E233: Guide to Building a Proprietary Database for Business Acquisitions with Expert Tips

[00:00:00] Ronald Skelton: Hello and welcome to the How2Exit Podcast. Today I'm here with Conner Young with Kairo Data and we're going to talk about sourcing deals. That's the one, number one question a lot of people have whenever I have networking meetings and I meet all my listeners, is how do I find good deals. So this is gonna be a fun conversation cause you're working on that.

You've got a software platform where you're helping people find deals, to source deals. And, you've got some experience in the background. So thank you for, thank you for being here today. 

[00:00:28] Conner Young: Yeah, absolutely. Ronald, happy to be here. Thank you for having me on. A big fan of the show. What do you guys have been able to do and I know we were just talking beforehand, different environments for where we're taking this call. I'm in Houston, Texas in the middle of a hurricane and you're in the redwood forest and you get to have a much nicer view than me. So good for you.

[00:00:46] Ronald Skelton: Yeah, it's, uh, you know, I live a little different life here, right. Like, I call, kind of almost a digital nomad, but we kind of stick, stick to, wherever we move, we stick for a couple of years. 

Let's, let's start off with kind of your background story. Tell people who you are, kind of how you got into this space. And my joke, running joke's always like, Hey, you're, you were born, then you ended up on a show about mergers and acquisitions. How in the hell did you end up here? So, kind of, kind of lead up to how you ended up on a show about buying and selling businesses.

[00:01:14] Conner Young: Yeah, you bet. So my background might be, I don't know, a little bit different than most that come into the SMB space. But my co founder and I actually met 2016 working with an investment firm. So we both did the traditional investments. Being able to handle, coordinate with tons of different clients, whatever portfolio management, trading, wealth management that they needed.

And, did that for four years. And actually in 2020, a ton of things happen. The whole world changed. We both left and, started our own individual investment firms, but still had a lot of clients that we would take care of, do the portfolio, changing management, anything they needed. But, of course, with the world flipping upside down, we got tons of questions and requests on alternatives, alternative investments.

So like commercial real estate, which I know you're very familiar with. And then a lot of the private equity space. So small businesses. We would get these clients. It would say, Hey, look at this deal, run the numbers and analyze, blah, blah, blah. And we were really good at that. We love doing that. And we'd, come back routinely saying like, Hey, this is what this looks like.

And here's what this investment is showing. And this SIM or PPM is looking like this and that's great, right? Kind of normal running the mill. But then they asked us this really big question in 2020, which is, Hey, Connor and team, this is fantastic. I love this deal. This is a bidding war. This is like 45 different people trying to go after this one deal.

Can you find this same thing, but off market? And in 2020, our short answer was, no idea how to do that.But if you pay us, we'll figure it out. And that's kind of what it turned into. So we put everything together, had the systems, ton of different things on what we did to analyze deals and to just scale it up, to go after these off market properties or business owners, these sellers.

We were able to just pour a lot of gasoline and then hire tons and tons of people, to do a lot of that propriety outreach and then figure out what worked, what didn't. And we cleaned and went through all sorts of data, but that led us to today where we've served over 210 plus clients, just enabled to find and source more deals.

[00:03:30] Ronald Skelton: It's interesting. The, finding off market deals can be a full range of emotional and stressful events because depending on the industry, right?

I thought it was super easy two years ago when I was part of a marketing rollup, because all the marketing agencies were on LinkedIn. I sourced over 250 deals. Has set 213 one on one calls with business owners on less than 200 days, right? I had a team of three people taking these calls. We had 26 LOIs signed. That said,here I am now working with the company, we're buying cabinet companies, cabinetries. And, uh, you know, what they call joineries and other countries. Companies make that they're, they're not on LinkedIn. They're not, they're barely online. These guys are hiding in case. So it's a lot of direct mail and personal outreach and finding trade magazines and trade shows and that type of stuff. So, it's very different depending on what industry is and going where the customers are.

What have you found, for sourcing for your software and for your clients?

[00:04:32] Conner Young: Yeah. Uh, very similar type of experience. So if you're going after cabinetry and you're right, it's, you're not on LinkedIn. You probably don't have the nicest, prettiest website, like even a startup company or a SaaS product that started two months ago, might not even have, right. So their web presence is light years beyond you. But your cabinetry business, or let's call it pest control, or let's call it roofing or plumbing or HVAC.

Could be 22 years old, zero web presence, zero SEO, but doing, you know, $ 6. 7 million in revenue. 2. 8 and EBITDA or something, and just a fantastic looking business. So our question was, how do we find those? Because they're not online. And that actually ended up being an advantage to us because if they were, everybody would have access.

But lo and behold, when 2020, and we were asked, Hey, go find the, these deals. We used everything. I don't want to drop any super serious names, but all the databases of businesses and go use it, pay tons of money. I'll throw numbers out there because people might recognize products or databases off that. They're like 15 to $18,000 a year, right.

For these complete databases. And we were doing all of them. And we thought that would help. And it definitely gave us some information, contact info, but the accuracy on some of them were just terrible. 30, 35 percent on, Oh, that's the right email and that's the right phone number. And that just killed us because the data is gold.

So that's when we started building our own proprietary database. Finding other solutions, not just doing web scraping, but tons of other pieces that allowed us to put together. It's an ABC roofing company that matches this Facebook profile, it matches this Yelp page, it matches whatever. You can take the phone number, email, thing from there. Run a test, clean the email, skip trace the phone number, actually make sure it's a perfect kind of record, and then put that into our database.

So that's a, forever to build constantly being reiterated. But now we have 18 million plus businesses that we can just do internally, source internally.

[00:06:44] Ronald Skelton: Oh, wow. So, I'm going through that process right now with this project we're doing in that we have a list. We picked two cities where there's founders local, because that's another thing. When you get to these old school businesses, a lot of times they want to be in person.

Still, they're not into the whole zoom thing, that may be closer to COVID they were, but they're getting back to wanting to meet in person. So what we did is we picked the cities where some of the like, the C level people on the team are. We avoid California cause it's difficult to do things here. 

So, we're not looking for anything immediately. We're around where I'm at. But, for the other guys like Florida and stuff, we're definitely chose that. We use one of those databases, right? We pulled data from Data, I'll say it, Data Axle. It was free. I use the library card version to get Data Axle. And since then it's not free. Anybody thinks Data Axle is free, hasn't really tested the data. 

Because since then we've got myself and two VAs taking turns cleaning that data and that's man hours, right? So you'll either pay for clean data or you'll pay for man hours. And we're going through everything from the Secretary of State. Half the time the owner's not even riding that axle, right? 

Somebody called themselves the owner and they happen to maybe just be an employer or a manager or maybe don't even work there anymore. But when you go on to, you go to the state records and go, okay, well, the guy that, the guy that the state records says that filed the last annual report as a president is somebody else. Put that name on there. And then go to the, do they have a website? Okay. What do they say the business number is?

Why is the number wrong on Data Axle? So yeah, we're spending a lot of time cleaning data. And yeah, we probably could play for those other services. Some of the big ones, crunch bases and all those different things that are out there, but their data is not perfect either. So why spend tens of thousands of dollars on three different databases when we're going to clean their data too? 

[00:08:31] Conner Young: Absolutely. And that's the golden nugget that call it goes into this funnel or into this waterfall, right? The golden piece is the data, the data. If you can get that and it is perfect, then that leads to the entire amount of volume that you should go after. Because the biggest thing, I mean, we've worked with dozens of PE firms and family offices and whatever, but deal flow.

Everyone struggles with it. It doesn't matter if you've got, 600 million ready to go after deals. If this is your first time and you got $10, 000 in the bank and you want to go after your first SMB. Deal flow affects everyone. And then one of the greatest ways that we combat it is volume. So if we can just have more than everyone else, we're kind of the winners.

[00:09:17] Ronald Skelton: You know, it's interesting that what you're doing there, the, um, a lot of people don't, in our space, the small to medium business, space, don't realize how competitive the next tier up is. So the private equity guys are going after, some of them will dip all the way down to that 4 million EBITDA range, in certain industries.

I've even heard a couple say they're dipping down into the like $2 million range in certain, certain very competitive spaces. Home services and stuff. Like,pest, even pest control, they'll dip down there for the little ones. Especially if it's added onto something they're already building. But most of them are looking for that five, 10, that almost mid market. Once these guys get to that realm, they're no longer talking to their local business broker. They're going to business banker and that business banker model is what you're talking about. Like, there's 50 people competitively bidding on this product, this business. And I wouldn't want to be the PE firm.

If I was a PE firm and I'm paying money to like to source deals, I'd be reaching out to you guys too. I'd be like, Hey, find me something everybody, you know, I'm not in a competitive bid against 45 other individuals, right? 

[00:10:20] Conner Young: And if you can avoid the bidding war, in my opinion, you're the victor. I do want to ask you, cause you mentioned you were doing tons of outreach in terms of letters and maybe even face to face or calls. And we started all over the map too. We did lots of emails, but then letters, and then we did calls and text. And we have, in my opinion, seen that calls are just the most effective strategy.

And it's led us to build up the, it feels like 20, 000. It's not even close to that. It's like 20 people, call center overseas. And then people here in the States that handle or organize just the more expert cold calling, to speak to these business owners after we get interest. But have you seen like your letters or mailers generate the most interest or what are you guys seeing?

[00:11:09] Ronald Skelton: I'm actually a semi trained, copywriter, right? I've spent my money. My, my degree, my master's degree is, my MBA is in marketing. And then I realized that wasn't working really well. And I got went out and paid a lot of money for Dan Kennedy to teach me how to copyright. And I've studied everybody else's. And I'll still tell you on average, and that's how I built my real estate investment firm is we've mailed thousands of letters, right?

I'm not a huge, I mean, not as big as some of the big companies, but we've spent two thousand to three thousand dollars a month mailing letters to a small market of Tulsa. And that's how we built our real estate investments firm before you, before I moved on from that. That said, it's still, like when you're first starting out this project's about four or five months old, for at least for me working on it, we've only sent a few hundred letters at this point at most. 

And it's a one to two percent response rate. Uh, it's, it's horrible at the beginning and we're just now starting to do the calls. Like now it's time, because our letter basically says, Hey, we're trying to reach out to you and we're interested in either buying you or like knowing anybody that you know that would be willing to sell, uh, kind of letter. 

And then it says, by the way, if you don't respond to the letter, I'm butchering what it says in there, but we're going to call you in a week or so. So now we're at that stage where calls, you know, and I'll be a little honest. I did a lot of cold calling in real estate. I'm a little reluctant to do it. It's not my favorite thing to do.

[00:12:28] Conner Young: No, we don't. Yeah, I personally, no, that's where we hire it out and then you organize it. I mean, thank God software, leaps and bounds every single year, but especially since COVID there's so many different tools that we use now and just kind of put together. And people overseas and then here in the States, all have access to the same type of dialing software and everything.

So it's organized. Feeds into a CRM. But that calling itself is crucial because that's where you're finding. And I'm surprised you said some PE firms are going down to like 2 million EBITDA. But, I guess I think they're realizing the same thing others have where it's just too crowded. But we found so many, like we found this one deal in Colorado recently that our client just, I mean, they wanted to marry us after. It was doing, I want to say 2.3 million.

It was a landscaping company. 2. 3 in EBITDA, uh, 551, 5. 1 in revenue. And they were ready to sell it for 2. 5. And that's ridiculous. And that's kind of, no one, yeah, every PE firm, or the giant groups, or even, somebody, Stanford, Harvard MBA grads that get together, put together a holding company.

That's kind of what they may want to go after quote unquote, but they just, they'll consider themselves like, Hey, give us everything that's doing 10 million plus in revenue. Because they don't know that you can just talk to a lot of these business owners. And then find something this good. Like, you don't need to do a ton of tech enablement to just like, Oh, how do I choose out profits?

You make your money back in one year. That client loves us. It's just kind of like, yeah, the greatest kind of hookup, or if you do the right reach out. I, you have to love landscaping companies first, right? I would marry the numbers. Like you got to know and love the industry, but my goodness. There you go.

[00:14:26] Ronald Skelton: That's interesting. The, uh, have you, have you looked at some of the tool, tools that are coming out that actually does some of that? There's actually decent sounding. I haven't tested them. Decent sounding AI tools that are doing some of that cold outreach. Have you messed with any of them out? out Like Air AI's and some of these other?

[00:14:41] Conner Young: We've looked at air, we've done demos of kind of everyone. 

[00:14:45] Ronald Skelton: There's one that there's, I remember the AI, I remember the AI's name, they named their AI, it's Ava. But I can't remember the name of the company, but they do kind of email cold outreach and schedule, do scheduling and stuff. And it looks really promising for like 500 bucks a month.

[00:14:59] Conner Young: That's pretty good. AVA?

[00:15:02] Ronald Skelton: Ava? I think it's the name of the AI agent.

[00:15:04] Conner Young: Okay. Interesting. I don't know if I know that one too familiarly. We check and use, or not use, but test tons of them. Like, we do demos constantly, and I think it's getting close. There's just, in my opinion, such a nuance for speaking to these business owners. Cause we, I mean, our clients, some love landscaping, some love e com, some love roofing or pest control.

Every single owner, geography, needs to be talked to in a different way. That's really hard to train AI. It, I think it can get there very soon, but that's why we just, I mean, we've been, in my opinion, super lucky with the team that we've had for years and years and years that they just know how to do it. And I think a lot of people underestimate like what that training entails to actually deliver results. And you know, that's why they pay us. 

[00:15:56] Ronald Skelton: It's interesting. I own a small pest control company in Oklahoma still. It's my nepotism company. My relatives work there and run it. That said I, for a long time, I was calling every single, there was a certain target of pest control companies, cause this is way too small.

We're really tiny in that area. Just a couple of trucks and stuff. And, uh, that's when I went and learned more about this industry. Cause I made a big mistake getting something so small. So I called, there's at least, I did what the, you know, the dream 100 where you're like, I, there's, are there a hundred companies in the area I'd love to own? I found about 35, 40 and I started calling them every quarter.

Hey, you ready to retire yet? And it was kind of the ongoing joke for a long time because I would just call them and go, Hey, it's Ron again. And they'd just go, I'm not ready to retire yet, buddy. So they would know me.

[00:16:38] Conner Young: That's the type of communication though, that they just really respect, right? So call it, you know, persistence is crucial. That's organization and like, scheduling the call or just knowing when to talk to them. And yeah, we, we love that. We use HubSpot, we use all sorts of tools. Plug in, integrate, send out automated text messages or whatever, right, to just touch base. 

That simple. Hey, don't know if you're trying to retire, but I saw this new beach house in Florida. This looks like your perfect home. That's the funny joke stuff that really like. 

[00:17:12] Ronald Skelton: That's the fun stuff I would do, you know. 

[00:17:15] Conner Young: That's fun, man. That's part of it. Yeah, I mean you've done it too with the, the real estate stuff. Like we, you spoke about AI calling tools.

There's this new one Leo. L E O. I don't know the website name. Let me see if I can find it. But it's super interesting because they can take essentially just like a build it out yourself type of roadmap. So if you want, this type of question to be asked and then this answer, you can build out the entire AI agent.

It's actually called askleo. io. Really cool website. Not endorsing it cause I, we haven't used it yet or demoed it yet. We're about to, but it looks pretty cool.

[00:17:56] Ronald Skelton: There's a lot of tools coming out like that. So let's talk about Kairo Data. What do you, what is it that you built? And kind of how does it work and what is it out there for?

[00:18:05] Conner Young: Absolutely. So we decided to just build the online platform that our clients asked us for. We had no intentions of being a software company. But they just begged us for an easy way for a few different things. And simply put it's to address every need or question that a searcher or an investor has. So we could solve all of that.

If you're coming to our website and you want to use our proprietary data, that's taken us four plus years to build. And then we source everything. We're constantly cleaning, improving it by no means. Is it a hundred percent accurate because people change phone numbers, emails constantly, but we do have over 18 million plus records that you can go through and look at. Surprisingly, that's not the hottest you know, ticket thing that people want to visit the website for. People are like, Hey, that's great. I don't know if I actually want to go look and source and find these plumbing companies in Texas, Ohio and Florida, where I want to buy one. I kind of just want to find one maybe already for sale or, have you guys just do the work for me.

So that's where we've also included a piece or tool for just checking out deals. And we've built it out so much that when we start working with clients, any client and then any person that hops onto the platform and uses it, can see all deals that's anywhere online. So we don't use scraping tools. We don't do anything else.

We find and filter and organize them ourselves. It's very more manual process, but it's worth it because everything we put on the website and the platform is under 5x multiple. And it can be whatever. Landscaping, plumbing, pest control, your sister's e com business. It could be anything, right? Plus all the deals that we found for clients.

So we're serving over like 210 plus right now, um, off market. And if they pass on a deal, either for a variety of reasons. Their financing fell through. It's too big. It's too small. It doesn't have enough employees or, it's kind of payroll system or whatever might be out of whack. It could be a ton of reasons.

We just say, great, we'll still put that on our platform. And if you're that eager to go find, that plumbing company that somebody else passed on, go for it. Here's contact information. They've told us directly that they want to sell. Here's information. It's all yours.

[00:20:30] Ronald Skelton: How do you guys get paid?

[00:20:32] Conner Young: So we get paid pretty simply. VIP clients where we're doing the outsource for. Um, it's just a quarterly 90 day subscription model. If you're just using the platform, you can just pay to use the platform. Right now, we're actually about to kind of jump up in prices, but if you buy before the end of July, I don't know when this podcast might be coming out, but end of July, 2024, it is only $49 a month.

You can look through all deals. You can look through data. You can create lists. You can do everything.

[00:21:02] Ronald Skelton: Interesting. Now, uh, for these off market deals that end up in there because somebody passed on them, do you make money when those sell? Or do you do something like some type of commission or finder's fee? Or? 

[00:21:14] Conner Young: Ronald, I'm super excited you asked that. And I just want to tell your audience, because I love your show. You even hopped on before we even started recording. Like, hey, I'm not going to take like loaded questions or, you know, whatever they're called questions that you want me to ask you. Right there is like the number one question, that I really wanted you to ask.

And I was like, Oh, okay. I can't tell him the conversation in a certain way, but here we are. Because, that, that question right there is probably why we've seen so much success and we love business brokers. We think it's an awesome model, but I believe we get 100 to 200 times the amount of responses from businesses, off market sellers and owners because we tell them we do not charge a fee or a commission.

And people are like, how does that make sense? How does that make you money? We don't care. What we do in a sense of being able to just work with the sellers and owners to get them to trust us, is the whole reason we have so many potential deals and opportunities that we can put on platform, but most importantly, serve directly to our VIP clients. Who tell us, like I said, like, Hey, Conner, I'm wanting pest control, landscaping in Florida, North Carolina, New York, give me everything you got.

And then we go after and we do it for them. 

[00:22:34] Ronald Skelton: So it's, it's interesting. I've often thought of, um, so I'm networked with all kinds of people because of the show, because of the fact that I host a twice a month networking hangout where 30 or 40 of us will jump in a room. 20, 30 of us sometimes. And we'll discuss where they're stuck. Normally they're stuck on deal flow, by the way.

Or they're, or they're really early in the process and they don't know what industry they want to be in. And then my, my rule on that one is just talk to more business owners. The more business owners you talk to, the more business listings you talk to, you'll figure out what you want to be in and what you don't want to be in. But, deal sourcing is the number one issue most people have. But I've often thought, a lot of these guys they get good at it and they go through dozens of leads before they find one that's great for them. 

What happens is all those other businesses that were interested, they go nowhere. They have to call a broker or something. It would be a great tool actually have some database. Like, look, if you pass on something, stick it in here and the rest of us will take a look at it. Have you, do you guys take listings from other people?

Or is there a way for somebody to go, Hey, here's something I passed on. Are you guys interested in having your database, uh, or a way to refer, cause it helps a business owner too. It's like, look, I'm going to pass, but you probably should put your information in this Kairo Data, cause they've got a good user base.

[00:23:51] Conner Young: Yeah. That's exactly what we do. And I mean, that's why, you know, it's, it's not a crazy amount of money, but you are paying to be a, quote unquote, serious buyer or searcher, the $49 a month, let's call it, to look at these deals. So it's not just anyone and everyone off the street window shopping to come in. And the owner sellers kind of appreciate that.

And if they want some sort of medium or in between or even higher use a broker, to handle all this influx of people coming in, great. That's their prerogative, but what we set it up for them to do is just have As many questions or people say, ask, Hey, like I'm really interested in your business. But you're right. Deal flow, it affects everyone. Whether you have a billion or, you know, 10, 000 in the bank. So everyone needs more.

[00:24:43] Ronald Skelton: Now, are you guys buying businesses yourself? Or you built this all from scratch? 

[00:24:47] Conner Young: Uh, we are. Yeah. So we love going after maybe some more of the service based types of businesses. And also financial services. So accounting, payroll type companies too, but, I'm partial to landscaping. Partial to, um, some other types of like roofing companies, solar companies, but internally we don't let that mix up with clients.

So we have pretty hard fast rule. Like if we do find a business, it's client first because everyone gets their leads. It's organized. We have a huge, man, if you run a database, let me just get into the weeds really fast. You have data reconciliation, aggregation that you really have to work on. So each client's not overlapped.

Even if they have the same overlap of a buy box criteria, their leads and businesses and everyone that we can connect them to is separate. So they do have first choice, first look, which is good. And then if it's a business that we really like. At the same time, we just have kind of just the integrity on his foot forward, similar to your dating app that you mentioned beforehand.

Love that. Where it gets put on the platform and we get to reach out and talk to them, but so does everyone else. So for us, our biggest piece of the business is just a, Hey, let's aggregate more sellers and buyers. Let's build this huge platform and or marketplace. And that's where a lot of our money attention focus goes.

But there are some businesses that we find and we're like, Oh, that's just really good. And if we do, we always go after and kind of make it happen.

[00:26:18] Ronald Skelton: Now are you buying them big enough that they have an operator in place or do you have to step in sometimes?

[00:26:23] Conner Young: See, okay. It depends on the business, right, industry, location, everything. I will say there's such a nice, call it a strategy. Cause it can totally fail, if it's small. That's honestly maybe more preferred because we do have groups of operators and people connected that love SMB or in the space and they're like, Hey, I would love to have 80 percent of this deal equity. And I would love to go in and move to X, Y, Z location, run this business. And if I get 80 percent that's great and I get a fat salary, that's fantastic. And they have to interview, apply, do everything with us too, but then they get their dream of being their own boss.

They work a ton, but they're running this business, but the upside is unlimited. They can take that, construction business and make the next Holt or whatever $10 billion construction company. Nothing's stopping them. But that's, we love those types of partnerships because we come in we can have the capital and then most importantly the lending, and then make some things happen.

[00:27:26] Ronald Skelton: That's awesome. That's awesome. The, uh, what do you think, so you've got a call center that does outbound calls. It said 20 plus people. Is that where most of these off market deals come from? Is that direct outreach? Like you just go through, somebody says, I'm looking like, we come to you and say, I'm looking for cabinet manufacturers.

Anything in the kitchen and bath remodel space in the Orlando, Florida, and some other state, you know, uh, another area. And we give you our buy box criteria. It has to be doing close to a million or more in EBITDA. So we don't mind the smaller, you know, in your world, that might be the, some of the smaller ones, but it has to be a million plus in EBITDA. The owner has to be pretty motivated to move. Right? Um, we do a lot of, uh, having the owner finance the deal and a lot of creative financing. So we don't typically go the SBA route at all. We're not interested in that route.

[00:28:19] Conner Young: Why do you say you're not interested in let's call it 7a or whatever the SBA offers?

[00:28:24] Ronald Skelton: Well, mainly for me, I own a lot of, a lot of real estate and the personal guarantee is a turnoff for me. And so a couple of other founders are like me. They have a lot of commercial real estate and we don't want a personal guarantee across other, other investments, right? So, uh, that's just a turnoff for us. 

[00:28:42] Conner Young: That's a very interesting point because we just, we just partnered with a lending firm. So credit or a private credit firm. And their whole thing is to be the, honestly, basic alternative to the SBA because there's no one else competing. And you're like, well, good luck. Like that's not going to work.

And you know, SBA does X, Y, Z. It's the biggest player out there. That's great. Their thing is, we don't require a PG, personal guarantee. And that has turned some heads. That has brought in so much deal flow just directly to them because they're like, tell me more. What do you mean there's no PG? Like, what are you basing this on?

What's the underwriting? The underwriting is fast under 30 days. It's completely coherent, kind of seamless. And I, I, I'm like seeing them like they're the best thing ever, but like, I do love them. I can talk offline about them to you because definitely need to know or understand from them if I can broadcast them. But yeah, no, there's some really good tools.

[00:29:45] Ronald Skelton: I'm interested in that mainly because, because like I said, we don't want to, we don't want the personal guarantee side of it. And the other side of that is, a lot of those companies, like for the manufacturing to be fine, right? Because it's, their asset heavy, right? They usually, they even sometimes have facilities, rent. So, you know, we're looking at things like sale lease back and other stuff. You know, there's opportunities to finance these deals if they own the real estate. I don't know if you're familiar with the sell lease back strategy, but you buy the business and the real estate and then sell the real estate and lease it back to yourself so that you could fund the whole transaction, right? I'm a real estate guy. So there's part of me that says, don't do it. Just keep the real estate. But there's all this part of it says, if you're going to fund a multimillion dollar business, it's worth looking into, right.

[00:30:27] Conner Young: It's a very, yeah, sourceful option for sure. 

[00:30:30] Ronald Skelton: I know you can't say the name of it. You don't have the okay to do that on this show, but, can you tell us, is it totally asset based?

I mean, a lot of these guys, they'll phone, they'll finance anything that's heavy in assets and some of them won't touch like SaaS companies and that type of stuff, just because there's no collateral at all, right?

[00:30:47] Conner Young: I don't want to speak directly for them, but let me just go ahead and guess, totally fair. I think it is more asset heavy, but I know that they've done e comm and SaaS types of transactions before too. So I think there's the ability with their underwriting team and process where they can qualify or disqualify pretty fast. And they can say, Hey, yeah, or no. But they're awesome. 

[00:31:09] Ronald Skelton: I promise you're going to have people from the show reaching out and go, Hey, what's the name of that place? So you might want to get the okay to send that out. Cause that's, that, that is an, there are two needs in this space, right, that I've always found. And I'm in the space for a couple of years now. Deal source, deal flow, and then finance sources, right?

You know, and it was the same way in real estate. Either have more deals than money or more money than deals, right? I was always, I do these things. I call them money trips where I go out and raise money for private investors. And I would travel, a lot of times I go to the private lender shows. Like, uh, I would go to shows where they teach people to be private lenders. And I, I'd walk out of that show with, 200, $300, 000 worth of loans before, you know, I've had money, you know, wired to our real estate investment firm within days of me walking out of one of those, training seminars, right? They're there to teach everybody how to be a private lenders. And

[00:31:57] Conner Young: Now go deploy it. 

[00:31:59] Ronald Skelton: Yeah, they're there to teach everybody to be private lenders. And I'm there going, Hey, I got three houses right now that's ready to be funded, you know, here, here, I have the deal sheets with me. And, you know, but, uh, I honestly think that's the same in this. Either, you either have more deal flow than money or more money than deal flow.

And you're kind of playing that ebb and flow game, right. So, it's good that you're looking for that because you're, now you've got, you've got to, you're working on the deal flow, but over here you're making these relationships with people. They go, wait a second, if they need money, you can go SBA route, which is good for a lot of people.

The only people I know, like myself, that have a lot of issue with it is you, right? You're trying to protect assets, right? I'm debt free, you know, as far as the house. I don't have any, I don't owe any money in my house, my cars or anything like that. I don't want to lose any assets because I got to tie them up to something that may or may not work, right?

[00:32:50] Conner Young: Yeah. Andyou play in the options game, right? If I can just fill up or get a house with 2000 doors in it and they're all different opportunities, great. And I understand that mentality. I'm kind of wired the same way. That's cool. But yeah, if you can, you're right, find the deal flow, have the financing partners.

You're kind of golden. That's why we're, we're honestly really excited about this partnership with them. It's helping a ton of our clients, but we're figuring out like, man, our reach or, people that are, the audience interested in that is massive. No PG. Are you freaking kidding me? Like, sure.

I'll talk. Like it can take me, a couple of days or a week, whatever, to just get a thumbs up, thumbs down. Let's do it. I'd be happy to figure out if this would work.

[00:33:35] Ronald Skelton: Awesome. That's really cool. The, um, I like the interface. I was playing with it yesterday or the day before when your people reached out to me. And it's, it starts off with kind of the Google earth feel where you got the whole world, right? And then you can zoom into your area and then you can, I like that.

It's unique. And as far as, it looks, it feels more modern than the other, some of the other search tools I've messed with. I'm going to talk my team into, you know, go ahead and subscribing and let's look at, cause even if your data is cleaner than what I'm using, that save us so much more time, right.And, uh, you know, I'll even look at the pricing of your cold calling because if I can, if I can avoid doing it, that would be awesome. 

[00:34:15] Conner Young: Yeah, no, we'd be happy to see if that, that can be a fit. And we're, Happy to talk to anyone, everyone that wants to try use the platform. There's a super simple way. Sign up, get a free account and you can just look, right. Like, Oh, I'm super interested in deals in Seattle, right. Or what's the data you have in Seattle, Washington.

And if it's up to par with what you're looking for, great. And you just see all that on the free account. And then if you're interested in, Oh, that business, I want to know their business or their email, their phone number, their Instagrams. We have a ton of those, or LinkedIn, social links, website, a ton of that data is just right there per business.

Great. And even, you know, I, I think I've mentioned this before, Ronald, like if someone wants to sign up, they can do that. You can even use promo code. Well just how to exit. And that'll get you 10 percent off and you can have that for life too. So every single month, 10 percent off and they can use the platform, day in and day out.

[00:35:11] Ronald Skelton: Awesome. Uh, Cool. So I have a lot of followers and a lot of people. I'm connected to people in Australia and Europe and Dubai. Is this all US based or do you have some leads and stuff starting to happen in other areas? 

[00:35:23] Conner Young: Now you're going down the roadmap, man. So we have U S, Canada, Australia. The data itself is not pullable or basically we don't have it synced up directly to the platform just yet. But if you're a user, we can pull whatever you want and directly send you in those three countries. 

We are working super, super hard on parts of Europe right now. My hope is we get a ton of that implemented, posted, everything. Just pushed onto the platform by end of year. So think in the next six months, but right now those three countries, US, Canada, Australia are available.

[00:36:01] Ronald Skelton: In my gut feel is it's, when you really start diving into Europe, you're going to find companies house and realize it's a little easier to get data on the European countries because I don't care how small you are in Europe. You have to report, right? 

[00:36:12] Conner Young: Yep. So that's the hard part here in the U S and ton of people tell us that and they're like, hey, like I want you to get me every single off market plumbing business that's doing 2. 2 at least in EBITDA. And I politely tell them that's impossible. We're working on it. Honestly, at this pace, we'll have called every single business in the U S by 2032.

So if you wait that long, we'll have contacted everybody, I promise. And we're not gonna, you know, access or steal tax returns, which is where they put that because that's illegal. We're never going to do that. So, um, yeah, that the hard part of financial information here versus Europe is definitely there. But yeah, if we start expanding to Europe and we pull tons of other data points, yeah, we'll explode into London and Paris.

And I'm sure the team will happily take a trip on our company credit card to the Paris Eiffel Tower and Olympics. Just to, you know, sightsee or work really hard. Let's say.

[00:37:14] Ronald Skelton: So, what's working for you right now is definitely the cold calling, not cold calling necessarily, but direct out, direct out, uh, phone outreach. Are there any other avenues that kind of work to help help that, to help feed that? Do you guys still send a lot of direct mail? Do you still send a lot of cold email outreach and that type of stuff?

[00:37:31] Conner Young: We stopped the letters. We stopped the mail because of rates and we're checking everything weekly, monthly too. Yeah. And the money part of it as well. I mean, if it costs, whatever, let's call it, we got a pretty low 78 cents or something, to just kind of send out mail, whatever, postcard or letter. But just response rate crushed or wasn't making it feasible.

It wasn't worth the investment. And that turned our attention to, it's funny you mention like, copywriting, but sequence and cadences of we know if we can send this email, this email, this text message, or sorry, a call, and then a text message. We're gonna see this potential statistic of a response, right? It goes this, this, this, and this.

And if we still don't see it, then we follow up with different types of emails. And then another, thing that we could send out, um, even, Hey, we'll do this, this, this for you. Happy to hop on a call. Are you opening hearing offers? But the number of emails, then calls and texts, then, in the exact structure in the timeline, separate this by three days in the fourth touch point is by 10 days that has taken years. Once again, not perfect, but I think it's just crazy to be able to finally figure out and have like accurate guess or estimates on, Hey, we'll go after this. We're most likely going to get you 15 responses. Positive responses because we know the numbers, we put it all in and that's pretty good.

[00:39:06] Ronald Skelton: Interesting. Now, one, there's one element of data I can't find. Like I told you before the show, that I've probably spent more money than most trying to learn how to be a direct mail guy. And I still like in the, in our real estate business, we got to where you got a 15 to 20 percent response rate. 

And that sounds insane. A lot of people don't believe that, but we were so laser targeted. We knew exactly who we were reaching out to. We ran a company that bought foreclosures. So I knew you were in a court case being foreclosed upon before I mailed you a letter. And the way we built that response is, we would build rapport with them over time for every step along the court case. 

We tracked every single case and we would, we knew exactly where they were in the process and we would notify them, Hey, this is what happened in your court case recently. If you need help or running out of time, and they knew more from us. If a lot of these guys would call us, you go, you know, I hired an attorney and I get more updates from you guys than I do our own attorney.

And, uh, but we just built rapport over time. So we, we would end up, 15 to 20 percent of the people that were on our list would call us at some point, right? But it took a couple years to get there. That said there's a piece of out, there's an element of data inside that I've seen missing and everything that I come across and I'm a marketing nerd, for this mergers and acquisitions space. I think it would be absolutely golden if I could have businesses doing over a million dollars EBITDA, been in 10 businesses, you know, 10 years in business, all that the buyer's box, and I know the owner's over 60 years old.

I can't find age demographics anywhere. I'm having the VAs right now. Like in Florida and some other states, voter registration data is easy to find. For one, for the low hanging fruit, people with unique names and stuff, I'm having to go back and backfill my list that we're going to, with targeted age, like this is probably the right guy.

It is, the addresses match, right? He's in there, he's in the right county. He's got the right name. And it looks like, on his last annual report, he listed this as a home address and they match his voter registration. He's 72, right? Those we'll spend more time in energy reaching out to.

[00:41:08] Conner Young: That's crucial and something that we're adding. And I will say this the same way that we're doing with financial information. Like I said, 2032, that's not a joke. Like that's when we estimate we'll have over 18 million plus businesses and their, quote unquote, financial information. Now, whether that's accurate or not, who knows.

But everyone would pay so much money to have access to that. It's great. That's what we're building towards. Everybody should want that. You're right. Age demographic does matter too. We get that. And the only way we're getting that is just by hiring more and more cold callers. Getting them on the freaking phone is probably the most important thing to us.

And then we can figure out more information on them. Get there, you know, age, maybe their birthday. You know, can confirm a ton of other pieces to get, you know, why are you selling? That's huge. The exact reason like, Oh, what's going on with the business. Can you tell me the revenue trend over the last three years?

Their financial pieces. That's so important. You're not going to get that through a mailer letter or email or text message. Like, a lot of these things kind of come down just to soft sales on the phone. So if we can start to build out that directory and database, like we're doing right now, it's great. We have the contact information, but if we had a database of 18 million businesses and their owners and their ages, I think from what you just said, you'd be like, you just say the number Conner and, it's yours.

[00:42:38] Ronald Skelton: Give me the age demographic, right? So in the real estate space, we did what we called list stacking or data stacking. 

So I would buy like, here's a good example. I'd buy a list of high equity absentee owners, right? So I know they don't own much on their house and they don't live in it. Their tax, their tax property, tax bill goes to a different address on the house. And then, then I would go and buy myself a list of anybody that has done an, an, uh, an eviction in the last six months. So now I know they're frustrated, right? And I would go and buy a list of all the expired mls listings or download a list of all expired limits.

Now, I know they tried to sell it. They've evicted somebody in the last six months and they don't owe much on it. Those people are so much more likely to say yes when I call them. Focus on that and you know, that's what we're trying to do right now that I'm, I'm trying to get my team to do right now with our VAs and everybody else, is we take that different data sources. So we're finding age demographics. In some states it's really easy. Florida, there's just, there's, it's, it's pretty easy to find age, age demographics.

In other states, like, uh, I forgot what one, one of them, which some of them were, you have to almost know their date of birthto get the voter registration data. Other places you just go and like, you know, Ronald Skelton, Tulsa, and it'll tell you the guy's 52 years old. He lives at the set. It has all that. It's just easy access. 

And if you look at that to their, their corporate filings and can match the addresses, now you know you got the right guy and the right age. So, uh, it's time consuming, right? Cause you're, it takes, takes my team you know, a good eight to 10 hours to clear 50, 50, uh, people on the list. 

[00:44:10] Conner Young: Step by step and it matters doing it in that sequence. And that's what we've seen too. When we do our reach out, it's like, there's the right way, quote unquote, to maybe go after it, but you're just spot on. Yeah. So I love that your team does that. It's pretty integrated or detailed into it.

[00:44:27] Ronald Skelton: so what do you see in, now you've been doing this for how long now? 

[00:44:30] Conner Young: Uh, the deal sourcing, four years. The investing piece, I've been working in tons of different areas, longer, since 2016, so eight years.

[00:44:38] Ronald Skelton: I was going to go, are you going to see, are you seeing anything changing in the market? Are you seeing the PE firms like I've seen, I've interviewed quite a few and they're dipping lower in certain industries. Like the, in those service industries, pest control, heat and air they're buying smaller and smaller.

Have you seen any trends that you're noticing with your clients? You know, uh, that was different when you first started?

[00:44:59] Conner Young: More and more people are waking up to the fact that buying a business at a 5x, is better than buying, and I know you're commercial real estate guys, so I don't want to be harmful to you.

[00:45:11] Ronald Skelton: I'm a residential real estate guy, by the way, but yeah.

[00:45:15] Conner Young: Yeah. If you look at a Walgreens or some, you know, standard, whatever type of investment, it's at a 20 X multiple.

And you can go buy a business making five X on cash. And so many people are thinking, why am I not doing that? And what's blown up since, I want to say, this is my guesstimate 2012 to let's go 2022. And then there's been a pullback in this, it's in real estate. People got hooked on Bigger Pockets. They got hooked on all these media channels.

All of these influencers came out and they're like, Hey, here's how I'm making so much money on my commercial real estate. Here's how many doors I own. I've own all these different doors. I'm making so much money on rent. Airbnb became the thing. Here's all the Airbnbs I have. You can come do the same thing too.

I'm making just as cash over cash, but what people are actually super interested now in doing, is just looking at the businesses themselves. And it's like plumbing, HVAC at a 3. 2 X. They come in, or they could be the operator or even outsource the operator. And that thing runs. That's so attractive to so many people. So we see such a flood or just wave of people coming in.

[00:46:23] Ronald Skelton: It is. And it's been even the last two or three years that I've been in it. You got a lot of people out there that were the bigger pockets guys. I've seen buying businesses show on their podcast, right? You look at people like, uh, the guys that have, uh, let me think of one of the gurus out there that's really talking about a, Pace Morby, right? Pace has been real big in the subject to real estate, real estate, real estate. You watch some of his last 12 months of his videos. He's like talking about buying businesses to buying businesses, right? And uh, the, it's just a different, different world now. It's good and bad.

[00:46:55] Conner Young: I want to go, like, I had no idea Pace was getting into this, but that was my guess too. Cause you're seeing so many people that were just influencer space. And it was the same thing with like people that were, you know, crypto, get rich day trading. They're just jumping from like the next hot thing to the hot thing.

But business influencers your Cody Sanchez's, your Ben Kelly's, your whoever, are just growing massively because, they're making a good point. Why would you buy a 20X when you can buy this business that does something and make 4. 2 on your cash?

[00:47:31] Ronald Skelton: Yeah. The, um, it was one of those things, I got into this because when I got out of the real estate business, somebody, uh, I hired a performance coach cause I thought, I thought maybe it was me. I thought it was, I was burned out on the real estate business and market had shifted on me. We were buying foreclosures and they were drying up cause the market got really hot for a while. 

And, um, so I hired a performance coach. Actually kind of a friend of mine. I wouldn't say hire. I, I talked him into helping me. And one of the things you said is, with everything you know and everything you do, why aren't you playing a bigger game? And I tell you, I'd flip a house and we would get wired money into our business account.

Not me personally, but like we'd, we'd wire money into our business account. It'd be 40, 35, $40, 000. And I'd hear his damn voice in my head, but why aren't you playing a bigger game? Right. So I started looking for a bigger game and stumbled across this. And then the numbers just didn't make sense in real estate anymore. I had a few dozen houses at the time and a lot of my houses, they cashflow 150, $200 a month. 

And I've got tied up, you know, 60, 80, a hundred thousand dollars in debt against them to buy them. Put money into them to fix them up because, this is Tulsa houses are cheap. So if you're, if you're living in an order where you go, what do you get houses for 60, 000? Tulsa. Now their markets doubled. Some of those houses I paid for 64, 200 now. But that said, you get appreciation in that. But this industry, you can go out and buy something and get all your money back in three years. Like I buy a house and have somebody move somebody in it and I can put a 15 year mortgage on it in 15 years I get, I get it free and clear.

[00:48:59] Conner Young: Your average business here, you know, you're buying two and a half, three X for your company's under 2 million in EBITDA. It's not uncommon to pay two and a half, three X. That's very, very common. You get all your money back and your loans paid off in two and a half, three years, technically, right.Yeah. Especially with the right private lender that doesn't require a PG or personal guarantee.

[00:49:18] Ronald Skelton: That's insane, right? Why isn't there, you know, it's one of those, why isn't everybody thinking about this, right? So, and then there's part of me going, I don't want everybody thinking about this, because that makes the deal flow a little harder again. So, it's, it's a chicken and egg problem. Um,I like that you guys are building this out. I want to take a deeper look at it. I've been playing with it because I,I'll be honest.

I've been in this space for a couple of years now and I've only stumbled across it because your guy reached out to me. Now I don't go out and search for tools because most of them are extremely overpriced, right?

You look at a lot of these tools and they want, you know, especially anything that has a few of the mid market deals in there, that's four, five, $10 million EBITDA, they happen to show up in there. Man, those guys want thousands of dollars a month to be part of what they're doing.