Complexity Hides Fragility: Losing a $20m Business | Joe Odell Interview
The one thing to remember
If a business is complex, underwrite what can break with one outside decision before you decide how much debt it can carry.
What happened
Joe Odell and Jess Patterson, a partnered traditional search fund team, bought Pharmacy Specialists, a home infusion pharmacy with about $20 million of revenue and roughly $4 million of EBITDA. According to Joe, the business looked attractive because it served necessary healthcare needs, had multiple service lines, and seemed to benefit from home-health tailwinds. After closing, cash tightened quickly, a key sales-rep loss and duplicated patient data undermined the revenue base, and later a manufacturer reimbursement change removed about $2 million of EBITDA. With about $16 million of debt and more than $200,000 per month of debt service, the company could not survive the volatility. The board declined to put in more money, the doors were closed, and the business was handed to the bank for wind-down or liquidation.
Who's telling it: Joe Odell, the buyer and CEO in a partnered traditional search fund This is Joe Odell's buyer-side account; the seller, bank, employees, patients, and investors are not heard directly.
Timeline
- Thesis
Joe and Jess wanted to buy a home-health-adjacent business benefiting from aging-population and home-health tailwinds.
- Sourcing
They found Pharmacy Specialists, a brokered home infusion pharmacy deal with clean rooms in Dallas and Houston.
- LOI
They underwrote about $20 million of revenue, just over 20% EBITDA margins, and paid about 6.5x EBITDA.
- Due diligence
The buyers performed healthcare diligence, including a costly Marwood study, but did not catch several operational and revenue-quality problems.
- Financing
The acquisition used about $16 million of debt, including traditional debt and a seller note.
- Closing
The deal closed around December, and the buyers began taking control of systems, processes, and corporate controls.
- Operations
Within weeks, cash was tight; January insurance recertification, an undisclosed sales-rep issue, duplicate patient counts, and drug reimbursement issues created a severe first-year crisis.
- Operations
The company recovered by the fourth quarter of the first full year and returned to roughly a $4 million EBITDA run rate.
- Operations
A later cardiology reimbursement change removed about $2 million of EBITDA, forcing layoffs, office closure, and a pivot toward other service lines.
- Exit
After a final sensitivity review showed margins could break the rescue model, Joe recommended not taking more investor money, and the company closed and was handed to the bank.
stage where a mistake was made
What went wrong 7 issues
Too much debt for volatility
The acquisition was financed with heavy leverage because the business looked stable and high-margin. When EBITDA fell, the company could not service the debt even though Joe says it was still technically profitable.
Mistake made at Financing → showed up at Operations
“It just couldn't survive the debt load it had.”
Warning signs
- The deal used about $16 million of debt on roughly $4 million of EBITDA.
- Debt service later ran about $200,000-plus per month, leaving little room for reimbursement shocks or cash delays.
How to prevent it
- Before closing, the buyer and CFO should size debt against a downside case where EBITDA is cut in half and cash collections slow for 60 days.
- At financing, the board should require minimum liquidity reserves and a monthly debt-service coverage test before approving senior debt plus seller debt.
- At LOI, the buyer should trade a lower price or more equity for less fixed debt service if the business has reimbursement or supplier concentration.
Hidden supplier pricing exposure
A cardiology drug manufacturer cut its AWP-like price by about 90%, which directly reduced reimbursement in home infusion. That single outside decision removed about $2 million of EBITDA and Joe called it the beginning of the end.
Mistake made at Due diligence → showed up at Operations
“long story short, it cut $2 million in EBIDA out of the business.”
Warning signs
- Cardiology was about one-third of revenue but about half of EBITDA.
- One major manufacturer drove much of the cardiology profit, and reimbursement was tied to that manufacturer's AWP-like price.
How to prevent it
- During due diligence, create an EBITDA-by-drug and EBITDA-by-manufacturer table and flag any single manufacturer or drug family that can change total EBITDA by more than 10%.
- Before financing, have a healthcare reimbursement specialist explain the exact pricing formula, including AWP exposure, for every top product line.
- At investment committee, require a written answer to: 'Which one outside party can cut EBITDA materially with one decision?'
Undisclosed sales rep loss
According to Joe, a non-disclosed issue involving a departed sales rep caused the company to lose about 20% of revenue over three months. The buyers had underwritten a larger business than the one they effectively received.
Mistake made at Due diligence → showed up at Operations
“us to lose about uh 20% of the revenue of the company over a 3month period. Um a non-disclosure issue”
Warning signs
- A single sales rep had relationships tied to roughly 20% of revenue.
- The departure occurred before closing, but the buyers say they did not learn about it until afterward.
How to prevent it
- Before closing, require a seller bring-down certificate confirming no key salesperson, referral source, or customer relationship has been lost since diligence began.
- During diligence, tie revenue to individual sales reps and referral sources so the buyer knows which employees control major revenue streams.
- At closing, hold back enough purchase price in escrow to cover undisclosed departures or referral losses discovered within the first 6-12 months.
Bad patient-count data
The buyers relied on patient count as a leading indicator of revenue growth. After operating the business, Joe found duplicate patient records across locations, turning expected growth into slight decline.
Mistake made at Due diligence → showed up at Operations
“we have this projection of growth. It's actually not growing. It's actually slightly declining once I ddup all that stuff.”
Warning signs
- Revenue was stagnant while reported patient count appeared to be rising.
- The second location had duplicate patient accounts that were hard to de-duplicate.
How to prevent it
- During diligence, reconcile patient census reports to unique patient identifiers, billed claims, and collected revenue by month.
- Before signing, require the seller to explain every duplicate patient account, location transfer, and census-number change.
- Do not use patient-count growth in the model until the buyer's diligence team can reproduce the metric from raw billing data.
COVID hid slower growth
The buyers believed historical growth could continue after COVID. Joe later said the company was not actually growing at that speed and COVID had hidden that fact.
Mistake made at Due diligence → showed up at Operations
“we had grown 20% prior to CO. So why wouldn't it make sense that they'd continue to do that after”
Warning signs
- The company grew from $15 million to $20 million during a period that included 2020.
- Joe later said COVID made it hard to tease out the real run rate.
How to prevent it
- During diligence, separate COVID-era volume from recurring demand by month, referral source, payer, and therapy line.
- Before valuation, build the base case from post-COVID run-rate data rather than assuming pre-COVID growth continued.
- Have the board review a no-growth case and approve the deal only if returns and debt service still work without continued 20% growth.
Working capital was too thin
The company entered ownership with just under $2 million of working capital. Cash became tight within weeks, then worsened when January insurance recertifications delayed billing and collection.
Mistake made at Due diligence → showed up at Operations
“started with just under $2 million in working capital. Uh looking back, not enough.”
Warning signs
- The business had insurance recertification every January, delaying billing and collections.
- The acquired company had been paying bills immediately, which used cash faster than necessary.
How to prevent it
- Before closing, build a 13-week cash-flow model that includes January insurance recertification, authorization delays, AR collection timing, and vendor payment terms.
- At financing, secure a revolver or cash reserve sized for at least one full recertification cycle with little or no billing.
- In the first 30 days after close, the CFO should reset vendor payment terms, monitor daily cash, and report authorization backlog weekly.
Complexity exceeded buyer experience
Joe and Jess bought a highly complex home infusion pharmacy without deep prior experience in that exact niche. Joe's later view was that complexity can hide fragility unless the buyer has enough industry experience to see the real risks.
Mistake made at Thesis → showed up at Operations
“frankly because we didn't know the industry well enough, how are we able to tease that out truly and know it?”
Warning signs
- The business involved clean rooms, pharmacy compounding, home infusion logistics, payers, reimbursement rules, manufacturers, and specific drug codes.
- The buyers were new to healthcare operations and learned key reimbursement dynamics only after owning the company.
How to prevent it
- At thesis stage, reject highly regulated niches unless the CEO, partner, or operating executive has direct experience in that exact niche.
- During diligence, give an industry operator veto power over the deal if payer, manufacturer, or reimbursement risks cannot be explained simply.
- Before close, install a reimbursement and gross-margin monitoring process with named owners and weekly review cadence.
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Thesis
LOI
Due diligence
Financing
Closing
Operations
Transcript 2431 lines · 17110 words · auto-generated captions
Joe Odell, welcome to Acquiring Minds.
>> Why, thank you, Will.
>> Joe, we're going to hear the painful
story of your acquisition today and how
you are recovering now, landing on your
feet. Uh, you and I have been in touch
for some time and I cornered you at
McGuire Woods in Dallas and and asked
you in person. Uh, and you finally
relented. We thank you for for doing
that. These hard stories are among the
most valuable. So, thank you very much
for saying yes, Joe. Where does your
story with search begin?
>> I grew up in a small town um with a
super bluecollar background. Uh I think
that's kind of key here because it it
there's this this sense of me trying to
uh just make something of myself as best
I can over the years. Uh worked in a lot
of bluecollar. Uh grew up with my my
family doing tractor services. Uh, I
have memories of, you know, with a
shovel digging out septic tanks and
stuff like that. Um, anyways, uh, ended
up in the military eventually and, uh,
got married. When I got married, I had
this moment where I realized, man, I
want to make more money and try to be
home somewhat. That would be great. Um,
having kids and everything. So, my my
oldest son who's 13 um now he was just
born and uh I told my dad, "Dad, I want
to I want to move home and and figure
out how to make $100,000 someday." That
was my big dream back in 2012.
And uh my dad said, "Joe, if you do
that, you'll be on a whole another tax
bracket." And that's when I realized I
need to stop taking financial advice
from my dad. Great man, bad financial
adviser. Um [laughter] but but yeah, I
ended up moving home in my parents
double wide trailer. Um started going to
school with my GI bill. I was I was
enlisted in the military, so didn't have
my undergrad yet. Had two years already
done, but started doing night school to
finish my degree.
Uh working for free at a consulting
company. I I heard they could make good
money. So I did that for a few months
and they felt bad. Started paying me 10
bucks an hour. But by the end of that
first quarter, I was their top sales rep
doing consulting for Bay Area tech
companies. I was really an SDR at that
point doing cold calling. Um, ended up
doing a lot of cold calling over the
years and uh, worked my way up through
that company, small boutique group, 60
employees, head of business development,
consulting after about four years and
uh, was signing contracts with Google
and Red Hat. I was so redneck at that
point. Um, I drove an F350 diesel and
parked it on the Google uh, uh, Google
campus between a Prius and a Tesla. Uh
that was like 2015 2016. So um it it was
a very interesting time and period. Uh
merging in traffic in the Bay Area and
F350 is very easy. Just let me tell you
uh people move out of your way. Anyways,
[laughter]
um
>> Joe, you're the you're the Yeah, you're
the truck in that parking lot that
everyone's like, "Who whose car is this?
>> What is this?" Yeah. Anyways, [laughter]
I eventually sold that.
Joe. And so, uh, are you from
California?
>> I am. I'm from about three hours north
of the Bay Area. So, it's called
Reading, California. It's near the
Oregon border. Very well, beautiful
area.
>> Um, but yeah,
>> it's kind of the the biggest town along
the border there. Or Eureka. Reading and
Eureka, right?
>> Yeah. Eureka is right on the coast. Uh,
and Reading is about two hours inland of
there. Um, it's Sacramento River Valley.
So, it's really where the Sacramento
River begins. Um, is is up there in the
mountains. in town called Mount Chasta,
but beautiful area. And so that that's
actually uh you know, I got a a degree
for teaching um up there at Simpson
University. And uh by the time I got my
undergrad, I was already making double
starting teachers pay. My wife had quit
working. Uh it was like 2016, I think,
and uh we'd had a third kid and I'd
bought a house. I'm like, I'm not going
to be a teacher. I don't think I think
I'm I think I'm in business. And uh
>> And how much were you making? I was
making just either right at or just
under 100K. I'd hit my target of of
making about 100K or so. So, well,
>> and you had a bought property in the Bay
Area.
>> No, no.
>> In Reading. So, I was up in Reading.
>> Mhm. I was living in Reading and
consulting down in the Bay Area.
>> Ah. Uh, okay. Because you were living at
your parents. Yeah. As you said,
>> and I bought a house nearby. Yep.
>> I see. But when you showed up to the
Google parking lot, that was on the
occasions when you'd be you'd drive down
to
>> once every other week. Yeah.
>> Gotcha. Gotcha. Okay. Okay. Great. And
did you tell your dad you made 100
grand?
>> I did eventually. He's very proud of me
by the way. I made it. [laughter]
>> Even though you're in a new tax bracket.
>> We figured it out. We I walked through
our tax brackets work with them. I'm not
a tax guy, but I knew enough at the time
to know it was bad advice.
>> Yeah.
>> Okay. Okay. Great. All right. Pick us
up. 201617.
>> Yeah. So around that time, I'd said to
my wife, I still have tears left in my
GI bill. I should get an undergrad or
sorry, a master's in business. And I had
had several friends go through different
programs and somebody I knew had
actually done the the Berkeley program
and uh I mentioned my wife and she
laughed um because she's like you're not
getting in there. So long story short, I
applied on a whim in a very short time
frame last minute took uh the GMAT and
uh passed all of it somehow uh with
great scores. I've always been a good
test taker, but um great job.
>> Yeah. Anyways, got in and uh was kind of
just blown away um right away from from
the systems process things that I was
learning. You know, I knew the go to
market side of things. I'd learned that
on the fly with a consulting group, but
everything else business, finance, uh
you know, large parts of operations, HR,
uh all of that was brand new to me. And
so, business school was my opportunity
to really get exposed to the other parts
of the business. um you know I could
manage a very muted P&L at the time
because it was you know really just
consulting fees and labor um that I was
I was handling at the time. So, uh, fast
forward a few months into school and
taking a class called New Venture
Finance, uh, had a guest speaker come in
and they were a traditional searcher
from about seven years prior and, uh,
had bought out their investors and were
owning and operating the company on its
own. Was very, very successful and I
can't remember his name right now. Uh,
but I can look it up and get it to you,
Will, cuz I knew I was gonna ask.
>> I knew it. [laughter]
>> What was the business? Do you remember
that?
>> It was a manufacturing uh, company.
Yeah, I remember that up in Washington
State. I think Trilogy was was very
connected with them.
>> Um, if I'm remembering right.
>> Um, so in the middle of that class, so
I'm on Slack, this is now 2019,
>> and I said to the group uh while he's
talking in the middle of the the
speaker. Don't don't look bad at me for
for you know, I'm sorry, but I was in
middle class typing this. Yes,
>> you weren't the only one, Joe. It's okay
to multitask in a lecture. Most people
do
was did anyone [snorts] else just find
out what they want to do with the rest
of their life? Like that was literally
my first take when I heard what search
traditional search was specifically. I'm
like, you've got to be kidding me. This
doesn't seem real, right? Growing up,
blue collar growing up and just,
>> you know, working for free to get my
foot in the door in a white collar job
for once. Um to the point where I'd
worked so hard and you're like, someone
just write a check to have you search
and look for the company to buy? Like
this sounds crazy. Um how hard is this
to get into? And so I I started just
kind of spending all of my time and
energy. You know, eventually 2020 hit.
Uh we're still in school. We're
finishing school at the end of 2020 uh
due to some delays and and everything
going on with with CO. And uh by the end
of that last semester of 2020, I was in
a class called uh opportunity
recognition and I recognized the
opportunity and I skipped that class and
went and met with search fund partners
[laughter]
in the middle of class
with my partner Jess. So I end up taking
a partner from class uh which was Jess
Patterson. Uh her and I had connected
well over the the time of uh of school
and uh she's a CFO by trade. So really
marrying my background with you know
sales, marketing, go to market strategy
and and hers with operation sales and
HR. Um no, sorry, operation sales,
operation finance and HR. And so really
marrying those two together felt like a
great uh fit. Uh had really good culture
alignment and uh vision alignment. what
we're what we're looking for and trying
to achieve. Uh but we were very agnostic
as we started going through the process
of identifying an industry to search and
buy from. Um part of that actually made
it difficult to raise capital. Uh
because um you you'll have the different
investors out there that really are
looking for hey where are you from? I
want you that to be where you're going.
And some that are more traditional in
the sense of hey tell me a good story
about why you can operate in this
industry and we're open to it. And so
that's really the the two things uh that
you see in tandem. My background for the
last several years have been in tech and
everyone wanted me to stay in tech. Um I
was trying to get out of tech though and
uh
>> now that we're seeing well I I would
love to say well I saw AI coming but um
that's not true at all. [laughter]
>> Um not that that's uh 100% a problem at
the moment but it's becoming something
you definitely have to contend with. But
at the time, um, as a sales guy, product
market fit was is the most irritating
thing in the world because you spin up a
sales team, you go to market and do
strategy, and then and you're like,
well, actually, our software doesn't
actually fit what the market needs. And
so, you have to reset
>> and the sales team gets wiped out,
marketing gets wiped out, and you go
back to an engineering base and slowly
just try and bring revenue again. And as
being a consultant for that period of
time, that means, you know, they maybe
keep one sales guy and everyone else is
gone. So the consulting consulting team
is gone at that point. So I just hated
uh I wanted to get into a business that
I could just just help grow because that
was really my my focus and background
was helping companies grow. And so I
wanted to get in an industry that had
that figured out already. And so you saw
tech I mean because the idea would be
that you would have bought a business
even if it were a tech business that had
some product market fit already and was
going to have durability of revenue but
your your your notion was that tech in
general just has this kind of inherent
feature where it's it's more off it's
it's more dynamic. It's being disrupted
more often. You can never really rest on
your laurels with your offering.
>> One big check from a VC and some your
your competitor passes you up, right?
And that's kind of one of the things
that I just I didn't want to deal with
anymore and really wanted to focus on on
something that um you know allowed u
allowed us to have more of a a zero sum
game when it came to you know big big
dollars getting forced into the
industry. Uh at least that that's what
was the notion at least.
>> What about your bluecollar background?
Were you attracted to bluecollar
businesses? That is that is an asset in
ETA.
>> Definitely. And and that was something
um we looked at the first thing we're
looking at was security. Um, uh, I would
call that a combination of IT and
bluecollar. You're dealing with a lot of
bluecollar folks, uh, home services, uh,
some commercial, but you're you're
dealing with the security aspect. I
think that market's been picked over
pretty heavily, though, so finding
something at an ideal multiple is tough.
Um, you did a couple onsites, couple
meetings here and there, but long story
short, um, you know, I think a really
boring business is very attractive at
this point. uh because I I went with
really complicated and as we get further
into my my my deal
>> and complication costs you a lot of
brain power um and just is a whole
another risk on top of everything else
right
>> um [clears throat] so you know I think
uh one of the lies that we told
ourselves uh when we started our search
um we and just timeline wise it was 20
uh 21
uh March of 2021 that we actually
launched our search finished our and all
of that. And one of the the bad uh takes
we had was that there's a lot of money
being made in complicated businesses.
That was that was a statement we had
made a few times.
>> Um and although that can be true, uh
that's not always true. And what
complicated businesses are just like
debt, yes, there's a moat, but there's
also uh a ton of risk just like debt,
right? It just means you're closer to
the knife's edge. Um because you know in
technical businesses for instance
software can be that way right it's
complicated business a lot of times.
>> Say a little bit more about your and
Jess's decision to partner.
>> Was it just um you know better to
partner than go this alone and we have
complimentary skills and we have some
trust built up over our being you know
both in the NBA program for a couple
years together sort of thing.
>> Um yeah
>> she she was the one person to respond to
your Slack message.
>> She she didn't respond. Everybody else
thought I was crazy. Um,
>> oh,
>> but uh a few months later I I started
reaching out to all the the financial
background people because for me, you
know, kind of going through my process,
I I took every finance class I could in
school. But that was my first experience
with finance. Um, that was it in in
school. And so I knew if I was going to
go traditional route, which I have a
wife that's very riskaverse, so I'd
mentioned the self-unded route and she
laughed me out of the room. Uh but
[laughter] uh when I when I went through
the and now she's showing herself to be
very smart and wise uh but the the
traditional route offered that idea of
coaching mentorship and we definitely
got that I would say you know even with
our our story that we get into here in a
bit but um we we got a lot of those
pieces um but that that was kind of what
I was looking for and so if I was going
to go the traditional route I knew I
needed stronger financials and me
building model, especially at that
stage, was non-existent. Um, so I really
needed to to focus on, okay, well, that
means we're going to have to go over
after a big bigger business as well and
uh get get Jess or somebody like her on
board with this crazy plan, which uh
feel like financial people to get on on
board with this plan to be tough uh
especially because they're a lot of
times riskaverse, right?
>> So you you kind of recruited her. You
pitched her. Yes, I was I was uh
definitely the engine uh trying to drag
someone along with me.
>> And what what did your pitch sound like?
>> Hey, had this crazy idea. Um and I'm
looking for someone to partner with. Uh
and you know, she was one of three
people I talked to in our class. Uh one
of the other people I talked to actually
end up searching and and acquired a
company, a software company. Um 11
software. It's Hannah and and Alex.
They're classmates of ours that also
paired as a part of this process. um
which was which was great, but really
just kind of hey values alignment. And
so for Jess and I, we both had a lot of
uh alignment of we're not coming from a
lot. And so taking down a a business and
being able to um operate it and get the
the experience and knowledge and
hopefully a good, you know, financial
outcome, like we're not going to if we
have the opportunity to sell it for a
win for the the the investors and we
take home a million dollars each, we're
going to be okay. Like that's a that's a
win for us. It it's not a great win for
everybody obviously, but if we're
getting a million bucks, we know we've
done something right for the investors,
right? They've made their money back and
then some.
>> So, so you saw that you saw the
experience of doing a traditional search
even if you too didn't personally have
enormous windfalls and it's still very
worth it because this is part of your
this is just going to be the first
chapter in a long business career and it
seemed like a great first chapter.
>> No, that's great. No, it's a 100% um
what it was for us where we we had that
alignment. One of the worries you'd have
is you see this incentive alignment that
that someone's like, "Hey, I have a huge
nest egg. My family's very wealthy. I
don't I don't need to have this
windfall." Um or sorry, a little bit. I
need to be like a home run, right? And
and I'm like, I'm I'm good with a double
right now. I don't I don't need to I
don't need to hit a home run this first
time. Yeah.
>> Okay. Interesting. Um great, Joe. Okay.
So, I don't want to get um I mean I want
to get into the meat of the story sooner
than later. Is there are there elements
of the search process, the mechanics of
your search that you want to share or
maybe raising money from investors? What
or or should we just jump right ahead to
the business you found? What do you
think?
>> I would just add that raising money can
be really hard and can be really easy.
Um so, one of the
>> pieces for us that was tough is the
timing that we raised money. I think
it's gotten a little bit easier now. Um
but also trying to do it in a very short
period of time after meeting people um
you know due to class. So just advise
like make sure that you're planning a
year ahead of time if you're looking to
raise money. It's a mistake we made. We
we did it in a six-month period and uh I
think really giving a full year cycle
people get used to seeing them at the
different events I think is really
helpful for raising money and if you
don't do that it's going to be painful.
Um and ours was painful but we were able
to get there. We ended up with about 24
people on our cap table. um which was
tough uh frankly just because of
managing all the different emails and
groups and the switching of the funds
you know oh actually we're on fund we're
going to invest at a fund three now you
know and just have to jump through that
and manage it needed an intern just to
do that we didn't but it just felt like
it right um and the last thing I'll say
is um Jess ended up uh having her her
first son uh right after we closed in
April so we we had our
in March where we had raised our 800k
for our initial search and uh she was
you know a month from popping and so her
and her husband welcomed our first son
and then uh I had uh about eight interns
that already rolled up uh in a group and
we were just going hard at getting as
much deal flow as we could. We end up
find we end up finding this deal in that
process. Uh and sat on it probably about
two months. Um while we looked at the
the security deal and a few other things
on the side, this deal um scared us a
little bit and probably should have more
apparently to to the point where we
shouldn't have done it frankly. Um but
uh we we take take some advice, ask some
questions and and felt comfortable
taking next steps of just having a phone
call with the company. tell us about the
company.
>> Yeah, so company was pharmacy
specialist. It is a uh home infusion
pharmacy company which does antibiotic,
IVIG and cardiology meds. So it's three
different areas um of [snorts] uh
injected IV based medications for home
health patients. So if you think about
this in the past, they didn't have the
home health aspect. If you needed a
drip, uh, it would be handled at the
hospital or or an outpatient like
live-in facility, and you'd have to have
that for however long you need the drug.
If it's a severe infection, that could
be months. And, uh, if it's cardiology
based, it could be years. Um, and so
IVIG is lifetime. And instead of going
to facility, you can get in the comfort
of your home. It's about a 4 hour 4 hour
to 8 hour injection per day. Um,
depending on the different situations.
And so this company um had a clean room
both in Dallas and in Houston. And those
clean rooms uh would take a powder most
of the time to a liquid state in a vial
um and uh create a prescription. That
prescription would be either shipped or
handd delivered uh to the home where a
home health nurse would administer or
they would self-administered depending
on their capability. So that that was
really the crux of the company. Um we
didn't have our own nurses when we we
first looked at the business. We
eventually did by the end. Um but uh it
was really just a manufacturing uh or
really last uh last leg type
manufacturing where we're taking an
existing prescription uh from a vial of
powder to liquid and then and then
delivering it on site.
>> And would this be considered a niche of
compoundingies?
>> Correct. It is a it it is a considered a
compounding pharmacy. Um, it's just not
going from not doing a paste or creams
or anything like that. Yeah, that's a
very specific.
[snorts]
>> And I recall in the pre-call you
mentioning you wanted to be close to
healthcare, a kind of picks and shovels
to healthcare and home health, but not
or or maybe in home health specifically,
but not in home health directly. This is
perfect.
>> Yeah. So, we we 2020 obviously was uh
the big home health explosion due to co
2021 is when we started searching. So,
we were hot off the tails of that and
really just seeing the growth in uh all
of the the the moves of of Congress that
happened quickly to support home health
to make it more accessible even the
Medicare world all these areas that are
pulling the trigger for home health. So,
we're just really just saying, hey,
there's a huge wave that's being pushed
with aging population as well. All of
this is playing in the factor of this is
going to be a really strong area to
invest over the next 10 years.
So with that um we said all right we
want home health adjacent companies not
so much point of the spear but something
that supports the home health piece uh
so that way we're not you know directly
patient uh uh facing. Uh this uh was
almost that um this definitely was
patient facing from a pharmacy
prescription standpoint but not so much
administering uh at least not initially
when we looked at the company.
>> Mhm. Well, without knowing any more
details, it sounds great at least that
it aligns uh with the thesis quite
closely if not perfectly. Um tell us
some metrics of the business if you
could. How big a business are we
talking? Headcount, revenue, etc. Yeah,
about 100 employees, about 20 thou,
excuse me, $20 million in topline uh and
just over 20% uh IBIDA um and it had two
years of 20% IBIDA, so 4 million this
year that we we acquired it. Um the year
before it did 15 million, so it jumped
from 15 to 20 in a year. Um but it had
maintained 20% margins over that period.
Now take note that one of those years is
2020. Um and so really especially back
then teasing out uh COVID lift uh
regardless of industry was super hard um
because a year after co which you know I
think we we've all seen a slew of
companies
>> just uh do a great job of of hiding
[snorts] co lift um and I've heard
stories of of the difficulties of buying
postcoid and now that we're several
years removed it's a lot easier to to
figure out where this company really is
because we have two or three years of of
actuals now to to look
But for us, you know, they had grown 20%
prior to CO. So why wouldn't it make
sense that they'd continue to do that
after um however they weren't uh cutting
to the chase, they were actually um not
growing at that speed whatsoever. And CO
was really hiding that fact uh really
well. Um that's something I wish we
didn't talk about before, but I
remembered because there's so many
facets of my story that I apparently
have forgotten over the last couple
years. uh maybe convenient
>> suppressed or forgotten, [laughter]
>> right?
>> Well, Joe, circling back to the $100,000
a year thing,
>> right?
>> You know, you must have just been when
you were looking at signing on the
dotted line, you must have just been
beside yourself that, wow, I'm about to
buy a $20 million b a $20 million
business, me and Jess. Uh I I mean
obviously it has ended in heartbreak so
I won't put too fine a point on this but
um let's let's hear it for the
traditional search fund model that it
could enable that uh for somebody.
>> Well it's wild you know and I was uh
2021 so I was 8 years removed from the
military at that point. um very short
looking back a very short period of time
like I was and you had had no and when I
got out in 2013 I had no college degree
right so I went from that to having a
master's uh in about 8 years and uh
pretty pretty significant executive
experience um so the the path after the
military as an enlisted person I think
is
it's hard I I found several people like
me it but they're hard to find it's
usually officers club uh so it's been
It's been pretty fun for for me to see
other people doing the same thing on the
listed side especially.
>> But um yeah, I was I was ecstatic. Uh
we're you end up paying six and a half
times. Uh that's the going rate for that
and that size uh company. Um you know,
four four plus million in Ebida does no
small feat.
>> So um you know we we paid um what would
probably be a market rate. It wasn't
low, it wasn't high. um you know and and
I think I've had someone ask me how
could you pay that much and it's like
well
>> the market is what the market is and
industry really determines it right it's
and that's based off of quality of
revenue right if the y
>> they say quality of of IBIDA for this
type of company is very high you're
going to pay a lot more for it and if
you're trying to pay three times for
that company well you're going to be
waiting a long time before anybody wants
to sell that to you at that rate and
it's not going to happen probably
>> um so that's kind of where we were at
there um
>> well with um without knowing the
specifics of of that industry you know
at M's capital so across our portfolio
uh the average business is doing four
our average investment is doing four of
ibbit and the average multiple paid I
think is 51 so you guys were six you
guys were a turn and a half above that
but
that's not a crazy amount that's not
doesn't strike me as a crazy premium
given that again I don't know this
industry but c the quality of revenue
here seems is just fantastic. I mean,
it's it's prescription
life
>> correct
>> lifep preserving prescriptions, right?
>> Correct.
>> Yeah. All all of the drugs either their
life would be significantly diminished
either in time or in quality if they
didn't have it. Um so it it was um or or
you know likely death, right? So there
were just a lot of factors going in
where this is like hey this isn't going
away. Um
>> yeah. Yeah.
>> And on top of that uh we were looking at
multiples. if you get to about 5 million
plus um 5 to 7 million in IBIDA, you're
starting to see multiples jump in the
tens. So, you know, the the arbitrage
there was real where hey, we we just
need to figure out how to keep uh a
portion of this percentage of growth uh
within an okay rate. The seller also the
other thing that was great is the seller
didn't want to just be done. the seller
wanted to um stay on as an operations
role and really want to help on finance
um and uh in sales and so we said hey
like we can come in partner um and come
in from that approach rather than yeah
we're going to figure out on day one how
to run this company. Um, and so that was
really, you know, an enticing piece of,
uh, how do we mold together as a
leadership team
>> and she'll take that on, right?
>> And, and did that correspond also with a
nice equity role by that seller?
>> Uh, small, but I wouldn't it wouldn't it
wasn't substantial, just slightly less
than 10%. Yeah.
>> Okay. Okay.
to your point about uh multiples
expanding at 5 to seven of ibbita and
this business was sitting at four when
you bought it. Um, this is something I
don't talk much about on acquiring
minds, but on the Minds Capital podcast,
it comes up a lot. This idea of zone
skipping and when multiples expand and
they expand at certain thresholds
because when you go from when you get
into 5 million EBIDA north that that
unlocks a whole new group of buyers, 10
million and above, 25 and above and so
on. And so there's there's a certain I
don't want to call it a hack, but a
certain shortcut if you can go if you
know if you're at a business that's at
four of IBIDA and you right under this
threshold of five and you could just tip
it into five, you might get some extra
multiple expansion um for your efforts
compared to going from just six to
seven. Let's say you just happen to be
right at that threshold. So going from
four to five there's extra extra punch
or 9 to 10 or 24 to 25 if you can go up
there. Um so anyway pretty interesting
dynamic
>> right and and the other thing about this
company or this company that we really
liked is because of the higha we could
strap it with a lot of debt. Um and
yeah, and that uh you know at the
acquisition side of things looked great
on the returns because just pay off the
debt over three to five years and and
everyone's going to be coming coming
home with a decent amount of cash. And
so even without a multiple expansion,
right? And so that that was kind of the
other piece. So we end up, you know,
doing three turns with traditional debt
and another turn in seller debt um in a
seller note, excuse me.
>> So we end up with about 16 million in
debt.
Which
>> so that was three 3x of a traditional
debt. Y
>> one and a half you said of seller
correct note.
>> Uh
>> and then 2x of of equity
>> correct.
>> Take take
>> okay.
>> Yeah it's right around that range. So
you know with that you're like okay um
the math on paying down this debt is is
very good. uh because if we can pay this
thing down um and operate uh you know
with with some nominal growth our
outcome's going to be pretty great even
though maybe our IR doesn't hit 35 it
hits mid20s
um well you know our our role or uh our
carry as an operating group is going to
end up in low millions um which
>> without without any kind of crazy
strategic growth that that's out of this
world. So it it just made a lot of sense
to to you know maybe this is our double
this is our triple with the upside of
you know arbitrageing that that uh um
multiple expansion band if we get into
that $5 to7 million range
>> now we're talking about real money. Um
and so so all of that just seemed to be
really good factors because when you you
know although uh most searchers are
optimists I'm probably a little too
optimistic or at least was back then I'm
I'm a lot less now. [laughter] Um, and
when you're looking at all these
factors, like man, there's a lot of ways
to be made whole here, right? And that's
that's kind of like um I was looking for
a company that we could do that and
figure out all our different ways to be
made whole. And company had three legs
of the stool, too, which sounded great,
too. But
>> but yeah,
>> could I just underline what you said
there, Joe, about your return? So, for
the audience, remember that
>> in a traditional search fund there, your
the carry that you earn is based on per
performance. So traditionally it's um
you get a max of as a single searcher
you get a max of 25%
eight and a eight and a third when you
close the business 8 and a3 after four
years in the business just based on
tenure alone and then your final 8 and
a3 to get to fully 25 based on hitting
certain performance hurdles. Um you guys
were a partnered search so I think it's
30% to the pair and it's 10 10 10 and
10. Now uh the that final the
performance tunch that third one is
pretty hard to hit right I mean it's a
pretty aggressive it's pretty aggressive
growth to get that final so when we talk
about traditional search being a 25% or
in the case of a partnered search 30%
split two ways so you we're looking at
15%. Um,
yeah, it's a pretty it's pretty
aggressive to hit that. And in your own
minds, you said, "Hey, even if we don't
hit that, if we just run this thing and
it just kind of carries on, but we pay
down debt and maybe get, you know, 10%
each, it's going to be it's going to be
a good outcome,
>> right?" And that wasn't the strategy of
buying a big bigger business, right? Um,
if we you see dual searches all the time
by really small companies and uh they
might hit that 35% IRRa but have very
nominal payback in cash um when they
exit and so
>> Oh, because they're starting from a
small base.
>> Correct. Yeah.
>> And when they sell, it's still just not
the dollar that I was really thinking
through the strategy of that of like,
hey, we want to take down a bigger
business. Um because uh you know, if you
you're able to do that, you can
arbitrage with more more debt. Um, and
you can also I don't know about
arbitrage. You can you can add on a lot
more debt, aka risk. Um, and you can
also uh go ahead and and uh have a great
outcome on the dollar side of things
while um while just operating it
efficiently, right? And so that was that
was part of the the theory and thought
and how we end up doing a broker deal.
Uh this ended up being a broker deal by
the way.
>> Um but was because the larger businesses
generally are going to be brokered. It's
going to be hard to find something that
even if you find it proprietary, they'll
bring in an adviser at some point.
>> Yeah. Yeah. Yeah. Exactly. Um and so
where did you find the deal? Was it on
listed on a site or did you have a
relationship with a broker?
>> One of the strategies I had with the
broker was to develop um a focus on an
industry and then find out who are
specific brokers to that industry. So it
wasn't just being randomized. And so,
uh, within this industry, there were two
main brokers that advertised. Went to
each, uh, conference. So, quick tip, go
to the conference associations, figure
out which brokers are constantly
representing them. They'll even usually
have them on their website, find them,
go to their website, have conversations.
Um, and and actually, I would call
brokers like that first before I even
talk to sellers because you can ask them
basic multiples questions. You know,
their job is to answer the phone. So
call them first before you even start
going down the industry route and
calling random owners.
>> You can ask dumb questions to brokers
that you can't ask to proprietary
owners.
>> Yeah. Yeah. Good tip.
>> Thank you. [snorts]
>> Okay, Joe. Well, I just want to be aware
of the time and um we haven't even heard
about
>> the drama,
>> what actually happened when you got in
there.
>> Sure.
>> So you guys buy
tell us to pick us up from getting in
there.
>> Yeah. So very very exciting. Uh it's
almost uh
to the day that we closed it was
December maybe 11th somewhere around
there
>> and and right now on the recording it's
right right around Thanksgiving right
now in 2025. So
>> um looking back uh very excited. I was
staying in a hotel. Um my family was
still back in California and I was here
in in the Dallas area uh closing on this
business. And so, uh, it's funny when
it's all closed electronically like it
is, uh, you kind of like, okay, it's
over and tomorrow I'm showing up to
work, I guess. Uh, this is really weird
of a feeling. Yeah. Um,
>> I bet.
>> So, um, we started uh, showing up every
few days and or every day and and going
through the process and transferring
things over. Uh my my focus was more
mapping systems and processes,
understanding, making sure we we
understood if anything went wrong, we
understood the business uh from every
step from you when we get a referral all
the way till we get it out the door and
servicing the patient. And so that was
really my job just really understanding
the operational flow. Jess is for
focused on corporate control and making
sure all of that transferred control was
in her hands. Um you know, obviously
it's a requirement from the bank and
whenever you take over company, you have
to make sure you actually have control
of it. So, she's working on that. Um,
and within probably about two to three
weeks, uh, right at the end of the
month, end of the the month of December,
Jess is like, "We are really short on
cash." Um, and I'm like, "What what do
you mean?" She's like, "Well, uh,
things aren't coming in as fast as they
used to." Um, and, uh, we've had, you
know, additional expenses that we're
we're trying to weed through. And uh we
had started with just under $2 million
in working capital. Uh looking back, not
enough. Whatever [snorts] you think it
is, you need twice as much. Um we've
seen it happen with a lot of companies.
There just just things that pop up out
of nowhere that you you want to have
capital to to deal with. Um but
we stretch out payments. You know, the
company at the time had terrible
process, so they were paying immediately
whenever a bill came in the door. They
just pay it. And so we bumped everything
to to net30, buying us some additional
time there. Um some people had problems
with it but you know they eventually
will will get in line because it's
pretty standard. So we start doing that.
Um January gets even tighter. Um in in
the industry one thing we didn't
understand being new to the healthcare
and we'd heard about it but never
experienced it was the reertification of
of insurance. Right? So insurance trips
over in January resets and so any prior
authorizations that you had have to be
reapplied for before you can collect
cash again. And so, uh, let's say we
have 400 patients or so, and we then
January 1st hits, we now need to start
calling the the insurance company and
getting priau authorization, um, or
faxing or whatever for all 400 patients
all over again. And uh every other
company has the same problem, which
means the call volume's insane, the
request volume's insane, and so it can
take a full month uh if not more to get
all of your company pre prior
authorizations resubmitted and approved,
which means you can't bill or collect.
So now it's even worse, our cash
situation. And during that time, um we
we learn about a diligence issue, I'll
just leave it at that, that we ran into.
And uh it it caused um us to lose about
uh 20% of the revenue of the company
over a 3month period. Um a
non-disclosure issue and that um was
devastating. Um frankly,
>> 20% of the revenue.
>> Correct. It was it was a sales rep.
Yeah. Um that uh was no longer there.
Yeah.
and and meaning that sales rep had a lot
of had relationships to the tune of 20%
of revenue.
>> Correct.
>> Wow.
>> So that that was devastating. Uh and
that um that happened during diligence.
But
>> what do you mean during diligence?
>> Um before we closed.
>> Yeah.
>> Oh.
>> So like I said, it was proceeded to
correct. We we didn't know about it
until afterwards.
>> Oh. Oh. So you were buying assuming 20
million in revenue when in fact even
before you closed it was going to be
really like 16.
>> Yeah.
>> And was your seller still working in the
business in these first few month? I
mean
>> Mhm.
>> How long did the seller stay in the
business?
>> Um through the end of the year because
we were in crisis mode
>> through the end of the first year. So
just meaning a few weeks. No, no.
Through the end of the the 202 full
year. Yeah, first full year.
>> And so all these issues are
does it is it how's your relationship
with the seller who's working in the
business?
>> Um at that point we were just focused on
all hands on deck to try to write the
ship. Um and uh you know there even if
we wanted to start any kind of
proceedings at that point for the escrow
account which is what we ultimately did.
Um even if we wanted to start it then it
wouldn't help us at all. Right. And so
we we needed because there's you know it
assuming it went to a court or something
like that or had to be dealt with with
an arbitrator or something like that. We
we didn't have um a quick cash fix. And
so what we had to do is just get into
the business and really understand it.
And we needed help to fix it because we
had no idea what was going on
>> from a cash perspective.
>> Um because we were uh not billing as
much per patient as we were expecting as
well. And that was the main thing
causing the cash issue. Um we had
compounding two issues. One uh that
person had left. two um there had been a
change in reimbursement for one of the
the uh antibiotic drugs. It's called
dpttomyosin. And there was a change in
reimbursement. It wasn't caught at the
end of the year. And I kind of just went
through all of our drugs and like, hey,
why are we making less per uh
administration of this drug? And we dug
in, figured out that something else
wasn't caught at the end of Q4 of the
year we closed. And so we were able to
make a switch and then our profitability
started building again which was a huge
win. But um those two things really
tough. The other thing that we haven't
got into yet that was tough is our
[snorts] projections are based off of uh
patient count. So specifically we say
hey one antibiotic patient on average
equals x amount of dollars. It's about
$300 to $400 or so um per per uh dose or
administration of the medication, right?
um which uh so that we'd look at that
and say, "Okay, we're doing well." Well,
we we were starting to trend really high
in patient count, but our uh
our revenue was pretty stagnant, and
that was really throwing me off. And and
right before closed, I was really
excited because I was looking at that
that number of patient count going up.
I'm like, "All right, revenue will
follow because it takes usually a month
or so to bill."
And uh after about three months of
operating, I realized as that number
those two lines get further and further
apart, um I figured out that uh because
we had a second location in Houston, uh
the uh decision had been made prior to
me coming on board to create duplicate
accounts of patients for uh each
location with different uh numbers uh
for their patient census number. Um so
it's not even something you can really
ddup. Um
>> so uh ended up with a duplication of
patients in this patient census which
then it's like okay so we have that
missing too. So we have this projection
of growth. It's actually not growing.
It's actually slightly declining once I
ddup all that stuff. Um we have a drug
that is no longer efficient. We have a
sales rep that left. Right. So those
three things um just started for a
really terrible first six months uh to
the point where
>> and and you have leveraged it a I mean
your your loan on this was
>> he was a little bit heavier than it
might have otherwise been.
>> Yeah. Yeah. Definitely. Um you know that
the models are great until they break.
Um and uh it's like oh this is a great
return. Uh um anyways it's imaginary
money though on on your model. So
then probably around that March or so of
that that first year, um things were
like still touch and go. Didn't know how
it's going to play out. Uh obviously I'm
scared of my mind. Board, we're having
emergency board meetings. We're you
know, we just started out in a fire. Um
just exactly how you want to start your
CEO stent of like everything's on fire.
What did I do?
>> And uh I'm a big emotional health type
person. Um, and I I knew I needed to
talk to my wife because uh I just moved
our family cross country to Texas and
I'm like the back of my head, this is
literally how marriages end stuff like
this, right? Um where you make this big
bet, you're wrong and the family pays
for it in some way, shape or form. So
sit down with my wife and I'm like,
"Hey, I just need to say something." And
you know, you don't have to respond or
whatever, but like are we okay? Like I
just need like I I did need to respond,
but I was like, "Are we okay if this all
goes to shit?" You know, if this doesn't
work out, like are you and I okay? And
she said, "We'll be fine. Like just go
for it. Go fight." And so for me, um
it's such a blessing like to have that
conversation because I was just in the
back of my mind like, you know, this is
this is worst case scenario right now.
And so it enabled me to know my back was
covered and I get to fight forward for
the rest of the time there. Right.
>> Um Yeah.
>> And uh
>> powerful.
>> Yeah, it was it was a huge help. So, um
by summer it kind of stabilized and then
by Q3 we were starting to ramp and then
Q4 of that first full year it was the
business we thought we had bought. It
was back again. We were you know turning
out a million dollars in IBIDA uh in Q4.
Um, so like the the rebound was real
>> and uh it was just such an amazing like
moment of time where uh you we're
getting ready for the Christmas party.
I'm playing Santa. Like um all the
things that uh you you know the funny
goofy things of of running a company
that you want to be a part of and like
blessing your your employees and um you
just being joyous and like having gone
through it. you know, investors are
coming out of the woodwork that are
like, I remember when I thought I was
going to lose my business in the first
year of operating. You're like, what?
Where was that story like six months
ago, you know,
and [laughter] apparently that's a
common thing, you know, and so I'm like,
oh, thank you. Um, you know, and some
some did tell me the story in real time,
but but at the same time, uh, you know,
there is there's a certain amount of
like crap, it's the fan sometimes in
that first year and and navigating that
shows a lot. Right. when it was hitting
the fan. How is your relationship with
Jess?
>> Good for the most part. Like we didn't
have time to like we're just dividing
and conquering. So we didn't have time
to like have major disagreements or
anything like that. It was
>> hey this is and that was actually the
beauty of having two different strengths
was I didn't have a lot of
input other than like simple advice or
if I can see things clearer just from an
outsers's perspective in her realm. And
same for her and mine. And so that was
really helpful. And so she was focused
on saving as much money as possible and
I was focused on making as much money as
possible for the company. Right. Yeah.
>> And so even with all the difficulties we
ran into, we still did over $20 million
in sales that year.
>> So we we had that knockdown and we still
did 20 million.
>> Um because we we were focused on
dividing and conquering. Um and we did a
good job. Yeah. And uh Joe, you
mentioned to me that when things got
tight, I think it was in this first
chapter of things being tight, you were
actually in the truck doing deliveries.
>> Oh yeah. No, I was I
I've driven into Arkansas, Louisiana, uh
East Texas, and Lock up to Oklahoma. Uh
there was like a snowstorm that we had
or ice storm. And so I was out doing
that uh with my my truck and you know,
you got that four-wheel drive truck
still, so got to got to use it
sometimes. There's that truck.
>> That's right. But yeah, you know, my I'm
we can either incur overtime by having
my team drive somewhere or I can do it,
you know, and
>> Yeah.
>> And so Joe, the business model was that
you guys would actually deliver
to your patients. Why? That seems like
something that would have been
outsourced.
>> So FedEx did 90% of it. The other 10% uh
was if we missed the FedEx P uh delivery
or pickup time
>> and it's a lot of times shipped next
day, same, you know, next morning. And
so there would be drugs that uh
potentially wouldn't make it on the
truck. And so, you know, logistically
we're trying to work our operations.
That was a big focus was to get to the
point where we would have everything
ready to go by 7:00 p.m. every night.
And every once in a while, we'd be too
late. We'd be past that time. And um
additionally, when we had the ice
storms, FedEx wouldn't run. Um, or if
it's a delivery in Louisiana or in uh
this is crazy, but Oklahoma, it's like a
two-hour drive for us. But because it's
through a different distribution center,
if Memphis was having a freeze, they'd
fly it from Dallas to Memphis. Memphis
is having a freeze, though. So, it's
stuck now in Memphis for a full day, and
then they'll fly it to Shreport, which
is like a 3-hour drive for us. So,
because of FedEx's uh delivery
mechanisms, it would just create issues
or the roads would be uh icy and so they
wouldn't run. And so there just stuff
where we're we're deciding to take on
additional risk by by driving it and we
end up in a situation where it's like,
"Hey, this just needs to get out the
door."
>> Um,
>> yeah.
>> Yeah.
>> Okay, Joe. So, uh, at the end of your
first full year, which is basically 13
months in.
>> Yep.
>> Things are looking good. You feel like
you've saved the company despite three
huge curve balls. Uh, you're back on
track to do to what did you say 20?
Yeah. Back on track at $4 million EBIT
run rate, which is where you started.
>> Okay. Take us then into 2020
4. Right.
>> Right. So, um in around December, we had
heard of a uh change in reimbursement
for the cardiology med, which uh
cardiology although it was about a third
of our revenue was like about half of
our IBIDA. Um and so uh it um had one
major manufacturer that really drove all
of our profit. They had a change in
reimbursement and the calculation on our
reimbursement we couldn't unravel for
another month or so. So it wasn't until
like the end of January that we really
understand the damage that had been
done. But bottom line is they had uh
it's called a AWP average wholesale
price, but it works like an MSRP. So
they had an MSRP that they cut by like
90%. And our reimbursement is based off
of the MSRP
where hospitals doesn't work that way,
but it does specifically for home
infusion. So because we'll have a
hospitalist listening to us be like,
"No, it's not true." It is true for home
infusion. Okay.
So um with the that drop though and cut,
uh they've now they said they were
trying to be more uh competitive with
other producers. The problem is that
directly drives our
our revenue and profit margin. And so,
long story short, it cut $2 million in
EBIDA out of the business. Um,
>> wow.
>> And so, we have the same amount of
patients. They're they're congestive
heart failure patients. We have the same
amount of logistics required, in-house
staff, like all of that to take care of
these patients are equal, but our
topline revenue just dropped. So that's
all IDA, right? It's a direct shot to
our IBIDA line. So 2 million poof. You
know, we' already eaten up of the four
almost a million just in, you know,
additional salaries,
professionalization, audits, like all
that. So now we're down to a total
million if nothing else changed in
possible EBIT off our total 4 million
focus, right? And so that's when um
things really really got bad. Uh and it
was really the beginning of the end at
that point. like we we had survived that
first year and got to a place like hey
we can do this but this was the one that
uh ultimately you know broke broke our
back. Um there are several more things
that we can go through that happened
that were bad like a ransomware attack
on a supplier of ours that froze all of
our our payments and all kind of stuff
like that. But long story short we we
ended up lasting another 18 months after
that [snorts]
and uh running on fumes. We had two
different layoffs half the company
twice. um extremely painful. Shut down
uh one of our offices just trying to get
it down to a site like a small enough
company to turn off the maximum ebida we
can based off of our patient load while
also focusing on IVIG and specialy
medication. So we're having to shift the
whole new company in a different
direction now um which I was heading up.
Um, so during this time, we're literally
running out of cash on FEMs for 18
months, but uh, we still hit $20 million
in sales that year because, um, I had
spun up that new specialty IVIG focus
uh, which is wild. And so we just kept
having small and small with the same
amount of sales um, which was painful.
U, but, um, definitely definitely had
some good uh, good growth. Uh the
problem is we couldn't service any of
our debt. About 200 and somethingk a
month in debt payments that we couldn't
make.
>> $200,000
a month just to service alone. That is a
big boy loan.
>> Um Joe, the $2 million in IBITa that you
lost from the 90% reduction in the what
did you call it? The AWS.
>> AWP.
>> Mhm.
>> AWP.
So you lit so you it was a $4 million
Ibeta business and then that killed half
of your IBIDA.
>> Correct. Yeah. And and like I said
another million had got killed by just
um you know professionalization costs uh
you know just my salary because we
didn't you know the seller stayed. So
>> um we had all of that being tacked on.
>> Yeah. Yeah.
So as you reflect back is how much of
this is uh could have been uncovered by
diligence.
>> Um I think there's two stages right
there's one of like um this last one
there was no catching that the thing
that actually killed us uh was not going
to be something you can catch in
diligence. Uh we you know happened a
year later something that was a stroke
of pin risk. um what you could look into
and say, "Hey, there's a lot of
dependency on this drug specifically and
just say maybe that's too much
concentration risk." But it's not
something that would kill a deal, you
know, supplier risk, right, with
concentration there.
>> It it you know, but you still have three
legs of the stool, so it tells you you
need to take less debt. It doesn't tell
you not to do the deal. Um and what what
that slash is really um in the AWP is
especially that much like you'll see
stair steps down, but that much of a cut
is unheard of. It's never happened
before. Um, and so it was really a rare
rare occurrence. So the thing that
actually killed us, not much. The things
that happened pre-close, there were ways
to catch and that's I think that that
hurts. Um, the those pieces saying,
"Okay, if I could have [snorts] I know
now because I know how I caught it post.
Um, but it it's really not it's not
because I didn't go a layer deep. It's
because I didn't go seven layers deep,
right? And so how do I really go down
and and uh you know look for the smoke
so I can find the fire eventually
because realistically you know that's
the only way I didn't buy this business
was to find some of the the mistakes or
non-disclosure things or something like
that before we close. But even at that
point like our search would have been
over. Um and I say that because you know
part of this deal we had to do a Marwood
study which cost $250,000.
And so
>> what's that? Uh it's a study
specifically for healthcare in our case
um going over you know potential fraud
and uh quality of of patients uh futures
uh talking to customers. So, it's a
study uh by the Marwood group um and
there there's a few other out out there
like it that are pretty much giving you
a report saying, "Hey, is this a good
investment or not?" Um based off of
healthcare specific trends and uh
specific to this company as well and
pulling all their payer data and all
that.
>> Wow. So, this is a a company
>> that specializes in these reports,
>> correct? And it's a quarter million
bucks, one of these reports. And that
had to come out of your $800,000 search
fund.
>> Yep.
>> Wow. And did you know about that cost
>> um in advance of looking at healthcare?
I've never heard of that.
>> Um it was a discussion that um had come
up uh hey, if you guys are looking at
this, we're going to require this study.
And so then we, you know, we started
doing our research and finding out about
it. But it was, you know, requirement
from both the debt provider and uh
loosely from our investment group. I
wouldn't say I think we probably could
have done it without the investment
group,
>> but the uh um the bank definitely was
requiring it.
>> And and the report was great. You know,
what's crazy is the thing that they said
was the most positive um is the thing
that actually killed us. So the the
cardiology leg being the one that has
the most plausible upside um is the
thing that actually killed us. uh crazy
enough, but frankly because we didn't
know the industry well enough, how are
we able to tease that out truly and know
it? And so I think that goes back to
like one of the key learnings from this
is it's a super complicated industry. Um
you know, payer relationships, uh you
being a small fish in a big big pond,
you know, you you have no leverage
whatsoever when it comes to payers. And
on top of that, um you know, we don't
have the experience navigating that. you
know, Jess and I, I think, did a great
job for what we ran into. And that first
year, you know, rebounding like we did
was a huge win. Um, like I said, it was
a huge sigh of relief. And then, you
know, back to the the grindstone of just
getting ground down, uh, right after
that. And so, um, so yeah, I think
everything else was was manageable until
we hit that last one.
>> Yeah.
Well, Joe, just to the penstroke risk,
as you put it, uh,
is and just more broadly, the audience
should take away from this, just the
supplier risk, supplier concentration.
We we talk we're so fixated on customer
concentration but there are other there
are other failure points in the you know
looking upstream and downstream and side
to side in your business where um the
whole point of concentration is that
>> is the kind of effect on your company
per decision. So can one decision at
something outside your control
a single decision really affect your
business in some way? And um and so in
your case, you had the supplier risk.
One decision by one manufacturer took
off $2 million of EBA overnight. Um so
just it's it's just um it's not going to
happen in every case for people
listening, but just don't don't focus on
customer concentration
um to the at the expense of all the
other concentrations that might might
exist in your business. Look upstream
and downstream,
>> right? and and with how complicated
health care is, especially when you get
into the pharmacy because now you're not
just dealing with, you know, what you're
getting paid or or the diagnosis, you're
dealing with now selecting a medication,
which there might be, you know, six
different medications that can do what's
needed. And so you're you're working on
with a doctor on figuring out, hey,
which one of these should we actually
have prescribed um specific NDC's uh
which are national drug codes, excuse
me, get, you know, figuring out what
actually needs to be applied in each
case. Um and so that that's that
combination you're trying to work
through. So the point is it's even more
complicated um than just a standard
business when it comes to having a
manufacturer. You have multiple
manufacturing options,
>> right? Um and so there, you know,
dpttomyosin was an example I gave before
that was a really good antibiotic for
us, but there was about 16 different
manufacturers of dpttomyosin because
it's a generic drug. Some of them are
wildly profitable and some aren't. And
so really keeping a pulse on what's
changing um what the new price is, what
our new reimbursement is. It's changing
all the time. And so you're just playing
this game constantly.
>> Wow. That really is complex. [sighs]
So Joe, wind up the story for us. Um, we
had a deal on the table actually
uh to uh get um the bank to let some
money up in front of it. Uh which is I
think an impressive deal that we were
able to put together with the bank and
and the board. Um and uh the board was
going to let a super um I think what
they call a super uh note or something
like that. I can't remember right now.
It's been too long. but going to let a
million dollars sit in front of the bank
note because they knew we were done if
if we couldn't get uh any equity in
front of them because equity behind them
is dead at this point. This company's
not going to make it and so any new
equity needed to come in as a form of a
debt and in front of everybody else. And
so we were able to get a deal on the
table for that. Um and part of it was
going down to one searcher. So I was
going to remain as the the CEO. Um Jess
was going to step down. Um at that point
we had uh cut all the way down to about
20 something employees. Um it was wildly
painful uh getting there from 100 down
to 20.
>> Wow.
>> Um [clears throat]
and uh we
were about a week away from making all
the changes needed for that. And um we
are and and and doing a capital call and
everything else. And we're
um trying to pull the levers to make
sure and I'm just going through the the
model like one more time. One more time.
Go through the model one more time and
doing sensitivity analysis because you
know one of the things that I did not
appreciate the first time we did this
deal was hey uh sensitivity analysis
wise we're screwed if things go bad
right and and really understanding the
levers of that. And so the new numbers
for August came in was beginning of
September. Um and
uh I said, "All right, what are our new
gross profit margin numbers?" Right?
They shift over by a couple percent and
it dipped uh for August and it dipped to
the point where it broke the model. Um
it it could have been fixable, but we've
had no ability to control our margins
because we don't can't control what's
diagnosed every month, right? And so if
we have any kind of dip like that, it
can break the model and and eventually
could come back up. But that's just a
risk we have no control over. So um I
just sat there and I'm like we never
took another, you know, other than the
first deal when we we raised the
capital. We never did another turn of
the hat, another capital call, anything
like that. And so this is our second
capital call now. It been two year two
and a half years. And uh I just had this
pit in my stomach like I can't I can't
take another dime. Um,
>> and so I I got the board together the
next day and just said, "Hey, this is
what I'm seeing and I do not feel like
your money's safe." Um, I feel like if
you put money into this business, you're
going to lose it. And uh, and so we made
the call to close the doors um, at that
point. And within 3 days, uh, I was out.
Um, and Jess, crazy enough, because she
actually had all the financial controls
and we hadn't transferred everything
over yet, she ended up staying on
another 2 months, uh, to help actually
shut down the business, um, and hand it
over to the bank. And so that was the
process that we went through, um, is is,
uh, that. And it was, uh, wildly
painful. Um, I don't think I made the
wrong call whatsoever. I think we had no
control um over our gross margin and uh
to you know we we had to hit X and we
were fluctuating up and down and uh you
know at some point our suppliers because
we were behind on some payments were
going to shut the faucet off at some
point and and that was going to be an
issue and so uh so yeah just it just
seemed like we're putting good money
after bad and uh decided to be done.
>> How did your investors react?
Um, I would say earlier that year I'd
gotten several conversations where
people were like, "Why are you still
here?" Uh, funny enough, where they're
like, people would have left a long time
ago.
>> Um, which is an interesting thing. And
it actually helped take some pressure
off me of like, oh, really? People would
leave. [laughter] Not that I was wanting
to, per se, or well, you know, I guess
in my in my sleepless nights, I'm like,
man, this sucks. But um it was more from
this place of um like oh okay it's rare
to stick this out this far. Um
>> Mhm.
>> you know obviously two and a half years
no no salary increase no bonus for
obvious reasons. Uh there's nothing
nothing there right
>> and so uh and you're just taking the
first salary you can when you're taking
a seat trying to uh you going after the
features not not trying to get your best
salary right off the bat. So,
>> so really that's been, you know, that
was tough is just figuring that piece
out. But I told him, "Hey, I I'm I'm an
old small boat captain from the Coast
Guard. You go down with your ship,
right? You're like, I made the call.
This is the company we're going to be on
and we're going to run it until it
doesn't make sense anymore." And and it
still makes sense. I think we can save
it and till we couldn't.
>> Mhm.
>> And then they were supportive of that
when it was time.
>> Yep. And and so what what did that look
like? What what does it look like? You
just handed the keys to the bank or
something else or what?
>> Yeah, we just called the bank right
after and said, "Hey, you know, this is
the meeting we just had. We we don't
think we can we can salvage it." Um and
uh so how would you like us, you know,
what would you like us to do? Because at
that point, we're operating on behalf of
the bank, right? [snorts] And that's one
of the things you don't at least there
might have been that part in business
school, but I I did breeze over it
probably the bankruptcy part. But uh you
know I think one of the best things one
of our board members told us from the
very beginning is like hey as soon as we
think we can't make a payment we're
we're operating on behalf of the bank
and so we got to make sure that we're
partnered with them and taking care of
their asset and we still operate another
year after that um when we had that
conversation with the bank but it just
helped the mindset of like
>> hey making sure that we're we're all in
alignment here um and you know being a
teammate with the bank rather than um
you not not that we don't think we can
get our equity out it's just like hey
we're we're in this gray area that we we
need to let them know right away, right?
>> And and so what did that mean operating?
So So there was some of course documents
signed to officially hand ownership over
to the bank and then the bank becomes
your boss and employer and are you
reporting to somebody at the bank for a
year?
>> [clears throat]
>> back then. Sorry, I think we're So, back
then, that's when we notified the bank,
hey, we we think we'll be in default, so
we need to have this conversation,
right?
>> Um there was nothing signed back then.
uh it wasn't uh then we we had uh so
they end up giving us more time and we
had a lot of renegotiated terms with the
bank until they said hey you need to put
equity in which was at the end of that
year and a half um period
>> where you know the week that we closed
frankly um where we got that deal on the
table and that's when we said hey um we
don't think we can save this so we're
what do you guys want to do with this so
that that's that timeline
>> and then what and then then what did you
do
>> um like I said I I was out with him 3
days. Um and Jess took over uh really
just working with him and winding down.
We even gave him a plan like here's what
we would do. Um and specifically built
the plan around how do we take care of
patients because that's our and and
employees. Those are our two
responsibilities especially being a
healthcare company. U [snorts] you know
DNO is great except for if you mess up
with a patient uh DNO doesn't matter.
They can reach right through it and come
get you personally. So um you're
sorry uh liability insurance for
officers.
>> Um so uh the point is is that you even
though you have an entity that that
separates you a lot of times you
personally are can be held liable for
patient mistakes. And so what we had to
do um is make sure we had a clear plan
articulated to the bank for them to take
over.
>> Mhm.
And then they weren't going to try to
fix the company. That's not their
business. They already told you that it
was going to need more equity put in to
save the company. So
>> they so they just started liquidating
it.
>> But yeah, they they should have kept
operating it. It was a profitable
company. Like that's that's a thing that
looking back a mistake
>> is they it was a profitable company
still.
>> Um and uh had very asset light like
three 400k in assets.
>> Um and they had $12 million note. They
could have kept it operating for a year
and then sold it to somebody at a
discount and made more money, but uh the
bank wasn't interested in that
apparently.
>> This also is the a point where if you
had been a self-funded searcher, it
would have become unbearably difficult,
>> right?
>> You didn't have a personal guarantee uh
because you don't in traditional search
land and you're working with traditional
uh conventional debt. Um did you ever
reflect on that point?
>> Um it definitely
yes. Um definitely reflected on that and
like wow like I still get to keep my
house. That's amazing.
>> Um the second piece is you know people
ask me do you feel how do you feel about
the equity you did lose? And I'm like
well I had three different friends that
were in the deal. One of them lost a
million dollars.
>> Yeah.
Um and uh uh do I personally feel uh
like I owe them like emotionally? Yes.
Like emotionally I feel the loss of that
>> deeply. Uh I know rationally I owe them
nothing. Um but it's it's still painful.
Um happy to report that the person that
lost a million bucks is still a very
close friend of mine. Um but uh
definitely was awkward for a bit.
>> Yeah.
Um and so how did you and uh you Joe and
Jess take it? What was the kind of
emotional aftermath?
>> I would say our probably our last 6
months um we were we were just fried. I
think our adrenals were shot. We were we
were just completely
um uh pretty wore out. uh for the 2 and
a half year just slugfest.
>> Her and I still got along really well,
but I remember one time where I'm like,
"Hey, like we both need to get
counselors because I think we need to
like have someone else to talk to about
this stuff because like we're dragging
each other down." So, we had moments
like that where it's like we're just
we're just talking about all this stuff
and we're so aware of how bad things are
getting. It's like I I need like we need
to start talking to probably a counselor
separately uh for just from the
standpoint of uh getting getting our our
crap out so we're not just dumping it on
each other. Uh there was nothing between
the two of us that was ever negative or
uh whatever. Just I'm dealing with my
own negative emotions and then we'd
share them with the other person. It's
like that's not helpful. It's like now
you're dragging me down with you. I need
you to be strong when I'm weak. You
know, and uh so we kept finding moments
like that. Um but uh but for the most
part um I can tell you like it was a
great pick. She has been awesome, was
awesome. Um you know, her and I are
still friends. Uh you know, we're still
business partners actually. Um which is
great. And uh you know, we're um I have
to say operating, which we're doing a
business right now, but operating that
uh in a place of strength, um rather
than getting drugged through the mud is
a whole different ballgame. It's a lot
of fun.
um and a lot less stress.
>> Joe, about the business itself. So, so
um
what are your what are your thoughts on
the business itself? Was it a
solid business that somebody who knew
the industry better could have acquired
or was it all was it always a house of
cards? What what about the quality of
the business that you bought? I think uh
I think there's a key mistake that a lot
of people make and we made um which is
good industry therefore good business
and if it's if you find problems you can
fix it to be in line with what the
industry is um and I I think that we
made that mistake thinking that
>> because the industry has tailwinds it's
growing you know 9% kagger um and other
people are making money that we can
figure that out too. The problem is is
that um all the niches underneath there
and you know what we turned we found out
that we were highly exposed to
cardiology. No one else had that
percentage of their revenue coming from
cardiology and so we got hit abnormally
hard by the change where other people
were able to drop a whole line of their
business and move on um or vice versa
use it as a loss leader even right to
gain new relationships. Uh we were just
already in a place where we're hamstrong
because of the debt load that we had. So
>> yeah,
>> I I think um I think that's a huge
difference. Um the you know, should we
have done that deal? Like it's easy to
say no now. Um you know, I think the big
lesson for us is uh it you know, I don't
think we're wrong that there's money
being made in complicated industries. I
just think uh we probably need a lot
more experience in that complicated
industry. Um do I think someone could
have saved this specific company? I
don't think so. Um, I think uh I think
the bank could have uh I think if it had
didn't have debt, it would have
survived, right? It it was a profitable
company technically.
>> Um, so it it was a survivable company.
It just couldn't survive the debt load
it had.
>> What other learnings, Cho, from your
nightmare here?
>> Um, I'm a lot stronger than I thought I
was, I guess. Um, you know, I think, uh,
it's one of those things that you don't
want to learn. Um, but when you do, you
look back and, you know, I think, uh, my
wife and I are stronger. Um, my dad, my
kids still like me, so like being a dad,
that that's pretty great. Um, but, uh, I
think really trying to find that
balance, um, and maintaining those
relationships through the insanity of
this, uh, is probably my biggest win.
Um, you know, I think I I made sure that
my kids uh baseball practices were like
7 PM every night. So that way I could
work like 6:00 to 6 every day and and do
12 hours and then still be able to be a
baseball practice with my boys at 7:00.
Like stuff like that. Uh I wouldn't
trade for the world. Like that's um
yeah, that to me is like, okay, I know I
can have it burning on both ends and and
still show up. Um
>> so that was a big for me.
>> Mhm.
Well, in your point, which we've now
talked touched on a couple of times, so
maybe we don't need to say anything
more, but about complexity and industry
experience, uh, you see that
differently. So, if there's complexity,
it's probably it's probably the more
complexity, the more industry experience
is necessary, which as I say that is
like stating the obvious, I guess.
>> Yeah. But I don't think it's said like
that though, right? So, like, yes,
you're stating the obvious, but I think
like for me it wasn't there was a
disconnect. And I think for people still
out there, you know, I had someone ask
me recently like, "Well, how do you feel
about turnarounds?" I'm like, "Well,
every company's a turnaround." Like,
especially if you're in search, like you
just don't know it yet. Um, [laughter]
and the level of turn is don't don't go
out looking for them. They'll find you.
You know, these turnarounds are coming
for you.
>> So, um, yeah, it's uh, yeah, and I have
relevant turnaround experience. I don't
have the great outcome, but um I turned
around the company a few times, right?
Uh over a few years and negotiated with
the bank and equity and you know all
that process. So it's it's a muscle you
wish you didn't have to learn but um but
it's a good muscle nonetheless. You know
I think the interesting stuff that that
came out of it um you know for me
personally I I was able to to land
consulting gigs right away. Um, so my
um, my board members uh, noticed
obviously that we we was able to always
build sales back up every year. Um, and
uh, so they had portfolio companies
they'd love for me to go talk with and
see if I can help on the sales side and
do some consulting and figure out how to
work on growth. And so that was a huge
thing for me. And within two weeks, I'd
replaced my CEO salary after everything
had ended.
>> And so that was a huge win. I had
>> you had replaced your CES.
>> Correct. Um and good timing because
Christmas was coming up and I didn't
want to be a Scrooge. So we're you know
my kids were happy that I had money
coming in.
>> So um yeah, that that carried us through
beginning of the next year. Um Jess was
able to
>> which is now this year 2025.
>> Yeah. and Jess uh because she had about
a two-month offboarding with the bank um
she was able to land a job with uh as a
CFO of Girl Scouts here in DFW Dallas
for Worth area. And so that was um great
and she's still there now.
>> You know, one of the things that was
tough um that we've heard over the last
year or so is there's been mixed
feedback on how everything went down and
we've even heard like some investors are
terrible that were on our board
potentially or whatever else. And I just
have to say like to clear the air on a
few things. Uh Nex Coast Partners
Anthony Walker um and their crew are
amazing. Um I've heard that they tried
to remove us or something like that. Not
true at all. Biggest advocate for us. Um
you know to to have us last a two and a
half years and not be replaced is
incredible. One uh regardless of how we
were doing like just you know that's
that's a long period of time to let
people be in the seat when things aren't
going right and uh a lot of questions in
the air. And so, um, he was great. Uh,
>> so, so you're you're saying that you've
heard rumors come back to you about your
own deal that your investors didn't do
right by you
>> and you, you want to make it clear that
the next coast crew absolutely did do
right by you for whatever negative rumor
rumors are circulating.
>> Then Todd Tracy searching partners as
well. Um, so yeah, great great crew. Um,
been been really happy with the
partnership there and relationships. So,
I just wanted to make sure that that was
clear. However, There's been rumors,
right? And another one is that um that
Jess didn't do a very good job. And so
she actually had a job on the table from
a search fund group uh sorry, search
fund acquired group uh back in earlier
this year and uh was going to go be a
CFO or or something along those lines
with them and it got pulled uh after the
someone on the board saw it. We don't
know who, but someone on the board saw
her name on it and said, "Hey, the way
that search fund went down, they weren't
somebody that was on our board, though.
It was somebody from the board of the
company that was acquiring, they decided
to resend her offer after she'd already
put a notice and everything." So, she
had an offer in hand and got pulled. And
that that was uh painful. She's fine.
Um, but uh as a friend, as a co-orker,
as someone that went through the fire
with her and uh if they talked to Todd
or or Anthony, um I don't think that
would have happened. Um and so that that
really sucks to see that happen.
>> Mhm. Yeah.
>> Yep.
>> Wow. Glad to um glad to hear you clear
the air here, Joe.
>> Yeah.
>> Um we're starting to uh wrap up here,
but I want to hear what you're up to now
and next. Um and then first just um I
get the sense that you don't that this
actually hasn't changed your view of
search and ETA overall or am I wrong?
>> Yes and no. Right. I I'm still um a big
fan of search. I think I would uh
nothing's ever off the table for me. Um
but having the experience I have, I I'm
a little more strict on my requirements.
uh you know I uh did the consulting gig
through beginning of this year and
things started slowing down a little bit
in in March and uh I met some local
people that was looking for some help
and one of them um had offered uh uh to
meet with me and kind of just pick my
brain on what to do with their company
that had a small plumbing company and so
I met with him and we kind of hit it off
and after about two hours he's like
would you just put an offer in to buy my
business and I'm like No, you don't want
me to do that. He goes, "Why is that?"
And I said, "Uh, I will offend you with
my offer. I'm a bad buyer for you. Not
the right fit." Um, he's like, "Well,
you want to offend me and and I think
you're the perfect fit." And I'm like,
"Well, I'm not a plumber, so that's a
rough." Um, so I'm said, "If you really
want me to, I'll put an offer." So, I
went ahead and look at his financials
and gave him a offer for half a turn of
his STE. Um,
>> what was the STD?
>> A little over 100K. nothing too big,
small company.
>> Okay.
>> And uh put it into a seller note with
10K down and he took it. He said,
"You're the right buyer for me." Like,
I'm
>> What? And what was the revenue on this
business?
>> Uh half a million.
>> Wow. So, you bought a half a million
dollar plumbing business
>> for around 50 grand.
>> For 50 grand with $10,000 down.
>> Yeah. The rest on a seller note and no
personal guarantee on the seller note.
And um now that's a tiny fragile
business, right?
>> Um but no personal guarantee and
>> rightarn [laughter]
and the seller understood who you were.
Yep. And in fact it's going well. So
tell us how it's it's gone.
>> Yeah. Um it the company was in decline.
So even though it did a half a million
the year before when I had taken over it
it had had several months of decline and
part of that was due to um the seller
had had a heart attack in the previous
year and just had taken the eye off the
ball. Right. And I I knew that walking
in. That's why the deal was so cheap,
frankly. Um and I I took, you know, I
was like, "Hey, this time risk, like
I'll take that. That's fine." So, um did
that and uh we have since tripled the
revenue within about 8 months of owning
the business. Um and, uh you know, we're
all the money is pretty much rolling
right back into it for tools and trucks
and we now have an office that we're
opening up at the end of the month. Um,
you know, I'm I'm trying not to take any
money from it. Taking a couple grand a
month or so just to help uh bolster my
expenses on top of consulting. Um, and
for the most part, um, other than
rolling out new softwares and answering
questions from time to time on pricing
or scheduling, the company runs itself.
Um the the owner had a really good uh
foreman who I've taken over and bonded
with and become really good friends with
and uh and we've we've really done a
great job of enabling him to be
successful.
>> So you've tripled revenue to what? So
what is revenue now?
>> Uh our it's really a a go forward basis,
right? So go forward basis we're a
little over um should be a million and a
half next year. So
>> Wow.
And uh but you continue consulting so
you're not giving your full-time efforts
to this and and and why not? This feels
like this feels like [snorts] I mean
it's it's um growing like without much
involvement by you. So it's just got
natural momentum. Imagine if you gave it
your full time.
>> You own the whole thing.
>> Um it's a it's it's an easier business
to understand to to the theme of this
episode. In fact, you you um you know,
you're at home in a bluecollar business.
It is a blueco collar business. It's
already been derisked because you're
you're now in it. I'm just it just feels
like all the indicators are are green.
And now I guess
>> it's not it's not throwing off enough
cash to pay you. That's this that's the
answer to that question, right?
>> It is. It is. Yeah. And like and I'm
trying to
>> It is throwing off enough cash to to to
to pay you a living salary. I mean,
>> right at this point, no, it's not paying
off. Yeah. I thrown off enough enough
cash because all the money is going back
into it, right? Like if I want to stop
growing, yeah, I could pay myself. I
could stop getting trucks, you know,
because it is higher capital expenditure
type business, right? With, you know, I
was thinking about it today and I was
driving. I'm like, "All right, one
truck, $50,000." So, every new person I
want to bring on can bring in, you know,
500k to a million dollars in revenue,
which is great, but that's going to take
a while before they're ready to do that.
And are they a good fit? You know, I had
to let go of somebody just this last
week. I've already backfilled which is
great but he's not going to be ready to
be on the road by himself for at least 6
months. So like there's all of that just
constantly you're negotiating. Um and so
if I can survive without taking money
out and the business can run itself
that's the best of both worlds because
if it never really needs me full-time in
it um then I'm in a really good
situation, right?
>> Yeah. Well, for sure. For sure. Unless
of course
giving it your full attention could then
grow faster. I mean, it's sort of a
time, you know, an attention allocation
question.
>> Um, I don't think it would grow much
faster and and frankly, the faster it
grows, the more the more difficult it is
to go to cash flow it, right? And so,
you actually have to have a staggered
growth to allow the cash flow to support
its continued growth. And I like I think
I said to you in the pre-call like I own
too much of this to take out debt on it
right now, right? like I just to take
out debt. Yeah, we could jump and and
grow, but now we add a layer of of
complexity um called risk in the form of
debt. And instead like the pathway to me
being where I want to be in 6 months
versus trying to shorten that like it's
not worth trying to shorten that to add
debt to it. Um I'm better off just
continuing to to make ends meet on my
own. and and you know and I'm not
throwing out the idea of not taking
money at some point but if I own own own
it and I don't need the money my ability
to negotiate uh you know a better
position for myself is much higher um to
that point right
>> totally
and so then in the meantime it's it's
going to be consulting gigs that
continue to pay the bills
>> yep yeah I've got an interesting one I'm
doing right now through the new year for
an engineering group locally um they're
they're doing really well and uh have
sold more than they can deliver. So, I'm
helping them with operation, CRM
buildout, making sure their projects are
being tracked and just mapping
everything out in there um in our CRM.
So, really soup to nuts type stuff. And
they've been really really uh good and
intentional about their growth, but they
have never hired someone before because
they started this up as a husband and
wife team and like what do we do next?
And so, helping them figure out that
piece.
>> Great. Well, Joe Odell, thank you on
behalf of all the listeners and the ETA
community broadly for um sharing your uh
horror story. These stories are um are
always the most uh valued uh by the
audience cuz uh it's easy to get
distracted by all the big numbers and
happy stories, but these are the these
are the ones that tell what the risk
looks like if it doesn't work out. So,
thank you.
>> You're welcome. Thanks, Will. Hope you
enjoyed that interview. Don't forget to
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