E135: Sam Rosati On His Journey From Being A Lawyer To Becoming An Entrepreneur In The ETA Space

[00:00:00] Ronald Skelton: Hello and welcome to the How2Exit podcast. Today I'm here with Sam Rosati. He is a powerhouse in the ETA world. He's the founder of Pursuant Capital, and, just does a lot of stuff. If you're not familiar out there with him, you're not on Twitter, you're not in the SMB Twitter world.

[00:00:16] Thank you for being on the show today. I've been looking forward to this. I've interviewed a lot of people, but sometimes you really look forward to getting somebody on the camera and talking to 'em and learning from 'em, and you're one of those guys, man. Thank you for being here today.

[00:00:26] Sam Rosati: You got it Ron. No pressure, right? 

[00:00:28] Ronald Skelton: No pressure. Nah. You just, you've been there, you've done it. A lot of the guys I get to interview are lawyers and advisors and, but they're not out there. They don't have a hold code. They're not out there buying 10, 15, 20 companies and hunting down operators and all this stuff.

[00:00:41] They understand the challenges from a, a lot of times from a academic level, but like, how many operators have you hired, right? I mean, how many of you fired? 'Cause that, that's one of the reasons I went into the space I'm in right now with the, blogs and web content sites and stuff. 'Cause they're usually three or four person companies, right? I don't have to have a great CEO and, managing the team of 10, 15 people. If something goes wrong, I need a new SEO guy, or I need a new rider. It's pretty, pretty laid back. Tell me about you. How did you get into this space? I guess, you're both an attorney and an advisor and just like you, you're really into this. So tell me kind of how did you get in here? 

[00:01:18] Sam Rosati: Man, it's too long of a story. It'll take up the whole podcast then we'll have to shut it down. 

[00:01:23] Ronald Skelton: Give us the brief view. Give us the, 50,000 foot view. It's funny 'cause I usually joke around and say, Hey, you were born then you ended up on a show about, mergers and acquisition. Can you fill out the gap in between? 

[00:01:32] Sam Rosati: All right. Let's see. I'll go back to, as far back in the origin story as maybe people care to hear. So before I got into ETA, I was a lawyer. I was a lawyer doing, m and a for entrepreneurs. Mostly helping entrepreneurs sell their businesses. And I can kind of go back, 10 years before that, to say it was up until I became a lawyer at a big, fancy, big law white collar law firm, that I had a plan.

[00:02:03] I was kinda always that guy, right? Studied fairly hard and it was when I found myself at a law firm, working for some partners that I realized, holy crap, I do not want to do this. And I had a couple jobs before that. I sold some golf stuff at a retailer, over summers and holidays. Worked in a couple internships and I always, noticed that I felt like I was a bad employee. And I didn't know why I kind of buried that thought. I said, just suck it up, keep going on the corporate hamster wheel. And it, so when I was a lawyer a few years in, I realized, holy cow, maybe it's not those jobs. Maybe it's me. And that was a tough one to deal with. I can tell you, I kind of was in a funk, whatever you wanna call that, a depression or whatever.

[00:02:59] And,I was in my late twenties and I had to figure out, holy heck, what the heck am I gonna do now? I had worked my whole life to become a corporate lawyer, helping other people do their deals. And then I got there, and I was, I kept finding myself wanting to read like the sims and the financial model and the businessy side, and had no interest in the legal documents. That's not a great sign for a lawyer. So I got really lucky. As soon as I started looking for what another route could be, I stumbled on a podcast. I don't know which one it was. I'm gonna guess that it was Brent Beshore. Five years ago, 10 years ago, not 10, 5, 6, 7 years ago. He was kind of the man. The only game in town, and, I must have just gotten lucky.

[00:03:47] Stumbled on one of his pods. Learned about search funds. Did what most people do. Go down the rabbit hole, read the HBR guide and Buy Then Build. And then I realized, holy cow, this might actually work. Because the only thing I know how to do in this world is help people buy and sell companies and that's what this is all about. So long story short, that's the origin story. I recruited my brother to join me who is younger. Was more of an operator and I was more of a deal guy. And this foray into SMBs, a HoldCo, helping people buy and sell small companies. It all came from that initial search we did to buy a business.

[00:04:31] We ended up buying two. We ended up running them both on a divide and conquer basis. We ended up selling them both and that is sort of how I am, where I am today. 

[00:04:43] Ronald Skelton: Was it a good sale? Did you sell 'em for a profit? 

[00:04:45] Sam Rosati: Yeah, we sold 'em both for a profit. Anybody who thinks that we made a home run, killing on 'em and I don't have to work, doesn't realize what the true outcome was and doesn't realize I have three kids.

[00:04:56] Ronald Skelton: And it's funny is I was working on a, when I was doing real estate, I had a real estate investment firm. I was asked a bunch and I actually owned a piece of the local Real Estate Investors Association.

[00:05:04] I got asked by a bunch of people, you gotta write a book. You gotta write a book. So I was like, finally caved in and I started it. I never finished it, but I might fire it back up when I get a little more experience on this and complete it and combined real estate and this together. I already have the title, and everything. The book cover's already made. Probably got 150 pages into it already. And it's called Get Rich Quick My Ass. All these things that are like, real estate, even this, like, it takes time. There's lessons to learned there. You've got to, it's not overnight. A lot of people go, I'm gonna flip businesses, make a million dollars a pop.

[00:05:35] Like, oh cool. Call me when you got that check. So anyway, let's go back to, So now you're like, you still have HoldCo. You bought and sold those, but you've, since then you've bought more. What does your current HoldCo look like? What is your investment thesis or whatever the word they would use? Like, what are you buying and holding and keeping?

[00:05:50] Sam Rosati: Yeah, it's funny 'cause, it's not tax season, but I'm trying to play catch up on my K ones and get my 22 tax returns submitted.

[00:05:57] So I actually have a chart that shows under the holdings, what are all of the holdings. And I won't bore you, but long story short, it's about two dozen entities, two dozen businesses almost. And they are all either small businesses, what we would all think of as, you know, a smaller, medium sized business. Or they are the real estate. In most cases that one of those small businesses, operates from. And they don't really have a rhyme or a reason. They're geographically spread out. Although there is a concentration in Florida just because that's where I'm at and that's, that was the way I started.

[00:06:34] They're various sizes. Like across the board, from businesses that are only making a few hundred thousand dollars a year of profit to, some real estate that doesn't make any profit. To, a few businesses in particular that have gotten fairly big and, I'd call 'em medium size. And as far as industry goes, I'd say the only thing that's in common is it's sweaty businesses. Old school, blue collar, mostly service businesses. 

[00:07:01] Ronald Skelton: Okay. And, do they actually have any cross sell, upsell of synergies across them? Or are they just pretty diverse? 

[00:07:08] Sam Rosati: Pretty diverse. I would say none of them cross sell on purpose. Those benefits are over exaggerated. 

[00:07:17] Ronald Skelton: I'd say, everybody has eyes of grandeur when they first get into this. Like, I bought, the first thing I did is I went out and bought myself. I bought a pest control company 'cause I had a couple relatives whose boss was retiring. And they, like my cousins and they're like, hey we really should buy this.

[00:07:30] And I was like, okay, I'm getting in that game. I'll take a look. I ended up buying just like the customer list and the equipment 'cause it was not following regulation stuff. Way too small. That's why I started learning, like interviewing people and learning is like I did this way wrong. I looked at it, it's like, okay, next time I'm gonna do, buy a cleaning company. 'Cause who finds more bugs than the cleaning lady? Like, I had this whole plan and then next thing you know, I'm not doing it right. You build these, eyes of grandeur, but you take the deals that you pretty much find and like, if they're great deals, you probably move forward with them and, we can search out that other stuff too. But eventually I'll have, some synergy around there.

[00:08:00] But that's, it didn't turn out exactly the way, that I intended on it either. I didn't like, own websites and other stuff. At the beginning I was like, it was like, find stuff that builds this one up.

[00:08:12] Sam Rosati: Never works out the way you think. And I think what's for sure true, is it's harder than it looks on Twitter.

[00:08:19] Ronald Skelton: Now how many of those did he has to say? Everybody's like, I held networking meetings and stuff where I meet people like yourself and other people and some of 'em we pull out and be on the show. And a lot of it's just to help each other out. Twice a month we meet and just have a chat and where you stuck.

[00:08:31] One of the ways they make money is if somebody's stuck, I refer somebody and I have referral agreements with a lot of people that have been on the show. So, and I tell the guys too, it's like, look, if you're stuck and you have the money to get unstuck, I probably know a guy, right? So I've interviewed 160 people in this space. So I probably know somebody can get you moving to the next step. But, inside of that, how many of these things do you operate? You have to, like, you can't operate all those. But I'm sure you have to step in and operate 'em on from time to time. So what does operations of what, two dozen companies look like? 

[00:08:59] Sam Rosati: It's a great question 'cause it's at the core of the way I've built it, and the way I've built my HoldCo is just a reflection of the life I wanna live. A thousand other ways to do it. Probably 999 of those are better. The experience I had with the first two businesses we bought, and I don't think we need to relive the story 'cause I've done a bunch of other podcasts, to talk about 'em.

[00:09:24] It was a roll off dumpster business, a rental. A wonderful business. And the other one was a light manufacturer. I'd call it a fabricator. A building component. That goes in mostly residential homes. And we, my brother and I had to be involved in both of those. And obviously he's a better entrepreneur than me, a better operator than me. That was my first foray into running a small business. Having to manage people and a P and L and all of the thousand things on an SMB owner's checklist. I will tell you, I struggled with it. And operations, I think I figured out the playbook if there is one, and what to do and how to do it. But I don't think I like it.

[00:10:09] And so I built my entire holding company around the idea, that in order for the day-to-day operations of any of these businesses to stay steady and in I, in an ideal world, to grow and improve, I can't be needed in the day-to-day, so that I can be an, call it like master of special projects. And whether that's accounting, finance, m and a, some sort of fire drill that comes up.

[00:10:37] Whatever it is that is not necessary to the day-to-day, that's where I can get involved. But the business doesn't need me to continue all. 

[00:10:46] Ronald Skelton: I like that. I consider myself, I think they're only probably two, maybe 3% of the planet are truly good at problem solving. And I consider myself one of those guys. Even all the way back when I came out of the military and went to work for Lockheed Martin, they recognized it pretty quick and I was the guy they brought in for.

[00:11:01] They were building something and they broke it. I got that project to go in and like, okay, this thing's breaking on a regular basis. I was a test engineer for 'em, for them anyway. But I've always had that, I can look at something, analyze it and solve problems, and I get real bored once all the problems are solved. So I like your approach. Like if, you do the day-to-day stuff, if something needs to be fixed or figured out, I'll take a look at that. That's what I'm really good at. So I love that approach.

[00:11:23] Sam Rosati: The pattern recognition has helped too. You do this once and twice, three or four times, everything seems new and incredibly painful. While you start doing this a few more times and the same issues just repeat. And that becomes a lot less stressful, a lot easier to diagnose. 

[00:11:39] Ronald Skelton: Yeah, I mean the reason I got outta the computer world is because, I always joke around, it's like, because there's a problem with the computer.

[00:11:44] It's either the idiot behind the keyboard that actually wrote it, right? The software. Or the idiot sitting on this side of the keyboard, hanging on keys. It's rarely the software itself and it's rarely the computer components themselves. So it kind of got boring and mundane. But in this space on businesses and stuff, human psychology comes into play. So a lot of times it's on this side of the keyboard. A lot of times it's operator error. And it's not 'cause they don't know any better, it's just they, their own habits and behaviors and stuff kick in. So, you're managing the multiple entities, dozens if not, I dunno how many employees total across all those.

[00:12:19] Probably over a hundred between, if you've got that many entities, probably over a hundred. Easily over a hundred. So do you have to do what they needed, the day-to-day dynamics of that? Or do they take care of all that stuff? 

[00:12:30] Sam Rosati: I would say that was one of the more painful parts of operating, was managing people.

[00:12:35] And I knew, there's this old saying that the deal business is the people business. And I'm okay with that. I love the art of the deal. I love human psychology in the m and a perspective. When you're doing a deal, when you're sort of having that first call with an owner all the way through closing. The thing I don't enjoy as much is managing the day-to-day of teams of your, of staff that are in small businesses. So I don't get involved in that almost ever. And that's nice. 

[00:13:06] Ronald Skelton: I have a buddy who just bought into a, him and another guy bought a construction company. And he was like talking about these guys. They're out in the yard, screaming and yelling and ready to fist fight each other. I was like, that's that industry. That is not uncommon.

[00:13:18] That is a very, I know a bunch of people in the construction business, and that's one of the reasons I wouldn't be that interested in it, is it's just a different culture. That's who you're hiring. That's their way of handling. They have no EQ right there. And I always, my joke is, uh, EQ is greater than IQ every single time. And emotional intelligence is more and more important to me than your actual IQ. Your ability to handle stressful situations and how you behave around other people is more important. So I'm looking, I'm under the same boat as yours. If I have to manage the individual day-to-day behavior of the pupil, I'm socially awkward anyway.

[00:13:51] I'd rather have an operator. If somebody can get in there, I have to train all my VAs and all the people on my business is like, look, I never mean to offend you. I'm really straightforward and direct. I'm a little socially awkward. I may be slightly on the spectrum. I've been accused of it more than once. I don't, here's a good one. I've been partners with somebody now on one of the websites and the content sites for probably with the other roll-ups and stuff I've worked with her, two years. I never knew she had a family. Never asked a personal question. We've been working side by side. 50% owners on some of these projects. Didn't know a single thing or I had to have a call the other and go, Hey, my wife just asked me a question about you.

[00:14:25] I don't know. And then I realized, she'd give me a hard time. I realized I don't know anything about you. It was like, just things she randomly brought up I knew, but I'd never asked. My wife's like, you're socially awkward. Like Yeah, I know. Because that'll tell you right off the bat, I probably shouldn't be the head of hr, right? I should not, probably, if I've got 50 of employees, maybe not be the guy that interacts with them on day to day and deals with their personal issues and growth issues. I need to be like the guy, like I could try to stay in now. Like you stay in, solving problems and leading something from the top as opposed to, in the data a operations and who's where, why they are. So. 

[00:14:57] Sam Rosati: Lemme just say something Ron. I, in the SMB ETA the hard thing is you, your success or non success in the search phase, is defined by your ability to close on a business. So managing people is not a big part of that. Maybe managing your seller and the broker and your advisor.

[00:15:17] But not, it's a deal. It's transactional. The problem is that when you become an operator, then you switch gears overnight. You go from being the searcher to the CEO owner, managing people is everything. And so I go so far as to say, the skills you may or may not have in managing people, are far more important to searchers than any book has written about, because they all write about the search phase and not the key part, the operating phase.

[00:15:49] Ronald Skelton: So that's where I stand and I like, I get it. And I know my own limitations. So I either have to have something that's, can be run by a very small team, where it's so big, the operator's already there. I have an operator already identified. And a vice president that can step up to be the operator, if my operator leaves.

[00:16:04] Or I'm not interested because I don't, could I do it for six months? Yeah, you can put on any persona or facade or doing like a fake personality for six or eight months. But, do I want to do that past that? No. I could create a daily checklist on myself and say, Hey, check on people. Do this, ask these questions. You can build a routine. Anybody that's socially awkward and trying to be out there as an entrepreneur in the world, we build these routines of how to behave like other people. Right? 

[00:16:27] Sam Rosati: I do know. I'm a closet introvert over here. I totally get it. 

[00:16:31] Ronald Skelton: So, you have a checklist like, Hey, when I see somebody, I probably ought to ask them this, this, and this. It's not that I don't care or don't know, it's just I'm extremely logical. So if it doesn't turn the widgets of the business, then like, my wife said, does she have kids? My other business partner, like, I don't know. It never made a difference to the bottom line of our company. 

[00:16:48] Sam Rosati: So the takeaway though, is that when somebody goes out there to buy a business and they're looking for the formula, right? They're looking for somebody to tell them, is this business good enough? Is this the one? There is no answer to that. The answer is what's right for you based on your skills and whatever the opposite of a skill is. 

[00:17:07] Ronald Skelton: How do you identify a great operator? 'Cause I've actually had some one or two really good opportunities and passed them on to people. I made some money, but, because I was like, I'm not the operator for this, but I know the guy. How do you identify a great operator if you wanted to buy it yourself and do it?

[00:17:24] Is it, hire fast and fire faster? Or hire slow and fire faster. I mean, what's your method of figuring out who's the right guy to, to run it? Or do you keep the seller, in the loop for a little while? Or, what's your game plan for making sure you have the right operator?

[00:17:37] Sam Rosati: Sure. So I've done it almost every way imaginable. I have, partnered with sellers and they continue to operate. I've operated myself. I have had my brother operate. I have. Bought a business where the operator was retiring and replaced them with somebody unfamiliar with the business. In almost every way possible I've tried it. 

[00:17:58] And I can tell you the more I do this, the more I actually lose conviction and my ability to figure out who the right operator is and how successful they're gonna be. Now there are traits that seem to be very consistent among the great operators of the businesses I have some insight into. And yet those operators have vastly different backgrounds. So I don't know if I have a playbook yet, and this is probably like top of the list of things to get better at if I'm going to do more of this down the road. 

[00:18:30] Ronald Skelton: It's funny, as I interviewed, like I said, I've interviewed over 160 people by this. I worked with one of my friends who's an investor. He bought a tow truck company and put an operator in it, and the operator was horrible. So we interviewed about, probably in the next 10 interviews I did. I was like, how do you choose an operator? I used this process to learn for myself.

[00:18:47] So everybody I brought on, they all said the same thing you did. It's an acquired skill. I don't know if I've ever got it right. You put somebody in, if they don't work, you figure out how to replace 'em, right? And that's the answer I've got from everybody. So I was hoping you had a magic formula, man. The answer is there is no magic formula. You gotta pick the best person you can find. Give 'em a shot at, and then be willing to swap 'em out I think, if they're not working right? 

[00:19:12] Sam Rosati: I'll give you the 10 steps to identifying a great operator for Twitter that you can post. 

[00:19:17] Ronald Skelton: We'll look forward to that Twitter thread, man. I do follow, I got your Twitter up on one of my other monitors right now, just to just kind of give myself reminders of things I ask you.

[00:19:24] If you don't post something in a little bit, I start looking. I actually go to your page. There's a checklist of about four or five people I go like, see if I missed one of your posts. You're one of them. I mean, you put out some cool stuff. Let's move forward on this. So we're out there, we're looking at deals. You do a lot of stuff in the search fund and search fund bootcamps and stuff like that. We've had some search funders on here, but tell us how you interact with them. I kind of think you're, you're doing this, you're helping them because it brings you operators, right?

[00:19:50] It's a way to get in front of people who wanna do this that have deals, but, is that me just guessing?

[00:19:56] Sam Rosati: Yeah, no, I mean, look, so, had the experience of searching from scratch. Like everybody has to do their first search. Acquired, operated, sold. So I had that full life cycle experience.

[00:20:09] And then sort of said to myself, okay, I'm never gonna operate again myself, so let's go find businesses to buy. Where I have a partner who's running it. And then I did a few of those. And somewhere down the road there, and this was about two, two and a half years ago, I started having people just ask. Friends, random folks, Hey, what do you do and can you tell me how to do it? And so I ended up spending more time on that than I should. So I said like anybody, I've gotta figure out a way, either not to do anymore of that, to helping people where it takes a lot of my time, or I've gotta find a way to do it at scale, some way at scale. So I had some folks come over to my office.

[00:20:52] And I just said, Hey, look, we'll take a day and I'll run you through everything I do. And when I did that, I realized, man, this is one fun, two, I think it's helpful. I got really good feedback. And three, it was frankly easy 'cause searching and doing a deal and sort of operational tips and tricks. That's all I did for the last however many years. Two years ago, almost to the day now, I opened it up. I said, anybody who wants to come, I'm gonna set three days, I think it was four days at the time, aside in my office. You gotta pay me something. Cover my costs and I'm gonna put together a whole content, a whole package of content on what we do.

[00:21:33] And I brought in my deal team. I said, Hey, the vendors we use, SBA lender, quality of earnings, insurance, law firm tax, I brought them in. I said, Hey, come if you can gimme an hour of your time, tell these. And it ended up being eight people in the room. Tell them what we do and how we do it. Let's have fun. And that was the first bootcamp. I think we called it a bootcamp at the time, but it was just a total riff and it was fun. I think people got a lot of value out of it 'cause the feedback was awesome. And sort of how the way things work, I guess I'm not a startup guy, but I guess that was a startup is that was I think five or six or seven live bootcamps ago. And now we do it pretty formally. 

[00:22:16] Ronald Skelton: So what's the formal one look like? How many people end up showing up? Do you guys still do like the panel thing where you have experts come in and talk about different subjects and stuff? 

[00:22:24] Sam Rosati: It just looks like a fancier, cleaner version of what we started with. Now it's at a, a nice business club. At my office. It's three days instead of four. So more people can put that amount of time aside. Day one is really all about, understanding your own criteria, being very clear about it, and then it's all about how to find a deal. Search tips, tricks, tactics and we have some speakers.

[00:22:49] And then day two is all about once you have a deal, how do you get it under LOI? How do you do diligence? What is it like to quarterback a deal? An SMB, M and A deal. So we bring in every one of our deal team folks, they give a pitch on how to do, what you're supposed to do as a searcher. And then day three is the fun day. We bring in a bunch of searcher, CEOs who have been through bootcamp, who are now owners. And they talk about everything. Backgrounds, where they found it, how they bought it, who the money is, how they run it, and it's awesome.

[00:23:22] Ronald Skelton: So I have found that, I think it's around 70 30. I think 70% of the people are still, are happy after the acquisition.

[00:23:29] And 30, 30% of the people who acquired something are like, what the hell I get myself into. You have any of those go through the course and they buy the business and they're like, oh man, this is more work than my old job. Why am I doing this? 

[00:23:40] Sam Rosati: Yeah. I mean, I don't know if there is a, every business owner is surprised by how much work it is and how mentally taxing it is. I think the only difference is are you making it, are you growing or not? And that dictates the variation of outcomes. 

[00:23:58] Ronald Skelton: Yeah. The ones I'm thinking that are probably, the 30% that aren't happy basically are, they didn't realize that the revenue would dip so much at the beginning.

[00:24:07] All these things, you, all these grandiose ideas you have about changing the business cost money. And that, like they just seen, okay, this company's making a half million dollars a year. I only made 150,000 in my best year in the job. I get to make 500,000 next year. Like they come in and they go. I'm gonna buy this thing. I'm gonna change the HR system and I'm gonna change the, the invoice and accounting system. And then I gotta retrain all my people on that. And the next thing I know, they didn't make that much in next year. And they're like, two or three years down the road, they're back where they need to be.

[00:24:33] But that integration and that changeover, stressful. And it's one of those, I was interviewing a guy yesterday. He makes people plan all this. Like, okay, now you're gonna buy this. What are you gonna change? We're looking at your cashflow analysis. You realize those changes cost money? How much are you setting aside for that? Now, at the end of the first year, here's all the money you have left. Is it worth doing this job for? Because the first year and the first 18 months and the first two years, this is what it's gonna look like. Would you buy this company if all you get to take home this year is 60,000 instead of 180,000?

[00:25:02] And then he just says, now the benefit is four, three years from now, two and a half years from now, you're gonna have growth, you're gonna be at, or, beyond where they were if you're doing this right. As long as the market can change the economy. There's a probability better than startup that you're gonna be ahead. So can you ride the storm? It's not as luxury as most people put it on to be, right?

[00:25:22] Sam Rosati: Not in the early days. Not in the early days.

[00:25:25] Ronald Skelton: We got all these guys teaching us. You gotta buy a business and make a million dollars a year. It's like, okay. Yeah, you could. 

[00:25:29] Sam Rosati: Before you owe the bank $650,000 a year.

[00:25:33] Ronald Skelton: Right. And, debt service and like that business looked really good before your debt service. And the owner is doing four jobs. You only wanna do, once you have to go hire three people at a hundred grand a piece. So, anyway. What is the process, for the guys at the bootcamp and stuff?

[00:25:48] Do they work with you a little bit? I mean, I know some of them you partner with, but is there a way for them to reach out to you after, like if they've acquired something? And, I know you're like, it sounds like you're a problem solver like myself. If they get stuck in a sticky spot and you're not one of the investors, you have any type of methods that people or resources for people to reach back and go, Hey, bought this thing and now I've kind of lost on growth. Or now I'm kinda lost on, we got this big accounting problem or whatever. Do you keep resources around for them to deal with some of that? 

[00:26:16] Sam Rosati: Yeah. So let's, two things. One for searchers who are still looking for a business. And obviously I get pretty involved, to the extent they want it. And it is not just me. Usually I'm helpful at issue spotting and saying, here are a couple ways you could deal with it. Or here are a few people to call, to help you deal with it.

[00:26:36] So a lot of that. A lot of, how do you think about it? From the investor's perspective. And how do you think about it considering the fact that you kind of know me? So a lot of that. When it comes to post-closing, after they've bought a business, It just depends. Sometimes searchers like to say, Hey, I don't really want anybody involved. I got into this to be independent. I want my investors to be passive. And I'm completely fine with that. And so I just like to be very clear about what my involvement should be beforehand. 'Cause it's just me too. I can't over commit. I got kids too. And just to be clear, I actually posted this on Twitter last night.

[00:27:16] Like, the whole reason I do this is like, I wanted to be very transparent. One, it's fun, right? So this is fun and frankly it feels easy to me 'cause this is my, what my life has been for the last 10 or 15 years. But, first and foremost, it's to help people get in the seat. And to get investment in small company purchases. So that's great. It gives me an opportunity to invest in deals. And then it gets, obviously a chance for me to make some money when I do the bootcamp. Mm-hmm. I have to make money. Otherwise, not worth our time. We should go hang with our kids. But then generally to reinvest all that money back into doing more deals and to support more. So that is my entire flywheel for why I do this.

[00:27:59] Ronald Skelton: One of your first purchases, I almost bought a business. The roll off business? I almost bought, I looked at one of those when I first started. I was in the real estate space. And we had such a deal flow that we didn't keep as many of our deals as, we probably could have.

[00:28:11] We whole sold a bunch of 'em, like, so we cherry pick what we want that met our criteria and we sold the rest of 'em off to other investors. So I had a decent relationship with everybody. And, one of the private lenders in town actually owned a roll up company he was selling. So I sat down with him and he like, he was friends enough, enough to go, Hey, probably you really don't wanna buy this from me. I said, why? He told me the inside and says, there's one big dump in town where all that stuff has to go. And they own their own roll off business. So they've been systematically raising the prices on him, dropping off his roll offs to where it doesn't make sense anymore. They were just basically squeezing him out.

[00:28:45] He's like, I'm selling it off because I just don't want to compete with the number one. Like I have to use them. At first when he started, they were really friendly. Like he could store their, his roll offs in their, in their big dump facility, like their landfill. And then at the end it was like, he barely was making any money 'cause of their fees and everything. 

[00:29:03] Sam Rosati: Yeah. Well, I've got my own version of, stories that give me PTSD from the roll off business. And, so our business was a, he's a broker, right. And not a hauler. We didn't own any trucks.

[00:29:15] We didn't own any dumpsters. We were just a lead gen business. And, so in that business we had our own problems. Which was, you know, we had a, anybody could open up a website and compete against you. There was zero moat. The other one was Google, like the primary way revenue and customers came in was through PPC campaigns on Google. Guess who raised their price and squeezed us? Everything is tough. Pick your poison. 

[00:29:42] Ronald Skelton: Yeah. Everything has, all businesses have that type of stuff. But this was one of those ones, I asked him, what are the horror stories of it, he is like, we've found bodies in our dumpsters.

[00:29:50] They had to call the cops 'cause there's somebody, and this was at slum lords of the all slum lords. Somebody had somebody who, an elderly couple had passed away in some form or shape in one of his rentals and he didn't wanna do it. Instead of calling the morgue he come and get him. His Hispanic cleaning crew just threw 'em in the roll-off. Rolled them up in the sheets and put 'em in the roll-off. And, the dump found it when they emptied the dump. Like it wasn't even him that found it. That almost made the local news. I don't even know if I should have been sharing that. You kind of said that to me in, in trust. But yeah, they found drugs. They found all kinds of stuff in, in those things. 

[00:30:20] Sam Rosati: I got a good one for you. People don't talk about this enough. The ones that got away. We looked at early on before we bought anything. We looked at a franchisor, so that the company that franchised and the franchises that they would franchise were hoarder cleanup. It was a service. They did cleanups of hoarder homes, crime scene cleanups, master cleanups. And we looked at that and we're like, geez, this is awful. Anyway, that was one that got away. I think that one turned out pretty successfully.

[00:30:52] Ronald Skelton: I once acquired a, I think it was like, very small. 900, 1100 square foot house, and it took 17, almost 18 dumpsters, 40 yard dumpsters to empty it out.

[00:31:04] It was so bad that when I sold it to the investor, they had to cut all the sheet rock off 'cause it had a cockroach problem so bad. They were in the walls that, that the walls were a foot or two deep in cockroaches when they removed the sheet rock outta the bottom. They couldn't kill 'em. Like, I own a pest control company. We couldn't kill 'em. We just cut the sheet rock off, it could spray up in the walls and kill 'em. 'Cause the house was so, so infested. So, yeah. We've seen some pretty bad ones. And everybody's like, oh, this smells horrible.

[00:31:26] And I walk through and go, smells like money to me, 'cause I'm gonna get this thing pretty cheap. But, anyway. So we're in, in the lineup of what we're going through. We've worked with search funders. You gotta HoldCo. What areas out there, is there anything you just don't touch? Like if somebody got a business idea or a business, not idea, but a business that they wanna sell. Are there any realms that you just don't play in? 

[00:31:47] Sam Rosati: That's a good question. I would say, today I am probably a little different. So I, the only things I'm actively looking to acquire where I have a very active role are, the businesses I'm fairly active in. And I guess, here we go. West Florida Fence. So the commercial fencing business, is one where I'm very active. We're trying to grow through m and a. We source directly to owners, which is something I certainly don't, advise searchers do on their first deal.

[00:32:17] So that is one big focus area. And otherwise, I'm looking to invest across the spectrum of industries, geographies, size, for the searchers that come through our bootcamp. So that's not changed. Otherwise, kind of agnostic. I guess the word opportunistic, although I kind of hate that word. It's whatever comes in. Whatever makes sense. I don't necessarily have a focus. For better or for worse. But it's pretty clear now just from seeing a bunch of things that, patterns repeat and it's easier to sort of assess what industries we wanna get into. 

[00:32:54] Ronald Skelton: Is there a red flag on the business side of it?

[00:32:56] Like somebody brings you a business and they're, what's too small? What's too big? Like, I'm mostly interested from not even just your, investment thesis, but as you're training these guys, what do you tell 'em? Like, look for something between this size and this size. Or are there traits, that are big red flags to, I know the standard ones like, customer concentration and all that stuff. But are there any ones out there, because you've got a lot more experience, a hands-on experience than some of these others.

[00:33:22] Are there things you have your guys keep an eye out for that just wouldn't be in the standard checklist of, this is a good buy and this isn't about a good buy? 

[00:33:32] Sam Rosati: So I kind of dodged your question. So I'll try to get more to the answer.

[00:33:36] When searchers come to me, usually they're geographically focused. And that's just the nature of self-funded searchers. They tend to be entrenched in a community and moving away from that city or state is a non-starter. So what that usually means is, if you are forced to stay local, if you are too narrow in your criteria for industry and size, you're not gonna have enough deal flow to find the business that you can actually buy. So we actually teach some in to be industry agnostic. The things I care a lot more about, 'cause obviously we all want repeating or recurring revenue. That's not always practical. So I think it's a much more qualitative assessment around, what is the risk of the business? And what's the risk that the revenues and the profits deteriorate?

[00:34:29] I think I'm stealing this from somebody, but Enduringly Profitable, that either came from the HBR guide or the Chen Mark folks, I can't remember. That phrase, Enduringly Profitable is a really, complicated analysis. It doesn't have to mean recurring revenue, contractually recurring. It can mean a lot of things. But it might mean, you're the only game in that town. Maybe that there's something unique about the business that makes it more likely to be successful over the long run. Because generally speaking, all of these businesses exist 'cause they provide value. But if you're gonna put debt on the business and you're gonna have a new owner come in, there are things you need to make sure you understand, so that you can survive long enough to see 20 years from now.

[00:35:19] And I think that a big one, is what does the owner do? How reliant upon the owner is that business? Is she responsible for a lot of the customers? Is there a designation or a license that's unique that's gonna go away? Are there competitors that are popping up, that are creating a more challenging dynamic for making money? Is it a cyclical business and you're looking at it during good times and just not looking at it during the hard times? So big time dodge of your question, but it's a, it depends. 

[00:35:56] Ronald Skelton: I think you got it there. I mean, in a roundabout round way, but we got it. Like I said, I was kind of in your shoes at the beginning and I just chose a different path later on.

[00:36:05] But, I looked at fence companies and to me, now I'm gonna separate what, what I was looking at was residential fence. And the reason I went away from it is I like things that if I look at it, how do I add a reoccurring, like a subscription model? How do I add re reoccurring? And I just didn't see it and like it was gonna be a constant hustle. I think all business, all entrepreneurs, we should be in a constant hustle, but I don't think we should have to be in a constant hustle. There needs to be like come some steady cash flow of some sort that's just recurring business. And I think in the commercial space, do you do like fence rental and stuff, or construction sites and stuff? Do you have a recurring element inside of your commercial side? 

[00:36:39] Sam Rosati: Yeah, it's a good question. So in the fencing business, we're all exclusively commercial. And that means all of the properties, we put fence on our commercial properties, with the exception of multifamily housing, which, other than the fact that people live there. It feels commercial.

[00:36:54] And on track homes, we will do a lot of the exterior perimeter fencing of the community, not backyard side yard fencing. And so we lose a lot of the repetitive work because it doesn't exist. Other than temp fence rental, which we do a fair bit of it, but it is not nearly enough of our revenue bucket to lean on in any way.

[00:37:20] Ronald Skelton: That's what I was, yeah. Sorry, I didn't mean to cut you off. That's what I was gonna ask is, can you get the recurring what model. The fence revenue, the construction site revenue. Event like where you're renting fence. Can you get that high enough to at least cover the payroll? In the event we have a bad economy, you've got it steady. You can hold people through a downs spill. Is that possible in that industry? 

[00:37:40] Sam Rosati: I mean, it is. Remember, we're pretty active in m and a. So we see a fair number of temp rental businesses that, that's either all they do or it's their core business. And it's really profitable.

[00:37:53] We'd love to be more in that business, but right now it would not cover our payroll. I think the thing we lean heavily on is in the commercial fencing world. It's a highly technical business. It's a technical sale, so we, and there are things about the best competitors in that space, that create moats. You need to have a bonding capacity that not a lot of people can have. You need to have the expertise and the network to be able to get looks at the best jobs and to bid them accurately. And to do them and to install them correctly and efficiently. Being good at all those things causes customers now to call us.

[00:38:32] To give us, the sole look at opportunities and it's definitely not recurring revenue, but it is a high quality revenue business. 

[00:38:42] Ronald Skelton: Okay. I was just curious in there as like, is it possible to do that? And the answer is maybe. Right? It's maybe possible to do it. Probably gonna take a lot of work to get it that high.

[00:38:51] So what would be a complimentary business of that? If you're building, commercial fence? Just doing fence rental I would say, there's a lot of little, like anytime you're doing the fence rental there, it's a fence. So if I was to buy a fence rental company, I would buy a port-a-potty company. 'Cause anywhere they're building something. Right? I looked at one, you know, and I see like, almost bought a shitty business. It was a port-a-potty company. Unfortunately, the reason the guy we almost got to the LOI stage. We started doing a little pre due diligence and found out the reason he was trying to sell it to me was his business partner was embezzling and he was just trying to get me, he was trying to force his business partner to sell out at the same time. And the guy just wasn't having it.

[00:39:25] As a matter of fact, at some point he, this guy's an attorney too. He eventually just had to go over there and, shut the thing down. And the guy, the guy had heard about it or something ahead of time, when he got there, they'd moved a bunch of the equipment off site. Like he didn't even know where all his equipment was. But, that was a profitable business. As horrible as it sounds like, picking up porta-potties and pumping 'em out and putting 'em back. The math behind it looked really lucrative. 

[00:39:49] Sam Rosati: Yeah. So the dumpster business and the porta-potty business go hand in hand. Or, I say can and can together.

[00:39:55] Ronald Skelton: Like, as I say, there would be your third one, right? If you were really like looking for synergy, rent fences, put porta-potties up and do the roll offs, right?

[00:40:03] Sam Rosati: Yes. And what we do is we try to be like a soup to nuts or, cradle to grave provider to customers in the commercial fencing business.

[00:40:10] So a lot of times what we'll do is, so there's a core installation project. And that's what we do. We're not a supplier of fencing materials. We're just an installer. Well, you can do the front end, the temporary fence, on the front end of a construction project. And then when it's done, put the permanent fence in. But then there are other ancillary businesses we're in. Like fabricating gates. Gates are highly customized and hard to make and in short supply. Well, we make our own now. And that's a profitable business. And then, the event rental business is a great fence business. Where there's access controls, like the gate operators. 

[00:40:47] Ronald Skelton: As I say, access controls, I'm always looking at what other synergies could you buy to plug into that. Access controls and security like the video, video cameras on the gates and stuff. That would be the two that stuck off my mind. If you're gonna put a fence around something, you're probably interested in some respect for security. So maybe, the cameras would be an auxiliary business you could bolt on. 

[00:41:07] Sam Rosati: No doubt. 

[00:41:09] Ronald Skelton: Cool. So what do you got coming up? We're almost at the top of the hour. Let's talk about you. How do people reach out to you? What do you got coming up that people, if somebody wants to work with you. Let's use the next few minutes to kind of solidify what you're up to. How people work with you and stuff.

[00:41:22] Sam Rosati: Yeah. Two core areas are, if you're an entrepreneur, trying to become an owner operator through acquisition, bootcamp is the best way. So we have a link on our website. It's pretty easy. We've got now nearly a hundred folks who have come through our bootcamp. So I've got a lot of references. I've got a lot of good stats, and it's become a pretty powerful program.

[00:41:45] So that would be first and foremost. I host office hours on Thursday afternoons just to be an open forum for entrepreneurs looking for, you know, some guidance and, no strings attached there. We are trying to get bootcamp to be available online. Live bootcamp will always be, kind of my baby. I love it. I'll never change that. But it's not always possible for somebody that lives, up where you live to fly all the way to Florida. So we're gonna get some of the content put online and that way it's more accessible. And that's it. If you are in the fencing business and don't wanna be anymore, or you wanna partner with somebody, call me.

[00:42:23] Ronald Skelton: Cool. Alright. Big takeaways. I always ask this question. To be a hundred percent clear. It's what I use to make my shorts, right. I don't think I've ever even said that on the show, but that's what we're using this for. So if somebody has, would listens to the show and they can only walk away with one or two things, what would be the key takeaways you'd want a listener to, to get from you?

[00:42:43] Sam Rosati: Acquisition entrepreneurship is possible for anybody who's willing to do the hard ass work it takes to do it, and we can help.

[00:42:53] Ronald Skelton: Awesome. That's awesome. That's a good one. And, anything else? Is there anything that we should have talked about? I always do the, what did we do well? What could we have done better and what did we miss? Let's just start with, did we miss anything here? Is there any area of this, what you do and what you're up to that we just didn't talk about today? 

[00:43:08] Sam Rosati: Well, what we didn't talk about is that, doing this ETA adventure is, in all seriousness, a mentally taxing and stressful endeavor. There is, I guess it's now popular to talk about mental health and becoming more common. And yet it's still not discussed enough how hard this is on people and their families, and that needs to be its own, thing. 

[00:43:40] Ronald Skelton: Yeah. Actually there's probably a good chance out there. I mean, there good opportunity out there for somebody to ETA support group.

[00:43:48] Like, let's talk about what you're dealing, it's funny is I say that jokingly, but we do a meetup twice a month. It's pre-acquisition before, most of these guys haven't acquired yet. A lot of people, guests from the show come on and they'll jump in and stuff. So we have some experts that come on too. But occasionally we get a guy on there that's like, Hey, I bought this thing and now, we try to help 'em. 'Cause all of us have our own business before. But you really know they need ongoing, like somebody to just chat with. Somebody that's been there, done that.

[00:44:14] So, if you're out there and you're a, an ETA expert, you bought a few businesses, but you used to be a therapist, there's a spot for you. 

[00:44:21] Sam Rosati: There is a spot for you. There's a peer group popping up just for this very reason. Yeah. 

[00:44:26] Ronald Skelton: Like, cool. Well, I think we got everything here. You wanna call that a show or you wanna got something else you wanna bring up? 

[00:44:32] Sam Rosati: That's good, Ron. That was fun, man. 

[00:44:34] Ronald Skelton: It was fun.