From VC Founder to HOLDING COMPANY MASTERMIND in Just 5 Years

Summary

In this conversation, Chase Murdock shares his journey from the venture capital world to acquiring small businesses. He discusses the challenges and lessons learned in both realms, emphasizing the importance of building sustainable, community-focused businesses. Chase highlights his partnership with Adam and their unique approach to acquisitions, focusing on enhancing existing businesses rather than starting from scratch. The conversation also touches on their commitment to community asset businesses and their strategy for growth and diversification. In this conversation, Chase Murdock discusses the intricacies of acquiring and managing businesses, focusing on the importance of understanding seller expectations, the transformative 'car wash' approach to business operations, and the challenges of rapid growth. He emphasizes the need for a supportive mentorship role, the significance of capital allocation, and the long-term vision of holding companies. The discussion also touches on personal growth and the influence of figures like Ernest Hemingway on living an intentional life.

Takeaways

Chase transitioned from venture capital to small business acquisitions.
He found fulfillment in building sustainable businesses with purpose.
The journey began with a failed tech startup that led to a successful small business.
Taylor Cooperative was a profitable venture that opened his eyes to small business potential.
Chase emphasizes the importance of community asset businesses.
His partnership with Adam is built on trust and mutual respect.
They have not raised outside capital, focusing on long-term growth.
Their acquisition strategy involves enhancing existing businesses.
Chase believes in the power of small businesses to impact communities positively.
They prioritize hiring great operators to manage their diverse portfolio. Understanding seller expectations is crucial in acquisitions.
The 'car wash' approach revitalizes acquired businesses.
Growth often leads to operational challenges and increased complexity.
Building capacity within management teams is essential for sustainable growth.
Mentorship and support are key roles for leaders in acquisitions.
Capital allocation strategies are vital for long-term success.
Holding companies can provide stability and growth opportunities.
Personal growth must match the growth of the business.
Living an intentional life involves balancing work and personal passions.
Community involvement enriches the entrepreneurial journey.

 

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Transcript:

jon_stoddard (00:01.47)
Welcome to the Top M&A Entrepreneurs. Today my guest is Chase Murdock. Chase has made five acquisitions. So we're gonna hear it, talk about his story. Welcome to the show, Chase.

jon_stoddard (00:15.693)
Yeah, so let's start back. I mean, what were you doing before you got into acquisition?

chase_murdock (00:16.384)
Thanks John, appreciate you having me.

chase_murdock (00:25.144)
Yeah, a lot of zero to one. So not a lot of this one to two business that we're currently engaged in. So I've been an entrepreneur my entire life. And typically what that's meant is pursuing moonshot ventures, you know, raising venture capital and trying to build a business that's not small. That ideally, if successful is the opposite of small. And so it wasn't until the past seven or eight years that I've really fallen in love with the world of small business,

jon_stoddard (00:52.19)
Yeah. Now, how many experiences did you have in the venture capital community where you actually raised some capital or received it and then it grew to a moonshot, you know, hockey stick kind of.

chase_murdock (01:10.884)
Yeah, a bunch of different projects. The failure rate in venture backed startups is daunting to those wanting to enter the space. The odds are you're getting a season day one. But I had a one really good outcome. We were able to grow an organization up to 50 people, multiple states, doing quite a bit in meaningful revenue. Had one that was what I still believed to be one of the better ideas I've had in my career that failed due to some founder issues, it's timing, and that's what's tough about the zero to one space

raising capital, finding product market fit, and burning through that capital to go create something that can make a dent in the industry. It's really inspiring. It attracts a lot of really smart people back when I got started my career.

jon_stoddard (01:49.811)
That's why hundreds of thousands went to California in 1849, just for gold and they never got anything. Most of them never got a dime from it.

chase_murdock (01:57.904)
That's exactly what I was just going to say. Yeah. The new Gold Rush, get out to the coast, go raise venture money, and go make a dent in the universe. And it's a very inspiring way to build a career. And that's where I got the first 10, 12 years of my career started. What I found, though, is that there's definitely a downside to that way of building companies. The advantages are you can be very mission-driven. You can recruit great people. You can raise capital from great investors.

So at least in my experience was it didn't feel like I was building something long term and sustainable and purposeful. I felt like every time we were building a venture we were scaling at the expense of so many things, personal health, scaling at the expense of the customer sometimes because you have these growth targets that you have to get in order to reach the next round of financing in order to secure capital to keep the company alive and to keep the company

And that is their, that's their fever dream. To me, it left something a little bit to be desired. I liked building for the long term. I liked being surrounded by people that I wanted to build alongside for decades, not years or quarters. And I wanted to build a company that had a little bit more soul and that had a little bit more purpose in the community. And I wouldn't have said it that way at the time, but looking back, I can, I could see what was left wanting in that part of my career.

jon_stoddard (03:21.37)
Yeah. So what was the call? I mean, what you say, Hey, I'm getting out of this venture VC back stuff and I'm going to start acquiring small businesses. I mean, what was like, do you remember the first initial thought? And it goes like, no, this is too frustrating or it's more lucrative on this side.

chase_murdock (03:42.584)
It's actually much more unintentional and accidental than that. So I'll tell you the abbreviated version of the story. It was about seven years ago when that great idea that I referenced earlier, this tech startup, we had to close down. And at the time, I was really disappointed that this phenomenal SaaS platform that we were building had to be disbanded, in part, because we didn't have the ability to raise the capital we needed to keep building the technology.

jon_stoddard (04:07.692)
Yeah.

chase_murdock (04:12.684)
At the time, my business partner Adam in Dakota Group, Adam and I went down into the desert of southern Utah on a backpacking trip. It was one of those long grueling grinding days where we were just logging miles and nothing to do but talk one another's ears off. We had this idea of starting a small business, not to hang our hats on and to build our careers around that, but as almost a passive, the goal would be to create a passive income string,

chase_murdock (04:42.664)
invest some capital and try to have it be a sideshow. So if successful in one, two, three years, maybe it could be throwing off some free cash flow and it would be a small incremental into our monthly income. That way both of us could continue to go build these moonshot ventures. That was the naive view at the time. And that led to us creating a little company here in Salt Lake City called Taylor Cooperative. It's a custom suit clothe air, a brick and mortar shop in downtown Salt Lake City. Really high end suits that are custom made,

about $1,800. We opened that up and 18 months later we were doing a million dollars a year top line in revenue. It was profitable. We started it up on that teeny tiny budget of $750 and every year from there got better, more fun, more lucrative. We hired better people and it was largely autonomous of our time. We were involved, a very kind of hands-on advisory board and sometimes

chase_murdock (05:42.624)
business that I think my eyes at least were certainly opened to the world of small business, which is the majority of the economy, right? The chief most employer in the United States, the majority of where people get their paychecks comes from small business, businesses with fewer than 500 employees. And it was an entire section of the economy that I'd overlooked in my career. I actually kind of looked down on small business, I think small services businesses back when I was building technology ventures, because it was like, do something

jon_stoddard (05:51.511)
Call first. Yeah.

chase_murdock (06:12.584)
at least the mantra that is steeped in Silicon Valley and other tech hubs. But while building that business, I found some of those perks and some of those areas that left me wanting prior, those itches being scratched, of we had a phenomenal team. We would host a company kind of holiday parties over at my house, and we got to know their spouses. We were building this really, really purposeful organization where people were passionate about the product,

jon_stoddard (06:14.238)
Yeah.

chase_murdock (06:43.246)
And that was the beginning of my journey, falling in love with small business.

jon_stoddard (06:45.47)
So this journey you took, this hike you went on, was that the, what are we gonna do next kinda track that you guys started rumbling? I got a question about this, and this revenue from this company that you did, Taylor Cooperative, did you actually produce more revenue from this in a short period of time than you did at the Sounds Cup?

Ha ha ha.

chase_murdock (07:14.384)
I've actually never thought of it. Candidate, probably yes in 18 months. Potentially yes. I'd have to go back and do some comparisons, but I'm not going to say this moonshot fast growing side of my career didn't grow as quickly as the slow growth side of my career. I never thought of it.

jon_stoddard (07:21.662)
Ha ha ha.

jon_stoddard (07:31.712)
No, I remember we got to, we raised some capital for a turbo square from Intel and then he's like, okay, the door is open and it was crickets. There's just no revenue, no customers. No, it was a marketplace and it just wasn't happening for a long period of time. Yeah.

chase_murdock (07:50.024)
Yeah, you learned some really powerful lessons though, when you are building companies from zero to one. You learn a lot about customer validation. You become kind of a multifunctional Swiss army knife entrepreneur because you have to wear all the hats, HR, finance, marketing, sales, product. And I think, looking back, fast forwarding seven years later to founding Taylor Coakry where we're sitting today, I think what Adam and I are seeing is that

chase_murdock (08:20.084)
of company building and come into conversations with prospective acquisitions, allowing us to more deeply understand how the organization functions. A lot of holding companies today are built on this strategy where you go and you buy an established business that's enduringly profitable. It's been around for a decade plus. Maybe it's here on your growth rate is in the single digits, maybe double digits if you're lucky. And the strategy is make the acquisition, bring in some debt if that's how it's financed,

jon_stoddard (08:49.25)
All right.

chase_murdock (08:49.984)
business up. Don't pull it off of its trajectory. I'm fast forwarding a little bit, but a lot of what we do at Decata is kind of the opposite of that. And it's so deeply influenced by mine and Adam's background where we come into our companies and we definitely try to deeply understand the founders' intention, their dream for the business, understand so that we can honor their legacy of what the company was built on because they created that company

and we've been there and we can respect how hard that is. And they've done something that most entrepreneurs fail to do, which is catch that genie in a bottle, product market fit and create a lasting company. But we come in, we respect that, we understand that, and then we go try to enhance it and bring these resources to the table that most small businesses just don't have. A full-fledged marketing team, a finance team, an HR team, so that we can run, for example, a fang level caliber recruiting process inside a small services business,

recruiting processes in this teeny tiny, you know, a few hundred dollar a year revenue business where there was no hiring function before we came on board. So I'm skipping around a little bit, but to us, that is one of the powers of a holding company is you have the ability to learn from each company. You have the ability to build a shared resource organization at the hold code level that can give each operating company an unfair advantage.

jon_stoddard (10:10.85)
I want to tap into that something you said about, it's sort of like an apprenticeship that you went through and this startup learning the avatar of the customer really deeply, what motivates them, who they are, what demographic, what psychographic, and then bringing that skill to a small business so that you understand that industry. I got to tap into that, because that's really important because you're in a startup, you got to figure out, you don't have the luxury of time. You don't have revenue coming in, you're spending somebody else's money,

right here, right? And at the end of the runway, it just drops off. So if you're flying as big jet, just know that it's dropping off. Yeah. Yeah.

chase_murdock (10:53.624)
Yeah, I often liken the venture backed ecosystem as being built, and this is maybe a little too critical, but as being built on the arrival fallacy where you're trading a lot of things in that year and a half after you raise funding where like you said, you have a very clear runway and you have to move as quickly as possible and break as many things as possible to get to that next mile marker so you can raise your next tranche of funding, whether it's revenue, customers,

chase_murdock (11:23.444)
culture where you're working 60, 70 hour weeks, you're stressed, you're yelling at people all the time, or at least I was, because we have this finite deadline. And it creates this culture around intensity where you have to force the company into existence. Because the world prefers atrophy, it prefers not to have your company in existence. And your job as the entrepreneur when you're going from zero to one is to go change that, to go force your company into existence.

chase_murdock (11:53.484)
an acquisition you try to go from two or sorry you try to go from one to two or one to ten is you have a business that's already captured that that already exists in the world and your goal then is to help make improvements so that you can unleash its potential to greater heights. It's a very different way of operating. There's some entrepreneurs I know who are incredibly gifted at zero to one and that's what they're wired for and then there's others who are more gifted and more wired for one to two and that's where I think me and my team really

jon_stoddard (12:08.691)
Yeah, yeah, yeah.

chase_murdock (12:23.705)
process, digitization, and really helping a great idea reach its full potential.

jon_stoddard (12:26.45)
But there are some gifted people that are zero to one. Now it's those guys that's all, you know, David, Sacks, and Calacanus, and Tamath, Paula, Tapetia. Those guys is really good at going from zero to one. Anyway, how did you, let me ask you about your partner. How did you know that this is the guy, individual that you can confide in, trust, and with your money and with your secrets and your everything else?

chase_murdock (12:59.764)
Yeah, I have, I'm biased, but I have the best business partner in the world. And I think we've built a partnership that took a lot of work and seven years later, still takes work, but we've reached the point that I think, you know, anyone wants in a partnership where, you know, we can kind of finish one other sentences to use a cliche. And where I know whether he and I are on the same page just instinctively. In fact, I even know when we're not on the same page, and I don't even need to talk to him because

jon_stoddard (13:25.07)
What are those looking, what does that look like? Just curious. Because I always tell, I love this story. I don't know, somebody was telling a story about where, hey, I want this guy brought Charlie Munger to a party and say, hey, I want you to meet this guy. He's kind of like you. And it was Warren Buffett. And then they sat and talked for not just the hour dinner party, but it was next six hours. They talked about business and life and explicit.

chase_murdock (13:53.065)
Yeah. Yeah.

jon_stoddard (13:55.09)
and more above it is liberal-evolveds-democratic. So they're completely different political ills, but their minds to come together to make one plus one equals eight.

chase_murdock (14:07.724)
Yeah, we broke a convention which was we were really close friends prior to going into business together and you hear often don't do business friends, right? And that's tested our relationship for sure. I think the best business partnerships, best marriages, the best partnerships in a business setting are born out of, you know, really having this deep level of self awareness, knowing

jon_stoddard (14:13.891)
Yeah, yeah, yeah.

chase_murdock (14:38.084)
I heard some advice actually on a podcast a couple months ago that has kind of stuck with me, which is a recommendation on how you build a great partnership is try to make it a contest of who treats the other better, who showers the other better in setting them up for success, or when there's a conversation on comp, who can be more gracious to one another. I don't think we practice that perfectly per se. I'm not going to sit here and say, that's our idea and we do that well.

jon_stoddard (15:00.15)
We're human. We're human.

chase_murdock (15:08.124)
Adam and I are probably at each other's throats, but there's also times when, you know, at the end of a really long week where we're exhausted and where it felt like everything went wrong, it's like, Adam, can we grab a beer? He's like, yeah, let's grab a beer. And in those moments where you have that camaraderie in the battle of building companies, it pays for itself to infinitely fold. So it's an act of humility. It's an act in like, you know, knowing yourself and respecting and honoring your other partner and trying to treat them really well.

at Decado, we haven't raised outside capital. Essentially founding company one, profits of that funded the acquisition of company two, profits of one and two funded three, one and three funded four and so on and so forth. And refusing outside capital has been a very deeply close value that Adam and I have held since day one, in part shaped by, exactly right, in part shaped by those scars from VC, which is I tend to prefer today moving more slowly

jon_stoddard (15:52.41)
that it's your scars from VC capital.

chase_murdock (16:07.684)
control of our company's long-term destiny than the alternative. We essentially flip the VC model on its head. The reason I bring that up on the heels of talking about our partnership is it allows us to operate in a much more long-sighted way, hence the name Dekotic Group. It's a nod to decade where the best companies plan and think in decades not living from one financial quarter to the next. What that means is sometimes Adam and I slow down and say, you know what, let's slow this

jon_stoddard (16:37.05)
Yeah.

chase_murdock (16:37.724)
same page before we advance this idea. Or we just have removed that pressure of speed because of that finite runway we talked about at the beginning of this conversation, where when that's off the table, it really lightens the load. Now, we're both driven individually, and so we're still quite driven, we're still growing aggressively.

jon_stoddard (16:53.132)
That's like the leasing attachment. Like, hey man, you're gonna die anyway. So just take your time.

Yeah, yeah, yeah. So you said that raised outside capital. How did you purchase that first company? Was it all cash or did you have some debt or what?

chase_murdock (17:02.712)
Four of them, but I think that's probably right.

jon_stoddard (17:12.89)
Oh, you start? Okay, okay.

chase_murdock (17:14.164)
So we started our first company seven years ago. And then we made our first acquisition about two years ago. We financed that through our own equity and some debt. We made our next acquisition using our own equity and no debt. We made the next one after that using our own equity and a little debt. And then we financed the last one just with our own equity and a seller note. So we've, across four acquisitions, we've been fortunate where we've only had to use debt twice. And so what that means is across our entire holding company, globally, our debt service

is quite favorable. Now, could we have grown much more quickly and aggressively had we raised outside capital or brought in more debt? Almost certainly. But we're on this long-term multi-decade mission. Where really what we're trying to do is make a dent in our community here in Salt Lake City and create a special Utah holding company, acquiring what we call community asset businesses. Where these are businesses that actually have a real human connection with the community on their block in their local neighborhood.

in their own sphere of influence. We feel like business has the opportunity, especially small business, has the opportunity to transcend beyond just a money making vehicle and really become a rich part of the community. And that was shaped by our founding of Dakota being on the heels of COVID-19 when we watched 30% of Main Street businesses close overnight. And we watched the richness of our local community start to erode.

jon_stoddard (18:30.471)
Yeah.

chase_murdock (18:44.444)
If we're building a holding company together, let's build one that encourages more community asset businesses, not fewer. Let's build the kind of Salt Lake where we have fewer Amazons and large mega corporations and really find a way to steward special community asset small businesses in Salt Lake. When the owner's ready to retire, instead of those businesses shutting down, let's be a buyer of choice where we can acquire it, steward it, honor that legacy, but also grow it into its next

jon_stoddard (19:12.85)
Well, what is your thesis on that? I mean, is it a very specific, like if I look at Constellation Software, Mark Leonard, he'll say, hey, we're looking for business in between this and this revenue, this type of, and this type of management, et cetera. Very specific.

chase_murdock (19:34.505)
Yeah. Yeah, our thesis is absolutely evolving. So to explain how we got to where we are today, I have to take a step back. So Adam and I, unfortunately, are not independently wealthy, nor do we have a rich uncle, sadly. And so what that meant is that in order to go build a multi-company holding company, we had to move slowly and use our own financing. And so that's meant that we've had to buy smaller than average small businesses. I sometimes refer to small businesses that are doing less than about $5 million a year as being

of small business because when you're under 5 million a year, you do not have a robust management team. You don't have a professional operator usually. And your room for error is next to nothing because you're just so small. And that carries a lot of risk. And that's why typically holding companies are acquiring much larger than a business that's doing exactly right. We didn't have that luxury had we had that luxury, we probably would have bought larger businesses on average, the businesses we've been buying are doing

jon_stoddard (20:17.75)
Yeah, they have management in place. Yeah.

chase_murdock (20:33.304)
And so that's quite small and that's all we could afford to buy. And so really what we've had to focus in on is exclusively acquiring businesses where we believe we can roughly 5x the business in roughly five years. So in other words, we're highly diversified across our portfolio five businesses. We have a luxury retailer, a fine art studio, a construction firm, an electrical contractor and a custom hat maker. Highly diversified, a little bit ADD.

that we're not focused on that is diversification is explicitly part of the thesis, but we're buying at such a small level where we're having to look for businesses where there is an opportunity that we can take our experience in building zero to one and deploy that into the operating company and accelerate growth. So for example, when we bought our first business, Workshop SLC, we closed the year out having five X the business in the first 12 months, the next year 400%.

jon_stoddard (21:26.85)
How big is it when you purchased it? Workshop at SLC.

Okay, okay.

chase_murdock (21:32.784)
It was a few hundred thousand a year. So it was a very, very small proving grounds for us. And we were able to come breathe life into a business that really kind of deserved it. And we've moved up the chain since then. So year on year this year, we've grown about 55% organically, irrespective of who owned it. We've been able to grow revenues 55% year on year in our first year of ownership.

jon_stoddard (21:36.711)
Right, right, right.

jon_stoddard (21:53.95)
bottom line net income or even revenues and all the, okay.

chase_murdock (22:00.144)
That's top line revenue. And so again, kind of our thesis is built on and not the traditional model, which is year one, try not to optimize for growth. Just get in there, learn the business and keep it chugging along. Our thesis is, no, let's jump in there and let's go breed some love and energy into the brand, into the marketing funnel, into the sales team. Let's bring in a professional management team and let's go pull that lever of growth rapidly so that we can get out of that small business debt zone.

jon_stoddard (22:24.07)
Yeah, so that's a challenge presents a challenge. I mean, it's small businesses definitely have upside because they're not optimized, but you have to become an expert in the niche and you've got three different niches here. And I'm seeing like you've got a workshop for artists built by Design and Construction Company and a hat maker, kind of a haberdashery kind of deal. So how do you become like your fingers

and becoming an itch on this, what are you doing?

chase_murdock (22:59.864)
I mean, what's integral to that is one of our primary duties, which is hiring a great operator who knows the industry well and supporting them and building a great management team and giving them a long-term runway to being successful. Right? So in other words, if Adam and I had to become experts in the general contracting business, the electrical contracting business and custom hat making, we would certainly fail. We can. Now we've come a long way since our ownership of each of those businesses, getting to know

chase_murdock (23:29.824)
for growth and value and helping them focus on that. But our job is to be that hands-on advisory board that we were with Taylor Co-operative in the early days, which is help our operators and management teams identify what to work on, put a budget together, develop a cohesive strategy, and meet with them regularly to make sure that we're moving the needle on that. So it comes down to this process of almost letting go, and not being in the trenches in every single one of our businesses,

the operators that we plug in to go do that on our behalf and work alongside them to be successful.

jon_stoddard (24:02.39)
So how long before in the workshop at SLC, did you find somebody to run that? Because it's pretty small revenue, not enough revenue to actually pay a general manager. How long did it take to find somebody?

chase_murdock (24:11.886)
Well, that's...

chase_murdock (24:19.924)
Yeah, so in three of our five businesses right now, we kept the original operator, the original team in place and promoted from within to allow them to step up into the operator. And so that's what we did with Workshop, that's what we did with Build by Design, and that's what we're currently doing with Tat and Barrett, our hat maker. And so that's not always the playbook, it kind of depends on the seller, right? And what infrastructure's already in place. Sometimes the sellers, it's like, hey, I want to step up and continue running the company

jon_stoddard (24:26.98)
OK, OK, OK, right.

chase_murdock (24:49.944)
three to five years. Others are like, hey, I'll give you as much time as you absolutely require, but then I'm out. And our job is to figure out where they are on that spectrum and build it.

jon_stoddard (24:56.47)
Yeah, let me ask you about that because a lot of people, what happens is if you say, you know, it's either the number one guy goes, okay, I'll sell you and I'll stay with you for a while, but I want out because I'm burned out. But then you take over a lot of the duties that he was doing, the hats he was wearing, and now he's a lot freer to do what he actually likes to do. How many times did that happen with your five acquisitions? I got four acquisitions.

chase_murdock (25:27.185)
That is one of the most relevant topics of conversation when we meet with sellers, and we meet with sellers regularly here in our community. And oftentimes, whether they're staying on or not, the way we try to position Dakota Group and help them understand the role that we play is as founders, we understand and honor what you've built and the legacy that you want to maintain. First and foremost.

chase_murdock (25:55.764)
a breadth of resources on day one that you haven't had the ability to afford, whether it's again an HR process, a head of marketing, a head of finance, and we can come in and we can provide what you've always wanted to provide and help give it that jet engine fuel to help it reach the next level. And third, if you want to stay part of that, we'd love to work alongside you. If you want to take two bites out of the apple, we'll give you some liquidity to acquire the business outright or majority today. And if you want to build alongside us, we're happy

jon_stoddard (26:24.35)
How do you prove that?

chase_murdock (26:25.084)
chemistry and alignment between us. So whether they stay on the block, that's a position early on in those conversations.

jon_stoddard (26:28.75)
How do you prove that when you say, hey, I can bring a ton of resources that will free your time up to do what you like to do in the business? How do you prove that? Do you just say, hey, well, here's our accountant, have a conversation with him? And how long does that process take? You convince him that we have these resources.

chase_murdock (26:48.184)
Yeah, we call it our car wash. I stole that term from Chenmark, who we deeply respect and who are years and years ahead where we're at at Ducati Group, where you have this beautiful truck. It's a little muddy, but it's a beautiful truck that goes into that car wash. And by the end of the car wash comes out as a squeaky, clean, shiny new truck that is adopting GAP accounting principles that has a refreshed brand, a digital marketing funnel. It has HR practices from a handbook to a recruiting process, and so on and so forth.

jon_stoddard (26:50.75)
Yeah.

jon_stoddard (26:58.05)
Yeah.

chase_murdock (27:18.124)
done at the other company showing them our track record, letting them come into the office and see the kind of people that we hire and what they care about and what we talk about, the fact that we don't have outside capital, the kinds of businesses we've acquired and the role that they play in the community, and really just letting our track record, ideally, speak for itself.

jon_stoddard (27:33.07)
Yeah, when you have these portfolio companies, how is the communication? Are you in deluge with calls? I mean, extreme, a lot of calls, I need help to, I don't hear from anybody until there's a problem, or are you actually putting your fingers in and helping them along the way?

chase_murdock (27:51.447)
Yeah.

chase_murdock (27:56.144)
Yeah, so we developed something we call the Operating Company Maturity Scale a few months ago. And what it was was this attempt to try to figure out what our companies need the most from Dicada Group right now and to help communicate to our operators and their management teams what ideal looks like. So it's a one to five scale, five being high maturity where the management team is incredible. They're focused on the right things. They've been there. They've done that before.

Decota operates as a board of directors effectively. On one side, meaning we've either freshly acquired it or it's smaller and in need of some professionalization, Decota is deeply involved. We're in there daily. We're helping run the business as well as build it. And it's full contact sport day in, day out, helping the company grow and get to its milestone, helping the company hire people, helping the company find a great operator. And we went through and we scale our operating companies on a quarterly basis.

score across five companies, that net average essentially defines how busy we are. If Adam and I and my team at the Dakota level are slammed and working 60 ROEs, it's a result of some immaturity, and I don't mean that in a bad way, immaturity on our journey across the portfolio. When we get to a point where our net average is over about a three, that means we're acquisition on. We're ready to rock and roll and add to the portfolio. And the goal that we communicate to our operators and management team is while we are here to

with shared services, hands-on involvement when you're a stage one. The goal is eventually to move to a stage two, three, four, five, and our job eventually is to hire and get out. Yep, yep, and so each operating company's on their journey, the idea is when we acquire a company, we make some one-time investments, capital and time. And the goal is to put that capital into a really effective car wash, get it on track for strong growth, hire a great operator and a great management team,

jon_stoddard (29:30.79)
And these are laid out, right? These are laid out to your owners, yeah, yeah. Yeah.

chase_murdock (29:56.324)
And then the time is the time that it takes to go do that. We're doing a lot of things that aren't scalable in year one. We'll even burn down EBITDA in year one if we have to in order to position the company properly for multi-decade growth. So we're almost on the spectrum of like a Berkshire Hathaway on one end to like Y Combinator, a venture studio or an accelerator. We're much closer to an accelerator than we are to a hands-off holding company, especially early on. And that's fine.

chase_murdock (30:26.324)
we're putting in sweat equity and time in order to go build our companies and get them out of the debt zone. And then ideally long term, we're buying companies a little bit larger in size where some of that autonomy and professionalization comes with the acquisition.

jon_stoddard (30:35.59)
Let me present a potential problem. Like the Northern Electric can built by design construction. It's a service type based business. And if you turn on a funnel and they get a lot of businesses, you can only scale by how many people you need to hire to help do the jobs. How do you, if you had a problem with a guy was, he's great at running this $500,000 business, but he's not great about hiring and running a $1.5 million business.

chase_murdock (31:10.284)
Growth is hard and growth really helps you hone in on what matters most as a holding company, as an operating company. The faster company grows, typically the more it burns in EBITDA. It's hard to grow 70% a year and put down 20% EBITDA margins. It's just really, really hard to do. Typically the more you grow, the more you burn, the slower you grow, the more profitable you can become. We are currently growth on. That's our focus at Decata.

chase_murdock (31:40.504)
for growth. And as you're growing the rate we are, again, about 55% year on your growth from 2022 to 2023, you're breaking a lot of things. You're breaking process. You're outgrowing software. You're outgrowing sometimes people. And what I communicate with our management team is our job as operators and leaders is we have to grow and develop personally and professionally at a rate just as fast or even faster than the growth rate of our companies. And for me at Dekata Group,

We three X our holding company over the past 12 months through acquisition and organic growth. Have I Developed professionally three X. I'm not so sure I have really big shoes to fill And and I communicate that as well out to our operators of our job is to invest in you send you out to conferences Get you a professional coach or an executive coach if that would be helpful and your job is To grow at the same rate or faster than the company. Sometimes we outgrow people

chase_murdock (32:40.364)
treat people incredibly well. We part with them on great terms. And usually it's quite obvious when we outgrow an individual why, you know, we're very good at identifying, you know, metrics, leading indicators on how the business is performing, what's going well and what's not, so that we can have a really honest and kind conversation around how a business is performing and what's standing in the way of growth. And unfortunately, we have to operate in a really growth oriented mindset right now, because again, any business

that death zone. The death zone of Mount Everest is once you reach over a certain level of altitude where your room for error is low. You have no cushion. You have to move quickly and you have to get out of that death zone as quickly as possible to return back to base camp safely. I almost like in that it's a little extreme but I like in that too the businesses we buy are in that in that death zone and we need to get out of that death zone quickly and to do that we have to implement technology we have to level up we have to grow quickly and that's that's the process of where we're at and so

right now our average maturity rating across our portfolio is lower than an odd of B and what that means is we're really hands-on and what that also means is we're not looking at average.

jon_stoddard (33:45.67)
So what do you, yeah, what are you saying when you're saying that maturity rate is low?

chase_murdock (33:53.924)
Yeah, it means we're very hands on. It means some of my peers run a holding company and the Act More is like an independent sponsor. They're out acquiring companies and looking at acquisitions all the time. We have to balance looking at acquisitions and running our companies and supporting them.

jon_stoddard (34:04.85)
You don't have a mandate for 30% growth, right? For 50% growth, which would put some, yeah, gotcha.

chase_murdock (34:14.784)
Right. Yeah, so right now the theme is, let's get our maturity scale up, and that's a really kind of wonky way of saying it, but right now we're building capacity in our businesses. We're hiring better and better managers. We're adding to the management team. We're supporting our operators, and we're helping them increase capacity to drive growth across portfolio. Even if that means we're gonna make fewer acquisitions this year as a result of that, that's the right thing to do for our long term mission.

jon_stoddard (34:36.774)
Yeah. So who do you go for inspiration, coach, and growth? Because you've got to grow too. Yeah.

chase_murdock (34:45.224)
Yeah, I've got an executive coach. Yeah, yeah, yeah, yeah. You know, across therapy and an executive coach, I'm able to kind of fill the soul. And then I have two really phenomenal peer groups that I was fortunate enough early on in acquiring businesses to meet some folks that really inspired me and kind of come at ETA, entrepreneurship through acquisition, from a very different perspective than myself. And one of my groups we meet every other week,

signal group and we get together annually or a little more often. And it's different folks at different stages across the journey. Most of them are youth. No, they're kind of more private, they were just created. They're not, no one's paying anyone anything. It's peers who have decided, you know what, building is a lonely job and it's really helpful to have camaraderie and guidance as you build. And so one of them is a group of holding company CEOs. So we all run holding

jon_stoddard (35:18.81)
of these public groups that we would know about.

chase_murdock (35:45.264)
of different stages. And that's been really helpful to me, John, because it is a very lonely process. And emotionally, the more I'm able to show up for my team and be present and focus on the right things and not get distracted by the wrong things, the better we perform. And I'm taking that kind of new part of my job really seriously of being really thoughtful and being really decisive with our strategy and the decisions that we make. So that's perfect.

jon_stoddard (36:07.63)
Yeah, so let's say you're working 60 hours, you're working 60 hours now or whatever that time is. I mean, how is that different from the 60 hours you're dealing with the BC companies?

chase_murdock (36:25.364)
Yeah, about seven years ago, I started to recognize a shift in what really drives me in my career. I think the first 10, 12 years, the folks I looked up to were the Zepcherbergs of the world, who were on the Fortune magazine covers, and I really got my fulfillment as the frontman of my companies. It was all about me. And the older I've gotten, the more I've matured on that. And a lot of what we are doing at Decada, me and Adam, is operating behind the scenes

our operators and being that front person for their organization. And the fulfillment that comes from that of really being, again, that hands-on advisory board, I found to be so much more fulfilling than back when I was in the rat race adventure on the treadmill trying to act like I had everything together and race financing and recruit people. Today, a lot of where Adam and I spend our time, it's incredibly fulfilling. We're in front of the whiteboard with our operators, helping them think through an issue. They call me when they have to let someone go or when they had

and they're disappointed. So we're shoulder to cry on. We're a sparring partner in ideas. We're a whiteboard partner, a spreadsheet partner on a financial model. And that's really fulfilling, because we can take that backseat and we can really help empower and support our operators and their management team in being successful. It was a big success in my career, but it's been really fulfilling.

jon_stoddard (37:35.331)
Yeah, so...

jon_stoddard (37:39.65)
there's a big shift. Do you feel like you're being in a much more of a teacher mentor mode to today than versus where you were? Yeah.

chase_murdock (37:50.204)
Yeah, I'm not sure my easiest coach is, yeah, a good coach is sometimes riding it because you can perform better. Sometimes it's rallying because we're here to win and, you know, we're on a streak. And, yeah, it's really fulfilling to get, you know, phenomenal operators who have great industry experience and, you know, be that sounding board and really help coach them to success and be available to them as a partner in crime.

jon_stoddard (38:12.613)
Yeah.

jon_stoddard (38:17.531)
Are any of these companies do the sellers own any percentage of the holding company?

chase_murdock (38:29.264)
No one owns any equity at the holding company level, aside from me and Adam. And so, yeah, we have a couple sellers in the cap tables of some of our operating companies.

jon_stoddard (38:30.397)
Yeah.

jon_stoddard (38:36.65)
Okay. How is that changed when people start seeing what you're dealing with five companies? How has that changed, you know, attention and celebrity? Are any investors coming to you say, hey, I'd love to let me know if you remember and she's just taking money.

chase_murdock (38:56.844)
We get a lot more emails a week than I would have thought, family offices and folks who maybe don't know our focus of refusing outside capital. But I take that less about as like a compliment to me and Adam personally and more as holding companies are an incredibly advantageous way to deploy capital. As I look at my role, having evolved over the past two years, it's a lot more about capital allocation, human capital, real financial capital. And what's great about holding companies is you have this huge surface area of capital allocation

opportunities. Internally, every day there's a list of something we could go to deploy capital into, whether it's buying a truck to improve productivity, whether it's expanding a building, whether it's something small. And then we have external capital allocation opportunities, acquiring companies. And so a holding company is this really beautiful, and this is coming from a naive entrepreneur who's never approached anything in life with the investor mindset. But now we're having to really shift and think a little bit more as capital allocators, and it's a really beautiful vehicle for capital

our capital into three different buckets. Cash reserves, make sure we're always good to go for a rainy day. Internal capital allocation and external capital allocation. External being acquisitions and tuck-ins and then internal being investments we can make into the stock market.

jon_stoddard (40:06.692)
Does that get an equal split? 33, 33, 33?

chase_murdock (40:14.084)
Oh God, I don't know. We're still maturing that process. We're pretty, it's a little west right now, if you're done. But yeah, we're always open to looking at external acquisitions. Right now, our constraining resource is not capital. We have the capital to go take down more acquisitions. Our constraining resource right now is throughput and like operational bandwidth. And again, coming back to that operating company, maturity scale, we need to build more capacity amongst our management team and our operating companies

jon_stoddard (40:15.319)
Yeah.

jon_stoddard (40:42.31)
So that sounds like a management challenge that you've got to figure out yourself on how to do that step back.

chase_murdock (40:44.104)
make more acquisitions. So we're doing a long view term for our application.

chase_murdock (40:53.824)
Yeah, and I want to be clear that it has nothing to do with a lack of competency with our managers. They're phenomenal leaders across the board. What's tough is we're trying, we have to grow our operating companies at neck breaking speed. Again, 55% you're on your growth.

jon_stoddard (41:06.031)
So why? Why? Why do you have that imperative? You have to grow.

chase_murdock (41:14.984)
I mean, fair. Do we have to know? We would like to because we see all the time that that lack of redundancy in these teeny businesses, that no room for error in these small businesses, is a very big risk that we've taken on at Decata Group. We have made bets that are higher risk, but higher reward. And the way we reduce that risk is to grow out of the death zone and get into kind of better territory where we can recruit

chase_murdock (41:45.044)
to that team and we're in a little bit more stable of territory. So instead of, let me put it this way, in the absence of having outside capital or being independently wealthy, we've had to build the Cotta Group with sweat equity, which is hustling our tails off, jumping inside these businesses and being partners to our operators. And eventually, hopefully we can buy that operational maturity and we can come at it more as providing capital and being long-term owners to an organization that already has

jon_stoddard (41:45.476)
Yeah.

chase_murdock (42:15.144)
you know a very meaningful level of growth established but we're just not there yet so we've got to go build to that destiny.

jon_stoddard (42:16.33)
Yeah. Do you have any intentions of accident or is this a buy and hold forever?

chase_murdock (42:27.944)
Yeah, it's a multi-decade hold, no intention to sell. Yeah, it's to us because we don't have an IRR target, we don't have a return on capital we're trying to achieve because no one even talks like that at Decada Group. To us, the question becomes, would I rather hold this business for a decade or two, or sell it for three to six times earnings? Three to six times earnings for 20 years. So for us, where we're building a model where we have this flywheel, one's fully built, where we can be this advisory board

It's so much more in our best interest to just hold it perpetually and that allows us to be better stewards to acquire businesses that are more like community assets and You know really build a purposeful holding company that Adam and I set out to build back two and a half years ago in Florida

jon_stoddard (43:09.631)
Let me ask you about this free cash flow excess and how you decide to pay yourself out of this. Like, how did you decide to pay yourself? Reasonable or is it like Congress going, hey, you know what, we should vote ourselves a raise? And they always do. It never fails to pass.

chase_murdock (43:31.684)
Yeah. Yeah, I think one of the values that keeps Adam and I so well aligned is we are very long term oriented. Every dollar we give ourselves today is a dollar we could have allocated into a phenomenal investment opportunity inside or outside of our portfolio. And we're very cognizant of that. And so our salaries, Adam and I are definitely not the best paid among our portfolio. We're maybe in the top third, but we're nowhere near in the top five or 10. And that's across a small

live comfortably, we're not eating ramen, but we are very long-sighted. And again, I think a lot of this comes out of the culture of zero to one, where I've built so many startups in my career genre where I didn't take a salary for the first 12 months and I was truly eating ramen. And so yeah, exactly. So I think some of it comes out of that. But in a long term, the goal is that we want to be able to create really incredible wealth opportunities for our operators, help them get into great businesses,

jon_stoddard (44:11.97)
Yeah, I know, that's crazy, right? Until you get funded by the DC. Yeah.

chase_murdock (44:31.584)
and have great outcomes. If we're the buyer, when they want to exit and leave the organization, that's great. Let's tee them up for success, pay them really well, and take great care of the people who run our companies and steward on behalf of the sellers you sold to.

jon_stoddard (44:41.31)
Yeah, I got a question. What does Ernest Hemingway mean to you?

jon_stoddard (44:51.572)
Well, I've got a picture of Abraham Lincoln. So, yeah.

chase_murdock (44:51.848)
So you're clearly referencing the picture of Mr. Hemingway.

chase_murdock (44:58.684)
You know, Ernest Hemingway, I think, is the original Renaissance man. If you were to pick up a biography on Hemingway, you'd be fascinated to hear all of the stories of him crashing airplanes over the sub-Saharan desert.

jon_stoddard (45:11.533)
He's the epitome of a man in the arena. He, yeah.

chase_murdock (45:18.184)
He is, he is. And so I think like it's a really beautiful thing to live an intentional life where you're passionate about multiple things. Hemingway really embodies that. A lot of people know him, of course, for his writing. But as you really start to understand how he lived his life and what really fueled him and the passions he has for anything from bullfighting to hunting to riding to, you know, skiing in the outdoors, a true renaissance in the game.

jon_stoddard (45:39.251)
Don't expect them to be a great dad or a great husband.

chase_murdock (45:46.224)
Yes, and definitely it's a definite faults in earnest for sure. But yeah, I think like to me, he kind of represents that shift. I talked about seven or eight years ago where the goal really evolved from thinking I wanted to be a Fortune 500 CEO naively in my, you know, when I was 22 and dumb to really evolving to, you know, definitely want to be successful and definitely here to make a dent in my career, but not at the expense of

jon_stoddard (45:47.15)
Yeah.

chase_murdock (46:16.284)
and intentional life with married hobbies and passions and community involvement that really Ducato allows me and Adam to have.

jon_stoddard (46:20.416)
Yeah.

That's great. Chase, I wanna thank you so much for being on my podcast, Top M&A Entrepreneurs. Thank you so much.

chase_murdock (46:32.944)
Yeah, it's been a fun, wide conversation. So thanks for the good questions and conversation, John. I appreciate you.

 

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