Jeff Charlton's 18 Acquisitions in 15 Years What's His SECRET?

 Summary

In this conversation, Jon Stoddard shares his journey from engineering to entrepreneurship in the printing industry. He discusses his strategic approach to mergers and acquisitions, emphasizing the importance of creative deal structuring and finding value in failing businesses. Stoddard highlights his focus on real estate printing and the innovative marketing strategies he has developed, which have contributed to his company's growth. He also reflects on his future plans and the ongoing need for innovation in the printing sector. In this conversation, Jon Stoddard shares his journey from working as an industrial engineer at Procter & Gamble to becoming a successful entrepreneur in the printing and real estate investment industries. He discusses his focus on automation, strategic acquisitions, and understanding seller motivations, as well as the importance of accurate financials and innovative deal structuring. Jon emphasizes continuous learning through mentorship and the need to adapt to market trends, particularly in the face of regulatory changes affecting marketing strategies. He concludes with insights on building a successful sales team and his aspirations for future growth.

Takeaways

Jon Stoddard transitioned from engineering to entrepreneurship in printing.
He has successfully completed 18 acquisitions over 15 years.
Stoddard's first acquisition was a no-money-down deal.
He focused on acquiring businesses to gain sales and employees.
Stoddard found value in failing businesses, acquiring top talent.
His company specializes in real estate marketing materials.
Innovative direct mail strategies have propelled his business growth.
Stoddard developed unique products for the real estate market.
He emphasizes the importance of creativity in business acquisitions.
Stoddard is focused on future growth and innovation in printing. I learned how machines and things like that work.
We're working on technology right now internally to automate our system.
I tend to see opportunity where other people don't.
I never take over debt, never take over liabilities.
Most printing companies are focused on buying equipment.
I cut that in half when evaluating businesses.
There's got to be a pot of gold at the end of my rainbow.
I have a whole bookshelf of books for continuous learning.
The SEC and FCC are cracking down big time on cold calling.
I decided to hire a professional sales manager to build a sales team.

 Watch the Interview:

Transcript: 

Jon Stoddard (00:00.568)
Beautiful. Jeff, welcome to the podcast, Top Entrepreneurs. How are you doing? My pleasure. I'm good. Hey, thanks for doing this. So let's just talk about your career in &A. And I mean, the first time I saw you was on some of the courses with Epic and Roland. So how long you've been in printing? 29, well, in the industry about 35 years, but I've had no business for 29 years.

29 years. Have you always wanted to do printing or is it something that came about that parents started or what? Total accident. I'm an engineer by degree. I did engineering for three years, decided I didn't like that. I knew I wanted to be an entrepreneur and it wasn't going be an engineering. So I sort of just fell into printing by accident, looking for some sort of an industry. At the time I was married to a gal whose father had a print shop and

So anyway, he was about, I think about 50 years old at the time. And I thought, you know, maybe I'll work for him, learn the business, then buy him out when he retires. That was my plan. I ended up doing that for a couple of years, then deciding that that plan wasn't going to work out. So I just branched out of my own completely cold turkey. And that's what I've been doing ever since. Did you buy the first business? No, I with nothing in my basement. In fact, they gave up. I was doing very well for this other company.

And I walked away from it all too, to start from zero in my basement. Yeah. That was 29 years ago, was me and now I have what 40 employees and 15,000 square feet and relatively successful. Well, the engineering part, I'm an engineer by training a long time ago too. And I'm not really doing that either. So I got to ask you about, you're moving along, you're growing the business. I mean, what was it?

What was the first time you said, you know what, I got to start acquiring business. Cause I remember on the interview you did with Roland, you've had about 18 acquisitions since then, about one a year. Correct. 18 and 15 years I did. Yeah. Which I, my last one happened about five years ago. So it's been a while since I've done it. But yeah. But what did it, what happened the very first time you decided, you know what, to grow this business.

Jon Stoddard (02:24.557)
I can either grow it organically or I can do with &A. I mean, what was that process when you first started talking about that? Well, two things. First of all, the first one I did was I was I started as a print what they call print broker, which means I bought and resold everything for the first 10 years in business. And it was getting tougher and tougher to do that.

And one of my main suppliers was a small print shop in St. Louis and he was struggling as well with finding customers. So I decided to get into manufacturing. So I made a deal with him and I bought him on, he brought his entire staff with me. And that was my first no money down acquisition too, because he literally took the entire thing on a, you know, he took the note. So I agreed to a price, but I didn't pay him anything upfront. I paid it all.

based on success going forward. And we set some parameters of what defined success. And I paid a amount over a period of five years and yeah, it worked out good. And that got me into the actual manufacturing business. Cause I had no experience doing that. And he had his entire shop and his staff, the entire thing came with it. He actually moved into my office, but well, we bought a new space to make room for it. But essentially he came to me and that was the first one sort of

strategically. Everyone thereafter was because I sucked at managing salespeople. I tried to grow it organically by hiring salespeople and I was literally like, for everything. Until I hired my brother, he was he's successful. He's still with me and he's been with me 20 years, but he's the only guy I've ever hired that was successful in sales. Every other one failed and I don't know how many there were, but there's a lot.

And so I finally, after beating my head against the wall for probably, well, this started before I even bought that print shop. So probably for 10 years of trying to be a sales manager and manage salespeople, I finally realized this model's not working. Clearly, I got to do something different. So I decided to switch gears and start buying companies with the objective to buy sales. And I was hoping I'd find some good salespeople along the way. But I wasn't a corporate raider. I wasn't rich. I didn't have a lot of money.

Jon Stoddard (04:44.333)
So I had to do it creatively. And since I'd done that one deal, I was able to do for no money down. I figured, well, if I could do one, I could do others. So I went with a complete open mind to the marketplace, seeing what I could do. And I was able to put together almost every deal for almost no money out of pocket. It was various different structures, but in general, the structure was, I'll pay you over time based on the success we have with your clients over time. And...

Sometimes the employees, well, the employees always came with the deal. Sometimes the owner came with the deal. Sometimes they retired or went somewhere else. So it was about 50-50. About half the owners came with it. The other half did something else. Yeah. How do you structure that deal? I mean, based upon the cashflow, you, you, still, the first thing you got to do is set a value for what you think of the business is, right? Correct. And if it's a

Is it where the business is always making money profitable or within? Well, my case, none of them were making money. they were all printing business is a tough business and people have been failing and going out of business and printing from my entire career basically. So when I got into it, they said, is the, you know, a losing deal. You picked a bad industry. So in retrospect, that was probably true, but I've made the most of it. But I, that's a different story, but I've had to adjust with the time that I've gotten into.

I've been pretty forward thinking in the way I run my business and that's served me well because we're very successful. well, the part of the forward thinking was this acquisition thing too. When everybody else is looking to get smaller and figure out a way to survive, I was looking to expand. And that was unusual. It still was unusual. When times got tough is when I got more aggressive in marketing.

an expansion. In fact, I made most of the best deals I ever made in recessions. So because when everybody else is hurting, that's the best time to buy. Best time to buy. Yeah, I read a book about Thomas Watson, RBM. He actually, the worst the economy was, the more he expanded. Right. Yeah. and I never had a lot of money. I mean, I do okay now, but I still won't have millions of dollars laying around to go buy companies. It's, you know, it's

Jon Stoddard (07:05.869)
You just have to be creative. I've always been a creative thinker when it comes to running a business in general. And I took that same approach to acquisition. I simply go to an owner and say, hey, well, what I did in the beginning is I sent out letters. In fact, I think I talked about it in Roland's thing. In fact, you're doing it right now. yeah. That's just perfect because I want to segue into this. mean, I actually hired you guys to do a marketing direct mail campaign. Yeah. I just bought it. I bought a mailing list of the printers in my area.

I'm a local company, so I was looking for within about 50 miles of my office. And I just bought a list of all the printers and I weeded through it and took out the ones I knew were too big that I couldn't afford anyway. But other than that, I sent it out. When I first did it, was about 300. The list had about 300 people on it. And I've done this five or six times over the years. And every single time I did it, I had at least one good prospect that came out of it. And I was able to make a deal. never did it where I was able to make a deal.

I never had tons of responses, but I had enough that I had something to work with. And so once I'd get a response, I'd simply call a guy and say, hey, I talked to the owner directly. No brokers or anything. It's me talking to him and saying, look, hey, you're looking to sell. Why are you looking to sell? What's your objective? What are you trying to do? And I look for what I call win-win situation. Is there a way that I could help him meet his objective and me meet my objective and do it for as little money as possible upfront?

And that's what I did. And I couldn't make them all work. probably looked at the 18 deals I made. I probably looked at 50 deals and the other 32 I couldn't make for whatever reason. know, lot of most cases it was because the people were unrealistic about how much money they wanted for the people. Most business owners are way overestimate how much their business is worth. The reality is a business, if you're if you're losing money, your business has no value except for the value you're.

your hard assets, the equipment and things like that. That has a value no matter whether you're losing money or not. But in printing, most of those are old machines that are worth literally the value of the scrap metal, that's about it. Because nobody wants that old equipment. They want the new modern stuff. So that was the case with us. Of all those deals I made, I think I only kept maybe 10 pieces of equipment. Maybe, I didn't think it was even that much. Most of it went in the dumpster.

Jon Stoddard (09:29.589)
Sent it for sold for scrap metal. You know, I all I was about buying the customers. And then what an unintended good consequence of this whole thing was, and I never thought of this, but it's really been critical to my success is when companies are failing, they're generally down to one or two people, including the owner, maybe one employer, maybe two. And that's usually the best people because they get rid of the weak people first and they keep the best people right up to the end.

Well, those best people all came to work for me and they're still working for me. darn it. I lost one single person from an acquisition other than people that left in retirement or actually a couple of them died, unfortunately, but but nobody has quit. And that's been great because I probably have 15 people that still work for me that came from these acquisitions. They're all outstanding employees. Yeah. In fact, I'm looking right now to do another one, not because I want the business, because I want the employees.

I'm having a heck of a time hiring people right now. I'm looking to acquire strictly for employees. Yeah. Employee acquisitions, the Silicon Valley, they do that a lot. I mean, I'll tell you this story. worked for Intuit at the time and Intuit bought this company called Step Up. They paid $60 million. One year later, they didn't even use the technology.

but they kept the five most important employees. Yeah, it really is. I never thought of that when I first started doing this, but it turned out that's absolutely a huge benefit to doing this. So yeah, my buddy that I had known for a long time, he walked away with 10 million bucks, but he didn't be like unbelievable, unbelievable that they do that. So these, now all of these employees that are still with you that, you know, the ones that are twos that you keep and they're just the employees. Yeah, they're great.

I mean, it's, and they've all been, I've never had any problems. That's been the best part of this whole thing as an employee, bar none. And I've done well. I mean, when I first started doing this, I was about a one and a half million dollar company and we're gonna do six and a half million. Well, last year we did six and a half million. I think I'm gonna do eight to 10 million this year, but that's not because of acquisition. I finally have taken all this that I've done and I've sort of...

Jon Stoddard (11:45.121)
developed a niche and we're really expanding that niche right now. And we've gone nationwide too. So we're doing really well right now. beautiful. I'm using the people that I bought through that, that I got through the acquisition. it's, they're key people, key to the expansion. What kind of niche is this that you're focused on? We focus on real estate. We're in printing, but when I say printing, that's a very wide category. Most of our growth is coming from direct mail printing. So we do marketing materials for companies.

with a heavy focus on mailing those marketing materials. Is that the real estate things we get in the mail with the broker and they say, hey, check this out, sir. Yes, but that's the major part of it. That's real estate agents that do that. We focus on real estate investors, people that are buying houses for cash, the house flippers, the we buy ugly houses type of people, people that say, I'll buy your house for cash. You see all these shows on TV where these people are buying house, they fix them up and they sell them. Well, that's a massive market in the United States.

And the challenge is they have to find the houses to buy. Well, they don't go on the MLS and they don't go through real estate agents. They find houses that are not on the market. And we help them find them through direct mail. We send postcards and letters to people that fit a certain niche criteria that they're looking for. It says, I want to buy your house for cash. And it works. And we've developed some unique products in that. And we have a nationwide presence now and we're doing really well. Yeah. Did that?

niche come from a company you purchased to where is it Kenny developed organically internally just say hey my god here's here's where our business comes from this is this this is did it pop out okay real estate in general i'll tell you the best the best deal i ever made was the easiest deal i ever made too we one of our paper salesmen he knew i was doing this and he knew i was looking for that's another thing we've done by that's another key strategy as we spread the word in our community that we're looking to buy people

And so we talked to all of our suppliers. Do you know anybody? Because they supply other people in the community. Do know anybody that might be looking to retire or having trouble or in financial trouble, whatever? Anybody you think might be somebody that might be interested in making a deal, a win-win situation, let me know. I've made, I told you I sent five or six letters. I made, I think about eight deals out of those five or six letters. But I made.

Jon Stoddard (14:09.067)
I'd say about five deals from pure word of mouth. The rest of them came from looking online. That's another strategy I use. just go online periodically and look for companies for sale. And there's various different like biz, buy, sell. There's five or six major websites that have companies for sale. I just, every once in go look and see what's available. But anyway, the best deal I ever made was it came from one of my paper salesmen. said this gal's got a little print shop, wasn't too far from us and her husband just died.

and he was the guy that was running it. She didn't know anything about it, but she was trying to keep it afloat, knowing nothing about it. And she was, you know, it killing her and she loved to get out. So anyway, I called her up. Sure enough, she said, she actually told me, I would give it to you for free if I didn't think my husband would turn over in his grave. So how about $5,000? And this was a very small operation. It was a little small retail print shop and.

They only had $60,000 a year in total business. So we're talking a very small. That's a small one. However, they had one customer that was one of the major real estate agents in St. Louis and they were just doing, that was her major customer. And at the time of the 60,000, that was like 40,000 of her sales and they were doing these black and white kind of crappy looking postcards. And at the time the world, most people were selling, sending out color postcards.

So I paid her the $5,000, no questions asked, because to me that was something in there. I mean, that was so low in amount. I didn't worry about any creative deal. I just paid her a $5,000 check, and that was done. I was done with it. We literally made that deal in like a week. I mean, I made the deal, no formal contract. It was almost a handshake agreement, and we took it over. But anyway, that one client was a major real estate agent. I went to her and said,

And at the time I did not, I was not in digital printing. I had all old fashioned printing presses and I wanted to get into digital printing, but it was expensive to buy one of these digital printings, essentially these really, really fancy copiers and they're, can, they can be as long as you want it You know, right now we have, we have them there like 40 feet long. But anyway, back then this was the, the dawn of this industry. And I went to her and I said, if until they're making this deal,

Jon Stoddard (16:31.053)
I bet you want colored postcards and it turns out she did. And I said, I'll make a deal. If you'll commit to me for a year, I'll buy this machine to do your color postcards and I'll do it for the same price as your black and white postcards for the first year. Just to, you know, we'll both win in that situation. Well, anyway, long story short, she agreed to that deal and that turned out to be about a $200,000 a year customer.

And that also got me into the digital printing business and got me into real estate. And I realized, wow, this real estate could be good. A lot of people send out postcards. So I started with brokers and agents, but that is morphed into over the, that was about 15 years ago I did this. That is morphed into the investors, which turned, which were a much better opportunity for us. And we, our shop is 10 times bigger than that now. So we're all digital now. got rid of my.

old printing presses were 100 % digital now and we do all kinds of stuff. How long do those machines last? I mean, how much can you run them and how long do they last? I you're the perfect manufacturing business where even a really make expense because you got amortization and depreciation. Yeah, it's unfortunately they don't last very long. They, they build these things to fall apart, which drives me crazy because my old printing presses were 50 years old and they still ran fine.

These things, if I can get six years out of them, I'm doing really good. Most of them are dying before the lease is even paid for. And which it drives me crazy because, you know, when you buy one of these things, you have a maintenance agreement and they agree to fix it unlimited for the period of the maintenance agreement. But it seems like there's a point where they're there. Well, we have six large machines now. We have a maintenance guy here every single day all day.

there's always one of them broke down. In fact, I have to have, I have two extra machines in my fleet just because they break down so much. You need that because there's always something broken down. There's a guy, you have a lease for fixing these things and there's somebody on staff all the time there. The lease, yeah, the leasing company. I mean, it's a, they call it clicks and the copy world, the maintenance agreement also supplies the toner and you pay, you pay a usage fee and it's called clicks.

Jon Stoddard (18:46.805)
And that's part of the maintenance agreement. So they'll fix it and they supply the toner all as part of that deal. And they'll come out every day for whatever, whatever it takes and the parts and everything are included. But they just break down so much. There's always somebody there and it's very frustrating, but I've come to accept that just the way it is. It's they build it for four stops, the lessons and that's the market. And they expect them to, you know, the last four years and then they want you to buy a new one. That's their whole plan. And they're not cheap.

I mean, they spent there at least $100,000 and up for one machine. So it's, you just have to build that into your model. We have that now we, we have the, the cost of the machines and the click charges all built into the model. So when we charge our customers that's factored into their, costs and we, you know, we mark that up appropriately so we can make a profit. So it works, but it's still frustrating because I can't get through my head that this $100,000 machine is going to be worthless in four years, you know.

And you can't do any I mean you don't sell it you just trash it or do they take it back or what? We keep them we stretch them longer than that. We'll I generally have a four-year lease is the deal I usually make and sometimes I'll get a loan instead of a lease depending on the the banking rates at the time But either way I pay it off in four years and I try to keep it for a couple more years after that As sort of a backup or we have we have some

We have, they don't completely not work. They just don't, the quality gets worse and you start having problems with them, but we can run things that are less critical quality like black and white copies, for instance. Those don't have to be super high quality so we can get more use out of the machines to kind of repurpose them for things that aren't as mission critical and we'll keep them. But they generally after about seven years, they are completely dead and they're worthless. And I almost can't even sell them for anything. I might get, you know,

a couple of grand for a machine I paid $100,000 for four or five years before that. That's almost like these HP printers. mean, the price of them got the quality of the printing's gone up, but they only last for one or two years. mean, they do that on purpose. That's all part of their strategy. Yeah. It is what it is. What's the model, but it works since, you know, we figured it out. Yeah. What's your plan for the future? You just want to keep running this until your room temperature or do you want?

Jon Stoddard (21:02.989)
I'm 58 years old and I am starting to think about, you know, what I'm going to do at some future date, but I am not set a date for retirement. I'm enjoying what I'm doing and we're growing like crazy right now. And I, I'm kind of a, where my engineering has really helped me through my career is I'm kind of an innovator with things. I've, I've developed several things that are unique to our industry. Back to our industry. I'm the guy that Google, you know, you go on Google, you can do what's called the street view of your house.

Yeah, front view your house. Well, that's been available on Google for I don't know, probably five or 10 years. But nobody was ever using that in the printing business. Well, we wrote some software about now about three years ago, we can take a mailing list and upload it to some software we wrote to go download that Google image and then print that as variable data on postcards and letters. So people would say, hey, I want to buy your house. And it's a picture of their actual house in the postcard.

As you get every week, hey, I heard your house is for sale. Yeah, I'm the first guy in United States that was able to do that. Now, unfortunately, I wasn't able to patent that because Google had this code readily available. You just had to figure out how to use it. But we've had several people copy this now in all kinds of industries. However, I'm the guy that came up with that for about a year and a half. I was the only one in whole United States of doing that. That sort of really launched me nationally.

And I've come up with couple of other unique products that are in the real estate mailing that nobody else has. I'm always trying to do that. I try to come up with unique things that other people don't have. What kind of unique way of doing business that really, you know, it's catching on. People are, we're getting a pretty good reputation nationally and we're growing pretty, pretty, pretty aggressively. Yeah. What kind of engineer were you? Software or? was 10. No, would say civil engineer. engineer. You know, I like construction and things like that. I actually worked as, I never did civil engineering.

I worked for Procter & Gamble as an industrial engineer right out of college. Did that for about three years. So I learned how machines and things like that work. I learned how manufacturing plants work, which has also served me well in the printing business. Didn't plan that, but it sort of worked out. So I don't know, I'm kind of a process guy and my mind works that way. And I know how to build things and create things. And I don't know, I'm just. You know, you ever watch that show, How It's Made? mean, it's got I like that show. It's amazing show.

Jon Stoddard (23:26.185)
I don't think it's like how you made the chips. It's like, who made this production line? Right. I agree. It's amazing. We're trying to do that right now. I'm working on some internal. I've got programmers working for me. I got a full-time IT staff and we're working on technology right now internally to completely automate our internal system so I can go from an online order, literally off the end of the machines with no human intervention. And that's really

complicated when you throw direct mail into that. We can do that today with like business cards. But with direct mail and you when you have mailing lists and things like that, it gets super complicated because you have to make the post office happy too. And there isn't software available to be able to do that. We're writing it right now. And we're about a year away from being where I want to be. But I'm excited about that because that also is going to fuel our growth. It's going to allow me to do a lot of things I can't do today.

do offer some things in the marketplace that I can't do today once I have that completely done. So how did you learn or discover that this real estate, the investment guys were the way to go? mean, a couple things just keep hitting and hitting and hitting or was it just you saw the profitability in the business? I am a real estate investor myself as a side business and I've never aggressively done I never flipped houses as a business. But I have

I mainly buy and hold that buy rental properties and keep them. And over the years in doing that, I built some relationships with some pretty good companies in the industry that were doing a lot of marketing. There was one in Memphis called Memphis Invest and I bought some properties through them about 15 years ago and they ended up, growing, they're over a billion dollar company now and I've been their marketing arm ever since. Well, in doing that, I got involved with helping them market

because they buy and houses on a very, hold on a second. My PA said, they buy houses on a very massive scale nationwide. They do hundreds of houses every year. Well, they got to find those houses. So I helped them do marketing to find those houses and that sort of got me into it. And then I saw, wow, this is great. So then I expanded that to other companies and now it's individual. Most real estate flippers, it's individual guys.

Jon Stoddard (25:50.125)
You know, it just, I know it kind of grew. It didn't happen all overnight. It was just one piece at a time. And I just kept, I've always been very good at seeing opportunity. And that's how I've been able to survive in this tough printing business is I tend to see opportunity where other people don't. And I've always, I'm heavily focused on marketing and looking forward. Most printing companies are focused on buying equipment, spending millions of dollars. They buy the latest machines and then they hope they can sell it. Unfortunately, that doesn't work that way.

I've always been of the mindset, I'll sell it first, then I'll figure out how to do it. And so I don't have a lot of debt. In fact, I'm 100 % debt-free in my business and with all these acquisitions, because I've never gone into too much debt, even with all these machines I buy, I have leases, but it's not such a lease that's gonna put me under if we have hard times. I limit my exposure, make sure we're always growing, make sure we're always marketing. And I play the same toss-up to when I was buying companies. I look for deals where it's not gonna,

take too much risk, you know, where I can financially afford it and make it work. And if the worst case scenario doesn't work out, it's no big deal. you take over a lease of a company, you know, let's say you're buying a company and what's the biggest expense? Is it the lease part of the equipment? I don't take over anything. By the way, that's a key element. I never take over debt, never take over liabilities. I only buy assets. So if somebody has that, that's one of the sticking points. Sometimes it gets in the way of a deal.

is if somebody's got a bunch of debt that they got to do something with and they can't afford to pay that, you got to figure out how to get rid of that debt. Yeah. Most of that's the leases, right? Of the equipment, right? Usually most in printing, most people are leasing their equipment because they don't have the money to pay. Usually banks won't give them the money either. It's easy to get a lease. Not easy to get a loan. So most people do leases. So I did take over a couple. I can't say never did it. I did take over a couple of leases when it made sense, when I thought, OK,

Couple of copier leases I took over a couple different situations where we could use the equipment and it wasn't, you bad deal. So I was able to take it over and I was able to make a deal with the leasing company to do that without any out of pocket. It was just taking over the payments. But usually we walk and find a way to walk away with it. And that's what comes. That's the sticking point because the the deal I try to make is I have, especially a guy wants to retire or something or do something else. They don't want to walk away with debt. They just want to wash their hands of

Jon Stoddard (28:19.437)
So I figured out a way to allow them to wash their hands of everything, including the hassle of closing down your shop. In many cases, we would literally like that little 5,000 deal I mentioned. This lady, and it's an old lady, and she didn't know what to do. And she had this, it was a small shop, but it was still filled with equipment and junk. And it was an overwhelming task for her to look at it. We said, you know what? Here's your $5,000 check. All I want from you is show me where your files are.

and let me write a letter to all your customers that you'll sign that says you're selling the company and you walk away. We'll take over everything, including your shop and everything. We'll make it easy on you. And that made her happy. That really makes it easy, helpful to her. Yeah. And so that was a win-win for her. know, she walked away, she was happy. She felt like she got something out of it. And so, you know, and she got that headache off her shoulders. Yeah. So what about those deals? Most of these deals, it sounds like, hey, I...

the seller is really trying to, they're motivated. Do you ever come across somebody that sounds motivated first of all, then he goes like, well, you're just not ready to leave and you pass or? absolutely. That happens. That's happened a lot of the, of the 32 deals I couldn't make. That was the most common thing is they think they want to sell, but they have this, they're losing money. Almost every print shop is losing money. Or if they're making money, even the ones that survive, there's nobody getting rich in the printing business.

because it's a tough business and the margins are really small, they're tight. And so even if they're making money, it's not very much. And so there's not a whole lot of value in most of the companies, but the owner thinks it's worth way more than it is. And so he's got this, he wants to get out if he can get $2 million when his company might be worth $200,000, you know? And he can't accept that, you know? And they don't deal with reality, they're dealing with this fantasy world of what they think their company's worth and it's just not. A company is worth a multiple,

of the net profit. And some people call it EBITDA. I don't believe in EBITDA, frankly. I think EBITDA is a bogus number. In small business, it's the actual money the owner's walking away. When you factor in what he actually pays himself, the profit, and anything, any funny money, like he's paying for his car or his insurance or whatever it might be, you add all that up as to what total money is he walking away with. That's what you look at, and then you'll come up with some sort of multiple of that.

Jon Stoddard (30:46.029)
I never pay more than three times that number. And even that is way too much in the printing business because it's such an unknown. And I've learned over the years too, even if the owner and the entire staff comes with it, we'll lose at least 25 % of the business they think they have. And most cases it's more like 50 % because there's, it just happens there. A combination of factors. Number one,

A lot of people don't like change. So when there's a change in ownership, even if you're a great guy and you got a great thing, they don't like that. So they take that opportunity to go somewhere else. But in most cases, what it is really is their books, the numbers they show in their books do not reflect the current status. let's just say, like right now we're at what? We're May of 2021. Well, most guys will only have books through end of 2020 and maybe they have current books.

maybe, but a lot of these small guys are not very good at accounting. And so their books are way behind. So even five months into this year, last year's books, they're relevant, but it's still kind of old news. You don't know how much business they've lost in the last five months that they don't reflect yet. So that's mainly what it is. They've lost more customers than they think they've lost, especially when they're on a downward trend and they're not doing that well.

Because customers, know, when somebody senses you're not doing well, customers leave just because they don't trust you. And a lot of companies that are not doing well, there's a reason they're not doing well. They don't serve people well. They don't do good quality, whatever. There's reasons why they're failing and all that reflects in customer loss too. So whatever their books say, I don't believe them. So what I've learned over the years is I take whatever they tell me and I cut that in half. And then I say, I, this deal make sense to me with 50 % of what they tell me?

And then I figure out how make that work. Were you ever successful on the, you know, somebody saying it's too, you know, they think it's worth 2 million a year and it's really only worth 200,000 a year. you ever successful? That's usually too big of a gap. can't make that. But what I did do is I say, look, what generally happens is either, either the deal is easy right away and I can literally make it like right now it's, have no trouble at all. The guy's ready to go like right now and he can't get out of the business fast enough.

Jon Stoddard (33:11.233)
Those are the easy, and that was probably half the deals. The other half took some time. You approach the guy and say, okay, here's what I'm willing to do. And he's gone, there's no way. And then six months later, he comes back to me and says, okay, maybe you were right. Let's talk. Because his business continues to go down. He's got nobody else willing to give him the kind of money he thinks he can get. And he has no choice. He gets to a point where he's got to do something because he's bleeding too heavily.

And I'm trying to take advantage of anybody. I'm just saying, look, I just, you know, it's got to be win-win for it to be win for me. I have to get something out of this. I can't just pay you money and get nothing out of it. There's got to be a pot of gold at the end of my rainbow somewhere. And so I'm willing to do is pay you a cut of that pot of gold. If you're right, and this thing really can generate all this cash, I'll pay you a cut of that. I have no problem doing that. But I'm not going to pay it to you upfront when it's such an unknown.

Yeah, well, I don't understand the argument. You're going to pay them out of the cash flow of their customer and business list because you're going to do what better than they do. Because we're just better at doing business in general. Plus we expand it. What I do, I told them, very aggressive in marketing. So the first thing I do is take their customer list and we go contact them all and say, hey, we made this deal. And by the way, we've got all these other capabilities. We've got a lot of capabilities, usually more than the company we buy.

So we can, and we try just like that example I gave you that real estate agent, we can take some of their best clients and expand them in some cases. And I tell them, look, I'll pay you, let's say we take that $100,000 client and make it a half million dollar client. I'll pay you a cut of that half a million too. Whatever I can grow it to over a period of three. My standard deal is I'll pay you 10 % of sales from all your clients over the next three years, whatever we do. That's my standard deal. If I grow it, then you get a portion of the growth too.

And if I don't, you we do the Are they usually in the business or out of the business? They're out of the business. Even if they come to work for me, usually they're not part of that. Maybe they'll still handle it, but I have found the best way we can do it is we let our people take over. That's the best chance of growing it. And how do they enter? They believe that. Did they say, I'll give you 10 percent of whatever the business from your house? It's a gross thing. I, you know, that's part of it. They might think I'm full of crap.

Jon Stoddard (35:37.453)
But I'm pretty good at getting people to trust me because I am an honest businessman. I do what I say I'm going to do. And over the years, as I've done, you know, the first couple of deals were a little harder because there was no track record. Now that I have this track record, I can say, if you don't believe me, here's a list of 10 people I made deals with. Feel free to call them and talk to them. Yeah, that's what I was getting to. And that's I did what I said I was going to do. Did I pay them all the money I said I was going to pay them? Did I cheat them in any way, you know? And I know I didn't cheat anybody. So I know I could talk to anybody. Yeah.

Building your reputation. Yeah, that's beautiful. Yeah. Have you ever considered looking at other bigger? I mean, I see the MO that you have for the type of business you You're like, there's a printing business doing 3 million. Should I go purchase that? That's outside your MO? Yeah, so those are too big. The biggest deal I ever made was 1.2 million in sales. And that company ended up being, they were hemorrhaging money. That was one of the deals I made.

That guy could make that deal fast enough. If he was hammering money, he was losing $300,000 a year and he didn't have, he couldn't afford it. So, but the reason they're losing money is even though they're 1.2 million in sales, they were giving it away. They were selling in some cases below their cost and they didn't know how to run the business at all. He was a horrible businessman and he knew it because that's kind of a long story, but an investor had bought the business.

And the investor wasn't running the company. had hired a guy that run the company that didn't know have any printing experience. And the guy was just running it into the ground. was horrible. They made mistakes at every level. And I could see that. So that was a deal. I said, I'm not paying you any money upfront for this because this thing is hemorrhaging, but I will agree to pay you on the back end. And they made that deal. How many? 1.2 million was really more like 300,000 of actual profitable business.

The rest of it, we just let go. so, it was so unprofitable. We had to raise the prices like 50 % to even make it profitable. And most of those clients just went away because they were, yeah, cause they were people that wanted something for nothing. And you know, there's no such thing as a good client that doesn't pay their bills or doesn't pay it where can make a profit. So what do you think about that deal? mean, would you ever look at a deal like that? Actually that deal. Now there's a good example, that deal in terms of pure money, that was the worst deal I ever made. Even at what I did.

Jon Stoddard (37:58.797)
It just didn't work out very well financially. However, they had 12 employees as part of that's one of reasons why I was hammering money and way too many employees for 1.2 million. But I still have half those employees and they were the ones I have are some of my best employees. They were outstanding. So when I look at the overall picture, yeah, the money wasn't great, but the long term impact of these great employees is I can't even calculate that it's way.

It's so it ended up being ironically the best deal I ever made overall, but it was probably the worst deal financially. So because I just did, even though I know he was, I didn't dream that the 1.2 million would end up in only $300,000. I didn't think we'd hemorrhage that bad on the sales, he was just, his books were, that was another thing in that deal. Their books were horrible. So I literally was taking it like purely on a guess. And you know, it was just way worse than I thought it was.

Yeah, what's just curious, what inspires you like to come in every morning just like, you know, skipping to work and stuff? Is there any books, any mentors, any, you know, leaders in the industry, like Warren Buffett or anything that you kind of follow? Not really, I do read a lot of books, mostly, and I it's all 100 % educational books, I don't ever read fiction or things like that.

No, neither do I. I'm not a fiction guy. mind feels like he's- Strictly things that are gonna enhance me in some way, shape or form. I used to do more than I do now. A guy named Dan, probably if I had, my entire career, Dan Kennedy, I don't know if you know his name, but he's a- He used to live in South Scottsdale for a while. don't know if know that. That guy has been probably my best mentor over the years from marketing standpoint. And I've read every book he's written. And I met him personally. I was actually in a mastermind that he ran.

for a year recently. That was two years ago I was in that. yeah, but he's probably the number one guy, but I got a whole bookshelf of books. There's not even one guy that I think is awesome so much. It's just in general, I'm a student of marketing. What I do do a lot is I observe what other people are doing. We're in the direct mail business. So I pour over every piece of direct mail I get. I have all my employees bring in all their direct mail just to see what they're getting in the mailbox. And I look at,

Jon Stoddard (40:22.453)
Like I'm not a social media guy, but I watch it to see what people are doing on social media and how they're marketing, how they're advertising. We have gotten into social media over the last year with a pretty good level of success, paid social media. We're doing some paid advertising. Really? I'm not an expert in that at all. We've been kind of experimenting, but it's working for us. So it's because we're in a niche though. We're focusing this one real estate niche.

And so we're still kind of learning, but. Outside your kind of geographical area, because that seems like, know, that's a that's an area that just not going to stop. It's like the mail. mean, real estate investment broken. But it's all over the. Yeah, we're national. Real estate investment national. Local for most general printing. We still do about we do. I said we did about six point five million last year.

Of that about 4 million was direct mail and the other 2.5 was local business in St. Louis. Just general printing of all kinds. Anything from forms in a manufacturing plant to labels to business cards to letterheads or brochures. Just all kinds of stuff. Shirts, we do a lot of apparel. We have an embroidery shop as well. We actually do that in-house. you know, it's a little bit everything when comes to that. But it's the direct mail area that's my growth focus going forward. And the reason being is

especially recently, you probably don't even know this, but the SEC and the Federal Communications, FCC are cracking down big time on cold calling and unsolicited texting. And in the real estate business, especially a lot of people have used that over the years to try to find deals. Well, they're cracking down on that big time and they're saying you can't do that. if you

SEC considers that boiler room stuff. don't like that. And that's great for direct mail because that we're losing business to that type of technology. Well, it's coming back to us because they don't have it. They can't do that. But the only other way they can market is direct mail. That's Yeah, because there's no restrictions on direct mail. You can mail any piece of mail to anybody. That's totally legal.

Jon Stoddard (42:34.207)
So do you have any plans for more acquisitions? 2020, anon plus? don't have anything on the table. I'm looking right now. I told you I'm looking for employees, but it's hard. It's my model is kind of run its course because most of the small print shops are failing. They're already gone. There aren't any of those left. And that, yeah, the COVID didn't hurt. Yeah. Yeah. That was the last straw for most of them. There was a lot of people hanging on, most of those are gone now. And so there's not a lot of that opportunity anymore. So

I've been looking for about a year and I haven't found anything that's even close to even worth talking to. So I've got this formula figured out now to grow this thing organically. So don't think I need to do that anymore. think I'm investing in, I've solved my hiring salespeople problem too. We now have a formula that works. so, I hired, and basically what I did there, just tell you that story.

For years, I had in my mind, I had to build a sales force before I hired a sales manager. So I tried to be the sales manager. I'm not a good sales manager because you need somebody that really is hands on, really deal with people every single day. And I'm not that guy. I'm the I'm a bigger thinker. I'm running the business. I'm thinking you're making all these deals. I don't have time to really do what I need to do to be successful as a sales manager. But I always thought I don't have a man. You know, if I have people to manage, why have a sales manager? Well,

Three years ago, I decided that model isn't working either. My acquisition model sort of runs course. So I decided to hire the professional sales manager with no sales team to manage and task him to build a sales team. And that's what I did and it worked. Six full time salespeople and the model's working. Yeah. Where did he come from? He's the sales manager somewhere else or? Headhunter. Yeah. It sort of happened. I think it's divine intervention because I started

I was just thinking about doing this and I got a call out of the blue from a headhunter. So I had not hired a headhunter. Guy calls me out of the blue and says, I wasn't in the market for a sales manager. he says, I got a guy. I know you're not in the market for a sales manager, but I think you ought to talk to this guy because I think he might be good for you. And long story short, he was right. And I hired him. It's been great. Yeah. Beautiful. want to thank you very much for taking the time today.

Jon Stoddard (44:55.565)
This is an interesting story you have there. Yeah. Yeah. Well, I appreciate it. I appreciate the opportunity. You I enjoy sharing. I'm at a point in my life now where I feel like I'm starting to start sharing some of this knowledge. I enjoy doing things like this. Yeah, that's good. Have ever thought about writing a book? got it. Actually, I've got several books I've written. So, but most of them are directly related to like the one I have. The most recent one is it's about direct mail. It's called Killing It with Direct Mail for Real Estate Investors.

I do have a book in mind that I have an outline for that I never started. It's just generally my philosophy in business that I used to make some speeches on this years ago and I've still got the outline for those speeches and it would be a good book. I just have never sat down and turned into a book. Yeah, sign me up. I'll buy it. Yeah, so I might do that though in the next year or two. So beautiful. Yeah. Yeah. Thank you so much for the time today. All right. All right. Great. Good talking to you. Thank you. Bye.