The Power of Cold Outreach in Business Acquisitions with Jesse Jackson

0:00You should do what you want to do, but at the same time, if you can't decide. I often encourage people on my coaching calls when they're narrowing it down to two or three things. Great. Start talking to owners in all three of those spaces. Very quickly, you'll begin to understand the landscape. When you've looked at 10 sets of financials in a single vertical, you know, you're going to see what those profit margins look like. You're going to see how the businesses look. You're going to see if that's, you know, potentially an interesting space for you or if you want to move on to something else on your list.

0:35Hey, everybody. Welcome to another episode of the Business Lunch Podcast. And I have the wonderful pleasure of having one of my business partners, Jessie Jackson, on today. Jessie, how are you doing? I'm doing well. I'm so excited to be on with you because I love listening to Business Lunch Podcast, and I think you are just so funny. Your dry humor gets me every time, so I'm excited to be a part of it. Well, I'm really happy to have you here. So you have done some really, really cool things. I would love it if you would kind of just, I'm going to say one thing real quick, and then I'd love to hear more about your entrepreneurial journey.

1:13But we had lunch a couple of weeks ago and you told me that from when we met, when you were just kind of getting started just a few years ago with your current venture, which is Mango Automotive, that you've built that through acquisitions up to an eight figure business with about a 25 percent profit margin, which is just insanely cool. And I think it's so awesome. And if you could share some of that journey as you share your whole thing, I'd love I'd love for you to share that with everybody because I think they'd really enjoy hearing it. So tell us the Jesse Jackson story of entrepreneurship.

1:55Oh my gosh, Roland, let me pull this out. But yeah, let me start with, you know, so much thanks to you, Roland, and the Epic program you created, really for helping me create this Mango Automotive business, which did sort of rise out of the dust to this eight-figure business. And it's funny, I'm going through an SBA program called SBA Thrive, and it's a bit of like a mini MBA. And when I showed up, what? How is the program? Oh, it's going well. We're just a few weeks in. It's very intense and very in-depth. So it's about 20 hours a week dedicated to that program. Wow. Okay, cool. And you fill out an application, and then they admitted me.

2:45And when I showed up, they sort of said to me, we wondered if you were being honest about your numbers, because to grow from zero to an eight-figure business is a bit unheard of, certainly in my landscape in New Mexico, and I think is an uncommon thing. So that's the power of the zero-dollar out-of-pocket acquisition. They're like, could you maybe teach the class to us? They did ask me to teach one class on acquisition. Yeah, for sure. So I think my deep background is environmental engineering. But as I sort of got out of school and got into the cube, the cubicle, I loved learning about engineering because you're driving equations and it's sort of magical.

3:36And then you get into the cube and it's like, OK, so just put the numbers in the software. it'll tell you the answer and like, you're good to go. So it wasn't nearly as much fun. Yes. That was a bit of a drain brain. Um, so I, I sort of segued way like into software startups and spent many years in that space. Now, were you there as a founder or were you working with them or how did that, how'd that work? Yeah, I, I think a combo, and this is very common in software, right? I was consulting sort of in the later years as a chief product officer. I wish I had met you and I wish I was consulting for equity, but I was consulting for cash as is more traditional, right?

4:20And also had startups on the side. So yeah, a combo of those things. And then what I did right before Mango was a software startup in the automotive space. It wasn't an automotive repair, it was in painless dent repair tech. So we sold to private equity. And that's the point where I saw this huge opportunity in the automotive landscape, because you have over 60 % of owners in that space are getting ready to retire in the next 10 years. And you also have the evolution of electric vehicles entering the space and still sort of an old space in terms of gender equality. And also So in terms of the marketplace is very disjointed.

5:04The biggest player owns 2 % of the space. So they haven't been through a consolidation phase yet. So then I met you and learned about acquisition sort of being on the other side of the table from what I experienced as a founder. And that seemed like a very much easier or more interesting space to be in. As a founder, you put your blood, sweat, tears into that for four or five years. You know, private equity or someone comes in and scoops you up. And when that happened to me, I was thinking, gosh, what did they do that was so special? They just came in and bought us and they bought a few other people.

5:46So I think it's really fun to be on the other side of the table though. Hey, Ryan Dice here, co-host of Business Lunch. And before we get to the show, I have an exciting invitation for you. My business partner and Business Lunch co-host, Roland Frazier, and I are hosting a live in-person event. And if you're a bootstrap business owner who wants to build a 10 million and even$100 million business in the next three years, you need to be there. This event is called Get Scalable Live. And over the last four years, it has transformed from a small gathering of entrepreneurs into the largest bootstrapped entrepreneurship conference in North America.

6:20Now, I know what you might be thinking. You're probably thinking, Ryan, really another business event? Is that really what we need, but trust me, this isn't just any other event. You see, unlike most conferences at Get Scalable Live, you'll have dedicated time to take action and actually work on your business instead of just in your business. Over three days, you'll work shoulder to shoulder with like-minded entrepreneurs to implement what you're learning and get valuable feedback that you're just not going to be able to get during the normal day today. You're going to be immersed in fresh ideas, strategic insights, and you're going to get the support and guidance that you need to actually reach your business goals.

6:56So this is your opportunity. This is your chance to step out of the day-to-day to eliminate the noise and finally work again on your business, not just in your business. And if you implement, I'm confident about this, if you implement just one or two key insights from any of our sessions into your business, you're bound to see a return on investment much higher than what we could ever charge for admission. And by the way, speaking of admission, right now, Business Lunch listeners can save an additional 10 % off of our already low early bird ticket pricing. So just head over to GetScaleableLive.com and use promo code LUNCH at checkout.

7:37Again, that's GetScaleableLive.com, promo code LUNCH. It is truly amazing what can happen when you step out of the day-to-day and spend just a little bit of time surrounded by other powerful business owners. And since this opportunity only comes around once a year, you don't want to miss it. Again, the link is GetScalableLive.com and don't forget to use promo code LUNCH at checkout to save up to 67 % off the full ticket price. That's all I got. I'll see you in Austin. All right, back to your regularly scheduled programming. It really is. So you didn't have any experience other than the then current software as a service that you were working with in the automotive repair shop industry, correct?

8:24Yeah, that's right. Both of my grandfathers were sort of in similar spaces. One grandfather in automotive repair, but in one in like same kind of thing, but for airplanes. So I certainly felt comfortable in a dirty shop. But they've both since passed and their businesses have evaporated. And I, yeah, I'm brand new to the space, which is why I have a business partner who, you know, makes all the magic happen in the shops and makes them run. Yeah, I love that. I think it's so smart. So, I mean, really, one of the big things that stops people from moving forward is I don't know what to do. So what would you tell somebody that was trying to figure out, gosh, I want to do this.

9:14I've decided I want to buy a business, let's say, or go into a business, but the world is full of so many opportunities. How do I decide? Like, was it that you saw? Well, just tell us how you decided. I guess maybe that's the best place to start. Sure. For me, I also, I had a business partner at the time and we had developed a software, ironically, in the podcasting space that we thought would be, was an AI software that we thought would be really interesting to sort of add it to an existing podcasting software. So in the beginning, I actually went on after podcasting software and I found out multiples were really high.

9:55They were at the time still expecting a multiple on revenue. it seemed pretty and you had sort of owner founder wearing 10 hats running these companies wanting a high revenue multiple so I pivoted pretty quickly you know away from that into automotive I think the key is if you're brand new to acquisitions and you want to get started it you should do what you want to do but at the same time if you can't decide I I often encourage people on my coaching calls when they're narrowing it down to two or three things. Great. Start talking to owners in all three of those spaces. Very quickly, you'll begin to understand the landscape.

10:35When you've looked at 10 sets of financials in a single vertical, you're going to see what those profit margins look like. You're going to see how the businesses look. You're going to see if that's potentially an interesting space for you or if you want to move on to something else on your list. Okay. And then when you made the decision to go into the automotive space. Did you, did you start out saying, because I haven't run one of these, I should get a partner that's an operating partner? I should have,

11:09but I did not. Retrospectively, I feel so lucky that I ended up with my partner. I actually was talking to business owners in the space and one of the owners I was talking to about potentially selling wasn't at the place where he was ready to sell but he was very interested in what I was doing and so we agreed to sort of partner in our first deal which grew up into a partnership in all of our deals. Okay and so if you were going to do this now or you were talking to somebody else thinking about doing it how would you go about finding that person? What's cool about, some people have called me the cold call queen.

11:50And I think what is cool about making calls, especially if you're, you know, looking in brick and mortar, but even if you're not, is getting to know the space and the business owners in that space. So likely the perfect business partner for you already knows how to run this kind of business. So they may already be running this kind of business. So if you're having those conversations, I think the opportunity for, you know, either an acquisition or a partner is naturally going to sort of come across your desk. And when you can present it, right, when you can sort of talk to them about what your goal is, if you're doing the roll up, what that looks like and what, you know, their financial gains would be or what their life would look like.

12:34I think it's very compelling. And you probably will have more interested parties than you know what to do with if you approach it that way. How, for people that have heard horror stories about partners, how did you decide that this person was right? Brian and I started baby steps. So when we first decided to partner, I knew that I was going to do many acquisitions and we said, okay, we're going to, we're going to partner on this one shop. And if we like working together, maybe we'll do another one. So I think it is hard to know. And I've had, you know, really rough situations with business partners.

13:13Also, it's just hard to know going into it, especially when you're bringing on someone into your vision. I think it's hard to know if they're going to own it like it's their baby too. So we got to know each other a bit. And then we essentially, you know, did a test shop followed by another test shop, you know, after a while, we decided we could probably commit to each other for longer. Okay. And then in terms of finding the shop, is that something that happened like right away or you said cold call queen? So it was there a lot of outreach before you found that first one? Roland, I really believe in your funnel where it starts with a hundred incoming leads and you get one to three that comes out the bottom.

13:58And that really happened for me. I was probably working with a hundred to 150 shops in the beginning in my area. And we ended up getting three deals. So our first deal, we, I think I did Epic in August and we had our first deal under our belts by the end of December. So it wasn't right away, but it was pretty quickly. And one of the, of the first five calls I made, one was my, ended up being my business partner. And one of them was a deal that I closed though. That one took me an entire year, year of working with that owner because, um, it was just a slow roll on that one. Yeah. Yeah. And, and then after that first one, so would you say it was about 150 companies that were in the, in the funnel to get the three that you did?

14:50Is that 120 is probably a better estimate, but. Okay. And then, um, the conversations with those people, because you didn't have a ton of cash to work with. How did that go? I think it was fun. In the beginning, what I had was a lot of energy. I, of course, had you telling me that maybe acquisitions weren't right for me. So I really was selling my vision, right? I was selling my vision and I built that vision based on what I knew about the market and things that were changing in the market. So what was compelling to these business owners is if you think of their business as their little baby, right?

15:33And they've grown, they've been working on this baby for the last 30, 40, 50 years. They still want their baby to go off and be successful even after they've retired, right? They don't want to see it die. So I think the ability to talk about my broader vision in the automotive space and what I was building sort of got these owners excited to potentially be part of that. I like that. I like that. Okay. So you've, and you and I've had lots and lots of conversations about this. So now we have the operating partner, we've got the first couple of deals and now you want to go faster. So one of the things that we've been kind of playing with is raising capital to go faster, but not going to private equity where they have kind of a deal where they get all the money.

16:21I mean, they get all the profits. Um, what, what has that experience been like and, um, and, uh, what's the good, the bad and the ugly of it? Oof. Yeah. Raising capital. So we've been, you know, raising capital from private investors. The good is the investors who have invested with us are really cool, interesting, smart people. and I know they've sort of come from your network, which is awesome. So I've loved having them on board and sort of getting their input. It's great to be able to talk about what you're building and to get feedback from other business people. So that's been really fun. That's the best part about it.

17:09It has been, it's been, I think, a little bit slower than we had hoped and a lot of people just a lot of people I'd say who are interested and have never invested in a business before some people who've invested in real estate some people who haven't done investments but really not a lot of people who have invested in a business so I think you know Sam and I have sort of come back to the idea of like okay let's help people understand multiple arbitrage is a starting point, right? Which isn't something we were initially talking about, maybe because it felt too familiar to us. It didn't occur to us that we should talk about it.

17:52But I think sort of going back to the basics and talking about multiple arbitrage and making sure that our investors are getting distributions have been some important pieces of ramping up our fundraising. and and for for somebody that's um i'm gonna hop back a a hair for somebody that's kind of going through this they don't want to use investor money because you didn't initially um and they're having a hard time getting that first deal in and i have some people who i don't want to say their names but um but they're friends of both you you and and me and they just like they're doing all the right things but just doesn't seem they can get that that acquisition down?

18:35What would you say to somebody like that? Somebody that's either afraid that's going to happen or that's experiencing that? Well, I think that, you know, fundamentally it's part of the journey. I think I shared with you once, Roland, my version of the Epic Journey, which it's, I know we're podcasting, so I can't share it, but it's sort of, you know, the initial talks and it's like ramp up in good feelings. everyone's feeling great. We think we're getting close. Maybe we even get a signed LOI. And then almost every deal we enter this, I call it the pit of despair, where it just feels like this deal is never going to happen.

19:15We're stopped up for whatever reasons. Usually a lot of the seller's feelings. Yeah. Or lawyers. Yes. Or the, yes. And the attorneys. And then we enter never closing Canyon. For me, Roland, this might not happen to you, but for me, every single deal, there is a moment in that deal where we go, well, guess there's no deal. That fell apart. And then somehow we sort of come out of never closing Canyon to the actual closing. Are you able, if you're thinking about it, to identify kind of what causes, what gets you past those two things? The pit of despair and never closing Canyon. Yeah. So, so the pit of despair, let's say you've got the LOI and these folks have been through that several times, lots of LOIs and then lots of advisors.

20:09Um, and, uh, and that's been a challenge for them, but, but for the ones that you were able to, to, um, get past that Canyon, what, what would you say causes it? Is it continued follow-up? Is it reframing? Is it, you know, you tell them, is it a takeaway? Or is it just always something different? But what would you say gets you past that? Yeah, well, fundamentally, Never Closing Canyon is a discrepancy between what I, as the buyer, am able or willing to do and what the owner is able or willing or wanting to do, right? So there's a gap there between what can be done. And so how can a lot of times, like you mentioned, that gap can get filled with attorneys that push you even farther apart or sort of third parties.

20:59It actually was a business lunch podcast. I don't remember which one that I listened to. And one of the tactics for negotiating was sort of developing a common enemy. So I do this a lot. And there is always a kind of common enemy. If you're working with a motivated seller and you're a motivated buyer, you both want the same thing. So we're stopping this from closing. And so identify that common enemy and find a way to work around it. And so if the common enemy is attorneys or paperwork, I mean, I've literally sat down in a restaurant for six hours and gone line by line through a 30 page contract.

21:37And agreed with the sellers what we can and cannot do. And we handed it to the attorneys and we said, draft it like this. And both attorneys went, no. And we went, yes, because, you know, we acknowledge we both wanted it done. So that's how we've, you know, that's one example how we've sort of worked through it. Sometimes it's time. Sometimes I'll just send in, you know, bad cop, good cop. I'll just send in someone else. Like my business partner isn't usually heavily involved in the negotiations. But if I get stopped up and I've tried over and over, I'm like, Brian, you call up Joe and you tell him how awful I am and you tell him that you're going to fix it for him.

22:15So sometimes just, you know, a different perspective to help bring us together. If the seller is feeling like I'm the enemy, then we got to, we have to find someone else so I can be the common enemy so we can work through it. Because again, like shared goals. So was it the Valley of Despair and then Never Closing Canyon? The Pit of Despair. The Pit of Despair came first. And what's the difference between the two? The Pit of Despair, things are feeling really rough. Okay. Never closing Canyon is, at that point, everyone in the deal believes that it is not going to happen. It's the farthest, the lowest point in the journey.

22:56And yet you've had several that went through both of those perilous things and came out on the end and happened, right? Yes. In all honesty, I'd say only one deal that I've been through closed very quickly in just a few weeks. And we really didn't go through that space. But all of my other deals have been through. What was different if you had to pick a couple of things about that quick one versus the others? It was the owner was extremely motivated. Unfortunately, he was in a health situation where his doctor literally told him, if you don't get out of that shop, you are going to die. Yeah. He was, you know, having heart problems.

23:37So, and he had already been, he had previously listed with a broker. He didn't have success. So he was, he was just very, very motivated that allowed us to close quite quickly. All right. So now you get through all of the, the journey and you have caught the dog, the dog that's caught the car. Congratulations. Now you own an auto repair shop or whatever other business. Yeah. What now? Now it's time to hustle. We sort of talked about earlier, you know, going into an industry that you're not familiar with. And I have found that coming from this space of being unfamiliar with the industry has its advantages.

24:25And one of the advantages is you, you're not accustomed to what you know, what the the assumptive actions or processes in that industry, which allows you, you know, to potentially grow revenue much more quickly because you think outside of essentially the box or the industry. In fact, I got a text from my partner today. He said, spoken by a true CEO, hard facts. I admire the pressure you just put on. This reminds me of why you're a great partner. And it grew out of this conversation where I'm like, well, I don't really know, but let me ask these questions so we can get to the heart of it and really changed our strategy for how we're thinking about some things.

25:12Nice. And in terms of systems, because you and I were talking about systems and things like that a year or two ago. Oh, yeah. In the beginning. you you were having a little bit of a challenge like getting the sops to put so that you could get people in that could then just follow the the book how did you go about making that happen in the beginning well in the beginning we had one shop and then we you know very quickly we closed to it around the same time so very quickly had three shops so i the problem is when you have when when you're starting with this smallish business is there's no really need for an sop Like, we'll just, you know, or you go down there and talk to our employees.

25:54And they do things the way they've always done. Right. Yes. Yeah. And so it was hard to sort of sell the story that we needed this thing. But of course, you know, we saw it coming down the pipe because we knew what we were building. But it was hard to make that feel important in the beginning. But I would say now that we're much larger, it's very obvious to everyone. Like we need to have a process around this. when we have a problem, we need to solve it with the process. So I think, you know, just knowing that from the beginning allows you to like begin the documentation and think about things in terms of process, even if everything's not solid.

26:33And then, you know, one day the light bulb is going to click for your, you know, partner or your district manager or whatnot that, yeah, we really need a process. We're quite big now. How did you go about it though? Because it's overwhelming for a lot of people to just like figure out where do we start and how do we get that? How do we get that ball rolling? And then how do we make it happen? You know, that's a good question, Roland. I think for me, I am thinking about process when something breaks. Okay. So if we encounter a problem and maybe it's that we, you know, we got to charge back from a customer, how are we going to deal with that problem?

27:14So whenever I'm in the mode of how we're going to deal with this problem, I'm like, okay, we're going to document a solution. This problem is new to us. I'm not sure if this solution is going to work, but we're going to document it. We're going to use it. If it doesn't work, we're going to revise it, right?

27:32And documentation even sounds like a big word. Literally, I mean, I use a platform called Notion to keep all my SOPs in. You can use anything. I mean, I think it's pretty straightforward. But I think it's just about thinking that anytime you're problem solving, like you probably should have documentation because you're going to need to come. You're going to come back to this problem is going to happen again. So let's record what we did and then talk about whether it worked or we need to revise it. OK, now let's let's look at growth from here. So you've got multiple shops now and things are going well.