Can you grow by acquisition without taking on debt?

Link: I think I was a person who knew was not very confident. I didn't have other entrepreneurs in my world, my sphere. I didn't come from an MBA from Stanford, HBS background here. People say, "Jeez, you're putting as much work into one of these little small deals. You might as well go just bigger." And I don't know that they were wrong. It was just a comfort level for me. It was proving out my thesis. I think folks talk themselves out of things, and so doing a small deal just to get the rep, worst case, I haven't lost any money. I burned a bunch of time. But the education that comes from that, 12 different deals with lessons with those, gives you that confidence to go a little bit bigger and risk a little more. I would encourage anyone not to make assumptions that you're too small or don't have the experience to do this.

Sam: Okay. Welcome to this every other week's episode of The Intentional Owner. We have our usual cast of characters. Kaustubh Deo. Kaustubh, welcome man.

Link: Moser.

Sam: Moser. Okay. So Linc Moser is joining us because I've known Linc for quite a while. You wrote a book called The Bolt-On Blueprint. It's all about your experience as a small business owner buying what I'll call micro businesses to add on to your core business. So first of all, welcome.

Link: Thank you. I, I, I'm honored to be here, guys.

Sam: Where are you calling

Kaustubh: in

Link: from today? So looking forward to it. I am up in New Hampshire, about an hour and a half north of Boston, where the leaves are either fallen or nice and orange and red.

Sam: Lucky you.

Kaustubh: If, if I can make a free plug right here, Sam, but I invested in a tombstone business in southern New Hampshire, so the next time you're in the market for a tombstone, let me know. Yeah. Hopefully not anytime soon.

Sam: I'm not-

Kaustubh: If he's ever near

Sam: the market, he- I'm not dying to buy one, buddy. Sorry. God, I've been so dying to make that joke for a long time.

Kaustubh: There's so many good jokes once you own a tombstone business. It's sick. Oh, man. Yeah.

Sam: Uh, so Link-

Kaustubh: It'll kill you ...

Sam: we as, I don't know if you know this, maybe this'll make you feel a little bit better about investing an hour of time with us today, but Kaustubh and I try our best not to use, like, our transactional background, M&A deals, to be, like, the North Star of this podcast. So we actually try to talk more about being a quality owner and intentional owner/operator, all things, like, post-close, and, and largely, like, try not to overemphasize the search phase. And so I think the reason when you sent me your book that it, it struck a chord with me is because while we generally always say, like, "Buy your business, run it, learn it, grow it organically," what we don't also talk a lot about is micro add-ons, and Kaustubh's done them, and I've done them, and yet we just don't talk about it all that much. So just maybe take a few minutes and give us some background on your entire history of becoming a business owner before we get into, like, what's in the book.

Link: Sure, sure. Well, it goes back well in the, even in high school. My parents had... They weren't great at having side hustles back then, but it was, you know, pre-internet, and we had a landscape nursery business where we sold trees. So we'd buy them bare root, throw them in a pot with some dirt, and resell them. And even though I don't think that ever made a ton of money, my s- dad still had a, a strong W2 job- It gave me a taste of entrepreneurialism. I remember building out an early catalog, and I really liked running a business. And so right after high school, a few years after high school, I didn't have a chance to go to college. It was the mid-'90s. Someone said, "Hey, why don't you build websites?" I think it was my dad, and I didn't listen to a lot of things he said, but that was one thing that I actually did listen to and taught myself how to build websites. So I started building websites, hand-coding them, selling it all organic. You know, built a website. Back then, you know, organic SEO was pretty easy. And a young guy in his early 20s, I didn't have a lot of overhead, so, you know, a couple hundred bucks, a thousand bucks here and there was good money. You know, fast-forward about 10 years, though, now a lot more people were doing it. Competition had gone up. People had been in it longer, and then they were starting to exit. And one of my local competitors, who I perceived to be bigger than me because they had a, an actual brick-and-mortar office, because back then working remotely was, uh, less than, right? If you didn't have a fifth-floor glass office, you were, your quality of work wasn't very good. It wasn't, the remote work wasn't where it is today. And so I thought these guys were big. They had employees, and next thing I know, they, they didn't exist. Their book of business had gone to another competitor, and I never got a call. Never, "Hey, let's ask Link." Now, maybe I couldn't afford it. Maybe it couldn't happen, but didn't get that chance. So that's, was the lesson that got me to be purposeful about What I said, you know, getting a lottery ticket, you know, sending these letters out to people and saying, "Hey, if you have..." I think these guys, they were my age, they were young, so it was a, a life circumstance. I think it might have been, uh, health related. So you never know when somebody's gonna shift gears, and if they don't have your information, they're not gonna reach out to you. So that's what got me started down this journey.

Sam: And let's just frame the business. So the business, the core business was called, or is called Windhill Design, right?

Link: Correct.

Sam: And would you describe it as like a traditional web dev, a hosting, and digital marketing agency? Is that, is that like the right way to describe it?

Link: Yeah, that's correct. I would say most of that is gonna be now the web hosting, the maintenance, even less builds these days. But, but over this journey, it was a mix of project-based revenue and recurring. Pretty consistently focused around the web development, m- mostly WordPress for the last 15 years.

Sam: Got

Link: it.

Sam: So, I mean, at least when I read your story, what struck me as like, yeah, you happened to build yours from scratch, so you were a startup entrepreneur, but it really didn't matter, right? I- if you'd have bought Windhill, other than the fact that maybe you had no debt, and if somebody who bought the base business would have some debt, you were largely in the same place, which is it was a fairly small business. You were the chief cook and bottle washer, for the lack of a technical term. And was it really the, it was like the first idea of buying a second business under Windhill, seeing your competitor get sold, not to you? Or had you thought about it before?

Link: I hadn't thought a- about it before. I remember thinking, you know, "Why didn't I get a seat at the table?" Now, there could have been a gazillion reasons why I wasn't the fit, and at that point in time I didn't have much capital to work with. But w- what struck with me is I just didn't get the chance. They didn't know, and they didn't think of me, and I'm, I'm 15 minutes away from them, and we knew each other 'cause we'd go up to bid for things, so... And we were friendly. So it just never occurred to them, and maybe they didn't have... I don't know. I can speculate, but I just know I didn't get a seat at the table, and, uh, I was pretty determined not to let that happen again.

Sam: Okay, so then I think this is where whether it's you, Link, and Windhill, or s- anybody who's bought a small company and, you know, maybe has run it for a little while so they understand what they own and have stabilized it, it puts you in a position to actually be a great buyer of, of like, I'll call it a micro small business. But what you did, what, 14 times? Is that right? No, you did 12 times. 12. 12. Is you didn't, I think 11 of them w- were what I would call, like, you just acquired a book of business. That's all you did. It, it's almost not even an add-on. You didn't consolidate much of team. You really just bought customers, and I think, like, sta- stating that in plain English, that you can buy competitors' customers, is a really interesting and under-discussed way to grow. So, like, tell us how you did that maybe in the first couple times.

Link: So it, it, I, I, I like direct mail. I started sending letters And I started locally, and I hired a VA on Upwork to build me a list. So I'm in New Hampshire, give me a list of other people like me in New Hampshire. And I'd run them, you know, give me 10, let me see what you get. Show me the websites, I'll go look at them and I'll say, "Okay, yep, these look right. These are on point. This one's not." Once we had that dialed in, go for the whole state, and then get me Maine, and get... You know, so at the point where I had a several hundred and I'd send those letters out, I did it manually, mail merge, Word, pretty unsophisticated. Got my kids to help me fold these letters and lick these things and put stamps on them. I hand signed them all. I thought that was important. And I'd put them in the mail. And inevitably, after a week or so, you'd get some phone calls. And, you know, and it's a, it's a top of funnel, work your way down the metrics just like anything, you know. S- many of these were just tire kickers, curious. But the other thing worth mentioning here is these little guys aren't getting letters. They're not getting the emails that we see folks on SearchFunder pushing out in mass quantity. They're, PE people are not knocking on their door. They don't necessarily know who, what PE means. So it's a pretty warm and well-received letter that's flattering, whether it goes anywhere or not, but it's a, it's a fish hook or a lottery ticket that you're planting. And those calls are f- are f- fun to have because, you know, we can talk about this later, but other things can come from that too, you know, different joint ventures, different potentials. So

Kaustubh: yeah, you know- I, I love that, that, that idea of sort of increasing your surface area for luck, right? Like, that's really what you're doing here is, like, you're creating opportunity for serendipity by sending out these letters. They may or may not trigger into anything. I'm curious from your, like to your point around micro and like, you know, businesses and SearchFunder people are not reaching out to, like what sizes, like did you have filtering on like how big or small businesses you were trying to go reach out to?

Link: I didn't. I mean, I, I did... Well, that's not true. I did, you know, if you looked at their website and the About Us page was showing 50 headcount, I, that was just too big for me, you know. I, so I, I was filtering it based on service offerings. If they looked like they were doing video production, that wasn't for me. So I was looking for things where there was- Apples to apples, and then a page count, or, or not a page count, but a staff that, you know, under five, you know? And, and we've learned that in that space those could be all remote workers, those could be contractors that are global. Mm-hmm. So it, it, it was really a pretty wide filter because you wanted to get on those phone calls, and I didn't wanna filter it too tightly and risk missing out on a call or a conversation that could lead somewhere, so I intentionally kept it pretty broad. A- and as I did more of this and, and got involved in the search space, you also, "Hey, this isn't for me, but I know someone." So you can be a connector. You know, there were some really large agencies at one point that just weren't fitting what I was looking for, but I, I knew someone I could introduce them to. So, you know, those are all really great conversations to have.

Sam: So just to step back on everybody loves tactics, right? And was there, like, a silver bullet in those letters? Was it, you know, was there a specific message you were sending? Were you customizing it? It's hard mailing, so it's via snail mail. Or was... Like, what was your secret, if not just pure persistence?

Link: So, uh, it's definitely a numbers game. I used a one-page letter. I was consistent with that. I put it on letterhead. So if you've already got a business in the space you're going after, having it on your letterhead versus personal I think gives credibility.

Sam: 100%.

Link: Because I was online and I had LinkedIn, and I would put that in there, 'cause these people were gonna, you know, in the, in the age of scams, you know, what's this guy's angle? Uh, I wanted people to look me up. I wanted the, them to do their homework. So I think- Beyond that, it was pretty, "Here's who I am. Here's why you're getting a letter from me. Here's what I'm looking for. If this resonates with you at any point in the future, I'd welcome a conversation." It was pretty simple, straight to the point, and people hung onto these letters, and they're still out there. So that, that's another point I think worth mentioning is over an email that can be easily deleted, a letter can sit tucked in a desk drawer. That's, that's how the f- first acquisition came was it was sitting somewhere for a good year before circumstances caused that seller to reach out. So the, it's, it's got staying power.

Sam: My-- And Costa probably has as much experience here as I do, but once you're in an industry and you can write those letters or make those calls as a fellow owner, the credibility just skyrockets in those counterparties' minds, and the conversation is instantaneously 100 times easier than the same letter coming from Succession Search Partners or whatever search, searcher entity's name is when you're not an owner, you've never bought anything, and you're certainly not in that industry. I mean, Costa, what's your experience?

Kaustubh: No, 100%. I mean, I spoke at this year's conference, like our trade conference, and last year's trade conference and gave a talk. Like, last year's talk I think was literally called, like, "How to Build a Business That Can Sell," right? Like, it was focused on what are, how do you build systems and processes to create an entity that somebody would wanna buy. And I viewed it as like, hey, like, this is actually, I'm trying to be value additive to my peers in this industry, and hey, if you actually do wanna sell, I'm a potential buyer, right? That was the obvious kind of undertone. But, like, it was meant, I meant it sincerely as like this is actually how I think you can go about building a business that turns into a financial asset for you in your retirement. But being able to, like, come to your peers in your industry from that lens, like it's, it's such a different, such a different angle than as a searcher.

Sam: All right. So l- why don't we go, 'cause I think it's, it's interesting to talk about that first deal and how you structured it and what it looked like. So that first one that you bought was, like, a year after you sent the letter. Can you, uh, you know, you don't have to share anything that's confidential, but, like, give us a sense for the size of the company you owned at the time, and then some stats around the business you bought and whatnot.

Link: Yeah, good question. And I'm going on memory 'cause I don't have the exact number in front of me, but I would say around that time my company probably was,

Kaustubh: was

Link: maybe doing around 200,000 top line revenue, and, you know, margins are always, you know, between 60 and 70%. That's, that's a, a good estimate, and I think the first one was maybe, I don't remember how many clients that might have been, 100, 120. And that first batch probably had about 30 or 40 customers It was, it was kind of a sad story, but as, as life, these things happen. It was a husband and wife team, and they, they were, you know, a lot of these folks I'd run into were running like ISPs, and because these guys... Or they had servers, physically servers in their property, and these guys, I don't think were an ISP, but they did host their own websites, like servers in their basement hosting. And the husband had the technical knowledge, and I believe the wife was doing the front end of the business, and then when he, he passed and took the technical knowledge with him, and so she knew she couldn't really run this, w- 'cause they had servers they had to maintain, and she didn't probably have the technical knowledge or the desire to move that stuff, 'cause the cloud, you know, in circa 2014 was, eh, it was there, but- you know, they probably were used to what they were used to, and plus the guy just passed. So I think it was a good year, um, from when I sent that letter. I don't know what, what point that transpires with the husband's passing. But she reached out to me and said she'd had this letter for a while, told me what had happened, and at that point was just looking for a home for the customer. It wasn't like she was gonna cash out. It was not gonna be a life-changing amount of money. She just needed to find a home for these customers. And, you know, my go-to terms for something like that was a, a straight rev share of, "Okay, hey, I'll take them over, I'll move it over. I'll make this as easy as I can for you. I'm, you know, sympathetic to what's going on here, and I'll give you 50% of whatever comes in the door from these customers off the top line for the next 12 months. So you'll get 12 checks from me. I, I can't tell you what that will be, uh, how much it will be, but it's, it's, it's value that I can put on these, and no, no worries if they all walk out the door in month three." You know, I mean, it's just I'm a solution to the problem. I'm one solution to the problem, and yeah, there certainly are others, but that worked for them and it worked for me and, and I've... That- that's been the model I've used quite a lot. Not, not every time, but it, it's, you know, financially no risk for me.

Kaustubh: No, that's great. So basically, and y- and you think most of these businesses, because they're being run kind of solo owner for the most part, like, they're probably running, like, a 50% margin anyways? Is that, is that fair?

Link: At least, yeah. These are, these, many of these are, that I've taken were small home-based busin- well, uh, at least half or more. Yeah. So margins of 50, 60%. That's great. Especially on the recurring revenue. Now, you know, some people are paying a lot for their expenses, and then, you know, so there's an opportunity to improve your margins when you move them over, but this one was... And they, you know, it's a split between some recurring revenue and some project-based, but the recurring revenue is, in, in this space, is really sticky. So it's, it's, it's very high margin and very stable

Kaustubh: In like apples to apples terms, it's basically like you're paying, if it were 50% margins for EBITDA, you're paying like one times EBITDA 'cause it's one year's EBITDA- Right ... but with no risk. Which like frankly, like at the scale we're talking about, you know, which is 100 to 300,000 revenue a year, like pretty fair. But like if you have the home, the home for that business, like you're the only possible buyer for that.

Link: Correct. Yeah, there's not a lot of... You know, they'd have to go out- they're not gonna go to market with this. There, there many times there's a time crunch. And I, you know, I can only really only speak personally to the industry I'm in, but I've gotta believe this exists at this size and across many trade businesses. I, I think of home services where, you know, the one-man show is, whatever reason, one man or one woman gonna sh- hang up the hat, has a book of business that needs to go somewhere. And, and we all hear the stories of doors just getting shut, and, you know, that's the last thing that any of us would wanna have. So, you know, you get the word out there, you're giving somebody another option.

Sam: Yeah, it's funny, I read this story and I thought to myself, "Well, it, there's probably not the opportunity set, uh, for Kaustubh and I to do this that you had," because yours is and was a digital business, right? Could be run anywhere, doesn't have physical assets. They're all digital. So I think that probably made your, your target list a lot bigger than ours. Kaustubh, how many of these kinda opportunities exist for you where you could just absorb it, like, 20, 30?

Kaustubh: No. I go back and forth on this. I would say there's probably, like, if it were, if I were to basically put no restriction on the bottom end size, there's probably, like, 50 plus. Like, I think it's doable. The part that I actually have a harder time with, which is a little bit different than the business, the industry you are in, Link, is our dollars per revenue are sup- or I mean, excuse me, our dollars per client are really low. And so, like, f- in that case, like, you are buying a known book of 30 to 40 clients, and you could track revenue for them for the next 12 months, and that's not too difficult. Our problem is, like, us- if, like, your average job is, like, $2,000 and you're doing, whatever, 300K of revenue, talking about, like, 150 clients all paying one time at different times throughout the year, it's just, it's, it's actually a much more painful, like, tracking process and, like, attributing it correctly. And that's the part that honestly gives me more heartburn. It's not the, like, the price I think is fair, and I think we could figure out the logistics. Like, we would just, like, that's just new leads, effectively, for my existing team. The part that actually gives me more heartburn is, like, making sure I'm, like, accurately tracking that cust- that, that seller's customers and, like, separating it out accurately. Which we could do, but it's a little bit more painful than I think it, it, it sounds at first.

Sam: Well, I mean, let's, like, create that story, right? 'Cause I'm sure there are lots and lots of people that listen to us, 'cause we are trying to speak to owners who can imagine, like, the comp here is maybe the one crew tree care owner Who's doing the office work, the selling, and is in the field with, you know, two or three folks, and it's a single crew. How many customers does he have? 200?

Kaustubh: I mean No, way more

Sam: 500?

Kaustubh: No, the problem with tree work, right, is you're not working for those customers every year, right? Ah. Like, you're working for them every f- like, there's a lot of repeat customers, but you're working for them every few years, right? Yeah. And so, and so we did one add on, right? Like, like, that looks a lot like what Link is talking about in his book, where, I mean, I should, I should go look at the numbers. But that business, you know, we didn't bring over the team, we didn't buy any equipment. The, the business kind of floated away. We just bought the customer base and the brand, and then, like, the phone number and email, you know, that kind of stuff. And, you know, I wanna say he was probably doing, like, [figure omitted] in revenue, and the customer data... And, like, the business had been around for, like, 30 years, right? The customer database we got from them, I wanna say it was [figure omitted] people.

Sam: Oh, whoa. Okay. So that's the challenge. And 'cause there's probably a second challenge too, which is there's gotta be some overlap.

Kaustubh: There's gotta be some overlap. The, it's in a different system than ours, and getting it into our system is a pain. Like, actually, like, tagging it in our CRM that, oh, this is a that company client, and then, like, figuring out a report to take out at the end of every mon- Like, that's the part. So, like, with that business, like, I wish I had done it the way you did it, Link. Like, that would've been much better deal for me. It just, like, ta- it was impossible enough that I... Yeah. So I did a deal with them that was more of a [terms omitted] structure, and the multiple, so to speak, was higher than yours. It wasn't no-risk the way yours was, which I love.

Link: Well, they weren't all that way. And, and I think, you know, uh, hearing you guys talk about other industries, you know, yes, it, being in the cloud, you know, I don't have geographical constraints. I don't, I mean, it's, it's, it's certainly a lot simpler. But I think for those listening, I wouldn't w- and I think you guys probably would agree, I wouldn't want anyone to take this idea off the table. The terms and the how you structure the deal certainly are gonna be different, and they could be anything you want. I, I did all of these proprietarily, so there wasn't... Nothing against brokers, but, you know, there was no intermediary getting in the middle saying you have to do it this way. So if you could build rapport and trust with these competitors, it opens up the door to getting creative to finding a way that works for both parties. And I'm, I'm naive in thinking that there's always a solution when you've got two people looking to make something work.

Sam: I agree. I, I also got the impression that the first few were really small, and maybe that's part of the answer, which is there's nothing wrong with trying this with a really small add on, and it might not move the financial needle for whoever's doing this o- on-- as the buyer. But you learn a lot of mistakes, right? And then you can apply those the next time, and the next time, and the next time. And like, I never would have thought to do some of the things you did, which is Y- y- I guess like all of our businesses. In, in our business, like, we have a recurring fence rental business. It is highly sticky, highly recurring. Oftentimes the term of the relationship can go multiple years. So that revenue stream is very valuable to me, like it is for you. So you paid roughly what? Like on average about 50% of the recurring for some fixed period of time. So, like, kind of to Kaustubh's point, you were paying, you know, roughly all of your profit on that work to the seller for a year or whatever the term was, and then it was yours to keep. And on the project-based work, which, you know, that's like the core of our business, like you were willing to pay for any future revenue that came from those customers just at a much lower, you know, rev share. And so there was just no risk to you. Worst case, like you did a bunch of work for breakeven, and- Right, right best case you captured a bunch of upside.

Link: That's right. And, and I knew attrition would happen. You got to see the pattern, and, you know, to hear what you just said was I think worth repeating around the de-risking of doing this in a small... You know, I wasn't looking to hit home runs. Yeah, I was taking a bunch of singles, and I had people say, you know, like, "Geez, you're putting as much work into one of these little small deals, you might as well go just bigger." And I don't know that they were wrong, it was just a comfort level for me. It was proving out my thesis, and if I was going to go out and raise capital for something, I felt like if I had a track record, 'cause I, I didn't come from... You know, this was in the time where I'm not guessing traditional search funds still happen, but I, I didn't come from a, an MBA from Stanford HBS background here. So I, I, I, I'm just a- an average guy, and I didn't know all this stuff. So, and I had a, you know, a young family, and as you start to have more things to lose, you realize that that was stuck. And so I was taking bets that, you know, as you said, worst case, I haven't lost any money. I burned a bunch of time. But the education that comes from that, the reps, 12 different conversations, well, h- hundreds of conversations, but 12 different deals with lessons with those gives you that confidence to go a little bit bigger and risk a little more, maybe go out and take a, a loan, you know, maybe p- put your house up or whatever it is. Y- the... People are still people, and you're transacting, and you're trying to get the other person to agree to something. And, and so I think you're right, this, the reps is, the education is the valuable part. Is, and the, the revenue that sticks is, well, it's not the icing on the cake, but it's equally Helpful. And, and it did, and it worked, and you see patterns

Sam: A- and let's clarify too. Was there a deal out of the 12 where you took on, like, third-party bank debt? Or was it literally- No ... every one of these acquisitions was done with some version of, like, contingent payments, an earn-out, and some cash down, which I assume, like, came from your own bank account. So rather than making distributions of profit to yourself, all you're doing is reinvesting in acquiring more revenue-generating customer accounts. I mean, I, I actually think that's, like, more powerful than it sounds given the lack of-

Link: 100% ...

Sam: of bank debt. 'Cause bank debt is a- Yeah ... is sort of a double-edged sword that a lot of owners don't feel the other side of that edge until they're in the seat

Link: I pulled a HELOC at one point just to have on hand because I realized pretty quickly that, you know, if I was gonna do a 7A, they were gonna put a lien on my house anyway. So I pulled the HELOC. Cost me nothing to have it, but I never used it. But I had it on, on standby in case I ran across something that really was attractive. But, uh- and I would have used it. I got to the point where I was comfortable with it. I just never needed to. You know, my capital at risk was my skin in the game, so of course I'm trying to keep that as minimal as possible. The earn-out is the seller's skin in the game, and so you're finding the balance between that. And, and it's, a lot of that's driven by their motivation and urgency, which I learned you, you can't change that. So unpacking early on these calls why someone is having this call and responding to your letter was something I learned to do after having, you know, all these calls and, and... But yeah, no outside capital, and it makes your diligence a lot cleaner. With an earn-out, you know, if they were fudging a little of the numbers, it comes out in the wash. So I wasn't... It didn't take me a lot of time to put these things to bed and just keep rolling them up.

Kaustubh: I guess the, the one thought I have here, and, you know, Sam and I talk about this a lot as sort of recovering workaholics. You know, I think Sam and I suffer a little bit from this, like, sometimes we do things because we can, right? Like, it's out there, so let's go do it. Like, for you, you know, you had started to build this foundation of a business that had the muscle to buy businesses, and you had done a few reps that had gone well. Like, a- and I s- like, I am kind of... I really respect that you were able to limit yourself and say like, "No, I'm not gonna go take the big bank loan PG and take a big swing." Like, I'm curious, like, along that path, like, somewhere between, I don't know, deal four and deal 11 or whatever, right? Like, were there bigger swings you looked at? How did you kind of stop yourself from overextending yourself? And I'm asking this sort of, this is a question I wanna know for myself.

Link: Well, deals, deals number two, three, and four happened in the course of about four months. And they all worked out, but what I learned from that was there wasn't enough runway on some of these to see where the bodies were buried. So I was- I was- ... writing my own purchase and sales agreements, and I didn't have enough runway to go in and tweak some of the things in these. Like, okay, this didn't work well this time, let's fix that here. So-

Sam: Claude didn't help you back then?

Link: No, no Claude then. And so it, it all worked out, you know, the time I put into some of these. But the succession of these, 'cause at, at that point I'm like, this is like shooting fish in a barrel. And it was pre-COVID. This was in 2017, 2018. The run-up to COVID, valuations started getting pushed more and, and I had a good gap in there. Once COVID hit, anyone doing this type of remote work was hanging on to it because, you know, that was something you could do remotely while keeping social distancing. And, you know, then we became the Zoom culture where everyone knew what Zoom was and, and so everybody just pushed into this space and now then you've got AI headwinds starting to come in after COVID. So you've got these macro economical changes that are causing shifts and, you know, and to your point around bigger deal, I was always looking. I was on BizBuySell like everyone, you know, I had the alerts coming, I was talking to brokers. I looked at, at tons and tons of SIMs. And the broker deals were priced at a premium. They were on the open market, and the more I did of these, the more I saw where the risk was. And so I was... I made offers, but you know, I was never, I never wanted to be the guy offering the most. And you, you tell a business broker you're gonna make an offer one or two times and with an earn out, they'll laugh at you. You know, it just, I wasn't the right fit for those. So I, I went after them- Right ... but I didn't want to, because at some point these internet deals became a premium where I could see a better value in buying a brick-and-mortar business. Auto repair was one I still like, and I've used the same letter on other industries as well, and it has opened up doors locally, but it got to the point where I'm not paying three or four times for one of these little things given I know where the risk is, and if it's someone else's, then more power to them. So I would have loved to done some bigger ones, but it was finding that, you know, those sellers became more sophisticated the bigger you went, there was more money. It was so... I don't know that I quite fit that profile

Kaustubh: No, I mean, being able to stay disciplined on your buy box is, you know, that is one of the biggest challenges as any, you know, acquirer. Like, very sophisticated private equity firms make this mistake all the time, right? Where they, they overpay initially into an industry, and then they kind of, like, go right their wrongs by acquiring a bunch of smaller ones. But no, like, you kinda came at this with, like, all- like, enough knowledge to avoid that big swing and miss early. So no, that... But like, I know I talk to a lot of searchers, right? And, like, I think the prevailing sentiment I often hear is like, "I feel like I just should bid higher, otherwise I'm never gonna get a deal done." Yeah. Right? And, like, you've gone a different way.

Link: Y- y- you feel you get these deals done, and even though they're small, that, that, that rush of, "Hey, I closed this thing," the first check that comes in from a new customer that you didn't have before, even if it's short money, it, it does feel good. And I don't know that we could overemphasize the value of those reps. Uh, at least for me, having a dozen of these makes me feel much more confident, where I think I was a person who, who was not very confident. I didn't have other entrepreneurs in my world, my sphere. I didn't come from that. I didn't, you know, have it in business school. So I was creating a lot of limiting beliefs for myself that, oh my gosh, I'm gonna, you know, sign on the dotted line and, and bet everything here, and I've got a wife who's not from an entrepreneurial background, and I'm supporting young ki- I mean, so you, you, you could... I think folks talk themselves out of things. And so doing a small deal just to get the rep, and then as Sam said, even if it's not gonna change your lifestyle like a big swing, it sure gonna help your confidence, and you're gonna learn a ton about that space and get you on the board, which, you know, all that time, you know, hearing, seeing these searchers that go years without finding something, it, it, it makes me sad because that's an opportunity cost

Sam: So can you spend a little time though talking about the big one you bought, which was I think in Denver, where you-- I, I would call it like the first, you know, enterprise you, you acquired. You just didn't buy customers.

Link: Yeah. So Denver was the, was a standalone. That was-- This was in the middle of COVID, completely remote, never met anyone in person, which is kind of wild. And it had its own brand. It-- Back then, what they were doing was social media content creation, which you could do with Claude or ChatGPT now in your sleep. And it was, humans would create content, and it was outsourced for these companies. And it was all recurring revenue. Small number of clients, I think around twelve to fifteen, with retainers from thirteen hundred to three thousand. So it was about twenty to twenty-two thousand MR. And this owner had moved into a different industry and had already tried to sell this to another competitor. That didn't work out. We'd been in contact for a couple years, so motivation was there. Like, "I just wanna move this on." "Hey, what were the terms you were offering them?" "Well, I was gonna do a rev share of fifty per-" "Okay, great." I didn't even have to negotiate that one. I'll just slip into that. Sounds good to me. And it came with two W-2 employees, both on salary. And so that was enough of a unique brand that I kept it. Like it became, you know, a Colorado entity. I got to pay Colorado income tax, which is, New Hampshire, we don't have income tax, so it's fun to send your money to another state. And You know, that lasted five months. I spent most of the first month and a half investing in those employees because it was remote. I'm trying to build culture. I also know they're client-facing and they're doing all the work, so I need to keep them happy and on board. And I think that was a worthwhile effort, but attrition was still happening. Russia decided to go after Ukraine and then so then there was some economic upsets, and people then started looking at, like, what are we using this service for? What are we paying for? And so there was no... And, and the previous owner was the sales force, so you're just try- I was thinking if I could just maintain this book, that would be great. But you lose a few, and you've got a fixed overhead that wasn't going down. You ju- you know, when you have hourly, you can have some variable costs, but you can't fire these people because they have... They're client-facing. So, you know, it sort of got into that point where it wasn't, I wasn't gonna write it down. I'm still making my earn-out payments. And what I learned from that one, and again, I didn't have any cash out on that one, so I didn't lose anything. But what I thought about a lot was could someone have done this differently? And I thought a lot about a Main Street business broker packaging this up in the tails of COVID, work from home, 100% recurring revenue, and some poor fella, you know, goes out and takes that bet. Would he have had a different outcome than me? I, I don't know. But I, I think a lot about that. And, you know, this is one of those stories where it didn't work out and I was on Will Smith's podcast a few years ago, and I've seen more shows out there in the ETA and SMB space of things that didn't work and went really south for people. And those stories are good to come out because, you know, we're, we're all playing with a little bit of fire here sometimes.

Sam: Yeah. But to, just to be clear, so you shut that business down.

Link: I did.

Sam: You, you acquired the equity of the business. You were running it standalone. You shut it down, but the reason you're sort of still here as a business owner to tell the story is you didn't have any bank debt.

Link: Correct. I offered it to the employee to take the clients. I said to the seller, "Hey, this is where it's headed. Do you want it back?" "Nope." "All right. Well, then we just re-home these folks." So no, no, no harm. Everyone worked out and walked away and And, uh, life went on. Yeah. No bank, no investor, nobody ma- mad at me they lost their money. Yeah. No spouse angry at me. That's, you know.

Sam: So obviously, like you, you paid a cost on that. You put some money down, you invested a bunch of time, but without that downside, like the, the risk on that kinda deal is so much lower. Yeah.

Link: Oh, there

Sam: was

Link: nothing

Sam: down on that thing. I, I can already hear peop- But I already hear people, like they're out there listening to this humble podcast on their drive to work, and they're like, "Sam, you're an idiot. Nobody would ever do that deal anymore." Is that true? I don't believe that. Like, do you think you could still find that?

Link: I believe it 100%. We, we, we all hear the stories- So what's the trick? ... of zero down. The trick has to be in- I've, I've done several of them. They're out there. You know, it, it may not be, you know, there's hair on some of these, right? I mean, it's not perfect. And it's timing. You know? It's, it's a needle in the haystack, so it's luck. But you, you plant these seeds with these letters, and you water them and nurture them. This, this was a three-year relationship that just sorta needed to come to the point of timing.

Kaustubh: Mm. I mean, this goes back to the like just get in the room, right? Like you need- Yeah ... you need to get in the room somehow, even if it's really not the perfect way, and do it in a way that doesn't take on too much risk. 'Cause then once you're in the room, and as long as you don't get kicked out of the room, then like things will start to come your way.

Sam: Right. I actually, like having not been in your shoes, the fundamental difference here to me in getting these favorable deal structures is, is sourcing them directly. It's not that they're just small, but you have to get them to when sellers aren't thinking about an exit per se. They're not thinking about maximizing the value of what they've built per se. You're catching them at points where other considerations are what drive them getting to a closing table. And 'cause the... I forget now. Are your add-ons, they're all broker deals? Like you've never s- sourced direct, correct?

Kaustubh: The two that I've done so far are, were brokered, but like the... I mean, in both cases, the broker reached out to me 'cause they, he, they knew I was a buyer of these. Yeah. And like, yeah, the, I mean, the, the first one, the larger one, like from listing to under LOI was like seven days maybe, right? And then I'm, I was, I'm working on another one that, that one, like the seller reached out to me directly.

Sam: But they still had somebody like, you know, fighting for maximum value- Correct ... or at least, you know, enough value so that you can't just do these- yeah ... creative structures, so. But

Kaustubh: it's fair value.

Sam: But I could imagine- Yeah. I, I'm just thinking, like, this playbook is so applicable to the local home service or commercial services business owner. But what I wouldn't be doing is going and sourcing a bunch of stuff through brokers. You, you're just not gonna be able to pull off these, like, creative no debt, no third-party debt, small, small, you know, cash equity injection down plus earn out deals. So you've gotta go direct, you've gotta go small, and then maybe the third point is you've probably got to assume that this is gonna take or two or three years before you get on the line with somebody who's willing to accept that kind of deal structure. You're gonna have to kiss a lot of frogs.

Link: You do have to kiss a lot of frogs, yes. But if it was easy, everyone would do it, right?

Sam: Yeah. '

Link: Cause patience- Yeah ... take time, and I don't, you know, I don't know that I've, have anyone hang their hat on this one strategy, but I, I think the message I would say is it should be on people's radar if you're growth-minded. Because sometimes a little bit of luck and timing, a great fit comes along that's right in your backyard. You don't wanna be like me and have that opportunity go somewhere else. So it's, it's a low risk, low cost, get the letters out there, and have some burgers, have some beers and, and you know, the, another thing that comes from this is you, you learn more about your industry if you are new to being a business owner by, you know, sign that NDA and you see how someone else runs their business. And you, you, I'm not saying you take their IP, but you- You learn a lot about how things work. I've picked up different service providers from people that I've met. Even if I didn't transact with them, you, you make a contact and like I said, most of these are very warm conversations. Nobody was ever mad or offended that I sent them a letter. It's not like cold calling where I ruined their day or, you know, or spammed their mailbox. I mean, it, if anything, it was flattering. So I, you know, and for many years I was a little thin-skinned, so I, I would not have identified as a cold caller. So direct mail, like, nobody's gonna write me back a letter and say, you know, "Screw you."

Kaustubh: You know, funnily enough, I initially sent some emails, some cold emails out on, on this kind of looking for acquisitions, and, uh, one owner did reply kind of pissed off at me. And, but he thought that I had been trying to reach one of his employees to try to recruit them away to my company. Oh. I don't know why he thought that, but anyways, it, it was funny 'cause, like, we've become friends now, like a couple years later- Sure and we kind of laugh about it. He was like, "Oh, you were trying to actually buy my business. I see. We can talk about that later," basically is what he said. But his initial response was like, "Yeah, if you come trying to poach people, like, you know, you got another thing coming," kind of energy.

Link: Yeah. And why would you email him, right?

Kaustubh: Yeah, exactly. Exactly. So other than that, nobody has had a, a, a cold response to any kind of outreach.

Sam: All right. M- I've got one more question, which is, so I'm imagining I'm a first-time business owner back to almost 10 years ago now, and it's, I'm sitting there, I just acquired in the last year. The last thing I had was time to go do this So I think my question is, could you- can you outsource the hard part? Can you outsource the conversation, the deal process part of it? Or do you feel like you, Link, were the key to getting these things done? Like, you had to personally build that relationship yourself.

Link: I think you can absolutely outsource the, you know, in my case, the, uh, I outsourced the sourcing of the names. I could certainly have outsourced the mailing of the letters. I don't know that I could have or have would have wanted to outsource the relationship building because y- you're building trust and, and authenticity on day one. You know, doing that with someone else, they, they certainly couldn't pretend to be you, but if I've hired someone else to do that for me, if a person... You know, someone else on your team internally could run that process and bring you in, I think that, that I think could work. Someone completely outside, it would have been hard to transfer that relationship because these, these people are, like, reading you too. You know? What's this about? So, and I, and I wanted to have those conversations because I didn't want to not know, you know, "Why are you, why are you responding to my letter? What's going on?" You know? I wanted from day one to have that. So the mechanical part of all that, uh, yes, and you've certainly there's plenty of people that could help you put together the deal if you're... B- But the relationship piece, I'd, I'd really wanna hang on to that, unless it was someone internal that was gonna be able to see that all the way through. If, if you can avoid the handoff, and then someone can take it from start to close and integrate, then, then that would work.

Kaustubh: I mean, like, you know, Jeff Homer, my friend who did Ensemble Music Schools, the roll-up. He's been on Acquiring Minds as well. He-- I've, we were chatting about this actually. He's now done over 100 acquisitions in this flavor, you know, like small music schools, basically. And I think he said it was around acquisition 35 to 45-ish was the first time they closed a deal that he didn't personally go, you know- Mm. -visit to, like, meet the owner, all of that. And so by that time, he had built out an M&A team and, you know- Mm-hmm. Like, they had a whole corporate office around it. But I think, I- I'm curious what he would say to this exact question, but I think he would say, like, "Hey, like, start by creating the time for yourself by making your business better. Don't try to outsource the relationship building for M&A."

Link: Agree. And, and I don't think it would take... I mean, I, I, I would challenge anyone that said, "I don't have the time for this." I think, you know, you, you can scale that at what size makes sense. And to your point, if you, if you have geographical constraints, it's, it's a fairly finite number of letters and relationships i- in your market, depending on what type of business you're in. So it's, it-- I, I would think it would be manageable

Sam: All right. Well, I, I mean, that's all I had for the conversation. Kaustubh, what about you?

Kaustubh: No, that was great, Link. Any, any parting thoughts you wanna share with the group before we talk about the actual, you know, where they can find the book?

Link: I would, uh, just I would encourage anyone not to make assumptions that you're too small or don't have the experience to do this. A- a- and, you know, buy one business in- if you're still, like, getting a business, you- this, this is the next step, right? Two, three, and four to roll in, tuck-ins, and this is- this becomes like a mini platform. Hmm. Whether you started it or you bought it, once you are on the board, you, you can do this, and I think it should be on everyone's radar to think about and consider, you know, sending out some letters. It's just y- y- the opportunities you'll miss with all 100% of them if you don't put it out there.

Sam: I agree, and so Link, where can people find both you and find your book?

Link: So you can find me at linkmoser.com, L-I-N-K M-O-S-E-R .com, and there's a link on there. The book's on Amazon, and yeah, with my name, it's not too hard to find me online, so I welcome anybody to reach out with questions. I'm on LinkedIn as well. Uh, happy to help, uh, fill any gaps if, if we didn't cover it all here today.

Kaustubh: Amazing. All right, it's The Bolt-On Blueprint: 12 Deals and a Repeatable Process for Growing a Main Street Business by Buying Your Competitors by Link Moser. Thanks for h- coming on, Link, and, uh, thank you all for listening.