
- [55:43]
Marcy LaRoche
That you couldn't rebuild this business in a year. It would, it would take. Yeah.
- [55:46]
Will Smith
I mean even putting aside the association.
- [55:50]
Marcy LaRoche
Amazing unlocked value thing or as yet unlocked value thing.
- [55:53]
Cissy
Right.
- [55:54]
Marcy LaRoche
Just 85 recurring revenue clients. You couldn't get that in a year. That would take.
- [55:58]
Will Smith
So, so you, if nothing else, you.
- [56:00]
Marcy LaRoche
Bought a three year, four year acceleration. And that's a lot, especially where you are in life where you have a balance sheet where you have the luxury of trading. You know, you have more money than time. A lot of people don't. They have more time than money. And so that you have to think about that trade. You have more money than time and so you should be buying time. The other thing which we haven't explored, which is further reason why this was a slam dunk to buy for, for you in particular. We haven't talked about what you paid and how you structured the deal, which was quite appealing. So that's also an enormous, enormous part of the value here. Talk to us, talk us through that, please.
- [56:40]
Cissy
I had a very motivated seller about to turn 80, was really very, very proud and should be of the great legacy that he built over the 40 plus years that he owned this business after acquiring it from somebody else. And, and he had had a couple of offers in the past and for whatever reason they didn't go through. I've talked to some people that actually took back, you know, took a swing at buying the business. And you know, my understanding is at the time he was asking for things that were not reasonable for, for what the business doing. By the time I got to him, he was basically like, I, you know, if you don't buy this, I don't know what I'm gonna do.
- [57:19]
Sandy
Right.
- [57:19]
Cissy
And so I, I was coming from a very, you know, like a very leverage point from a negotiation standpoint. With that said really good guy, high quality individual. I wasn't going to take advantage of the situation. So I offered him a fair price. I can't give the exact amount, but you know, let's call it mid six figures from that perspective. And, and he.
- [57:38]
Marcy LaRoche
Can you give the multiple, Marcy?
- [57:42]
Cissy
It was about a little, a little, a tiny bit over like 2.2 of, of SD.
- [57:48]
Marcy LaRoche
Okay. Okay.
- [57:50]
Cissy
And obviously less than revenue, less than one time revenue. And he, he immediately said okay. So I put together an loi. He didn't have counsel look at it or anything. He just, I think his CPA might have looked at it and said okay and sign the loi. And he Said to his CPA and the team member that's been on for a long period of time, he said, give her literally anything she asks for. I don't need to be involved. So I. I did hire Hollywell. Mike and Carrie helped me with a very light Q of E because I started to get emotionally attached to the deal. And I was like, I gotta, like, I gotta have somebody that's not attached to this, like, wise.
- [58:29]
Marcy LaRoche
Wise of you, Marcy.
- [58:30]
Cissy
Yeah, that. That I wasn't missing something that was like, right for me. And, And Carrie Roach was the associate that helped me, and she was fantastic and, And. And validated that what I was seeing was all legit and. And you know, that it was going to be a good investment from that perspective. And so about. It took about two months total from the initial zoom call to closing date. I would say the only drama that happened in the whole deal was that he waited until the week of close to hire an attorney to look at the deal. And I was really nervous about that because I was like, what attorney is going to turn this around in like a day? Turns out the attorney turned around in like two or three days after things. I was like, no, I'm not going to do that because it's three days before closing and you didn't get an attorney. I'm not trying to screw you over. I gave you a very, very fair deal here.
- [59:21]
Sandy
Right.
- [59:21]
Marcy LaRoche
And so you guys had a closing date agreed to, and he just didn't his attorney even look at it until a week before closing?
- [59:27]
Cissy
He didn't. He didn't even. He didn't even have an attorney. Like, he didn't know the guy until about 10 days before closing. And it was referred to him through a friend, and then met the guy and was like, here's what I'm trying to accomplish. Here's the word. I mean, I had Ackerman as my attorney. Like, I, Like I, you know, like, I had a legit purchase agreement and didn't even have anybody looking at it until the weekend. I was like, oh, my gosh. So. And the attorney that he had was good and tried to do stuff. And I was just like, well, I'm just not. I'm just going to say no. The date that he was set was his date. I didn't choose that date. He was driving towards May 31st of last year. And I was like, this is your date you want to do. I'm willing to push back. And he was like, no, let's do it. Let's do it. So I Gave him every opportunity. But I was like, I'm not, I'm not giving you these things in the 11th hour, which were smart things to ask for. I just, I wasn't going to do it.
- [60:13]
Marcy LaRoche
And well, and you knew that he had said to give Marcy whatever she needs. He probably. And maybe you were operating under this assumption. He probably also told the attorney, you know, don't, don't just get it done. Yeah. I mean, you knew that was his psychology. That was a very powerful thing to know.
- [60:31]
Cissy
Right. But you know, for all of our lovely attorney friends, right, like he wanted, he, like the attorney did the right thing of adding value. It wasn't like he was trying to bill him on it. It was like, no, no, Sandy, you should push back on this. Like, like the attorney was good and probably would have had some meaningful negotiation tactics if we'd done it a month earlier. We didn't. So. So yes, we got it done. We closed and he did. I paid him 60. He did 40 seller financing. So an incredible amount of seller financing on it.
- [61:00]
Marcy LaRoche
And how did you come to that 40% seller note arrangement?
- [61:04]
Sandy
I.
- [61:06]
Cissy
Not, not anything very scientific. I had a friend who did a deal and he did 4060. And I was like, all right, I'll do 4060. It wasn't truly just like, I guess this is what people do. And I, I'm sure I passed, I send it around in my search funder group with Iris and Ben and, and, and Brett and them. And I'm sure they were like, okay, you know, like, I don't think I got any, like, meaningful pushback of how to calculate that. And so I was like, he just accepted it. He was going to accept probably anything I put in front of him, which now I'm like, I should have, I should have lowball. No, no, I, I did the right thing. It was a very, very fair deal on my side. Like, I, I got an incredible deal on it. I just had a very, very motivated seller. So he did the seller notebook. So, you know, I paid him the, the 60 at close and then the 40 is over a six year, excuse me, a five year horizon. So I've got four more years left in that I can pay early on it without penalty. So just a lot of things that I think, you know, I feel comfortable. There's been, there's been no issue. Actually he actually asked me, he's like, can you push back paying me until this day? Like, he's, I'm like, so I think if I went to him, I was like, hey, money's tight this month. Can I, you know, can I pay you my, you know, my promissory note a few weeks later or something? I think he'd be fine with it. I haven't had to do that, but like, it's very, it's very copacetic. And he worked in the business as a consultant for the last year. He is now at the end of this month, he is fully retiring. Good for him at 81 and so proud of him for that. But, and, but he's still like, if you need anything, call me. And I'm like, I know. I, you know, I, I know and I trust I can do it. We go to lunch about every quarter, so just been a really great relationship throughout the process. But yeah, he scared me a little bit when he was like, when I was like, do you have an attorney yet? And he's like, no. I was like, what are we doing? Do you really, are we, really, are we selling this? Because I'm spending a lot of money on an attorney. Is this happening? He's like, yeah, yeah, it's happening. We're fine, we're fine.
- [62:55]
Marcy LaRoche
Okay, Marcy. And, and so I know you can't give super specifics, but this was less than a million dollar revenue business. So some six figure number and then. So some number less than that. It was the SDE and then you paid 2ish for it. So we'll assume the purchase price is, you know, it's obviously in the six figures. 40% of that was financed. So you, and you didn't use an SBA loan as you've covered. So you basically went out of pocket, some six figure number.
- [63:31]
Cissy
Yep. Correct.
- [63:33]
Marcy LaRoche
Okay.
- [63:33]
Cissy
Yep. And felt completely great about that. Like, there was no, like, when I was sending that wire, there was no emotion around that at all. It was like, I am beyond, like, let's, let's do this. Like, like this. This is the easiest money I've ever spent. I, that's an exaggeration. I mean, I had a lot of thought into it. I want to be very clear. I was very intentional about all this, whatever. But like, when I looked at the numbers and saw the opportunity and it aligned with the lifestyle that I wanted to live, this was a really, you know, it was a perfect investment for me to make for. With my, with my capital.
- [64:09]
Marcy LaRoche
Your risk tolerance goes up when you have a healthier balance sheet. Or maybe another way of putting this is, it's. There's not that much risk to this. You could lose every dollar and you would still have a Respectable net worth. It could go on to your next thing. You'd be fine.
- [64:25]
Cissy
Yeah, yeah, yeah. And I, and that, I mean that's not obviously not the goal, but yeah. And I think, you know, you know, there's always. I, you know, I can go back to peo. I know I can. There's not many, there's not many successful exiting CEOs that are out there in the PEO space. I think that, I think that would be very appealing for somebody to have on their team or in their portfolio to, to run a peo. That's just not what I want to do right now. And so, yeah, I felt, I felt very much like this is absolutely the right risk for me to take. Absolutely. Like, no, no questions asking. You know, again, I'm not doing sba. Don't have a pt. Like, there's not like, it's just me. I'm the, it's just me. I'm the only, yeah, I'm only answering to myself. And listen, I worked really, really hard with other people's money for the first 20 plus years of my career, right. And like took really good care of it and made a lot of people a lot of money. Like, that's not my, that's not my purpose or my goal on this. But like, I felt very confident that like, I'm not going to screw myself over.
- [65:14]
Sandy
Right.
- [65:14]
Cissy
Like, I'm going to do well on this. Like, there's just no way around it. That's just who I am. I'm going to work hard, I'm going to build a great team. I'm going to find great clients.
- [65:20]
Will Smith
Like, well, and this is the industry that you, you know so well.
- [65:24]
Marcy LaRoche
I mean, yeah, yeah. This is so de. Risked by the fact that the business buyer fit is just could not be a tighter fit. I want to now explore more the business model here. Concisely. How are you going to grow this?
- [65:38]
Cissy
I think that if I, I would be lying to myself and to the, to you and the listeners if I was like, oh, I don't care if we grow it or not. That's just not my, that's just not my nature. That's like not my DNA. My DNA is competitive. I like to grow things. I, I like to figure the, you know, figure that, that map that roadmap out. I, I like to be able to deliver to more clients. So, so. But I also don't want to be like, I have to grow 10x in order to hit some number or whatever. Like it's, it's going to be What I believe is right for the team and for us and for our clients for the best experience. And so we've been focusing on. When I bought the company, it was kind of like, we can do any HR for anybody. Which is true. There's no. That is an accurate statement. But as far as spending and, and spending my time and, and investing back into growing the business, I mean, we're up 30 year over year on just me organically networking and, and our clients referring us to other clients. I'm in ypo. I'm in wpo. Like, I'm. I'm, you know, reconnecting back to the Central Florida community in a meaningful way that has brought us a lot of business. But that is not. That is not predictable.
- [66:45]
Sandy
Right?
- [66:45]
Cissy
Like, we don't know when somebody's gonna refer. I got three referrals this week, and like, none of them were planned.
- [66:50]
Sandy
Right.
- [66:50]
Cissy
So I want to have more predictable revenue pipeline from that perspective. So we, we. I partnered with a local company here called Clarity Marketing, and they are based here in Central Florida and they focus on B2B marketing. And so I've been working with them. We've referred to, refreshed our website with, you know, just kind of re. Re realigning our message of how we actually solve things for clients. And then we're focusing on some niches to. To test them out. So one is obviously pest control, because we have that great relationship. We're also focusing on Central Florida as a geographical component. If somebody calls us from Chicago, like, we can absolutely help them.
- [67:27]
Sandy
Right?
- [67:27]
Cissy
But like, I'm here, I'm networking. Let's see if we can capitalize on that. And then we've got two other partnerships. One is in, like, the live and rental industry for, like, hospitals, restauran. That's roofing. So an association on that. And then the Florida Roofing association is another one we have a great relationship with and has a lot of members here in. In throughout the state. And so. And that's not, that's not discounting all of our other great partnerships that we have with associations. Those are just ones that I'm going to be spending some marketing dollars on, doing some digital marketing, some advertising, you know, some things very specific to those different niches just to test them out and see, like, can we. Can we be the pest control HR company and like that, you know, like, really build that out and focus on it, because I just can't spend the money to compete with the giant HR companies out there to everybody.
- [68:11]
Sandy
Right?
- [68:11]
Cissy
So that's part of it is to have some real specific niche marketing and, and investing in that. I also, I didn't mention this before but you know, the, the, the 1099s are, are no longer with us for the most part. They do maybe a little project worker in there, but I hired another W2 employee, Jackie Morris, who's extraordinary. So Sissy and Jackie are delivering on a conversation a consistent basis. I've got a couple of other 1099s that come in for specific project type work that they have expertise in and so building out a really strong team. So I think that also gives me the confidence Will, to go out there and really push on these different marketing initiatives because I know we're going to deliver on the back end and I'm building a bench of other really extraordinary HR professionals when the time is right. That, that you know, to have, to have them come into our organization as full time employees is really exciting for me. But again, I don't like, I don't need this to be a 1550, 100 million dollar company. If it happens, it happens. But that's, that's not what I'm, that's not the purpose for this for me is so, so yeah, that's what I, that's where we're focused on from the growth perspective right now. So we've got a nice little referral thing going. But I want to, I want to do some more dedicated things. I'm doing all the sales and marketing. Jackie and Sissy will upsell clients on projects or things like that when it comes up. But I'm doing all the proactive outreach or you know, proposals and, and going through the discovery process with prospective clients. I don't know if that'll be forever for me, but I enjoy doing it right now and it really helps me to build out an actual sales process because we've never had one here. So that if I was to hire somebody in to help us grow from a sales perspective that we had some processes in place for them to build off of and not just come in and be like wild, wild west. Go sell whatever you can.
- [69:54]
Sandy
Right.
- [69:55]
Cissy
So those are some of the things I'm focusing on.
- [69:57]
Marcy LaRoche
And are you paying yourself?
- [70:01]
Cissy
I am not much, I would say like I'm not. And I were aware, you know, my pri, you know, my previous salaries and bonuses and things like that. Like I am very intentionally reinvesting back into this business and that is into my people and that is into this marketing efforts. Like that is very much so where I'm spending what I would Say what? Typically I could pay myself but again, I have pretty low personal overhead and I've got money in the bank. So like I, you know, I don't want to, I don't want to spend all of my money that I've invested in other places right now. But you know, I've got a bit of a cushion where it's like, I really, I really want to grow this thing. And so I, I'm mostly reinvesting it back into our team, into these marketing initiatives.
- [70:38]
Marcy LaRoche
The question of talent here. So you let go of the 1099s. You brought in another W2. In so many of the businesses that my guests buy, talent is a big constraint, particularly on the blue collar side. This is not a blue collar business, this is a white collar business. What does it look like to acquire talent here?
- [71:02]
Cissy
I will give you a specific example. I, before we hired Jackie, I posted a role for an HR consultant. I put it on LinkedIn. Now granted, it's full. I put fully remote and anywhere in the United States because I've worked. When I was in Hawaii, I had people on the east coast like I don't care where you are in Philippines, like I don't care where you are. Like you can, can we can be successful no matter where you're at. I did an unpaid LinkedIn post of a job and I had to shut it down within 24 hours because, because I had over 1,000 applicants on that job posting. Now are they all qualified? Were they all the right fit? Absolutely not, Will. But I got it narrowed down about 20 that really were very, very strong candidates for this role. And again that was within just 24 hours of looking. And yeah, and I found, and found Jackie. Jackie was actually referred from Cissy. Jackie actually worked here at C Management in the past. Left, went in house at a local company here and then came back to us when, when we posted this role and has been an extraordinary addition to the team. But all that's to say is like there are really great HR professionals out there. And so, and you know, so I think one that would be, you know, that gives me a lot of confidence in growing this thing. But also like the, the folks that I'm building this kind of bench of they're all fully employed so they're not even really looking. They're just really great people that I know or know through my, that are interested in working at a company like what we're doing and how we're doing it and the kind of clients we're working with and that Sort of thing is very appealing to people who are currently already HR consultants in other and other organizations like us.
- [72:34]
Marcy LaRoche
You mentioned the Philippines. Now I've heard you say it twice. What sort of work would go to the Philippines in this business? The work itself.
- [72:40]
Cissy
Well that was, that was in my prior business. I'm not doing anything currently.
- [72:45]
Marcy LaRoche
Right, yeah, I understand that but I heard you did it in your prior business and I guess it's something that other firms do. You said now it's a differentiator that you are not doing it, that everybody's here. But, but for, for the sake of understanding is, is. Is this a business that is vulnerable to being offshored? And of course AI, there are absolutely.
- [73:08]
Cissy
Pretty large HR consulting firms right now that have offshored the vast majority of their client phone and email inbound, you know, people asking for consulting, things like that that are, that are probably, you know, probably fairly talented HR individuals. I'm not in any way saying that that's not the possible. I have not heard anybody have a great experience with that. But it is pretty cheap, right? So if you are a business owner that, that, that cost is, is very, you're very cost conscientious and you've got to go with the lowest priced option. We're not it, but you might not get quite the level of service that we're providing. And with the type of experience that my team has and as we grow that we'll continue to grow as far as our experience. You know, I've been a CEO of a company and so when, when other business owners call me or if I get something, you know, if I get wind of something that my companies are going through, that my clients are going through, like I can relate directly as being a CEO, you know, if you offshore that like, like that's not probably the case.
- [74:07]
Sandy
Right.
- [74:08]
Cissy
On the AI side it's kind of the same thing, right? Yeah. You can go on chat GP and you can ask some HR questions right now it is very much going to give you an answer to give you a result. And you know, it's built that way. It's intended to, to, to be action oriented. It's intended to. I mean we're seeing all these studies right now, right. That it's like you have to tell AI to not be as agreeable with you.
- [74:30]
Sandy
Right.
- [74:31]
Cissy
So if you, if you put into AI that you know, hey, so and so showed up to work drunk today, can I fire them? Like it's going to find a way for you. Hire them. Whereas we're going to say Time out. Let's get the full context of the employee, of the situation. What issues have we had in the past? What have we done with other people who may have shown up and we thought they were intoxicated? What does your handbook say? Right. Like, it's a very interactive process that perhaps offshore, you can get a little bit of that. But definitely in AI right now, we're not seeing that. Will they grow and potentially get to that point? Maybe this will never. HR will never be a, in the, in this particular case, like maybe payroll, but like consultative HR will never be a manual where you can say, if the client says yes here, you'd go down this path. If they say no, you go down this path. And then there's this nice, nice tree to know how to support them in a meaningful way. Like when you call up Verizon or something like that.
- [75:17]
Sandy
Right.
- [75:17]
Cissy
Or when you call, you know, your credit card company. That doesn't exist in hr. And I think you can try and build that to a certain extent, but it's not going to be that interactive process that people are looking for that could come, people could be building that right now.
- [75:29]
Sandy
Right.
- [75:29]
Cissy
But where I'm seeing it be beneficial is, is like we use AI in a generative, an AI generative tool that there is a, an employment law firm that basically built a tool just for HR consultants where they dump in all of the state, local and federal regulations and change it as it, as it updates. So like, and us, instead of us going on to like the Colorado Department of Labor website, trying to figure out with a regulation, you know, what do you need to do on your last day of employment for an employee or whatever. Like, we can put this into a very small, specific generative AI platform that we've, you know, bought into, that we know and trust is going to be updated on a regular basis, is going to help us do that research significantly faster to be able to deliver faster to our clients from that perspective. So in those types of instances, there is ways to do it. But I wouldn't, I wouldn't, I still would not just go on, you know, any of the, the, the, the large, large learning models or the AI models right now and just put in, you know, what do I do on, for an employee in Colorado's last day? Because they're pulling from all kinds of stuff that might not be accurate or might not be up to date. Whereas I know I'm looking at the actual legislature from, from Colorado onto what is the, what does the law say that we have to do on A on this particular scenario that we're putting into the system. So there are ways to supplement to enhance. There's a lot of stuff in AI being done around checking payroll, you know, making sure that benefits are, are being calculated correctly. Like I love all that stuff in it, but the like answer my question of how to handle this HR issue. It's not there yet, but we are. And so like that. I think that's where right now I'm really bullish on what we're doing because I think there's going to continue to be business businesses that either have complex HR things more in that blue gray collar space that, that need to actually talk through some things with people or want that more of that consultative guidance. There's always going to be people who are going to be diy, are going to do it on their own and going to look it up and that's fine. But there's still this market that is, is really interested in what we're doing and can. And we're growing. So I think as long as we can, you know, as long as that continues to be the case, we're going to still have a business.
- [77:23]
Marcy LaRoche
Let's talk about the, the market here, Marcy, because I heard you say that there are some really big firms. So, so you are. So they're big companies here that you might bump up against. I, I also, I want to compare this to say bookkeeping or accounting. What you'll hear often from that world is that growing an accounting business is, is not about the, the demand is not the constraint. There's plenty of small businesses who want your services. It's about good operations. And actually in the case of that industry, there are fewer and fewer accountants. So hiring is constraints. But I'm hearing from you that hiring is not a constraint here. So is the constraint the demand side? What, what, how competitive is this market? Where do you feel a constraint?
- [78:14]
Cissy
So that's a great question. I think that if I was willing to put many, many hours every single day into selling that I would be growing it a lot faster. That is just not what I want to do. So I would say I am the constraint at some, to some extent on.
- [78:33]
Marcy LaRoche
This and for people listening, Marcy, so, so somebody maybe who does want to build a $10 million business and is wondering if this is the type of business they should buy. Do you think that they can?
- [78:46]
Cissy
I. No, I. You have to do outsourcing or offshoring on this. You have to build, you have to have AI components of it. You have to have like Chat bots and like. So I think, I think you're just going to be up against some really heavily funded companies that are out there really far ahead of doing that, that are moving more towards the self serve model with clients. And that is not the direction I'm building. That's just truly not how I'm not the purpose of me buying this business. And so I have not modeled out what that would need to look like to get to those numbers because I have genuinely no interest right now in doing that. And so I don't, you know, I don't feel well versed in being able to tell you exactly how somebody would want to do that in the hr. Is it possible? Yes. Would you have to do it in a different way than I'm doing it also? Yes. And so that's just not my plan or my dream for this. And so I just haven't, I, I don't have a really strong answer for either because that's just not where I'm spending my time is trying to, you know, envision that and try and build towards a model that can get us there.
- [79:53]
Marcy LaRoche
Why did you say earlier that the revenue mix of 60, 40, where 60 is recurring and 40% is project, that, that you like it there. Understanding that, you know, you, you had mentioned the thing about how a lot of guests will come on here and talk about how. Well, in fact a lot of guests have bought businesses that are project based and, and they're perfectly happy. Thank you very much. And I take that point and I do think that people should be more open minded about project versus recurring and think truly about more about the quality of revenue underneath those, that sort of oversimplification that, that spectrum.
- [80:28]
Cissy
Right.
- [80:29]
Marcy LaRoche
But if you could take it, why wouldn't you want more recurring? Why wouldn't you go to 100 recurring? I mean if you could get it. Excuse me, if you could just.
- [80:41]
Cissy
I don't think. Yeah, yeah, I don't think that that is particularly so. So of course, yes, of course. If I could, if I could have just check millions of dollars in recurring revenue and that was it. Yes, absolutely. Of course.
- [80:53]
Marcy LaRoche
Okay.
- [80:54]
Cissy
But with the, I think there's two, there's two things, two reasons why I say that. Like I, I don't want to do that. So yes, if I could get that number 60 to 75 to 80. Yeah. I'd go up on the recurring. Absolutely. All day long.
- [81:05]
Marcy LaRoche
Okay.
- [81:05]
Cissy
But I, but I like, I like the project stuff for, for two reasons. One is we, we, we have really decent margins on the projects there. And, and it does allow us to get our foot in the door with a lot of these people through the channel. And if I was to immediately say, like some of our competitors, some of our large competitors, they will not do any project work, it's recurring or nothing because of what we're talking about here.
- [81:26]
Sandy
Right?
- [81:26]
Cissy
And they're, they're, they're, you know, their PE is like, or, you know, their firm is like, this is what we need to. In order to sell this in five years. I don't have that right. But we do a project for somebody and that turns into another project or that then they turn, then they're like, okay, now we want to do a fractional HR service with you. Like that is, we have a fairly high reoccurring rate with our project folks. Folks. And it's a really nice way in the door for us to then work with us longer term. I don't want to cut that, that, that doesn't make sense for me to cut that off for the type of partnerships that we have, those channels. I think that that would be incredibly at a disservice to us and to our partners if we were to say, well, after you call us once on the hotline, after that you have to pay us a monthly recurring like instead, let's, let's look at this. You know, you've got this employee investigation. Let's help us, let's help you through that. We're going to give you an extraordinary experience. We're going to charge you a fair rate, but we have good margins on it. And then, then you're going to say, you know what, we could use them more often. And that does happen quite often for us. So, so that's where for me, I don't think it would be the right move for us. And what type of business we have to, in order to, to completely lose all of that project work. Just go straight. You know, we're only retainer or nothing for prospective clients that come through our doors.
- [82:35]
Marcy LaRoche
Marcy, I heard you use the word fractional at some point. So fractional HR is kind of a way to think about this business or at least with the recurring agreements, the recurring business that you offer, you're basically a fractional HR for the, for those clients. I hear you hear a lot about fractional CFOs. You hear about fractional marketing, fractional CMOs. You hear about it less, if at all. Maybe I haven't been paying close attention in hr. It seems like the model makes just as much sense in hr. Land as it does in cfo. But am I right that it's not as established as a, as established a thing as a fractional cfo?
- [83:20]
Cissy
I think you're. Yes, you're correct. I do think it is growing though. And, and I think that particularly smaller business owners, let's call it, you know, under 5 million in revenue, are really starting to see the even larger though. I gosh. Anyway. But yeah, I think, I think that you're starting to see more and more of these small to mid sized business owners realizing the value of having these fractional experts that, you know, you don't need to spend $120,000 on a full time HR person. You might have HR in house and we have quite a few clients that have HR in house. But then, then stuff gets, maybe it's above their level or maybe they're just, it's too much for them and they, but they don't need that next person yet.
- [84:02]
Sandy
Right.
- [84:02]
Cissy
Like there's just a number of different models where it makes a lot of sense. And for those folks that are not aware of it, when we talk to them about it, when I talk to prospective clients, they're like, oh yeah, of course, absolutely, this makes sense. Like I get it and I use that, you know, you perhaps, you know, a lot of them are telling me they have a fractional CFO already or that, you know, their cpo, CPA helps them on a fractional basis or they have a fractional controller. And I'm like, well, it's the same thing. It's just an hr. It's like they get it right. So I think it's becoming, it's growing in its understanding. I'm not having to educate people significantly on it because there's all these different areas where there is. And I think we're just going to see more and more of that as business owners realize that they can, maybe other parts of their business can be assisted with AI. Maybe they want to focus more on, you know, other kind of growth initiatives, things along that nature. And so having full time headcount in these different areas might not be as required because before you used to have an hr, right? You'd have like someone who was just doing payroll because you had to do it manually. Well, now that's primarily is done through technology. Okay, so what is that person doing now? Well, maybe now they're doing some more bookkeeping stuff. Okay. Or I've got somebody who, you know, they were doing like HR compliance work. Hr and, and they're like, well, you know, we're we're kind of okay on that, but can you do more strategic things? Right, so we, you know, we've got somebody in house that's doing HR compliance work but like the day to day hr making sure we're staying out of trouble. But like, like we want something on employee engagement or we feel like our culture's got a little bit of toxicity in it. Can we, can we try and figure that out or often what happens will is it's like we've had this hr person for 15 years and they're retiring. Can you come in and take a look and make sure that we're doing everything right, Just a fresh set of eyes and, and you know, and help us find a new person. Like we will recruit for HR roles only. We don't do any other outbound recruiting. We do some recruiting process support but like actual, you know, going out and sourcing. We're not doing that in other industries, but we will do it for hr. So we often see that where it's like we're seeing a changeover in the HR industry of employees that are retiring. And so we're either backfilling them as fractional or we're coming in and we're, you know, we're kind of cleaning up the book, so to say so that the next person coming in has got, you know, a little bit more of a, of a modern situation of what's going on and that they're coming into a cleaner situation from an HR perspective. So a lot of different models on that, but it's, I think it's really growing from the fractional standpoint and it's not, you know, we're not, we're not going in and saying, hey, you can fire your HR person if you hire us. That's not our model at all. I, in fact I would be really uncomfortable with that. But how can we add to what you're doing right now without having to hire a full time person is really where people are seeing a lot of value in what we're bringing to the table.
- [86:35]
Marcy LaRoche
Is it, is it perhaps that like also that in let's say CFO or like a fractional marketer that a business has, you know, money is coming, coming in and going out every day. So there's a constant cons, inconsistent need for somebody to be doing the CFO stuff. And same with digital marketing generally. Like, you know, you basically have your campaigns running all the time. I realize they're exceptions. You turn it off sometimes, whereas with hr, maybe your needs are more lumpy you don't, you don't need somebody there doing something all the time. And so the fractional needs need is just not like getting onto a monthly contract because you don't need HR services on a monthly basis necessarily.
- [87:22]
Sandy
Right.
- [87:22]
Cissy
No, I think that's a great point. And, and I think that's why the, like, you know, some of our competitors, they'll put, you know, we'll, we'll give you an HR person. They'll come in, they'll be in your office every Monday. Well, HR isn't restricted to Mondays. And I've also seen contracts where it's like, we're going to give you X number of hours per month.
- [87:39]
Marcy LaRoche
Month.
- [87:40]
Cissy
Well, you could have nothing in a month and then the next month you could have six people have a major issue that we need to do an investigation for. And so I've really thought a lot about that and worked with clients to try and come up with a good solution. So we do like a, we basically, we do an annual block of hours. They're still paying us monthly for that, but like, we'll give you X number of hours for the entire year. And so we can be lumpy and you can be lumpy and you're going to still use them up. Because of our past experience, we know well enough of probably how much you're actually going to utilize business for. But so that, that's where I feel like we're, you know, we're trying to be thoughtful about that because you're right, you got to close your books every single month. If you're doing it right.
- [88:16]
Sandy
Right.
- [88:16]
Cissy
You don't necessarily have to do things every single. Now, I will say in certain industries, particularly a blue collar, gray collar, we've got HR issues pretty consistently.
- [88:25]
Sandy
Right.
- [88:25]
Cissy
So like, you know, depending on the size and depending on your leadership style or how strong or weak your managers are, we might have, I mean, we have clients that literally call us nearly every day. I mean, like, so, so it's, it really depends on the particular industry, the company, the culture, the management style. All those things add up into how much do you really need this, this, you know, what we're offering on a regular basis versus more of an ad hoc need. And so that's where we kind of have been creative about that to try and make it so that it makes sense for both sides that we're covered on our hours. But I don't care if you use them in June or January, like, like use them whenever and we're going to be there for you no matter what. To make sure that you're taken care of through whatever challenge comes up, no matter the timing of that, because we can't predict it.
- [89:08]
Marcy LaRoche
Great. Marcy, just two more questions, then I'll let you go. This is just wonderful. Thank you so much for all this.
- [89:14]
Cissy
Thank you.
- [89:15]
Marcy LaRoche
Kind of related, so I'll just kind of blend these questions into 1. Ish. I think you said that you're not trying to do any of the service delivery. You are doing sales, you are doing marketing. So you do, you are forward facing or outward facing, you're the face of the business. But any of the. And I guess maybe, maybe you said you do a couple of project, you'll do project stuff here and there, but for the most part you are trying to work on the business, not in it. Even though you have the expertise to do, to do some of the actual service delivery. But mostly that's your vision. Here is just your, your two W2s do all the work, generate all the revenue, essentially. Right? Okay.
- [89:54]
Cissy
Yes.
- [89:55]
Marcy LaRoche
And, but you do know the industry really well. Really well. So, so the, the question is for all the people listening who might be intrigued by this business, could they buy this business, could they buy this business without an HR background?
- [90:15]
Cissy
Of course. Yeah, I don't, I don't want to, you know, like, there's nothing, something so unique about what we're doing or about HR that couldn't mean that somebody couldn't learn along the way or figure things out.
- [90:26]
Will Smith
But it is, it is, it is.
- [90:28]
Marcy LaRoche
A, a deep and broad field. Deeper and broader than maybe we give it credit for. I mean, you can, there, there are majors in hr. You can major in hr, can't you?
- [90:36]
Cissy
Absolutely. Yeah. And it's something, it's some, you know, some very rigid accreditations. Yeah, no, I think they're, you know, so it's not the HR part of it that I would say. It's the, the running the business part of it.
- [90:46]
Sandy
It.
- [90:46]
Cissy
I think a lot smart people could figure that out. Where I think I have an unfair advantage is that, you know, I can understand, like, I can look through the emails that Cissy and Jackie are responding to clients and, and like know exactly what's going on and understand and not feel like, gosh, did they do that?
- [91:04]
Marcy LaRoche
Right, right.
- [91:05]
Cissy
I would never doubt them anyway because they're extraordinary. So, like, I don't remember. That's never why I'm looking at the email. Usually I'm just curious as to what the topics are that people are asking about. And, you know, it's kind of seeing if there's any trends going on or things along that nature. And there's some, some clients where I'm always just kind of interested for them personally because I'm just want to make sure that they're getting taken care of from, not from our perspective but like what's going on in their lives. So when I talk to them, I know, I know what HR issues they've got going on. But I think that, yeah, I think I have a pretty unfair advantage from that perspective. I also have an unfair advantage in that I know what I want and what makes a really good HR consultant. So building my team, I think I, you know, I, I, I very much have, have the ability to, to see and know what it takes to deliver at the level that I'm looking to deliver to our clients because there's a lot of HR people out there, a lot of them are extraordinary. Some of them would not be able to cut it and, and what we're doing and how to the standard that I want to do it at. And I think, you know, these partnerships, these relationships, of course, again, like a smart, another smart person could come in here and I think figure these things out. But I, I, I believe, I think part of, and part of this is from coming in and running Makai HR in Hawaii. And part of this is just, you know, like my mentor Dustin, like he always says, do no harm. Like I think I knew enough about having come into another business and running it successfully and having an exit up to like not do a bunch of crazy stuff on day one here. And you know, I hear some of the stories from your things. I'm like, oh my God, I can't believe they did that on week one. But they did it and they just fixed up successful with it. But like for me, I, I didn't make a lot of changes for the first three months. I really wanted to understand like how much different was this from Makai, what, you know, like, and I think because I had so much industry knowledge I could, it didn't necessarily accelerate things but like I got to the heart of the matter a little bit better. I don't have to test a bunch of stuff. Like I really understand it and, and I allowed for some space and for the transition to go really well. And then as I made changes, they weren't client facing things along, they should just internal things. We implemented a CRM, we got the generative AI technology hired Jackie.
- [93:04]
Sandy
Right.
- [93:04]
Cissy
Like those types of things, things I feel like I have heard and I've seen other folks that didn't know the industry as well and they come in and then they make a lot of changes in the real. Oh shoot. You know, like, you know, maybe, maybe I should have done like I kind of know what we need to do and when we need to do it and I can decide, you know, with Jackie and Sissy's input, like the timeline for those types of things. So I think that's, that makes it easier for me. But you know, I don't want to give the impression that this is impossible. I think the real key thing for me was that, that Sandy was not delivering a ton of day to day client delivery. The projects were going to the, to see in the 1099s. I mean he was taking calls and stuff but like they were taking the vast majority of the calls and the emails. So like I wasn't coming in and then having to replace somebody who was a full time consultant. That is really, really unique in HR consulting firms. Really unique, especially small ones.
- [93:55]
Sandy
Right.
- [93:55]
Cissy
They're usually solopreneurs that then have built a small team and they, you know, get more clients. They have a, a very small team that's part of it. But they like, I mean the name is on his, you know, I have the name on the company for Sandy C. But like a lot of the clients that we interacted with were like, okay, I've already been working with Cissy for the last five years. No problem, you know, like it's no big deal. And then they knew Jackie from before. Oh, Jackie's back. Great, great. No problem. You know, like it wasn't like, gosh, I talked to Sandy every day and he did all this project work for me. What am I going to do now that he's gone? That is not normal in HR consulting. So I think that's the key, more of a key thing here Will of folks that are looking, if they're looking in this space place to acquire is if they especially in the smaller ones. Financially it won't make a lot of sense for you to hire like a GM or a leader or something like that. You're going to have to do it and you're going to have to deliver. And that's just something that I didn't want to do and I really lucked out with this particular business that I don't have to be in the day to day with our clients delivering because I've got two fantastic people that are taking care of it and we, as we grow, we will add to that list and then I will be focused like you said. On actually running the business and growing the business and not client delivery on a day to day basis.
- [94:57]
Marcy LaRoche
I think it says a lot about the robustness of this business that you had a seller who was not doing well. I gather he wasn't super active period. But in particular he, he basically was working on the business, not in the business. And yet it was a one person business with a bunch of contractors that he, that it was that, you know, that the business can, can, can, can perform with such a small footprint and still be delivering real value. Do, do you know what I mean? You know, you'd never get to. Well, maybe I'm wrong, but I would think that you just wouldn't be able to have an owner kind of step out like that in a blue collar business until it was much larger. And maybe wrong.
- [95:41]
Cissy
I agree, I agree. I think that's why this is such a unique, a unique deal. Like I think in, in, in most scenarios even, you know, God, I, I'm trying to think. And I talked to other, as I was looking at this deal, I was talking to other people who own HR consulting firms in other parts of the country and you know, even at like 2, 3, $4 million in revenue, like they're still delivering on the client delivery side. Like I'm just like, oh my gosh, you know, So I think it's, I think I just walked into, I just really, really lucked out with this really unique kind of mix of things. Things that it was really small, but he wasn't doing a lot of the delivery. Yeah. So I, I think, I think that is not what you're typically going to find if you're out there looking. And frankly, you know, I, I have been looking at other HR consulting firms and potential acquisitions not, not as a full time job, but if something comes across my desk, I take a look at it. And most of the time either they are way too into actually consulting or it's actually staff firm. Like a sheep with wolf's clothing.
- [96:40]
Sandy
Right.
- [96:40]
Cissy
Or wolf with sheep's clothing, right. Like as a staffing firm disguised as an HR consulting firm. And I don't want to do staffing particularly so they're not the right fits for me. But most of the time it's because like, gosh, what am I buying if I'm, if you, if you're delivering all the things as the owner of this company, like how, how would we make that transition? I know people that do it, but like, I don't know that that's something that I wouldn't have done. That on my very first acquisition, maybe in a tie in like I'm potentially doing as another acquisition, maybe someday that would be make it easier to build in because we're building a little bit of a platform in that regard. But as my first acquisition that wouldn't have made sense for me to do it all. That would go back to your point earlier of like then just go build it from square from scratch by myself if I'm gonna have to do this anyway if I'm gonna have to re resell all these clients because you know, Sally's no longer their HR person. As the owner of the business, I didn't have to do that with, with Sandy and this company. So I think that made it very unique for the size and the type of business that we're in, in this industry.
- [97:38]
Marcy LaRoche
Marcy, thank you again for such a thorough interview. I, I love the business. I love what you bring to it. I love your enthusiasm.
- [97:46]
Cissy
Thank you.
- [97:47]
Marcy LaRoche
Put your LinkedIn. Is that the best way for people to reach out?
- [97:50]
Cissy
Yeah, absolutely. I also give my email address, it's Marcy M A R C I C S C A Y dot us and you can go on our website we work with a number of different people that are searchers with their pre, you know, prior to closing to do some due diligence but mostly afterwards of like okay, I bought this business, now what do I need to do from an HR perspective? So we work with quite a few from that perspective. So yeah, if there's anybody out there that's interested in and you know, learning more about that, we're happy to do that. But yeah, but I also just love to talk to other people who are searching and that's, this is a real passion of mine. I'm investing back in searchers now. Like it's just, you know, I obviously, I believe in this model. I put my own money behind it. So I'm excited to you know, continue to see this. So I appreciate what will all that you do to help with the, with you know, growing the awareness and, and helping people feel empowered to do this. I, you know, I just, I just feel like I'm on absolutely the right path for me in my life and so I just appreciate everybody's support and accomplishing that and happy to pass that forward however I can.
- [98:46]
Marcy LaRoche
The URL was S E A Y.
- [98:49]
Cissy
Us that's for the, that's for our email or this is a 60 year old company. So our homepage is, is C H R S a y h r.com s.
- [98:59]
Marcy LaRoche
A y h r.com Yep, that's our website. Y Y right. Marcy Laroch, thank you for coming on.
- [99:06]
Cissy
Thank you. Will appreciate it.
- [99:08]
Marcy LaRoche
Hope you enjoyed that interview.
- [99:10]
Will Smith
Don't forget to subscribe to the Acquiring Minds newsletter. We send an email for every episode.
- [99:15]
Marcy LaRoche
With an introduction to the interview, a.
- [99:18]
Will Smith
Link to the video version on YouTube, and soon, key takeaways, numbers and more essentials from the interview. For those of you who don't have time to listen or watch it, subscribe at acquiringminds Co. You'll also find all our webinars there on the website, both those we have coming up and recordings of past webinars. At this point, There are over 30 webinar recordings, a wealth of information on all the technical nitty gritty of buying a business. Acquiringminds Co.