Scaling a Tiny Acquisition to a PE-Backed Exit

Summary

Acquiring Minds Podcast: Scaling a Tiny Acquisition to a PE-Backed Exit

Episode Overview Title: Scaling a Tiny Acquisition to a PE-Backed Exit
Host: Will Smith
Guest: Phil Miller, Founder and CEO of Pawville
Release Date: July 3, 2025
Description: In this episode, Phil Miller shares his entrepreneurial journey of acquiring and scaling a struggling pet supplies store into an 11-location regional brand, culminating in a partnership with private equity-backed Wagway.

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1. Introduction to Phil Miller and Pawville’s Genesis (00:00 - 04:20)

Will Smith introduces Phil Miller, highlighting his remarkable transformation of a single $100,000 pet supplies store into Pawville, an established brand with 11 locations. Phil’s keen eye for underutilized space and strategic zoning played a critical role in this growth.

Notable Quote:
"I saw that the store had a ton of underutilized space that could be monetized with pet boarding, pet grooming. I jumped in and bought it."
— Phil Miller (00:00)

2. Phil’s Early Entrepreneurial Ventures and Real Estate Challenges (04:20 - 10:25)

Phil recounts his initial foray into real estate influenced by Rich Dad, Poor Dad. Despite saving $50,000, external challenges, including community resistance and property mishaps, led to financial losses. His experience on cruise ships as a port and shopping guide, where he earned commissions, reinforced his entrepreneurial spirit.

Notable Quote:
"I lost all the money I had saved up on cruise ships. However, I still had my credit intact and a little bit of dignity left."
— Phil Miller (06:16)

3. Pivoting to Pet Boarding: The Birth of Pawville (10:25 - 16:17)

Phil’s wife, working as a vet tech, introduced him to the pet boarding industry. Despite lacking prior experience with pets, Phil was inspired to explore this sector. A rudimentary pro forma gave him the confidence to acquire a pet-related business, focusing on zoning advantages and potential revenue streams.

Notable Quote:
"Even though it was incredibly off, what was important was that it gave me the confidence to take that first step."
— Phil Miller (11:08)

4. Overcoming Early Financial Struggles and Building Resilience (16:17 - 27:11)

The initial acquisition in 2006 was fraught with challenges, including prolonged construction and personal financial strain. Phil shares poignant moments, such as choosing to prioritize the commercial mortgage over his house and finding solace and strength in caring for dogs.

Notable Quote:
"Those dogs were my salvation in many cases. They helped me through the most challenging times."
— Phil Miller (24:49)

5. Scaling Through Strategic Acquisitions (27:11 - 48:55)

After moving to North Carolina in 2012, Phil transitioned from a micromanager to an absentee owner, fostering systems and trusting his team. This shift enabled rapid scaling, acquiring multiple locations through partnerships like Store Capital’s sale-leaseback model. Phil emphasizes the importance of asymmetric information and continuous learning in identifying and capitalizing on undervalued businesses.

Notable Quote:
"I developed an asymmetric information advantage where we could do things much better than mom and pops in many regards."
— Phil Miller (36:28)

6. Capital Allocation and Real Estate Strategy (48:55 - 65:53)

Phil discusses the pivotal decision to separate real estate from business operations, partnering with Store Capital for sale-leasebacks. This strategy unlocked significant capital without diluting ownership, allowing for aggressive expansion. He highlights the opportunity cost of holding real estate and the benefits of focusing capital on business growth.

Notable Quote:
"By partnering with them, I could acquire multiple locations without being tied down by real estate ownership."
— Phil Miller (61:39)

7. Transitioning to Private Equity with Wagway (65:53 - 95:41)

As growth accelerated, Phil sought equity partners to sustain the expansion rate. Partnering with Access Holdings and Wagway brought professional expertise and resources, enhancing back-office operations and marketing efforts. Despite initial challenges and emotional hurdles, this partnership provided Phil with the support needed to scale further.

Notable Quote:
"Having a true VP of HR and a CFO has been amazing. They handle the back office, allowing me to focus on operational culture."
— Phil Miller (105:02)

8. Lessons on Franchising vs. Strategic Acquisitions (95:41 - 103:07)

Phil critiques the franchising model in the pet services industry, arguing that the ongoing royalty fees do not translate into substantial brand value or competitive advantages. Instead, he advocates for strategic acquisitions that leverage economies of scale and regional brand recognition, positioning Pawville as a superior offering.

Notable Quote:
"Franchises are going to be the first to topple because they pay 8% royalties without gaining significant competitive advantages."
— Phil Miller (101:48)

9. Navigating the Private Equity Partnership (103:07 - 107:30)

Phil shares the complexities of integrating with Wagway, emphasizing the importance of mutual respect and aligning visions. Despite the initial "fetal position moments," Phil celebrates the ongoing partnership and the value Wagway has brought to Pawville, particularly in professionalizing operations and implementing effective marketing strategies.

Notable Quote:
"Scott Butts has been my saving grace throughout this whole process. He understands our vision and supports our growth."
— Phil Miller (95:41)

10. Final Insights and Future Outlook (107:30 - End)

Concluding the episode, Phil reflects on the cyclical nature of business acquisitions and the evolving dynamics with larger players. He underscores the necessity of continuous adaptation, learning, and maintaining a strong company culture to sustain growth and navigate partnerships with private equity firms.

Notable Quote:
"Turnaround and a lean startup approach are inextricably linked. Those early challenges transformed who I am as a person."
— Phil Miller (54:52)

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Key Takeaways

• Strategic Acquisitions: Focus on acquiring businesses with growth potential rather than just existing revenue figures.
• Capital Allocation: Separating real estate from business operations can unlock significant capital for expansion.
• Asymmetric Information: Gaining unique industry insights leads to competitive advantages and better investment decisions.
• Private Equity Partnerships: Aligning with the right equity partners can professionalize operations and accelerate growth, despite initial challenges.
• Franchising Limitations: In certain industries, franchises may not offer the ongoing value needed to justify their costs compared to strategic acquisitions.

Final Thoughts

Phil Miller’s journey exemplifies the transformative power of strategic acquisitions and effective capital management. His ability to identify undervalued opportunities, coupled with the support of strategic partners like Wagway, underscores the importance of adaptability and continuous learning in acquisition entrepreneurship.

Connect with Phil Miller: LinkedIn Profile
Subscribe to Acquiring Minds Newsletter: acquiringminds.co

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Note: Some sections containing promotional content and advertisements have been omitted to focus solely on the core discussion between Will Smith and Phil Miller.

Transcript

[Host]

Today's guest bought a tiny struggling pet supplies store doing just a hundred thousand dollars in sales. But Phil Miller had a nose for value. He saw that the store had a ton of underutilized space that could be monetized with pet boarding, pet grooming. He also understood that being zoned for pet boarding was precious and and this business was so zoned he jumped in and bought it. That was back in 2006. Eighteen years later in 2024, Phil had grown to 11 locations, two of them pet hospitals and Pawville was an established regional brand. Private equity came knocking and Paville became the platform for PE backed Wagway. Now, 18 years is a long time, yes, but note While it took 14 years to get to three locations, the next eight locations came in only four years from 2020 to 2024. Listen for how Phil unlocked growth when he shifted from owner of the physical locations to tenant. This is a lesson in capital allocation. Always be asking, is there a better use of the capital your business has locked up in real estate? Probably. Also listen for the theme of turning around existing mom and pops and how dare I say, easy it is if you are an experienced, competent operator from the same industry. Okay, Please enjoy this conversation with Phil Miller, Founder and CEO of Pawville. Welcome to Acquiring Minds, a podcast about buying businesses.

[Will Smith]

My name is Will Smith.

[Host]

Acquiring an existing business is an awesome opportunity for many entrepreneurs, and on this podcast I talk to the people who do it. Running payroll, paying your bills, closing your.

[Will Smith]

Books and producing financials.

[Host]

These are critical tasks every business owner must do or oversee, but spending time on them distracts you from the leadership in growth work you want to do. So let system 6 do it for you. Owned and led by a former Searcher, Chris Williams, System 6 is a leading outsourced finance team for hundreds of SMBs, including over 50 searcher acquired businesses. Chris, Tim and the System 6 team understand firsthand the challenges the opportunities of jumping into a business as its new owner. So whether you own your business already or have one under LOI, talk to System 6 about how they can give you time back and improve your financial operations. Mention Acquiring Minds and they'll provide a free review of your books and Financial Ops, a $500 value. Check out system6.com, link in the show notes or email helloystem6.com Phil Miller welcome to Acquiring Minds.

[Phil Miller]

Thank you. It's an honor. I am a listener of course, and I have enjoyed the fact that it is a very prolific podcast. I've worked through a lot of them.

[Will Smith]

I love it Phil, thank you for saying that. Well, you are the founder of Paville, a very successful brick and mortar pet brand. We'll get more specific. And one that sold to private equity, partnered with private equity last year. 2024 is when it closed, correct? Or was it this? Was it? Okay, so the Paulville empire actually began back in 2007 when. With your own acquisition of the first location. So this is an ETA story and a wonderful one. Take us back there, Phil. 2005, 6, 7. Time frame, what were you doing? What led you to buy that first business?

[Phil Miller]

Okay, so around that time frame, what I was doing was I was working on cruise ships, hosting lectures and seminars about upcoming ports of call. I knew I wanted to. To get into some kind of business, and. And so I was just saving money. I had no idea what kind of business I wanted to get into during that time. Then I read Rich Dad, Poor dad, and for the first time, my mind was opened up to cash flow. This incredible concept to me, which is. It seems so elementary now, but it was. It was this wonderful. This wonderful concept. So I started off going in with this rich dad, poor dad mentality of buying real estate, right? And so I. The only place, you know, real estate, the real estate market was. Was really trending up at that time. The only place I could afford to get in and purchase was. I was in Florida at the time, was in the south side of St. Pete. Not the best part of town to be buying a rental property in. And I was. I wouldn't say I was really welcome coming in there and. And fixing up properties and trying to. To try to generate some cash flow and. And, you know, I got up to two properties, ultimately had one of. One of my properties almost got burned down with them trying to send me a message that. That I. That I wasn't welcome because they thought I had called the police. So, very, very interesting, colorful story backstory there. But. But ultimately what ended up happening with that is, is I lost all the money I had saved up on cruise ships. However, I still had my credit. It was still intact at that time, and I had just a little bit of dignity left, so.

[Will Smith]

And how much cash had you invested in this real estate venture?

[Phil Miller]

I had. I think I had saved about 50, 60,000. But to jump into it at the time, I actually. I actually really focused on paying down student loans. And in hindsight, maybe I shouldn't have been as focused on that because that was some really low interest debt. In hindsight, I should have kept those student loans and injected more into business Ventures. But having said all of that, my only option was to go back out on cruise ships. So I had to save money. And you know, cruise ships were a great place for me to save money because you have, you're out at sea, you have, and there are, you know, six, seven, eight month contract. So during that time you have very little to spend money on. You don't have a car, you don't have to pay for housing. And, and the interesting thing is I was actually looking at cruise ships or going into the military. I almost went into the Navy because I viewed both of these as paths to escape the rat race, escape the monthly bills piling up and, and just try to save.

[Will Smith]

So, but I imagine working on a cruise ship doesn't pay great. Yes, you don't have expenses, but on the other side of the ledger it's, you're also not earning a lot.

[Phil Miller]

So the position. So starting out I was working as I got my undergrad to be a teacher. So starting out I was a youth staff. So we, we made almost nothing even back then. However, in my time on ships, I discovered that there are a few people that are making money on cruise ships. One is the art auctioneer, another one is, you know, any of the officers. But I wasn't of the right nationality to be an officer on cruise ships. But another one was the port and shopping guide. And that's. What do you mean?

[Will Smith]

Sorry, Phil, what? You weren't the right nationality? What do you mean?

[Phil Miller]

Well, on Carnival, for example, they're almost.

[Will Smith]

All Italian officers because an Italian corporation, they're all basically.

[Phil Miller]

Oh, no. Oh, it's very interesting. So now on, if you go on most of these ships, there's a lot of either, you know, Italian officers, like on Costa Cruise Lines, on Carnival, I think on Norwegian, there are a decent number of, of Norwegian officers, a decent amount of Brits, but almost no Americans working on cruise ships anymore, even though they are mostly owned by American companies.

[Co-Host]

Yeah.

[Phil Miller]

And then throughout, most of the ranks of the real folks that are on the ground getting the work done on cruise ships are mostly Filipino, Indonesian, some of these folks from third world countries that work incredibly hard.

[Co-Host]

They're incredible people. Yeah. Okay.

[Phil Miller]

So I discovered, okay, Port and shopping guide is one of these positions where I can make a decent amount of money and then just put it all away. So I, you know, hosting lectures and seminars about upcoming ports of call, I would get commissions from the items purchased by, by the cruise ship passengers at my recommended shops and stores. So when they bought a Rolex, then when they Bought diamonds. I ultimately received a little bit of a commission on every single one of those transactions. So it was. Yeah, yeah, it was a great opportunity to save money.

[Will Smith]

Well, and it sounds like a great gig, too, by the way. How fun.

[Phil Miller]

I had so much fun. And that's actually how I met my wife, who was also an important part of this story, because as she will remind me to this day, she is the one that gave me the idea for the business. So she takes 100% of the credit because she did that. So she was a passenger. Now, you're not supposed to date passengers on cruise ships, but she was exquisite. I. And. And so I. I went there, and I did not regret it.

[Co-Host]

You went there?

[Will Smith]

We.

[Phil Miller]

She actually then ended up joining me on cruise ships. And she would model jewelry while I would go out. While I would be doing my shopping talks, she would walk around the audience modeling, dripping in jewelry modeling. You know, these.

[Will Smith]

Wow.

[Co-Host]

Yeah.

[Phil Miller]

20 tens of thousands of dollars worth of jewelry.

[Co-Host]

Yeah.

[Will Smith]

And you. And you quit all this to go buy a business? Phil, I'm scratching my head, but go ahead. No, it sounds like an amazing life. Continue.

[Phil Miller]

Yeah, it's an amazing life for a while, but you can only do it for so long before you start things like. Like going to a movie that. That we all take for granted. Or driving a car that we all take these things for granted, but you start to miss them.

[Co-Host]

Yeah.

[Phil Miller]

And it's a good gig for a single guy, but, you know, especially married, wanting to eventually have kids, it's not.

[Will Smith]

Sure, it's not as good no more. No, it's a. It's a clear. It's clearly a young person's kind of gig.

[Co-Host]

Yeah. Yeah.

[Phil Miller]

So. So we. So here we had to go back out, save up more money. And this was around the time my wife said, well, you know, she was. She was working as a vet tech. She started off working in the boarding kennel for the vet she worked for. She said, well, what about the boarding industry? I knew nothing about it growing up. Our dog was. Was mostly an outside dog that ate whatever it could, including the neighbor's chickens. And so I had. I had very, very little experience with animals. I was baffled the first time I saw a dog playing with toys. And so. But she introduced me to the world of pets. And she said, well, look, I think there maybe let's. Let's give the boarding kennels thing a shot. So I ran the numbers. In hindsight, I would love to go back and look at that rudimentary pro forma. I put Together, because I think I had maybe 5, 5 expense items compared to the maybe 100, 100 expense items we have now. But, but what was important is, even though it was, it was, it was incredibly off, what was important is that it gave me the confidence to take that first step. I believed it.

[Will Smith]

And to be clear, Phil, your wife had said, when she said, why not look at this industry, she meant why not buy a business in this industry.

[Phil Miller]

Correct. Because she knew I wanted to buy some kind of business.

[Will Smith]

And, and, and by the way, where did that come from? Your, your notion of buying a business or her notion of buying a business? Why buy a business as opposed to any, you know, anything else?

[Phil Miller]

Yeah, that's a good question. So, you know, I, I already was introduced through, you know, the rich dad, poor dad real estate thing. I quickly realized, you know what, maybe there's not much money in real estate. Then I kind of started going farther and farther down this slippery slope where I started looking at storage units. In hindsight, that would have been a great time to get into storage units as well, but I could not afford that. So I was looking. Then I started continuing down this slippery slope of heading into businesses. And then I was like, well, what if I can find some real estate with an attached business that the cash flows. Well, because it was just all about cash flow. And I was completely enamored with the idea of working for myself the rest of my life. I knew that's what I was going to do. There was just no question about it.

[Co-Host]

Great. Okay. Yeah.

[Phil Miller]

So.

[Will Smith]

So this pro forma, rudimentary though it was, gave you the confidence to go search for such a business.

[Co-Host]

Correct, correct.

[Phil Miller]

And that search first took place in where we were living, living in Citrus County, Florida. I wasn't necessarily looking for a, a pet related business to acquire. There were only a couple of them in that county. I was very focused on zoning. Zoning is very, very problematic in our industry with trying to acquire a new location. So I was kind of walking up and down this street where I knew these businesses had the correct kind of zoning. I saw one that was pet related and I said, well, let me start there first. It happened to be a, a pet retail operation with an unutilized grooming shop because according to the previous owner, groomers are a nightmare and the employees who groom are nightmares. Correct, Correct. And it also had. The back half of the building was a 5,000 square foot building. The front half was retail, the back half was a underutilized warehouse. I thought, man, that's that 2500 square feet. That's my kennel. This is, this is where we can do that. I'll keep doing the retail thing. And we are.

[Will Smith]

And had the previous owner, did he not have opinions on boarding? Why, if he had thought about grooming, why hadn't he thought about boarding?

[Phil Miller]

He. He did not. He was, he was very much focused on retail. Very much. That was his game. I remember at the time that business was generating 100,000, and I remember my wife saying to me, man, do you think we can eventually get our business to the point where it generates 100,000 in revenue? And I said, no, I believe I think we can do it. Which is so funny to think back on now, but.

[Will Smith]

So this business was doing 100 in revenue.

[Phil Miller]

That's it.

[Co-Host]

Yeah.

[Phil Miller]

So we were essentially, we. We were essentially buying the building, we were buying the real estate. There was no value in the business. He was working the desk himself. He was getting kind of buying in bulk, you know, for really cheap. Just barely making enough to just pay him something. It was, it was remarkable that he was able to even do it.

[Will Smith]

Yeah, no kidding.

[Co-Host]

Yeah, yeah.

[Will Smith]

So, but you have the first of all. So there's this key insight, was this underutilized square footage where you can tack on an. Or launch an entirely new business unit. Boarding. Kennel. Right, kennel. And so that was your thesis of this particular investment, if you will.

[Co-Host]

Yeah.

[Phil Miller]

And to use that, that grooming shop, that was, that was not being utilized at all. So from my vantage point, I thought, well, well, I can do at least 100k in retail and. And add in two more streams of revenue between boarding and grooming.

[Will Smith]

Sure, Very. Makes a lot of sense. And to be clear, this was zoned. This real estate was zoned to. To enable all this. And that zoning is quite permissible. Zoning is scarce in this industry, Correct?

[Co-Host]

Correct. Yeah.

[Phil Miller]

In nearly every municipality in which we look. And getting more and more scarce.

[Host]

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.

[Will Smith]

Into CEO and owner of the business you bought. The link to download it is in the show notes.

[Host]

Aspen is a professional employer organization or peo, run by a searcher for searchers. Search fund veteran Mark Sinatra runs the.

[Will Smith]

Company which provides HR compliance, flawless payroll.

[Host]

Fortune 500 caliber benefits and HR due diligence support for your acquisition, all for.

[Will Smith]

A fraction of the cost.

[Host]

Go to aspenhr.com or contact Mark [e-mail].

[Phil Miller]

We acquired it at the end of 2006, but we really got it up and going in 2007. So early 2007 is when we launched into construction. I assumed that construction process to get it where it needed to be. On the kennel side of things, I assumed that process was going to take us, you know, three months. Well, six months later, it was still dragging on. We had no jobs. We were just kind of living off money I had saved, and my. For our first child was just born. So all of a sudden, my wife was completely out of commission trying to take care of our daughter, and I was. They're in the trenches trying to get this thing up and going, so.

[Will Smith]

And Phil, before. Before you continue, is there anything to learn from the transaction? I know it's now 18 years ago, but. So I'm not going to ask for the, the numbers or anything, but anything like, did you buy. Well, how did you value that first business? Let's, let's at least learn that, yeah, it was purely the real estate. Basically the comps on the real estate, it was.

[Phil Miller]

It was purely the real estate. So. But I can tell you, you know, we bought that first location for $300,000. So an interesting little anecdote about that number. We. We hired a groomer. She came in with a decent amount of experience. I learned later from her that she, two years prior, had inherited 300,000 that she had quickly kind of run through, and there was. There was nothing left. What I found to be fascinating is that I had saved about 50,000. It was enough for a down payment that was back in the Wild west, pre mortgage meltdown. So I was able to get almost all of that financed, I think, and it wasn't even sba. It was just a traditional loan. So what I found to be fascinating was that two years prior, if you would have said, which one of these two people is most well equipped to come in and do this, it would have been her. She had $300,000 in experience. I had $50,000 and unbridled temerity. And it turns out the latter is far more important for going out there and getting these things done. It's kind of been the theme here for me where, you know, and I see if I can just kind of share this.

[Will Smith]

Yeah, I love this.

[Phil Miller]

I recently had a. A friend that came and visited. He. He did not know what he was, what he was not capable of. He had this landscaping business. And then he said, you know what? I'm going to. I'm going to jump into the pool business. I'M we're going to start putting in, in ground pools. And me and everyone around him is saying, but what do you know about pools? I don't know anything about pools. I'm going to figure it out. And, and he did it. He just did it. And I love this story. And he was more ready to jump in and do things than me. I was trying to pull him back, but it turns out that, that willingness to just jump in and say I'm going to do it turns out that is a huge part of success.

[Will Smith]

That is such a. We can stop the interview now, Phil. That was, yeah, that was the gold nugget. It's such an important point. And, and I think you're talking to an entrepreneurial audience. So I think many entrepreneurs have, have a bit of that. That's almost definitional to entrepreneurship.

[Co-Host]

Yeah.

[Will Smith]

But it's still really important to, to call out and, and even for those of us who are entrepreneurs, we're on a spectrum. And it sounds like, you know, your friend was at an extreme end of the spectrum. And the further you can be to, to that end where not to be reckless necessarily, but just to have the self confidence that you'll figure something out and to dive in is very powerful. Very, very powerful.

[Phil Miller]

And just to be clear, there is a spectrum there where he was trending more towards reckless and, and I've kind of lost track lately.

[Co-Host]

But I.

[Will Smith]

He's out of business.

[Co-Host]

Now.

[Phil Miller]

There is no doubt in my mind that that guy is out there working some kind of business. No doubt about it. But it's just, it's just, it was so instructional for me to see. Man, you, you just need the, the con, the, the confidence, false confidence or not, and the work ethic. And man, you can do a lot of.

[Will Smith]

Yeah, that's very true.

[Co-Host]

Yeah. Yeah.

[Will Smith]

And, and yeah, it's great. Okay, pick us back up. So, so you, so you basically bought the real estate. You could do it at pretty favorable terms because this was 2006 before the whole economy was brought to its knees by loose lending in real estate.

[Co-Host]

Right, right.

[Will Smith]

And you think you're going to be able to, to renovate or to, to build out this, this boarding facility in the back half of the building in three months. Six months later, still not operative. Wife is no longer bringing in income because she's got your little baby daughter at home.

[Co-Host]

Yep. Yep.

[Phil Miller]

So we really started to go under, went deep into credit card debt and I mean deep 100k plus and eventually hit the point where I had to choose am I going to make the mortgage payment on this commercial building or on my house. And I chose that building because by this time I could see. I, I think this thing is going to work. I think it's going to work. We were just starting to get some customers coming in. We, we were starting to pick up some momentum. So. But those moments that, that was. And we couldn't afford to hire anyone. So our industry, it's a seven day a week industry, it's a 12 and 12 hours a day because the dogs need to be. Whether you're open or not, whether it's Christmas day or not, those dogs need to be taken care of. They need to be fed, they need to go outside, you know, all of the things. And so those were those early days. Those were my fetal position moments, you know, between a newborn daughter, Debt collectors calling.

[Co-Host]

Wow.

[Phil Miller]

Me trying to explain to them. I remember one debt collector, actually, this is the only time this ever happened. But I remember one feeling bad for me. I was trying to explain to him why I couldn't pay my obligation. And by the way, I felt awful about it. Yeah. I was explaining to him why I couldn't. My daughter was crying in the, in the backseat and he, he broke and he said, you know what, sir, you have enough on your plate. You're okay.

[Co-Host]

Wow.

[Phil Miller]

And of course, his company didn't, didn't take that approach. But, but that one individual guy, he saw me as a human in that moment. And, and I remember, you know, with all those long days there at the, at the kennel taking care of these dogs, and I remember those dogs were my salvation in many cases. I remember talking to, literally having conversations with, with golden retrievers, because golden retrievers are by far the best listeners out there amongst all. I remember this one just sat there just staring at me and I told him my problems and, and you know, but, but moments like. So I think back on that, and while I never ever want to go back and do anything remotely like that again, it, it made me. It felt like it genetically transformed who I am as a person. It gave me so much more strength to deal with future adversity that would come.

[Co-Host]

Yeah.

[Phil Miller]

And I think it's like that where you. Fetal position moments. I think it feels like they change your DNA almost when you come out of them. They, they either break you or they make you stronger, but they don't leave you the same.

[Co-Host]

Yeah. Yeah.

[Will Smith]

Well said. And, and I think, you know, that that's probably true of most of life's challenges. That, that you, you emerge stronger if you survive. It, but, but certainly in our, in our world, in those fetal moments.

[Co-Host]

Yeah. Yeah.

[Will Smith]

Very powerful.

[Co-Host]

Wow.

[Will Smith]

I, I guess the, in addition to the golden retrievers and the, the debt collectors giving you grace, it was also very beneficial to have a supportive wife. You guys were in this together. This was not a case where she had needed to be convinced. You guys went into this venture basically together. Indeed. She actually kind of gave you the idea.

[Phil Miller]

Yeah.

[Will Smith]

So that's a good thing because at least it's like you're not, you don't feel like you're, you know, your wife didn't want you to do this in the first place.

[Phil Miller]

Oh, she was incredibly supportive. And back then, you know, we were so young, especially her. She's very risk averse now, but back then we had nothing. And it's relatively easy to jump in and take risks when you don't really have much to begin with. And so she was very supportive. And then as soon as my daughter got to the age where we could take her out of the house, we actually created a little living room there in that building where we, where she could come and one of the two of us could watch our daughter while the other one was working. And that was, that was amazing. I felt like, man, this is, this couldn't be better. Because she was like, oh, you're, oh, you'll watch our daughter. Amazing. And I'm like, you'll watch these dogs. Amazing. We both had a lot of our portion of the, yeah.

[Co-Host]

Of our side of it. Yeah.

[Will Smith]

Well, Phil, we could, I mean this is an 18 year story and you're a wonderful storyteller. We could, I need to keep us on on time here. We could get sidetracked at many points along the way. This is what I would like to do. I'd like for you to tell us where you ended the journey. Kind of size of, of Paville. And then what we'll do is we'll go through some of the key acquisitions and what, or some of the acquisitions and the key learnings from those acquisitions because of course, each of those is a story unto itself. But there's a few acquisitions or, or lessons that you learned in certain acquisitions that really, that really emerge as really pivotal lessons in your journey. I, I, I gathered from the, from the pre call. So let's, let's again tell, tell us where this whole journey ended. Just as you exited to PRI or when you exited to PRI Private Equity. What did Paw Patrol look. Paw Patrol. I have a four year old daughter.

[Phil Miller]

I can tell Paulville.

[Will Smith]

Where did Pawville End. And then we'll work our way forward again.

[Phil Miller]

Yeah, yeah. So I have been told that I cannot give the exact numbers. So what I. But what I can say is that we ended with nine locations. Generally what we did is we built them up to 1 to 2 million revenue. Some were a little more, some were a little less, but. But generally kind of in that range. And then we also had two veterinary hospitals, both of which were. Were fairly new. So. So there. There wasn't really much in terms of profit from those two. Those were mostly startup ventures. So that's. That's kind of where we. Where we ended with at least where we started a new chapter, I should say, partnering with the private equity firm.

[Will Smith]

Great, that's. That's very helpful. You had nine locations when you partnered with private equity. We just heard the story of the first. The other eight. Seven of them were acquisitions, and one was de novo.

[Phil Miller]

Correct.

[Co-Host]

Correct. Yeah.

[Will Smith]

Okay. All right. Why don't we go through these acquisitions? I think I. And from my notes, I think the second acquisition also had a. Had a key learning or story behind it. So let's. Let's go there.

[Phil Miller]

Yes. So the second one, by this time, we'd moved up to North Carolina. So this was 2012. I.

[Will Smith]

For five years. So you ran that first location for five years before you attempted acquisition number two?

[Phil Miller]

Correct. And by the way, moving up to North Carolina and leaving it in the hands of a manager was one of the best things for my personal growth that I ever could have done. Prior to that, I was very much a micromanager. What being an absentee owner forced me to do was to develop systems, processes, stop micromanaging, learn how to incentivize people, get them to think like an owner. It was absolutely invaluable. I'd learned so much. So then.

[Will Smith]

Well, Phil, that is. I mean, we could spend countless hours on that. That is. That is such a skill to have learned and. And so. So elusive to so many small business owners. It's a very hard skill to master.

[Co-Host]

The.

[Will Smith]

The audience will be very familiar with it. Any. Any key learning about how you did that. I know it's going way back, and it's a broad topic, but anything you remember in particular that unlocked that for you?

[Phil Miller]

Yeah, I remember it being very. And all these. I know a lot of us as entrepreneurs, we go through this as we grow a business where you step away and you. It feels like you're making less money because now you're paying someone to do your job. So it's like take two steps back so that I can take three steps forward kind of thing.

[Co-Host]

Sure.

[Phil Miller]

And the other thing I would say about that experience was, as I said, I was very much a micromanager in the beginning because when you're small, you can fix every single problem. Even when you have four or five employees, you can micromanage to greatness for your little venture, have really happy, happy customers, get everything sorted out. It is so much more difficult to then grow. And now I can't be there. I can't micromanage all these things away. I now have to trust people. And what I found is that in many cases there were people that could do these things I had been doing that I thought only I could do. They could do it better than me. That was the real unlock for me. And I. And from that day forward, as I made these decisions about, okay, this is another task I have to let go. It was as we grew to about 200 employees, it was, okay, this is something I've been doing. Here's someone that can do it as well or better. I'm going to hand it off to them. And it was this perpetual handing off process as we continued to grow so that I could focus on the things that only I could do.

[Will Smith]

The handing off and the kind of perpetual handing off. You hand something off and then you refill your calendar and then again kind of go through audit your time and hand it off again, have space in your calendar, fill it and rinse and repeat. Actually, that, that is the, like one of the big themes of. Are you familiar with this one? Buy back your time. Dan Martel, you probably don't need to be because you mastered this 15 years ago. But this is the latest in like time management for entrepreneurs and basically how to delegate basically effectively. And, and so in some ways it's old, in some ways it's old news, but it's been, I mean, making the rounds. That was a gift of, from Athena Simpson to me. But so many people that I talked to are reading this book right now and, and that is the, that is the, the theme. Oh, but book one of the key themes, he says, which is a little contrary to your point, because I've, I've heard your point where you think that you're the best at everything and then you delegate and you discover, oh, I, I not, not only now do I have free time on my calendar to work on other stuff, but I wasn't the best at that anyway. There are, there are other people in the organization who could do what I was doing better anyway. But he's got this somewhat cheesy line in here that he says over and over, which is 80% done is 100% awesome, which is basically like lower your standards a little bit. As the founder, you're going to have just unrealistic standards of perfection because it's your baby, et cetera. We all know how that feels. So you just gotta accept a little bit of imperfection that it's going to be. 80% is good. What, you know, to delegate some of the stuff that you do, but that's fine and you should embrace that. And it's 100% awesome.

[Co-Host]

Yeah.

[Phil Miller]

Anyway, you know, we're very much a blue collar industry and I hear other, other owners of blue collar industries on your podcast say similar things that, that you really have to work with the team that you have and some, and you're working towards the end state. But for now, these are the people that I have let me do the best I possibly can with these people. Maybe there's even one person that I know they really need to go, but I don't have a replacement for them yet. I can't let them go yet. You know, and it's very real. This is because it's so easy to sit back as a, you know, on the sidelines and say, you know, hire slow fire fast, get them out of there, get them out of there. You know what I mean? But it's a very different thing to be running a blue collar industry, trying to, and trying to keep it all together throughout this process.

[Co-Host]

Yeah, yeah, yeah.

[Will Smith]

Great. Phil, returning to the story here. So five years moving to North Carolina was this enormous step. But by the way, over those five years, what did the business, the Florida business, business number one at that point look like?

[Phil Miller]

It, it just kept steadily growing, you know, year over year over year over year. We really focused in, and this is up until we partnered with private equity. We've, we've been very, very focused on, okay, we have very limited capital. Let's put it all back into the customer experience. So we kept kind of evolving and changing and, and growing and, and it results in this kind of steady, just organic growth. So by this time it had, you know, 50 boarding enclosures. We had actually cut down on the size of our retail to expand the size of our boarding area. And we became much more of a pet resort and much less of a, of a pet retail facility.

[Will Smith]

And do you remember what revenue was roughly after five years?

[Phil Miller]

Yeah, I think we were, we were somewhere around several hundred K. I can't. So we'd we'd, we'd gone from 100k to several hundredk. So.

[Co-Host]

Yeah. Yeah.

[Will Smith]

Okay. So acquisition number two in North Carolina.

[Phil Miller]

Yeah. So with this one, this was another one of these ones where I kind of knocked on a door in order to and said, hey, do you want to sell this building? She said, sure. Now keep in mind, at this time my credit was shot. So I had to convince them to do an owner finance. Fortunately, Marion Sidney Williams believed in me and I will always, hands down, the best folks I ever bought from. For that reason, they believed in me and were amazing and so supportive. So that one kind of, we got up and going with much less drama, of course. We'd learned so many things about how to operate and, and, but another highlight here is that we were actually operating under two separate brands. The place in Florida at the time was called Citrus Pet Resort. Surf City. It was called Surf City Pet Lodge. I still didn't at that time have this vision for a larger chain. I just thought, well, hey, new state, new brand, you know, but, but then around that time, around 2013, I'd gotten my MBA from UNC Wilmington and it was throughout of the MBA program where I started to get this vision for something bigger. What if we can build something where customers, we're booked up here, we can send them there. An employee moves across town. Great, we got a location over there. Oh, we're opening a new location over here. Let's take someone that's been very well trained from a location on the other side of the town and go over there. And. And so then the next thought was, okay, well, what do I name this thing? And I was very drawn to the idea of village or town. And I just lucked into Paulville. It's a, it's such a, such a great, no brainer kind of brand. It is, yeah. The trademark had just been abandoned. Got that. And. And we were off to the races. And what I always tell people is we are, we're much like a village. We're a place where you can get everything you need, you get that convenience. But it's also a place where you know everyone's name small enough, where you know everyone's name. So when that dog comes in, we need to be saying, bella, you're back. You know, so that, it's, that, it's that village kind of vibe.

[Host]

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[Will Smith]

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[Host]

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[Will Smith]

I do find this very interesting in our world and as we talk about growing multiple acquiring multiple businesses and certainly when a platform like yours is acquired by private equity and the implications there brand and in small business so often, first of all you're buying brand value in many cases so that's often kind of what you're buying or otherwise known as goodwill in many cases. But a lot of people like the idea of working with a hyper local mom and pop and when yet as entrepreneurs we are always drawn to making a system, to building a system, to building a big brand. We admire big brands but it does feel like we we that often something can be lost there or we'll lose a certain type of customer who prefers the mom and pop. How do you think the tension between, you know, a big brand and that there is something lost when you go, when you quote, go corporate and maybe you, maybe, maybe, maybe you just answered it that you were trying to have your cake and eat it too with, with Paville. Paville is a bigger brand but the brand is smallness. Villageness.

[Phil Miller]

Yeah. Yeah. So I would, I would say that I completely agree that, that there are some of these owner operators out there that from a standard of service level we can come close. We can have great devoted employees with a great culture but we can't quite beat them. Where can we beat them though? Well, we can certainly beat them with access to capital. And it turns out that when it comes to finding a pet resort, yes, half of it is the people but the other half of it is the facility. It doesn't matter how how friendly and how professional that owner is behind the desk. If it's a rundown facility, most of our owners are not going to take their dog there. The other thing that we can get is, is we can develop a lot. We can learn so much. We're very much and always have been a learning organization and so we, we essentially develop as we grow. We. We develop asymmetric. An asymmetric information advantage where we have tried so many different things at so many different locations and developed so many systems and processes that we can, we can do things much better than mom and pops in many, in many regards. And, or take, Take for example, you know, webcams in our daycare rooms. There are a lot of mom and pop operators that don't, don't care to or don't want to put the money into webcams, and they don't. But we can really do these things. We have the access to capital. Let's make it work. Let's focus on what are all these things we can do to build this, to build this into a really special experience to, to.

[Will Smith]

To. Basically, you can deliver a superior product. It might not have the. The folksy feel of the independent mom and pop, but. But it's fundamentally a better offering.

[Co-Host]

Right.

[Phil Miller]

And this kind of goes back to what we were talking about before with developing a culture. In the beginning, when I was that manager that micromanaged, I never thought about culture a day out of that year. Now every single day, I'm thinking about culture. I want our people to believe in us. I want them to believe in Paulville. I want them to feel like they work for a company that has integrity, a company that genuinely has the best interest of the pets in mind. Because if they believe those things are true, which they are, they are going to care. Because we hire. We hire folks that they all love animals, and we're actually hiring specifically for that. And so if we can get all of them really caring and feeling like they work for a company that cares, it's a. It's one of the best ways to build a great culture where they do the right thing because it's the right thing, and for no other reason, because it's a part of our culture.

[Will Smith]

Before we hear about acquisition number three, which I guess was your first acquisition after your epiphany that you should be building a regional brand. That second acquisition, the one in North Carolina, you walked in off the street. What were you plan. What was that business and what were you planning to do with it at this point? Did you have a playbook that you were basically a boarding business with a little bit of retail? And what was this one? Just give us a little bit more on what the actual, you know, nuts and bolts of this strategy this business was?

[Phil Miller]

Yeah. So now this one was different because coming into it, we were acquiring an existing pet boarding operation. It was very much kind of an Old school chain link and concrete kind of setup. But it was very much, we're acquiring a pet boarding operation. So we then operated it. We. We fixed it up as best we could. We didn't have much money at that time to. To be able to do much, but we. We painted the walls, got everything looking nice and fresh, and. And then it was a couple of years later, this was, I think, our first SBA loan where we were. Yes, we were able to fund the building and expanding the size of that building and remodeling and revamping it and rebranding it as Paulville at that time. So here, I think that was three years later, it was nearly twice the size and looked completely different. And then it was propelled to a much higher revenue. And that was. That was one of these moments where a light bulb went off for me, and I realized, if we can come in and really remodel and in many ways, or in many cases kind of reconfigure the layout, make things more efficient, we can have drastically different revenue. So from that day forward, as I looked at potential acquisition opportunities, I didn't look at them as, what is your revenue today? I almost didn't care what their revenue was.

[Co-Host]

Yeah.

[Phil Miller]

All I was thinking about is the size of the market and the size of the building, what I could fit into that building, how. And then. And then I could project out how much we could generate in revenue. And, oh, by the way, if they were already generating 500,000 in revenue, that's great. It's a great starting point.

[Co-Host]

Point. But.

[Phil Miller]

But now. And then we ultimately hit the point, and I may be jumping too far ahead. You're gonna. I know you. You're gonna dial me back. But we hit the point where we were generally tripling revenue from the date that we acquired these existing boarding kennel operations. We came in, remodeled, revamped, rebranded, and then, you know, three years thereafter, we. We've tripled revenue from the date we acquired it.

[Will Smith]

Incredible. Well, I. I feel like you have a. You have a knack here, Phil, for hitting on some just core. Core themes. I feel like what you just articulated is why, first of all, making multiple acquisitions in the same industry can be so powerful because you just.

[Co-Host]

You. Your.

[Will Smith]

Your knowledge is compounding. The experiments and the failures that you've had that you've run over the years are compounding. And like you said, you can. You can walk into any boarding facility, existing boarding business in the country, and identify the opportunity there and what you could do with it if you were building a Hold code, let's say across multiple industries. You wouldn't. That knowledge, you wouldn't be able to apply that knowledge across, across industries in the same way. Very powerful. And also why M and A strategies can kind of become so powerful in their own right and accelerate as well.

[Phil Miller]

Yeah, this is one of the favorite things I like to, I like to talk about. So if you'll, if you'll indulge me for a second. So I am obsessed with this idea of asymmetric information getting you asymmetric returns. And so when you drill down in an industry, you know, you, you start off in the industry and you're at an information deficit.

[Co-Host]

Right.

[Phil Miller]

You're just trying to catch up to everyone until you can hit information parity. Now I'm on, now I'm on par with everybody else, but if I can take this kind of lean startup approach, which is one of my favorite books of, of. Hey, should we, let's try this. All right, let's. Yeah, we'll try this here.

[Co-Host]

All right.

[Phil Miller]

Oh, let's try this. And we constantly have this mentality of we're always evolving, we're always growing. That's a great way to start to hit information asymmetry. And then as we add more locations, that compounds that information asymmetry. So we, we're now in a variety of different markets and we can then predict how much revenue we're going to generate if we go into a market of this size, with a building of this size. And, and hopefully eventually we can hit this information frontier where we are just right there at the cutting edge. And if we're sitting there in that information frontier now, it allows us to see opportunities that are hidden from others view. So for example, one of our locations, it was sitting on biz by sell for six, seven months before I saw it. It was in a different state. So it wasn't on my radar. But I saw it and I, and I said, man, this thing is. Right away I knew what it, I knew what it could do. And it's so crazy that this thing was sitting out there. Everybody could see it but it. And yet nobody could see it.

[Will Smith]

Yes, yes.

[Phil Miller]

So this is the beauty. And so this is why, you know, we're looking at moving into another venture where I'll have more of a. I'm going to continue running Paulville, but in this other, I'm looking at this other venture right now and the guy that I'm going to have, that's the CEO of it, it's a completely new industry. I keep telling him, he's a young guy. And I keep telling him when we get into this, we're just trying to learn, we're going to experiment, we're going to learn, learn, learn, learn, learn. And he's tired of hearing me say that. But I, but I see so much value now kind of at the end of this Paulville journey. I see so much value from that information gathering process and reaching some kind of an information frontier.

[Co-Host]

Yeah, yeah, yeah.

[Will Smith]

Beautiful. I love it. Phil, that was, that was just a really, a passionate.

[Phil Miller]

Yeah, I get excited.

[Will Smith]

Thank you. Yeah, no, that, that's great.

[Host]

And you know, I think what you.

[Will Smith]

Just, what you just described is essentially being a strategic acquirer. So we throw around strategic acquirer as a phrase mostly from the perspective of who's buying the business. It's rare that you ask, well what does that mean? Why are they strategic? And it's in and oftentimes what that means, what that implies is that the acquirer of you is that they can pay a premium versus other players in the market. And why can they play pay a premium? Because plugging you in your business into their overall enterprise, they there it has strategic online or has, there's, there's, there's more value to them than there is to some other player in the market with your business. And typically it's because they can do something with your business that other competitive buyers would be buyers of your business cannot. So you became a very strategic buyer in this, in this market.

[Co-Host]

Correct, correct.

[Will Smith]

And it does, by the way, to my point, not only. Not only allow you to see things that others can't. You know, a boarding, a boarding business sitting on bis by sell forever. Nobody buys it. You see the value there where others don't. It actually allows you to pay a premium. Sounds like you don't need to in many cases because nobody else is buying it. There are no other buyers.

[Co-Host]

Right.

[Will Smith]

But even if you were in a bidding process, you could probably pay more because you can do more with that, that business. Which is so, so often why strategics bid out everybody else.

[Co-Host]

Right, Right.

[Phil Miller]

Yeah. So just to finish that point up. So I feel like turnarounds, because that really ended up being our story turnarounds and this lean startup approach of always learning. I feel like they are just inextricably linked because when you first come in on that first on that first location that has to be turned around. You need that lean startup mentality of okay, this doesn't work. All right, let me try this. Oh, this isn't working. All right, let me Try this. And you need to be trying to get through this learning process just as quickly as you possibly can to get the model to where. To where it needs to be.

[Co-Host]

Yeah. Yeah. Great. Great, Phil.

[Will Smith]

Okay, so we still got a ways to go. I'm paying attention to the clock here. Just, I want to move us beyond acquisition number two, but just to understand where your head's at at this point. By acquisition number two, your move to North Carolina, are you. Have you made the decision that you're going to build an empire here, or is it just like, oh, I'm moving to North Carolina, let me just buy another business and see how that goes sort of thing. When is the vision of this broader thing take shape?

[Phil Miller]

It was really when I was in the MBA program, that's when it really started coming.

[Will Smith]

And that was the kind of, the regional. That was one in the same. This idea of building a regional brand.

[Phil Miller]

Correct. Correct.

[Co-Host]

Yeah. Yeah. Great.

[Will Smith]

Let's also hear about your view on real estate, which was also. Which was also informed by an experience at business school or a line you heard at business school. Tell us that story.

[Phil Miller]

So I remember telling a finance PhD. I was still kind of, you know, my story has been an evolution from real estate to business. So I was still kind of hung up on real estate to a certain extent, feeling like real estate is. At least half of this thing is real estate in terms of value. I remember him saying to me, and I quote, phil, forget the real estate. The value is in the business. And it just kind of blew me away. And he started talking about EBITDA multiples and valuations. And, and that's when. That's when it really clicked.

[Will Smith]

And, and what, what is, why is that true? Why, why had you been wrong? Because intuitively it's like, yeah, I can buy a business. And it's a back door into owning all this real estate, which is long term, incredibly lucrative, and, you know, generates that cash flow, has assets that don't go down in value. In theory, a natural bank, because you can just keep taking loans out on the real estate. Of course, you can do that with businesses as well. But it's, it's, it's a much, it's a, it's a, it's a much more common playbook in real estate. So, so why was the value. Why is the value in business and not in real estate?

[Phil Miller]

So for me especially, it was the case because I had very finite funds, and so there was an opportunity cost to holding real estate if I was going to acquire a location with the real Estate attached. What it meant is that I was sacrificing, buying two or maybe three businesses by themselves. And let me explain. So this is where I have to tell the story of store capital. So I was getting very, very frustrated with, with these, with these lenders and, and essentially owning this real estate. I remember our third location was Jacksonville Paulville in Jacksonville, North Carolina. We got a SBA, a 7, a SBA on that one. We got it fully remodeled. It was ramping exactly the way we said it would. I went back to BB&T and I said, hey, let's do another one. They said, well, not yet. I know it's ramping and it's on track, but we want to see one year of profitability before we'll look at the next one. And that's when I realized, man, this thing, this thing is going to go way too slow. Because if, if each one of these has kind of like a three year cycle from acquisition to, to one year profitability, I'm going to be moving at a snail's pace. I've got to speed this thing up. And so I started turning over rocks trying to figure something out, how can I grow this thing faster? And that's when I found a real estate investment trust named Store Capital who allowed me to, they would buy the real estate for me, pay for the remodel expense, and I would, my lease would be based on a cap rate. And so, yeah, you can spend more to remodel this facility, that's fine. This is the cap rate. You're just going to pay a higher and higher lease payment. So we were very much, our interests were very much aligned to keep the remodel costs down. And so by partnering with them and saying, forget the, the real estate now, I could acquire two, three locations. In fact, I was, I was, at one point, I was doing, I think in one one year we did, we might have acquired three locations all, you know, in the same year, which in my prior years that never would have been possible with, with banks like BB&T telling me, no, I'm not bitter.

[Co-Host]

Right.

[Will Smith]

Okay, let, let, let me, let me distill that to make sure I got it. So, so first of all, if you, if you were just going to be buying the real estate every time you bought one of these, it was going to take forever, as you said. So this was an accelerant. And also, I'm not sure you said this, Phil, but is it not true that, that if a business had real estate attached and you buy it, then a lot of the Value of the. Of the project is locked up in the real estate. So by selling the real estate, you get a slug of capital, too, that you can then put to work.

[Phil Miller]

Correct, Correct. Thank you for reminding me. So that was the other really important part of this. So at this point in the story, we owned three or four locations. We owned the real estate of three or four locations, and that real estate had appreciated. So in order to fund our continued growth, what I did with store capital is I did store or sale leasebacks, essentially selling them the real estate, which then I was able to raise money without giving up any equity. I was able to raise several hundred thousand dollars. Maybe it ended up being a million throughout the. It was. It was. I would go back to them and say, yeah, all right, I need more money. I'm ready to sell another one. All right, got to sell another one. And it was just kind of this unwinding process, but. But once again, I could see there's so much more value here in. In opening up a couple of new businesses as opposed to holding on to this real estate. There was just. It was. It was just an opportunity cost sitting there.

[Co-Host]

Yeah. Yep.

[Will Smith]

And. And when you talk about sale leasebacks of the pre. Of the. Of the locations that you'd already acquired, but what you were doing for new locations, this partnership with store capital was essentially also sale leaseback, you were buying this business, and immediately. Or they were buying the real estate.

[Phil Miller]

They were buying it. I.

[Will Smith]

So you find a new business to buy that owned real estate, and you would together, you and store capital, go to the business and say, let's do two transactions at once here. Essentially, let me buy the business. Founder, let me fill by the business, and I have the. I have these store capital guys who will also buy your real estate. So you'll exit the whole thing, right? Is that.

[Phil Miller]

Yeah, yeah, exactly. So, so now we were. We had kind of. By this time, we had really moved up the stack. And so we were now looking at real estate. So businesses that. Where there was real estate, where there was some, you know, let's say 500,000 in revenue, there was a decent business there, but it was mostly just pretty much every single business we acquired. And it was. It was largely unprofitable that we weren't really paying anything for the business itself. So we knew what we could turn that business into over the course of a couple of years. But so it allowed us to spend very little to come in and acquire a business because they were. Store capital was paying for the real estate, which was enough to make the owner feel like they'd sold. And in some cases they had assigned, you know, they had said, hey, the business is worth 200,000, the real estate is worth a million. So it's a combined price of 1.2 million. If store capital and I could get comfortable with the value of the real estate being at 1.2 million, well, then we would do the deal. And I once again, didn't really pay anything for the business.

[Will Smith]

It's amazing. And, and the way they're seeing it, I think, is basically like a sale leaseback buyer would see it, which is they're betting on you. As I, as I've heard sale leasebacks put, they're almost betting on you. It's like a, an annuity, like a bond in your business, actually, because, because you're, I mean, and maybe that's kind of what all leases and rents essentially are, but they're basically, you know, betting on the viability of you as an operator in this business over the long term to be sending them, sending them a monthly check. I'm trying to tease out how that's different than just rent. But I, but I heard it put. We actually, we ran a, we ran a webinar on how to buy a business using a sale leaseback because we, before that we done an episode with Carlos Santelli who bought a quite sizable business with very or no money down because he had did a sale leaseback to buy the business piques people's interest. We worked with the, the vendor to do a sale leaseback focused webinar. So anyway, anybody in the audience listening to this and wanting to learn more about sale leasebacks, go search for sale leaseback webinar and acquiring minds. Very very educational. But in that webinar it talks about like these buyers who, who, who, who, who. The store capital in this case are thinking about it as almost like binding buying a, a little bond in your, in your enterprise.

[Phil Miller]

Yeah, I digress. And, and they like owning all of our enterprises and all the real estate associated with our enterprise. It, it makes them, it's a much more secure investment, especially for a, for a REIT of their size where we're, we represent a minuscule percentage of their overall portfolio because, you know, if one of our locations isn't doing so well, we can't just kick it to the curb because it's all wrapped up in one master lease. Ah, ah, ah, they, they, yeah, they, that's, that's how they get you.

[Co-Host]

Okay.

[Will Smith]

And, and, and by the way, is this, is this store capital is offering here or their partnership with you. Is this called something. Are they a category of lender, real estate buyer that, that people can Google or it just happened to be this one firm, vendor REIT that you found that could do business with you?

[Phil Miller]

Yeah, I think the n. The story is told in there in the acronym for their name. Store, single tenant only real estate.

[Co-Host]

Ah.

[Will Smith]

So, okay.

[Phil Miller]

Dollar Generals, Paulville's. Okay. You know, Chick Fil. A's. But they're, they wouldn't, you would never see them buying a shopping center.

[Co-Host]

Yeah, yeah.

[Will Smith]

This is their multi unit owner operators is their niche.

[Co-Host]

Yeah, yep, exactly.

[Phil Miller]

And, and if, and if I was, if I had just one location, I don't think they would have really wanted to talk to me. There was, you know, hitting that point where, where we had, I think I talked to them when we had three locations operational and they said, okay, yeah.

[Co-Host]

You'Re good to go. We'll work with you.

[Will Smith]

Fantastic, Phil. Okay, so where are we now? We've talked about. Where's the next pivot point in the story, do you think?

[Phil Miller]

Yeah, so we've gone through, obviously we've gone through our first three locations. Midtown was in 2017. That was our one and only de novo where we. The land was acquired in 2018. Construction began in 2020. Construction was completed in 2021. So that was a really long journey and it taught me, I don't know how I feel about this de novo thing because I'm an impatient person at my core and it takes a long time.

[Will Smith]

Well, but is that a real learning that you would, that you would tell others or. Because that's a, that's a really strong statement that basically de novo kind of is. Is inferior to just trying to find existing businesses and, and buy them. Or was that. Or is, is it, was it. Because it was just a single story, it's not enough to base a whole, a whole theory on.

[Phil Miller]

Yeah. Now I know that if, if arguably you could say, well, if you get good at de novo, you get. You really develop a process for building these things out. But even then it still is. It's just a really tough one to do. It really is. So we, I, for us, it was, okay, we have to deliver a premium customer experience. Can we deliver a premium customer experience without doing de novo and, and the numbers work. Okay, then let's not do de novo for now. Yeah, that was kind of my mentality and that's why we, we really focused in, on, on doing more acquisitions and turnarounds.

[Co-Host]

Yeah.

[Will Smith]

Well, Phil, I, I will. I Will call out kind of, I.

[Host]

Guess, sort of a competitor of yours.

[Will Smith]

She's been on this podcast, Taylor Wallace of Pause and Rec. But two things that I've heard you say that I heard him also say. So people can go Google Taylor Wallace acquiring minds if they want to hear. He's been on two or three. Two, two times, I think. Now they, I think did two or three locations. So they were smaller than you. They've also partnered with private equity, but they did, they bought a location and then they did a de novo. And the de novo was just, it was just a quagmire. I mean, I think they eventually did it and figured it out, but it's essentially real estate development. And it's like if you don't have. That of course is its own, its own deep multifaceted specialty. And so they were kind of having to learn real estate development on the fly and just a much bigger bite than they anticipated. So. Yeah, the other thing that Taylor said, which I'll just call out because you said it too, is how they. Taylor's partner had years of experience in the pet boarding business and saw how you could optimize space within a, within a, a boarding facility, which I guess is, is that, that's the name of the game in, in, in so many businesses. Restaurants, you know, hotels, so much retail. But anyway, he knew how to optimize space without compromising on the experience for the dogs. So that they're not cramped. But, and that was a playbook that they could then apply into acquisitions and, and, and know that they could increase revenue by, by acquiring new acquisition. By acquiring new businesses.

[Co-Host]

That.

[Will Smith]

So another example of being strategic kind of strategic acquirers.

[Phil Miller]

Yeah. And that, that comes back into what I was talking about with having asymmetric information. As you continue to do this, you just build up more and more information. So it's not surprising that when, when I was coming in and acquiring these mom and pops facilities, of course they weren't laid out efficiently. Why would they be? My first one wasn't. And even the ones. There was one who had hired a consultant, even that one was, was not laid out efficiently at all. It was very old school in the way it was set up and. But once again, why should they be? I, that's, it's, it's. I think it's, it's almost impossible to come in and on your first location just have it all figured out. So I assume there are other industries out there where, where you can come in to a mom and pop type type facility and reconfigure and get a lot of really low hanging fruit just by doing a reconfigure.

[Will Smith]

Yeah, certainly, certainly. So it's an enticing picture that you paint here, Phil, so we can continue.

[Phil Miller]

Moving through the story. So by 2020, we had acquired a place called Porter's Neck, Paulville, North Shore. And then when I talk about Porter's Neck, I need to talk about Scotts Hill, Paulville. These are all in Wilmington. Because these were two competitors that were just up the street from each other. We acquired both of them. We remodeled Scotts Hill and then moved Porter's Neck out of the shopping center where it was located into Scotts Hill. So we essentially turned two competitors into one big one. Turns out that's a really good thing to do. It worked. It worked really well.

[Will Smith]

And, and why, why Economies of scale. I assume you consolidate a lot of expenses, centralize certain things and, etc. But what about your vision of kind of a brand multi location? You know, if, if an employee doesn't. Can't work, it wants to move across town. Now you got two locations. Yeah, if, if a potential customer doesn't live near location A, they can go.

[Phil Miller]

To location B. Yeah, the. Well, they were too close. There would have been cannibalization of sales.

[Will Smith]

Oh, okay.

[Phil Miller]

We're talking about a couple of miles away. So. And they also really had kind of different strengths. You know, the one in the shopping center was very much more focused on. It had a great grooming operation and, and a decent little retail operation and just a little bit of daycare. So we rolled that in and merged it into this bigger location that was, that was really weak on grooming, no retail and a decent, decent daycare operation. So it really, it made collectively it was a much stronger business when, by combining the two together. And of course it was, as you mentioned, economies of scale. You know, one manager, not two managers, one. One lease payment, not, not two. Yeah, yeah, the numbers. So essentially when we acquired both of them, they were both near break even. And, and once we remodeled Scotts Hill and combined the two, then, you know, it, it essentially became very profitable. And then we added a veterinary hospital which we can get into. Maybe now's a good time to get into the vet hospitals because they're very much tied into the pet resort story.

[Will Smith]

Let's do it.

[Phil Miller]

Okay. So at two of our locations, both at Scotts Hill and at Midtown, we discovered, or we realized we had these kind of empty, smaller buildings sitting out by the road that were largely unutilized. So we said, well, man, we can turn these into veterinary hospitals. We then we started off trying to do more of an urgent care model. Quickly realized just listening to our customers, you know, they were saying, wait a minute. So I understand that if my dog is sick, you can see me same day, but. But what about just getting my dog spayed and neutered? Can they just be my vet? And we said, well, I mean, yeah, we're happy to, but it's going to cost more. And, and collectively our, our customers were telling us, no, that's not what we want. We want you to. This is our Paulville customers saying to us, if, if you're going to be our vet, we want you to be our vet. You know, not our vet when, when. Just when the dog is injured.

[Co-Host]

Yeah.

[Phil Miller]

So this comes back to this lean startup approach where we heard enough customers telling us that and we pivoted, completely changed the model. It ended up being a kind of a pain in the butt because we, we remodeled and created our first veterinary hospital at our Scotts Hill location. And I think six months later we were remodeling again. But it's what the, the market makes the rules, right Will? I mean, I don't make the rules, so I just gotta, I gotta play by the markets. Whatever the market dictates to me, that's what I gotta do. 23 was when we opened the Scotts Hill veterinary hospital and then we opened up at Midtown in 2024. So what we learned is that those were a slow build. At a pet resort, there's more rapid growth. But within a veterinary hospital space, if you think about it, people will drive past four vet hospitals to go to their vet. It's a very, very sticky relationship. So you essentially have to acquire people that don't have a vet yet or are unhappy with their vet. So it's a really, really slow build.

[Will Smith]

And sorry, why not acquire an existing vet hospital?

[Phil Miller]

They're just weren't any available and we were. I wasn't used to paying any amount of money for any acquisition. I was, I was used.

[Will Smith]

So they would have sold at a premium or they weren't as distressed or unprofitable as the, as the boarding facilities. You were. I didn't used to buy.

[Phil Miller]

Yeah, I didn't have the knowledge to be able to come in and, you know, ascertain whether I could turn around a veterinary hospital that was distressed. And the ones that were profitable were selling for huge multiples. Especially at that time. I mean, I think some of them were selling. It was up around 12 times EBITDA I think it's really come down the market kind of corrected itself. But, but yeah, private equity was paying a lot of money for veterinary hospitals at one point there Maybe, I mean 10 to 12, I don't, I don't know. But it was, it was big, big multiples. So. And once again we had this vacant real estate that we had to do something with and it seemed like the highest and best use of these buildings. So that takes us through pretty much all of our acquisitions. You know, we, we in that time we acquired, you know, our Pawley's island location in South Carolina, Winder in, in Georgia. These are all in the last three years. And then North Chase Paulville, which is in Wilmington in North Carolina to kind of round out our, our offering in, in the Wilmington, North Carolina region. Yeah. So that kind of brings us to, to pretty much all the locations that we currently have.

[Co-Host]

Now.

[Phil Miller]

We could also jump into talking about the, the private equity experience. What that was, what that was like, I can't say too much, but I can, I can get into some info on it.

[Will Smith]

Well, we, and we definitely are, and we'll probably close there, Phil, but I want to, before we turn our attention to that, I want to ask kind of two bigger picture questions. The first is what you built here was, is just an absolute wonderful home run story. You had the vision eventually at business school for a regional brand and you built it. So, so my question is, is not to take anything away from that. What I will say is that, you know, entrepreneurs are impatient, hungry people and some people are, some people listening to this are going to say how can I do what Phil did but in less time. This has been an 18 year journey.

[Phil Miller]

Yes.

[Will Smith]

What. And, and like, you know, going from acquisition one to two was a five year span. So I guess the question is what could somebody listening do to do it to, to build something like you did in, in less time?

[Phil Miller]

Well, you have to remember that, that I essentially kind of wandered in the wilderness for the first several years. I mean, we were what. It wasn't until 2020 that we really started picking up steam. I think we had, in 2019 we still only had three locations. So we went then from three to nine. So what, what I would say is doing things more like we did from 2019 to 2025 and less like we did from 2007 to, to 2019. For sure.

[Co-Host]

Yeah. Yeah.

[Will Smith]

And just to repeat what some of those things were, separating out the real estate, unlocking that capital, going all in on boarding, although you had done that long since Before.

[Phil Miller]

Yeah, we had, yeah, we had done that long since. Yeah.

[Will Smith]

It was that the, the realization of asymmetric. The, the, the, the, the power of turning around perhaps.

[Phil Miller]

Yeah, yeah, for, yeah, for sure. And, and, and finding, ultimately finding store capital, finding a partner that was willing to help us to unlock that capital and, and willing to help us move fast because that was the, once again that was the problem with the, with the lenders. They didn't want us to move fast.

[Co-Host]

Yep.

[Phil Miller]

So I remember going to store capital and saying hey, I, I know we just did this last one, I got another one. And they were like yeah, send it on through. Yeah, let's get a shot. So yeah, ultimately and I, and I know you'll get into the final part of this with private equity, but that was kind of what drove us into the arms of private equity because we started, we started running out of sale leasebacks to do to raise more money and store allowed us to grow aggressively and ultimately we started to need some, some cash if we were going to maintain this rate of growth.

[Will Smith]

But couldn't you, and I think I was trying to hit on this earlier, maybe I didn't do it successfully but couldn't you for every subsequent acquisition you'd want to make bring in store so they would be like you gave that example of the 1.2 where you know, point to 200,000 of the valuation was the business and sometimes you could, you in store would just work it out where 0% of the purchase price was allocated to the business itself and you were effectively buying the business for nothing.

[Phil Miller]

Yeah.

[Will Smith]

Couldn't. Why couldn't you rinse and repeat? Why wasn't that infinite scalability?

[Phil Miller]

Great question. Because in the, you know, in the year or two leading up to the, the full turn remodeled building turnaround, we were negative cash flow on that location and in some cases significant negative cash flow because Stora still expects their rent payment and it doesn't matter that we just acquired a location that was break even and now we're by the way, we're remodeling it. So we have half of it shut down while we remodel this half, you know, and so, and then we're starting to ramp up our staffing. So in that period, that year or two, we're losing a lot of money and that's essentially the down payment that we're paying because up until you hear that you think man, there is no downside here. That's the downside, that's the rough part. So we at one point around the time that we partnered with pe. I think we had five, if you include the two vet hospitals. We had five locations that were in the pipeline. And because they were in the pipeline, they were losing money. That, that was where it got a little, in hindsight, maybe I got a little out ahead of my skis.

[Will Smith]

They were losing money. They were unprofitable businesses. And because those were, those were kind of your ideal target, you'd take an unprofit, you were turned. You're at this point, you were a turnaround artist in the pet boarding space.

[Phil Miller]

Yeah, but, but, yeah, but exactly. But in order to do that turnaround, it takes two years to, to, to fully remodel, reconfigure, rebrand. And, but, but especially the remodel part. The remodel part is what takes time because if you think about it, you've got to spend, you got to spend six months going through kind of planning, getting, getting your plans drawn up and then, you know, and then you got to spend another call it year, especially because we had to do, we didn't want to close down, so we did it. The remodeling in phases, phase one, phase two. So it was easily a year worth of construction. And then we're kind of reintroducing the new brand. And so, yeah, we were, we were either break even or losing money. Usually losing money for that two year period.

[Will Smith]

Yeah, well, I, and I liked how you put. That was the down payment. So even if you got the business for, quote, unquote free or next to nothing, the down payment came in all the, the capital that you were going to then sink into the location to make it optimal and viable. Right, but actually on that point, Phil.

[Host]

Isn'T there an ecosystem of lenders who.

[Will Smith]

For example, are focused on franchise land, who, who help entrepreneurs with the capital necessary to spin up a new location?

[Phil Miller]

Yeah. So you know what we could have done? The wife wasn't crazy about this because we had gotten rid of our last SBA loan and didn't have a, didn't have any more of those personal guarantees sitting over our head. Didn't have our, our, our own personal residence, you know, signed on the dotted line with that SBA loan. So we, I actually talked to Live Oak bank and Live Oak said, hey, look, you have pretty much zero debt. You and you, and you have good income coming in. We can help you to fund this. But, but I didn't have a wife that was willing to, to, to jump back into SBA land with just Live.

[Will Smith]

Oak offered you an SBA type product. Yeah, to do to, to, to, to fund all of this.

[Co-Host]

Yeah.

[Will Smith]

And I guess that would have been. That's probably not the 7A. It's probably not the acquisition loan. There's probably another one.

[Phil Miller]

It was, I assume it, maybe it was but it was like a cash, it was almost like a, like a SBA line of credit type of thing where we could just, just tap into it. But yeah, that's, that's. I don't know exactly what that would have was, but yeah.

[Will Smith]

And it would have meant going back under the PG which you had just freed yourself from.

[Co-Host]

Yeah, yeah.

[Phil Miller]

Especially something about signing the, the personal residence away.

[Co-Host]

Well, yeah.

[Phil Miller]

It feels like you are, you know, this thing goes under, I lose my house and, and yeah, I, because of my shenanigans. She had already lost a house once and she didn't want to do it again. I guess I can't blame the girl.

[Will Smith]

Yeah. And I mean we're laughing, but that's excruciating. And it's, and it's risk that many people listening would just be unwilling to take. Signing the personal guarantee is, is just a hard. A hard no for, for many people. Mid career people.

[Co-Host]

Yeah.

[Will Smith]

Who might otherwise consider a self funded search. They just can't because it's not, it's the risk and it's not a risk there that they can take. So I'm totally understandable.

[Co-Host]

Yeah.

[Will Smith]

And then the other question before we just hear the story of selling to private equity and you may have, I think you did already answer it. So I'm going to ask him and hazard my own, my own answer. You had developed this playbook, this very powerful playbook. You were accelerating. Took you 13, 12, 13 years to get to three locations. Then you went from, what was it? Three to nine in three.

[Phil Miller]

Three didn't. But if you count the vet hospitals. Three to 11.

[Will Smith]

Three to 11. Yeah, sure. In, in another, in four, in four years you were really dialed in on being able to identify these turnaround targets and going in and doing it. So why not pour gasoline on that? And the answer is that's precisely what you wanted to do. And, but you.

[Co-Host]

Yeah.

[Will Smith]

So we just unpacked all of that. And so the answer to that was not more debt. Instead it was equity. The capital was going to. Capital always comes in the form of either debt or equity. You considered and dismissed it in the form of debt. So then you turn to.

[Co-Host]

Yeah.

[Will Smith]

Bringing on an equity partner that can infuse the business with a lot of cash to go faster. Of course that means giving up a Lot of ownership. So.

[Co-Host]

Right, right.

[Will Smith]

Tell, tell us that story now, please.

[Phil Miller]

Yeah, there we go. So by this time we were getting a lot of requests, request from, from private equity, wanting to reach out to us. And you know, and in hindsight, I didn't recognize it at the time who they were, but in, in some of them were searchers. You know, thinking back on some of these letters that I was getting in emails, it was, you know, hey, I'm so. And so I'm backed by such and such, but I'm, it's me, I'm buying the business from you.

[Will Smith]

So I was hearing maybe, maybe somebody listening was one of those emails.

[Phil Miller]

Maybe, maybe. And so by the way, that process was, was very, I guess vindicating as I started getting these requests from PE because the, the story I forgot to tell you was very early on in the process when I was trying to raise some money. I went to our local angel investor group, among others, and tried to raise some, some equity. And I was, they called my business the L word. They called it a lifestyle business. And I said, I said, but look at this. I mean, it's scalable. I've, I've already got three locations. I can rapidly scale this thing. But I think it was, it was the, the sector threw them off or something. And, and they called it the L word. So I called them other words that I can't say here, but, but, well.

[Will Smith]

They clearly haven't been exposed to the, to the wonder and majesty of boring businesses. And, and we all know the secret, but they, they're still not clued in or weren't.

[Phil Miller]

Yeah, yeah, so they might have figured it out by now. But, but so I started getting these, these PE requests coming in. What, what ended up happening is I would, because you know me, I love to learn. So I would start taking these calls and I found that I was giving them more information than giving me, than they were giving me. And that's when I realized, okay, I have to be a little smarter about how I'm doing this because there was a lot of tire kicking. You know, there were these situations where they would, they would call and, and ask me, you know, an hour of questions about my business and then at the end of it say, yeah, well, it's not bad. It's not big enough. We're looking for businesses that have reached a certain EBITDA threshold. And I would say to them, well, I told you in the beginning of the conversation what my EBITDA was. Yeah, sorry about that. We just, we really enjoyed talking to you. So we wanted to keep talking. So, so I got kind, I got kind of smart then and, and around that time, the folks from. So Michael Rogers from Access holdings in, in Baltimore, he came with, with Scott Butts, who is the CEO of Wagway. So Wagway was created by Access holdings to be a platform of platforms essentially. So they had already acquired a location in the, a platform in the Northeast called Pups and they were looking for something in, in this. Well, Pups is mostly in Chicago, but, but they were looking for something especially in the Southeast and Paulville was, it's. Our industry was and is still very fragmented and there weren't a lot of opportunities for them. So they were really pushing hard. So I went there and met, met up with them and I still remember that day when I was sitting there across the table from Scott Butts, the CEO of Wagway, and, and we just really bonded. I remember saying, okay, oh well, if, so if, if we end up doing this, who do I report to? Who's going to be the CEO of Wagway? And Scott raised his hand and it was when, because I had already, we, we had already really bonded. In the end, I could really tell that especially on, on integrity. He just intuitively got it, he got what we were trying to accomplish. And when he said, raised his hand and said, oh, I'm the guy, I practically said, well then let's do the deal already. Because I knew just how important that person that I was going to be reporting to was going to be for my. More than anything, for my happiness and fulfillment. And Mr. Scott Butz has not let me down. I love working with him. I have learned so much. And, and so, and so Phil, the.

[Will Smith]

Idea here was that you, that, that not that you exit, but that in fact you continue on and growing your business. So when we say, quote, partner with private equity, that can be a bit of an eye roll phrase. It depends, I guess, largely on whether or not the founder seller is staying on. And if they are, it really is a partnership and if they're not, it's more of an exit and less of a partnership. In your case, you were staying on. So, so the journey continues.

[Phil Miller]

Correct? Correct. So I am the CEO of Paulville and will remain the CEO of Paulville. And that was very much their vision as well. They, they didn't want to take me in and I was looking for that too. I was looking for somebody that I could kind of build and grow this thing with. So, so when they came in, they, they offered to me, you know, One of the. There were some quick wins, and you know me, I love to learn new stuff, and so they really helped me to. To solve some puzzles, and there were some. Some quick wins. And we're getting to a point now where I'm. I've. You know, I'm learning how to work with them, they're learning how to work with me, and we have really kind of reached a good state now where we really kind of have it figured out. But that first six months was very, very difficult. There were fetal position moments there, and I'm convinced that at the bookends, at least for me, at the bookends of your business, there lies the fetal positions in the beginning and then with this. And I'm not having as many fetal position moments anymore as we've kind of worked through this. But it has been. And I think it has to be. I don't think this is. I don't say this to say anything negative about Wagway or Access. I think it has to be this way. It doesn't matter whether it was a private equity firm or a searcher that I partnered with. It's a partnership. It's going to be painful. It has to be painful. You're coming in from two completely different spots and just kind of mashing everything together and trying to make it work.

[Co-Host]

Yeah. Yeah.

[Will Smith]

And. And, Phil, to be clear, your. Your fetal position moments related to this were just because the frustration or despair. Despair at the changes that were being basically imposed by Wagway. I mean, not. Forgive the. The heavy term there, but imposed by Wagway.

[Phil Miller]

I think it's more the. A lot of it has been kind of like a personal journey like that.

[Co-Host]

The.

[Phil Miller]

That feeling of losing control has been very painful. And then in these moments where we don't agree, trying to get to and. And Scott Butts has been amazing. He's. He's done this a number of times before. He's very experienced with working with founders like me, and so he has been my saving grace throughout this whole process. I'm so glad that I'm going through this painful process with someone that I. That I love and respect so much, and he has really helped me to get through it. It's been so. It's not been, you know, financial, financially induced fetal position moments. It's been. It's been very, like, deep, like, emotional things coming up from. From many years ago. And. And so it's. Without getting into too much detail, but it's. It's been true. It's been interesting.

[Co-Host]

Yeah.

[Will Smith]

Well, I Mean, I, I think it, this is really valuable to hear, Phil.

[Co-Host]

Right.

[Will Smith]

Could you have chosen not to continue on as CEO or was that, was that a requirement for this deal to proceed? Was or was there a version where you step out?

[Phil Miller]

They probably would have entertained it at the time. I really wanted to continue because, you know, the whole thing was, well, I'm, I'm not done. I got a lot of work to do and I was looking for someone like Wagway that, that wanted to more of a partnership. So it wasn't even on my radar at all. In fact, I remember getting approached by someone. They were, they wanted to take it and turn it into a franchise and, and then kind of build it out from there. And they were going to kind of get me out of there as quickly as they possibly could. And, and I said, well, well, first of all, can I have a couple minutes to talk about franchising in our industry? Sure.

[Co-Host]

Okay. Yeah. Yeah.

[Phil Miller]

So first of all, I don't believe that franchising would have been the right thing to do for the business because if in our industry the franchisor front loads all the competitive, all the benefit to the franchisee thereafter, there is very little benefit that that franchisee is getting on an ongoing basis. When I say it's all front loaded, it's site selection, it's, you know, systems and processes, it's, it's all these different things. But then, but there's very little ongoing brand value. These are all just folks that, that live within, you know, a 15, 20 mile radius that are all coming to you. You're, you're, you're kind of, these franchise. None of these franchisors are so big that they're, none of them are the McDonald's of pet services or the holiday.

[Will Smith]

The brand that they have doesn't bring much value.

[Phil Miller]

It does not. It does not. So for example, our, the Paulville brand brand is, the brand value in our industry is at the regional level. So the Paulville brand in Wilmington, North Carolina is far more recognizable than the biggest franchise or brand out there. And so even the biggest franchisor brands out there in pet services, when they come in, they have to build the brand in that region. So there's, there's very little brand value and there's, you know, I don't know what is the ongoing benefit to the franchisee. So then they're paying out this 8% royalty fee every, every month, just feeling like, man, what am I getting in return? And, and you compare that though, with other industries like McDonald's for example, where there's an immense value to somebody seeing those golden arches, Holiday Inn, there's an immense value with people traveling from all over the place coming in and that brand is, is meaningful. Or, or take for example, some of these learning franchises like Code Ninjas or Sylvan Learning. They have this ongoing support in the form of curriculum that they can, that they can provide. And they are essentially providing a competitive advantage to the franchisee on an ongoing basis. So, yes, I'm paying an 8% royalty fee, but in exchange I get a competitive advantage. Yeah, I would argue that in the pet services space, you are paying an 8% franchising fee and getting no competitive advantage in return. And now that big, big money is entering our industry, I would venture to say that franchises are going to be the first that are going to topple. I would venture to say that they are the weak ones because they, the whole thing works in a, in a fragmented, underserved industry as things inevitably will get more competitive, we are going to see that the weaker ones are going to fall. And I'm convinced that that franchises are the weak ones in our industry because they're paying an 8% royalty off the top and getting very little competitive advantage in return.

[Will Smith]

Well, it's fascinating, Phil, that analysis of your analysis, because certainly one of the things that everybody knows to everybody listening knows to do with a franchise is ask yourself the franchise fee, what you're getting in return. And so everybody knows to ask themselves that. But I've never heard it put quite the way you have, which is not only like the value you're getting, but what, when is that value being distributed? Is it all at once or is it ongoing? Right, because, because oftentimes we hear about franchises as like business in a box. So you're getting a business in a box and you can, you know, as somebody with, you know, less experience or whatever, you can become a business owner and that's positioned as valuable. But that, but that kind of in the, in that phrasing captures what you're saying, which is, will help you get off the ground. Being part of this franchise network will help you get off the ground. But how much value after you've gotten off the ground and your business is operating, how much value in the tail is there? Maybe, maybe not a lot. So, yeah, so anyway, it's a great way to think about, frame that franchise fee you're paying. Where and when is that value being conferred?

[Co-Host]

Yeah, yeah.

[Phil Miller]

And you know, they might argue, well, you know, we can do it in marketing, we can kind of generate leads. Well, well, yeah.

[Will Smith]

Right.

[Phil Miller]

So can we. You know, we're, that's, that's one of the things that. So all these private equity backed roll ups are, are able to do that very thing and then some but, but they don't have to pay the 8% franchising fee. And so honestly as I look at what, where we're going to add new locations in the future, if I see that one of our competitors is a franchise and certain brands are stronger in our industry than others among franchises. But some of these brands I see it's almost like they, from a competitive analysis it's almost like in my mind they don't exist.

[Will Smith]

So let's start closing out here. We're well over our time. I can't let you go though. You have said that partnering with Wagway did come with benefits. We focused a little bit on the negative. Let's focus on the positive. What have they. Because a private equity buyer. And by the way you make this point that like it's not private equity necessarily. That's, that's, that's. That causes this turmoil with sellers. It's any buyer, any buyer, be it a searcher or private equity or something in between is going to cause heartburn for a seller or particularly seller who sticks around. So it's, it's more just the nature of M and A than it is in necessarily private equity specifically. Okay, but, but private equity would probably say of itself in defense. Well we are bringing a lot of that. We're going to, we're going to whatever professionalize this or bring financial acumen that allows you to scale faster. Something some benefit and it sounds like you have experienced benefit in this case, what was it?

[Phil Miller]

What are for sure. So for one the back office is amazing. So for me to not have to worry about, about payroll. I barely think about payroll anymore and I don't want to. I want to really focus on the things that operationally our culture, you know, these are the things that I really want to focus on. So. And honestly my team doesn't care that the back office handles, you know, handles payroll. HR is far more professionalized. I didn't realize until we went through the acquisition process and talked with our attorneys how for a company with 200 employees it was a little bit. We weren't where we needed to be. We, we had no, no HR people. We were kind of running through it as best we could. And I remember there were occasions where I would get a question from one of the, the general managers who had Asked the director of operations, she would come and talk to me and I would say, I don't know, what do you do when an employee does X, Y and Z? You know? Yeah, yeah, I don't know. And of course our team, I'm sure thought that we had it all together because we would put together an answer and come back to them. But it's been so great to have a true, you know, a VP of HR handling this. To have a cfo, that's been amazing. We didn't even have a controller, much less a cfo. So to have these people as resources, it's been amazing. And then there have been some, some quick wins for us when it comes to marketing. And I can't say exactly what they were, but, but as they said, they said, oh, here, let's do this, this and this. And I remember just hitting myself in the head and saying, wait, why didn't we do that? And then I, which promptly after that I said, man, I wish I would have thought of that or you would have paid a couple million more for this acquisition.

[Will Smith]

And you can't share what it is because it's, it's a trade secret.

[Phil Miller]

Yeah, more. Yeah. More trade secrets.

[Co-Host]

Yeah, yeah.

[Phil Miller]

So there have been some of these really quick wins that have been really exciting to, to see as we've rolled them out.

[Will Smith]

Indulge me being a little philosophical. But this is just the life cycle of, of these businesses. You know, you buy it as a very tiny, not profitable, unprofessionalized, amateurish, one person turnaround. You bring all of this value to the businesses that you bought, make them profitable, make them real businesses. All of your professionalization and new customers, etc, and then a bigger player than.

[Host]

You comes in and over top of.

[Will Smith]

You and, and does the same thing and the chain continues. And yeah, on, on up these, on up these entities go, go and grow. It's, it's, it's so interesting, the dynamic and.

[Co-Host]

Yeah.

[Will Smith]

All right, Phil, and, and can you share anything with us about the deal with Access with Wagway or not?

[Phil Miller]

No, only that it was, that it was very much a partnership. So we, we maintained a certain level of ownership and, and still do.

[Co-Host]

Yeah, yeah.

[Will Smith]

So you wrote you, you rolled equity.

[Co-Host]

Okay.

[Will Smith]

All right, well, we've already talked offline how you can't say more. I, I tried to twist his arm audience, but, but he, but he can't. And that's fair enough. All right, Phil, Anything else that we didn't get to. This is, we're well over time, but just in case.

[Phil Miller]

No, I think, I think we, I, I think, I think you got everything out of me for sure.

[Co-Host]

Great.

[Will Smith]

Well, this has been lovely, Phil. What a, what an epic run. Thank you for, thank you for sharing not only the highlights, but the lowlights. A really honest assessment of what it's like to partner with private equity. That was extremely valuable, as were so many other points. We'll put your link to your LinkedIn in the show notes, unless you prefer a different way that people reach out.

[Phil Miller]

No, that's fine. Yeah, LinkedIn is good.

[Will Smith]

Okay, great. Well, we'll do that. And congratulations, Phil, on, on a wonderful career to date.

[Phil Miller]

Thank you so much. I appreciate it.

[Will Smith]

Will, thanks for coming on. Hope you enjoyed that interview.

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[Will Smith]

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