Royce Yudkoff:

Welcome to Think Big, Buy Small, a podcast from Harvard Business School about entrepreneurship through acquisition. We’re your hosts, Royce Yudkoff…

Rick Ruback:

…and Rick Ruback.

Rick Ruback:

Today we have Brian Seeling as our guest. Brian has such an interesting journey, from software engineer, startup entrepreneur, to buying a business. Brian thinks about his career in such a fascinating way. I think you're really going to enjoy the conversation.

Royce Yudkoff:

Brian, welcome aboard. Rick and I are just delighted to have you with us today and to learn about your journey as a self-funded searcher. But maybe a great place to start is for you to tell us about your journey from early on, a little bit about where you grew up and your family and, in particular, your education and career before you picked up on becoming a self-funded searcher and bought a company. Could you walk us through that?

Brian Seeling:

Sure, absolutely. And first, thank you both for having me. I grew up in the Washington DC metro area. As a kid, I was always that entrepreneur-minded thinker. My parents were working class folks, so if there's anything that I wanted outside the norm, I had to figure out a way to get it for myself. And just one quick story on that. Growing up, I wanted a new pair of shoes that was just way too expensive for my parents to afford. So, I was the kid that decided to find a piece of cardboard, write “Car Wash for $5”, and in my apartment complex, I'd wash people's cars all summer until I saved up enough money to go buy that pair of Jordans that I wanted so bad. So, that was my first venture into entrepreneurism and really solving problems for people. I always had that kind of drive and that ambition to be an entrepreneur, be a business owner. After school, I fell into IT so my formal training, I'm a system engineer, Microsoft, Cisco, VMware type of guy. It wasn't my first choice, career-wise, but it was at least a path that I took that I knew that I could have at least a good career and then maybe, you know, go into that entrepreneurial path. So, I spent about ten years working for various companies. I worked for HP, I did some defense contracting, worked for the Navy, and then my last stint as a W-2 employee was with the Roman Catholic Church there at Catholic University, there in DC. So, I left that job the same year I got married. My was then pregnant, and then I started my IT consulting firm. So, that was quite the step out from that comfort zone of that W-2 job.

Rick Ruback:

Back to working for your Jordans again, huh?

Brian Seeling:

Yeah, that's right. So, I ran that company with a business partner for about five years and then I had an exit, and then I was trying to figure out what I wanted to do next with myself, and then stumbled into a SaaS startup. And I did that for about two years. And then that's when I left, saw the writing on the wall that it probably wasn't going to take off like I hoped it was going to, and so I thought to myself, “Well, heck. I've done the bootstrap thing, right? In a buddy's garage, started our own IT consulting firm. I've been a part of a startup for about two years. I don't want to start from scratch again. I want to buy something that's got a base that I can apply my skills and my talents to, and then take it to the next level.” Because one thing that I found in working in my MSP for those five years was there was a lot of businesses that we supported that were founded by a technician. So, you have a technician that then creates a job for himself by starting his own business, gets a good name and reputation, and then starts to hire other technicians, and then gets to a certain point where they don't know how to scale it beyond the four or five or maybe seven, eight techs that they may have. And so I thought, “If I could find a business like that, and then I can apply all the things that I've learned in my career to really scale it, that's what I want to do next.” So, ETA, you know, obviously made a whole lot of sense and I just started looking at deals and I just dove in.

Rick Ruback:

How long did it take you to find your deal?

Brian Seeling:

Well, it wasn't so much how long it took me to find the deal. It’s how long it took me to get it closed, I think, was the bigger challenge, especially in today's market. I probably looked at, I don't know, seventy, eighty deals in totality, but this was one of the first ones that I did look at. I didn't move forward with submitting an offer on it until probably three or four months later because, like most things, I wanted to see what else was out there.

Rick Ruback:

Sure.

Brian Seeling:

I wanted to really understand what options were there first before I committed.

Rick Ruback:

Makes a lot of sense to me.

Royce Yudkoff:

Brian, I'd love to dive in on one set of comments you made about your background. A lot of people, when they think about entrepreneurship, look at startup entrepreneurship – frankly, the better-known form of entrepreneurship – and maybe they look at entrepreneurship through acquisition. You are one of the relatively few people Rick and I have met who have now done both. You've been involved in a couple of startups and, of course, you've bought your own existing profitable company. Tell us a little bit about the difference and why, after trying both, you've chosen ETA as your path. What are the pluses and minuses that you experienced?

Brian Seeling:

Well, you know, starting the business from scratch, there’s just a lot more risk there. And buying something that already has a set of customers and stable cash flow, it just made a lot more sense for me today. But obviously the biggest difference too is just the amount of work and effort that goes into getting the business off the ground. To get to your first million dollars, you'll work, you know, ten times harder than you will getting from a million to three million. And then, you know, same thing when you go from three to five. You know, just getting the business off the ground, it's just a challenge. And the stats show that, right? I think it's like 95% of small businesses fail in the first five years. I mean, that's just a risk that I didn't want to take at this point in my life.

Royce Yudkoff:

That's really helpful, thank you. Maybe you could tell us a little bit about how you found the business that you bought and tell us a little bit about what it does and its history when you came upon it.

Brian Seeling:

Yeah, so I found it off of BizBuySell. I didn't do a proprietary search. In fact, I didn't really even learn about proprietary outreach until six months in. I was already, you know, twenty-five deals in, as far as what I was looking at. So, I thought I was making good progress with BizBuySell and then I started to reach out to brokers. And then having those conversations, which was a tremendous help. When you find a good broker, especially, if you're new to the space, they can kind of help guide you a little bit too. Obviously, their job is to try to get a deal closed, so sometimes they're busy and don't want to listen to or deal with someone new. So, I was just on the websites, you know, on the broker sites, just hammering away. Every deal that fit my criteria, I was sending information and requesting one-pagers.

Royce Yudkoff:

And Brian, what were those criteria? Tell us a little bit about how you screened all the companies that you find on BizBuySell to get down to some manageable number that you liked.

Brian Seeling:

Sure. So, I know I didn't want home services, which I know that sounds crazy because there's a lot of private equity money going into home services.

Rick Ruback:

You mean like plumbers and electricians?

Brian Seeling:

Yeah, plumbers, electricians, pest control…

Rick Ruback:

HVAC, yeah.

Brian Seeling:

Yeah, lawn care. I just didn't want do B2C. When you're asking for somebody's personal money, it's a little harder than B2B. Like, B2B, it's a budget, it's a business. You know, the people that are running it or making those decisions typically aren't as tied to the cash in the business. First thing I focused on was, “Alright, it needs to be B2B.” And at the time when I started my search, my plan was to move to Florida. So, my search criteria was anything that was in Florida, and then anything that I could run remotely. I kept my options open.

Rick Ruback:

Why did you want to be able to run it remotely?

Brian Seeling:

I didn't want to be tied geographically. Like, if a good deal that came up, that maybe was a marketing firm, I wanted to be able to potentially pursue it.

Rick Ruback:

I just want to make sure I understand it. You wanted to move to Florida.

Brian Seeling:

Yup.

Rick Ruback:

And if you bought a business in Florida, you wanted that business to be remote?

Brian Seeling:

No, no, no.

Rick Ruback:

Okay. That was what I was confused about. It was just like if it was going to be outside of Florida, you wanted it to be remote.

Brian Seeling:

We wanted to get south. My wife wanted to get south, and so our search was if it needs to be run locally, it has to be in Florida, or it can be something that I can run from Florida remotely.

Rick Ruback:

1. And the business is in Tampa, and it does…?

Brian Seeling:

We do maintenance, service, and repair of commercial food equipment.

Rick Ruback:

So, that means like when I go to a restaurant, if I sneak in the back room and I see the fryolator – because like there's no better food than fish and chips – do you install the fryolator or just fix the fryolator?

Brian Seeling:

Typically, about 90% of our work is maintenance and repair. About 10% is new installs.

Rick Ruback:

So, when that fryolator breaks – is that what they call it? The thing that, you know, with the baskets and the oil and all that…

Brian Seeling:

There's all kinds of different fryers, but yeah, there's all kinds of brands. But yeah, your typical fryer, yup.

Rick Ruback:

Okay. Oh, fryolator is a brand. I didn't realize that.

Brian Seeling:

It is. Yeah, it's a brand.

Rick Ruback:

Okay. So, the typical fryer, do restaurants only have one?

Brian Seeling:

Well, it depends on the restaurant. Like, something like McDonald's or Chick-fil-A, I mean, they got several, but most restaurants have at least one fry bank where they're frying food. But they also have, you know, griddles, grill tops, ovens, convection ovens, pizza ovens. We also do dishwashers as well. So, any of that really heavy-duty commercial equipment that's on the hot side, that's what we do.

Rick Ruback:

So, if it breaks, is it an emergency or is it, “I can get to it next week”?

Brian Seeling:

It depends. If it's both fry banks or all fryers at a restaurant, it's an emergency and we need to get out there quickly to get it repaired and back up and running. And part of the reason why I was gravitated to this business was because that hotline of a kitchen is, that is super valuable to a restaurant, right? I mean, that's how they make their money. And so, if anything is down…

Rick Ruback:

…it's a problem.

Brian Seeling:

It's a problem because now they're not producing. They're not producing, they're not generating cash flow – it's a problem for everybody. So, there's a cold side to this too, where you have your refrigerators, your walk-in freezer, your coolers, your ice machines. We currently don't do any of that work. With the hot side, it typically can wait to the next day, right? So, if it's nine o'clock at night and they're winding down the restaurant, the service, and something is broken, typically we can come out the next day.

Rick Ruback:

Yeah, the next morning before they open for lunch.

Brian Seeling:

Next morning before they open. So, we do a lot of work between 4am and 11am.

Rick Ruback:

Oh, wow.

Brian Seeling:

And then our guys are typically home by 2:30pm. Restaurants are flowing businesses, you know, they're in the midst of their rushes. So, we typically don't have to do any of that late night work or repair or emergency calls.

Rick Ruback:

Is there a maintenance piece to that? Do they have a service that comes in and does maintenance on the hot side so it doesn't break?

Brian Seeling:

Yep, absolutely. So, we call that “preventive maintenance” in the industry.

Rick Ruback:

Yup.

Brian Seeling:

When I bought the company, they didn't do a whole lot of preventive maintenance. It was all reactive, emergency-based repair work. And we actually have a PM program that we're pushing out now so we can be more proactive with our customers, but also have more touch points with them too.

Rick Ruback:

Yeah, but it's also so cool because what you do is, first of all, reduce the emergencies, which while I suppose they're willing to pay a lot to get the emergency resolved, it's taxing on everybody. Best to avoid that stress if you can. And you're taking an episodic revenue and turning it into a recurring revenue. Because, you know, you're building a relationship with that customer every time you do a preventative maintenance call. And so you've taken what would be episodic revenue – "Hey, my oven's broken, let's get on Google and find out who can fix it" – to now I have a service. "Oh, you just call Brian." That's great, right? That's magic.

Brian Seeling:

That's another thing I love about B2B, is typically when you're a business owner, you have a guy for things or a company for things, right? And so we're that company or we're those guys for our customers on the hot side.

Rick Ruback:

Yeah. Perfect.

Brian Seeling:

Yeah, I have a great crew and they do a great job of taking care of the customers. And the business has been around since 2008, so it's very well known in the Tampa area, within the restaurant world and community.

Rick Ruback:

Well, the other thing about preventative maintenance is so much of these businesses are route density businesses. You know, you waste so much time driving from A to B to C to D, and for emergencies, you can't do anything about that. But for preventative maintenance, you can actually organize it so that the person, you know, services this restaurant and then services the restaurant the block down the road, so they're not driving in circles all day. Transforming the business in that way is exceptional.

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Royce Yudkoff:

So, Brian is going down a path you and I see a lot in trades businesses, businesses which send technicians around to repair. And that is taking an episodic revenue business – something breaks, they get an emergency call, they send someone out to fix it – to a recurring revenue business, where he persuades his customers that it's in their interest to reduce the emergencies by subscribing to a preventative maintenance service. Rick, why don't you describe what's so good about this transition, because we see it again and again.

Rick Ruback:

Well, there's so many things that are good about the transition. Usually, these preventative maintenance contracts in these kinds of businesses are a small percentage of revenue. They might be 10% or 15%. But what they do is you get to go to the customer. In Brian's case, you're cleaning the equipment, you're inventorying the equipment, you're making an assessment about what's likely to break. And some of that might be immediate repair work, but some of it might also be, “Hey, when Jimmy's Diner calls, I think they’re going to need a new heating element soon. And this is the model number and this is the part number that they'll need. We should stock this.” And so there's a great information advantage. The first thing is while it's a small source of revenue, it is recurring. Number two is it allows you to learn a lot about your customers and they learn about you. So, you know, you can put that little sticker on the oven that says, “If I break, call my good friends at, you know, Royce's repairs.” Boy, would they be unhappy if you were the repair technician.

Royce Yudkoff:

Rick knows I can't repair even the simplest machine.

Rick Ruback:

I wouldn't be very good at these either. The third thing is that if you're in a business like this, you have this high value peak demand that is the emergency repair work. And you need to staff up for the maximum high value peak demand that's economic. But that means that your technicians are going to have some downtime in between emergencies. What a great time to schedule preventative maintenance contracts. So, you're filling in some of that downtime. And sometimes people do this seasonally. Like if you have an oil burner, the oil burner repair company always sends you the notice to do preventative maintenance. When do they want to do that?

Royce Yudkoff:

That would be the summer, Rick.

Rick Ruback:

That would be the summer because the technicians are too busy in January. So, there's this blending of labor tasks and allowing to get closer to full utilization of your employees. So, I love this enhancing revenue quality. I think it works on so many different dimensions. It's a big plus.

Royce Yudkoff:

And now, let’s go back to our conversation.

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Rick Ruback:

Why don't you do the cold side? I'd just look at this and say, “Wow, I'm already here.” Is it a different skill set?

Brian Seeling:

We do have that in the pipeline. That is coming because our customers are asking for it, right?

Rick Ruback:

Sure.

Brian Seeling:

And so, a couple things. One, you need a license. So, you need to have a refrigeration license or HVAC license to work on that equipment, which is separate from the gas license that we currently have. So, we’ve got to get the license first. And then, yes, it is a different skill set for troubleshooting equipment. That's the kind of the next iteration of our growth, is to then find some qualified techs that maybe we can hire or maybe poach from some competitors and bring them over and introduce a cold side repair.

Rick Ruback:

I would've thought you'd say, “The cold side's a really interesting opportunity too. I'm going to go out and buy a business that does the cold side and add it to it” because, like you said just five minutes ago, it's a real annoyance to go from zero to a million. Why don't you buy a business that's already doing four million in your geography and then you can kind of cross-sell the hot side and the cold side? You got all these cross-selling opportunities.

Brian Seeling:

Yeah, I agree with you a hundred percent. And that is on the radar. We just…

Rick Ruback:

…haven't found it yet.

Brian Seeling:

Well, you got to find it, right? Because it's a geographical challenge. There's only so many of these businesses in Tampa, and I got to find one that's willing to sell. But also we actually have an opportunity to bring someone on board that has experience in both sides so we can dip our toes in it to see if it actually is a good strategy before we actually go, you know, full on into searching for that particular acquisition.

Rick Ruback:

Although it's so hard because some businesses look so much different at scale than they do with one person.

Brian Seeling:

Yeah. A hundred percent.

Royce Yudkoff:

This is great and I can really see a huge cross-selling opportunity here for you, Brian, that's worth experimenting with, which you're doing, of seeing whether you can shift that cold side demand to your existing customers, who are buying hot side maintenance services from you. It's very exciting.

Rick Ruback:

If we were on the board, we'd be asking them that question every week. We'd call them up and say, "Hey, Brian, have you found that cold side yet?"

Royce Yudkoff:

“Have you started cross-selling yet?” Because when you're in a business which has sticky customers, which are wonderful to have, it's a trick to find new growth. And this is such an interesting new growth opportunity because of course you can go to your customers and say, “You're happy with my service. Why don't you simplify your life by having one person take care of everything?”

Rick Ruback:

Well, and what's interesting about it is that the business might be doing, say, $750,000 of EBITDA as a stand-alone, cold-side business, but when you buy it, both because of the cross-selling opportunities and because of the consolidation play, you know, there'll be one group of phone banks taking customer calls. You know, that $750 could almost instantly become a million and a half. And so the pricing of that business has much more flexibility to it than your pricing of your business, right? You needed to pay, you know, three, four, five times for your business, but for the next business, it's a little more flexible because you’re going to see a different benefit to owning the business than the seller does. Yours is going to be higher. And, you know, most times you get to keep that advantage, not the seller. Just trying to get you another pair of those Air Jordans, you know? That’s all.

Brian Seeling:

Yeah. Exactly. Exactly. And this is a hundred percent on the radar. I think where I've really been focused on – we're five and a half months in, six months in – is getting the systems and processes in place on the back office first, before I go add more chaos, right? Because the way things are run now, there's just no way I could add anything additional without causing severe stress to the business.

Rick Ruback:

Yeah, because it's still early days.

Royce Yudkoff:

Brian, besides the fact that you've been in startups and buying an existing profitable company, you've also been in businesses which are sort of traditional white-collar businesses, like an MSP and a SaaS software business, and a blue-collar trade or technical business, like the one you own now. A lot of searchers spend time thinking about which path should they go down and what are the pluses and minuses. What observations do you have about running a white-collar business and running a blue-collar business? What can you share with us that you've learned?

Brian Seeling:

Yeah, great question. I don't think any one path is necessarily that different, if you know how to manage and talk to and communicate with people. I will say that being in a blue-collar business is a lot more relaxed. Like, you know, I could throw on a T-shirt and a pair of jeans and go into the shop and fit in just fine. As to the white-collar side, like I was more in sport jacket, button-up shirts, and I was meeting with executives about their IT services and things. So, it's just I guess more of the persona that you want really in that kind of lifestyle. Do you like to get up every morning and throw on a polo with your company logo and a pair of jeans and stroll into the shop and it's not very glamorous? Or do you want more so that sport coat kind of persona, where you have maybe a little nicer office in a downtown area or something? That to me is, at least, what I observed, was the biggest difference.

Rick Ruback:

Yeah, I'd get rid of the buttons and just go with a T-shirt myself.

Brian Seeling:

Yeah, man. And there's some startups out there, they just wear T-shirts every day anyway, but it's the people in there are a little different that you're managing, right?

Rick Ruback:

And so have you felt the urge to become a tech? Have you gone out on calls and you start getting certified in cleaning out the oven and tightening up the gas valve?

Brian Seeling:

That's the other reason why I love this business, because I have no experience in the actual work itself. Now, I'm mechanically-inclined, don't get me wrong. I absolutely could turn a wrench with no problem, but I don't want to because then I'll get stuck doing the things that I'm comfortable with doing. And I don't want to do that. I want to focus on growing the business and adding value where I can from a back office, operational perspective, and then obviously, potentially adding additional acquisitions. I can't focus on growing the company if I'm out, you know, changing fan motors in the back of a convection oven.

Rick Ruback:

But that is so interesting to me because I think we all have personality types, you know, inclinations, and if I were doing this, I would be thrilled that I could come to work in a T-shirt. As I said, I'd get rid of the buttons and just wear the T-shirt and jeans would be fine for me. I'd be a happy guy, but I would feel the urge to learn to take apart and put together the equipment so I can fill in if tech goes down. And also because I'm just really fascinated by how things work. And so I couldn't resist. What I think is interesting is your approach is a much more mature, adult approach, and I think going to make a lot more money if you don't give up the CEO's job to be a tech. The way you said it, it makes a ton of sense but I'm going to walk away today and reflect on that because my inclination would be, "Hey, I got to learn how to do that." You know, if I bought a ski sharpening store, I would be the guy who was sharpening the skis or at least knew how to run the machine.

Brian Seeling:

I've done my ride-alongs with my techs, you know, I've learned a lot about a commercial kitchen in the short period of time, so I can understand better the problems that we're solving, right? And there's times too where we do stuff in our shop, where customers will either drop off equipment or we have a training session every Friday where our senior tech trains our junior techs around new equipment. You know, I'll pop out to the shop and see what they're doing, see what they're working on, and help them out, you know, and just try to be involved. But I always kind of keep it there. I don't go beyond of, "Hey, I can go run calls for you if you're out sick today." I'm not doing that. I don't want to do that.

Rick Ruback:

Even though you're sort of naturally inclined to be able to do that.

Brian Seeling:

Yeah, sure.

Rick Ruback:

It's just that you want to work on the business not being one of the workers. I love that. The seller, was the seller somebody who could take apart an oven and put it back together?

Brian Seeling:

Yeah. So, the seller was a technician. He had been in the business for thirty years and worked for a large company and that company – back in the late nineties, early 2000s – went through a bunch of acquisitions and he decided to step away and do his own thing. So he, up until about a couple weeks ago – because I kept him on for almost, you know, five months – he was out still running calls.

Rick Ruback:

It's just so interesting.

Royce Yudkoff:

You know, we see this a lot and it's part of the magic of entrepreneurship through acquisition, where you have a founder who's deeply expert in the service and has great work ethic and values, and they gradually build a group of skilled technicians around them. But then it's almost time for the business to move to someone who feels like, “My job is really being a manager and growing the business, and there are other fine people who can do the technical work, but my job is selling and organizing and recruiting and training.” And it sounds like that's where the business might be right now, at that inflection point.

Brian Seeling:

Yep. That's exactly where the business is. And, you know, he's even told me privately at times, "I've gotten it to the point where I think I can get it to and I'm ready to retire and move on." And so it actually worked out well and with him sticking around, which traditionally isn't something a lot of searchers allow. Sometimes they do, sometimes they don't…

Rick Ruback:

Three months is pretty typical. Six months is a little long. But three months is pretty typical.

Brian Seeling:

Yep. And he was great. I mean, he was great the whole time. I had no issues with him and I still communicate with him because he wants to see the business be successful in the future too.

Rick Ruback:

The other lesson in this that is interesting is that when you buy a business and you take over the CEO's role, you don't have to do it the same way the old CEO did it. So, you shouldn't look and say, "Hey, can I do what that CEO did?" The question is – as Brian, you've put it so well – is, “Can I improve this business? Will this business thrive under my leadership?” Different question than, “Can I replace the CEO?”

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Royce Yudkoff:

Rick, you and I see the transition that Brian did with the founder of this company, we see it so many times in businesses. It's worth spending a moment on, where you have a talented founder who understands a trade, in this case, and works really hard to build a loyal base of customers and adds technicians and is soon supervising a crew of technicians. But there are several things that lead to this moment where it's just perfect for the business to move on to a young entrepreneur. One, of course, is that the founder gets older and has made a lot of money and really wants to spend their time not pouring it into the business, whereas the young entrepreneur has more time than money and is delighted to spend those additional hours building an outbound marketing program or creating a preventative maintenance program. But that's not the only difference between a founder and a buyer.

Rick Ruback:

It isn't. They see things differently. So, I had a conversation today with a searcher who was telling me about a potential acquisition. And he said, one of the things he really liked about the business is the seller was willing to stay on, perhaps a year, perhaps multiple years, to continue to work in the business doing the task that she did. And I said to the searcher, “Well, if you do that, what will you do?” And the searcher said, “I'm going to visit all the people who are potential customers that they don't serve and I'm going to grow the business.” And I thought to myself, “Oh, that was the right answer.” And how many times do we talk with young CEOs and we say, “You've got to spend two days a week on sales.” And they say, “Ah, I can't do that. I'm so busy in operations.” Well, that's sort of a version of this problem, right? The technical founder only knows operations, perhaps, and doesn't even know that there's a long list of things to do. And the MBA that is stuck working in the business and doesn't have time to do all those things knows they're missing it, but they're still maybe not getting to it.

Royce Yudkoff:

Right. So, it starts with at least realizing that there are some things on the list that the selling founder, successful as they were, just didn't get to, like marketing, like, in Brian's case, a preventative maintenance program or an acquisition. And that's the gift that a new buyer brings to an acquisition.

Rick Ruback:

Right.

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Royce Yudkoff:

Brian, walk us through the trip you took from finding the business on BizBuySell to closing on the acquisition. Rick, and I would just love to hear you tell us about that journey, and as you look back on it, things that really went well and maybe things that were challenges or, now that you've lived through it, you might've done different.

Brian Seeling:

I think the biggest takeaway was the banks that you work with and making sure that you are having conversations with multiple banks and/or you have some type of capital consultant that you're working with. And I say that because you don't want to get so far into your deal where the bank then comes back to you and says, "Well, we like the deal but we need this thing changed," or, "We need you to provide additional equity." You don't want to be backed in a corner with a lending institution that may require you to potentially lose your deal. And I'm not saying that that happened in my case. It's a case of where business gets under LOI, you start the due diligence process, you're trying to gather as much information as possible. You're also working with the bank at the same time, right? You got to get the package together to then send over to the bank to get to underwriting. And then some banks that have approval committees that they have to approve the deal as well. So, you don't want to get all the way through that process to get to the approval committee, only for the approval committee to say, "You know what? I like this deal, but I like it better if we're only funding 75% of it and not 85% of it." So, then you, as a searcher, need to go figure out, “Well, okay, where am I going to come up with the additional 10% to get this deal closed?” Do you go and find another bank, which at that point you're already six weeks, you know, eight weeks into your deal? I mean, that could kill your deal. So, the point is that if I could do anything differently, I would've worked with a capital provider, because typically those capital consultants, you know, have a list of banks that they work with, and they know the risk profiles of each bank and what debt they're willing to finance and what they're willing to take on and what they like and what they don't like. That way your deal has a better chance of getting closed sooner, and you don't have to go through some of the turbulence that I went through.

Rick Ruback:

So, you used an SBA loan?

Brian Seeling:

I did.

Rick Ruback:

You had a seller note. And then you raised outside equity from three investors?

Brian Seeling:

I did, yep.

Rick Ruback:

Where did you find the three investors?

Brian Seeling:

So, I got really active on X, or Twitter, which has a tremendous community of just people that are willing to help from an ETA perspective. And so I just was having conversations, meeting people, and I came across this company called Capital Pad, and what they do is they raise capital to finance ETA deals. And so they were the lead on my capital raise. And then I had two other investors that I found – they came in for smaller amounts – that I knew from previous ventures. One guy I found on Twitter as well.

Rick Ruback:

Fascinating. You didn't know any of your investors personally before they invested in your deal?

Brian Seeling:

No. No. It was cold outreach. And I could talk for hours about trying to find investors, but it was cold outreach. I was reaching out to individuals and just trying to get an idea of what, you know, the requirements are and what they look for in a good investment. And typically they have circles of people that they talk to, because it's a small community. They just refer, I got referred around. And so yeah, I didn't know anybody. It wasn't through friends and family, and it was a hundred percent through strangers off the street, for lack of a better term.

Royce Yudkoff:

Brian, tell us a little bit about how you priced the equity investment that you were taking in. Were the investors making proposals and you kind of got to a proposal that all three wanted? Did you have an idea of how to structure that? Talk us through how that piece worked.

Brian Seeling:

I did not. The first investor I talked to, I didn't offer him a step-up at all, and he kind of laughed at me. So, it was quite the learning curve that I went through. And then I started to do a little bit more research on, you know, what an investor looks for in these types of deals and what the structure looks like. And then I came up with how much equity in the company I was willing to give up for the dollars I was receiving.

Rick Ruback:

Did you do a financial model?

Brian Seeling:

I did, yup. I did the financial model and I put that all together and I put a presentation together around the business and business plan. I came up with a whole data room for all the investors that were interested, to share with, and I gave them access to it, and I met with them two or three times and really dove into the details of the deal. And overall, it took about six weeks from the first time I reached out to an investor to the time that I had a commitment letter from the investor with the amount of money they were willing to put in.

Rick Ruback:

So, did you think it was easier or harder to find the debt financing or the equity financing? Because you led with debt financing.

Brian Seeling:

Yeah, I led with debt. It was harder to find the equity financing.

Rick Ruback:

Oh, it was harder to find the equity?

Brian Seeling:

I mean, there's lots of banks out there, right? It's easier to find banks that have SBA programs and it's harder to find people with money that are willing to invest in these small business deals.

Rick Ruback:

And, without revealing too much, what was the typical size of the investor check? There was one big one and two small ones?

Brian Seeling:

Yep.

Rick Ruback:

Was it hundreds of thousands of dollars or…?

Brian Seeling:

It was somewhere in that range. Yeah, so it was, you know, one was greater than a hundred grand and the other two were less than a hundred grand.

Royce Yudkoff:

And Brian, how long did it take you from when you first saw the business on BizBuySell to when you closed?

Brian Seeling:

Eleven months.

Royce Yudkoff:

Eleven months. Now, that's an unusually long period. It’s sort of, you found the business in an unusually quick, short period of time but then the journey from LOI to closing was a little bit longer than Rick and I typically see.

Rick Ruback:

I think he found the business and then didn't put an LOI out for a few months.

Brian Seeling:

I think it was like two and a half months, almost three months in before I came back and said, "Hey, I want to submit an LOI. Is the business still available? Where's the seller at, you know, in their journey?" So yeah, then I submitted that first LOI and the deal died the first time around, which happens, right? And I think the deal was a little overpriced and I wasn't willing to pay the extra amount of money and so the deal fell through. And then thankfully, the broker pulled us all back together and said, "Hey, how do we make this work?” And so we settled on a number that made sense for both of us. I was willing to concede some things and he was willing to concede some things, and the deal was back on the table and then we were off to the races again. The problem was that happened right around the holidays, and so it obviously caused some delay there. But also, when I went to then take on the equity, I had to find a new attorney, which then caused the seller to find a new attorney, and that then delayed almost a month, month and a half, to get the new attorneys up to speed. And it was just very clumsy, very evident of a first-time buyer, for sure.

Rick Ruback:

But not super stressful or adversarial with the seller?

Brian Seeling:

No, no, no.

Rick Ruback:

I mean, I guess you had that price adjustment, but after that it seems like things went relatively smoothly. But it's just the mechanics of getting a deal done. Your experience is not unusual. You know, six months maybe is a little long but, you know, Royce and I have been involved in deals where the attorney who's supposed to be writing the asset purchase agreement goes off for six weeks and hikes somewhere outside of the country and doesn't bring a cell phone and never communicates. And it's a sort of frustrating experience, but it's real life. I mean, it happens when you buy a house, happens when you buy a business. It doesn't seem to happen anymore when you buy a car but, you know.

Brian Seeling:

Yeah, actually, I think it's harder to buy a business than it is to buy a house, which I think is kind of crazy, but…

Rick Ruback:

I don't think it's crazy because, you know, houses are pretty transparent, right? And there are pretty good comparables for houses. That's what makes this space so much fun is that all the businesses are unique, whereas houses may be green and orange and white and yellow, but they all sort of have four walls to them and windows. How many employees do you have?

Brian Seeling:

So, we have twelve employees. Ten of those are technicians.

Rick Ruback:

And how has this impacted your life? I mean, it's interesting because you've had so much startup and entrepreneurial experience beforehand. Do you feel like you have a more manageable life or a less manageable life, or it's too early to tell because you're only six months in?

Brian Seeling:

I don't think much has changed as far as, you know, my involvement day-to-day, because even when I was searching, I was cranking away for eight, ten hours a day on the phone, looking at deals, and just trying to orchestrate things. So, I am down at the shop every day just because that’s, you know, I'm comfortable there, at least right now. But I do see myself, as things start to grow and stabilize, that I probably won't be in the shop every day. But yeah, I still coach my son's flag football team. I'm at my daughter's softball games. Like, I'm still able to do all those things. I'm not tied to a sixteen-hour-a-day job.

Rick Ruback:

You said a lot of the work gets done between 4am and 11am. You're not there at 4am.

Brian Seeling:

No. I'm there at 6am but typically the schedule is put out the afternoon before, so the guys that are scheduled at 4am, they know where to go at 4am.

Rick Ruback:

Do you actually do the scheduling? I would think in a size business like this, you do.

Brian Seeling:

No. So, I'm fortunate enough to have a GM – or a service manager, I call him GM – but he runs the schedule. He's there at 5am every morning. He's got thirty years of experience in the industry. And that's the other thing that made this business for me was that the seller wasn't in the back office doing these things, right? He wasn't doing the scheduling, he wasn't ordering parts, he wasn't coordinating with customers, he wasn't doing any of that. He was literally a technician out in the field running calls. So, the fact that this came pre-packaged with the GM that also was willing to stay, and at least for the next two to three years or five years or whatever the case may be, until he’s ready to retire, it just made it that much more of a gem for me because now I can come in and, like I've mentioned before, really focus on the scale.

Rick Ruback:

Yeah, what a great opportunity. Royce, we should ask Brian the question we always ask our guests at the end, which is, do you have any questions for us?

Brian Seeling:

Yeah, actually, so you guys kind of know a little bit about me, a little bit about the business, a little bit about the potential of the business. What would you suggest that me, as an entrepreneur, should do over the next three to five years? Should this be maybe a platform company? Should I try to, you know, maybe double it in size and then sell it? Like, what advice would you give me, being six months in?

Rick Ruback:

The first thing I would focus on is an acquisition on the cold side. Because if you can make an acquisition on the cold side, the synergies and cross-selling opportunities there are just fabulous. And I get that it's different techs. I get that. It might be that the person who's fixing the oven can't fix the refrigerator, but I think that's okay. I think that the bigger part is that the customer acquisition costs are much, much lower once you have both, and you can cross-sell. And the way I would do that is look at the labels, you know, in the restaurants, because you know who's servicing their equipment. So, it's not hard to find out who the targets are. It's very different from the search you did before. This time what you do is you call the owner of the cold side company and you say, "Can we get together for lunch? I want to introduce myself. I notice we're going in the same places." Feel them out, build a relationship, and then see what that next step is. But it's not a BizBuy thing.

Brian Seeling:

Right.

Rick Ruback:

Royce, what do you think?

Royce Yudkoff:

You know, I'm not sure I have advice as much as encouragement. I think you've found a really high quality, enduringly profitable business. There's a real need here that's not going to go away. You're picking it up after a founder has done great work establishing it, and it seems like there's just so much potential for growth by a combination of continued good service, really marketing preventative maintenance, and turning a bigger and bigger piece into a subscription business, which makes it more efficient, as we talked about earlier. And then this intriguing opportunity of expanding into the cold side. You know, one of the things Rick and I look for in businesses is, “Are there a lot of ways to win?” And it seems like there are a lot of ways to win in this business, which is really great.

Rick Ruback:

Right. The other thing, Brian, is, this may seem far-fetched, but I wouldn't be surprised if you owned the business for five years and discover that your IT background comes back as a huge asset because I think there's probably nobody in this business that knows as much about IT as you do. And as wages continue to rise, restaurants are looking for ways to automate and bring IT in. And so far they're doing it with ordering, you know, tablets instead of people taking notes, and communication, and that kind of thing. But I suspect the next stage will be more automation in the kitchen, and your IT background is going to, it's like, “Oh wow, here's somebody who knows about IT and how to fix a stove.” That's kind of a special combination.

Brian Seeling:

Yeah, I agree. And to your point, the equipment is getting more sophisticated. It’s just not mechanical anymore.

Rick Ruback:

Right.

Royce Yudkoff:

Brian, thank you so much. This was great, to hear about your journey. I think a lot of searchers and would-be searchers are going to be keenly interested in how you accomplished this. So, a big thank you.

Brian Seeling:

Thank you both for having me and I appreciate it.

Rick Ruback:

It was great.

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Rick Ruback:

Royce, I love the arc of Brian's career. Didn't you?

Royce Yudkoff:

I thought it was great that he started out in these high prestige, white collar jobs – software engineer, things like that.

Rick Ruback:

Startup.

Royce Yudkoff:

Yeah.

Rick Ruback:

Independent consultant.

Royce Yudkoff:

…the kind of thing you're happy to talk about at a cocktail party when someone asks, “What do you do?”

Rick Ruback:

Right, so he decided he would improve his life. And how's he going to improve his life? “I'm going to repair ovens in restaurants.”

Royce Yudkoff:

I think one of the goals you and I hear again and again from people who are considering being an entrepreneur through acquisition is that they want professional independence. And they know they're giving things up, like that ability to say at a cocktail party, “I run a new software startup” and trading it for “I repair restaurant ovens.” But they're more focused on not answering to anybody. What do you think?

Rick Ruback:

Yeah, I think that's exactly right. I think in this career path, you give up a little bit of cocktail party prestige but in exchange for that, you are likely to make more money, you're likely to have more control over your life, you certainly have more independence. And by the way, you're likely to build prestige in other ways. In your community, you'll be the guy sponsoring the Little League team. You'll be the person who gives the donation to the high school. You'll still be a very active and well-respected member of your community, but it won't come because you've got some really cool business card. I mean, could you imagine all these people saying, “Oh, my business card's better than your business card. I have a really nice business card.” Who cares, right? Who cares?

Royce Yudkoff:

You and I see this all the time when we do alumni talks because we end up having these people in their late 30s and 40s approaching us, who work for big companies, and always asking how could they do this entrepreneurship through acquisition. But somehow, despite the fact that…

Rick Ruback:

We never hear the opposite.

Royce Yudkoff:

We never hear the opposite, across the hundreds of entrepreneurs through acquisition or would-be entrepreneurs through acquisition, not once do they come and say, “How do I get that job in a big company?”

Rick Ruback:

“How do I get that job at a big company? Because I'm really interested in losing control over my life and having to move where my company needs me” and all those other things that come with those big company jobs, which appeal to a lot of people. I mean, it's not that they're bad, because I think if you don't value executive control, working for somebody else is probably an easier life.

Royce Yudkoff:

Yes. And those big companies, as you and I have talked about, provide you with many things that some people weight heavily: the huge amount of resources to get your job done professionally; the sharing of responsibility with a team of others; being surrounded by people who are like you, in terms of education. And, you know, you could understand how someone would rationally look at those choices and say, “I'd rather work for Google or General Electric.” It's not wrong. It's just what's right for that person.

Rick Ruback:

Right, it's just different. In any event, it was great to see Brian giving up the sexy career paths and following the really dull one to make himself super happy.

Royce Yudkoff:

Rick, that was a great discussion with Brian, which touched on a lot of issues that searchers face. Next week, you and I have a very interesting conversation coming up with Betsy Harbison, who bought a software business serving the group travel agency. And it's kind of an interesting contrast between these two businesses because Brian was making a migration out of being an executive in a software business to running a blue collar trades business, whereas Betsy bought a software business herself and now manages a set of white collar engineers. So, we're going to see two people who kind of moved in different directions to express their careers.

Rick Ruback:

And Royce, I think now’s a good time to ask our listeners to send us in some questions. Our last episode of the season is going to be us answering the questions that we hear from our listeners. Listeners, please send your questions. Our email is rickandroyce at hbs dot edu.

Royce Yudkoff:

You’ve been listening to Think Big, Buy Small. We’re your hosts, Royce Yudkoff…

Rick Ruback:

…and Rick Ruback.

Royce Yudkoff:

Katie Zandbergen produced today’s episode. 

Rick Ruback:

Craig McDonald is our audio engineer. If you have any questions, comments, thoughts, feel free to just e-mail us – rickandroyce, all one word, at hbs dot edu.

Royce Yudkoff:

We’ll be back next week with another episode of Think Big, Buy Small.