E214: Ujwal Velagapudi: Buying Unique Businesses and Building a Diverse Portfolio

[00:00:00] Ronald Skelton: Hello and welcome to the podcast today. I'm here with Ujwal Velagapudi. Did I get it right, man? 

[00:00:05] Ujwal Velagapudi: You got it right. Yeah. Velagapudi. 

[00:00:09] Ronald Skelton: Velagapudi. Man, I love your name. It's one of the most unique ones I've had. So that's cool.

So let's just start off right off the bat. Tell us kind of who you are, what your background is and what got you into the mergers and acquisitions fields. The ongoing joke is you were born and then you ended up on a show about mergers and acquisitions, how in the hell did you end up on my show, man.

[00:00:26] Ujwal Velagapudi: No, I appreciate you having me on. And, my story, I started back in Detroit. So grew up in suburbs, went to school out there in, in the State of Michigan. And I had a day job. Working in supply chain, aerospace and then automotive. Work in procurement and then simultaneously I was like, okay, what do old people do?

What do adults do? It's real estate. And so that's the only thing that I had heard of. That's the only thing that I knew as far as what adults did with their money to invest. And I got out of stock market. So I cashed everything that I had out out of stocks for my internship days. Took that cash and looked to buy some real estate.

Started in the suburbs and slowly diverted into the city of Detroit, the proper city. Some of the worst streets probably in the country and bought my first investment. You know, a lot of failed, suburban properties, condos and things like that and then found my way to the city. And my very first investment and negotiating that down to 20 grand cash for a three unit retail strip. Had like a barber shop in there, had a clothing store, had a, and then the other units was vacant at the time.

But three units, all break. I loved it. It was beautiful building, a very high trafficked area and 20 grand cash. So that was my very first investment. And that started the snowball into my investment journey at a, at a higher tier. And like a more professional way after I started working full time. That snowballed into dozens of units.

And by the way, I bought that first property on Craigslist. And so that really opened the door to quite a bit. My second property was off Craigslist. And so eventually that snowballed into dozens of units. And I was always on Craigslist. Selling Air Force Ones, buying Air Force Ones, buying gym equipment, buying cars, whatever it was.

So that's how I found those properties. And then I stumbled across the business section and one day it was, I think I was looking at a liquor store or a pizza shop. And so that took me down the rabbit hole of wait, I can buy a business? That's a fraction of the cost of the real estate, and it makes more cash flow. You know, because the cap rates for real estate are very different than a multiple on a, on a business.

So, especially back in the day. And so, after probably over a half a dozen failed deals, I eventually bought a sports bar in the city of Detroit, right next to our NHL arena. And that was my very first acquisition. So that,kind of started my snowball in, in where I'm at today, where I bought a total of 10 businesses and continuing to buy more.

And, I've sold a few of them, but always looking for the next opportunity. 

[00:03:27] Ronald Skelton: It's interesting, we have a little bit of a similar background. I, uh, I too worked in aerospace, in a different way. Designing systems and stuff for aerospace and, and government agencies, through Lockheed Martin. And then I got into real estate. Uh, a funny thing was I got a master's degree in marketing. And one of my clients, bought our marketing agency and took me in house and he had a real estate investment firm.

We were doing residential. And, did that for years from 2007 to 2017. Lots of properties in the real estate, uh, residential side. 

So I stepped right over that and I went and bought a company, a pest control company. And I did it all wrong. It was horrible. It was too small. It was too risky. Ended up having to go get all the licenses myself. I thought it was going to hang my licenses on the old, owner's shingle. And he was in a semi retire and just keep his licenses up to date. Found out he wasn't complying at all.

We pretty much just bought his equipment and his, and a list. It was, anyway. So that was, that was a mistake. So I thought I learned most of this real estate through by hiring mentors. So I went out and started training. One of the reasons this podcast exists was because of that, right. Because I wanted to go out and learn more about the space.

So, uh, it's a little bit similar backgrounds. You know, going from, W2 job to real estate to, you know, wait a second. There's something out there that makes a lot more money than real estate. 

I love the idea of the bar. I actually considered that before I had children. I kind of see it now as like the lifestyle of it.

If I had to be the operator show up, I don't want to be gone from, seven or 8 PM at night until three or four in the morning every day. So I didn't buy one eventually. So I seen the profitability of some of these clubs, like some of these little clubs, you know, do pretty good. But, uh, I still like the idea. Like there's a lot of nightcout clubs. If you do it right, there's some good cash in there.

Bars are probably the one of the food businesses that the profit margin is decent, right.What other type of businesses besides the bars and stuff? What do you, what kind of, kind of give me the flavor of the variety of things that you've got your hands into?

[00:05:27] Ujwal Velagapudi: Yeah. But, in six different industries, so just the one bar, gym, e commerce business, uh, software consulting and a virtual assistant agency and, vending machines. So bought on those six so far.

[00:05:43] Ronald Skelton: So cool. Let's talk about the, uh, the one that kind of jumped out with me was the virtual assistance agency. Did you still have that one? Or did you sell it?

[00:05:53] Ujwal Velagapudi: I do. Yep. I still have that one.

[00:05:54] Ronald Skelton: That's really cool. I just talked to another gentleman who,it's not live yet, but he has probably a competing one. Andhe sold a company that did in that virtual assistance place too.

That said, there's a lot of competition in the space, but there's a lot of people would need and do that. Does your company find them for them or you manage it? What does that company do?

[00:06:15] Ujwal Velagapudi: Yeah. So it's called Hibyron. H I B Y R O N, and so I, this is something that I had purchased.It's about an eight year old company, and it's a hundred, it used to be a hundred percent U. S. based assistance. So, they are administrative assistance. And our main differentiator is that we really focus on the tech stack that we are providing the service for. For example, is this assistant someone that can help you in Trello and ClickUp and Notion and, QuickBooks and Salesforce and HubSpot, Zoho, whatever it is, do they know that particular platform?

And that's the vehicle that they are assisting you in. Of course, the basic administrative work, the basic research, using Excel, using the basic tasks, email management, whatever it may be, running reports. That's all there as well. But it's primarily for the digital entrepreneur that is utilizing all of these services, all of these platforms, and our team can actually go out and assist you on those. 

At the same time, we're not someone that's like a high end developer in those. But we can run with whatever it is that you're requesting. 

[00:07:40] Ronald Skelton: That's cool. I've use a lot of stuff like that. When I jump in to like a new platform, like HubSpot or something like that. I've actually used, it's a temporary thing. Like help me set up this and help me get it running. And, maybe it's a 2 or 3 month gig until I've, like, I don't want to deal with the learning curve on a lot of these things.

I just want it working. Like, here's what I wanted to do. Go do it. So a lot of times it's good to bring somebody else in that can, that does it. That's what they do. They know that the system inside and out. And then, you know, for me, we can do hourly occasionally when I need modifications or changes or something like that. 

You said when you bought it, it was a hundred percent US based. Are you augmenting it now with people from around the world or? 

[00:08:19] Ujwal Velagapudi: Yeah, so we're actually in the middle of that process right now. We've tested it out with a bunch of clients. And, for me, I've always believed in global talent. I've got team members all over the world. And so it's something that we have shifted the model over to. Yes, we have, we're primarily still US based, but we have had, we have hundreds and hundreds of applications every single week from potential assistants around the world that want to come work for us.

And we turn a hundred percent of them down. And so it wasn't until very, very recently that we said, you know what, there's all this talent out there that's knocking on our doors. They have the ability to utilize, or they have the expertise in all these softwares. They've got the experience, great communication, et cetera, et cetera.

And why not find the best suitable candidate as opposed to just restricting within our US. So we have expanded it globally and we're trying to find something, the best talent. And, we manage the team members as well. So they're, they're in house. We can, we have a backend platform where a customer would jump out of the platform and request, hey, I need to do some research for this particular topic.

It's a five hour project. And they would go and put in that request. And then within an hour, they would have an assistant working on that, or at least assigned to them to be able to work on it. And so on the back end, that's what we do for short term projects, short term little gigs. And they are paired up with someone that has that particular expertise.

So if you need, hey I need, you know, some book data entry or book entry, some light bookkeeping work, someone with bookkeeping expertise that knows how to use QuickBooks. Let's say, if that's your, software that you're using, they would be the ones to jump on and get assigned to your project. If you're looking for something long term, you can jump off the platform and coordinate with that individual if they're a full time team member. 

But, so that's on a recurring basis. That's something that we manage and you start or stop as much or as little as you would like. And so start off with purchasing 10 hours a month to two full time members a month, whatever it is. And then depending on the cyclicality of your business or the requirements, you can scale that up or down as, as they wish. So that's what we offer.

And our process I think is very, very different, very stringent. Compared toyou know, what I've seen, the services that I've used and the team members that I have temporarily tried for my own projects and it's, it's a pretty rigorous process. It's pretty stringent. We do aptitude tests.

We do personality assessments. We assess exactly what the customer is wanting and overlay it with what the actual individual is. We try to have as perfect of a fit as possible. We interview them quite a bit. And then we give it over to the customer for full time opportunities. And it's, that's I think where we really have the strongest fit with what we provide to our customers.

And then during the onboarding phase too, we try and start off everybody very small or very, very slowly so that they're not dumping a whole bunch of work onto the assistants. I think it's, anytime you're onboarding somebody, it's got to be, in a methodical, slow manner. And we, as the owners of that responsibility or the owner of that work, we need to do it in a way where there are SOPs there.

It is done slowly. Whoever we're teaching can actually comprehend and run with it. And so that's something that we kind of hold our customers through. So that it's as good of a transition process as, as we can make it. 

[00:12:21] Ronald Skelton: It's interesting. You, you showed that yourself because of the, from some of the potential risk in that industry, because you do platforms and you do, such detailed training and stuff. I, if you had asked me last week and I'm all into the AI space, I love reading about it. I love toying with the different tools.

If you asked me last week, if AI could replace, you know,VAs, I would have told you absolutely no way. It's still a manual process and stuff. This week I just found one that's doing the sales research. So if you had a VA doing sales research, I found one that's done, it's backed by Y combinator.

That's could easily replace an average sales assistant. Somebody that does the research does the digs up, adds detail to your CRM tools. Does a lot of the background work, sends out cold email, even, does the lead nurturing, write some of the copy, like it does a lot of the stuff and it's backed by Y combinator and it looks amazing.

So, but you, you're still shielded from that. I was gonna, you know, in the fact that anybody developing something like that are going to stick with the general fields. Like this is, sales coordinator type of role that their first one, and they have two more they're working on that'll be a marketing coordinator.

And then the other one is a customer assistance, type of, full blown agents, where the agent does the work. So I always concerned, like,I was buying some blogs and newsletters and stuff, but I'm really concerned how fast there's the A. I can take over that. Not in the fact that he's the eyes that generate content and put it on blogs.

That's not what I'm worried about. I'm worried about search engines like Google and Bing stuff like that. Answering all the questions with their AI tools that I would have normally like wrote about and had in my articles on my sites and my newsletters. They go into the search Bing for how to do something and the instructions are right there.

Like they don't have to click on a link to a website to go see it. AI answered it. So it's changing the game a little bit. So looking at the different, I think you said it had eight different platforms right now. Are you growing any of them through acquisition? Like you buy in companies that augment the ones you currently have or is it you just look out there and see what's a great deal and you're going, continuing to broaden your spectrum as opposed to growing the individual ones through acquisition?

[00:14:37] Ujwal Velagapudi: I am. A little bit of both and so, in one of the industries, I had bought a total of five and that was purely growing through acquisition and of course organic growth as well, but then through acquisition. And that's what I would like to have. I really would like to have, at least four or five strong platform entities. And for me, a platform, I'm pretty small.

It's just one man show. Never raised any capital. It's just my own capital. And so, you know, platform for my size is probably a small acquisition for, for others. But, I would like to have that sort of size about four or five different industries where I do have a decent little base. And kind of diversify the portfolio a little bit.

And then if I happen to come across one offs that are super attractive just because they're interesting to me and I can learn from them, then, that's what I enjoy doing. I love getting into those opportunities to be able to buy, understand, operate and just learn from that.

[00:15:41] Ronald Skelton: You know, the, do you still own the vending route?

[00:15:44] Ujwal Velagapudi: I do, yep.

[00:15:46] Ronald Skelton: So I, my son's 13. He wanted a summer job and here you can get a summer job at 13, but it's kind of rough, the way the rules will play, but they can work for me. It's a lot easier if they work for the family business. So, we did some evaluation and buying like a vending routes to buy some other stuff.

And, we've have made a selection. We're starting to make purchase the items. We couldn't find a company doing exactly what we want to do. So it's one of those, like, I keep talking about buying businesses. We're kind of doing a startup here, right? But, it's a proven business model. There are other people in other markets doing it.

There's nobody in our market doing it. So it's a little safer than your average,like, Hey, I got an idea, let's go start something up. But I'm solely buying it because him and my wife are going to do it during the summer and during the, like when the school's out and stuff. And my wife will probably hire assistants and keep it going if it's fairly profitable, but it's in that, and that food service type of food truck type of business.

But we, we came real close to doing the, um, the, the vending routes. Just because it's, nights and weekends we can go fill up the machines and check on them, right. The only thing stopping us is the storage of all the equipment. This is a mobile studio. A tiny house is a tiny home we take with us.

We don't have like a big garage or anything to work on anything or fix it. So anything we would need to do on a machine, we'd have to have a location for that to take something off site and work on it. I'd have to have a spot for that. 

But, uh, I liked the vending routes because it's a great, it's not passive by any means, but you, it's kind of, you can maintain it with low hours is the way I see it, you know. 

And it's kind of industry, I mean, it's economy agnostic. People are going to walk up and use a vending machine if the economy is doing great or the economy is doing bad as long as it's in high traffic spots. 

What are you currently looking for? What's the current set criteria,not just the industry, but kind of, you said small, you're, you're normal or you're a cornerstone business or forgot the right exact phrase you use, but might be smaller than others.

What is, what's your buyer's box? What are you looking to acquire?

[00:17:39] Ujwal Velagapudi: Yeah, as far as my size and criteria, I I mean, I've been teetering back and forth on this, but I would say,if it's cool and weird, I think those are the requirements. it's cool, and especially if it's more weird, and intriguing and interesting and peaks my interest, I'll go small. I'll go very small, especially if it's digital.

I can even go super tiny, but for the most part, if it's a physical business, I'm looking at at least 3, 4, 500, 000 and free cash flow. And, that is not SD or EBITDA. That's true free cash flow after I inherit my expenses. So usually like you run the math and SD is at 500. I'll probably get 250, 300 out of that after I do things my way.

After I stop paying people under the table and go to W2, unlike the previous owner. I start using software as opposed to doing things by pen and paper. I mean, all of those things, once those are shifted over and factoring in CapEx, whatever it is, hiring a GM. So my true free cashflow, I'm wanting at least a few hundred thousand up to probably a million, around that ballpark. 

A million, million five. If it's a bit bigger, I'll still take a look at it and depending on the right type of business I would go in. Especially if it's one of my core types of industries that I'm really trying to go after, then absolutely I'll go up to two, even though it's slightly bigger. But once you start getting into that territory, I'm competing with big dogs with a lot bigger money.

And I'm just very conservative in, in my approach. And so I'm not looking to shell out the type of money that some of these people are. And so I try to play in a little area that I, I know that I can win. And I'm looking exclusively off markets. I don't really touch broker deals.Again, I don't want to play with the crazy money that's out there and all these people throwing around crazy offers, SBA money, all that. So, this is my capital. This is, I'll be inheriting this debt, not SBA. And so it's got to be on very conservative terms. So again, I'll, like I said, about a few hundred thousand free cash flow, upwards of a million plus. And recurring, I can't touch anything project based. It's got to be a recurring revenues or long term contracts in place. At least 10 to 15 years old, ideally closer to 20 or more.

Some sort of management has to be in place if the owner is the business. Just, uh, the key man risk there is too high. It's just not my cup of tea anymore. I used to do those back in the day, but I can't do that anymore. And, um, there's a few other things, like I love things that have, high regulatory involvement or licensing.

Or perhaps it's mandated. It's a mandated industry for other industries. Those are modes that I, I love to see. And then personally from a tax perspective, I love high CapEx businesses. So, you know, those are ones that I would get attracted to a little bit, a little bit, easier.

Just. 

[00:20:52] Ronald Skelton: I got turned on to an industry not too long ago. Buddy of mine works for one. That's what made me look into it because, because I asked him what he was getting paid and his commissions, cause he usually, he's a high end sales guy, make six figures living in Oklahoma. I'm like, how are you working for this company making six figures? 

You usually make, to be comfortable, he's in the six feet, you know, 180 to $150, 000 a year and what he needs to live in his house and do what he's doing. And, he works for a company that, he travels around a lot, but he's the company's I think is best, based in Texas or Houston.

They do fire inspections for buildings. It's mandated to come every, every building in most cities have to have their sprinkler systems and fire systems inspected every so often. The person that's doing it has to have a minor certificate, right? And they actually sell some of the repair and stuff.

So their, their primary business is the inspection, but they can do minor stuff. Like they can replace, so for instance, if they're ticker type of building, I guess the little wax melting things that are in the sprinklers had to be melted, meltable at a certain temperature. Well, some of those codes changed over the years.

So these guys can go turn the water off on that and switch the head out there. They have, they're not total plumbers, but they can do certain minor stuff. So they can do some of the work and they make a killing. Cause almost every time you go there, you find stuff that the codes and regs change.

You walk into a building, it's a hundred years old and there's sprinklers, the stones, you know,you test it out and it's got rust in the lines and stuff. Well, it's gotta be purged. There's, maintenance that has to be done and they do the maintenance. And I never thought about that. I own a little pest control company and it's highly regulated.

But there's a, there's a moat to that. There's a moat to, like, you're the guy in town that knows how to inspect that and do it right and keep people to doing it. And they have to do it, especially anything that's a public services. Hospitals, dental offices, hell, I mean, California food trucks and all those have fire suppression systems that have to have in it.

So if you have a, if you have a grease fire or anything that cooks over a certain temperature, you have to have a full blown fire suppression system built into your trailer. So that would be one. What are some of the other like industries that you think that would be like to have that type of mode?

[00:22:55] Ujwal Velagapudi: I've got a spreadsheet of over a hundred. Probably maybe 10, 15 industries that I'm looking at. And, yeah, over a hundred individual unique types of businesses. But, I've looked at anything from heavy machinery rentals, in the construction world and heavy duty equipment. Talking down to the dumpster level to, porta potties. From the service standpoint, there's so many different types of repairing types of companies from appliances and the hospitality sector. All the way to commercial, or to residential as well, but also commercial. And then you kind of get into the traditional, you know, the hottest stuff right now, electrical, plumbing and HVAC, but in different verticals.

So for example, the hospitality sector, not touching residential whatsoever.I mean, just different things that I find attractive and looking at elevator repair companies. Looking at, really for me, it's, it's the weird stuff. So if it's dirty, other people don't want to do it, like, for example, septic, anything related to septic.

I mean, they've got a lot of equipment out there as well, but it's just the dirtiness nature of it that many people don't want to touch. And so that's attractive. Looked at fire and safety. That is a pretty hot field as well. Looked at pest control. Again, those are all hot fields that P, P is all over and it's, it's a tough market to fight in. But it's just, I think getting, for me, it's all about finding the off market opportunities.

And, sometimes that may mean that you got to go much smaller for companies that have not beenyou know, wooed by the larger, larger players. But, uh, so I'm looking at a different approach of, okay, if I have to go that small as, small as like a few hundred thousand in cashflow, could I make a dent in growth, expansion, grown through M and A, would that make sense?

And so that's kind of what I'm evaluating for each opportunity. 

[00:25:06] Ronald Skelton: I interviewed a guy who, he bought, grew, then sold the company that kind of in that septic space, but it was for commercial properties only. And it had a niche business inside of it that would, because it uses the same pump trucks and stuff, but it was a empty grease traps for restaurants.

And then he built a thing where he would clean the grease hoods and the grease fence, because those people need that, that's mandatory. They have to do that every so often. So he, he would take the, and he had a truck that could pressure wash all that stuff and then capture the grease and, you know,in the grease trap. The truck had a grease traps built in it.

So it wouldn't release any grease back into the, into the ground or whatever. And, but he, like, I think the number was something like seven, $8 million a year that he grew that to, or he sold it. That a lot of these companies make a lot of money. 

So there's a lot of these businesses are a lot more cashflow positive and have bigger margins than you would think they would. You look at some manufacturing companies, they're doing good to have six, seven percent margin, you know, margins.

They're, that's in crazy, in crazy insane form, that's good. But some of these little service companies, like you're talking about, these septic clean out and these other stuff, they can, you know, they can have considerable profit margins that, you know. When you build something, it's yours to figure out, grow, expand, figure out product market fit and all that.

When you buy something, it's yours to screw up. So I need some room to learn some lessons. But, um,I like those industries too. I think it's really cool. And I love your ideas.

It's weird, unique. That's a unique moat in itself. There's something to being, you know, your unique selling proposition to just be in something that you do that just kind of different from everybody else. I looked and they wouldn't sell because they were leaving it to the, they only called me off on one of my ads because they wanted to learn how to sell it to their, their son.

Like,they didn't need to know how to do the transfer and I helped him because I'm overly generous in that and I walked him through what type of attorney they needed and how to set it up. But, it was a foundation company. Sounds non generic, right? But no, they, they, do foundation repairs for major bridges.

And like, they're like a top engineering firm. They get flown around the world. If you go bridges, the bridge looks like it's sinking they can lift bridges and restructure bridges and like major structures. And they're based, they have an office in Tulsa, Oklahoma, but they're mostly out of Dallas.

And, it's like six engineers and then they bring on expertise is a need, but if somebody says, Hey, this bridge is sinking and we don't want to tear it down and rebuild it, these guys can go in and say, Hey, can it be saved? And, it's like, man, I wanted my hands on that. Cause that's something that like, they're known that they're the only ones that can do it.

But, it'd be hard because the engineer is the father. The son's been working there 10, 15 years now. So he's got a rep too. So that's one of those is the, is the owner so tied into it? That when they leave, it's going to be a big problem, right? So what are some of the unique ones that you, when you say unique or weird, like,have you seen any, I don't want to disclose anything you're still working on or the ones like, man, you wish you'd have got or anything cool.

These stories of mannequin this close to getting an X, Y, and Z.

[00:28:03] Ujwal Velagapudi: Some, I mean, yeah, I guess a couple of that had gotten away. The ones that I, these are from years and years ago, that I wish I had gotten a couple of job boards. So one, with developers, that's one I'm still in contact with even until today. About five years ago is when we started that relationship and still keep in touch.

But I would love to have that business. It's a very aged, tenured company in the job board space, which I know has become more of a commodity. It's, it's just almost anyone can start one up very low barrier to entry, but that's still a very attractive business to me and the age, the tenure and just, it's placed in the industry as well as niche job boards. So I've looked at job boards and very, very particular niches, which I think is super fascinating. 

[00:29:05] Ronald Skelton: Was it FreeUp by chance? I interviewedNathan yesterday. Who, uh, sold in 2019, he sold FreeUp, which is a job board forpart time gigs and like, uh, outsourced gigs and stuff like that. He built, they built that thing up to, I want to say, I think it was like $12 million a year revenue and then sold it.

[00:29:25] Ujwal Velagapudi: This was super niche in the medical space. One of them, one little vertical, another one was in Hollywood, and, uh, very select niche. And so that's, that was super attractive. 

[00:29:40] Ronald Skelton: I tried to convince, there's one in that job board space. I tried to convince a young lady who had a traveling nurses placement company. Was more of a placement. She had a little bit of a job or she could have done better for her website, but she had a really profitable business. They had, I think, five staff plus her.

So six people doing three million on her tax return.Not bad for and they're operating like six states virtually because they just do everything through zoom. So, basically, they find traveling nurses and coordinate contracts with, hospitals and send nurses around and they have quite a few. More than 100 nurses that travel around.

So I don't want to give too much detail because people listen enough shows. They might be able to figure out who she is. So, um, what does it look like, your day to day operations?

As I did, I did hear a key piece of information when you're talking about these, you look for general managers and stuff. I don't want to buy anything. I have to run 20, 40, 60, 80 hours a week. It sounds like you make sure that you can put a GM or a daily operator in there. Or any of these that you're the main operator, or you pretty much like that? You just, you have a primary operator and you kind of play the chairman of the board role.

[00:30:49] Ujwal Velagapudi: Exactly. Yeah. Each company has someone that runs it. And then I am basically the back office staff. So I'm the administrative staff. I'm the part time M&A as well as the back office HR and the back office part time CEO. You know, so I run everything on the back office side for the companies. And I'm the one that oversees the KPIs, the financials, the management on a monthly basis for each one of the companies.

But, and then I work on the new opportunities with an M& A, negotiating new deals, working on the next company and, anything in administratives, even the menial tasks, I do. Just at a back office level,like from the holding company perspective. And so,my day to day is, it really varies. For example, last year I was out of state, out of country for about six months out of the year. Probably averaged two, three hours a week in terms of work.

And really didn't do a whole lot. And so I traveled personal, just whatever it is that I wanted 

[00:31:59] Ronald Skelton: go anywhere. the world,

[00:32:00] Ujwal Velagapudi: Antarctica, Kilimanjaro, Europe, Southeast Asia, Asia, India, um, six continents.

I mean, last year I didn't do too much with that. This year I'm more back in the saddle, really enjoying being more immersed in my companies and really trying to spend time on building the relationships for off market opportunities to buy the next company.

And so, it's really, that's really consuming most of my time is just the relationships and I'm not a short term guy. So I'm building the relationships that may not pan out for years. And I know that after doing this for a couple of years, I will have a pipeline. And two, three, four or five years that, even if I had a hundred million dollars, I don't think I could even fulfill.

And so that's, that's really where I would want to get to is just to build up such an immense pipeline of off market opportunities of companies and owners that I know intimately. Or at least well enough to say, yes, I'm going to go with this. And then to be able to sift through, to purchase the highest quality opportunities.

And like I said, I think even right now, it's a bit overwhelming, the opportunities that there are out there. And so,even if I added small little fun that I created, I want the opportunities to be so overwhelming that I get the pickings of the absolute highest tier of quality.

[00:33:30] Ronald Skelton: It's brilliant. It's a key to this. A lot of people wonder, like, you know, what's the key to getting a deal done? I was like, deal flow. Look at, you need enough deals coming on your plate where you're looking at, 10, 20, 100 of them, in a given period of time, 6 months or so. And in that, you'll find things that just, you just kind of have to buy, right? 

There's such they're, they're deals. They're really deals. As opposed to like, one of my mentors always tells me, look for reasons not to buy. If you've got enough deal flow, you're looking for red flags, you're looking for reasons not to buy, and you can weed things out pretty quickly, like, okay, this one just isn't going to fit and you won't fall in love with businesses.

If you've only got one or two businesses a month to look at, you're going to fall in love with something that's, you know, a dog with fleas. But it's a nice dog and it likes me, you know, like the owner likes me. Like it's interesting that a lot of people do that, right? 

That said, the only way to get over it is to have deal flow. To do what you're doing to play the long game. I have people coming to you and explaining it and then working with it. And everybody gets value. If you do it right, everybody gets value for having the conversation.

You call me to sell your business, you're going to get value out of it. I may not buy it. You're going to be better for me and at the end of the call, cause you're going to need to know, what you're going to know what you need to do to make it sellable to me or another acquisition entrepreneur, because I'm just gonna be honest with you. And that's, there's value in that.

So long as you're adding value to people's life and going through that and building rapport and relationships, I do my best not to make people mad all the time. Just to make sure that we're adding value to the, the conversation. I don't want to waste my time. I don't want to spend three hours on a phone call, three different phone calls with somebody I know I'm not going to buy. But I can, there's never been a time where I've told somebody no, and I didn't give them a, like a one to two page, here's why, and here's what you need to do to make it better for the next guy.

I always give them that and I'd say, if you fix these things, call me. I did that recently with a, with a wonderful little company, but they made so many changes. Their revenue was declining and they're in a market where the competition, there's no barrier to entry, there's no real moat.

So there's a bunch of new competitors that are weren't there before. So now they're in this weird, like, they don't call it a death spiral. They don't think it is because they made changes to improve upon it, but they haven't written out the, the curve where the 35 employees are used to those changes and performing at how they used to perform, let alone performing better because they've got new training and new standard operating procedures.

So,what's the biggest red flag for you? Like, you've done enough deals right now, people that need to know, like, if you see some X at a company, like, okay, I'm just done, gotta be nice to the guy and get off the phone. What is the biggest red flag for you?

[00:35:56] Ujwal Velagapudi: I mean, there's so many right, when we go through diligence, but, and there's so many that have bit me in the butt in different ways. One of the biggest ones that I look out for right now is the seller themselves. And if there's a broker, I mean, get them out of the way. I don't even want to talk to them, but like, if it's, I want to sit across the table directly from you as a seller, hear it straight from your mouth.

And if your story does not align, I forget, you forget, I understand that you can forget stuff. You don't know every little aspect about your business that happens. But if I don't see a level of sincerity, you being genuine, you not having a consistency to your story or however you present your business and yourself, that is probably the biggest red flag, that I have seen from previous sellers that just, they're really good salesmen, they sounded good, they look good. They wooed me in their pitch. The broker wooed me in their pitch in selling the company. And so that's, like everything fully encompassing the person that I am buying from, I think says a whole lot.

And so I want to dissect them. I want to vet them. I want to do a background check, do reference checks on them, externally, but also internally with their employees. I want to understand exactly, I want to put them through the ringer and just really make sure that I'm not getting told a bunch of BS and for me, I just want it real.

So if there's a, there are a whole bunch of red flags, tell me up front. If you're going to hide stuff and I find out, you've already lost my respect, my trust. I mean, I'm probably walking at that point. So, that's probably one of my biggest lessons learned is that's really how I interact and deal and diligence, the seller and everything encompassing that individual, is so critical.

[00:37:56] Ronald Skelton: It's interesting I have the same gut feeling, like,told you I had a marketing firm at one point and I sold it to one of my clients. I had red flags about that. He was a pain in the butt as a client, right? And he'd offered multiple times like in our coaching, I had a marketing coaching business, at least for about six weeks straight at the last five minutes for our coaching sessions, right?

Hey, you should come upstairs and just, and he just increased, kept increasing the offer to one day. It just made sense. I was like, it'd be stupid not to, I had a baby on the way and he's offering a big check, you know, I'll give you a big check today and he'll give you a percentage of ownership of every deal we do.

And it sounded really great. So I went with it, but you know, it lasted a couple of years before I had to leave cause it just didn't work. The red flags were there. So I think trust in your gut. You've developed a gut instinct now. And when you said, I need to set a cross from that seller, I've had to tell more than one broker, look, I'm not looking for the damn answer. I'm looking for the way the owner answers it. 

[00:38:48] Ujwal Velagapudi: Exactly. 

[00:38:49] Ronald Skelton: I'm looking for their mannerisms and the tone in their voice and the sense of excitement or non excitement, or do they seem drained or not? Is there integrity in what they're telling me? Are they umming and ahhing about the, the conversations? I'm not giving you the, cause a lot of people just ask me the question, the broker wants to play the in between.

Like that won't work. If I can't build rapport with the seller, I'm not interested in the deal. 

You know, it's, it's different at this level. When you're, when you start getting at the mid market level and you're in a bidding war against other people and they're not using a broker, they're using private equity banks and they got 50 offers on the table, now it's a different game.

So it's a, it's a different game if they've got more than two or three partners, right? I, my rule of thumb, if it's husband and wife or business partner and an individual, that's fine. Third man, then I'm out. And the reason for multiple reasons, right? Once the third person's introduced, it's harder to negotiate.

And once the third person's introduced, it's also more about the numbers than it is about anything else, right? Somebody on there is wanting to hold out for the highest number instead of the best buyer. And I'm not interested and, I mean, I'm sure you're not, I'm not interested in being the highest number on the market.

I'm interested in getting a fair deal that the business can thrive and survive on, after we, you know, I can get the money back within a certain period of time.

Any industries you just like, I just won't touch this industry. Is there anything out there? Like it's a red flag for you. It's like, it's too vulnerable. It's too at risk with what's going on in the environment, the economy or anything?

[00:40:19] Ujwal Velagapudi: Anything B2C I don't touch. I don't want to deal with end consumers. So I'm 100 percent B2B. I won't touch anything otherwise. And declining industries.Those, uh, I mean, there's some that I've been a part of that I just, you can still make money, you can still increase your margins and still do well, but going forward, I won't touch a declining industry.

So I want to be on something with that's on the up and coming and kind of ride that wave. Just because like you were saying, I don't think I'm going to be the best operator. I know I'm not compared to the guys that I'm purchasing from. So I want a little bit of buffer in there so that I may screw up. And so either industry buffer or like you were saying about profit margin, that buffer has got to be there.

So, nothing specific that I won't touch, but yeah, I personally don't touch anything B2C or anything on with the declining trend industry wise.

[00:41:15] Ronald Skelton: I get that the, I interviewed a guy who buys declining businesses, but he does it in a very unique way. He pretty much is only paying one X, right? And he says, I get my money back in the first year. And then I was like, I don't buy anything or it doesn't have, uh, at least a three to five years cycle left.

So I get my money back the first year. I basically shut it down to maintenance mode only because I know it's in declining. So there's no new development. I'm not trying to beat the market. I know it's going away. I maintain the current thing. So I just, he minimizes everything and just, you know, gets his cash back within the, he tries it, he, he buys it as if you buy it at his current operating and it gets the money back in a year. He short, he does all kinds of stuff. He goes, I have my money's back usually in six months and the next three to four years is nothing but a cash cow for me knowing it's going to do under law, right. There's a play for all these different things, but I like that you look at the industry and go, is it inclining, declining? Can I, you're much younger than I am. You know, you've got some longevity in front of you. Where if I look at the future roadmap, I say, can my kids, can my kids take over this?

I'm 52. Hopefully I'll make a hundred. So that's 48 more years, but, chances are, I won't want to do anything after probably 75. So now I've got, you know, 23 years. I'm looking for a runway and be honest nobody knows, with AI and everything else going on nobody knows what's going to happen within five years, let alone 20 years. 

What's the, what's like the biggest mistake you've ever made? That's a good one. But we'll,we'll wrap it up with, we'll do what's the biggest mistake you've ever done in business, so that other people can avoid that. And then we'll do it through quick takeaways.

[00:42:46] Ujwal Velagapudi: I think, and this goes across the board, if I was to generalize some of those lessons learned. It is just, over trusting people. I think I'm very trusting in general, and if I vet you and I bring you on my team or if I want to do business with you, I'm believing that you're good. You're, we're going to be in it together.

And I think over trusting sellers that I've done business with, brokers,employees to people that I'm investing in.So for example, I've made an angel investment without even seeing the documents just because I had a good gut feel or so I thought, and once I wired that money, never saw documents, never saw anything after for a year. Trusting employees, so I trust that I'm putting my business in your hands to operate.

Maybe I, and that was a mistake on, in multiple times. Maybe I didn't properly give them the adequate resources, the right training, maybe it was too much for them to handle or they were just the wrong people. And so, just kind of overtrusting that they were capable of doing it, even when they kept telling me that they were.

I knew that things weren't actually happening and, um, they shouldn't be in that position multiple times over. And then sellers, I think believing, like I was saying earlier, just believing everything that they're saying. And not truly drilling into some of the little doubts, some of the little red flags that I was seeing.

And so I think that going back to what I was saying about the sellers and really checking them and vetting them out, I think that can just be taken over in a general sense, just people in general. One of the best, someone told me, he's got a pretty massive company now. He told me this is a people business and he was referring to his company.

But I think about that all the time because I think we are in a people business. And I, from the people that we invest in, people we borrow from, people we buy from, people we set out to hire. I mean, this is truly a people business. And so just, dealing with people, I think, has been my biggest lesson learned, my biggest theory of growth, my biggest weakness, everything.

And so, yeah, that's, that's, um, it really, I guess, mistake would be trusting or over trusting people without vetting and verifying and keeping tabs continuously. Because I just kind of let go and I just kind of walk away and, and, don't micromanage, don't do any of that. But I think as I've become a better leader, just being able to manage people in whatever sense that may be, and just working with people, dealing with people, I think is still my biggest area of improvement.

[00:45:42] Ronald Skelton: I get it. There's a, there's a reoccurring theme in all these small businesses too, that I've seen. Most of these business owners, if they've got more than 30 or 40 employees, they have one or two that they know, is the wrong butt in the wrong seat. And they haven't done anything about it because of loyalty or, you know, Oh, that's my, his father worked for my father for 30 years and I promised to take care of him.

And,it's the wrong butt in the right seat, uh, the wrong seat, right? It's the, maybe he's a great employee, but he's not a great employee in the role you have him in. I believe that everybody's a great employee somewhere. Some of these guys should probably be not working for me and better, better employee flipping burgers somewhere, but they're a good employee for somebody.

Right? So it's the wrong butt in the wrong seat is a common thread. And, uh, being able to realize that now you've had that self realization that, you allow this to happen, well, we'll keep you from doing that in the future. I think it's a brilliant lesson for everybody listening.

Is take a look at everybody you've got working for you. Is that the right person in the right role or responsibility? Are they going to thrive? Not only just performer, are they going to thrive in that environment? And if not, what environment would they thrive? Sometimes it's not getting rid of them.

Sometimes it's just shifting people around. Maybe there's an environment that they would love to do and would thrive in because it intrigues them and they're curious and they're passionate about learning or whatever. 

You know, I had, I had a guy that worked for me for years when I was in a W2 employee. I ran big divisions of companies. And I learned he was really fast. He was fast to learn, but he enjoyed that process. So I, I moved him around from department to department cause he got things done. He would go in there and take all the broken stuff in department and fix it and learn different things and do standard operating procedures.

So they, people knew what he would do. Then he would get bored and start not showing up and stuff. And I was like, Hey, you gotta come over here and work at this other department for me. And I just, It takes something to recognize. You've got certain people that are just thrive in certain environments and then put them in that environment.

[00:47:37] Ujwal Velagapudi: Yeah. 

[00:47:38] Ronald Skelton: I appreciate you being here today. Is there any final, like, first of all, like you got any key takeaways you want people to know? And then secondly, like, what do you want people, if people have a business to sell or they want to work with you or want to reach out and talk to you for some reason, how would you recommend they reach out to you?

[00:47:53] Ujwal Velagapudi: Yeah, I would say, like, key takeaway, I mean, if there's I got this has a the solid time as far as how do I get in the game? How do I start? How do I, uh, do what you're doing? I mean, for me, I think there's so many resources out there online. You can choose something. There's, you don't got to pay a penny for anything.

There are so many free courses, so many free avenues, podcasts, and just different forums to be able to help. But for me, I'll always suggest, just get out there and start doing it. it's absolutely free to even get on the Biz Buy Sell, fake it and just window shop deals and just start speaking the lingo.

Even if you don't know it, you'll slowly start learning the language and just getting out there, talking to sellers. But I think it's just getting out there and starting to pick up the phone and doing it. I think we overcomplicate this process. It's not very difficult. It's just you need the reps.

And that's where I think the biggest bang for the buck is in terms of learning and growth. And that's, I didn't know a single thing before starting. So I learned that through a lot of poor deals, a lot of mistakes. So I would say just start getting in the arena, just start doing some work, just start doing something.

And there's a whole bunch of people that are willing to help. And so, you can reach me directly at Twitter. That's probably where I'm the most active, Ujwal Velagapudi and that's my handle, at Ujwal Velagapudi. Or my website, ujwalvelagapudi.Com and, it's probably the easiest way to be able to reach out and connect with me.

[00:49:28] Ronald Skelton: And we'll put those in the show notes so people can, can find those and, you know, and spell it. You got a really unique name. People tell me all the time, I tried to go to your website, but I couldn't spell your name on it well, because you spelled it skeleton, not Skelton. It only has one E. So that's a very simple name, but, uh, for yours, I'll make sure it's in the show notes.

If you're listening, uh, check the show notes, I'll have direct links for you to find. Find him there. And I want to thank you today for being here. So, we'll call that a show.

[00:49:54] Ujwal Velagapudi: Appreciate it. Thank you.

[00:49:55] Ronald Skelton: Cool. Hang out for just a second.