223 - How He Paid Off a $2M SBA Loan in 24 Months with Garth Fasano

0:00By building a direct integration into these lead aggregators, we took the conversion rates from 2 % to 14%. We started pumping an additional$200 ,000 of revenue per month for our clients. So W2 employee, ETA, buy the business, pay off the SBA loan to today. How many years is that? We're two and a half years roughly post-acquisition. Dude, F you, man. End the interview. This is two and a half years? Imagine your best sales rep is on every call and in every text message and in every email with your leads. Better than your best sales rep because it's going to have access to all of the data.

0:40So you're in corporate America, right? You're working and you were searching at the same time and you found this business. Yes. Yep. You paid off your SBA loan in the first two years. I did. Yep. That's, dude, that's freaking nuts, Garth. But what was the business? The business I acquired was a call center supporting small businesses around the United States and Canada. What I was doing was taking leads that were generated by the small business and or their marketing agency, putting through a sales and conversion cycle, and then not just appointment setting, but closing the deal, taking a deposit and scheduling it on the small businesses calendar.

1:16What year was this? I acquired it in October, 2022. If we're running this for two years, the board would always ask me at every meeting, what is happening with AI? And in October 2022, the answer was, hey, it's about 10 years out. I think we've got some time. Then 2023, yeah, you're laughing. We can all laugh with it. October 2022, what happened in December 2022? The world started changing and it started changing faster and faster. So basically we went into some serious strategy planning meetings and there were sort of two choices. There was, hey, we have a fantastic business. It's doing really well.

1:55Clearly, the writing is on the wall that this is going to have to shift or it will sort of compete out competed by AI over time. Or we can, you know, make a big investment and go see what we can go do. And so we made the decision to go invest in the AI future of the business. Okay. Yeah. I was trying to like put these pieces together because I, in my research, I was like, all right, he bought this business, crushing it. He's like, you're processing a hundred thousand dollars a day worth of revenue for people who are utilizing you as this outsourced sales team, right? Call center. And then all of a sudden you've launched Rainmaker AI, which is, it's along the same lines, but I was like, I wonder what this whole process was to actually make the switch to go heavy into AI.

2:39I, what's the size of Rainmaker right now? Like how much revenue are you guys doing a month? Net income a year? Three and a half million in revenue. A month? Annually. Annually. Okay. All right. We're still running it today. How big is that business? That business is, I'm going to give you in terms of people. We have about 50 people in the call center still. Oh, it's big. It's big. Yeah. It's not small. Let me ask you this. So between the time of being a W2 employee to now where you're like, probably$50 million plus in enterprise value in the businesses that you have, which is just freaking nuts.

3:16So W2 employee ETA, buy the business, pay off the SBA loan to today. What's that years? How many years is that? We're two and a half years, roughly post acquisition. Dude, F you, man. Hey, Jamie and the interview, this is two and a half years. Yeah. So we're, we're, well, it's August, 2025 right now as we're recording. Uh, and so we're, we're getting closer to the three-year mark. Was this your goal? Like, were you like, no, man, I'm going to, this is what I'm going to do with it. You know, I mean, I searched for a business for, for five years. I put in LOIs on, uh, in-home non-medical, uh, senior care business.

3:54I put an LOI in on a port-a-potty company and septic pump out business. Like my plan was to sort of follow the traditional searcher ETA into one of those sort of more standard businesses, uh, home services, blue collar, really your sleeves. I mean, I love that stuff, but my background had been in enterprise sales and service, which is call center work. What size of business were you looking for? I'll be honest. I was very comfortable going small. I'm glad I didn't end up doing that. So I would probably drop anything that was less than a million in revenue and looking up to probably about 10 to 10, maybe 15 million in revenue.

4:30When I was doing my search, Wow. The family office sort of supporting me. And so if I needed to get, if I had an equity gap, I felt very confident that I was going to be able to close that. So that gave me a pretty wide aperture that I was able to look at. Well, yeah, that's what I was going to ask, like dude,$10 million. You're not just buying that with the SBA and some gap funding. Yeah. I felt confident I could pull it together if I needed to. So when did you find this business? Summer 2022 is when this business sort of kind of came across my desk. And I'll be honest, it was on BizBuySell. I found it on BizBuySell.

5:02Yep. What narrative violation. I hate this by cell. I think people give it a bad rap. I think that there are some, uh, I mean, clearly in the rough that are out there. And I think this by cell is great for getting your reps in like legitimately, like go on there, request a bunch of information, talk to these brokers, understand how to look at a SIM and ask the right questions, et cetera. It's just a lot of kissing frogs until you find that Prince. You know what I mean? It you just like surfing biz by sell and you saw it? Yeah. And I can't remember exactly. I mean, I was on and off searching for five years.

5:40Ultimately, I just had so much fun doing it. I love looking at businesses. Like I love seeing a business that was sort of in my geographic area and being like, wow, this is, this is so cool. And I could start to envision myself being the owner operator. So you were at your corporate job. I'm assuming you weren't full-time searcher for five years and you started out with a thesis of like, I'm going to get the unsexy sweaty business. I'm going to freaking do porta potties and septic pumping. And you ended up with a business that was basically the same thing that you had been operating in where you had experience.

6:13Yep. How did that happen? I mean, it's not by chance. You know, my friends in the search space now are like, what were you doing looking for something that was not in your background area? Like, why would you even try that? Like, that is just silly. And, and they're right. Because when I saw this business, I didn't need to go pull five SIMs from anywhere else. I looked at it and I was like, wow, they're, they are doing some amazing things in these couple of different ways. And like, this is awesome. This is awesome. This is awesome. And no one else that is doing outsourcing or outsource sales can do this.

6:44I'm so freaking glad Connor connected us. Cause this is like the scene in stepbrothers where it's like, do we just become best friends dude for the last two years? I've been doing this podcast, right? Like I sold multiple businesses and I was in healthcare and I was like, well, what else is out there. Oh, tech is cool. Or SaaS businesses are cool. Or communities are cool, whatever. And then like three or four months ago, I got to the point where I was like, what am I doing? I have this like skill set where I'm better than 99 % of people just because I have a lot of experience in that space. Why would I leave that space to go into a space I have no clue about?

7:12Right. That's just seems like the dumbest thing in the world. And so now, you know, my brother-in-law and I have launched this venture studio for healthcare in particular. but as I've reflected on it, I feel like that is the way to go. If you're getting into entrepreneurship, because now I don't have to learn how to run a business and what the business is. Now I just need to learn how to run the business. Cause I already know what the business is. I already know how it's supposed to operate, but I'm an entrepreneur for the first time. I don't have these like multiple competing learning curves.

7:38At least that's how it was for me. Yep. Yep. That was my learning to focus on what you know. I mean, the other thing is like, this doesn't apply to you, but for people who are looking for a business out there is like getting in the game is so important. And now that I'm in this game here, like I know so much more about small business operations, CAC to LTV, how you acquire customers, what the sales motions are, what's important, what's not important. And you know, that's what we're taking and leveraging into the future platform of Rainmaker. Yeah, dude, that's awesome. Okay. So you, you just found this business by chance.

8:09Tell me a little about it. Like how big was it? What was the revenue top line? What was the asking price? It was about$2 million in revenue. They were asking for about 3X, and it had pretty standard margins. What are standard margins for call center? What, 20%, 30 %? Sure. Base is usually pretty low, like 15 % to 20 % gross margin. It's pretty rough. In a typical outforcing business, yeah. 15%, 20 % gross margin? Yeah. So you make all your money. The F? Sure. resources. You don't make money on the onshore resources. You get high revenue on onshore resources, very low margins, whereas like, you know, offshore and it's different by each geo, but typically you're looking at like 50 plus 50 to 60 % margin.

8:58So this business is doing$3 million top line. It was doing what? 250 bottom line. It was better than most because of how deep room embedded it was into services. It was, it was all around like 500 and yeah okay so you saw it and you're like i know this space 500 000 in ebda okay they're asking for 1.5 i think i can swing this did you have a lot of money you could put down i wrote the check yeah oh you just bought it out right i wrote the equity check myself but then took an sba loan to fund the gap sort of traditional traditional eta smaller side where oh oh okay okay so 10 10 roughly yeah there were some okay to that sorry when you said that i was like holy balls dude how why did you leave the other company she got a freaking million and a half dollars laying around okay so your thesis was like cool i can get in there i know this business did you know that it would have the explosive growth no because okay so you buy it's doing three million i'm assuming you're not doing three million dollars a year anymore it was doing 2 million at the time.

10:002 million? Yeah. 2 million. Gosh. Yeah. If you're an acquisition entrepreneur, I don't think your thesis should ever be like explosive growth. It should be base case. Like I'm going to lose some customers when I take over. Like it's very slow. And that was what I built my entire financial model on. Yeah. Year one, learn the business, stabilize, learn the team, right? It's just like, do no harm. If the ship can keep sailing, I'm in a good spot. And then years two and three. You're supposed to go for explosive growth. That's not what happened to you. It sounds like though, that is not what happened.

10:30Well, there are a couple of factors at play is we got a little bit more involved with what I was calling like lead gen. And we offered that as a new service product to our customers. And there was incredible adoption. And so as we started generating by launching a lead gen program, which let us connect in lead aggregators directly into our sales motion for our clients, we improve the conversion rate on leads from those sources. And I'm talking like thumbtack, bark.com, Angie's list, things like that. Angie's list. Yeah. Our clients conversion rate on those leads prior to us building the integrations was 2 % like on all leads.

11:07It was terrible because speed to lead was lower. I mean, like literally we had people who would get a thumbtack lead, reply to it on their phone, screenshot it, send it to us. And then we would have to like input it into our pretty sophisticated CRM and dialing solution and call it. And so the conversion rates were terrible. Was there a specific niche that this call center was servicing? I forget. Sorry. It was dog training. And I'll get back to like that'll tie back into what my thesis was with this business. Wow. $2 million a year for just dog training sales or a call center? Yeah. Like 25, 30 million in dog training a year.

11:44Oh, really? At the time? Yep. by the time it got scaled up and we did this stuff. So, but you got to hear this. So by building a direct integration into these lead aggregators, we took the conversion rates from 2 % to 14%. So we 7X the conversion rate on those. So we started pumping an additional$200 ,000 of revenue per month for our clients by building that integration. Hold on a second. Let me get my calculator out. Yeah, that's a good, that's good. That's a good, that's a good improvement. Pretty good. Yeah. Oh my gosh. Yeah. When you say working the leads, you kind of went from an inbound call center to where you're like getting calls and your whatever leads that you're getting from your customers.

12:26How did you turn into an outbound? It's like almost like an outbound call center where you're working the leads or no? Doing both. So we would get inbound calls and then we would also get like web leads or leads from any other sources. And then we just built it like the business that I, when I bought it, it had a CRM was using Salesforce. We also had five, nine. So these are like Fortune 100 level systems and pretty sophisticated outbound dialing program there as well. So we get a Web lead, we send text messages, we do these follow-up sequences, and we convert those into customers. Okay. So then walk me through, what was the change?

13:02All you did was you started integrating with the aggregators? Yeah. So the lead sources that we would get and were automated when I came in were things like phone calls. Those would come direct to the team. It would ring. Web leads would come directly in and integrations would show up in our CRM and they get an outbound dial. But there were these other sort of like parts and pieces that were sort of sitting out and not connected into the platform. And so I just went down the list and started connecting them all in. And, you know, that speed to lead went down. The service that we were able to deliver improved and it started delivering significant revenue for our clients.

13:40So as our clients' revenue went up, so did ours. That is insane. So you were getting a lot of leads that were not either phone calls or web generated. You were getting a ton of leads that were the Google LSA or Angie's List or Thumbtack or wherever else they're coming from. And then you'd have to manually enter those in or at least get them from the client. Probably actually that was the problem is you had to get them from the client. Then you had to manually enter them. And then by the time you're responding to them, there's this big gap, like you're saying, of the speed to lead. Yep. so it's not rocket science okay i'm gonna tell just like a kind of similar story my the first company i worked at was a publicly traded company but they were very entrepreneurial and they they like give you opportunities to go and run these local agencies they call them their healthcare operations and i took over this one and this one was losing i think it was four hundred thousand dollars a year yep and then i got in there in the next year it made six hundred thousand dollars in profit.

14:38So I had a million dollar swing and it was like, dude, Nick is amazing. It's great. I wasn't, they were writing off like 8 % of their, of their revenue to bad debt. All I did was like fix the collections. So I didn't really change anything to the business. And then, you know, instantaneously it's going a lot better. That sounds like this, right? Like you're coming in and you're like, dude, we're getting the leads. All we have to do is improve our speed to lead. And boom, we just seven X the conversion. Hey, I don't know if you remember this, But when we started this podcast, we entered into a social contract.

15:08I would spend time, energy, and money producing this podcast, interviewing these individuals and giving you insights into how to build, buy, start, grow your business. And you would like, subscribe, and leave me five-star review. Now, out of that, we both get to talk to really cool people and hear really cool insights. We both get a ton of value. But I just want to help you keep your word. So would you do me a favor? Will you go leave a five-star review for me on Apple or Spotify? it would really help and if you want even share this with a friend the epiphany was like wow we're converting at two percent on thumbtack thumbtack seems like it's a pretty good business people invest in thumbtack so it must be better than two percent like what is going on here and then you're like well it's it's because this person screenshotted their phone and sent us the lead and now we you know have to manually input how hard was it to to actually get them integrated it is It's not that hard, but it is a process building the relationship with it.

16:10It took hoops to work it through the sort of chaos that that created was from billing because I essentially had to put the company credit card and was buying. So it was like very, very messy to try and figure that out. Cause I was like, Oh, perfect. I just push it into Salesforce, run a report every month. Did you see that opportunity before you bought the business or was it after you got in there? Like, no. No, it did not create that opportunity before I got in. But that was not the number one idea of buying the business. The business was like, wow, they built, you know, the founder of this business and the team built something amazing, like fantastic.

16:44Like the goal wasn't even to touch that. It's like, perfect. Let it keep running. The goal was, can we prove that this model works in another industry? If I can go prove that this model works in another industry, then we are onto something because we can go take this and bring it to additional industries. And so that was my goal from the beginning. We very quickly got into a med spa about less than six months after I came in. We had a med spa. And what we proved was we can sell med spa really, really well. Now, that MedSpa franchise did not create leads. They just wanted us to keep working their existing customer base, which if you're doing calls on your existing customer base, not a good strategy.

17:27So in the long run, that didn't work. But what we did prove in the six months we were working together with them is that we run the same sales motion. The sales call flow works just sort of like plug and play different pieces. And so that was the epiphany was like, OK, we can actually take this anywhere. Let's continue to prove that. So then we got into a couple more franchises. We're in a home cleaning franchise and one of the largest franchise rollups. We're also into a pest control company and one of the largest global franchise systems. And we now have a handful of other businesses that we're involved in as well.

18:03Tell me about, like you said, when did you identify that, hey, these aren't integrated with the aggregators? And when was it fixed by? I'm going to guess it was about 90 days to figure that whole process out. So let's just say you bought the business and the business is doing, for simplicity's sake,$150 ,000 a month. I know that's a little bit less than it was, but$150 ,000 a month. After 90 days and you fix the aggregator problem, what did your revenue jump to? Or did it not jump? I don't know if it was a percentage based on what your customers were doing or no? Yeah, so that is how we built.

18:36It was a percentage of the revenue generated for our customers. So we were basically - Oh, hello. Yeah. So anytime we could make our customers more money, we made more money. So it wasn't really that complicated. Okay. And you said that just by fixing that, it increased revenue for customers. 210 months. Yeah. In aggregate? In aggregate. Yeah. So that was adding. Wow. 10 % revenue to them per month. Dude. So you doubled the size of your business within 90 days. That's making it sound way too nice. No, it wasn't quite that big. Well, you said, no, you said it, I would, it added$200 ,000 a month, right?

19:14For our. Oh, for the, for the clients. Yeah. Got it. You had a percentage. Got it. Yeah. Yeah. Okay. Okay. What was the percentage you got? We were typically getting around, like, depending on the exact business, like 10 to 15%. Let's just say you were getting for number's sake, ease of number's sake,$30 ,000. Yep. You increased your revenue 20%. Yep. Wow. That's awesome, dude. Wow. And I'm sure your customers were happier because they were getting more business with the same amount of work and leads. They literally didn't have to do anything differently other than stop screenshotting stuff and sending it to us.

19:54So it was like more efficient across the board. Everyone loved it. So that business growing, doing well. Can you tell me where it's at today? Like, what are you doing in revenue today? It's about three and a half million in revenue today. So we are in a tricky transition moment of like, what is the future state of, you know, business? And this is a hard play. And a lot of people say, hey, you know, no services businesses can transition into being the type of networking company. I would challenge that. I think we're probably, you know, I'm sure the size of this business to some is big, to some is minuscule.

20:26I think we're small enough where we can make this kind of a transition and do it successfully. And I think one of the reasons we're really well positioned is because there are a ton of AI technology companies trying to come into their space. And I would say probably more on the B2B enterprise side. But what we are doing that I'm not seeing other people doing is that we are coming into the SMB side and not doing appointment setting, like end-to-end sales. So by Q4, our product, that will be the sort of real first release of the product. And with AI voice, we will be able to ask discovery questions on the call, identify the right product and pricing, deliver that to the consumer, and then handle talk-offs and objections, and then schedule the service and take payment all with AI.

21:15Is everything currently combined with it? Like the delivery between AI and humans? Yes. Yeah. It's combined at the moment. And I think that's actually the really fun question that we're spending a lot of time thinking through is like, what does that look like in the future? I think we all know what it's going to look like in the long run. And honestly, the long run is like 24 months, 36 months at longest five years, like, cause these things go so fast. And I think we know that at that point it is going to predominantly be AI. And I think that is scary to a lot of small business owners, but maybe you saw this update from Google on July 16th.

21:53They said, Hey, we're going to start having AI call small businesses. And so as we get pressure from corporate America, like this is going to force a small business owner to have an AI voice solution. I'm a caveman. So please explain it to me like an idiot. Tell me what is the current process that business owners are experiencing? And what is this new process that business owners will experience? Let's say with your company. Yeah. Q4. The process that small business owners have today is that they spend money on leads and they get leads. If you're using a platform like ours that to outsource the sales motion, or maybe you're doing it internally, or maybe you have a team, but now you have to manage some system, whether it's an employee, a VA, an outsourced sales organization to manage, convert, close those leads.

22:48You got to figure out what to do with these leads that have been generated. Yeah. And I think actually the technology setup is pretty complicated once it's not the owner doing it, because now how How do you get the local number? How does everyone stay on the same page? What email address are you using? Like who follows up? If you have seven day a week coverage, how do you make that work? Like, cause now there's multiple people involved. What are the handoffs? Like, and now what happens when you're doing it at scale and you're running a multi-location business that's doing 10 million in revenue a year?

23:16Like, so how do you build a system that can scale? So, and so even in the current state, what they might have done is said, Garth, I need your company, please handle these leads. And so your company is working those leads, all of the inbound stuff that happens. Inbound Webly, we're doing the mix of inbound, outbound from a local number, giving it that consistent look and feel. I mean, our people can talk about the weather in that town when someone asks. Do you use Go High Level? We do not. I just saw that they came out with one of the things I don't like about the texting softwares is it's green.

23:48Oh, yeah. You know, on the iPhone, High Level just came out with like, it texts in blue. I think, to be honest, we spend a lot of time thinking about if go high level would be a core part of our future technology stack. And it is our take. And we made an attempt at using it for a period of time because it sort of solves a lot of the problems. But what it does not let you do is have a team. To be honest, you need scaled teams. Okay. So that's current state. Q4, what does it look like? Do you no longer have a centralized team and AI is literally just deciding? We will still have a team in Q4. We will have AI voice that can, like I said, talk to a lead, understand their challenge, pitch them on the product, identify the right product and price, handle talk offs, and then book talk offs.

24:40Yep. So it'd be like, that price is too much. Oh, tell me what budget were you thinking of? Like the AI will be able to do all of that. I thought it was like a competition. Today we're having a talk off. How long can Brad go? You're talking to us. It's a process. Okay. It's just me and my, like the, the sales, we could do a whole episode on like home services, sales, best practices, like what to do, what not to do and how to handle these kinds of things. So talk offs are like pretty core part of our training. That is going to mean that 100 % of calls are answered immediately, 24, seven, seven days a week, three 65.

25:15And for sure, there are going to be customers that do not want to speak with AI. And so I think one of the big questions is like, where do we go? We can handle that in with our human team and our sort of traditional call center. We can escalate that to the business owner. But I think what is, so the sort of midterm is sort of what I think there are some more questions about, but it's super clear that in five years, as we introduce our recursive learning models, there is no way that the AI can't handle it all. The question will be, how do you handle it? If a customer doesn't want to talk to AI.