Buy and Hold Family Businesses with Malcolm Peace

Josh (00:00:02) - Good to everybody. Welcome back to The Deal Scout. This is tape number two because I screwed up. Uh, we're having a conversation with Malcolm who buys blue collar businesses in Texas. Um, Malcolm, welcome back to the show. We did the seven minute series. You just graduated through that. Now we're going to talk a little bit more about who you are and your story. So welcome back to the show, man.

Malcolm (00:00:22) - Yeah. Thanks for having me. That's seven minutes. It was awesome. Uh, learning to keep the answers concise and give the value you can give, uh, is always a fun challenge, so I appreciate you having me again.

Josh (00:00:31) - Yeah, absolutely. So, uh, we meet in a coffee shop, and I go, hey, man, who are you? How do you typically answer that?

Malcolm (00:00:38) - Yeah, I'm a I'm a girl dad who happened to be a former athlete, um, in college. Now I run Ironman, and that keeps me busy 90% of the time.

Malcolm (00:00:47) - And then I find a way to make some businesses work and operate outside of that. So I squeeze in the hours where I can. But I'm a big believer in scaling businesses kind of in a lean fashion, um, and building a business where my kids can see it and they're proud of it. So it was it was cool. Um, kiddos, this past week, um, were able to come down to one of the businesses that we own in South Texas and hang out with, um, you know, just just see the people put face to names, all that kind of stuff, see my office manager, get them colored pencils to draw, and the kids just kind of wander around. Wow. I didn't realize how big it was, you know, all that kind of stuff. And so, um, it's fun. It's fun to them to see tangibly, like, this is what their dad does. And, um, you know, being able to kind of show them, hey, there's a lot of people, um, that, that I get to take care of and, and be responsible for.

Malcolm (00:01:30) - And, you know, I feel that way. Right? So when dad's, you know, trying to knock a little bit of thing out at night or in the morning before they get up, um, the real goal at the end of the day is to be able to just provide an amazing experience for people employed through the companies that we own.

Josh (00:01:42) - That's super cool. So you really needed to develop a business model that supports your Iron Man and being a girl dad, that's the that's the reason we're focused on scale and buying businesses, right?

Malcolm (00:01:52) - That's right. And I candidly, um, it's just by happenstance. I'm born and raised in Austin and I live and I think it's the 10th largest economy in the world now in Texas. And so the plethora of businesses is vast. The, you know, we got 3 to 4 major hubs between Houston, San Antonio, Austin and Dallas. You got so much going on activity wise between people moving here and employment. I think I was trying to explain to somebody today sitting in Austin, I've got four, maybe three universities with over 25 to 50,000 students in the area.

Malcolm (00:02:25) - Like the plethora of just talent and people and everything that's happening in Texas is big. So it's it's such a coincidence. I think, that there's people that are doing deals and doing opportunities in other states and other parts of the country and the world for that matter, that have that same kind of edge. There's always a slight edge if you can figure it out. Um, but I think, you know, I just had this random Syrian typical situation of being in Texas, born and raised, and it resonates with the business owners that I get to to, you know, engage with.

Josh (00:02:51) - Yeah, that's super cool. Now I'm going to try to pronounce the name of your company because it's it's spelled very unique. It's like tessera. Did I say it right?

Malcolm (00:02:59) - That's right. So it's it's a slight slight, uh, slightly off. But since Sarah, um, so given a little backstory there, my great grandfather owned 50 zero zero 0 to 70,000 acres. No one actually remembers how many was in the end, but, um, and on the border of Mozambique and Zimbabwe.

Malcolm (00:03:13) - So there's Mount Saint Sarah. And so my family farm was there. And if anybody's a historian or a historic buff, um, there was a lot of Civil War and things that took place. So the Portuguese actually owned Mozambique for a period of time. Um, and what ended up happening is that they had a civil war. That regime was taken out. And then there was Rhodesia, which was next door, and then that converted into Zimbabwe that we have today. And then simultaneously in South Africa. When my family ended up moving there, we had, um, apartheid breakup that happened as well. So there's been a lot of family moves because of just civil war and challenges. Uh, but there was the family farm at the base of Mount Saint Sarah, and we still have pictures from it. Um, but my great grandfather built that. And really, what he did is he employed hundreds and hundreds of people, um, but also at the same time, became a beacon in the community for both good employment but also a good product.

Malcolm (00:04:01) - And so we try to embody the exact same thing. We're going to be high quality products. I don't want to be bottom of the barrel kind of services or products that we build. I want to build high quality, nice product, and at the same time, I want to take care of my employees internally.

Josh (00:04:14) - Wow, man. So you buy businesses, right? That's your your business model is buying businesses and helping them scale. You implement systems and processes, SOPs and software to help scale. And we talked about this in our seven minute chat. But you you, um, you specialize in maybe the commercial space. So commercial blue collar work kind of give us, uh, for people who didn't listen into the seven minute, give us an idea of an ideal target for you guys to acquire.

Malcolm (00:04:43) - So we look at businesses that have been in business longer than ten years. We like family owned or founder or family owned. Still, um, there's just some nuances that happens when a business is transitioned to before us.

Malcolm (00:04:55) - Um, we like something that's been stable, something that has 15% net margins or greater, um, kind of bottom line. And, and. Just have a stable characteristics to them within the community. It sounds crazy, but I'll be on a call with an owner or somebody that's bringing a deal to me, and I'll immediately just throw it on to Google and just say, hey, what's a reputation of this business? Just like for fronting reputation of this business? And that's often an awkward conversation because some people don't even look at their Google feed back. And yeah, but yeah, we look at businesses that have this long stability in the community already and something that's a nice platform to build off of because, um, I if I'm going to do this for the next 20 or 30 years, um, hopefully, um, we're going to buy ten businesses over the next ten years is our goal. I don't need to hit a ton all, all at once, or I don't need to rush or I don't need.

Malcolm (00:05:39) - We can be super patient. And so we try to have very candid conversations with the owners, whether or not these businesses will transition well. And sometimes they just won't when they're heavily dependent on the owner. And if he wants to be out in the next three weeks. Uh, there's some challenges with that and there's some risk. And so we have to make some price adjustments and structure adjustments on the transaction. And so not to get too much in the details of it. Um, we are we are looking businesses that can transition. Well because there's enough risk, um, to do that already.

Josh (00:06:04) - Yeah. What are the risks of transitioning. So we go out. You and I were hanging out and we we decide to go buy a business together. We already said, uh, we learned our lesson about residential services. Let's let's focus more commercial, less blue collar. This kind of range in prices 5 million or above. Right? Ten year in in service, 15 million. Net margin at the bottom right.

Josh (00:06:24) - So we got our our target. So we go buy one. What are the what are some of the challenges for the transition.

Malcolm (00:06:31) - Yeah. So we obviously try to protect our downside. Looking at customer concentration I think that's a no brainer for most people. But what ends up happening a lot of the time is that there's there's reps and warranties that you can have within the contract to help protect some of this and some pullbacks to protect this. But there's the unmeasurable or incalculable. That's a word I'm not sure. Um, but if being able to understand what is the risk when you find out there's a warranty issue. Classic example. You buy a business. There's a bunch of warranty claims, don't they weren't presented in due diligence. You get the hold back and you can kind of make yourself whole. But there's the intangible aspect that goes along with that, the reputation that goes along with that. And so that's the one thing that we we've learned over time is, you know, don't just equate the dollar of the warranty that you get to, you know, go back against the, uh, the hold back aspect of it.

Malcolm (00:07:16) - So that's a that's a big part of it, kind of the unknown, um, intangible aspects of that reputation that can be, uh, fluttered, that's not communicated. Um, and then the other part is, is I like to look at the people side of things. Um, you know, it's great to have key employees, but for the key employee side, how is the leverage to the owner or the leverage to the business for that key employee? So here's what I mean by that. If I come in and someone's like this absolute expert, or they hold the license or licenses for that matter, you know, what's the what's the risk associated with that? What's the downside? What's the speed like. There's unfortunately we try to retain everybody. That's our goal. I think when you're buying a business, um, you're buying the assets of it. And some of that is the knowledge and the people that that previous owners being able to aggregate and bring together. Um, but people leave for all sorts of reasons.

Malcolm (00:08:04) - Um, and, you know, sometimes they leave for things that they expected that were communicated from the last owner that never came true. I had one guy who told me that every call that he answers, that's a customer, and they end up being a sale. He should get 6% of the commission on that. But he's not a sales guy. He just picks up the phone every once in a while with warranty claims and other quality control situations. And so that was a very awkward conversation. Um, you know, ultimately, he decided to leave after a period of time for some other reasons. Um, but you know, all that to be said, um, the the leverage that people have over the business is one of those things that I try to try to determine and see how fast we can mitigate that risk.

Josh (00:08:40) - Yeah. Uh, we, uh, I worked with a construction company, and one of their main salespeople had all the relationships. And when they when they left the the pipeline dried up.

Josh (00:08:52) - And they that was a that was a risk that that we had to look at how to how to overcome that. Right. How do we duplicate this person? How do we maintain relationships so that, you know, people, uh, if it wasn't for people, life would be easy, but it would also be very lonely and boring. But in an acquisition, key players are very important. Uh, how do you when when doing that, you know, how do you start having the conversation with the owner? Yeah. And then the key players. Right. You don't want to set off a bunch of signals, like how do you how do you walk through that dance where you're not trying to, you know, alert anybody fear of that. You know, like being acquired and, and ripped, you know, maybe from a private equity, you know, perspective. Like how do you approach that.

Malcolm (00:09:33) - Yeah. Great question. Um.

Josh (00:09:36) - Uh.

Malcolm (00:09:37) - Learning lessons. I tell everybody right now, I think we're in the walking phase.

Malcolm (00:09:40) - I hope to get to the running phase here soon. Um, so learning. Right. But one of the things that we found is there's some owners that are super eager to engage that conversation with the owner or with the employees. Hey, this is the new owner. We're like, in due diligence. And it's like, wait, slow down a second. Things might not all work out, but, you know, they're mentally checked out, right? And so if they're mentally checked out, they're trying to make that transition. And they're trying to involve us even in the due diligence process, I've had circumstances where they're trying to involve us in, like the operations of the business while we're doing due diligence. And how would you make this decision, what's your thoughts here and all that kind of stuff. And so managing that is super important. And then I've seen the inverse. I've seen where people, you know, hold back the communication that's related to the transition. And then all of a sudden they make this abrupt introduction and people just quit on that on the spot.

Malcolm (00:10:25) - So I had a buddy that literally recently happened that in the last month or so, um, you know, bought a landscaping company, three people quit on the first day when he got that introduction on Monday. So there's a I think there's no perfect way to do it. You try your best. Um, you try to communicate as best you can. Um, everyone's going to respond differently. Some are going to respond to. Yes. I've been so excited, been waiting for this opportunity. And some respond to, uh, what does this mean for me? And so, um, it just, you know, all those questions come up and you try to clarify those as best as possible. And the best way to do that for anybody that's out there that's new or wanting to buy a business soon, um, make sure payroll does not bounce. I have never had that happen, but I've had friends that have that happen. You make sure payroll never bounces on those first few weeks and do not transition to some new payroll system.

Malcolm (00:11:08) - Adopt it no matter what it costs. Um, figure out what it is that payroll. As long as that keeps going for a little while, you slowly build trust because people, um, they worry about their jobs, right? And their livelihood and the responsibilities that they have. So, um, that's a big one that I learned from somebody else. Never had a circumstance, but I've seen it in and it doesn't it doesn't turn out well. So hope that's.

Josh (00:11:26) - Gold right there. Right? A lot of people, they'll they'll go acquire something and they're like all of our new systems, processes, partnerships, all that stuff. You're switching over today. Yeah. And there's always an issue with payroll when you're doing a switch or something like that. And for Blue Collar, I grew up digging ditches right. Like I grew up on a construction site. I lived for a long time in my life, paycheck to paycheck. If that shuts off, I immediately lose distrust right in in the situation now because my trust was with the, you know, the family.

Josh (00:11:57) - Operator. Yeah, right. And, you know, let's just say we've been working together for 25 years or something. And then one day I don't get payroll, and I got this new person, new group coming in. So that was Goldman. Really good job.

Malcolm (00:12:09) - I never anticipated going into this space like so I got started doing blue collar deals, mainly because I was working with another firm years past, and we were buying kind of hospitality type businesses, and we were interacting with a lot of blue collar vendors. I mean, that's where I started interacting with folks the septic installer, the Rohloff dumpster, the porta potty guy. We were doing all these different hospitality businesses, and I just started interacting with them and come to find out that, like a lot of their employees are paid weekly, a lot of their employees are treated very poorly. And so when you made this transition to me buying businesses in this space, um, I saw it firsthand, uh, you know, a paycheck was late by like two hours when we switched from, um, written hand checks to digital, um, deposits going into their account, direct deposits.

Malcolm (00:12:51) - And it was late by three hours, and I had a guy walk off just making a big scene, and it was like, wait a second, come to find out, like he had been screwed or people had taken advantage of him in the past. And so, um, you know, truth be told like that, that solves a lot of issues. And people feel stable about their life circumstance financially. Um, you can you can tend to kind of work through some of the other stuff, um, for the most part, personnel wise, on the different rungs, but personnel wise, um, so, yeah, give out.

Josh (00:13:17) - Uh, when it comes to treating people. Well, you have uh, you guys are more buy and hold, right? You're not trying to buy and flip these businesses, right? Because then it's just like, ah, you're a number. We're buying flipping. We're going to increase profitability and see you later. And everybody has different business models and whatever works for them.

Josh (00:13:34) - But like your business models buy, hold and treat people well long term. Yeah. Um, why is that important to you? Rather than, hey, let's buy this, let's flip it, let's make a bunch of money. Why?

Malcolm (00:13:46) - Um. Great question. I've never been asked in that way. Um, I think it's the decision making tree, as I shared, kind of in the seven minutes of the goalpost and what you're shooting for. If I want long term stability for my own personal life. Um, and I want to build, you know, what we're doing here? Kind of a long term vision. Yeah. I mean, don't get me wrong, I've definitely gotten calls from the family offices and other groups that are like, hey, heard you bought this. I wish we could have got it. What's it going to look like? What are you building? What's the status? All that kind of stuff. We've gotten those calls, um, and they're flattering. Um, but if I'm building, uh, with a marathon kind of mindset, I'm going to make different decisions.

Malcolm (00:14:21) - And if I'm constantly teeter tottering based on the next shiny object that comes down and says, hey, I think you're worth something, let me talk to you. I'm going to make different decisions. And so I need to have consistency. And one day maybe that might change. But that's not our intention. If that's not our intention, we're going to make consistent decisions along the way. Yeah.

Josh (00:14:39) - Getting to this part of buying companies and such, you said you were working with a group in the past that were that was doing something similar in hospitality. Yeah. You're you're somewhere in your 30s. I don't know exactly. But if we go back to you going through college, what were you trying to study? Did you go I don't I made an assumption that you went to college, but like growing up, learning about what do I want to do with the rest of my life? Is this what the direction you wanted to go?

Malcolm (00:15:03) - Yeah. So I had quite a bit of shift back in 2016.

Malcolm (00:15:07) - Um, I, uh, candidly, I came out of undergrad. I played tennis in college at James Madison University. Um, had a great experience there, came on to be an assistant coach with the team there. And, um, was very grateful for my, you know, coach then became boss. Um, forgive me that opportunity. And, um, so in that process learned a lot about college athletics and learned a lot about kind of what the prospects were for me and kind of in that space. And as I kind of looked at the landscape, um, was given the opportunity to go over to University of Virginia and help over there as well. But prior to that, um, undergrad, I started as a business student. I thought I was going to go into business. My parents are both in business in some form of fashion. I thought I'd go into business. Um, and then I had a, um, second semester accounting professor. I don't think I tell this story very often, but a second semester accounting professor.

Malcolm (00:15:53) - Um, that was like an a very, um, a very intense capitalist, let's put it that way. I'll try to keep it as simple as possible. Um, and, uh, truth be told, I was really put off my business the way he described business, the way he described financials, the way he described just revenue and generating revenue almost going to stop. I was like, no, like, this is not for me. I think there's a bigger thing about people within business and how people work. So I actually switched to become a psychology major, um, and started working with the dean of students and the head of one of the heads of the psychology department on research, on leadership development, and basically the science behind how do you develop great leaders. And so I came out of undergrad with that intention, and I thought, you know, hey, I'll go into college coaching, maybe I'll go to get a grad degree in sports psychology. How do you develop these great leaders? Um, and so I started taking counseling classes and other sports psychology classes and came to realize, like, people, people really matter in all circumstances, but they have these small intricacies about them that really allow you to make a difference in the scenarios that what I was in.

Malcolm (00:16:52) - So here's what I mean by that. Sitting in a room with a small group of people and understanding what's the dynamic, what's the feedback you're getting body language wise? What is the thing that's taking place? Being able to read that, I took a specific counseling class where we would sit in a room not any bigger than three by four, two, two cameras pointing at the client, um, and myself as the counselor. And we would switch roles, um, throughout the semester, and we would get filmed both ways and we would get feedback, very honest, very direct feedback about body language, about how that person responded based on what that person just said, or how you should be sitting to make them feel like they can give you more information. All those types of seeing. What does it look like to lean in? What does it look like to sit back? You crossed your arms there. All this stuff matters. To be able to project out to that person. They're in a safe environment to be able to be the authentic self.

Malcolm (00:17:38) - And I took that concept and went into grad school to get my MBA at the University of Virginia to apply it to businesses. So I got the robust understanding of business and financials. But then I said, if these businesses are predicated on good people hiring great people, which is what everybody tells you, right? Hire great people, get them on the boat as best you can. You then got to know how to how to work with them and understand their intricacies about what's going on. And it's it's fun. And I've got a team all around the world now. We've used a bunch of different people, but also a US based team, and being able to understand, um, you know, who's good at that kind of EQ side of things has made a big difference for us to be able to kind of do some leaps and bounds that we've been looking to do.

Josh (00:18:18) - Yeah. EQ anytime someone mentions like, uh, uh, an abbreviation, an acronym or whatever you call that, like, what does that mean and why is that important for you and your emotional quotient.

Malcolm (00:18:28) - And so being able to understand what's dynamically happening emotionally with that person in that scenario, I always tell people I'm probably not the best person to go speak in a room of a thousand, because it would be like just mental overload because I'd be reading. The room constantly to try to understand the feedback, but sitting in a room with 2030 people or less, I do really well because I feel comfortable reading and understanding what's the message people are receiving in this process. And there are there are very good people that can do that. And that's why I think where the business really happens, well, when people can sit in a small setting and be able to understand what's happening dynamically between people.

Josh (00:19:02) - Yeah, especially for family in small, you know, small family operations and such like that, like dynamics are so important. I grew up in a family business doing construction. And I'll tell you, like, if you don't understand what's going on in the family dynamics, father, son, father, daughter, whatever, the husband, wife, like that, all those little things impact the business.

Josh (00:19:25) - So if you're if you can't look at that and go, hey, there's something off here, like, hey, let's talk about it. Because you, you could unveil unveil opportunity to really add value or a warning sign like I'm not getting involved here. Yeah. When you're reading a room and you're going through basic due diligence and you're sitting across from a, uh, a owner operator family business, right, 15 year, 25 year in the business. And you go, hey, boys, we're pulling out. Like, what are some of those warning signs that you see that you would go, I'm not going to buy or invest in this business.

Malcolm (00:20:04) - Um. People have to have a servant heart in these businesses, not a controlled heart. Right. And so that dynamic is tough. There was a business, um, I'll just geographically explain it in the industry. Um, there was a business in Dallas area that they did, um, sale and resell and renting of storage containers. Great business, financially loved it.

Malcolm (00:20:28) - Nice husband, wife owned the business, super nice people. There was one particular key employee, um, we're in Texas that people have rights. I totally get it. But there was one that would really exhibit his freedom in that. Right? And it was a it was a control thing. It was his ability to establish, I'm in charge. There's a limit. You can only do so much to push me around or communicate to me what you need from me, or whatever the case may be. Um, and that dynamic was going to be very tough because he had a lot of leverage from a knowledge base. So he was a control type person that also had the skill set to match it. And so he was given a ton of responsibility because it helps the owner kind of get through some of the challenges that they were trying to get through. Um, but there was going to be some real transitional trouble there. And so I walked away from that business. I'm disappointed, you know, that we had to do that.

Malcolm (00:21:16) - I thought it was a nice business. Um, but explaining that to an owner, hey, this is a risk that I'm not willing to take. And I and I've been communicated about this risk from three other key employees. I think I have a better picture. I think I have a sufficient picture of the severity of this risk that I can't move forward. So, um, that was a tough conversation. We had gotten pretty far on that deal for sure.

Josh (00:21:38) - And it's hard, especially due diligence isn't always cheap. And you've invested a lot of time, energy, like you get attached to the people, like you're like, ah, man, I, I really like you and I and you build this relationship and there's expectations. You know, people start envisioning what it's going to look like in the future and then pulling back. I had to do that, man. It's it's hard to walk away from a deal, but sometimes the best deal you do is the deal you don't do. Yeah.

Josh (00:22:04) - Right. Um, I.

Malcolm (00:22:06) - Would say the, the real kind of challenge or sorts is you're going into a scenario where people are uncertain about what this means to them. You're asking them for information that they've probably never aggregated before because you're trying to make your framework of decisions, and so you're trying to build that immediate trust. Hey, you can pass me this information. Hey, it's okay that you may not know this, but give me the raw data, you know, all this kind of stuff, and then you all of a sudden know at the end of it, like, I'm going to eject potentially from this. And also they might eject potentially from this as well. Like it's hard on those employees. And so we're we're always sensitive to that. I think it's ideal um to get a best sense as you can of those key employees, but recognizing that there are obvious sensitivities around that. Yeah.

Josh (00:22:46) - Well, how would you classify your business? Is it would you guys consider yourself, you know, private equity or like how would you guys if someone says.

Malcolm (00:22:55) - That's a term that most people understand colloquially or understand kind of on the street, if that makes sense. But we're we're a Texas based holding company with no intention of selling. Um, and so we, we buy these businesses, um, we structure them in such a way that, um, our intention is to hold them for a really long time. We look for platform opportunities is a term that sometimes is used in this space, um, certain industries and verticals as kind of a platform build on. Um, so we like the opportunity to be able to kind of build these for the long term with that intention. And so we've, we've structured accordingly to that.

Josh (00:23:25) - Yeah. Yeah, that's really cool. Um, I got to go back to the servant heart control heart how. I've never heard it said this way. How do I how do I do a self check in my own brain that I'm approaching things with a servant heart, not a control heart? Because I'd rather. To me, people matter, man.

Josh (00:23:43) - You and I had these conversations in the green room before. How do I do a self check to to see which one I am in the moment?

Malcolm (00:23:51) - Great question. Um, so I heard it once. I've got a friend who sits potentially on a different side of the aisle for me on certain thoughts, and, um, he and I have been friends for 17 years. I think it is now something like that. Um, I think it's longer 18, 19 years now, but who knows? Um, the point is, is that, um, at the end of the day, our goal is the same the way we would go about it, how we would solve maybe a social issue or how we would solve a certain circumstance is is different, but our goal is the same. We still care about the person. We still care about them being successful in their own right and all that kind of stuff. And how we'd go about that would be slightly different, potentially. And so when I look at the business, a lot of people get hung up on how you do things, how it's done, how it's supposed to be done.

Malcolm (00:24:39) - But missing the ultimate goal is like these two people collectively have the same goal in mind. If that's the case, like give them the autonomy and freedom to be able to do that. So that's the check. In my opinion, you check is the goal the same, or are you trying to make sure that the outcome, call it the 80% of the doing in the middle is done the way you want it done? And that's the challenge. Um, and when someone's unable to see it in that kind of dichotomy of. Choice. Um, that's that's where I think people stumble, um, from a servanthood kind of mindset of, hey, this person's, you know, maybe they'll go about it differently, but they've got the same goal in mind, given the resources and tools to do it their way, allow them to have the autonomy and the ability to do that, rather than trying to control what you think is the most optimal way to do it.

Josh (00:25:25) - So good, dude. Yeah, that's really good.

Josh (00:25:27) - Solid. We have a few more minutes. So I want to ask you, because I think that this is so important with a family business looking to scale. And I said the numbers wrong. It's 7 million. Is your is your target base right.

Malcolm (00:25:39) - I said yeah, in that middle target transaction size. Absolutely. Somewhere in there's a little lower. But we you know, ideally we're looking at businesses that generate about 750 to about 1.25 kind of net. And then we you know, we work with them multiple of some kind of market multiple kind of two and a half to four and a half somewhere in there is tend to be kind of in the range on these types of businesses. And so you know, you can do the math on that. But yeah, that's kind of our sweet spot where we think we can add tangible value and we play talk about private equity play kind of lower than that low or, you know, lower private equity kind of group where we think we can add some real tangible value.

Josh (00:26:15) - Yeah. Got it. Why would um, so let's just say it's my family business and we're doing something commercial, blah, blah blah, in Texas. But right around the block from you, my son was born in grapevine. So a Texan in my family. Yeah, yeah. Uh, so I come to you and I go, hey, I've got this business. And, you know, some one of my buddies told me that I should talk with you about maybe selling or transitioning, what would be going through my brain that I would want to have a conversation with you? Yeah. And I've got 20 employees. Yeah. Ten employees. Whatever. Why would I want to have a conversation with you?

Malcolm (00:26:49) - Yeah. Um, there's multiple thoughts there. But the biggest one is, is that our intention is to hold on to this business for a long period of time. There are three options, in my opinion. There's maybe more that in variations of different ones. There's three options. In my opinion, someone can go, you know, be sold into a bigger group, uh, firm of some sort that will flip them and move them really quick.

Malcolm (00:27:10) - Um, you know, sell them in five years. Again, seven years somewhere in that nature. Um, then there's, there's kind of the, um, strategic buyer of sorts, someone that's going to go in and that's already in their industry. It's going to buy them, kind of roll everything together. And then there's us where we will. Our intention is to hold on to it. We think we're buying the brand name that the reputation that's part of the assets that we're buying. So we have no intention of rolling that or dissolving it or anything like that. That's our that's our intention. Circumstances might change, but truth be told, I haven't had that circumstance yet. And and I know a lot of folks that are in a similar situation to us or do things kind of in different parts of the country that have the same mindset, is that there's value in that name and that reputation. Um, and so, yeah, that's that's the real key thing for us. You have to kind of the decision of what you want this business to look like when you get to talk about it in five years, do you want it, you know, known that it's flipped.

Malcolm (00:27:56) - Do you want it's known that it's, you know, dissolved into something else, or do you want it to know that it stand on its own and it's thriving and we've doubled revenue and we're thriving, and all these people are, you know, still employed and all that kind of stuff. That's the real sell. Um, and then candidly, you know, you're going to get some young folks that have some bright ideas. And I think that we bring a different angle to what that looks like to scale these businesses. They need software implementation. They need standard operating procedures. They need, you know, the ability to understand org structures and pathways for people. Call it professionalizing the business a little bit more. Um, that's that's what we bring to the table. That's the playbook that we know we can play, um, and that you can be proud of. You know, in five years time, the person that was your office manager is now a director of operations and so on and so forth.

Josh (00:28:37) - Yeah. Bottleneck is a term. I'm working with an organization and one of the key players, the key leaders of the company who started it's been doing it 25 years. Like we're talking it goes I just found out that I'm the bottleneck. I went on vacation and all of these decisions piled up. And now that person's overwhelmed with the amount of work that they now have to do, not only to get back on track, but to to carry forward. Uh bottlenecking. For family businesses is is a real concern. Yeah. Releasing control and starting to create those scale process systems, software integrations. And that's a great concern for these people because they've been doing it their whole life. Yeah. And teaching, you know, old dog new trick. Uh, what are what's one tip you have for, you know, the acquisition merging and then, you know, helping that person realize that they can start releasing control. What's a piece of advice you have there?

Malcolm (00:29:36) - Um, so tangibly the first few weeks and we've got it on our website, our 100 day plan.

Malcolm (00:29:42) - It's a document that people can get, um, but, you know, the the big thing is in the first we have that kind of first intro, there's a first kind of conversation with everybody. Um, and then two weeks after we do another conversation and in that second conversation, I present the org chart. I've at that point gotten a sense of kind of what people are, what they do, kind of who they reply to, all that kind of stuff. It's fascinating to find out who thinks they report to somebody when they actually don't, or whatever the case may be. Um, and so we put it on there and I let people absorb it for a moment. We usually do steak dinner, I go to Texas Roadhouse, we go get some steaks and some nice meals. We have a good lunch. Um, we have a conversation. We call it family, uh, family lunch time. And, uh, in that moment, um, I show them the org chart and I'm not on it.

Malcolm (00:30:22) - And that's a huge, uh, emotional and kind of confusing and all this kind of stuff where people just have to digest that for a second. Because the owner, whether they've ever drawn it out or not, they're on the org chart. Um, the best is when I see the email. So it's just tangible little things. When you take over a business, you got to get everybody's email that's been going out or sales emails and figure out where they're going and kind of figure out what's happening with all the email flow. Um, and it's the best when I get an email that has like chairman at company name or, you know, like head head, CEO or whatever it may be, I've seen them all. And so, um, you know, it's it's great when they give all these titles, but it's confusing to the audience. And the audience often is your internal employees because they're trying to understand who are you and what is happening within the business that it relates to you and me and, and dynamics all around that.

Malcolm (00:31:06) - And so when I say, hey, none of you directly report to me. It's very confusing because one, your super your senior supervisor kind of folks and your senior management, they're like, okay, so who do I report to? And that's when the KPI kind of conversation happens and we start explaining here you're measured very objectively, not subjectively. It's not my job to come in every quarter, every year and to evaluate you on a team player rubric or something like that, which I've seen, um, you know, all these kind of things that I think are just, um, antiquated processes. And so, yeah, controversial statement. I believe that the owner should not be on the org chart. And I think that that decision, um, allows you to make different decisions for autonomy and responsibility within the organization.

Josh (00:31:49) - Wow, that's so interesting. When the owners on the org chart, what it does is it puts crap under like they have to do. Yep. And that's not a business. Yep.

Malcolm (00:31:59) - You got 20 employees. You got 20 assumptions about what that means when the owner is on the org chart. They they all have different interpretations about it because they've been in past experiences or they've experienced you for the last couple of years and how you operate. They've got all different interpretations, what that is. And you make a different decision when they say, yeah, you don't need to call me. I don't need to be involved in that. Oh, that's your team you're hiring for. Wow. Here's the measure at the end of the year.

Josh (00:32:22) - All right. Putting the owner hat on, taking my name off org chart. It's an attack on my identity. I've been doing this. My name's on this business. What do you mean? You're taking my name off the org chart. Like, what am I? What am I going to do? Right?

Malcolm (00:32:37) - Yeah. It's a it's a huge shift. It's a challenge. It's a.

Josh (00:32:40) - Challenge.

Malcolm (00:32:40) - It's a real challenge. And as we scale and we bring in new operators for deals after we've acquired them and all this kind of process that we do, um, that's the Eck being able to take that set and set it aside and say, what's the best interest of the business? I'm going to make decisions in the best interest of the business.

Malcolm (00:32:56) - And one of those is getting rid of your ego. And it's a hard it's a hard reality because, candidly, like I've telling a friend on a mountain bike ride a couple of weeks ago, if you're an owner getting started, you're just starting out. You got to have a little bit of chip on your shoulder. You got to be able to bet on yourself. So all credit to you. But once you get to this phase where you have a seven figure business, you got to start betting on other people. You got to be able to know and understand how this person is going to add value. Take your business to that next rung, not just take on tasks, but really elevate the business. And you take a bet on that. And again, controversial take. I've got friends that disagree with me. I hire before the need I hire based on where we're going. Um, and sometimes that person feels like there's not enough for them to do. And I like watching to see what they do.

Malcolm (00:33:39) - My kids, I've got two little ones, a nine year old and almost six year old. And, um, we often talk about what happens when you're bored. What happens? What do you do with yourself? What does it look like? Um, and being able to create that skill set, to be able to be productive when there's obscure moments or there's kind of gray moments.

Josh (00:33:55) - Yeah. Thinking ahead, planning ahead, doing doing the taking initiative, right. Yeah, yeah, I heard it say this way. Ego starts.

Malcolm (00:34:03) - Humility scales I love that.

Josh (00:34:06) - That's good. Yeah. Um.

Josh (00:34:08) - Yeah. So really cool conversation, Malcolm, for for people who want to connect with you, you do a deal. And maybe, uh, I know that you guys are looking for operators. You guys are looking for talented operators. Kind of one minute plug on. What kind of operator? What does a good operator look like for you guys?

Malcolm (00:34:24) - So, you know, truth be told, um, I think the best model is to develop somebody and to work with them to get them up to speed, rather than just drop them in and hope that it all kind of works out.

Malcolm (00:34:35) - Um, so we are doing an internal development program. Ideally it's we're rolling out this year, so it's all raw, new in some form fashions, but we've had a lot of people reaching out, um, through different forums and different aspects. Um, and so candidly, the goal is to have somebody internal for nine months and then be able to be a part of that due diligence acquisition process and go in as the new operator through kind of a smooth transition. So call it first three months is kind of ramp up on just how we do things. Um, next three months is kind of being a part of that due diligence process, hopefully. Um, and then finally kind of in that closing phase, um, you know, in those last few months. So, um, that that person, um, you know, male, female, we're looking for somebody that wants to be in Texas for a long period of time that likes alignment, wants to be a part of the decision making about cash.

Malcolm (00:35:18) - That's the big thing, too, for us, right? We want to get you to have that decision and be in that driver's seat and not be coming back to the the mothership or coming back to the group to ask, how do I deal with this? Or what does that look like? You're measured on your ability to produce a great business for the employment, um, for all those people and being able to optimize that. And so, um, all that to be said, we want somebody that wants to be a part of businesses that are kind of long term intended, um, be able to generate nice, um, good environments for our employees and kind of the brand name of what we're building. Um, and just again, be here in Texas, we're exclusively looking at deals and, and people come from out of state happy to take a look. Um, but yeah, we're wanting to be here long term.

Josh (00:35:56) - Yeah. That sounds like a really good fit for someone who's like an integrator.

Josh (00:36:00) - They have this desire. They maybe been in corporate. They've been trained. They're really good at building systems, processes, operations, people, leadership. But they're not ready to, you know, maybe they're not ready to go out on their own, but they want, you know, more of a partnership and a model that you've created. So, uh, for people like, maybe like that and they want to know more, what's a good place for them to connect with you and, uh, maybe find out more.

Malcolm (00:36:23) - Yeah. You can go to our website. So Sarah said Sarah is spelled tsetse ra com. I'm all over LinkedIn and Twitter. You can get Ahold me on there. Um, but yeah, it's called our generalist vice president program. Um, and again, like I'm saying, we're taking interviews and process people as they come along. We've had a lot of interest over the last year. We started communicating what we're building. And, you know, candidly, we want people again that are interested in learning.

Malcolm (00:36:48) - And wanting to develop their skill set and be in that driver's seat. You have to have a slight chip on your shoulder, but you have to have the ego and the capability to be able to suppress that at the same time. And so, you know, all that to be said, we love folks that are just eager to be in these small businesses.

Josh (00:37:03) - Yeah, super cool man. Thank you for your time. Uh, for people listening in, you can go back and you can listen to his seven minute dealmaking presentation. Or you could, you know, check out, you know, this conversation, but his contact information will be in the show notes. So if, if, if you have a deal that you'd like him to look at or maybe you're a good fit for that general VP role, uh, reach out to our guests and say thanks for being on the show, but find a way to do a deal with them. That's the purpose and mission of the show, is to connect deals and deal makers.

Josh (00:37:29) - Uh, if you have a deal or you have a system or a process that you'd like to talk about here on the show, the deal Scout. Com fill out a, you know, quick form maybe get you on the show next. But till then we'll talk to you all on the next episode. We love you all. See you then. Bye bye.