30 Jul A Search Fund Business Buyer
Today, we learned what a search fund business buyer is looking for in a business to buy and their process for finding and buying a business.
In this week’s The Faces of Business Episode, our guest speaker was Thomas Campbell. Thomas is the Owner and Founder of Argyll & Co. His company offers business owners an opportunity to preserve their company’s legacy and commitment to employees and the community. Thomas is a search fund business buyer looking for a company to purchase and operate.
The conversation started with Thomas introducing himself to the show. He said that he is a navy brat and so he bounced around for quite a bit. After this when he graduated, he got a job to handle the accounts of a company.
Thomas got introduced to a company and got the opportunity to become a search fund business buyer and a controller. After this, Thomas explained in detail how to get a search fund business buyer.
He said that if you have three buyers, you must choose which one is the perfect search fund for you. In this situation, some buyers have investors with equity funds. Here, the initial fund of the buyer goes into the paying of general funds.
Moreover, in this case, according to Thomas there are several advantages and disadvantages as well. After this, Damon asked Thomas about how many companies has he looked at since he started? At this, Thomas said that as a search fund business buyer, he talks to about a dozen companies a week so that makes around 600 companies in total.
Further, Damon asked about how many of them did he sign an NDA with? Responding to this question, Thomas said that he has probably done some 75 to 100 NDAs. Moreover, Thomas said that the hardest part here is when you have a chat with someone, and you send them an NDA afterward.
But then you wait a few days and even weeks and you get no response. This is when you get the most disappointed.
After this, Thomas shared that he is a high-pressure man and he sends hundreds of emails and dozens of calls every week, yet at times he has to sit free for months as a search fund business buyer.
By the end of the conversation, Damon asked Thomas about the kinds of companies he wanted to work with. To this, he said that he has touched a lot of industries as a search fund business buyer, however, most of them were medical and engineering industries.
The conversation ended with Damon thanking the guest for his presence.
Thomas Campbell is the Owner and Founder of Argyll & Co. At his company, he offers business owners an opportunity to preserve their company’s legacy and commitment to employees and the community. Before this, he was the Chief Operations, Financial Officer at Charleston Shoes. Co. Moreover, he was also the Owner at Salty Dog Yoga & Surf.
Before this, Thomas was also the Controller at Queensboro. Moreover, he was also the Project Manager, Controller at Energy City Tire Recycling. At his first job, he has also worked at SPAWAR for over a year.
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The Search Fund Business Buyer
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Damon Pistulka, Thomas Campbell
Damon Pistulka 00:03
All right, everyone, Welcome once again to the faces of business. I’m your host, Damon Pistulka. And today with me, I’m excited because I’ve got a very special guest, Thomas Campbell. Glad to have you here today.
Thomas Campbell 00:17
Glad to be here, Damon, appreciate it.
Damon Pistulka 00:19
Yeah. Is this is exciting for me, Thomas, because I, from time to time I get to interview business buyers, and you are a great example of a business buyer. And, and quite honestly, some that our clients tend to work with. So it’s really exciting for me to be able to let you share a bit about your background, you know, kind of your, your how you ended up deciding to buy a business and and the process and then some of the experiences you’ve had with that. Sure. Yeah, I would love to. So yeah. So tell us about your background here.
Thomas Campbell 00:54
Okay. Well, my background, I guess, started from the beginning. I’m a Navy brat, so bounced around a good bit growing up, but Charleston, South Carolina is kind of home where my folks are still got my undergrad at Babson College up in the northeast, which for those who aren’t familiar is, you know, small school that kind of specializes in business. From there, you know, I kind of graduated right.
And as the great recession was kicking off in 2008. So, you know, whatever hopes and dreams and career paths I thought I might have pursued as a bright young undergrad kind of went by the wayside pretty quick. and ended up actually kind of as a financial analyst work in real estate for a minute. And it was a little bit of a winding path to get where I am today. From there, I you know, ended up transitioning to helping out large, maybe, branch, you know, Navy there in Charleston, with migrating their enterprise management systems over to SAP.
Okay, so I was in charge of managing all their financial data, which a lot of responsibility for. Yeah, I guess, to trust somebody who’s pretty young and inexperienced, but managed to get through it. And they hired me on briefly but to be a full time government employee, towards the end of my contract. But by that point, I’d also started to send out feelers, the folks that I’ve worked with before in real estate. And that’s kind of how I got on the path.
Currently long, I ended up connecting with some startup investors who had backed a alternative energy company focused on different technology applications within oil and gas and alternative fuels. One thing led to another and we purchased a tire recycling factory outside of Charleston. With the intent of using the tires as kind of fuel for some of the technology applications that we had in mind. I was a controller for this, our recycling plan was one of the largest in South Carolina, I didn’t know the first thing about being controller, but had to kind of learn on the fly.
And there is a lot to cover everything from chasing down accounts receivable to you know, listening to vendors, asking to get paid, making sure payroll is met every week, and likewise, making sure that the equipment was all in good shape, but the trucks were going out what have you. So, you know, trial by fire. And, you know, within a couple months, though, buying the business, we were approached by a Canadian company looking to buy us out and move migrate their own manufacturing from China to the United States.
You know, we kind of were operating on bases in good faith, and I was kind of feeling like, you know, pretty good about it at first, but, you know, they made us a lot of promises. They told us that they were going to close within a few months, they asked us in order to get the deal done, they needed us ramp up capacity. Some of the new equipment, what have you, which we did, unfortunately, the check ended up being in the mail for about a year. Yeah. And meanwhile, we had kind of overextended ourselves by plowing that operating capital back into growing the business.
So, you know, I spent about a year kind of sleeping at the plant and going without pay trying to, you know, make sure the payroll was met, and that, you know, the lights were able to stay on until the deal close. And it was it was a pretty Rough, you know experience for somebody my age, not one that I definitely don’t care to repeat, but the experience was pretty invaluable. And yeah, from there went up to Wilmington got a job as comptroller for a apparel manufacturing business soon screenprint embroidered apparel while they’re founded co founded a yoga studio, and not too far away in Carolina Beach.
Got that business. I’m in as much as I could automate a lot of my responsibilities, were using different technologies and what have you. So that really kind of opened my eyes to a lot of the Yeah, efficiencies that can be gained from just instituting good standard operating procedures and some of the technologies that were coming out. And from there, took that experience to a woman shoe company, based out of Charles Carlson shoes. So some of some of your listeners may actually know of this company just through their spouses, or they themselves being fans.
But at any rate, they’ve got, you know, a couple dozen locations throughout the West Coast and East Coast, Florida, New England, Manhattan, as well as you know, Charleston. And when I came on board, the business is owned by a young woman who knew a lot about designing and selling shoes, but didn’t have much in the way of traditional business background. And so it done about four and a half million dollars the year before prior to my coming on board. But unfortunately, my predecessor had taken advantage of some of the lack of controls in place to commit about now, better part of half million dollars in credit card fraud.
Oh, wow. destroyed the books on the way out. And, you know, so when I came on board commissions and payroll taxes, what have you hadn’t been paid in months? Yeah, there was no bookkeeping. So pretty much immediately it was kind of triage type situation where I, you know, had to rebuild the books from scratch based on bank statements, had to get new payroll systems and, you know, timekeeping systems implemented, within the first week, get everybody caught up.
And then from there, you know, one thing when blessing certainly was that the business was growing rapidly. So, you know, everything had been run on pen and paper, they had no idea what they had in inventory, or really anything. And so that was the next thing. So in the first few months, rolled out new point of sale systems and Ettore management systems, what have you, for their e commerce, wholesale, retail business lines of business?
And, yeah, over the next couple years, kind of helped grow the team and handled everything from kind of finance, operations, technology, marketing, you name it, letting the owner kind of focus on what she enjoyed doing, which was, like I said, designing selling shoes. And, yeah, grew the business from four and a half to by the time I left 12 and a half million in two years. The, you know, had the backfill man, we hired, you know, Harvard MBA president with a bunch of years in the apparel industry to kind of take over my role from the strategy side of things as well as a financial manager, and, you know, tech admin.
Yeah, basically replaced my role with three folks. Yeah. But, yeah, from there, I got my MBA at UNC. And, you know, didn’t really know what I wanted to do with my MBA at the time. I felt though, that I’d kind of reached the pinnacle of where I can get within my current career path. You know, I was CFO, CEO, for lack of better term of a small business. You know, I wanted to continue to progress and, you know, learn, but didn’t know what that looked like.
You know, the fact was that larger businesses didn’t really appeal. I like the thrill and motivation that being in a small business provides the feeling that your work, your effort matters. And having that laundry list of 101 things that need to get done range from urgent to needed to be done yesterday on fire. Yeah, yeah. And so, you know, winning kind of a little bit blind as far as you know, what my next You know, steps in my career would look like, thought about consulting a few other things.
But one of the clubs there, UNC, invited a couple speakers, the private equity Club, which I just had joined for, you know, to see what it was about. And one of the speakers happened to me, one of the partners, currently back and enrichment accelerator, and they introduced me to the concept of search about how, you know, basically young, motivated talent with, typically with MBAs, but not always, you know, to try to attract them away from these high paying six figure jobs being thrown their way by Fortune 500 companies,
you know, this model have kind of been created to incentivize them to buy small businesses with, you know, investor capital, and, you know, receive a CEO compensation and responsibilities, but also have some sweat equity, for your efforts. And for me, it was just kind of like a light bulb going off, chase the guy down the hallway after the Yeah. Asking about, you know, kind of next steps and how I learned was going to go about learning more.
So, I was given a few resources, including kind of a Stanford primer on search funds that they released every couple of years detailing kind of all the trends within the space and went to Harvard conference. Later that fall. More I’ve met a number of other individuals kind of within the search fund community. And yeah, yeah, yeah. It’s kind of a funny story, though, while there, there was nobody else from UNC there. And there’s nobody else from Duke, it was a bunch of MBAs from the northeast, so we’re attending this conference.
But for one guy who’s standing, you know, I saw this one dude standing off in the corner of the cocktail hour afterwards, and wandered over to introduce myself not knowing many people there. And lo and behold, he was the only other person from my state. He was a Duke MBA is pursuing search. And, you know, we’ve got to talk and kind of bemoaning the fact that the concept, the model of search just didn’t really wasn’t really popular, you know, well known within the SE. Yeah. You know, a lot of the conferences are, you know, Booth up in Chicago, as well as Harvard and Stanford on the west coast.
Yeah. So yeah, we get decided, you know, if anybody was gonna change, it might as well be us. So we went ahead and got the ball rolling on starting a, a, se, entrepreneurship through acquisition conference at Duke University. And yeah, through that got to know a lot of folks involved in the community more investors, searchers CEOs, who had formerly been searchers, as well as you know, folks who support that community attorneys, accountants that advise on the diligence that’s involved, which I’m sure we can get into.
Damon Pistulka 13:22
Yeah, yeah. Well, it’s awesome. Listen to your background, Thomas, because I go back always because first of all, people unless you unless you’ve been in a turnaround situation, like you were in a couple of them and I that’s what I did. For the vast part of my career for for investment owners is our turnarounds and and people that if you’ve never been in those situations, people don’t understand why you would ever want to go into it.
But the thrill of doing it and being successful in it is addictive. Because you can know that the amount of change that you can really make by getting people aligned and getting systems in place and getting things going is really incredible. So that’s that’s one of the things that’s pretty cool about it. Sorry, I didn’t have the camera set right at the beginning.
But the The other thing that’s that that does for you though, it those scrappy situations, you know, where you have no money, but you have to still do it, you still have to execute and all the things you have to do that prepares you for being an entrepreneur later down the road. It really does. I just I think about that. And I want to make sure that that I at least say it because that kind of thing teaches you invaluable lessons that take some entrepreneurs years and years and years to figure out but when you drop into those situations, like you said it’s trial by fire and you learn it tomorrow if not today, but you know your second day. Yeah, no, they
Thomas Campbell 14:49
don’t teach you in business school what to do when your foreman disappears on the first day of deer hunting season. Oh yeah, you know the accounts receivable check that you’re waiting on to make payroll 30 days late.
Damon Pistulka 15:01
Yeah, yeah, exactly. Yeah, exactly. There’s some of those things that you learned how to do. And like you said, you brought up a couple times of, you know, people call and wanting to get paid or people you tried to get payment. You know, that’s, that’s just not a lot of when you understand that, you really get to understand that, you know, a business is almost like a human being where you’ve got to feed it, there’s things that come out. And it’s just, it’s really interesting when you can have that that type of experience. And I can see now how this, this translated for you into becoming a search fund buyer.
And I can also see then how your experience gave investors behind you now, confidence in backing you, because some of them went to school, went out and got a job at a big fortune 100 company and decided to do this, hey, there’s nothing wrong with that. And, but and deciding to become an entrepreneur, there’s nothing wrong with that. But I think if if something doesn’t go exactly right, you’ve got a you’ve got a leg up on them and figuring out how to get and make it right. That’s the idea. And certainly, you know, operating experience is invaluable.
And a lot of folks have great experience working at these larger companies, some of investment banking, or finance or whatnot. But the folks who are backing me in particular, they were very interested in the fact that I had real operating experience. Yeah, both in terms of managing large teams of people. Just, you know, rolling with the day to day fires that just happen, you know, and yeah, yeah. And I think I think it’s this is this is a great, great, I mean, I’m just so thankful I get to talk to you today.
Because that because your experience is even better than I thought, as we talked for the first time. But the the thing that most people don’t understand is, is you have to sell yourself twice to become a search fund is for each fund buyer, like you’re doing with you have to sell yourself first the investors that say, yes, if you find the right opportunity, we will do that. And then you have to sell yourself, again, to the owner and the investors to back you in a specific business, the owner that selling the business and the investors is going to invest you behind you in that business.
Thomas Campbell 17:30
Absolutely. And that’s one of the things is like these investors, they’re putting a lot of money at stake. Yeah. And the worst case scenario for them is a failed investor. Yeah. Sorry, I failed company, a failed build company. Yeah, I feel bad by is the worst outcome. You know, failed search. It happens. Nobody wants it.
But that’s kind of, you know, the expected risk. Yeah. And that failed search, meaning just simply, you know, somebody my shoes who, you know, puts a lot of time and effort in, but comes up short, and just for one reason or another doesn’t find a company to buy. But yeah, if you buy a company, and you know, those investors, they want to make sure that whoever they’re putting in charge knows what they’re doing. And, you know, because they’re trusting them with a large check. Yeah. So yeah,
Damon Pistulka 18:32
that’s that’s, that is that is so key. And I think that’s one of the things that when I’m working with business, sellers, I am always trying to have them put themselves into the the buyer shoes. Because an owner of a business that sells that say, I’ve got to say I’ve got a $10 million hv AC company, and I’ve had it for 25 years, and I started it in my own truck, or I bought a small business and grew it up and I’ve got this big, I don’t have debt in that business anymore. Probably not much, maybe a little bit. And I don’t I don’t really, I don’t have that kind of debt load that you’re going to have when you buy business.
Because not if I’m walking in and have to pay six, 7 million, 5 million, whatever the number is on that business. I have to pay that back. Yeah, you know, I got a reasonable time to pay that back. Now I’ve got that chunk of money comes out first every month, and you get it and that and that starts to really eat into what you can actually pay for a business and I then I look at this and I see.
The worst thing that can happen are public companies doing deals in spaces that that you’re going to try to buy in or we’re going to try to have people sell businesses in because they don’t bother to to research the fact that private or public companies are valued much higher because they’re public and the way the right sizes and everything else
but Getting into that buyer perspective is something I’d like to talk about a little bit because, you know, you have a much different profile and a different look at the way the cash from a business with because just for example, if a business is making a million dollars and you have to pay 5 million, you know you that debt load right off the bat is a pretty good chunk of money that comes out every month. And that that is something that he Yep.
He still there. Oh, he just cut out for a second cut out for a second. No worries, we’re back. Okay. Yeah, you know, you as a business buyer that, you know, if you if you have to, if you’re buying a million million dollar, even a business, and let’s say it’s 5 million, you know, you You are not the owner sitting there, they’re pulling their income out of that business or is setting in the business, whatever, they’re not paying that that loan part of your buy, but you coming in as the buyer, now you have to pay, what two thirds of that of the cost in alone?
Yep, that’s, that’s gonna have me it’s got principal and interest payments, like everything else. So you coming into that business, the cash flow looks much different, because there’s a chunk of that cash flow is gone, that that owner is sitting there today that’s going to sell the business has available to him?
Thomas Campbell 21:17
Absolutely. I mean, so that’s a big part of it, you know, you basically break it down a little bit further. On that point, you know, if you, you’ve got really three different types of individual buyers, right, you’ve got your, you know, self funded buyer. And these are folks who have either been relatively successful in their own right, and have some cash sense that they’re looking to buy a business and kind of get back into it.
Or they may have another stream of income, either through their spouse or through, you know, military benefits, what have you. And oftentimes, they’re going to be looking at these businesses with an eye towards financing through an SBA loan. And for them, the risk is pretty powerful, because there’s a personal guarantee, yeah, on that SBA loan, if the business fails, they potentially lose the house.
Damon Pistulka 22:14
Yeah, that’s exactly.
Thomas Campbell 22:16
So their families, they and their families, livelihoods are very much at stake. And then likewise, you know, you’ve got two other kind of search fund, individual buyer types, one being traditional, where they go out, and they raise equity from a bunch of investors, sometimes institutional investors, sometimes a bunch of individual, wealthy individuals, usually a mix.
And then, you know, key difference there being though that when they do find a company, they have to raise that equity to buy the company from that group of investors. But in the meantime, there at least, you know, they are able to raise that initial small fund to pay themselves a salary and, you know, live somewhat comfortably pay their, you know, team of analysts and interns office space, what have you and diligence costs? Yeah.
In their case, the debt that is being put on business is oftentimes going to be senior debt from just a traditional bank, that they don’t have a personal guarantee for Yeah. And as well, usually, there’s a certain amount of seller debt. Which, yeah, point being, though, is that, you know, and I guess the third group, I should mention is actually the path that I’m going where you have a sole sponsor a single either family office, or for lack of a better term kind of group of investors structured like a private equity group who are funding your search and funding the acquisition.
There’s a number of advantages and potentially disadvantages, you know, the different models that we can go into if you’d like, but point being is that in every case, there is a tremendous amount of risk that we’re having a judge and, you know, both in terms of the ability of the business to finance that debt, because of it doesn’t, you know, has a bad year, it can be a really bad year. Yeah. And, you know, basically, searchers, or individual buyers are putting their life on hold for one or two years are kind of putting their entire lives in limbo.
They don’t know where the biz, what kind of business are going to buy. We don’t know where it’s going to be. And we don’t know if it’s going to be successful. Yeah, we know. So if we make a wrong move, if we buy the wrong business, you know, that’s, that’s a serious amount of years of our lives, and As well, you know, capital from friends family, you know, investor Yeah, that we’ve essentially lost, as well as our own, you know, having to kind of start from scratch in terms of our own livelihoods.
Damon Pistulka 25:13
Yeah. Yeah, that’s a great point. Because it is, it is. And I’m glad you I’m glad you touched about touch on that a little bit from a personal side of what the buyer search fund type buyer goes through, because you are literally in a in a large private equity firm. They’ve got people that are searching for businesses every day that are going out to conferences that are doing the email campaigns and you know, every every business owner, let’s listen to me right now I bet you’ve got if you’ve got more than a couple million in revenue, you’ve been hit by these emails of people trying to market to buy your business is the that’s what they’ve got.
They’ve got those cadres of people that are doing it, but in the search fund case, a lot of your work is is individual. And you’ve got you have more control over a small team of people or just sometimes themselves looking for businesses that they want to buy. Absolutely, yeah, yeah, we got some we got some comments here.
I want to share real quick Thomas, I think Jeffrey Graham put this in there. He’s someone I know that he’s been. He’s been a private equity CEO before. So he’s been in the trenches and out of the trenches. So it’s good to see that. And, and he also in that process, he was talking I think this was when we were talking about raising capital, he’s raised capital to people so and then magit, another another friend of mine in Las Vegas there, he just sees us saying he loves the conversation. So thanks, guys, for listening. I love to hear it.
But yeah, Thomas Thomas gamble here with me here today’s awesome conversation about this so far, man, and I just love that look, you just gave us into the different types of buyers, because I just I can’t, I can’t emphasize it couldn’t find my word there, I can’t emphasize enough with with a with, with people that are looking to sell the business, the importance of reducing as much risk as they can out of their business, because you as a buyer coming in your risk profile is completely different, like you said, your land, your land, you know, couple years on the line, just trying to find that business.
And then you’re laying out, you know, in an SBA situation, you could be on the line for the loan. If even if you’re in a debt, other kind of situation, when you’re not having a personal guarantee, it could literally ruin your career by going out and doing one of these bad and, and not not making it in that business and the ambassadors losing their money with a bad purchase. So that that is I just, I just can’t emphasize that enough. I’m just gonna say the same thing again, because I want people to think about that, if you’re considering the sale of a business, that’s sizable, because that is something that, you know, customer concentration, you know, the owner being too much in the business.
Not having duplicate resources are too dependent on something, but we’ll get into some of that stuff. But those are the kind of risks that you have to look in. Or if I’m 100% of the market in a small area, and I can’t expect you know, growth and just there’s so many things, but so, I’ve got you’ve been looking for a while now. Yep. Yeah, you bout a year. So this is this is good. This is where the fun questions come in. I really think every year, the stuff you’ve shared so far is awesome, dude, I really appreciate that. But what I was wondering that I’m wondering about is just roughly how many companies have you looked at?
Thomas Campbell 28:48
Oh, man. Okay. Well, it depends on your definition of looked at in terms of having had conversations with? Yeah, let’s just start there. Okay, so I probably have, give or take about a dozen conversations per week. So if you want to think about that, that’s about, let’s say, five to 600 conversations.
Damon Pistulka 29:13
500 plus, that’s good. Yeah, that’s good. That’s a good number. So then out of those 500 conversations, how many did you get to the point to where you signed a nondisclosure agreement? And actually looked at them just roughly again?
Thomas Campbell 29:27
Yeah, man. So we’re actually so it’s actually two steps in the process of signing a nondisclosure agreements, the easy part and I probably have done maybe, I don’t know, 75 to 100, NDA. Okay. And that probably includes broker deals. And maybe maybe more than 100 Yeah, when you throw broker deals in there, but yeah, the hard part is, you know, you can have an incredibly good conversation with a seller you think you’re clicking the seller is motivated. You think it’s great. You’re interested, you send an NDA and you wait to hear back and correct.
It’s not that you ping them again, you know, a few days later, maybe a week later. And, you know, maybe they say they’re working on it. Maybe they say nothing like you just. And certainly I understand it from the sellers perspective. You know, they’re running a business, they’ve got a life to live, it’s busy. And unless you’re feeling really pressured or motivated to sell the business, you got you got other fish to fry. I get it. But certainly from from my perspective, it’s, it’s one of those things where it’s a little soul crushing when you go from a high of thinking, Oh, man, this can be the one to just nothing. Yeah.
Damon Pistulka 30:47
Yeah, like that.
Thomas Campbell 30:49
Yeah. You, you very quickly learn to temper your expectations. Yeah, no doubt.
Damon Pistulka 30:55
No doubt that. That’s, that’s great, too. And I’m sitting here looking, I think this is, I can’t see who’s comment. Oh, yeah. Because Jeff, Jeff said, again, because he’s been through the deal process, you know, deal fatigue is real. And that’s a good a good one to add to it. But that’s a that’s a great way to describe it is because you do you mean you you are potentially finding a something that could last a long time and, and be a great career move for you.
And it’s, it’s you’re investing a lot emotionally, and, and timewise in the beginning and, and to get ghosted, like that, that’s, that’s got to be pretty, you know, something just like this, like in a sales process, you have to get used to it and realize it’s part of part of doing it.
Thomas Campbell 31:43
And, you know, I think I touched on this earlier, but, you know, I think that’s one of the hardest things for me is, you know, like I said, I’m used to high paced, high pressure working in small business where I’m constantly doing things and seeing real results from my efforts. And, you know, with search, I’m sending out hundreds of emails per week, and having, you know, dozen plus phone calls and working on financials, I’m doing a lot of work and, you know, may go a few months and not have a single thing get close to an ally.
And it’s just, yeah, it feeling like you’re doing all this and not making any headway is it’s, it’s very demotivating. And that’s probably been one of the hardest aspects of doing search, I would say. One that I definitely underestimated just. Yeah, yeah. You think about the actual work itself is not that rough. It’s the, you know, feeling of just not getting anything for the work. That really, you know, really is tough to get get over and keep pushing. Keep, keep going.
Damon Pistulka 32:56
Yeah, yeah. Oh, I bet. I bet it’s, it certainly would be, you know, sending. There’s not many people that send a hundreds of emails and have dozens of calls and continue to do that. And that’s, that’s why I think that successful search fund buyers are the ones that are really will end up being pretty decent business owners, if they get into the right business, because they have to be that persistent. Yeah, you’re gonna probably be able to be pretty persistent in your business too. Well, it
Thomas Campbell 33:25
certainly is. taught me a few things too, about, you know, I thought I knew a good bit about sales marketing. This is certainly added a few tools in the toolbox, I’d say in terms of just persistence, and you know, how to go about reaching out to, yeah, develop the sales pipeline.
Damon Pistulka 33:41
Ah, awesome. Awesome. So then, then when you get down to it, you’re you You’re pretty excited, because you’ve got it, you’ve got a couple that are getting might be getting closer into it. So this is this is something again, so what this backup a little bit and just what kind of businesses were you looking for? I forgot to ask you that earlier. So
Thomas Campbell 34:02
yeah, so, you know, I’ve got a little bit as kind of touched on a little bit of a varied background, which is somewhat unique, and that a lot of searchers, they have experienced that specific to, you know, a certain type of industry be of medical or engineering background, what have you. So my case has been kind of a blessing and a curse. And that kind of had a little bit of a agnostic approach.
You know, I can have a conversation with a lot of different business owners and relate to them once in some form or fashion, because I’ve, you know, seen a lot of what they’ve seen either administrative functions or marketing or, you know, somewhere along the line kind of touched on the issues that they’ve had to deal with and of course of their career. Yeah, but to put a finer point on it. I’d say that, you know, I’ve looked heavily into you know, technology enabled asset management. So, using RFID, and barcodes and other technology to kind of track where your inventory is your forklifts, your trucks, what have you.
I’ve also looked pretty heavily into some of those inspection companies that may use similar types of technology to manage inspection data for the companies that they that for their clients. Okay. Very cool. Now, I’ve looked into along the same lines, like emissions testing and kind of compliance for, you know, oil and gas and chemical refineries and infrastructure. But a few of the things that, you know, all these different companies haven’t or industries have in common is typically, you know, really sticky revenue and potential growth opportunities.
Yeah. You know, so when I’m looking at an industry niche, and trying to judge if it’s worth my time, you know, that’s, that’s one of the biggest priorities is how the quality of the revenue, how risky, is it? You know, like, you touched on customer concentration? How recurring is it? You know, do I have to every year, go out and, you know, find new projects? Make sure I hit the same level of revenue that I did last year? Or? Or do I wake up January 1, feeling like I’ve got, you know, 95% of my revenue spoken for already? Yeah. So, you know, there’s a lot of other aspects, really, that goes into it. But that I would say, is probably the top. Yeah,
Damon Pistulka 36:47
yeah. And that’s something that we’ve, you know, because we run into it on the sell side, helping helping owners get their businesses ready to sell and sell them is that over? If you’re in a business for 20 years, you could have a 20 year relationship with a customer that grew from very small to being a very significant part of your business. 70 80%, even sometimes, and it’s not that risky to you, because that happens over time. Yep. But someone walking in and seeing that, that that’s, that’s almost unacceptable. I mean, I’m actually you just can’t take that kind of risk.
Thomas Campbell 37:25
No, one one walking away, and also to that point, nor would the bank that’s underwriting the deal.
Damon Pistulka 37:33
Yes, you’re right. You’re right.
Thomas Campbell 37:34
So the point being is, you know, I’m, I’m typically looking at a lot of risks can be mitigated, you know, there are things that can be done to try to reduce it, or at least, you know, gameplan around what happens if, you know, if the unfortunate event occurs, but, you know, if you have a risk that is existential in nature, like if, if that customer that you’re referring to, besides that, you know, what, they’ve got a 20 year relationship with the old owner, they don’t know me from Adam. And so they’re gonna shop the business.
And if I don’t keep it, then yeah, my company’s dead on arrival, like, I can’t fund the debt. And so, yeah, at that point, yeah, it’s, there’s other risks. You know, I spoke to a company that had significant vendor risk, where they pretty much their entire business was dependent on one vendor. And oh, by the way, that vendor happened to be a competitor.
You know, and yeah, they, they had a great relationship with a vendor. But, you know, that, for all I know, is very much on the fact that the vendor trusted the individuals in that business and they had a long standing relationship with those owners, but they don’t have that with me. Yeah. And while certainly I’d like to think I could build that relationship and work with the seller and the customer vendor to maintain it. There is no guarantee of it.
Damon Pistulka 39:11
Yeah. Yeah, that’s that’s it’s so great. Just let letting you explain your thinking behind this stuff. Because I know that people listening are gonna love this, the business owners are gonna begin to visualize how their business will will be seen by a potential business buyer better and, and it’s so valuable because like I said, you know, that that kind of stuff can creep in over time.
That kind of stuff is well, Damon’s always done business with Jill and Jill’s awesome, their friends, their families go out, you know, whatever for 20 years, we don’t each other and for if, if that if that relationship is critical to the business, someone probably is going to look at it well, they are probably You’re going to look at a lot differently.
Like you said, it can be customer or vendor, or, or employee to get, I’m sure that you’ve run into situations to where you go, Okay, this is a great business, but there’s too many family members in it and things like that, that if you go, okay, the father wants out, and they’ve got, you know, three, three cousins and two kids that are doing it out of out of 50 people. And those are in key positions.
That’s, that’s another thing. So one of the things that that, I don’t know if you run into this, but I’ve always thought this, but I was gonna see if the good, I just came to me. So if you’re in a situation that you consider that, that you’re going to have to pay the owner, but they’re gonna stay on with the company and some other role, right? How much would you be weighing the fact that I’m going to give them a big chunk of money? And what is their attitude going to be like, after they receive that big chunk of money?
Thomas Campbell 41:05
Yeah, no, i. So my approach typically is, you know, great if it happens, but I need to assume that it’s not going to work out.
Damon Pistulka 41:17
Yeah. There you go. There you go. Because I was I, yeah, I had I had somebody was gonna told me that it was an owner. And there were there were several owners, and they were all pretty integral to the business. And they were saying, well, we can we can keep working with the business and keep things going. I said, so how do you think it looks if somebody is going to come in and pay you guys millions of dollars each? What what what is your real reason to come to work and work as hard as you’re doing today? Yeah, exactly. And I just wanted to ask the question to let you explain it, because I don’t know if they ever really did believe me. But it’s again, it’s perspective, right? It’s
Thomas Campbell 42:01
Yeah, it is. I mean, you know, certainly you have business owners who are, you know, they love coming into work, they’re passionate about their business and their employees. And, you know, it’s something that they want to see the business seed after they sell it. And, you know, I absolutely believe that, you know, their heart is in the right place, and they genuinely think when the deal closes that, yep, they’re going to spend the next few years working hand in hand with this new buyer to, you know, see this business grow and take care of their folks. And, you know, and make sure it’s a smooth transition.
But the fact is, yeah, like you said, at a certain point, there’s going to be issues with the business, there’s going to be a disagreement between the buyer and the seller, there’s going to be, you know, something that happens, that requires the seller to feel a good bit of stress, if they’re in a senior management role, because guess what, that’s just the nature of the beast.
And when those periods of stress happen, either in between in the relationship between buyer and seller, or just in the course of running the business, you know, understandably, the seller is probably going to have the thought of, why am I doing this again? Yeah, more money than I know what to do with? Why am I not playing with my grandkids on a beach somewhere? Why am I putting up with it?
Damon Pistulka 43:30
Thomas Campbell 43:31
yeah. Yeah. You know, it’s just the reality that, as a buyer, we’ve got to assume that however compelling and however convincing their argument might be, that they’re, you know, want to stay on board. We got to just assume that it’s probably not going to happen.
Damon Pistulka 43:54
Yeah, that’s not gonna work. You know, awesome. Awesome. Well, you know, the thing is, what are what are some of the good things you’ve learned? Good things you’ve seen? seen as you’ve gone through this about yourself? I mean, what did you What? You said you underestimated stuff? Or what are some things that you really learn about yourself? Because you had to have some soul searching moments where you just said, Is this really for me if I got it?
Thomas Campbell 44:18
Yeah, yeah. So I think, certainly, I’ve found, you know, one thing I do want to mention, I think, is the model that I, you know, that took with my search was a little different from the typical traditional search. You know, not only am I working with a single sponsor, but I’m working with a group that takes a different approach towards both. And by having a cohort of other searchers every year that you’re working with, and so in my case, I’ve got four other individuals who are doing the exact same thing I’m doing maybe they have an industry focus. different from mine.
So in the office here in New Orleans, I’ve got a young woman whose former Army major that was in charge of all mental health services at Fort Bragg 400 staff that she was managing, serving 85,000 family and servicemembers. She’s working in mental health.
But, you know, it’s one of these things where having an office to go to with peers that you can kind of, you know, share stories with complain about, you know, your investors, your sellers, your deals that fell through, you know, you’re, like, wise, you know, prop each other up, when a deal falls through, or when one of us is feeling a little D motivated, just knowing that you’ve got a group of other people going through the same thing. And, you know, cheering you on helps, I guess, maybe the phrase is misery loves company, but it definitely, in my case has helped propel me through this.
Damon Pistulka 45:59
Awesome. Awesome, that’s great. I mean, cuz I think you’re right, you’re right, having having people along with you helps.
Thomas Campbell 46:05
Yeah, absolutely. And, you know, so that that was a big part of that. I think I made the absolutely made the right choice. Working with the group that I did, because I don’t know if I’d still be doing it if I was on my own. Yeah, frankly, the other things I found, you know, I think, like I said, You know, I definitely have felt good about the process that I’ve run, you know, my email campaigns, I send out hundreds of emails, and I’ve got a 40 to 50% response rate.
Now, granted, most of those responses are, stop pestering me. Yeah, oftentimes not using such pleasant language. Yeah. But, you know, it’s still encouraging to feel like I’m doing a good job with my approach, and likewise, to know that, you know, I’ve developed some skills that I can really exercise and flex, hopefully, with a higher conversion rate down the line, as I’m building out sales pipelines for whatever company I buy.
Damon Pistulka 47:12
Yeah, yeah. Well, this, this has been awesome. Thomas, I just, I can’t tell you how much I appreciate you taking the time to share with us because, man, from the comments, we’re getting just from me getting excited about talking to you, and surely the business owners that are listening to this understanding that the perspective of a buyer, and in your case, how a search fund buyer looks at this and that and the kind of work that you have to go to go through to get to a deal.
In the end, it’s really commendable. And and I just, I just want you to know that I’m rooting for you, man. Because it is it’s cool that you’re you’re putting in the work. And you should succeed by by doing the right things and keeping keeping going. So I just, I just appreciate you being here so much. And and if someone wanted to contact you, is LinkedIn a good place to get ahold of you, Thomas,
Thomas Campbell 48:12
LinkedIn is a great place. You know, I’ve also got my email and phone number on my website, I believe. Okay. So I don’t know if you can share that in the comments,
Damon Pistulka 48:22
or I will share that in the comments. So we’ll have that. But yeah, yeah. So someone has a business, it’s in that inventory, tracking images and testing kind of business, you know, then and like you said, You want something with sticky revenue and great growth opportunities. You know, that’s they should definitely reach out to you because it’s, it’s good to put buyers and sellers together, that’s for sure.
Thomas Campbell 48:49
Likewise, if a business owner just wants to have a conversation about how it works, and has view questions, happy to have a you know, just candid conversation, giving peek behind the curtains.
Damon Pistulka 49:01
All right. Awesome, Thomas. Well, thanks for being here today. Thanks, everyone, for listening the faces of business today. And with my incredible guests here, Thomas Campbell, just talking about, you know, the trials and tribulations for a better way to say it of being a search fund business buyer. Thanks so much, everyone for listening. We’ll be back again next week. Have a great weekend, everyone.
Thomas Campbell 49:23