Summary

In this conversation, John Lawrence shares his journey of acquiring companies. He discusses his background in entrepreneurship and the decision to sell his grading and excavating business. John emphasizes the importance of taking action and not being afraid to make mistakes. He also highlights the conflict between traditional education and the skills needed for entrepreneurship. John shares the painful experience of selling his business and the lessons he learned from it. He then talks about finding the right business partner and the process of acquiring his first company, a retaining wall business. Finally, he discusses the importance of building connections and trust and evaluating the financials before making a deal. In this conversation, Jon Lowrance shares his experience and strategies for acquiring companies with growth potential. He discusses the process of negotiating the purchase, including valuing the business based on EBITDA and owner financing. Jon also talks about the importance of cleaning up the books and improving profitability after taking over the business. He highlights the need to increase prices and manage cash flow to pay down debt. Jon explains how he grew the business by adding crews and improving marketing. He emphasizes the importance of hiring a general manager and shares his approach to interviewing and assessing candidates. Finally, Jon discusses his plans for future acquisitions and financing. In this conversation, Jon Lowrance discusses the importance of learning through experience when it comes to running and buying businesses. He emphasizes that while academic knowledge is valuable, actually owning a business is the most important aspect for an entrepreneur. The conversation also touches on the difference between serial acquirers and one-time buyers, as well as the role of the owner operator in a business.

Takeaways

When acquiring a company, look for growth potential and the ability to double the business in size within a few years.
Valuing the business based on EBITDA and using owner financing can be effective strategies in negotiations.
After acquiring a business, focus on cleaning up the books and improving profitability.
Increasing prices, managing cash flow, and paying down debt are essential for financial success.
Hiring a general manager is crucial for scaling the business and delegating responsibilities.
When interviewing candidates, assess their hunger, humility, and people smarts.
Networking and building a reputation can lead to more deal flow and opportunities for future acquisitions. Learning through experience is crucial when it comes to running and buying businesses.
Owning a business is the most important aspect for an entrepreneur.
Serial acquirers have figured out how to turn over businesses to others, while one-time buyers may prefer to remain involved in the operations.
The owner operator plays a unique role in a business, often dealing with one person and making key hiring decisions.

 

 Watch the Interview:

Transcript:

Jon Stoddard (00:01.166)
Welcome to the top M&A entrepreneurs today. My guest is John Lawrence from Tennessee, who has acquired five companies and he's gonna tell us a story. But before we do that, make sure you hit the subscribe button if you like this content. All right, let's get on the show. John Lawrence, first thing, you spell your name correctly because that's how I spell my name. Haven't met too many of those people on the planet. Yeah. Where's the H?

Jon Lowrance (00:23.282)
Absolutely. You know the struggle.

Jon Stoddard (00:30.142)
Where's the H? It's not the first time I've heard that. I don't have a...

Jon Lowrance (00:33.363)
Yeah, I blame my dad. He's got the same name that I do.

Jon Stoddard (00:37.882)
Yeah. My mom never had an answer for that. Never. All right. So John Lawrence acquired. So let's talk about where you started from. What were you doing before you started acquiring these companies, which in, which is what in the last couple of years?

Jon Lowrance (00:41.975)
Hehehehe

Jon Lowrance (00:55.338)
Yeah, yeah. I've started my acquisition gig, I guess, probably about two years ago. And it was basically earmarked by the day that I decided that I was going to sell my current business. So I've been an entrepreneur most of my life. And when I was about, I guess at this point, I would have been 42 years old.

not really ready to retire and didn't really have the energy for a startup and was trying to figure out what the next version of my life looked like. And that's when I got introduced to this whole concept about acquiring businesses.

Jon Stoddard (01:33.678)
Yeah, so what was this business that you wanted to sell?

Jon Lowrance (01:37.398)
Yeah, so I had a grading and excavating business here in Middle Tennessee, and we were doing right around 15 million in revenue. And I was a part owner in that company. And we kind of had a little bit of a breakup. And so he continued on with his ownership and bought out my portion.

Jon Stoddard (01:55.717)
Amical?

Jon Stoddard (01:59.578)
It was an amicable, it was something other than.

Jon Lowrance (02:02.45)
Oh no, yeah, it was a little messy. It was a little, disagreements, you know, that's kind of par for the course sometimes. I mean, if you've been in business long enough, you've had some sort of disagreement or something that basically causes a relationship to end.

Jon Stoddard (02:06.055)
Yeah.

Jon Stoddard (02:19.878)
Yeah, if you haven't, you're not in the real world.

Jon Lowrance (02:23.787)
That's right.

Jon Stoddard (02:25.094)
I'm pretty sure even Warren Buffett and Charlie Munger had disagreements. In fact, Warren Buffett was a Democrat liberal, Charlie Munger was a Republican conservative. So do you think they had any disagreements? Yes. Yeah.

Jon Lowrance (02:34.306)
Oh yeah.

Oh, for sure. For sure they did. I mean, are they human?

Jon Stoddard (02:40.578)
Absolutely, yeah. Let me talk to you about this little grading, excavating business. Did you guys start this yourself and what was your role?

Jon Lowrance (02:48.691)
Yeah, so it wasn't a startup in the fact that he had already started the company himself. I think at that point in time, he was doing somewhere around $600,000 or $700,000 in revenue. I think he was kind of a field person. We pretty much kind of joined forces. I think he realized that if he was going to scale the business, he needed to bring somebody on that...

had some of the knowledge on the back office, the back end, not necessarily the field. And so we kind of joined up and I was a 30% owner at that point and no, I bought in, yes.

Jon Stoddard (03:27.934)
Did he give you that 30% or did you buy in? Yeah. At the valuation of a $600,000 excavating business. Yeah. And it was that, was that over time or you just got to gave him, had to give him cash?

Jon Lowrance (03:37.238)
Yes, yes. So that was...

Jon Lowrance (03:43.795)
That was over time, you know, and of course, needless to say, I'm way overpaid for what I didn't know how to evaluate a business at that point in time in my life. He kind of had to value what he thought it was worth. I had to value what I thought it was worth. None of it backed up by any academic equations.

Jon Stoddard (04:06.248)
So what do you think 600 what you know now what you thought then like $600,000 excavating business is a service based business. What was that thrown off in cash like back then? Just say give me a range.

Jon Lowrance (04:21.378)
Oh gosh, you know, I think I bought in 30% of the business somewhere and I think that 30% cost me about $250,000 which I paid over time.

Jon Stoddard (04:33.382)
Yeah, sounds like it was you overpaid.

Jon Lowrance (04:36.187)
Yeah, yeah, yeah. That might have been, that might have been.

Jon Stoddard (04:40.122)
Wait a minute. What is the excavating? Even if it was doing 50%, let's say it's all service. I'm not sure it was because you got a lot of heavy equipment moving stuff around. Even if it was throwing off $300,000 and you bought 30% for 250. Yeah, I think somebody overpaid, but you know. Well, we all start from somewhere. I can tell you. We're all making mistakes.

Jon Lowrance (04:47.884)
Oh!

Jon Lowrance (04:51.106)
Yeah.

Jon Lowrance (04:56.682)
Yeah. I don't think I'm really building credibility here with your audience, John.

Jon Lowrance (05:07.01)
I pay for my education on that one.

Jon Stoddard (05:09.274)
You pay. Is it better than going to an Ivy League school right now? Yeah.

Jon Lowrance (05:13.102)
Yeah, for sure. For sure. You know, it was really kind of my entrance into really scaling a business. And I think going through that, knowing that I overpaid, and I think even on the back end, when I sold it, it was, you know, we didn't really get counsel on this. And I really didn't do a whole lot of education and due diligence. And had I, I probably would have not done the deal. But if I hadn't done the deal...

I don't know where I'd be right now.

Jon Stoddard (05:44.934)
Yeah. What's your philosophy on that now? Because it sounds like you're saying, get the deal done. You may overpay, but get the deal done.

Jon Lowrance (05:51.978)
Yeah. Oh, absolutely. Yeah. I know that's, and of course, correct me, I'm not saying be reckless and, and make horrible decisions. But, you know, and, you know, obviously the mergers and acquisition space has got a lot of interest right now. I know that you know that it's people are talking about it more than they ever have. People, a lot of people are aware that that's an option for them. And there's lots of content out there that talks about it.

Jon Stoddard (05:58.781)
Yeah.

Jon Stoddard (06:08.892)
Yeah.

Jon Lowrance (06:21.718)
In a lot of ways, I believe that the academic world, the educational system that we grew up is in direct conflict with what it takes to acquire a business or be an entrepreneur. And I think what I mean by that is, in our school system, the way we were raised, it was like, how do you succeed in school? You know, you study and you give the right answers. And the people that give the most right answers are the most successful in school.

In this world.

Jon Stoddard (06:52.19)
that you would place your bets on that it would succeed. Yeah, based upon that standard.

Jon Lowrance (06:54.89)
Yeah, just or just saying that you were rewarded for having the right answers. You weren't rewarded for having the wrong answers. There was no reward for that. You are graded and tested. Right answers give you the success, you know, to say, Hey, I was a successful student now in the entrepreneurial world. It's right or wrong answers are the right answers and that you, you are rewarded even in mistakes.

Jon Stoddard (07:23.29)
Yeah, that's true. Man, like I think you're talking about somebody wrote Ruder Kipling, you know, the imposter and the success and failure are imposters. It's just all part of life's experiences where you learn. Yeah.

Jon Lowrance (07:37.898)
Yeah, yeah. And so, I mean, I've made a ton of mistakes and every single one of those have been great teachers for me. And so in a lot of ways, I just, I tell people all the time, the number one thing that is probably the most important, if you're going to be in this, is action. Is taking action. And not sitting on the sidelines, not spending so much time just thinking and studying and preparing. I mean, you can make a career of, you know, learning this material.

Jon Stoddard (07:43.473)
Yeah.

Jon Lowrance (08:05.962)
You can learn everything there is about evaluating a business, doing due diligence, you know, how to organize it and how to structure it and contracts and LOIs and NDAs and all this stuff and be great at it. But the one that's going to actually make money is the one that actually bought a business. And that means chances are, you know, I haven't had a business yet. That I didn't look, you know, hindsight. Say, oh, I wasn't aware of this existed.

I wasn't aware, you know, maybe I paid a little bit too much. Maybe it looked a little better on paper than in reality. I mean, I think without exception, every single one of those is gonna occur.

Jon Stoddard (08:43.79)
Yeah, I just saw a post on a guy from Twitter that said, oh my God, just bought a business six months later. Everything is different than when I bought it. I mean, a contract, uh, fall, fall out, fell out. Uh, employees did this, everything kind of was different from what it looked like than when I bought it and what my eyes, my point of view look like. Yeah.

Jon Lowrance (08:52.14)
Uh huh.

Jon Lowrance (09:07.486)
Yeah, but I mean, you know, the point is, is that I'm sure he's probably glad that he has it, even though it's different. It's the start of something to where he's kind of, you know, shortcut it in front of the line here, bought something that hopefully cash flows enough that it's able to take care of whether it's owned or financed or whatever debt payments he has. And he has something he can improve upon. And if that business had been in business for 10 years, he got a 10 year head start.

Jon Stoddard (09:28.583)
Yeah.

Jon Stoddard (09:36.103)
Yeah.

Jon Lowrance (09:36.95)
You know, and you can make things better and things aren't permanent. But things are usually never as good as you think they are, and they're also never as bad as you think they are.

Jon Stoddard (09:46.078)
That's true. I love that statement. When you sold to this guy 30% fair market value, did you get a good price now you're smarter?

Jon Lowrance (09:51.266)
Mm-hmm.

Jon Lowrance (09:56.394)
Uh, I probably got a little, you know, I sold it and it was a little, it was a little complicated. Um, one thing I learned in about this was when you, we had a buy sell agreement, but in that buy sell agreement, we didn't really have any language that said how we were going to go about evaluating what it was worth. Now, every company that I have that I'm in partners with, I've learned from, and not only do we have a buy sell language.

But we also say we're going to evaluate it under this metrics, you know, you know, and be very specific, whether we're doing a trailing 12 months, you know, EBITDA that's being, you know, approved by a third party accountant. And here's the multiplier that it's at today. And, you know, we can always, as the company grows, we'll always, uh, mark it up as, you know, we can, we can always change the language and admit and do an amendment to that once a year or once every two years, or as often as needed.

Jon Stoddard (10:52.722)
So he bought the 30% back for you? Yeah, yeah. And do you feel comfortable about that accent? Or do you regret, is there, is it just like, let me just put context to my thing. It's like, you know, every, we all are like, oh, I wish I could have got better, but you gotta move on. Yeah.

Jon Lowrance (10:54.774)
Yes, he did.

Jon Lowrance (11:00.792)
Oh, I mean it's...

Jon Lowrance (11:10.09)
Yeah, I am extremely, I think it was a very hurt, it was a hurtful thing for me. And I think that I still got probably if I'm being honest, some pain from that experience. But if I... It's going to turn it.

Jon Stoddard (11:22.502)
Let's talk about that, John. What's painful? What's painful about it?

Jon Lowrance (11:29.334)
But yeah, I mean, I...

Jon Lowrance (11:35.714)
Gosh, I wasn't prepared for that. Um, it's, it was, it was one of these things where I think that I had really worked pretty hard in the business on the backend and I think at the time he was the field guy, I was kind of the back office person and as, as time moved on, um, I had basically hired, train, built the processes, built the entire back office. And I think it got to the point to where, um,

you know, there was, we got crowded at the top. And I think ultimately the day happened when, I guess he kind of demoted me to head of, I guess head of estimating and made himself the CEO. And that's not really what I had been spending so much of my time for. And so I said, I'm out. And.

Jon Stoddard (12:29.51)
And there was really nothing in your language that you could have done. I mean, in the, the constitution of the, or the. Yeah.

Jon Lowrance (12:37.342)
Yeah, I mean there probably been a fire burning, you know, under, you know, a lot of tension that had slowly been building up and it just, I think you had the right accelerant at the right time and I think that was just the dissolving of the relationship and, you know, it was 70% him, 30% me. I probably felt like I was doing quite a bit of, you know, I wanted to be...

Jon Stoddard (12:58.714)
Yeah. Do you feel that was true? I mean, it's hard. It's like we're as humans, we like, we always think we're doing more. Then we're viewed by others. Yeah.

Jon Lowrance (13:02.497)
Yeah.

Yeah.

Yeah, no, I think if you asked him, if you had him on this podcast, he'd have a completely different opinion about how the whole thing went down. I think ultimately I was wanting to be a 50-50 partnership and there was no way for me to get the other 20% and it just created some tension, I guess.

Jon Stoddard (13:29.13)
Yeah, yeah. Oh, ask a witness at a crime scene. They're both gonna tell two different stories. Yeah.

Jon Lowrance (13:34.77)
Yeah. But I mean, but also in that moment, in that moment, I had a very limited mindset. And I, you know, every percentage, percentage of equity mattered because that's all that was ever going to be available to me. You know, and so I wasn't living. Yeah. But I didn't, I didn't come from a place of abundance, I think I was probably still in a place of scarcity. You know, now I'll take 10% of a company. I don't care.

Jon Stoddard (13:48.91)
Yeah. But you were throwing off 15 million. I mean, you were doing $15 million. I mean,

Yeah.

Jon Lowrance (14:02.89)
You know, because there's so many companies out there. You know, my, my plan is to have in my, in our holding company, you know, at least 30 companies, um, over the next five to six years, and you know, and I'm not going to have a hundred percent of equity in any of those, and so it's just going to be small bits and pieces and. You know, and you know, that was a bad.

Jon Stoddard (14:03.047)
Yeah.

Jon Stoddard (14:24.926)
Did you, was it a desire for wanting more action in the company, like more control to make decisions? Because you're not gonna be, I mean, with your holding company now and owning minority shares, you don't have a lot of power to make decisions.

Jon Lowrance (14:42.258)
It's true. I mean, most of, as soon as I got out and was trying, I probably spent about four or five months trying to figure out what my next step was. And I call that my wandering in Egypt phase of life. You know, I had to do a lot of reflection and, you know, I got right back into partnership with somebody else. And, you know, we're 50-50 partners. And so most of our deals that we have,

We own 100% of the company, he's 50 and I'm 50. And I feel like we really spent a lot of time making sure that we wanted the same thing, we come from the same value system, we have the same goals, we're very aligned and we're very different in personality.

Jon Stoddard (15:25.47)
How did you do that? How did you, what kind of tests? I always call it the Buds class, the Seal Buds class, because the way they pick people, it's like through fire. How do you do that?

Jon Lowrance (15:33.358)
Mm-hmm.

Jon Lowrance (15:37.418)
Yeah. Well, I mean, for me, it was a faith-based decision. You know, I'm a Christian and so I pretty much am under the authority of God. And I felt like I needed to find somebody that had very similar values, had very, had incredible strengths to bring to it, different strengths. And so I was looking for a very specific set of

talents and this person was extremely talented in accounting and bookkeeping. They basically were a real estate investor that also had a side job working for PWC and turnaround restructuring. So really, really big on the, you know, corporate world has an incredible pedigree, very calm, not excitable, you know, patient, has the same values, family.

I mean, before we even did our first deal, I mean, I had invited him and his wife and kids over to my house to eat, you know, and I wanted to see what his wife was like. I wanted to see how the interaction was. I wanted to see what my wife thought about him. And you know, so we had lots of conversations. Say what? Oh, she, I mean, she loved him. I mean, it was like, he, you know, he's a, he's just, he's a great person. And so, um.

Jon Stoddard (16:53.803)
What did your wife say about him?

Jon Lowrance (17:04.258)
there's a for sure an opportunity for him to hurt me and betray me. And I could be having a conversation 10 years from now about how that relationship eroded too, but, um, you know, sometimes you got to take the risk and you, and you've got to extend trust because the alternative of me being cynical and never trusting anybody. I don't want to know that, that John Lawrence, I want to know the guy that is trusting and trusted.

Jon Stoddard (17:33.03)
Yeah, you'll never take risk. Yeah. So you agree to this. Did you guys have an alignment as far as types of businesses you wanna do and what that looked like? What was that thesis? What did that thesis look like?

Jon Lowrance (17:42.622)
Mm-hmm. Yeah.

Jon Lowrance (17:49.602)
Well, I mean, he came from the turnaround structure. So, I mean, he was a lot of times dealing with distressed businesses. And then we basically agreed that we did not want to, we wanted to buy profitable companies, not distressed companies. Now I think there's some benefits to that. He's obviously well qualified. Um, and we pretty much knew what we were going to, um, we, we pretty much were looking for about a 500,000 to 700,000 EBITDA company and we wanted it to be local.

Jon Stoddard (18:00.444)
Right.

Jon Lowrance (18:18.758)
in our backyard and we were going to do one company together. And, um, 50 50. Well, what's, you know, what's odd about that is I actually had found the first deal and I had found it before I decided to go into partners with him. And so I had this whole thing and I feel like I was equipped to run 100% of the company and I was trying to figure, I had the deal and I basically approached him and I said, Hey, what do you think about

Jon Stoddard (18:24.978)
50-50.

Jon Lowrance (18:48.598)
you know, doing this with me. And he just got so excited and was like, yeah. And I was like, why don't you think about what you want and then come back. And so he came back, I think the next day and is like, I want 30%. And I was like, oh, because the 70-30 split was the same split that we did.

Jon Stoddard (19:07.474)
He's like, all right, let me write out a script for you because it's already been written, yeah? That story's already been told and it doesn't turn out. So, yeah.

Jon Lowrance (19:10.986)
Yeah. And so in that moment, I was just like, I felt like I knew exactly that moment. Like, no, it's going to be 50-50. I'm going to give you 50, you know? And so I found the deal. I provided the down payment form. He kind of got in for no money out of pocket and, you know, is gifted. And so I extended him quite a bit of trust. But, you know, I think he's so thankful and gracious. And since then, he's.

I think of the five deals that we've got.

He's brought in two of the five.

Jon Stoddard (19:46.138)
Yeah. So what was this first deal? What kind of deal, business was it?

Jon Lowrance (19:50.456)
It was a retaining wall company here in Nashville. Yes.

Jon Stoddard (19:52.85)
retaining wall. So tell me what that is in Nashville. Why do you need retaining walls?

Jon Lowrance (19:58.91)
Well, you know, first off, I didn't go out looking for a retaining wall company. I was looking for companies that I could buy and I happened to find out that company, the owner was interested in it. Well, you know, what's weird is, is actually the retaining wall company was the first company I bought, but the first company that I actually had on their contract under LOI, um, became my second company that I had bought because first they said no to me and it was a, that was a roofing company.

They said no. And then that deal fell apart. But in the meantime, I already bought my first company. And then it shows back up. I find out when the deal fell apart, I reached back out to the owner and said, you still want to entertain taking an offer for me again? And so the first deal that I had that fell apart, that was the reason why me and James partnered up, that fell apart and yeah. Yep.

Jon Stoddard (20:28.978)
Uh-huh.

Jon Stoddard (20:49.018)
Oh, so this was the next one just fell on your lap, which is a dream to well, how big was that? What did that look like in revenue? The retaining wall, the first one you close, yeah.

Jon Lowrance (20:55.978)
Which one? The retaining wall or the roofing? Yeah, the first one was somewhere around 3.5 to 4 million in revenue.

Jon Stoddard (21:05.902)
Yeah. And it was profitable on market, profitable or off market.

Jon Lowrance (21:10.518)
Mm-hmm. Yeah, it was profitable. It was off market because I was, you know, strangely enough, I was sitting in a office of somebody where I was doing a little bit of consulting work. I was still looking for a business to buy. I was in a landscaper's office helping, doing some consulting work because their CFO had passed away. And so I kind of came in as an interim CFO for a month or two just to help.

get things until they got a replacement and he gets the owner of that landscape and come and gets a phone call from I guess a supplier saying, hey, would you be interested in buying a retain wall company? And he's like, not really, but I'm sitting here right now talking to somebody that I know is looking for businesses. And so that's kind of how that happened.

Jon Stoddard (22:02.318)
Yeah. So this was this one, like, uh, being in the right place at the right time, kind of lucky, but through grit, you're doing work for somebody. So, yeah.

Jon Lowrance (22:09.246)
Yeah. And so, you know, one of the first things that I mean, I told every, I put it on my LinkedIn, I put on Facebook, every conversation I was having. I had talked to most of my warm network, letting him know I was looking for businesses. So he knew, you know, yeah, but if I hadn't ever told him I was going to do it, he never would have thought of me when that conversation occurred. So I mean,

Jon Stoddard (22:22.266)
So, and he knew, he was like a apostle for you, he knew. Yeah.

Jon Stoddard (22:31.398)
Yeah.

Jon Lowrance (22:34.122)
You know, the first thing, first advice that when people a lot of times ask me like, man, I want to get started. How do I get my first deal? It's like you got to let everybody know. Treat it like if you were just became a real estate agent. You got to let your entire, let everybody know. And so you got to do the same thing, you know, from an investment side point is that you've got to tell your entire, your whole warm web network needs to know that you are actively inquiring for businesses. So when that happens.

Jon Stoddard (22:46.878)
Cards, cards everywhere, cards everywhere. Yeah.

Jon Lowrance (23:05.174)
conversation happens, great. And the other thing is too, a lot of times just asking people, hey, do you know any owners? I mean, the first real deal I had, I called my accountant, the accountant that I had been working with in the construction business that I had just sold. You know, he did construct, he did books for tons of construction companies in my area here in town. And so I called him, I said, hey, do you have any clients that you're working with that are looking to retire and

Jon Stoddard (23:26.301)
Uh huh.

Jon Lowrance (23:33.106)
might be entertained having a conversation with me about selling their business. He's like, yeah, I've got three. And so that's, that's kind of how that conversation, you know, and so I had the same type of conversation with, with all the business to business professional services that I had used, whether it was an insurance agent and accountant, any of our sub, you know, kind of.

Jon Stoddard (23:54.276)
Some people that have a big microphone are talking to a lot of people already. Yeah.

Jon Lowrance (23:56.63)
Yeah, yeah, and specifically business owners. You know, like, like if you owned a business and you were ready to retire, I mean, who are the people you're talking? You're talking to your lawyers, you're talking to your accountants, you're talking to your insurance guy. Maybe you're talking to realtors. Think about selling your building. I mean, there's all sorts of things, conversations that would be happening. And so a lot of times I try to get in front of those people to figure out who the owners are.

Jon Stoddard (24:21.586)
Yeah. Well, so tell me about this process. Does he give the phone to you or do you just get the information and call him back and you start the process?

Jon Lowrance (24:29.858)
I got the information, he said, yep. And so I got the information and then I made a phone call. Like I basically said, all right. And I walked outside, immediately dialed. I mean, I didn't give it two minutes rest.

Jon Stoddard (24:43.76)
You're hot on the trail. Yeah. And now who was this calling? The owner died. Who was this calling?

Jon Lowrance (24:45.014)
Well yeah, I mean, why wait?

Jon Lowrance (24:51.37)
The owner hadn't died, he was a supplier. So this retaining wall company bought a lot of blocks from this supplier. And this supplier obviously doesn't want his, you know.

Jon Stoddard (25:01.981)
Uh huh.

Jon Stoddard (25:05.114)
his great account, cash flowing account to go away. So yeah.

Jon Lowrance (25:08.682)
Yeah. So he's trying to find, you know, anybody that he knew in his network that might be interested in buying a retainable company.

Jon Stoddard (25:16.186)
Yeah. And so what did they do? He put you in touch with this, this owner and you guys get together face to face or what?

Jon Lowrance (25:22.93)
Mm-hmm. Yep. And then we had lunch. I think we met for dinner.

Jon Stoddard (25:29.406)
And it's not a surprise to the owner that he's looking for a buyer, right? It's yeah. Okay.

Jon Lowrance (25:32.926)
Right. Yeah. I mean, I always try to get in front of the owner and a lot of times, I bring my wife with me. You know? Oh yeah.

Jon Stoddard (25:43.066)
Oh, is that right? How does that, are you see a model or she's just good reader or you know?

Jon Lowrance (25:47.07)
No, it's just like I'm a normal person. I'm a person just like you. You know, I'm like, you know, I think in some ways like I'm not private equity. I mean, I'm wearing a hoodie, you know, it's hey, let's get together and have a conversation. Well, you bring your wife. I'll bring mine and let's just have dinner together. I think something magical happens when you when you when you break bread with somebody, you know, it's not it doesn't feel the stuffiness of sitting in a boardroom.

Jon Stoddard (25:50.279)
Yeah.

Jon Lowrance (26:15.178)
you know, with a bunch of lawyers talking back and forth and trying to, you know, be too buttoned up. I mean, real answers.

Jon Stoddard (26:18.6)
Yeah.

Jon Stoddard (26:23.078)
Were you starting this conversation, you exchanged all the pleasantries and then did you just like jump into it? So you're trying to sell your business or are you trying to look for some connection? Hey, what school did you go to? Where do you kids go to school, et cetera like that? Yeah.

Jon Lowrance (26:34.922)
It's all connection. I want that, my only goal in that moment, and of course these are off-market property, off-market business. Yes, and so it's not like there's no broker involved, there's no attorney involved, and so my only initiative in that first meeting is for them to walk away and like me.

Jon Stoddard (26:42.406)
Yeah, these take a lot longer to cultivate. It could, yeah.

Jon Stoddard (26:56.858)
Yeah, and you're not asking for NDA in place or financials or tax returns.

Jon Lowrance (27:02.578)
No, I mean, I know at that point, I know that the company and, you know, I can do it. There's enough information out there if you know where to go look to get an idea of how that company is a small company, big company, how many employees they have. And so for the most part, you know, of course, I wouldn't do that without, I mean, I had a conversation with the owner on the phone, right? So, I mean, that's just, you know, I basically got the owner's information from that vendor, and then I'm making a phone call.

And I made a phone call that day and I introduced myself and I probably had a 45 minute conversation with him over the phone where I'm just having a, you know, are you interested in selling your business? You know, and yeah.

Jon Stoddard (27:45.954)
Well, let me make sure you're not chasing a bad deal. Did you find that it was, you know, did he tell you it was doing $3.8 to $4.5 million and it's very profitable or?

Jon Lowrance (27:54.55)
Yeah, yeah, yeah. And I didn't ask for, you know, proof of any of this. It's just a conversation. How big is your business? You know, how many employees do you have? You know, you guys making good money. You know, what do you love about it? What do you not like about it? You know.

Jon Stoddard (28:09.075)
What did he say when he said, you guys making good money? He said, yes, of course. Right.

Jon Lowrance (28:11.966)
Yeah, yeah, of course, right. I mean, so at this point, it's not it doesn't feel like a bad deal. And it is something that I'm interested in. So then you just take it to the next thing, which is like, hey, let's get together for dinner. Would you be open to that? You know. No, no, my wife.

Jon Stoddard (28:27.998)
Did you take your partner? Did your partner come with you? Okay. Your wife, not your wife did, but not your other PWC partner. Great, yeah.

Jon Lowrance (28:36.446)
No, no. And of course he knows about it, you know, but it's like a lot of times like I don't, I don't want that meeting to feel too stuffy. Like, oh, I'm gonna bring my partner. We're gonna, you're gonna add, and I got a checklist here of 25 questions. And, and let's go ahead and, you know, give me your P&L statement for the last three years in tax returns.

Jon Stoddard (28:55.738)
Just getting to know them if you have warm feelings toward each other. Yeah. Did you probe in any way that to find something you didn't like, or like you would dismiss anyway, like everybody's got their own personality? Yeah.

Jon Lowrance (28:59.365)
Yeah.

Jon Lowrance (29:08.542)
Right, right. I mean, you know, I didn't really find too much in there besides realizing, I think I realized, you know, it was an owner-operated business. So, you know, in some ways I'd be buying a job, which I knew that, you know, my plan wasn't to have a job. I think I worked there for about a month to help transition that out. But, I mean, I knew that there was several things that I didn't like about it, but I also felt like those were opportunities. And so.

One thing that I've noticed is that I don't even call it due diligence anymore. I call it opportunities, opportunity finding. Because a lot of times people will go through due diligence. They're looking for reasons to either lower the value of the business based on what they had on their LOI or they're looking for things that scare them away. And so every negative thing that I can find is an opportunity to make it better than what it was.

Jon Stoddard (30:02.498)
Right. I would say that's true. And, and I, I agree with that. However, there's some things you just can't change. Yeah. And it's a, it's a red flag. Yeah.

Jon Lowrance (30:11.53)
Yeah, no, and I agree. And by the way, this is not a prescription of how to, you know, every business I've bought has transpired different ways. None of them have been the same. You know, so, you know, there's been times where I haven't taken, I mean, I try to have dinner. That's what I would prefer. But I've also sat there and I've taken my business partner before. I've sat in a boardroom at a bank.

where it was an on-market property and the whole family's there and there's an attorney there and it felt very stuffy and we had a pitch deck in front of us. So, I mean, I've experienced a lot of different things. You know, I have my preference of how I'd like it to go, but you know, well, you know, everything's gonna change, you know, and change, you know, breaks the brittle. And so I really need to be flexible and open-minded.

Jon Stoddard (30:51.594)
Yeah.

Jon Stoddard (30:57.99)
It doesn't always get the same, right? So.

Jon Lowrance (31:10.782)
to different types of personalities, different ownership structures, and different ways of doing business, including the transaction of acquiring a company.

Jon Stoddard (31:20.154)
Yeah. So I am in agreement with that because you got to sell the seller. They got to, you know, peers tell their peers, they got to like you to be able to want to take over the business. How, and obviously that was green light, check, mark the box. How soon was it before you asked for the financial documents, report cards to examine? And, and let me go back to something. You were doing interim CFO. So you definitely have some financial acumen with you, plus your PWC guy.

Jon Lowrance (31:26.572)
Uhuh.

Jon Lowrance (31:38.378)
Yeah, I mean pretty much at.

Jon Lowrance (31:45.837)
Yes.

Yeah, yeah. And you know, a lot of times I felt like I had a lot of financial acumen because it was necessary. And so in my company, I was the one that was the crunch, the numbers and I was hiring, you know, people from a financial bookkeepers and accountants to help. And, you know, I wanted accounting as a language of business. It's so important. And so I love it.

And I spent a lot of time doing it, but I also realized, you know, you can go a lot deeper than what I am in that realm. And so I wasn't looking for, I didn't want to be the expert in accounting. In, in, you know, in my, in my partnership, I wanted somebody that yeah. And so I brought in somebody that's much more talented and gifted in that area than I am, and I'm grateful for it.

Jon Stoddard (32:30.034)
You just want to be able to tell the winners from the losers. Yes.

Jon Stoddard (32:39.446)
And so when you asked for the financial report cards, what did you, when you looked at the business in the balance sheet, income statements, what'd you think? It was like a good business? We need to put an LOI on it quick or what?

Jon Lowrance (32:54.251)
The first one was not, the books were not accurate. I mean, you could tell, like we asked for, oh no. I mean, I knew that right off the bat. And so you almost had to throw it in the trash because it was worth nothing. And I had to be very gentle about saying that because the wife was doing the bookkeeping. So...

Jon Stoddard (32:59.273)
They were not balanced.

Jon Stoddard (33:15.878)
Yeah, it's an insult to go like, what are you doing? Do you know what balanced books are? Ha ha ha.

Jon Lowrance (33:18.11)
Yeah. You know.

So I had to pretty much look at, you know, so instead of looking at it from an accrual basis, I mean, I had to look at it from a cash basis and really base it on tax returns to sit there and say, you know what?

Jon Stoddard (33:31.546)
Yeah, so they weren't doing a accrual accounting.

Jon Lowrance (33:35.702)
Well, they were trying to.

Jon Stoddard (33:37.074)
They were trying to, but it was half and half, right? Yeah.

Jon Lowrance (33:39.442)
Yeah, it was just it wasn't it wasn't accurate enough that I could not justify it. So I really had to look at, you know, the tax returns, you know, proven tax, you know, tax receipts, I guess, rather like I know how much they pay in taxes. And and they obviously had an accountant at the end of the year sit there and say this. And so it's kind of money coming in, money coming out. So I had to kind of I was going a little blind. It was not the ideal situation. I mean.

Jon Stoddard (33:55.207)
Yeah.

Jon Stoddard (34:07.514)
No, because it's really hard. If you're doing cash accounting, you can't tell where your expenses meet your revenues and you don't really know if it's profitable because you're paying bills, you know, differently.

Jon Lowrance (34:12.394)
Yeah.

Jon Lowrance (34:19.474)
Yeah, I mean, I wouldn't I wouldn't recommend that. I mean, I really wouldn't. But I had the same philosophy that I'm telling you. It's it's you got to get you got you. Well, you just you got to get your first deal. You got you know, you got to get your first company. And I wasn't about to let it go. And so.

Jon Stoddard (34:28.046)
Well, I mean, like you said, that could be opportunity, right?

Jon Stoddard (34:42.555)
What did your PwC partner say when you said, I got some messy books, but it looks like a good company.

Jon Lowrance (34:47.466)
Yeah, I mean, we went through it together. I mean, you know, it was, I mean, there was a veil of obscurity there. And so in some ways, we felt like we could, you know, we wanted to make sure that we weren't going to be making a dumb decision. And we felt like there was a tremendous amount of opportunity here and that we could grow the company, which we did. We grew the company, almost doubled it in the first year. Yeah.

Jon Stoddard (35:15.302)
Really? So let me go back to something, a point here. A lot of times in these small businesses, they're not doing accounting with cash and accrual and trying to hide things. It's just because they don't know, right?

Jon Lowrance (35:30.686)
Yes. Yeah. Nothing malicious. You know, and it's but. No. Just just didn't know, you know, and so. But but most every company that we acquire, we acquire it with the hopes. And maybe this is a better way to say this, is that I got to believe that I could double that business in size within three years.

Jon Stoddard (35:33.262)
Yeah. Did you see any malicious behavior in the funny ad backs, anything like that, moving expenses here over there or just hiding expenses, something else?

Jon Stoddard (36:00.262)
Yeah. So it was due.

Jon Lowrance (36:02.678)
Because at that point in time, if you can double a business in two or three years, it almost makes whatever you purchased it for irrelevant as long as you weren't just, you know.

Jon Stoddard (36:13.586)
Yeah, no kidding, right. So, when did you decide to make an offer and how did you value it?

Jon Lowrance (36:24.194)
Um, we, we pretty much valued it on about a three and a half. I mean, it was, it was pretty quick. Uh, uh, a bit, uh, yeah, adjusted a bit.

Jon Stoddard (36:28.478)
Three and a half of what? SDE or NET or EBITDA, of EBITDA, okay. And did you say that the tax returns were EBITDA or the?

Jon Lowrance (36:40.194)
I weighted it based on three years of tax returns. So I basically gave them, you know, obviously higher preference to the last, the most recent year and decreased down over the three years and kind of got an adjusted weighted EBITDA. And then I also realized that I was not going to be taking a job. So I also needed to replace his salary with somebody else's salary that was going to be operating the company.

Jon Stoddard (36:42.727)
Okay.

Jon Stoddard (37:06.598)
Yeah, and you definitely found enough cashflow in there to do that.

Jon Lowrance (37:09.843)
Mm-hmm. Yeah.

Jon Stoddard (37:12.59)
And then what did that offer process look like when did you meet face to face to do an offer? You sent an email or what?

Jon Lowrance (37:20.49)
Yeah, we had several. I mean, it went back and forth, to be honest with you. I mean, it was probably the whole deal is we, I found out about this probably in April. I'm trying to remember my head, but I want to say that somewhere around, you know, February, March or April is when I knew that this company was available and I had it purchased.

by mid-June.

Jon Stoddard (37:47.366)
Yeah, that's less than 90 days. Yeah. And did they have legal representation? That's fast for any business. This is legal representation? No. So how did he, how do you think he saw you?

Jon Lowrance (37:51.658)
I move quick.

Jon Lowrance (37:56.734)
Yeah, I know. Hmm.

Jon Stoddard (38:05.714)
Hey, here's an honest guy, Christian. You know, he's not going to try to screw me over. We're going to get the benefit of the doubt on he values my business. Yeah. He's not taking it, trying to take advantage of me. Was there a feeling that they, that he ever was like, Oh, you, it's worth more than three and a half.

Jon Lowrance (38:07.886)
Mm-hmm. Yeah.

Jon Lowrance (38:14.156)
Yeah.

Jon Lowrance (38:18.154)
Yeah.

Jon Lowrance (38:27.114)
Yeah, yeah, I mean, I would say, I mean, every owner, it's their baby, right? They've like, yeah. And so we had to negotiate back. I think that it ultimately was at a higher price than I wanted.

Jon Stoddard (38:31.647)
Every owner thinks his business is worth more.

Jon Lowrance (38:45.122)
But I was willing to concede that because I worked it into where it was 100% owner financed.

Jon Stoddard (38:53.438)
So let me ask you about that 100% owner seller financed. It's an off market deal. He's receptive to this because why? I thought he had health problems.

Jon Lowrance (38:58.498)
Yeah.

Jon Lowrance (39:06.246)
Um, he, he did not have health problems. He was, I think he was stressed and he was ready to retire and was probably overworked and was just done.

Jon Stoddard (39:17.626)
Okay. So he was just, there's no more gas in the tank. What benefits did you convey to him to say it's better to go this seller financing than for us to go out and get an SBA loan?

Jon Lowrance (39:32.798)
Yeah, and so he was ready to move quick. You know, he wanted it to happen quick. He was stressed to the max. And so I basically said, you know, Hey, you know, he wanted to, it happened very fast and I was like, this is going to take a while because we're going to get a loan on this and you know, the. Yeah. And then I said, well, here's the deal. We can close fast. We can do a hundred percent owner financing. And in fact, here's what, you know, here's what you're going to get per month.

Jon Stoddard (39:49.07)
Oh, so you presented that to him and said, we're going to go there. Yeah.

Jon Lowrance (40:03.71)
And so I really framed it because sometimes people aren't open to owner financing. But when you give them a decent interest rate on it, that's competitive. I mean, at the time it was, you know, six, I think it was five or six percent.

Jon Stoddard (40:11.349)
Yeah, what's a decent interest rate?

Jon Stoddard (40:16.634)
Yeah, you're three years ago, so that was fine. Right. Is it variable interest rate or is it? No. Okay.

Jon Lowrance (40:18.57)
Yeah, yeah. No, but you know, is you know, I basically put together an amortization schedule. And sometimes, you know, I do a balloon payment. Sometimes I don't. Um, and I try to pay it off aggressively to where they're at least getting, I mean, I want them to see a monthly check that is actually appealing to them. And that makes seller financing much easier to pitch.

And so I think the difference on this was that we can go slower and you can get this, you know, at closing table, you're probably gonna have a higher tax implication because you're getting it all at once. But the bank's gonna do some underwriting and they're gonna make sure that too, that I'm not paying too much for this.

Jon Stoddard (41:07.442)
That's right. There's guardrails on that. Anytime you do an SBA long. Yeah.

Jon Lowrance (41:08.962)
There's guardrails on that. Yeah. But I was really, I mean, because what's the return on investment for me if I didn't have to put anything down?

Jon Stoddard (41:19.029)
Kind of unlimited, right? Yeah.

Jon Lowrance (41:20.106)
It's infinite. You know, so in some ways like the company's cash flowing and you know.

Jon Stoddard (41:29.818)
What was the terms on that? How many years did you give him or did he want with seller financing? Five year, okay. What's his involvement anymore? Was he involved at all or just like the mailbox money? Yeah.

Jon Lowrance (41:35.73)
It was basically a five year. Yep.

Jon Lowrance (41:46.933)
He was involved for about three months and then he was gone.

Jon Stoddard (41:52.09)
And does he talk to you anything? Like, hey, this is the greatest thing in the planet or what?

Jon Lowrance (41:56.152)
Yeah, I mean, I think he's happy. I mean, after he sold the business, he did have a health issue. And so I think he's very grateful that he sold it at the time, because if he had that health issue, you know, while he's still in the business, I think he would have had no option but to shut it down.

Jon Stoddard (42:14.97)
Yeah. So what did you guys do the first thing you do when you took over the business? I mean, clean up the books. What was it?

Jon Lowrance (42:23.274)
Yeah, I mean, we basically, at this point, we started over. It was too much to all the historical, obviously we had to keep the balance sheet right, but we basically started back, kind of started back over and said, you know what, we're not really gonna have any benefit or there's too many distortions here to look at it from a historical thing. So we obviously really clean up.

Jon Stoddard (42:49.166)
At some point, you just got to go, OK, we're going to write that part off. And then we are starting all new with a whole new system and some stuff we have to write.

Jon Lowrance (42:55.245)
Yeah. And because of that, I needed, we had to get better clarity on what our costs were because obviously it's in the construction base. So what, you know, cost accounting is a, is a big deal.

Jon Stoddard (43:06.77)
Well, it's to understand a unit level economics. So was there any surprises in there? It costs more to do the business than you thought or costs less or great, okay. Costs, no surprises, it costs more. Ha ha ha.

Jon Lowrance (43:14.944)
Mm-hmm. Yeah.

Jon Lowrance (43:22.146)
Yeah, you know, and so we obviously had to raise our prices. I mean, it cost more. And so, I mean, it was, we were, it was probably a 10% gap. So we raised prices, you know, within the first two months, about 10%.

Jon Stoddard (43:29.36)
Like how much?

Jon Stoddard (43:40.236)
And those prices were to make a, but you were profitable. You just wanted more profit or did you were unprofitable and had to fix them?

Jon Lowrance (43:48.022)
We weren't, it wasn't as profitable. It wasn't as profitable. The cost or margin wasn't high enough.

Jon Stoddard (43:54.799)
Yeah.

Jon Lowrance (43:56.882)
And so in order to fix that problem, you can either increase volume, reduce cost, or increase prices. And so we've kind of done a combination of all three.

Jon Stoddard (44:04.092)
Yeah.

Jon Stoddard (44:07.438)
Yeah. And who's driving it? Is that you or your PwC partner guy? Both of you. Yeah.

Jon Lowrance (44:14.142)
But it's a it's a it's a team effort. It's a team effort and you know, we have discussions how we're gonna get how we're gonna get this accomplished So I mean a lot of it is just you've got to have good, you know good clean accounting And then you're able to look at the numbers and saying hey, what is our gross profit? You know, we're looking at revenue or cost of goods Look at our income and then obviously we got a factor in you know, our debt-free cash flow It's because we're

Jon Stoddard (44:41.202)
Yeah, it's completely different now that you have a debt payment for the business. Yeah.

Jon Lowrance (44:44.286)
Yeah. So we've obviously got to make enough money every month to pay the salaries of, you know, the people that are running the business. You know, pay all of our bills plus pay the debt payment in principle, you know, principle and interest and then hopefully have something left over.

Jon Stoddard (45:03.274)
Yeah, I kind of, you know, this is kind of a conversation side now, but these guys that take out the SBA loan on a 1.2 debt service coverage ratio don't realize that most of their cashflow is going to go right to paying off the debt of the loan for 10 years. And like that changes your complete look of your business on how you feel like how much cash do I have in this business to spend on expansion? Well, not much.

Jon Lowrance (45:16.462)
Mm-hmm. Yeah.

Jon Lowrance (45:27.272)
Yeah.

Yeah. And so, you know, obviously we're, we are probably, we're not trying to buy for value as much as we are trying to buy for growth. And so I think that those are probably two separate types of buy boxes. Some people are really trying to get a good price and a good stable value. And thinking that it's just going to continue on that trajectory. I'm more focused on buying something and being able, it's got to be scalable, like, you know, immediately.

Jon Stoddard (45:59.078)
Well, how scalable did you think this business was? I mean, you know, I don't know what town, what town are you in? In Nashville. Well, it's pretty big town, right?

Jon Lowrance (45:59.221)
And so.

Jon Lowrance (46:09.49)
in Nashville. Yeah. I mean, and it's, you know, we've got the topography that, you know, all the good real estate's gone. All the flat real estate's gone. It's all, what's left is things are getting tighter. And of course we have a topography that changes quite a bit. We're not a flat city, you know, and we're not, you know, we're not on a mountain either, but it was just, we got hills all over the place. And so retaining walls are pretty much...

Jon Stoddard (46:32.614)
Yeah.

Jon Lowrance (46:35.89)
showing up almost any property of any substantial size is going to have some level of retaining walls going into it. And there's really not a whole lot of competition. So the competition was low. I was looking at that like, hey, what's the competitive environment look like? What is the projections and growth? Is this a service that's going to be necessary? You know, and

Jon Stoddard (46:59.462)
Yeah, that's interesting. That's unique to Tennessee. If you go to New Orleans, you'll see some houses there that are, like sunk it down. And to build a new house in New Orleans, you have to dig down before you hit the water and then put massive telephone poles down there before you put sediment and then concrete. Yeah.

Jon Lowrance (47:04.106)
No. You're in the Delta. Mm-hmm.

Jon Lowrance (47:11.799)
Yeah.

Jon Lowrance (47:15.094)
Piers. Yeah.

Jon Lowrance (47:20.779)
Yeah. So I mean, having a being in that business in New Orleans would be great, you know, not retainable. But you know, obviously, if you're driving, pile driving and peers and, and doing, you know, that type of aggregate footings.

Jon Stoddard (47:36.59)
Yeah. So how did you guys grow this business? How much did you grow it in the last two years?

Jon Lowrance (47:43.006)
Yeah, so we went from three and a half to, we're right around five and a half to six. Yeah.

Jon Stoddard (47:48.018)
Five and a half to six.

Yeah, that's pretty great. What did you guys do to grow it?

Jon Lowrance (47:54.982)
um hired another crew Yep, um added another crew

Jon Stoddard (47:56.038)
You clean your books, you understand your new level economics, and then what? Yeah. One more crow. As soon as you understood what it took to do 3 million, you added a, uh, the whole crow or just kind of have to get to the. Yeah.

Jon Lowrance (48:10.991)
It was a one crew company. They had one crew that was operating, so now we have two crews. I mean, there was a little bit of capital investment. I had to buy another machine. You know, I had to buy another truck or two.

Jon Stoddard (48:15.506)
Okay.

Jon Stoddard (48:23.566)
Yeah, once you understand what the expenses required to generate a million or two million, whatever revenue it was, it goes like, that's all we have to do. Yeah.

Jon Lowrance (48:27.393)
Yeah.

Jon Lowrance (48:31.158)
Mm hmm. Yeah. I mean, you know, we improved our marketing, you know, we I mean, at the time there was no website. There was no real digital, no digital presence, you know. So I mean, it was lots of opportunities there, you know, and so we pretty much are doing that, you know, prescription as far as, you know, most of these companies that we're purchasing, we're really looking to say, man, while we're looking at entertaining

Jon Stoddard (48:41.459)
Oh my god, that's cool. Yeah.

Jon Lowrance (49:00.45)
the thought of buying it, we've got to believe that it can grow.

Jon Stoddard (49:04.538)
Yeah, you have to. This is, you know, how did you decide there was a lot of demand for it? If, did he have a process in place for, you know, creating marketing to create demand or was there just people just calling him automatically, like, Hey, I understand you're the do retraining walls. What did that look like?

Jon Lowrance (49:24.33)
Yeah. I mean, that's pretty much how he was getting, he was known as the guy that installed retaining walls and he might've been one of four or five that were known in this area. And

Jon Stoddard (49:36.774)
Yeah. And demand was so I, I'm kind of getting a read on the guy that was like, he grabbed onto a, a bull and it was going a little bit more than he wanted to. And it kicked them off after eight seconds. Yeah.

Jon Lowrance (49:49.77)
Yeah. And I don't think that, you know, that some, a lot of times owners, they, they suffer from a similar affliction that they can't hand off some of the responsibilities that they do either because A, they don't think anybody can do it or B, they don't want to trust somebody with that much responsibility. And so you end up that the company is going to grow.

Jon Stoddard (50:12.571)
Yeah.

Jon Lowrance (50:19.158)
to, you know, they're the lid on their company because they can't get out of the way to create systems and processes that don't involve them.

Jon Stoddard (50:27.77)
Yeah, that's why 93% of business never go over a million. I mean.

Jon Lowrance (50:30.282)
You know, so I mean, I think he was exhausted. I mean, he would, he would, he was a crew leader. You know, he was a sales guy. He'd come, he'd work all day, come home, have him, his wife might do some accounting and he'd do some estimates and bids and send some stuff out. And then, you know, he'd go get up in the morning and go look at a job before the sunrise came up and then, you know, I'm sorry, he was hard working and just burn out.

Jon Stoddard (50:54.766)
Yeah. Let me ask you a technical deal. Did that require a contractor's license in Tennessee? And how, and how did, I'm sure it did. And how did you solve that? Like you got the contractor's license. Don't you have to go, you go through a task, but you have to do a apprentice stage. Not in Tennessee? Okay. So his contractor's license left with him. It didn't stay where they come.

Jon Lowrance (51:02.734)
Mm-hmm. Yeah, I got a contractor's license. Mm-hmm.

Jon Lowrance (51:13.327)
That in Tennessee. Yeah.

Jon Lowrance (51:19.814)
He didn't have a contractor's license. He said he didn't have a contractor's license.

Jon Stoddard (51:22.447)
What was that?

build retaining walls in Tennessee. You know how much trouble that would happen in San Francisco if you built anything.

Jon Lowrance (51:28.011)
Yeah.

Jon Lowrance (51:32.546)
Well, this is the free world out here in Nashville, Tennessee, buddy. Tennessee is not like California. Yeah.

Jon Stoddard (51:38.743)
Oh my God, you have to get a Juris Doctorate to get a contractor's license in California. So this is a nice template. You guys happy with the way it's going? Let me ask you, you're talking about growth. Growth is different than throwing off value.

Jon Lowrance (51:53.102)
Mm-hmm. Yeah, I mean, I've...

Jon Stoddard (52:03.826)
Did you guys split the free cash flow? One goes into one bank account or are you taking a salary? And what is that? How did that?

Jon Lowrance (52:11.122)
You know, so we're pretty much planning on being, you know, we haven't really taken, you know, we haven't really taken much money out of that business right now. It's helped fund the growth and then we're aggressively paying down. And so our hope is that here within six months, we'll be free and clear. That's our hope.

Jon Stoddard (52:31.803)
lot more cash flow after that.

Jon Lowrance (52:33.514)
Yes. We also didn't need to take money from it because we had, once you start getting other entities involved, it takes the pressure off. Once you, one entity has to, if you were to buy one company and you're not taking a job in the company, that company's got to have enough cash flow to not only take care of its company obligations, but pay down the debt and also feed your entire family.

So that's a lot of pressure for one company.

Jon Stoddard (53:05.574)
Yeah, it is. What?

Jon Lowrance (53:07.906)
So that's why we've kind of got the idea that it's like, man, let's take the pressure off this, let's get another one. So we've got five companies. So the burden right now on keeping my family taken care of and keep my partner's family taken care of is essentially being spread out over five different companies. Yeah.

Jon Stoddard (53:25.022)
Small percentages, yeah. It's kind of like having a merchant service account. You have 10,000 accounts just taking 0.01%. Hey, let me ask you about the general manager you hired. How long did it take to find this guy and what is a general manager of a now $5.5 million business in Nashville, Tennessee? Is it 150,000 or $200,000 or what does that look like?

Jon Lowrance (53:29.025)
Yeah.

Jon Lowrance (53:32.81)
But we don't.

Jon Lowrance (53:50.352)
Yeah, you're asking... I know, I know, I know. I just... part of me is starting to think that like, oh, some of these people I know are going to be listening to this podcast.

Jon Stoddard (53:50.698)
I can go to Green Door and find out what that is.

Jon Stoddard (54:01.53)
You know, this is the problem. Sometimes I ask questions that the guest gets in trouble with later for revealing and then they call me back three months later, hey man, can you take that part out or take it down?

Jon Lowrance (54:04.63)
No, no, I like it!

I know.

Jon Lowrance (54:15.446)
Yeah. Now, so let me reframe this and I will give you the answer you want. Every company that, so the owner has been involved a hundred percent in every company I've bought and within a couple of months, somebody has been hired to replace them, to take over that operation. Without doubt, those owners never really felt like somebody could do what they were doing. And I think, and I think if we're being on,

Jon Stoddard (54:41.575)
Yes.

Jon Lowrance (54:45.022)
We all suffer from, you know, you definitely are proud of who you are. You feel like you're a smart person. Everybody does. You feel like you do a good job. And so pride gets in the way sometimes to where even for me, I'm like, man, I do a great job, like, I mean, when I left my company, I thought the doors were going to, the building was going to collapse without me, you know, it's pretty humbling to realize they're still going on. I obviously wasn't as important to.

Jon Stoddard (55:10.238)
to say that's part of your personality because, and I'll tell you one signal here, is because the way you separate your books in the back, regardless of the title, you have red on one side and you have yellow on the other.

Jon Stoddard (55:29.395)
You-

Jon Lowrance (55:30.034)
You've got a good mixture here of accounting, psychology, but you know, it's so that we replace the owner and one time I brought in one of the companies, I brought in a 30% equity partner to let him be the operator. Okay, so I basically recruited about an investor then also said, hey, we're going to pay you a salary to take care of this company.

Jon Stoddard (55:36.53)
Anyway.

Jon Stoddard (55:48.166)
Yeah, yeah, okay.

Jon Lowrance (55:59.09)
outside. I made a job ad and did interviews. Another company...

Jon Stoddard (56:04.03)
How did that go?

Jon Lowrance (56:06.783)
How'd that go?

Jon Stoddard (56:07.546)
Yeah, how did like the process of did you find good clients? I mean, interviewees and potential, yeah.

Jon Lowrance (56:11.713)
Uh-huh.

Yeah, yeah. I mean, I've got a few things that, tactics that I prefer. My, this will be interesting. So my wife, she's a real estate agent and she was ready to hire somebody, employ somebody to be basically her right-hand person. And so a lot of real estate agents were like, oh, you can't find good people out there.

And if you do, they're going to realize they can do it themselves and they're going to go start their own real estate career. Part true. And so what I did for her and what I do for myself and will continue to always do is you put out a job ad and you basically say right up front, here's what we're looking for. And don't send me a resume. I want you to answer these.

Jon Stoddard (56:47.838)
Part true. Yeah.

Jon Lowrance (57:11.83)
five questions and send it to me in a video.

Jon Stoddard (57:15.486)
Okay?

Jon Lowrance (57:17.402)
And you don't, number one, it weeds out all the people that aren't tech savvy. Because it takes a little bit of knowledge, right, to understand how to record a video. It's too big to email, so you're gonna have to do some sort of file sharing option. And also, goal, they follow instructions. And so, you'll get a whole bunch of people that will send you a resume.

Jon Stoddard (57:23.751)
Yeah.

Jon Lowrance (57:44.819)
I didn't ask for a resume!

Jon Stoddard (57:45.564)
Immediately, they did not listen to what I was asking for.

Jon Lowrance (57:48.158)
Yeah, so they can't fall instructions. I'm not going to hire them. And then some people are like, how do I, you know, we'll reach out and like, how do you, can you please give me some direction on how to get this video to you? Well, they're not technology savvy enough. And most of my companies, part of the growth metric is actually implementing technology into some of the things and set and get away. These are tools. So I don't want to hire somebody to run a company that doesn't know, you know,

Jon Stoddard (58:11.307)
Using tools. Yes. Yeah.

Jon Lowrance (58:19.306)
how basic computers work. It's just, it's a different world. And then the other thing is too, is like, I wanna see how they communicate and present themselves to me. And so I can watch five or six or 10 different videos of people and get an idea of, you know, their cadence, their community, are they effective communicators? You know, and they obviously, yeah, yeah. And so it's, and then after that, you start doing interviews.

Jon Stoddard (58:21.466)
Yeah, yeah, yeah.

Jon Stoddard (58:40.716)
because they're going to be representing your company. And yeah.

Jon Stoddard (58:48.166)
What kind of questions did you ask him to talk about?

Jon Lowrance (58:51.898)
You know, it depends on the job, they're always different. Some of these questions, I mean, a lot of times, have you ever one of, I mean, you asked some good questions. You asked some good questions. Yeah, I'm going to find.

Jon Stoddard (59:07.246)
You're just looking at your books again. You've got black down here at the bottom, you got red and then orange over here. Hey, this is not, John, I just want you to know I graduated in engineering a long time ago. It's just things I do, right? Right?

Jon Lowrance (59:13.91)
I'm trying to find Patrick.

Jon Lowrance (59:18.253)
Yep.

Jon Lowrance (59:26.078)
So, uh, have you- I prefer-

Jon Stoddard (59:27.962)
My daughter always said to me, goes, dad, how do I get this number from these three numbers? And I go, oh, I love this. And I'm going to sit there for the next hour trying to figure it out for her.

Jon Lowrance (59:37.806)
But you're going deep, you know, you're asking very, I don't even think I asked the other question about, you know, what I'm paying people. But Patrick Liianocchi, are you familiar with him? So he wrote a book that I pretty much follow verbatim on interviewing. And I think it's like the ideal team player, I think is the name of the book. And he basically says that to have the perfect team player.

Jon Stoddard (59:50.015)
I am not, but I'll write them, yeah.

Jon Lowrance (01:00:05.282)
They need to be a healthy combination of three things. They need to be hungry, they need to be humble, and they need to be people smart, hungry, humble, smart. And so he has a list of questions that you interview people that really try to flesh out, is somebody hungry? Is somebody humble? Are they people smart? And so I've got several questions that I will ask that kind of flesh out, you know, like hunger. Like number one, like you don't wanna hire a lazy person to run your business.

You want somebody that's driven, that is hungry. And so one of the great questions is, tell me what it was like, what was your first job like? How old were you and what did you do that was hard work? And his theory is, which I agree with, that work ethic is often developed at a young age. It's not something that is developed later in life. Now it can.

But I wanna see somebody that worked hard, early, and young. And so I'm really trying to ask questions that kind of flesh that out. Did they have a job in high school? Did they make money?

Jon Stoddard (01:01:13.626)
Yeah. How do you do work on this? And I'll give you the context for this because Intuit had their mission statement and it used to be work hard, but they changed it just when I was there to work hard and smart, work smart and hard. Like, how do you know the difference between, yeah, I got you. You worked your ass off doing this, but were you working smart? Yeah.

Jon Lowrance (01:01:31.083)
Mm-hmm.

Jon Lowrance (01:01:38.09)
Yeah. And so, and so his thing was smart. It wasn't being intellectually smart. It was being people smart, emotional intelligence rather. And so, you know, think about it. What if you had somebody that was like really hardworking, but they, and they were really people smart, but they weren't humble.

Jon Stoddard (01:01:47.151)
Right.

Jon Stoddard (01:01:57.266)
This is where I want to zero in on the humble. How do you understand or, you know, get a feeling for somebody else's humbleness? Like, oh, they got a humbleness rating of 10.

Jon Lowrance (01:02:10.166)
Yeah, I kind of, I do score it on that, right? When I have my three questions that I'm asking about trying to flesh out humility, right? I've been, like I said, when I read that book, I was just, I was sold on it. And so I do kind of score, I see three questions and I kind of give them a score, one to 10 on humility. And so a lot of times on humility, it's, I think it boils down to can somebody admit

that they're imperfect and that they're wrong and that other people are good. And so I think it's kind of that combination where I might ask you, John, I'll be like, so tell me about somebody that you used to work with that is much more gifted than you in a certain area and that area really needs to matter.

You know, like, can you easily identify people that are more gifted than you in some very important areas? Because a lot of times you got to be able to admit that people are better than you. And the second thing is like, hey, tell me tell me what is, you know, I don't really know you. And if we were to become friends and work together, obviously, there's going to be some tension, like, what is the worst thing? What is going to be something that I'm going to find frustrating about you?

Jon Stoddard (01:03:12.387)
Yeah, I'd probably.

Jon Stoddard (01:03:31.183)
Right.

Jon Lowrance (01:03:32.77)
You know, like, put you on the spot, Johnson, you put me on the spot. If we were really good friends at working together, what would be something that I would find frustrating about you?

Jon Stoddard (01:03:47.175)
Uh, probably my Spartan and, uh, NIS and my, like trying to do it on my own, right. Instead of delegating and bringing other people's in for advice.

Jon Lowrance (01:03:53.686)
Mm-hmm.

Jon Lowrance (01:03:57.698)
So how does that play out in the workplace? Like tell me a time, give me a very specific incident of a time.

Jon Stoddard (01:04:03.455)
Well, I would take a role in a business of sales where I'm dependent on John Stoddard versus taking a role in operations where I have people under me. So I clearly identify I'm not very good at managing a lot of people because of my Spartan attitude.

Jon Lowrance (01:04:15.082)
Uh huh. T-

Jon Lowrance (01:04:21.33)
Yeah.

Yeah, so yeah, so it takes a humble person to admit that, right? You know, and so you're not a narcissist. And so, you know, and sometimes I'll even ask them, like, hey, you know, if I called your wife right now and asked her, what would she say is the most frustrating thing about you? And so you kind of go through and so I'm really just trying to understand, can people be honest and honest about their giftings and their weaknesses and their strengths?

Jon Stoddard (01:04:27.151)
Yeah. Well.

Jon Lowrance (01:04:50.522)
And some people just can't do that. Oh, you know, you know, the worst thing about, I just work too hard. You know, I just try to do everything. It's always even there, even in their weakness, they're still kind of elevating themselves. And so for me, those are red flags, you know, and, you know, people, people are people. I'm imperfect. I frustrate the heck out of people.

Jon Stoddard (01:05:14.95)
What's a, let me turn the tables. What's the most frustrating thing about you that people would find?

Jon Lowrance (01:05:21.806)
Man, you know, I'm not super disciplined. And sometimes I get a little bit too scatterbrained. I'm probably that guy sometimes that misses the podcast deadline, you know, time meeting. Maybe I don't respond to an email. I'm a little bit hard to wrangle down and to get fitting inside of a certain box. You know, I like inspiration, I love action.

Jon Stoddard (01:05:47.547)
Yeah.

Jon Lowrance (01:05:50.574)
And when the idea hits me, I act on it, and everything else goes to the wayside. I am sometimes too transparent, which gets, my mouth gets me in trouble a lot. I say things I shouldn't.

Which means in some ways I'm polarizing. There's certain people that love me and there's certain people they can't...

Jon Stoddard (01:06:10.022)
Yeah. When you say too transparent, like, do you blurt out an opinion about somebody or something before you think about it or what? Yeah.

Jon Lowrance (01:06:20.238)
Yeah, yeah. Or just I say what I say, what I say things that I'm thinking. And so it wouldn't make me a very good politician. I would not, I could never be a CEO of a fortune 500 company. I can never be a politician. I could probably never be a preacher. Um, because if I think it, I say it right or wrong. I process through my words and my thoughts.

Jon Stoddard (01:06:45.762)
Yeah, that takes a different caliber type of person to be able to just say something and not sweat or pass a lie detector test. Yeah.

Jon Lowrance (01:06:54.73)
Yeah. Well, I mean, what is it? Mark Twain said that an honest man needs no memory, you know, and so, you know, you don't have to keep track of what, what you said in the past, because, you know, to, to know what's true and what's not. I mean, I just, and so, um, yeah, but so those were some of the, some of my things, but getting to, getting to your point, I think hiring a company manager is critical and there's a lot of ways to do it and they've looked different every single time. Um,

Jon Stoddard (01:07:02.098)
I love that. Yeah.

Jon Lowrance (01:07:24.366)
And some of them are better than the others in certain areas. You know, I don't think there's a perfect person, you know, and in some ways it's really tough on me because I feel like I was a pretty good operator of a business. And it's hard sometimes when they have an idea or want to do something that you don't necessarily a hundred percent agree. Like, I don't know that I would do it that way, but them doing it is better than me doing it.

Jon Stoddard (01:07:50.682)
Right. And you got to let that go. That's difficult. Isn't it? Yeah. I, it's even for me. I mean, sometimes, you know, even with running a small business is just, how do I search with that guy? Why does it take three days to do it? I'll just do it myself. Yeah.

Jon Lowrance (01:07:52.906)
You gotta let that go. Mm-hmm, it is very difficult.

Jon Lowrance (01:08:07.776)
Uh huh.

Jon Stoddard (01:08:12.37)
Just the way it is. John Lawrence, there's a reason I spent so much time on the first one is because I think it sets the tone, the template for the rest of them, how you approach an acquisition. Yeah.

Jon Lowrance (01:08:13.665)
Yeah.

Jon Lowrance (01:08:22.41)
Yeah. Yeah, I get it. I don't, I'm not going to say just buy the business and let the worry about it later. But it's for me, it's just, it's kind of meets my M.O. We've gotten smarter every time we've done it. I promise you what we do on this next. We got we got three that are under LOIs right now. Three companies. And I think we're going to take down all three.

Jon Stoddard (01:08:32.263)
No.

Jon Stoddard (01:08:47.069)
Yeah.

Jon Lowrance (01:08:52.362)
were much better And we're

Jon Stoddard (01:08:52.558)
And how are you going to finance those? Is it seller financing or is it bank or debt or what? Raising capital.

Jon Lowrance (01:09:00.69)
I pretty much go for, I mean, my stick is seller financing.

Jon Stoddard (01:09:05.326)
Yeah. And these are off market deals or on market? Off market. Yeah. And you found those through the same ways you found the first one, it was just networking.

Jon Lowrance (01:09:07.498)
Mm-hmm. Oh.

Jon Lowrance (01:09:14.23)
You know, you usually find what you're looking for. And once you get one or two under your belt, it gets easier because people know. And I think you've got a track record of proven success. Yeah. And you know, it's having conversations like this, everybody that knows me knows this is what I do and I'm probably top of mind if I guarantee you and for a lot of people that know me.

Jon Stoddard (01:09:25.906)
Gravitational pull.

Jon Lowrance (01:09:42.502)
if they run across an opportunity, you know, I'm top of mine and I, and me or my wife or my partner, they're getting phone calls. And so we actually have quite a bit of deal flow coming our way. And I think that the longer I do this, the more I don't even have to go searching for them. They come to me. I really feel, I feel like it'll be a flip, but it wasn't. So that's why the first one's so critical. And so, um, you just gotta be willing to.

Jon Stoddard (01:10:00.334)
I would agree with you there. Yeah.

Jon Lowrance (01:10:11.782)
learn through the experience of doing it. And I think I share with you too, one of my favorite quotes is again, Mark Twain. But you know, a boy learns something by carrying a cat by its tail that he can learn in no other way. And running a business and buying businesses, you learn by experience more than you do academics. And I think that the risk is yes, be smart about it. Don't overpay for a business.

Jon Stoddard (01:10:22.277)
Hehehehe

Jon Lowrance (01:10:41.002)
know all the academic aspects about what it's going to do, but also realize that the most important thing is to actually own a business. So the most important day of an entrepreneur's life or emerges in acquisitions probably is that first business, because that's what started it. And I think that people become collectors. And I doubt, yeah, I mean, how many people do you know that

Jon Stoddard (01:10:50.61)
That's right.

Jon Stoddard (01:11:04.859)
you enjoyed the ride.

Jon Lowrance (01:11:08.074)
that acquiring a business went through it and only did it one time.

Jon Stoddard (01:11:11.046)
Yeah, a lot, yeah, yeah. It's just like, a lot of my, because I interview people and then I interview serial acquirers. Most of the people that just buy one haven't figured out how to turn it over to somebody else. Yeah, yeah. Or maybe they just want that or they like that. It's just a, it's a decision too. Yeah.

Jon Lowrance (01:11:13.206)
Really? Okay.

Jon Lowrance (01:11:26.374)
Oh, so they're an owner operator. Okay.

Jon Lowrance (01:11:31.678)
Yeah. Well, it's weird because every time I've got to, I can't be on the organizational chart. I don't have a company email. I don't deal with customers. I don't deal with employees. I deal with one person. And a lot of times I have to hire that person.

Jon Stoddard (01:11:49.714)
fantastic. John, and I have taken you way over the hours limit and I appreciate this. So let me ask everybody here, if you guys like this content, make sure you hit subscribe.

Jon Lowrance (01:12:00.118)
And that's just hope that I didn't say something in this interview, that I'm gonna call you back, that you're gonna come back and say, can you edit this little part? No.

Jon Stoddard (01:12:03.526)
Well, it's gonna come out. If you, you should have warned me.

Jon Stoddard (01:12:10.086)
Yeah, you told me things you get in trouble for in 50 minutes into the interview versus the first day.

Jon Lowrance (01:12:18.233)
Well, I enjoyed it, John.

Jon Stoddard (01:12:19.078)
Yeah. And happy holidays, John. Thank you so much. Let me hit stop.

Jon Lowrance (01:12:22.862)
All right, thank you.