How I Bought a $3.4M Business For $200K

26:16It's like a summary of the business today. And so that's the one where it's like, you know, I think a mistake is people think you fall in love with the first few businesses you see. Oh, this is great. Yeah, I could buy this. So you kind of really like, I mean, you're just like a teenager that just went through puberty and you just fall in love with the first, you know, the first set you see. And you're like, well, no, that's probably not the right way to do this. Let me actually just plan that it's probably going to take me over 100 to even find one good one. And let me have that mental expectation.

26:46And let me start counting how many I'm looking at and not just like being desperate to find, you know, the one right away. And then you're saying like, you know, you're looking at an HVAC company. You're like, I don't know what HVAC is. you're looking at the financials you're like i don't know which number to look at it's overwhelming but you got you kind of got to go through those reps and figure it out before you even have any idea of what you're looking at i i kind of liken it to looking for a house because i think that's that's a pro uh you know or an apartment even because that's something that that most everyone goes through even if they're renting you know usually the first time you see it you have nothing to compare it to so you end up kind of getting to a place where you can you can spot the winners from the losers faster.

27:22But like Sean said, when I first started, it was like super exciting because it's like the ultimate career fair. It's like, oh, cool. I'm going to be a landscaper. I'm going to be, you know, I'm going to own, you know, a scrap metal recycling center. It's like you just get so excited. And again, the business brokers, especially like they make these things sound amazing. It's like, of course, I want to buy this business. So what were some of the cool businesses you saw? Like what's what? Give us an example of one that you kind of like, but you didn't end up pulling the trigger. so my favorite example um is i i got pretty close to buying a sausage company it did about like 10 million dollars a year in sausage you know my favorite my favorite anecdote on this sam is also a fellow sausage man actually i know i i know that kindred spirits well if we held an event it might also be a sausage fest we don't know you're uh you're almost a purveyor of fine wieners that could have been i i could have been and still maybe so you went but you did just like look at You didn't just read the sim.

28:18You're like touring. No, I went there. I went to this Austin. I went to this. I'm like walking through, like pretending to know what I'm talking about. Like, you know, how hot does this oven get? Like, it's like, that's the biggest thing. You gotta like figure out what questions to ask. This is a really common. Have you guys heard of the secretary problem? Yeah. Somebody explained it. Somebody told us that on the pod. So I used it when I was looking for an apartment the other day, and it was actually pretty magical. And so the thing is, is that, so I'm repeating from memory, so I might get it wrong.

28:45But basically, if you have, It started with the secretary. If you're hiring a secretary, you'd want to interview, let's say you had 10 interviews lined up. You wouldn't want to pick who to hire until you saw at least 37 % of the applicant pool. So for example, if you saw 10, or if you had 10 to see 10 interviews, you'd want to go through the first four. And then after the first four, you would select the first person who you met that was of equal value to or close to the highest person you saw in the first four. Does that make sense? So for if you see an apartment, let's say you go and see 100 of them.

29:24The first 37, you don't do. But the next one after the first 37 that you see that is as good as the best one that you previously saw, that's the one you select. And that's called the secretary problem. So you can't go back and buy that first one? You can't go back. You cannot go back. But you need to spend time exploring the first third to see what all is out there. That's fair. I bought the house that I found on the first day of touring, so I just want to make sure I didn't violate the secretary problem, but I did. You did. But you didn't with the business. I didn't with the business. And so of the 100 or so that you saw, were there any that, looking back, you're like, that was a winner?

30:05No. It wasn't until we saw. And there were a few close ones where, I think I was under LOI maybe three or four times. For example, that sausage company had one huge client. They had one huge client. And no contract. No contract. But you thought they were amazing. That's kind of my point. You thought of some were so good that you're under LOI. Yeah, but then you're under LOI, and then you get the full amount of information, and then you very quickly see business being missing. So in this business, it's kind of like agreeing to a first date more than it is an engagement. People make LOIs. They'll have three LOIs out at the same time.

30:42And it just says it's an agreement. We agree to look more, right? We agree to take this seriously, to show you some interest here. But it's not binding in the way that you think when you first go into this. Or if you're the seller, you're like, oh, we got an LOI. It's like, well, hang on. And I would bet the LOI to close ratio is probably, I have no idea, but I would guess it's like under 20%, you know, in terms of just LOIs received during a process. Yeah, because, you know, you're not giving the, a lot of the information you're not even getting until that point anyway. So, you know, you're checking all the boxes up until there, like, this seems good.

31:16I think this is going to be good. And then, you know, you get their financials or you go toward it and you find kind of that, oh, this is why, you know, you're selling it or this is why it hasn't been bought yet. That's another thing. One thing you did that was great, I think I kind of was like, the one piece of advice I think I was pushing on you was like, hey, write a memo for every one of these deals that you like. Basically, he would write me like a one-page notion memo that was basically like, what is the business? Why does it, you know, like, what is the current state of it? Just speak in numbers only, right?

31:46Why is the seller selling? You know, what's the one reason that you would buy this business? What's the one reason you would not buy this business? You know, what are the kind of, and you would just go there and you would write these memos. And I feel like that was key because I remember you would call, you were like excited about, let's say, like, I don't know, what was an example of one you were excited about that then after the memo, we talked it, we beat it up. And then we were like, no, this is not worth doing. It was a Clover app. I remember the conversation. So basically, like, so the Clover point of sale system, like when you're checking out of a restaurant, it's like, you know, they flip it and you're like, what's your tip?

32:18This guy made different apps for it. So like, you know, like when you round up for charity, for instance, I think that was one of his apps. um so it was actually pretty interesting it was like hey clover's a growing super niche yeah very niche um but he owned 20 of these things it was you know more up my alley in terms of tech but you know when i actually hashed it out with sean you know it was kind of like at the end of the day it was very niche very small and there wasn't necessarily a good path to grow that business it was just something that like was interesting now but probably didn't have the longevity of hey you're you're about to swing you know this is gonna that's another thing you said to me sean you were like this is gonna be you know don't don't listen to all those like blogs out there like yeah you're gonna buy this flip it and the next you're gonna buy two more businesses like no you're probably gonna be working in this business for for a little bit of time um make sure it's good make sure it's lasting um and i think that first one was an example of like sure if i was gonna buy 10 businesses maybe that was one of them but like that's not the game we're playing right now.

33:18A couple other, I thought like key points. One was, um, don't buy a job. So I think early on when you go to search, you see big price tags and you get scared a little bit because it's like, how am I going to afford this? And like, this is too risky. And so you gravitate towards things that feel like kind of safer and more achievable, but it's actually a bit of a trap because it's like, yeah, this is safer, more achievable. It nets a hundred grand a year of profit. I can buy it for only, you know, he only wants 180 or something like that. You know, and And so you get excited because it seems cheap.

33:50But the problem is it's still going to take all of your time to own, to buy this business, to run this business. And you basically bought a job versus the thing you bought, which was like$11 million in revenue, doing a million dollars. Yeah, real dollars. Yeah, that's not a job anymore. Now that's like an asset. That's like a real business. And yes, it took more risk and it took more time to find a good one of those, but it was like well worth it. So I feel like that was another kind of like key learning. I think we both had during this process, like became blatantly obvious. Yeah, not rushing the search.

34:18And you want to, trust me, call it five months in when you really hit this pit of despair of like, I'm never going to find anything. Everything under$5 million is trash. Private equity is scooping up all the good stuff and anything that's left under this point. There's a reason it's there. You kind of just get to this place like you're never going to find it. It's easy to want to just grab one and say like, those things are fine. We'll kind of ignore those there was holes in the business. I've made so many bad decisions like most all bad decisions that I've made it was I could like it's like I had principles leading into this and I got fatigued and I didn't stick to my principles.

34:55Fatigued, yeah. Exactly. There was one that was like an SEO business it was actually like a good business but what was the situation with that one? Yeah, so that one was like a competitor for like SEM Rush you know, it was a solid business it made, I think it did like a million it was like half a million to a million in here in profit. It was a nice business. But this was right as AI was really starting to becoming the center point of the conversation, especially as it relates to search. I helped a friend buy a company that was in the SEO space. And anytime an SEO company wants to sell, it's sort of like at a time...

35:33Do you guys remember Bitcoin miners? It's like, so if these are so good, why are you selling a money-making machine? Like a literal money printer. Yeah. And SEO is sort of the same way where it's like, wait, so if you're just getting like a fountain of traffic and customers, why would you want to get rid of this? Well, that's the same thing. It's like when you meet a 30 year old selling a business, it's like, you know, why? And that was exactly that. And I think going into, you know, let's call it the AI headwinds. It was like, there's a lot of reasons this business might be completely different.

36:04And I think Sean said, like, unless you feel like you're the best suited to take this SEO company into the, you know, the next five years, there's more risk than upside. And it's like, that is not my background. You know, that's not the game I want to play. And funny enough, I was actually in LOI with this SEO company when I found fleet. And I was, I almost wrote off fleet. Like it seemed really interesting. And I like, there was some part of me that, you know, didn't have me rejected, even though I was kind of in very late stages with this other company. Thank goodness. I, you know, I made that pivot.

36:37So let's tell the story. So you, you, the broker calls you says, check out this business. what happens from there so from there um i think this was before i was under loi but you know effectively fleet looked very different than a lot of these other companies like the finances at first glance like were super clean um you know the story made a lot of sense like a lot of these sims and a lot of these brokers like you know yes they're padding things and trying to make things sellable but um there was always like a blatant gotcha in a lot of these like let's take the sausage example they're like oh yeah this makes half a million a year oh and by the way he also makes another 400 000 in cash but we don't pay tax on that so like you can't see that anywhere and it's like a part of me is like that's kind of cool also sounds a little dangerous like selling 400 000 worth of sausage on the side of the road um but like there's always something like that uh with a lot of these businesses but but fleet was like very clean like everything was kind of buttoned up the story was really tight and it kind of checked all the boxes of like this is a recurring business like people are rebuying the bags several times a year they have these amazing clients they have these amazing factories they're like it looked very different than than these other than these sort of sounds like denner mifflin of bags exactly yeah exactly i am michael scott um you know it's it's it's a it's a necessity that these companies need um so what'd you do you go you meet the guy i was actually gonna say no to the broker um because again this seo thing was heating up i hadn't had my you know come to terms talk with sean yet he's like hey the seller wants to meet you you know let's all go out for lunch um i was like all right like free lunch that's cool um so we meet for lunch um and like my goal was like you know entertain this business but at the end of the day like i'm under loi so i really shouldn't uh free lunch yeah free i should i should break up with him after this lunch but we start talking and like you know just had this instant connection with this guy like he was the most stand-up guy I had met in in the past few months especially when it comes to like the business ownership you know he wasn't trying to you know pull something over my eyes like he wasn't trying to spin the story he's like this is the story like a lot of people like you know put lipstick on a pig this guy was like selling a rabbit or selling a different animal like it wasn't like he kind of said it as it is and it It was very refreshing.

39:03And like in that moment, it was like I kind of abandoned the like I'm going to break up with you. And like we kind of went the other way. We started talking about like, OK, well, how are we going to work together in the transition? How are we going to grow this? And then my favorite part is they, you know, they asked if we wanted any dessert. And he's like, oh, do you want to share a tartufo? And I was like, yes. And we shared a tartufo. I don't think I've shared dessert with my wife ever. But I shared a tartufo with this guy. and like i remember calling uh my wife after and i was like you know i didn't do what i was supposed to do like i was supposed to break up with this company but like we shared a tartufo and like i think we're gonna buy a bag business now um and it was just like this like complete 180 um but in literal michael scott right doesn't even have a scene at chili's that's like exactly this yeah exactly it would be like a lava cake or something like that a tartufo a tartufo is very I don't think that was my first Tartufo I've ever had, too.

39:59Who knows what a Tartufo is? I had to Google it. You're my type of people, Dan. I'll tell you that. There you go. And then from there, I broke it off with the SEO guy. Diligence took a while. That's the second part. It was like, okay, now you're committed to buying a business. How are we going to do this now? And it actually took four months. Because again, I'm signing my house away, signing my life savings away. I needed to be damn sure that this thing was going to be solid before I did that. And then the world of search took on that next chapter of, all right, well, how do you actually figure out, are the assumptions you've made in this quick few-week period of dating, are they correct?

40:44And we kind of transitioned to that phase of the process. What was wrong and what was right for your assumptions? And what was the difference in his asking versus the paying? So we actually negotiated the price of it pretty early. Like that part actually happened during the LOI for the most part, or like 99 % of it. And there were actually five bidders, which I thought was a lie. I kind of assumed this was them bluffing because they were like, yeah, we got four people in the packaging industry that want to buy. And then there's you. So, you know, it's going to be competitive, blah, blah, blah.

41:21But again, I just figured that was a tactic to try to drive the price up. but to this day the you know the seller maintains that that was the case so at this point i have no reason not to believe it we ended up taking i think they wanted three five or three six for the company so we ended up uh agreeing to three four the part that took the most negotiation was that forgivable seller note uh so the biggest kind of uh red flag in the business uh was that One client was over 50 % of their revenue. So my biggest fear, rightfully so, was everything's great today. They've been a client for 15 years.

41:59What happens if next year they leave? All of a sudden, this is a very different business. So what we did was kind of ran the numbers of the bank and said, hey, in order for us to finance this, this is the number that we'd have to have if for whatever reason we lost that client. so that part was probably the you know the most intense of the negotiations but for better or worse like most of what he said ended up being true like there weren't any of these and he said that in the sim like that that wasn't news what was surprising to you or what was different than the dream that gets sold on social media so if you watch the videos and you see cody sanchez telling you to buy just buy a laundromat it's gonna you'll be rich whatever that that type of shit.

42:42Like, was it in line with that? Was it different than that? What was the difference if there was one? Yeah, it's not nearly as easy as Cody Sanchez makes it seem. And I probably went a little more overboard. I think like when I think about the amount of time I spent in diligence, the amount of money I spent in diligence, you know, I like I'm a risk taker for sure, but I'm a calculated risk taker. So it's like before I make this gigantic gamble on the rest of my life, I want to make sure I've done everything humanly possible. And I think when you watch a lot of these videos about buying the business, like they make it seem like, you know, you can just find one and then kind of transition right away.

43:22And the whole process is really easy. Like the process of getting the loan, like some people liken it, actually, I think Cody Sanchez likens it to this. So maybe, maybe she actually isn't setting unrealistic expectations, but it's like, it's a financial colonoscopy. Like they want to know everything about you. And like that part's tough. And then you give the company a colonoscopy to try to figure out everything about it, quality of earnings, that sort of thing. And one of the things that I did, I think that I'm happiest that I did because it got me the most comfortable outside of, you know, paying for accountants and lawyers to scour things was I shadowed the guy.

43:56So every week. Because he happened to live in New York City too? Oh, the whole thing was serendipitous. Like he lived 20 minutes from my house. Wow. And the, the, you know, before I signed the SIM, it was like packaging distributor in, in the Northeast. So like, you know, it could have been in Boston, could have been wherever. This guy lived 20 minutes for me. That's how the Tartuffo was so accessible. But I literally went to, I went to the office every week, sat with the guy for several hours and just, he walked me through packaging. He walked me through his day to day and it just gave me, it, you know, it started my training of like, okay, well, how am I going to run this business?

44:29But it allowed me to really kind of take what was on that paper and figure out, you know, okay, this is, these are the skills that I will need to run this business. This is how I might be able to grow it. This is where I might need more help. It made it more real. And I think I was lucky in that I was able to do that because I've talked to other searchers. I was like, you know, let's go back to the laundromat. You know, you buy a laundromat. I would imagine day one, you kind of walk in and the machine breaks and you're like, oh crap, like, what do I do? I know nothing about these machines. Now I need to find a mechanic like everything is a little more complicated and nuanced uh with regards to even like how laundromats are you know i went down the laundromat path like i spent a while thinking that was going to be my destiny and it's like well no like valuing a laundromat like actually has a number of facets and you need to kind of really get into the weeds there so you know i'd say like the biggest takeaway is like it is hard and it takes time it's not something that you can just do you know for a few minutes a day um like you really got to invest in making this happen if that's what you want to do or you're going to end up you know with some surprise down the road i think that's probably my biggest relief is like i've been waiting for you know the shoe to drop somewhere and like this is what i missed and like you know knock on wood haven't had that yet how many hours a week are you working on it now and how many hours a week was he working on it he was probably working let's call it 25 to 40 i think he definitely was working less he kind of had it on autopilot i think he had started to you know kind of tune out a little bit but not in a way that like he neglected the business it was just like he'd been in packaging all his life like he could run it in his sleep he wasn't as focused on kind of doing the growing or renegotiating things with suppliers building the supplier base um you know i'm probably working on and you know 50 to 60 hours like i spend like a bunch of time on this um how much were you able to take home?

46:19So that's the million dollar question. It's like, okay, cool. Your business is making all this money. At the end of the day, two years in, I'm still only making 150 a year. I take the minimum amount that I need to for IRS compliance because I'm saving the rest in able to finance growth. I've made enough to pay back the loan, but I'm not paying back the loan because I need that cash to fuel the growth. It's a very cash intensive business and I'm not in a place quite yet where I can take as much off the table. Although Sean has been giving me some other frameworks saying like, hey, you actually should be doing this.

46:54What's that framework, which is like, if you want to replace yourself, you have to pay yourself the replacement costs? No, not that. But basically, I did this in one of my businesses. Not right for everybody. But I think it's easy to go into rainy day mode as a business owner when you play like two conservatives. So several of our businesses right now have just like, like one of our businesses has just like two, $3 million just sitting in the bank account. And the bank, like it goes up every month. It's not like we have this like wild swings where you need this big cash reserve buffer. It's not like a heavy inventory business.

47:26It's like, you know, you're all of your operating expenses, a salary and you know, your salaries. So there's no surprises coming next month. And even if there was like one of my friends, our buddy, so we told me this, I was like, how much do you keep in there? Like three months of working capital, six months, 12 months. Like, I think I have like 12 months of working capital sitting in the bank right now. He's like, no, I just take it all out. I'm like, zero months? He goes, yeah. He goes, I own this business myself. So if I ever need the money, I just lend it back into the business. I could always write the check back.

47:53It forces you to make a profit as well. Yeah. And so Andrew Wilkinson came on this podcast and had this book. He was talking about profit first. And I really liked the philosophy of it, which is basically with normal business, you have your revenue, then you have all your expenses. And then it's like, surprise, here's how much profit's left over after all that. And usually what actually happens is there's less profit than you would have guessed. And it's why, because expenses were a little higher, blah, blah, blah. And you're always in this profit comes last. Profit first was basically you decide upfront, you say, okay, I want to have a 20 % profit margin.

48:25So you take your revenue, you set aside money for taxes, which you know is going to be, so you take your revenue, you take your profits, you set aside amount for taxes. What's left is your expenses budget. So instead of making profit, the thing that comes last, you make the expenses come last. And then you have to say, all right, cool. Then my marketing budget can only be this much because I've decided to take this much as a profit, a set profit margin out of my business. And I don't adhere to it 100%. I don't think it's right for every business. But I do think that, you know, Dan, in this case, I think he's being a little overly conservative as to how much cash he's leaving in the business.

49:01I did that too. And the longer I delayed it, I took away one very valuable thing, which is if you have, If you pay yourself every month out of the business and one month that's light or another month that's heavy, the body just reacts to it. If it's light, you're like, yo, what the hell? And you will go fix a part of your business that was broken. If you just leave it in and it's just like a P &L, it's just numbers on a spreadsheet. It's not money you actually receive. You'll wait 15 months before you end up correcting that problem because it's all fictitious money anyways. It's not money you're actually getting.

49:30And so I think that actually getting that check every month creates this feedback loop that's actually quite valuable to a business owner. It'll cause you to scrutinize unnecessary expenses or go after it. Because once you taste a big month, like Sam, we have this with MFM. If we have a big month, the next month I'm kind of like, I kind of like the feeling of that one. Yeah, let's do that again. What do we need? One extra episode too? Should we go get a guest? What's Monish doing today? Let me see what's going on over there. You start to think about what you could do to go drive it back up. And I think there's an unhealthy version of that, but there's some healthy components to that.

50:03Yeah. So I think that's a lesson learned for me. I think I'm still in the very conservative, you know, what if I need this money? And I do have high working capital costs, especially around now, kind of pre-holiday. I'm about to have to write a bunch of checks. But very soon I should get to a place where I can take more out and or start paying back some of the debt a little faster. All right, listen up. Turn the volume up because it's your boy, Sean, and I got a little message for you. I talk to hundreds of founders a week. And when I talk to founders, everyone says the same thing. That the one thing they need the most is not funding.

50:39It's not more resources. It's just having more time. The goal here is to win. And the way you win is you get yourself free time to do stuff that's high impact. How do you do that? Well, I'll tell you my solution. The answer is Gabby. Well, you might be wondering, who is Gabby? Gabby is my assistant. She is my wonderful assistant. Gabby lives in Latin America. And she helps me save about 20 hours a week. So what she's doing for me is every morning, my inbox is sorted and triaged. And the most important stuff is right at the top with draft replies ready for me. So I'm never behind on email. And then as I'm on the go, I'll just send her voice notes saying, hey, can you find my kids a soccer class?

51:16Hey, can you take care of this car registration thing for me? All these little tedious BS things that would take up time in my day, she takes care of for me. And so that's free time I'm getting back. So if you are a CEO who's serious about growing your company, you need to get yourself an assistant. The best place to go is somewhere.com. Somewhere sources the best assistance from low-cost areas for you. So you can get an amazing executive assistant who's got business experience and has supported other CEOs for seven, eight, nine, $10 an hour. And so go ahead, go to somewhere.com, tell them I sent you, they'll hook you up with a good deal and get yourself an assistant and you can thank me later.

51:50All right, back to this episode. So Sam, I'm curious, what's your reaction to this whole thing? So I think that for people who have your personality, type, which is you're a very serious person, I think. If I was a broker and I met you, I would not think you were kicking tires. I'd be like, oh, this guy's for real. You have that very obvious for real energy. And if you have that very obvious for real energy, we're like, no, I'm going to do this. This makes sense. I think that the path that you're taking is so wonderful. And my assumption is that you're going to be wildly successful. And so I think it's very wise to do.

52:27I think that if you are an unserious person where you are not willing to put your house up or something like that, that's kind of like one of the tells. So if you're not serious like that and you are not willing to do the diligence and say, I'm willing to look at 100 things, I would say, do not do this. Yeah. I think there's also one, I think you said it perfectly. There is one more thing to it, which is what situations do you shine the most? And so for Dan, I think he always had an entrepreneurial streak that was used as random side quests in life. We would go try to win the McDonald's Monopoly game every year.

53:04We tried to actually win it. Not just hoping we would win it. We thought we were going to win it. We were like dumpster diving, trying to win this stupid thing. We started a blackjack club on campus, and we're running simulations to see how much money we could make if we started a blackjack club. We were always trying to come up with ideas. It was more fun to come up with our own idea versus just like Like, go get a job and do the thing. And so I feel like if you know that you actually turn up the most, you're the most version of you when you're doing this type of shit, when you're like in control of your own fate and you have your own project, as arbitrary as like, you know, bags are, it doesn't matter.

53:41It's like, I'll take bags super seriously. I took, he took gum seriously, blackjack seriously, sushi seriously, like all those things. I think that that's the other part, which is not the part you said, but then also if you really are like at your core, or more entrepreneurial, and you're more switched on doing that, then you're going to have a better result doing this than you are if you, you know, stay in a more traditional job. That's my guess. And I think people, you know, when I tell them about, you know, first, it's always like the unbelievable way you do what? But then the second, like their mind goes like, oh, I should do that because, you know, it sounds great in hindsight, right?

54:14Like when everything works out, it's like, cool, of course, this is easy. Of course, anyone can do it. But I think people miss the point that there's a lot of ways that this doesn't go like that and it's not necessarily the most glamorous i also think most people shouldn't do this so for example i agree this is not something i like this does not fall within my skill set so my like uh if i had to guess you when you were buying the company like you guys were negotiating over 10 20 30 40 000 things like if i had to guess you were incredibly anal about the paperwork you were asking you're like what's this 300 what's this $3 ,000 charge.

54:50What's this? That is not what I do. I do not do that. That kills me. That does not fit my personality type. So I have bought and invested and done a bunch of real estate stuff in my time. And I lose on all of it because you make your money when you're buying it. And when you sweat the details up front, which is not that is not what I do. I don't think necessarily that is what Sean likes to do. And I think that if you are the type of person who plays a board game, and you memorize all the rules and you sweat the details and you have that attribute, then buying a company could potentially work well for you.

55:27I'm the guy that takes the rulebook out of the box and reads it to explain to everybody. Exactly. If you have that trait, this could be awesome. Life-changing. Yeah. So Dana, one of the other cool things about doing a search for a business is you realize how big the universe of businesses is. And I asked you, I said, usually we try to brainstorm business ideas with people like what opportunities do you see um you said you would come up with a couple ideas give us a couple of your ideas of what you think other people could go do um this is just like the sort of random section yeah i think the i mean the biggest takeaway like from buying a business before i get into into the ideas like everything's a business right like you walked you know go look at any store you know every little piece of that business is something that someone sells like that display that says for sale like someone sells that like the the holder for the gum on the store like that's a business.

56:16I don't think I really appreciated how random and how basic some of these businesses can be. And people make really good money doing it. Even packaging. It's like you don't really think about that. By the way, I'm pretty sure Robert Kraft, the owner of the Patriots, he owns the Kraft Group. I think that's a packaging company. It could be. There are so many packaging companies. They make corrugated cardboard, I believe. Yeah, okay, cardboard. One of our best episodes ever, if you want to go listen to a great episode, is the Sarah Moore episode on this podcast. And she's the, I think it's called the egg carton queen.

56:48And her thing was, she did the same thing you did, basically. She went and found a retiring guy who owned a business that sold egg cartons. Like, not the eggs, the carton they come in. And you don't even think that's a business. Like, when you go look at, you're like, eggs, yeah, okay. There's a farm that sells eggs. You don't even realize that the farm has to then buy egg cartons. And there's somebody whose job is to make egg cartons and they sell it at the best price and the best value, blah, blah, blah. And so her episode, I think, is amazing. And you see that? The other example, Sam, that I always give when I explain what this podcast is to people is I talk about everything you see is there because someone sold it.

57:26Nothing gets there by accident. And so I was like, even in the workplace, if you go to your break room and there's a poster on the wall that's like the labor code, there's a guy in Minnesota that sells that. he makes a million dollars a year selling you the poster every year. Once I heard that, I was like, oh shit. It's like a physicist when he learns about string theory or some shit. It's like, oh, it's everywhere. I get it. Oh, the waves are particles. You see the world of the components. Yeah. All the components themselves are businesses too. And then you realize like, if you're not making it in business, it's mostly because of a lack of creativity and effort.

58:03It's not because of a lack of opportunity because literally every item everywhere is itself a business that somebody is running to get it there. And so, you know, there's no lack of opportunities in that sense. Yeah. So now I'm like hardcore on the other end of the spectrum of like, as unsexy as possible, I want to do that. Like, I want to be the guy that has like the most random thing. Like, packaging is pretty random. Like, you know, in a future world, once I, you know, if and when I'm done with this, like, I want to go even further. Yeah, by the way, do you have, when you lay, when you're laying in bed at night, what do you think, like, in 10, 20 years, we're going to, we could be this.

58:34Like, do you have, do you think this could be a$100 million company? Do you think you could sell it for a certain amount what's your sort of north star that excites you so you know at this point i don't have any plans to sell it i do think it could be a hundred million in sales company easily like there's so like some of these big packaging players are huge um and we're able to compete with them that's kind of the you know we're small in the scheme of things like it's a nice size business but we're small in the scheme of things but what i'm finding is as we as we work with these brands Like we actually do have a pretty differentiated offering because we are small, we're scrappy and people love that.

59:11And, you know, as we've been able to kind of add clients, I'm like, oh, this thing can really take, like we can really scale this up and, you know, start to gain more traction with these large brands. And, you know, the crazy thing is people spend, you know, these big companies spend tens of millions of dollars on their packaging. So you could easily get like five clients to get you to a hundred million like that, if it's the right five. So my goal is to grow it. I do think in a few years, I'll hire an operator to run it. One of my biggest pieces of advice to people searching is like, don't assume you're going to hire the operator day one, especially if you're putting your house on the line, because there is not a single person that I trust to run this business when I'm going to get kicked out on the street if it fails.

59:53When I get to the place that I feel better about that, like only then will I then decide, okay, well, maybe I'll hire someone and just do more strategic work. But yeah, like I'm loving doing what I'm doing now. So I think it's eventually scaling my time. So it's not like I'm very involved in all the processes right now. And I designed it that way because that's how I learned. You know, I'd love to be able to go away and not have to take a call because the blue isn't blue enough. Like, you know, I do a lot of color matching. When we were doing the sushi restaurant, Dan was not only sweating the details in the finance side, but we were like, dude, we don't really know how a restaurant works.

1:00:29None of us have ever worked at a restaurant. So Dan went and got a job at Noodles & Company. and he studied them from the inside and we treated it like it was like Ocean's Eleven. Every day he'd come home and we were like, what did you learn? Read a report, yeah. How long did you work there for? He'd draw the workflows. What did you learn and what did you bring me? Give me the pesto cavatappi. Yeah, then he'd bring the pesto cavatappi and he'd be like, trust me, do not eat the tomato basil soup. We're like, why? It seems just tomato soup. He's like, don't eat the tomato basil soup, guys. And so he was like, went undercover and he was willing to go to that.

1:00:59And then I had the big reveal, the big undercover boss reveal at the end when I quit. Yeah, by the way, were they blown away by the fact that you're like, I am creating a sushi chain? I think I tried to hire the GM and she's like, all right, that sounds better than what I'm doing here at Noodles & Company. She was like, I thought you'd be like, you betrayed me. It's like, cool. You're like, oh, you're trying to move next door? Great. We can trade food at lunch. So Dan, let's do, actually, do you have that, the business plan that we made? Do you still have that binder? Yeah, one sec. Let's find it.

1:01:34So the story here is that not only did Dan work undercover at Noodles & Company, at some point... Also, this was not a... I didn't just put that there. Like, that's lived there behind me. You just keep that there? I don't have one. I need to get a copy of this. I have this. I also, like, our Sabi Sushi hat is right there. Oh, nice. Yeah, so basically the first business me and Dan and our buddy Trevor had out of college was to create... It was a brand called Sabi Sushi. The idea was to create the Chipotle for sushi. So go get sushi the way you eat Chipotle, where you just walk down the line, you pick your ingredients, and you get the thing.

1:02:07This is our big idea. Which was I maintain a good idea at the time. I think it's been proven. It's been proven it's a bad idea, but I still want it. Okay. So we – not only did Dan work undercover at Noodles & Company, we then go and – I don't know how. We get a meeting with the founder of Noodles & Company, and we show up to this meeting with this binder. This binder is our business plan. We had been working on this for months while we were searching for a location. And can you just hold up the thickness of this binder so people see it? Oh, yeah, it's thick. Let's see. Yeah, like this is probably a couple hundred pages of a business plan in there.

1:02:43And there was stupid things. So part of it is what you would expect. Like, here's the startup cost. But part of it was dumb stuff like the uniforms and how we're going to progress people from entry level to manager and what their values are. We had not sold a single role to a single customer and we're worried about all this other shit. What we think, we're tricking ourselves into thinking that planning equals productivity. And, you know, spoiler, planning did not equal productivity. We're basically doing a very fancy form of procrastination. And so we get to this meeting with this guy from Noodles & Company.

1:03:13I think his name's Aaron, if I remember correctly. And he... I forgot that guy's name. He's like, all right, so like, what's the plan? And we think we're about to wow this guy. And we're like, plan? Oh, funny, you should ask. whip out that binder, slam it on the table. And it's basically like, here's our plan. Look how great this is. And I remember he looks at it. And first of all, it looks like a kid's project. Even the cover is like, we inserted this colorful thing and the front plastic thing. And then he flips through and he's like, realizes pretty quickly, oh, these idiots wrote a 250 page business plan for their sushi restaurant.

1:03:48And they don't even have a location. They don't have any customers. They're starting on, you know, from scratch. and I remember the look on his face and then I remember like the moment that was rock bottom for me in the whole sushi journey which was that he should have just ripped us and been like guys what the hell are you doing this is so ass backwards like why don't you get out there start testing your concept see if people actually want this and then like you know you'll learn by doing and instead he kind of took pity on us and didn't say that I could tell he wanted to say something and then he was like and then he just tried to be nice about it And I was like, oh my God, we're so bad that he feels like he needs to be polite about this.

1:04:28That means we're even worse than just being bad. And I just remember realizing like, well, I don't know what the right answer is, but whatever we're doing is dead wrong. I could tell you that right now after that meeting. Years later, someone did tell us that though. In Boston, we were talking about, we were about to sign a 10-year lease. And we literally just met this guy like 10 minutes ago. and he oh he was uh it was a guy uh he like owned a bunch of boston markets i don't know yeah john john prendergast oh my goodness nice call that's his name uh he was not he was doing a tech company now but he was like in it you know early in my career i own 20 or 30 boston markets and um he's like so i know a little bit about the quick service industry let me you know be your mentor yeah but he basically just tore the whole thing to shreds like within five minutes was like this is wrong.

1:05:19Don't sign that lease. And like Trevor wasn't in Massachusetts with us when we were doing this. He was like about to sign the lease. We called him. We're like, wait, no. Well, this guy was great because he's like, you know, so like he asked us a question and we gave him the answer we'd been giving everybody else. I think he was something like, you know, so what makes you think that there's like there's demand for this? And we were like, well, you know, sushi's been on the rise. We gave him this like spiel. He's like, all right, so is this going to work or what? And he basically cut through the nonsense And he's like, how do you know?

1:05:48Are you testing this? You're just going to sign a 10-year lease with a personal guarantee with no clue if the market actually even wants this? Like, doesn't that seem insane to you guys? And he gave us real talk. And I'll forever be grateful for him for giving us that real talk because he saved our ass from signing that lease. And he gave us a different plan. And he was like, why don't you test this? Rent out a commissary kitchen like bakers and caterers use. What turned out, they were like$20 an hour. It was like super cheap and no long-term commitments. And he's like, rent those out. Do a delivery only.

1:06:17Validate the demand. See if people like your recipes. See if people like their price points. You'll learn so much by doing that. And then you'll know what you need out of your first location if you're going to go there. And that saved our ass. That advice saved us. And whenever somebody asks me for any advice or help, I just remember, can I give them one-tenth of the value John gave us is the new North Star for that situation. Yeah, I remember he introduced us to like lean startup and, you know, actually figuring out, you know, we used to poll people were like, you know, would you eat sushi once a week?

1:06:52Like, how many times a week would you eat sushi? Which is a bad, badly phrased question. Anyway, in hindsight, like, oh, I'd come two to three times a week. And it's like, we did this proof of concept on the cheap as quickly as we could. And like, the answer was like, not even once a month. Like night and day. right outside of outside of like la sf new york the answer is like if i eat sushi at all like right to make a concept like this work it needs to work in texas colorado you know it needs to work everywhere and the answer was if i eat sushi at all i eat it about once a month and i'm happy with that i'm not trying to eat it three times and i'm gonna go to the nice restaurant to do it right and we were looking for like the three people who validated us rather than ignoring the 97 people who were saying no we're like yeah see those three um he also did one other amazing thing that as an entrepreneur, I now see like this pattern over and over again.

1:07:44So he suggested to us, he's like, do a delivery only. And we were like, ah, but he like saw the look on our face. He's like, what? And we were like, delivery just sucks. And we, we started, you know, he's like, why? So we're like delivery. I mean, you order food, you don't even know when it's going to come. This is before DoorDash, by the way. I think the biggest thing is we, we probably invented DoorDash and didn't know it. And we were fixated on the sushi, but we really came up with a better model. Exactly. So this is before all those. We were like, you call in an order. You don't know when it's going to come.

1:08:16It shows up an hour later. The packaging is all shitty. The food is cold. It's leaking out the bottom. And it just feels cheap. And we're like, that's why it sucks. And our takeaway was, therefore, no. And his was, wow, looks like you found all the things to improve to make this a 10x better experience. And since then, now I see this all the time. If you talk to entrepreneurs, it's like you think about a space and you're like, oh, that's horrible. That's horrible for these reasons. And the entrepreneurial response, the customer response is it's horrible. The entrepreneurial response is, wow, what an opportunity.

1:08:49Because if I just change those four things, I now have created this huge level up in the customer experience. And so we ended up doing it where our delivery times were sub 30 minutes. You knew exactly when it was going to come. We stamped on the food when we made it. so you knew it was fresh. We put a webcam in our kitchen so you could see us working on your order. We did all these other things to try to make delivery actually a cool experience. And the bar was so low by basic delivery standards that that kind of actually worked. And so I thought that was the other really brilliant thing that John did for us.

1:09:19Yeah, rethinking what everyone kind of assumed we would make with a restaurant and kind of flipping it on its head. And it allowed us to fail faster. So back to the business ideas. You had a few here. Are there any that you think are cool or interesting that you think somebody could go do? I'm very into what I'm calling fun-to-run businesses. So I actually looked at a few of these towards the end. I think I found Fleet when I saw some of these, like laser tag, bowling alleys, like kind of these family entertainment businesses. And I have kind of two hypotheses around them. One is like, I think I saw like one or two P &L.

1:09:54Again, do your own research. Don't just blindly accept that this is a good space. the one or two I saw like wildly profitable very low cost there's probably a high startup cost in the beginning but like climbing gym or something like that it's like once you get it set up they have like these autonomous ones now too you don't even need that much labor but also as a dad I have two kids like I'm always spending money on these things like my son had a laser tag birthday party there's like one person working at this laser tag thing they like own the laser tag game in town they charge you for the adult standing at the birthday party and i'm like wow like i could do this better i want you know they and they have you hostage all the arcade games you got to buy their food um kind of these very easy to run um like almost a single person but you know let's call it like a teenage business so you hire teenagers to work there like anything that they're not going to mess up yeah like a bowling alley and then how do you find things that like have multiple purposes like there's a bowling alley in my town and i you know it's you know during the day it's for kids like they have the kids activities and like after school activities and then at night it's the bowling league for the adults and they have a bar so it's the local dive bar it's like you know then there's like five you know five vending machines in there again teenager working like the no frills but i have to imagine if you can find the right business like this kind of great to be able to just go bowling at your bowling alley i can't do much with my paper bags.

1:11:19Like I go and I check them out. I maybe walk around with them, but like not much to do. Like why family entertainment? Why this out of home entertainment? Why now? Like, is there anything that's changed in the market? Why? Cause you know, these have been around forever. Laser tag, public golf, bowling alley, whatever. My hunch is they've been profitable for a while. Like I think a lot of these are like sneaky businesses that you don't think of. Um, you know, I think there's also kind of more of a trend. I was reading about this, like, you know, millennials like don't drink as much they want more like sober events um i think this idea of doing more like games is starting to take on again you know small sample size of things in my town but like you know you go to these like unlimited you know there's an arcade in my town it's like you pay like eight bucks for an hour you can play unlimited arcade games this place is packed um you know that sort of thing never really existed but i think there's like this desire to leave the house and do things.

1:12:11Maybe it's a post-COVID thing. I'm not sure. The thing that I think is really interesting about this is, and this is probably true across the country, I always drive by these large commercial real estate, old malls, these big buildings that no one wants to buy anymore. And then when I see what people put in them, it tends to be these newer, more interesting things like pickleball courts. I read something it's like oh they're taking all the old bed baths and turning them into pickleball courts um so it's like you like take something that maybe you can get that's not being used and you know make a climbing gym make it a ninja course um what i think is like the most incredible marketing uh where they like just marketed gymnastics to boys and now all of a sudden they've doubled they've doubled the amount of like demand for this and then there's like the climbing team and like this place is packed all the time um so that one is one so so one of my biggest investments over the past two years has been in my brother-in-law's commercial real estate.

1:13:13So he does what everybody thinks is dying, but is actually thriving. So for example, these kind of like strip mall locations, not like a mall, like an indoor mall, but basically a shopping center. And a shopping center with a grocery store, maybe a Trader Joe's, there may be a Crunch Fitness, there's a bunch of these types of locations. And then how do you fill up the rest of the boxes? And people think that shopping centers are probably dead because e-commerce or whatever, everything's on Amazon now or whatever. These things have like 97 % occupancy. It's like really, it's like higher than multifamily and office.

1:13:51Like it's a really great category. And even the few concepts that are like kind of going out of business, like a Bed Bath & Beyond or like Joanne's Fabric, he's replacing them with trampoline parks and pickleball and tesla charging networks he's like there's just new tenants that are always there and he's like the best part of this entire model because the returns are bananas for this thing like it's like it is by far like the thing i've been most bullish on in the last 24 months has been investing into this i basically took all my spare cash put it over here and um the reason why was a he's a good operator but b um there's no supply so nobody builds any new shopping centers.

1:14:28So like, even though, um, like, you know, every, everything else people build more, they build more condos, they build more stuff. Nobody builds new shopping centers. And so it's all just retrofitting existing centers. You buy them usually like below the actual build cost of the, of the center themselves. And so I've seen this, my kids go to this thing called, uh, little kickers. It's in, uh, San Ramon, like a little town, like, you know, in the Bay area. And it's exactly what you're describing. A teenager runs it. Like I asked to speak to the manager and um the manager was 17 years old he was just like yeah like a chain on and like the f-boy haircut and i was like what you're in charge of this and he was great by the way he was actually like a really good uh good manager but everybody who works there is young like he's young he's like you know probably he's definitely like i don't know under 23 years old and all the coaches there's two coaches per class that they're all they're all also like just kind of soccer players who high schoolers probably.

1:15:24But this thing is packed. And it's just like one large venue for kids' soccer. And this thing has to be printing. Like I was just doing the rough math on it. This thing has to be printing. They have definitely over 1 ,000 members. It's like$200 to$300 per month. This is a very big business that's basically, like you said, sort of like a fun business that's teenager-run. Yeah, and it's, you don't need to... And it's AI-proof, right? So if you're looking for where do I do business if I know the whole world is changing with AI, well, AI is probably not going to like do a trampoline park or do a kid's soccer center.

1:15:58You know, like those are pretty safe businesses. Yeah. And they're predictable. I mean, like their kids are always going to want to jump. It's not like you're buying a product that, you know, all of a sudden you don't know if it's going to last. Right. You put a bullet point on here. The least sexy business is possible. Touch the taboo. What do you mean by that? So this is, I start again, in the pit of despair, you start to go crazy with ideas. were like, all right, well, I started looking at medical ambulances, which I still think could have worked. But effectively, the government subsidizes medical transport for disabled and elderly from nursing homes to their medical appointments.

1:16:33So it's actually government contracts. If you have a fleet of these special handicap accessible vans, you effectively can immobilize this fleet every day. You kind of fill up your appointments with the people and you just transport them to and from. Super simple. You don't really think about it, but the demand is there, especially as the population is aging. That's a good example of an unsexy one. I would love to buy a funeral home, something that's just like, oh man, you work in that. I mean, all of the deal, if you want to find a deal that's kind of like punching above your weight, if you will, there's going to be some hair on the deal at the lower end of the market.

1:17:12Like I said, private equity is going to scoop up the easy ones. there's going to be something like if that something can be that it's just like weird and like no one really wants to touch it or think about it like to me that's a great a great reason to buy it right because because it might mean that you know let's say there's a really sexy business on one side right there's a business that's like maybe it's like software only you don't have to run it you know you know it's low operations blah blah blah and it's it's about whatever, party planning or something fun. The hair on that deal might be just that the valuation is extremely high, so it's going to take you a long time to get your cash back.

1:17:51Or it might be something else, like users are very fickle, the competition's very intense, whatever. There's going to be hair in every deal. The good thing about what you're saying is that if you choose the hair that it's not the most fun thing to run. Or the hair's going to be like you've got to cremate someone. I don't actually know if I want to do that, now that I'm saying it out loud. I'll hire a teenager to do it then. But like, that's a better hair. That's about a better amount of hair. Like you kind of know what it is. It's like the hair is the thing. Right. Versus like the P &L has hair or the, there's a lot of debt on the business already.

1:18:22There's other problems in other areas. Exactly. So if there's something that like, yeah, like if 20 people are going to flock to the software, only party planning one, but only like two crazy enough people are like, well, let me roll up these funeral homes, try to like, I'm sure people do this. Like, you know, I'm not the first one to think about this. But I like that. The other thing I really like right now, Party City just went out of business. Where are you buying balloons? There's a guy, like 20 minutes from me, he had a firework store. His firework store happened to sell balloons. The day Party City went out of business, he rebranded, man.

1:18:55Now his store is called Balloons. It used to just be called Fireworks. Now it's called Balloons. He's taking out all the ads on the street. And we went there for my son's birthday. He's doing awesome. So it's like, how do you like kind of, and don't copy Party City, that clearly didn't work. Right. But the demand for balloons still exists. And will continue to exist. Exactly. The supply just shrank like a whole lot. Right. And I imagine as things change, like the landscape for better or worse is changing very rapidly these days. You know, maybe something goes out of business because they can't compete because of tariffs or whatever.

1:19:28Like, how do you think about being, you know, opportunistic in that sense and doing it? And you can do it. you don't even need like you could start selling balloons like get a permit and start doing delivery only balloons like that I actually saw a truck doing that when I went to Monish Pabrai's house he's a great investor and he on his desk there's a like where you have a name placard normally you just have your name engraved on it engraved on it it just said trouble is opportunity and he just had it on his desk so because at all times you know he's reading the news or he's hearing something as a reminder trouble is opportunity I love that yeah that's awesome cool well dan dude awesome hanging with you as always i'm glad you got to tell your story and congrats man i'm blown away by what you did with the with the business that you bought you are officially dan the bag man thanks for telling the story yeah thanks for having me on it's uh exciting to uh to be here cool

1:20:28all right my friends i have a new podcast for you guys to check out it's called content is profit and it's hosted by louise and fonzie cameo after years of building content teams and frameworks for companies like red bull and orange theory fitness louise and fonzie are on a mission to bridge the gap between content and revenue. In each episode, you're going to hear from top entrepreneurs and creators, and you're going to hear them share their secrets and strategies to turn their content into profit. So you can check out Content is Profit wherever you get your podcast.