Summary

Jordan Hammond shares his journey of starting and growing Genuine Comfort, an HVAC company, after experiencing a bankruptcy with his previous business. He emphasizes the importance of having a competitive advantage and being able to execute on it in reality. Jordan also discusses his strategy of acquiring competitors in the industry and building relationships with them over time. He shares insights into the valuation and financing of the acquisitions, as well as the challenges and successes of the integration process. Jordan Hammond discusses two acquisitions he made in his business and the impact they had on his company's growth. The first acquisition was a PE-owned business that was struggling and not profitable. Hammond saw an opportunity and acquired the business, turning it into a profitable venture. The second acquisition was a mom-and-pop business with only two owners working long hours. Hammond acquired the business and saw significant growth in revenue and profitability. He emphasizes the importance of building a strong leadership team and focusing on key metrics like inventory efficiency and revenue per employee.

Takeaways

Having a competitive advantage and being able to execute on it is crucial for business success.
Building relationships with competitors can lead to acquisition opportunities.
Valuation and financing are important considerations in acquiring other businesses.
Integration can be challenging but with proper planning and support, it can be successful. Acquiring struggling businesses can be a great opportunity for growth and profitability.
Building a strong leadership team is crucial for effectively managing and growing a business.
Key metrics like inventory efficiency and revenue per employee can drive profitability.
Focusing on a niche market can provide a competitive advantage and opportunities for growth.
Being a strategic acquirer in a specific industry offers advantages over being industry agnostic.

 

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Transcript:

Jon Stoddard (00:00.572)
Well, welcome to the show, Jordan. How you doing?

Jordan Hammond (00:03.69)
I'm doing amazing, John. Thanks for having me on the show.

Jon Stoddard (00:07.132)
Well, thanks for being here. I wanted to talk to you about Genuine Comfort, what you've learned from your journey. Now, you started Genuine Comfort, which is an HVAC company, 2010, right?

Jordan Hammond (00:18.878)
I did, yeah. I started in 2011 and that came on the heels of my first business that I started in a retail sector and that went bust pretty quickly. But thankfully I learned some lessons from that I could apply to the genuine comfort, which was actually back then called HC Air Conditioning. We rebranded it about 2019.

Jon Stoddard (00:43.452)
Yeah. So let's talk about those lessons. What did you learn from, uh, and I'm looking at your LinkedIn profile was definitely a bankruptcy. So what did you learn from that? I mean, tell the, kind of rewind a little bit how it started. You got the idea and how big you got it. And then where did it start falling apart? And you go, Oh my God, I got to pull the plug.

Jordan Hammond (01:03.618)
Yeah, day one. Day one I knew it was done. You know, I just wanted to get in the game. I was 22, kind of had a, you know, a God-given desire to be an entrepreneur. And, you know, I just jumped in. I didn't really do the post-secondary route. It was a very short business program. And so it was my, you know, it was my MBA of heart knocks. And it was a retail concept, very low barrier to entry. The competition was fierce.

Jon Stoddard (01:06.283)
Hahaha

Jordan Hammond (01:33.422)
online competition was just ramping up. So literally, you know, as I'm setting up the whole concept, I'm getting blocked out from suppliers by my competition, who's telling these suppliers, key suppliers, hey, if you open this guy up, like we're going to, you know, we're not going to carry you anymore. Just like I would do if, you know, my competition was trying to open up. So, you know, I saw even before we opened, it was before day one, probably, that I was going to have some issues. And, you know, it took about a year.

to kind of before I finally pulled the plug and said that's enough. And it was a tough year, but really your first question was what did I learn? I learned what having an actual competitive advantage looks like in reality and not just on paper. Anybody can write down on a business plan, this is what we're going to do and this is why the customer is going to choose us instead of competition. Are you actually able to execute on that in reality is what matters.

And I wasn't. I didn't have any definable competitive advantage. So going forward, you know, I just, I took that lesson to heart and I knew whatever it is I had to do, I had to clearly be able to articulate to the market and have them actually give me feedback that they would be willing to pay for that competitive advantage, you know, over one of my competitors.

Jon Stoddard (02:49.896)
Yeah. How, when you filed the bankruptcy, I mean, how deep did that go? Was that a business bankruptcy and personal too, or you just like, you know, everybody that watches show like, wow, how far did you have to come from? You know, was it way down in the sand pit or just like, you know, I wrote that off and restarted.

Jordan Hammond (03:09.366)
Yeah, I mean, I had a PG on everything, right? So it was personal. It was personal bankruptcy. So yeah, it was like what 150,000 to 200,000 in liabilities. And, you know, being a guy in my early 20s, you know, I probably could have clawed my way out of that without going the bankruptcy route. I choose to go that route. I don't really have any regrets, you know, about it. I might've thought about it more if I could go back and do it over in my early 20s, thought about how I could claw out of that.

Jon Stoddard (03:12.686)
Yeah.

Jordan Hammond (03:37.61)
Maybe without going to bankruptcy route. Really, you know, the biggest impact was just on my credit, right? The liability going forward on the credit. But it really didn't impair me from starting up the next business, having that bankruptcy. You know, I still got I still got all ended up getting a line of credit when that bankruptcy was only four years old on my credit. And, you know, I might have got lucky in a couple of situations, but it didn't really impair me that much.

Jon Stoddard (04:05.468)
Yeah, maybe they saw something in you. You just kept getting up dead at bat. So this new idea that you came out with genuine comfort, how did you create this, the competitive advantage? I mean, what was it?

Jordan Hammond (04:18.21)
Yeah, competitive advantage wasn't rocket science, it was product availability. That's all it was. Really, you know, I got to start in this space because it is a niche of a niche. And you know, I was working for a company at the time distributing appliances and a little kind of add-on product that they had to selling appliances to apartment buildings, so property management companies was our main avatar, was these air-conditioning products that go through the wall into apartment buildings across Canada.

It's not a big market at all. It's like I'm talking tiny. It's like a 2 million, maybe 2.5 million dollar market across Canada. So I just saw that they were dabbling in it. They didn't care about it. They ran out of air conditioners when they ran out. They didn't order another container from China because they didn't want to sit on them throughout the winter. And I saw very clearly like customers, when it comes to August and it's still hot outside, they got to tell their tenants, sorry, we don't have an air conditioner for you. The tenants sweating in their apartment.

like it's causing problems for them and their business. And we weren't doing anything to solve that need. So, you know, I just kind of ran with it. I made as many connections as I could, figure out how to build half the parachute before I jumped and then jumped and took half of the customers with me my first year. And then the other half that were wondering to see if I was still gonna be around the year after, they ended up coming with me the year after that. And that was really how we got started.

We didn't stay there in just that market, but that was the genesis of HC Air Conditioning back in 2011.

Jon Stoddard (05:52.049)
And you use that line of credit to go buy inventory to do that?

Jordan Hammond (05:56.51)
Yeah, I didn't have a lot of credit at first, so I used something called factoring, as I'm sure people are aware of. A lot of factoring is the most expensive financing you can get, but it gets you in the game. The other financing that I got, and there's stories around this, but I had cash flow issues my first year, even with the factoring. And one of my suppliers from China, a billion dollar Chinese brand, they forgot to bill me for a couple containers worth of product for about six months.

Jon Stoddard (06:02.26)
Yeah, yeah.

Jordan Hammond (06:27.342)
and you know we're talking 150,000 USD, 125 maybe. Like when you're getting started and you just have a million bucks in sales, that's a big deal to float you for that long. And so I got floated by some reasons, bills ended up coming and I ended up paying them, but I got floated with that, by that situation for about six months. And that really, I wouldn't have been able to figure it out, I'm sure, but it was nice to have that cashflow float for that long. And then by my second year,

Jon Stoddard (06:55.809)
Take as long as possible to pay your vendors.

Jordan Hammond (07:00.382)
And don't chase them, right? Especially early on. It's different when you get further along and you want it for reporting purposes to be able to get your books tight. But at that time, I was like, you know, I hope they never send that bill. And then by my second year, I was able to convince a credit union to give me a line of credit, a small one. And obviously, I had an increased interest rate over the traditional FIs.

Jon Stoddard (07:09.192)
Yeah.

Jon Stoddard (07:24.216)
And what kind of size of the business was it the second year?

Jordan Hammond (07:28.675)
We got up to about a million top line and you know, SD at that time, you know, we've been doing about 250 SD. So it was really cool.

Jon Stoddard (07:36.892)
Yeah. And you're running this all by yourself? Do you have any partners or anything?

Jordan Hammond (07:40.81)
No, me and a bookkeeper. Yeah, me and a bookkeeper. I'm doing all the sales. I mean, it's a very simple business at that point. Very seasonal. Yeah, basically. I'm a bookkeeper.

Jon Stoddard (07:42.964)
Yeah.

Jon Stoddard (07:48.68)
You just, you just get product from China and find these property managers that need, uh, in window units and then just apply those. And did you do the installation too, or did they have their on service guys do those?

Jordan Hammond (07:57.456)
Yeah.

Jordan Hammond (08:01.27)
Yeah, no install needed. So we're strictly a distribution company. We don't have any trucks out on the road. We don't do any out on the road service. We do tech service and over the phone. So it's a really simple model. It's a distribution model. And yeah, I was doing it all with a bookkeeper. There's a warehouse component to it, but that's all three PLs. There's a procurement component, but that is extremely simple back then. And yeah, and then you're just selling and collecting the money.

Jon Stoddard (08:10.418)
Yeah.

Jon Stoddard (08:27.152)
And these relationships with the China suppliers, did you actually ever go to China and meet them and say, Hey, I want to see who I'm buying from and what's your process?

Jordan Hammond (08:36.406)
Yeah, yeah, I ended up going over there in 2017. Now I have a product manager and a procurement manager who does that trip annually to China. But yeah, I went over there once, went to Guangzhou in 2017, and this is when we're trying to get deeper into our supply chain and really get to kind of the end of the line with China in terms of like the most effective form of supply. In China, it gets confusing. There's a lot of people that are agents that appear like they're actually the factory, but they're not.

And you can kind of get muddled in all of it. So I went over there and we finally got to the heart of, you know, who is the actual factory and let's start a relationship with them.

Jon Stoddard (09:15.848)
Yeah. And buying more units at a better price.

Jordan Hammond (09:19.45)
Yeah, we've driven down our costs consistently over the years and doing the acquisitions which I'm sure we'll get into, that really helped us just get the knowledge of how to drive those down even further.

Jon Stoddard (09:31.984)
Yeah. So where were you, what kind of revenue were you at when you started these thinking about buying these other companies?

Jordan Hammond (09:33.698)
Thank you.

Jordan Hammond (09:41.234)
Yeah, 2017, 2018 is when I started thinking about it. I just started dabbling with other acquisitions because I was stupid. I started getting outside of my circle of competence. No entrepreneur does that, right? That's not it.

Jon Stoddard (09:56.24)
Yeah, narcissists will punish you. Yes, yeah.

Jordan Hammond (09:59.906)
So, you know, after I learned my lesson a little bit there, I started focusing on my own space and we were about 4 million top line, you know, back in 17, 18 and doing, you know,

Jon Stoddard (10:09.632)
Were you about the same bottom line, about 25%? Yeah. Yeah, and how many people?

Jordan Hammond (10:13.538)
Yeah, well, 15% on the bottom, around there. Yeah, so it was healthy. It helped me for a single lifestyle business. It was, you know, it was, you know, I wasn't, I wasn't complaining for sure, but we were just kind of a mom and pop shop. It was me and a handful of people at this time, a couple of sales reps, you know, A-R-A-P clerk, it was about five bucks.

Jon Stoddard (10:32.956)
Yeah. How did you pay those sales reps? That's curious. Was it a lot of commission, some base commission? Or, I mean, I don't know if there's a standard in Canada, different than United States. Like, I don't know if that's.

Jordan Hammond (10:39.69)
Yeah, boy. I hope.

Jordan Hammond (10:45.67)
Well, it's all different industries. So we paid back then the one main rep I had, I paid very small base. I'm remembering correctly, well, 25 grand a year base. And then the rest commission based on gross margin percentage. So commission not based on the top line, but based off the middle line, based on gross margin. And they did well. He probably made, you know, he was making over six figures for sure.

Jon Stoddard (11:06.865)
Yeah.

Jon Stoddard (11:11.676)
So what did it make the bell ring on these sales? Like how did he become really successful?

Jordan Hammond (11:20.91)
Relationships. It was opening up a new territory is when I hired my first rep. So the province next to us in Saskatchewan. So we started expanding in 2013. That's when I hired him. And I just started opening up, you know, your Canadian geography, but Saskatchewan, Saskatoon, Regina, and they went into Alberta and BC. And it went to the associations, it's going to the trade shows.

It's easy to find all our target customers. At that time, there were only property management companies. We weren't into hotels yet. And so it's limited to how many there are. There's maybe 150 across Western Canada. And so it's finding out who's the decision maker, getting in front of them. There's no marketing component. It was just all outbound tailored.

Jon Stoddard (11:59.63)
Yeah, yeah.

Jon Stoddard (12:10.017)
Just phone calls and creating relationships, yeah.

Jordan Hammond (12:13.138)
So literally just planting those seeds and watering them over time and you know, you have to be the right kind of person to be able to do that. But thankfully, I kind of got lucky with that first tire and we're able to extract them from the post. Nope, nope. So we kind of bumped up against the level, you know, the people that you start with, usually you don't end with, right? So you know, when we were kind of doing our next revolution and getting into professionalizing the business more, he didn't want to make that jump. So that's when we parted ways.

Jon Stoddard (12:20.511)
Yeah.

Jon Stoddard (12:24.712)
Is he still with the business? No.

Jon Stoddard (12:43.292)
Yeah. By the way, I haven't been in any of the other, I used to be living in Platsburg, which is right below Montreal, Quebec. And then the other side where my wife's from in the Washington and that side. So yeah, beautiful country. So what, uh, where did this idea come about acquiring these other competitors? How did that transpire?

Jordan Hammond (12:59.758)
Yeah, and this is beautiful.

Jordan Hammond (13:10.358)
Yeah, so like I mentioned, I kind of got into the ETA, SMB space and just, I got really interested when I started to have a little bit of cash I could play with. I was like, what do I do with this money? Because we're just growing organically at that point. So I had excess cash. I was like, do I put it in real estate? And then I started hearing about this micro private equity and hired a guru, one of these guys back in 2017 and did his coaching program.

Um, and uh, and didn't have, you know, what wasn't a good experience. I'll leave it at that. I don't need to mention names. What wasn't a good experience, but I ended up at this conference in Vegas in 2017. And you know, these conferences, you hear a ton of stuff. Hopefully you take one nugget away that you actually apply. And one, that's it. That's, that's all I needed to make it worth it. So the one nugget I got was a guy that exited for eight figures. And he said the best thing I ever did.

Jon Stoddard (13:56.788)
Just one.

Jordan Hammond (14:07.246)
And the reason that I was able to produce all this enterprise value was when I started in the business, I reached out to all my competitors and I started having those awkward conversations and we built relationships over time. And when they were ready to pull the plug for whatever life circumstance came along, right? Death, divorce, disability, you know, whatever, partner goes away, they called him. And he was like, we ended up acquiring, not because we were like seeking to acquire, but just because we had those relationships.

And it just dawned on me, John, at that time. I was already trying to acquire these little websites that I had no idea how to make money at. I lost money. It occurred to me at that time, why the heck don't I do this M&A thing, which I love so much and I'm so interested in, in my own space that I already know everything about? Right? Or at that point. Yeah, four main ones and then some tertiary ones.

Jon Stoddard (14:57.456)
Yeah, how many competitors did you have throughout Canada?

Jon Stoddard (15:04.202)
Yeah.

Jordan Hammond (15:05.286)
And I had no idea what a roll up was. No, I had no idea. I've heard people use the term, I had no idea what it was. And then when I told somebody this, they're like, oh, you mean like a roll up? Yeah, yeah, exactly. Like a roll up, yeah. Exactly what I was thinking.

Jon Stoddard (15:16.616)
Yes, yes. I'm not trying to be naive, but I am. It's an okay.

Jordan Hammond (15:22.621)
So that's how the idea got planted and when I got home from that conference in Vegas, I literally just picked up the phone and I just started calling my competitors and having an awkward conversation.

Jon Stoddard (15:32.52)
Yeah. How did that conversation go? Hey, by the way, my name is Jordan and I'm your competitor, by the way. And just interested if you ever want to talk about selling.

Jordan Hammond (15:45.25)
Didn't go there right away, but it did sound like a good part. And what it started out with was, you know, hey, I know that we don't compete directly against each other. We did a little bit for sure. And it was saying, hey, like any information I have that I can share that can help you, right? We kind of, maybe we can help each other with making sure we don't run into some of these hurdles. And some of that kind of just fluff and it doesn't mean anything and it's just to get them on the phone.

Jon Stoddard (15:47.561)
Yeah.

Jon Stoddard (16:11.164)
Yes. First, you're starting to kind of colleagues and friends, right? You'd like, Hey, let me help you with best practice. Here's my best practice. You know, like, yeah.

Jordan Hammond (16:20.458)
Yeah, yeah. And I think, you know, the guy on the other end of the phone and you kind of both know like that's not really like it's just kind of fluffy. But the thing that I learned that actually held weight and that actually made a difference was I was just transparent about a lot of stuff. And I kind of led first, like not like giving away anything proprietary or but like really there is nothing proprietary about our business. So

Jon Stoddard (16:30.886)
Yeah.

Jordan Hammond (16:46.474)
I would just tell them, hey, this is kind of what we're doing revenue-wise. This is what we're finding on the cost side. This is what we're finding with suppliers right now. Like, I would just lead with all that. And...

Jon Stoddard (16:55.196)
And were they providing the same suppliers? You'd go to China or different people completely. Because I've done some China business and like there's so many people that build the same thing, but you're right, yeah.

Jordan Hammond (17:00.959)
It was the two of us.

Jordan Hammond (17:06.787)
Yeah, yeah. No, there's definitely some of that. Some of my competitors were different suppliers, different supply chain. Some were getting supplied by the same people, just putting a different name on it. So it was both. But the point being, I led with that vulnerability first. And then over time, it doesn't take one conversation, right? It takes 20. And just staying in touch, shooting a text once in a while, shooting an email.

Just planting seeds, like a guy that I know down in the US and in Tennessee that's acquired over 50 businesses says buying businesses is just planting seeds and watering them. And some of these seeds, they don't come to fruition for 15 years. Right? Sometimes you get lucky and you get one that comes to fruition in six months. That was our first deal. It was, we got lucky. Less. Five.

Jon Stoddard (17:53.588)
Six months from first call to the start. And yeah.

Jordan Hammond (17:59.822)
from first call to closed and like possession was five months. And so that's not common, right? Not even close. So I just, I look at it as that, right? I'm continually planting seeds, building relationships with people in the space. And if I start another search in a different industry, I'll be doing the same thing. And fully expecting that lots of them, they will take a long time to mature.

Jon Stoddard (18:04.425)
Yeah.

Jon Stoddard (18:27.14)
Yeah, and how did that guy, what was one of the reasons why he wanted to sell?

Jordan Hammond (18:33.414)
lockdowns in Canada. So he was, they were more than, beyond strict. We were a communist country for two and a half years.

Jon Stoddard (18:35.645)
Oh, they were pretty strict. Canada, yes.

Jon Stoddard (18:44.768)
Trudeau was just going with whatever, whatever his bureaucrats told him to do. Yeah.

Jordan Hammond (18:49.514)
I don't know who you talked to, we're still a communist country, but we won't start talking politics. So, they were a mom and pop shop. They were making 500k on the bottom line, but they were working 60 hours a week, both of them, him and his wife. They had a couple of people working part time for them. Just that old school mentality that if they want to grow and they want to make more money, they got to work more hours. So, they were just getting burnt out. And then the lockdowns come and the hotel industry gets shut down.

Jon Stoddard (18:53.34)
We'll go there.

Jon Stoddard (19:15.049)
Yeah.

Jordan Hammond (19:19.394)
and they're like, oh shoot.

Jon Stoddard (19:20.808)
Nobody's buying. How much did that affect their business? Like what did it look like? Half. Yeah.

Jordan Hammond (19:24.606)
Mark, you got cut in the head. Yeah, yeah, so at that time he calls me up and he's like, okay, we're ready to get evaluation done. We're ready to chat seriously. And we made that one happen quickly as well.

Jon Stoddard (19:39.712)
How did you feel about that? You don't want to overpay based upon previous years, but you don't want to be a vulture picking off, waiting for them to die.

Jordan Hammond (19:51.042)
Yeah, I mean we were the only ones at the table. So, like, the business is worth what the market determines it's worth. You know, I'm not interested in squeezing dimes and nickels out of people. Don't say pennies, but we don't have pennies anymore. I'm not interested in that. You probably didn't know that. We don't have pennies in Canada anymore. Can you tell by the look on your face? Yeah, they scrapped them. But, you know, like, the market will determine what it's worth.

Jon Stoddard (19:54.633)
Yeah.

Jon Stoddard (19:59.923)
Yeah.

Jon Stoddard (20:13.128)
Yeah, I didn't know that.

Jordan Hammond (20:19.342)
So, you know, we were the only ones at the table and we got a good deal because we were the only ones at the table and we took a risk because we were buying this thing in the midst of the government saying you're not allowed to have your hotel open, which is our target

Jon Stoddard (20:34.78)
no runway on when they would open up, just nothing. Yeah.

Jordan Hammond (20:38.806)
No, no, it was complete, it was complete guesswork in terms of what was going to happen to our economy, right? And how long they were going to be able to keep everything closed. So you know, there was risk there for sure, but we bought at a, at a, at a, at a valuation that, that mitigated some of that risk for sure.

Jon Stoddard (20:48.256)
Yeah.

Jon Stoddard (20:58.376)
Yeah, what was the evaluation?

Jordan Hammond (21:01.016)
We paid one time earnings.

Jon Stoddard (21:03.248)
Yes, sounds great.

Jordan Hammond (21:05.253)
Yeah, and then we got a 25% take back as well.

Jon Stoddard (21:10.496)
Tick back meaning seller financing. Yeah, that's it. Seller now. Okay, 25 years. So he just kind of gets mailbox money. Oh, 25%. Oh, gotcha.

Jordan Hammond (21:11.714)
So annoying.

Jordan Hammond (21:18.93)
25% Yeah, three years.

Jon Stoddard (21:23.889)
Yeah.

Jordan Hammond (21:26.154)
Yeah, so...

Jon Stoddard (21:27.173)
That's a very nice deal. And, but how did, I mean, like originally had you to pay for that. Did he ask for, like the one X right up front or do over time, some kind of terms.

Jordan Hammond (21:40.014)
75% was that close, 75% on value. We financed most of that through cash flow, through retained earnings. We took out a little fixed loan for the amount. So yeah, it was, we paid one times earnings and plus we paid inventory as well, I should clarify. So one times earnings plus inventory.

Jon Stoddard (21:43.197)
Yeah.

Jon Stoddard (21:52.306)
Yeah.

Jon Stoddard (22:00.732)
Was, did he have too much inventory or no?

Jordan Hammond (22:02.93)
Nope, nope, they were actually the other way because they knew they were exiting so they were careful not to not to over do that.

Jon Stoddard (22:09.884)
just whatever they needed. They just had just in kind of time inventory, yeah.

Jordan Hammond (22:13.178)
Yeah, they were running a lean and they didn't have a long supply chain like we do. We have a five month lead time. They were ordering domestically, so it was a lot easier for them to keep their inventory tighter because it was just like, hey, if we need stuff for only a two week lead time, three week lead time away, so they can make those decisions quickly.

Jon Stoddard (22:26.43)
Yeah.

Jon Stoddard (22:34.088)
How did you find their accounting and the finances? Was it clean, ugly, what?

Jordan Hammond (22:40.278)
Yeah, Clean, they were using Sage. They were on top of their books. I had a CFO at the time. He's now on my fractional CFO and on my board. And he did a great job with the two acquisitions. I couldn't have done the integration just myself without him. And he did an awesome job on the book side with the details. And we ran into a couple small issues here and there, but just like the regular stuff that you bump up against in deals.

Jon Stoddard (22:45.652)
Yeah.

Jon Stoddard (23:09.188)
Yeah. By the way, Sage is definitely a level up from QuickBooks. So that tells you something about the financial integrity. Yeah.

Jordan Hammond (23:17.019)
What? Yeah, so we had zero issues there. The integrations on both of them were fairly smooth, except for the people component on one. Our first one we did was a little messy.

Jon Stoddard (23:29.045)
How many people did he have?

Jordan Hammond (23:31.562)
This was our second deal, the one we're talking about, and he had zero people. It was two part-time people and then him and his wife each putting in 60, 70 hours a week. They'd actually let go of both their part-time people during the lockdowns. It was literally just him and his wife. There was no people transition with that second deal.

Jon Stoddard (23:35.536)
Oh, he's at Zero People. Yeah.

Jon Stoddard (23:41.129)
Yeah.

Jon Stoddard (23:49.276)
Interesting. What did that do to your business? And even though the business cut in half, what did that do to your business? Like in then revenue and then the customer list, basically you're buying a customer list too.

Jordan Hammond (24:01.898)
Yeah, yeah, pretty much at that point. That's the asset. Yeah, so initially, I mean, it gave us a bit of a bump. I think their biggest year they did $5 million. So the initial bump was $2 to $2.5 million. And then as the market started to come back in late 2022, kind of mid to late 2022, we bought the business in April of 2021. So then you really start to see it in the subsequent years as the market comes back.

as the integration happens, it took us to, we're going to do about 14 this year. So between our initial four million, yeah, our first, just ourselves getting to 2020, we were at about four million. And then we tacked on about another five million from the first acquisition and then this last one's about another five million. So we're...

Jon Stoddard (24:38.816)
You're doing 14 million this year? That's awesome. Yeah.

Jon Stoddard (24:54.588)
Yeah, the second one was the mom and pop where the two were putting in 60 hours. What was the first one? Yeah.

Jordan Hammond (24:58.706)
Yeah, yeah. So first one was really interesting. First one was a P.E., micro P.E. owned, basically orphan business.

Jon Stoddard (25:08.38)
Yeah, that they cast off didn't want or come to you or what was it? Yeah.

Jordan Hammond (25:11.946)
Yeah, they were just done. So they made, it was a bit of a nightmare from the beginning, I think. I won't get into details, but they bought it and it wasn't what they thought they bought. And then they made two bad executive hires that blew up the payroll, ill-fated US expansion, which many a Canadian company has done. And oh yeah, oh yeah. Exactly. And it's...

Jon Stoddard (25:33.14)
That's always the dream, isn't it? How do we tap into that golden goose? Yeah.

Jordan Hammond (25:41.266)
There's few small businesses that I've seen make it work. Yeah, so they were just done. It was not profitable, way too many people, and they just had no outlook of how they get it back to the black. And in these companies, they have like a business is a skew to them, right? It's a product to them.

Jon Stoddard (26:01.776)
Yeah, yeah. It's just like, is it making money for us? Has it moved the needle or is it not? If it's not, you gotta dislodge it, yeah.

Jordan Hammond (26:10.094)
And it's taking money out of the system. So for every year they have to run this unprofitable business, it's not only we're losing that money but we're losing the opportunity cost of what that capital could do for us in our system to buy another business that's growing at a growth rate of whatever, 25%. So...

Jon Stoddard (26:13.053)
Right.

Jon Stoddard (26:24.616)
Yeah. There's a threshold, like at 30% IRR or 35%. It's not. It's out. Yeah.

Jordan Hammond (26:31.626)
Yeah, this was well below that threshold. So, it was an interesting situation. I hadn't talked to them before, and I just had this gut feeling one day, like, hey, it's time to talk to these guys. And from the day that I called, we had an LOI sign two weeks later.

Jon Stoddard (26:36.209)
Yeah, they cut-

Jon Stoddard (26:53.492)
Was it the owner that you talked to get to this PE owned company or was it somebody employee?

Jordan Hammond (27:02.775)
CEO kicked us up to the PE backers. Yeah, and then we're dealing with the managing director and the guy who's operating the port coat. Yeah, we got an LOI signed real quick. It was an amazing first deal to do because doing a deal with a PE company is like no emotion, just all business. They don't, it's not the PE company they're selling, it's just a deal for them. They do it every day.

Jon Stoddard (27:04.723)
Okay, okay.

Jon Stoddard (27:13.182)
Yeah.

Jordan Hammond (27:29.266)
And these guys were awesome to deal with. I still keep in touch with one of them. Me and the owner of the P company have exchanged some messages. It was a fit for both of us. They dumped it, we got it. We could make something that had no value for them. We could turn it into a lot of value for us. And it worked out both ways.

Jon Stoddard (27:29.544)
Yeah.

Jon Stoddard (27:50.864)
Yeah. And it was losing money. Was it selling the same products, the same different manufacturer or same manufacturer?

Jordan Hammond (27:57.062)
Yeah, this ended up being the same manufacturer we thought. We were kind of dealing with an agent of this manufacturer. So by acquiring this company, we actually got, we got talents. We got a couple of really talented people. We got direct to the manufacturer through them. And then we got this customer list. So it was like one plus one equals 10 for us on this one, John.

Jon Stoddard (28:04.265)
Yeah.

Jon Stoddard (28:18.428)
Yeah. So a couple of years later, that was a definitely a good acquisition.

Jordan Hammond (28:24.662)
That five million in revenue when it was fully realized and we were out of this government induced economy, government constricted economy, it produced a million in EBITDA from that one act. Plus, you know, one of the most knowledgeable, the most knowledgeable person in our space product wise in the whole country.

Jon Stoddard (28:36.672)
That's fantastic. Yeah.

Jon Stoddard (28:45.32)
You brought on staff. Yeah.

Jordan Hammond (28:47.691)
We got that, yeah, this individual massive asset to our team. We got him in.

Jon Stoddard (28:53.32)
Where does that person sit? What kind of role does COO or what?

Jordan Hammond (28:57.643)
No, no, they're more of a project leader than a people leader. So that was actually a big learning. We actually completely screwed that up when we first acquired it. We put this individual who was their CEO, I kind of just assumed, oh, this person's running this company, you know, they're qualified to be our COO and it was not the right seat for them. It was crash and burn. They uh…

It really showed me the expectations at one company can be drastically different at a different company even if they're a similar size. It took a couple years to get him into the right seat to get him where he's effective, but now he's absolutely a massive asset for our team. But we had to get him into the right seat and do a good job leading and managing him.

Jon Stoddard (29:44.23)
Yeah.

So you're doing about, there's two acquisitions later, you're doing about 14 million, they're still at the same kind of profit percentage?

Jordan Hammond (29:48.17)
It's not.

Jordan Hammond (29:54.954)
Yeah, we're going to step up here right now. So we're doing a big ERP implementation. We got some extra payroll because we're trying to really get our organic growth engine going. It's a little bit lower this year, but you know, we where we're at, we should be at 20% on the bottom would be.

Jon Stoddard (30:03.252)
Yeah.

Jon Stoddard (30:09.928)
That's pretty good for a... that's dang good for a distributor.

Jordan Hammond (30:13.45)
Yeah, typical, like best in class is usually 10%.

Jon Stoddard (30:17.12)
I mean, I was like 5% of distribution. Yeah.

Jordan Hammond (30:19.597)
5% normal, yeah 5% normal, 10% you're doing amazing.

Jon Stoddard (30:23.344)
Yeah, that's amazing. So what are you doing to get to this 20%? What is it? Low overhead, great prices on inventory. What is it?

Jordan Hammond (30:33.058)
Yeah, it's a couple things. We've done a lot of good R&D work on our side with these kind of niche products that we've been able to drastically lower our cogs on, but also produce a great unit and so kind of our cash cow product would be 60 to 65 points gross margin on this kind of cash cow product that we have.

Jon Stoddard (30:56.384)
That's amazing.

Jordan Hammond (30:58.238)
Yeah, so we had to put a couple hundred K into it, a few trips to China, it took some years to get there, but it's been okay.

Jon Stoddard (31:03.808)
So now you're doing R&D and taking it to them to design versus just buying off the shelf.

Jordan Hammond (31:10.651)
Yeah, exactly. So we're going to have this partnership with our manufacturer now, which came through this gentleman who I'm talking about who were able to hire from this acquisition. Without him, we wouldn't have any idea how to do any of this stuff. Now we're able to kind of work hand in glove with the manufacturer to help them R&D and they have the tooling and everything, but we actually own the product. We own the rights to the product.

Jon Stoddard (31:33.148)
Yeah, yeah, that's like your, is it your brand? You create a whole different brand, yeah.

Jordan Hammond (31:35.974)
Right. So that's why we rebranded in 2018, 2019, we created our brand, which I mean is really nothing when you're just slapping your name on a product that comes off the assembly line like everybody else's does. But when you can...

Jon Stoddard (31:49.936)
Yeah. That's what Whirlpool and all those Maytag do. It's just like, it's the same product, just like a different brand on there. Yeah.

Jordan Hammond (31:56.961)
They basically all come from Medea, which is that big Chinese company that forgot to bill me for six months, you know, $35 billion company. But yeah, we've been able to actually R&D a couple of our own products that we own the rights to. And that's where a lot of the money goes.

Jon Stoddard (32:12.432)
So it's kind of interesting because you were able to see this. You were doing what everybody was requesting and all of a sudden you saw this niche. So what is this really lucrative niche? Is it the unit over the window or is it still in the window?

Jordan Hammond (32:27.666)
Yeah, under the window in the hotel rooms and senior living and apartments. Yeah, so it's just a small market and there is a barrier of entry. Like you're going to need some capital to be able to compete with us now because you've got to be buying containers from China. And it's not like it'd be extremely hard for somebody to start up, but there's a barrier of entry. But it's still small enough where the big guys aren't saying, hey, let's focus here.

Jon Stoddard (32:32.564)
Yeah.

Jordan Hammond (32:57.418)
So we're going to stay off the radar of people with some big financial resources.

Jon Stoddard (33:03.224)
Yeah. How big is the market for you? Like you said, you're investing in some R&D and some ERP. Is there some other markets you're going after and acquisitions you're looking at?

Jordan Hammond (33:10.263)
Yeah.

Jordan Hammond (33:14.238)
Yeah, so we're still trying to roll up the rest of the Canadian market. So, you know, Canada's 30 to 35 million. We have 14 of that. So, you know, we're working on a couple of...

Jon Stoddard (33:24.048)
Are you allowed to do that in Canada? Because we have this, you know, rules down here that you can't be a monopoly. You can't buy up all the distributors.

Jordan Hammond (33:33.91)
Like for like a $35 million market though, do you think the regulatory process knows?

Jon Stoddard (33:38.1)
Somebody might file a lawsuit. Yep, somebody might file a lawsuit. If you buy up five of them and there's one less and you see differences, you can't compete, they'll file a lawsuit. Guaranteed, yeah.

Jordan Hammond (33:48.786)
Yeah, different but different here for sure. There's nobody that would even do to off the radar like Yeah, and what's and what's that level at? You know, like what is a monopoly? We're just a lot less we're a lot less litigious up here, right?

Jon Stoddard (33:56.892)
Yeah, interesting.

Jon Stoddard (34:04.104)
Yeah. Well, you're in a private equity EBITDA numbers now. Are you getting calls from somebody wanting to buy you and help you out to grow?

Jordan Hammond (34:14.519)
Yeah, I get a few. We've made a couple lists of Canada's fastest growing companies in the last couple of years, so there's people that just scan those lists and call up and put them on them. So yeah, I've called once in a while, but nothing. Yeah, we're not, I'm not looking at anything, you know, until we, there's so much value left on the table for us that for me, if it doesn't make sense, I might take some chips off the table at a certain point to try to.

Jon Stoddard (34:21.788)
That'll do it.

Jon Stoddard (34:35.848)
Yeah, yeah.

Jordan Hammond (34:40.994)
to try to diversify a little bit, try to find the right minority partner, but not looking at selling majority anytime soon unless some stupid kind of number comes across my desk.

Jon Stoddard (34:50.812)
Yeah. How are you making those decisions? Like what opportunities to go for? I mean, like, do you have a board of directors now, or is it just still Jordan?

Jordan Hammond (34:59.638)
Yeah, I have a board of advisors. So we have a leadership team, which is relatively new and we're developing. I'm in the process of hiring my COO. I'm in the CEO visionary seat right now. Not sure if you're familiar with EOS, but we've run on EOS. Yeah, so we're a big EOS company. Just got back from the conference a week and a half ago. Been running on EOS for six years. And so finally, hiring my COO slash integrator.

Jon Stoddard (35:15.4)
Yeah, yeah.

Jordan Hammond (35:28.194)
and we're running a pretty good process the last few months and we're almost there. So we got talent at the table and then I recruited a board of advisors, just three, team of three board of advisors. So it's not a board of directors, it's a board of advisors. Yeah.

Jon Stoddard (35:47.156)
Board advisors, what do they look like? I mean, we kind of look at somebody that's already been there, done that, bigger than us and can offer a port.

Jordan Hammond (35:55.227)
Yeah, so one guy's got extensive experience in distribution. So he's been COO of companies, you know, $300 million companies. He was a PE kind of hired gun to go in. So he knows distribution in and out. Another guy is a guy that's been in distribution in the telecom space. He's had three exits, part of my network I know really well. And then the other guy is my former CFO, who is now a fractional CFO for me.

all the context on the business, really smart guy from the analytics and finance and accounting side. And so, you know, somebody gave me really good advice when I was starting to think about a board of advisors. They said, you know, seek a board of advisors that actually wants to get context on your business or already has it. If it's just doing a quarterly board meeting for the sake of one and you're just reporting out and they're just looking at, you know, what's transpired, there's no value there.

It has to be a board that actually seeks to understand the business in the context and then seeks to add value through network, capital, advice.

Jon Stoddard (37:00.68)
Well, your bottom line, if you're bringing in a guy in distribution, you say, well, I'm at 25% margin. Now, how do I buy products, cost the goods better, get them shipped here faster, everything caused less there. I put more to the bottom line.

Jordan Hammond (37:16.218)
Yeah, they speak the language, they've already been there. So, you know, we're only six months into this. So we're just learning kind of how to create this effective relationship between me and the board. But yeah, I think it's gonna be well worth the investment that we're putting into it.

Jon Stoddard (37:34.096)
Yeah. And so let me just ask you a couple of questions, like the, like the best decisions you made, worst decisions you made on this, like don't do this. Like somebody listen to this goes, don't do this or, or do this. Uh, just grow in this business and starting these that grow in these acquisitions. Like, I mean, the one of the ag is like, don't go outside your core competencies. That's a great decision.

Jordan Hammond (37:47.842)
Related specifically to what?

Jordan Hammond (37:59.582)
Yeah, I will repeat that again, but that's 100%. Don't chase the shiny coins. You know what? Investing earlier in a leadership team, like I would have done it earlier if I could redo it. Once I saw the trajectory of where the business is going, I think I waited a little bit too long to hire that leadership team. And...

Jon Stoddard (38:23.6)
What were you seeing to make that decision? Were you coming up against like a flood of decisions you had to make and you weren't making them fast enough or what?

Jordan Hammond (38:33.91)
means the team's growing and need to be able to expand the leadership to be able to lead and manage these people effectively to be able to add value to the business or else you know I like just get burned out and I don't I don't want to be the type of entrepreneur that works 60 hours a week. I don't. I work 25 to 30 hours a week and I'm gonna keep it that way. So for me it was like how do I go find talent and how do I get good at recruiting and hiring talent?

Jon Stoddard (38:49.129)
Yeah, yeah.

Jordan Hammond (39:01.282)
And I'm not saying I've learned everything there is to know about that, but I've gotten a lot better in the last few years. And just being, you know, truly seeing that investment in a leadership team as an investment and not a cost. Like as stupid as it sounds, it's like, it's going to cost, you know, a lot to have a fully functioning leadership team that's leading each department. You know, our leadership team is going to be around 700, 800k a year when we have our COO on board.

Um, you know, that's a big improvement.

Jon Stoddard (39:32.73)
Yeah, they can support that. 14 million top line, 50% or 40% cost goods. Yeah, can you still do that?

Jordan Hammond (39:38.858)
Yeah, it's an investment that will produce fruit not only now but to get us to our BHAG which is to be a $50 million company by 2030.

Jon Stoddard (39:49.396)
So that sounds like it's going to require a number of acquisitions. Do you have an imperative over the next, uh, you know, seven years, 2030?

Jordan Hammond (39:58.858)
Yeah, we got to make a couple happen. We can't get there just organically. So I'm always working on, like I said, planting and watering those seeds. You never know when they're going to come to fruition, but, you know, I specifically know the targets and I'm always working on identifying other right fit acquisitions. So there's going to come a time where they loosen up, something happens, and then I can be there for that situation and hopefully we can work out a deal that makes sense.

Jon Stoddard (40:02.129)
No way. Yeah.

Jon Stoddard (40:28.8)
I was just curious, how is the numbers that you looked at when you were running a million dollar company changed to the numbers you're looking at today? What are your CEO and your managers, what numbers do they give you that you know you could tweak a little bit? Hey, we gotta focus on that or what do we need to do?

Jordan Hammond (40:46.942)
Yeah, I mean, the numbers just become bigger. I mean, our KPIs have gotten tighter as well. Inventory efficiency.

Jon Stoddard (40:54.548)
tighter, less number of KPIs or what? More?

Jordan Hammond (40:57.998)
No more. I mean, which is an issue too. And that's something you're always fighting against as a business grows. More not perfect at. The complexity tends to just spread organically and spread by nature. And really, if you can simplify and keep it to those type metrics, which our ERP is really going to help with. Right now, we're just running too many different spreadsheets and systems and it gets confusing.

So the ERP is going to help with that, central dashboards, keeping everybody tight. But the biggest thing for us has been inventory efficiency. So in a distribution business, your working capital is everything. And your working capital, like it's asset light. Our working capital is AR and it's inventory. And the AR we're super tight on, our weighted average days to pay. We're green if that's under 30. We're usually rocking at 25, 26, which is amazing for weighted average days to pay.

Jon Stoddard (41:37.929)
Yeah.

Jordan Hammond (41:54.058)
Our inventory efficiency has sucked. And that's a function of our demand planning and a function of our sales, obviously, our demand planning and our procurement system. And that's the area where we've just been brutal. Like we're running at two turns right now, trailing 12. And we should be able to.

Jon Stoddard (42:11.432)
just two turns and you should be your new inventory. Board of advisors said it should be what?

Jordan Hammond (42:17.834)
Well, they didn't have to tell me that. Well, yeah, we kind of got some context. About four and a half would be where we should be. Yeah, yeah. But it's hard when you have a five-month procurement cycle. That's a long time to predict out. So it's simplifying and it's getting the communication flowing really easily between revenue and procurement. So that's a...

Jon Stoddard (42:22.496)
Four and a half. Yeah.

Jordan Hammond (42:47.586)
That's a focus for us in terms of just efficiency. And then the other big one would be revenue per employee. We're running pretty low there in terms of efficiency. We should be at about a million top line per employee, and we're running at like 550. Yeah, best practice. We're running at about 550, and that's kind of cultural changes that need to be made. It's efficiencies with the ERP system that need to be made.

Jon Stoddard (43:00.597)
One million per employee. Yeah.

Jordan Hammond (43:15.502)
training, developing, growing people, pouring into people, personal development.

Jon Stoddard (43:19.548)
Yeah, well, you get more turns to four and a half to five, you'll get there. Yeah.

Jordan Hammond (43:25.022)
Yeah, yeah. So we're, you know, we're certainly not a perfect business. We've got tons of opportunities and internally and externally. The question is always which one you focus on now, right? Because you can't do them all.

Jon Stoddard (43:37.948)
Right. Well, fantastic, Jordan, fantastic story. I really appreciate you spending time on the show. Last question, what kind of businesses are you looking for? To acquire.

Jordan Hammond (43:49.258)
So going outside of our space, I'm always looking at acquiring within our roll-up, but I'm looking at launching another search, hopefully in Q4, that will kind of be my new platform once my COO is ramped up and I'm hopefully down to less hours per week. And I haven't determined exactly what niche I'm going into. I'll kind of tell you my thesis. My thesis is to do the exact same thing that I've done in this industry in terms of identify

identify that niche and go deep on that niche. So I plan out starting pretty wide with a broker outreach and getting 20 to 30 LOIs in, in order to determine where actually do I want to focus and then deep diving on that focus. Because what I've found is that...

Jon Stoddard (44:38.879)
I mean, not this niche, a different niche or?

Jordan Hammond (44:42.234)
Yeah, so this is kind of like my next, like when I get to the next platform. So we'll be running and growing this, but you know, the COO is really going to be executing on the business plan. We've got a very experienced COO coming in and hopefully it works out. But maybe just to leave with one thing, like I, one of my biggest takeaways from all this was these two acquisitions that we did that added a ton of value, ton of enterprise value, any financial buyer that would have looked at them would have walked away instantly.

Jon Stoddard (44:45.663)
Okay, gotcha.

Jon Stoddard (45:11.101)
Yeah.

Jordan Hammond (45:11.106)
there was zero, zero financial value for them in either one of these apps.

Jon Stoddard (45:16.156)
Yeah, if you would have taken that, the second one with the two husband and wife running all the revenue and working 60 hours, I doubt that would have got approved from SBA down here in the United States.

Jordan Hammond (45:28.81)
No, I doubt it. There's so much owner risk. Like, it was completely owner-centric. And then the other one was losing a lot of money. So, like, run around, right? But it just showed me that being a strategic acquirer and knowing the space well offers a lot of advantages versus being an industry agnostic.

Jon Stoddard (45:31.664)
Yeah, like.

Jon Stoddard (45:37.128)
Yeah, that wouldn't have got any money.

Jon Stoddard (45:47.744)
It's that first one. I got to tell you, it's you build on that first one and it comes a lot easier. Yeah.

Jordan Hammond (45:52.278)
Yeah, yeah, 100%.

Jon Stoddard (45:54.932)
Jordan, thanks for being on the show.

Jordan Hammond (45:56.886)
John, appreciate it. It was fun.

Jon Stoddard (45:59.649)
Stop.