Daniel Lee spent 15 years building his career in corporate America before deciding to take a new path and become an acquisition entrepreneur. In 2020 Daniel purchased Windura, a premium window and door replacement company in the Kansas City area....
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Ronald Skelton 0:06
Hello and welcome to the how to exit podcast where we introduce you to a world of small to medium business acquisitions and mergers. We interview business owners, industry leaders, authors, mentors and other influencers with the sole intent to share with you what it looks like to buy or sell a business. Let's get rolling.
Hello, and welcome to the how to exit Podcast. I'm here today with Daniel Lee. Daniel spent 15 years building his career in corporate America before deciding to take a new path and become an acquisition entrepreneur. In 2020, Daniel purchased Windura, a premium window and door replacement company in the Kansas City area. Man, it's great to have you on the show today. Welcome, Daniel. And let's just jump right in.
Daniel Lee 0:57
All right, thank you very much for having me. I'm looking forward to it.
Ronald Skelton 1:00
Cool. The place I always like to start and anybody who's listened to this show, they know this first question I'm going to ask you is kind of how did you get started? What What had you speak to shift from corporate America to wanting to own your own business? And more specifically, buy in one isn't supposed to do? And I'll go out and start start something.
Daniel Lee 1:19
Yeah, that's a that's a question that I get a lot. And it's kind of interesting thinking, thinking back. And so I started my career, I feel like I was supposed to I went to college, I got a job with a big company, I worked hard, worked my way up, I got promoted, move to another company and open, open new doors. And it really started I think, when I started to think about entrepreneurship, or at least doing something on my own, I had spent time in boy the operational side on the claim side of an insurance company for the better part of 12 years. And I found myself looking for something more. And there was this opportunity to take a regional sales manager job. And so I applied for it I spoke to the VP asked if they would consider me and jumping from the claim side to the sales side is not something that's done, it's like operational to sale. So in career wise, it was it was a pretty big risk. And it was a move that just was the path wasn't paved by a lot of people in front of me. So that gave me an opportunity to get out in the field and work with insurance agents. And I had this great team that worked all the way all around the southern Midwest. And so I traveled to different states, meeting independent agents with my team. And that really got me exposed to the agency as a small business, then it just happened to be the product that we sold was small business insurance. So I'm talking to my team, to their agents, about small businesses that they are running as agencies, and then the small businesses that you're trying to insure. And I just found myself just fascinated with the inner workings of an agency, the inner workings of a small business, and had the perspective coming from large corporations, I had had great training, great mentors, all the support system, I really, really felt like there was something I could add to a small business. And I said the difference though in the entrepreneur is the entrepreneur, newer had always had had a you the confidence or maybe just didn't see it as a risk, to believe in herself to jump in and start start a business or buy a business. And so I got to a point I spent three years on the sales side is really, really invaluable in sales to go well with my operational background. And so I really think it's those last three years of my corporate career that gave me that to help give me the confidence are looking for a business and I decided it I think the date is like March 23rd 2019, I just I put a plan down, I'm gonna stop talking about it. I'm going to do it. And so within the next three years, I'm going to exit my job and I'm going to buy it. From there, I started to go on a search and I thought about being starting an insurance agency buying an insurance agency, all the different franchise offering models. I settled on acquisition entrepreneurship, there's this book called by then build by an author of Walker Dyball that I just stumbled upon. First of all, there's not a lot of books out there on buying an existing business. There's won by a couple Harvard Business Review professors, and then Walker's book, and I literally followed it to a tee and met with business brokers in town and found Windura, as well as other businesses but then transitioned into acquiring Windura really, we put the APA on paper really the almost the month that the entire country shut down for COVID So we kind of work through that rockiness and eventually before before the end of the year 2020. Finalize that Purchase, and I have been at it for about a year and a half now. There you go. That's it.
Ronald Skelton 5:06
I actually had him on the show a few weeks ago, brilliant guy really, really down to earth guy for all the knowledge he has in his head. So,
Daniel Lee 5:15
Well, it's a, I've recommended it to a lot of people, it is literally a playbook. And there are two things that were really influential to me is the first thing that he talks about is treat it like you're interviewing as to be the CEO of this company, not like somebody's trying to sell you sell you a bill of goods. And I think to go into that transaction thinking, you know, hey, what, you know, what, what, what are they trying to hide, where have skeletons in the closet, they're going to be things you don't expect, which that's just part of the acquisition process. The other thing is when I went to a business broker to find it, and that in, you know, those are businesses that are ready to and I created a one page bio about myself, and had all the things a business broker would care about my professional qualifications. I even put just a real snapshot of my net worth, I had Ken connected with a lawyer, a CPA, a small business banker, or SBA banker and put forth that hey, look, I am I know what I'm looking for. And most importantly, I have a target statement, what I'm looking for, because that's the first question you get, what type of business you're looking for. And, you know, at first, my answer was just, you know, and just a guy wanting to leave the corporate side. And there, there's really not a lot of businesses that just match that and so I came up with a statement based upon my experiences, my strength, what I like to do my financial capability, and just started knocking on Business Brokers doors and asked them to see their listing. And fortunately, I was sitting in this office and this broker in town was was bringing me a couple of deals, and I was looking through them and you know, considering do I sign the NDA. And just lo and behold, there had been this one deal had just fallen through seller finance, or buyer financing fell through or something like that. And it was another brokers and he brings it in, I first I shrug it off, it's somewhat related to the construction industry, which I wanted to stay away from. And then as I've just started doing due diligence about other companies, you know, I had this one as the bottom of the stack and dusted off, start looking at the financials, okay, you know, like, it's, it's checking is checking all my boxes. And so I got interested in it, and then started to hit it off with the owner, as the owner introduced us, the business broker represented the owner and not not me. And so the owner and I essentially just really had values that aligned, there was quickly a sense of trust between the two of us. And we really just hammered the deal out ourselves, use the broker when when necessary, which is, which is pretty minimal. So, you know, we still remain in contact and kind of pinch ourselves that we feel like the deal was, was really perfect for both of us at the right time.
Ronald Skelton 7:55
That's brilliant. Well, I just got off the interview, and another gentleman in the mergers and acquisitions phase, and he is all in on the human connection. So he you know, he's He even said on the on the podcast this morning, the he said, I think he said like, sometimes as many as eight to 10, I think his record 16 calls happen before he sees the financials, he just really gets into, like, what it is they need to accomplish what it is they're dealing with, you know, kind of what is the state of the business, you know, on a personal level to them, and looks to solve a problem for them. So it sounds like you guys made a report, because you both had, you both cared about what what the end goal was, and were willing to work towards seeing, seeing what lined out?
Daniel Lee 8:42
Well, I, I remember the phone call, remember where I was sitting in my house. And I've got this book, or this notebook that I just take notes on every morning, as I'm thinking through my journey. And I have prepared for the call one to ask a few questions. And I distinctly remember asking two questions that I think had an impression on him, I asked him, you know, tell me about the culture and how you built it. And what are you most proud of, I didn't jump down to the EBITA, I jumped down to the emotional stuff. And because this, you know, he had started this when he was similarly similarly, my I'm 42. He had started this when he was in his 40s and making a big step in his life. So handing it over to another individual was was very, very personal. And I think there was a lot of reputation wrapped up in it and wanting to know it's gonna go to a good place. It's going to, it's going to continue on with the reputation, the legacy and then take care of the employees. You've got long term employees that we inherited, and have been very fortunate, they stuck with us. But he wanted to make sure that as he exited, it felt really good that it was handing off to the right place. And so that's, that's the two questions that I started with. And it just seemed to be a great point to jump off of, we got all the nitty gritty financials and What's this and what's that but if you're patient enough to wait to get there to see if you have a connection, then you've got a chance to to have some of the honesty come out of you know, so for example, if they trust you, they want you to take this business. And that was my goal, I wanted the owner to want to sell me the business. And then they might say, you know, we've had a good couple of years, but we really ran into this bump back in 2018, that we didn't do so well. And we kind of tripped up, we tripped over that. So you want you're gonna want to watch out for that instead of, you know, glossing over it to make your last three years look really, really great.
Ronald Skelton 10:25
Yeah, so you bought this now, you you've been running for almost a little over a year and a half, right? I think I was looking at your profile a year in seven. Right? What is your game plan? Now? Are you looking to acquire similar businesses and add them in? Are you are you you bought your one, you're gonna build it and run it for a while? What's the, you know, an acquisition entrepreneur? We don't stop with one. So I'm curious, you know, what's your mindset? Are you looking to do a growth through acquisition? Are you?
Daniel Lee 10:54
Yeah, that's so great question. And my mind was, so I believe it had the business had grown to the edge of being sustainable for just one entrepreneur. So it was the owner and his son who ran operations. So so he ran sales, the sun operations, and they've had salesmen in and out and then a team of installers, but it was right there on the edge of just being too much. And I think had he kept the business, he would have scaled it back to make a little manageable. So this is a 20 year old business. So it is outside the five years, it's a $2 million business when I bought it. So above, you know, above that million dollar threshold where it was going to you know, it's it's sustainable. It, there's a product out there, there's a market out there, there's a process. And so I feel like I'm gonna share the analogy of you know, he raised the kid till he was 18. And then now it's my job to take it into the next chapter. And so our thought is to grow organically, the majority of our customers are referrals repeat. And what's interesting about our business, there's a lot of repeat business, because it's a, it's both a high ticket item. But then also something that you can you can chunk out you can you unlike a roof, unlike a kitchen, you can't do half a kitchen, or it doesn't look great or can't do half a bathroom, you can just do half of your home and windows and also do your kitchen at the same time and then come back and then upgrade your door. And so there's a lot of repeat business. And so our thought right now is to grow organically develop a team that can handle the business, which is one of the unique things in our industry is having our own on staff team. Many competitors use subcontractors, which we feel like that kind of degrades the product that we're trying to deliver. So no real plans for any further acquisitions down the road, I'll always open to that I've tell other people I like I like the model of the great game of business, if you've ever heard of that. I was just down down the road in Springfield, Missouri. And what they would do would be by a business that they're that winter are also up patronizes. So like a painting business. So you'd bolt that on or something like that. buying another window company doesn't necessarily excite me for growth right now. And I think it's because the culture that is established here, I really want to protect it. Sometimes when you acquire companies I live in Kansas City, one of the mergers that we studied in MBA school many, many years ago about biggest failures with Sprint next tail. And being from the tech space, you probably you probably know that. And there are people here that still that still remember that this culture clash. So that's one of the things that I'm protecting against. I want to create a business where we are we're serving the business the business serves us as we serve our customers. And it's it's sustainable, I can take a vacation one we can we can have somebody choose to take another role, and it doesn't, it doesn't sink the business and we're there to serve our customers for many years to come.
Ronald Skelton 13:58
So I get the cultural thing. But I don't I've yet to see a faster way to scale a company. If especially if you look at like what you've gotten. And when the windows and doors space, I've got some background in real estate, I own a pest control company. It's one of the ones I bought. And I used to own the local Ria, so the Real Estate Investors Association and I made most of my money like in the portfolio houses we have. So I've got that space and fit plenty of money on windows or doors. But you know, if you look at there's probably other people in your space that are doing this, maybe not doing it as well as you are and when you buy them you don't necessarily have to buy you know what you what you bought was your Cornerstone you bought the culture, the business and everything else. You can also buy companies that have customers list repeat business, right. They have, you know, installed contracts and installers contracts with, you know, developers other stuff, but they don't necessary Certainly managers Well, anything else that you know they would the employees there, I promise you, there's somebody in your in your area where the employees would be glad for somebody else take over because they know the owner is burned out. So it would I don't think that necessarily every purchase would disrupt your culture, you just have to, you have to really look at what's out there. There are a lot, especially in this services industry, where most people are out in the field, there are a lot of these little service industries, which I say is almost cultural LIS, people show up, they go to work, they leave and right no real commodity like, I mean, what you seem to like, would you value in your company is missing there. And that would be a value gain. For some, you know, mom and pop shops that, you know, maybe they're only making six figures, but and they're wanting to retire, that's an easy add on for you, especially if you get them to structure some type of deal where you're not taking a big loan or put yourself in debt, you're paying them over time. So you do a creative finance structure where you give them a down payment, and then over three to five years, you pay them for the rest of their business. And it pays for itself. That's a, you know, it's we're in the tech space, it's very common, if you look at things like Apple, and the big companies, they do what they call an aqua hire, they acquire companies just for the talent, right there, there's probably a door or window shop in town that has a sales rep that kicks all you guys as but you know, in acquiring their little the owner wants to retire acquirin' their business, if you could keep that one sales guy could almost double your life with with his sales, skill, sales skills, and your culture and your dedication to proper service and stuff like that he would thrive. Right, right. So I would say don't give up the whole concept. Like as soon as culture, look around and see what's there. The other thing is like, I do believe in what you were saying earlier about the
like buying similar companies, I'm looking at doing something with the pest control company like that, because you know, things like cleaning services, the cleaning lady always finds the bugs first, right. So I'd like to have you know, kind of don't want to franchise I don't want to marry maid or something like that. But if I found a good 20 to 25 person cleaning business in Tulsa, that, you know, would work beside my, my pest control company, we could pass business back and forth all the time, right? I would love to be able to go in and say, Yeah, we treat you place for cockroaches. And if you if you really don't want that powder left in the corners, and all that other stuff, you know, let it sit for three weeks, and then my cleaning crew can come out for you know, I don't know, $100 and then deeply in the place afterwards. And you know, and then my pest control company can come back after the deep clean and only put that stuffing hidden spaces that you'll nobody will ever see or touch. And you'll have the long term residual in a really clean house. So that would be a beautiful acquisition, there are things like you know, for what you do, that would probably be great. I would think like insulation companies, a lot of people are replacing their windows and the doors to try to get better thermal value for their house. So if you acquired a third like spray foam insulation, or even a pink spray, like they spray the insulation up in the attics, that would be a huge an easy upsell for you like, Oh, you're replacing the windows because you're leaky, you know, I can scan your whole house and tell you you know, with a thermal it because they have these thermal, right where where you're losing it. Yeah, I can tell you where you're losing it. And then, you know, if it happens to be your attic, or you know, your walls, my guys can come in and spray foam or insulate the place better put better weather. The other thing you could do is like, you know, handyman, right? If you found a good eight or 10 person handyman company, that's one of the things I'm looking for here, like for the pest control, because one of the best ways to keep bugs from coming in as exclusion basically blocking, you know, filling in the cracks, putting new thresholds under the door replacement weather stripping that type of stuff, because they're crawl it in, right? So it's just a logical, you know, I would look at things that you could cross sell and upsell easily. It's just natural. Like, you're probably referring some of that stuff out anyway. Because you know, somebody goes, hey, what can you do for my attic? I want to really insulate the house or replacing the windows for this. You probably have a buddy in that space, right?
Daniel Lee 19:03
Yeah, we get referrals or give referrals for all sorts of things like that in the home.
Ronald Skelton 19:08
Awesome. So we you've bought this thing, right? You've been running it for a year is yours seven months? What lessons like what do you know now about the whole process that you wish you'd known when you're out looking around for a business? Is there suddenly Oh, man, I wish I had known this before I got before I jumped into this.
Daniel Lee 19:26
Well, you know, I'm learning more about or spending time learning more about marketing than I ever have. In my prior roles. I had great experience from sales, you know, sitting across from somebody talking about how to grow their business, but marketing to masses. And what we've spent our time on this last year is formalizing structure. You know, create bringing in IT systems, so and processes so we can continue to serve customers over and over and over. And it's not just rely on on somebody's memory, I need to call Susie back or we need to do this or we're just moving across in the Google Calendar. So, so we have spent the last year trying to get sustainable over time and trying to document that. And with with automation, where it makes sense, and we've added people to the team. And so probably what I wish I knew more about is now we're switching to the phase and I say that because that's, that's kind of now we got the foundation. And now when we invite people into our house, we have a nice house that they, they like to see. And so now we're focused on is bringing more business in, whether that's from referrals, whether that's through Google searches, whether that's through some affiliation, and going round and round with a company that we use for marketing, just try just asking dumb questions, and you're just gonna have to help me understand this again, and again, and again. And so it especially digital marketing, and how you show up in search, I mean, it's just all been, you know, being in a large corporation, that's just all done for you. Which is, which is which, which is really fun. So that's probably one of the biggest things I wish I had known more about, or maybe that one of the gaps that I didn't understand or didn't fully understand when I got into it. But I'm fortunate to have a great team that we work with, that's, that's patient with me, and we're getting started. And I like to use the analogy, get our house in order, and then we go up to the hill, and we, you know, wave our hands, and we let everybody know, we're, we're here to help. So we're just kind of starting that phase as we work through year two.
Ronald Skelton 21:32
Awesome. So like, in the in the digital marketing space? Are they are you actually looking at locations and stuff? Do you target certain neighborhoods like Geofilters that what they refer to as geofencing. So as your as your master's degrees in marketing, by the way, so if I go to too deep in this realm, just status, let's back this up. But uh, I'm just curious, do you guys have certain neighborhoods in your area, certain regions you're you're working with, and like, as your marketing agency work with you and said, Hey, we're gonna do geofencing is where it's just where your ads only show up in neighborhoods you're wanting to do business in?
Daniel Lee 22:06
Well, yes. If I'm following you correctly, probably not those, you know, I haven't heard those particular terms. But there are definitely neighborhoods and zip codes that we work regularly in. And the reason people generally call us is in the Midwest, we've got all four seasons, and prior to 2000, most of everything, windows and doors were made of wood. And if you don't maintain those things, every year, they start to rot away. And so our really sweet spot is a house that is 30 plus years old, from 400,000 to a million and a half, that are looking to upgrade their windows. So they have a problem, they got this beautiful home, but the front is south facing, you know, get all the rain that you send us up from Tulsa. And it just just eats into the front of the house and you got this beautiful home your nice front door, and you've got this big, ugly black eye on your front window. And so folks will call us to help us with that window. And they experience the beauty of it, the energy efficiency of it, they enjoy our team and the way we go about it. And so they call us back again and again. So we do have neighborhoods that fit that kind of demographic that target customer that we have. And we've built out City Pages. So as some of the they search for window replacement and Leawood or window replacement by Lions Gate. So we've got some neighborhoods where we haven't worked in so we target some of our, our presence by creating pages. We haven't gotten into any type of digital advertising yet at the moment. Right now, if I can explain it correctly, we're placing little markers out there. So as people search for things, it's relevant to them, they drop into our site, fill out a form for from premium content, and then we start to market to them or they can schedule an appointment. Right, right through our website.
Ronald Skelton 24:01
Okay, got it. So walk me through the process you use. You talked about that the Biden build, actually had a step by step process. Walk me through that process and kind of, you know, when you're when you're building rapport, and you're looking to buy this company, you know, was there anything else was like, was there a close second runner up? Like, I probably should have bought this company? Or like, what was the process? Like?
Daniel Lee 24:24
Yeah, so I think it starts with understanding what you want. And that's the question. So so let's say you take the path that I did, and you go to a business broker, or even if you're just having a conversation, somebody needs to know what you want. And that is a really tough question. Like you know what you want, but it's really hard to articulate it. And so my process, I was very fortunate. I've got a lot of leadership assessments, 360 surveys, and I just had saved all this stuff from my corporate career and I would just just pick through it and I came up with art, what are my strengths and when do I win? Have I enjoyed my roles the most and Where have I seen the most success. And, you know, I kind of came up with this framework of, alright, here's what I can add to the business, I don't need a bit. So I don't need a business where I need to be the number one sales guy, that's just not my background and skill set. Whereas you were talking about insurance agencies before, if you were that personality, that's where you really excelled, gosh, insurance agents who would be perfect because you're going to go network with people, they're going to love you, and you're going to teach them about insurance, and they're going to sell to you that just really wasn't where my experience was, it was 12 years more operational, three years sales. And so as I kind of reflected on that, the other thing that I found is delivering claim service was really delivering the invisible, it's not really, I mean, it is a product, but it's an intangible product. So you're delivering the service through people. So I was looking for a company, a service based company that delivered through people, and it had an established sales routine, and was in need of operational efficiency. And I think I was like two to two to 600 and SDE or something like that. So So I have what I'm looking for the oil in the service industry. So my success had been building teams, creating process directly with the public and with small business. And so I wanted to come into a role with an established team. And so so that's what we had, I had a business that I purchased from somebody in the baby boomer generation, what I observed in my insurance career going out in agencies, oftentimes that entrepreneur had built a business to an extreme amount of success for themselves. And once it pays enough dividends to you, that hard works been done. So why invest digitally, and why improve the process, you know, when it's when it's serving your needs. And so I was looking for a place where none of that was done just yet, it did create a sustainable business, there was room for improvement, I could come in, I could bring in a CRM, I could bring in some digital capabilities. And we could make the business a little bit more efficient. While it's still continuing to produce income because of the revenue sorry, because of the reputation out there. So I think the first place to start is really spent a lot of time for me, it was like 530 in the morning, jotting in my notebook reading some stuff, and it's really introspective to come up with that. Once you have that. And I only took one meeting where I didn't know the answer to that question. And once once I took that meeting, and you know, just a bumbling idiot, I just realized, well, I'm not gonna, I'm not gonna do that again. And so that's the that's what started some of my research. And then I came up with a target statement, then it became really crystal clear of what I was looking for. And as I saw a deal come across my desk, theoretically, I knew, is there a place for me? What can I What can I do? Okay, the owner is going to leave? Where can I sit? And I would say my experience is mostly in a general manager type of a role. And so I was looking for a company with a general manager type role. So if there wasn't a general manager, it wasn't something that I was that I was looking for. Because, you know, where do I fit it in? So that was my number one criteria. Can I fit in? That then we started to get in deeper? And do I like the financials? Does it does it cut? So I did an SBA loan? Does it cover the debt? Enough? That makes me comfortable to the ratio that the bank needs to the ratio that that I need? And you know, it's amazing once you once you have some laser criteria, how easy it is to weed everything else else out. It's kind of in life when you when you decide what's important, it makes all the noise just kind of go away.
Ronald Skelton 28:40
I got it. So the SBA loan. So I've heard that that's very doable. And I've also heard it's kind of a pain. So, you know, that said, Tell me about the process that you had to go through, I know that you're there are some definite benefits of it, right? I know that they help do some of the mutual do the due diligence and stuff like that the SP is going to do some of their own, so they might find something you missed. But tell me tell me your experience of that SBA loan process.
Daniel Lee 29:13
So first thing I did is I don't remember how or I asked, I asked for a referral to an SBA lender. And I met with that SBA lender ahead of time, shared on my target statement to my one page buyer profile that I created and talk to him about can I qualify? What do I qualify for? What do you need? And we started talking about my financials, my assets, my home, you know, everything like that, and the what the process would be like, and so the first thing I did was educate myself on the process. And then it was during COVID. So it was a bit challenging. It is you know, it's it's, it's interesting, it's it's difficult, in a sense that there are repetitive forms, there's a lot of forms, there's information, you're like, why do you need this, but you really have to go come into it and coming from the insurance world as underwriters, we asked a lot of questions that our insurance weren't quite sure why we needed it. So I was used to the paperwork, and I went in with the mentality, just fill out the dang form, don't question it, just fill it out in triplicate, if you have to. And I would, you know, print it all out, I've got this scanner at home, it scans one page at a time, I remember like sitting on the ground, one page one page at a time it was it was brutal. Now, it's really difficult, in a sense of, there's paperwork, and there's a lot of information, it's not different, you know, it's not laying bricks every day for your life or hanging windows or you know, lugging a window up the side of a house. So you have to put the the difficulty in perspective, but my process for the business almost made it to close previously. So the first place I went was to a big bank that everybody knows, and they had previously approved, approve the loan. Well, I went along that process didn't think about any other lenders, we just went all along that process. And so this is, you know, March of 2018, right about the time that we shut down and a little bit later. And then just got to the end of the final underwriting was taken a while and taken a while. And my take on it was it got to the end of the line. And the banker that was helping me out Susan, no big deal got in VP, somebody that head of underwriting or something, had a credit, shot it down. So we're four months, four months into it, and I get this news. And he's you know, I'm so sorry, I think his name was Eric, I'm so sorry. Later, later, it came out that this bank had major major write downs, in the middle of COVID Expecting expecting the bad debt. So I allowed myself to be disappointed for you know, the rest of the night in the morning, the next morning, I got up, I made a list of every single SBA banker in town, started setting meetings, calling them and was asking them really a couple of things. And at the time that PPP program was was really heavy. So one, do you even have capacity to do an SBA loan, they didn't even have capacity, because the SBA department was two, three people, and they're trying to manage all the PPP loans from their prior SBA clients. And it was was really, really challenging and taxing the system. So what do you even have capacity to do you have any interest, probably talked to 10, 10 bankers in town and eventually got to a point where later, a loan broker called me and through a mutual friend, and he said, you know, can I help you out? And I said, Yeah, I've been talking to some people, I went down the list of people that I talked to, and he is just essentially said, That's everybody I know. And so I just in I'm uploading the same financial package to every everybody. So eventually found a narrowed it down to a couple of banks. And in that time period, credit was starting to tighten, you're starting to look at June and July of 20, and I was working less about terms and more about appetite, are you willing to do the loan? And the decision is made locally, the decision is made by the local bank, and then the SBA will back 70% of the loan. So the bank still puts out 30% Plus, I don't know how long they would have to carry the loss or something like that. So there's definitely risk to the bank. And through my kind of real estate, real estate ventures had was aware of the process by going to a loan committee, and I ended up choosing a bank where I had a friend at the bank. And that friend was not part of the decision making, but he was had the opportunity to sit in loan committee and convince, you know, just speak on my behalf for for example, and I you know, I sent them a headshot and you know, told them a little bit who I was, and all that type of stuff. So the decision is made right there at loan committee. And one of the things I just fascinated by, and was they are there is really some focus on prior experience in the business. And so that was the, the word that I got from the big bank of why they didn't approve the loan. But I just I just never really understood that they would rather have given the loan to somebody less financially capable, with no manage experience, experience, but a lot of experience in the window and door industry, maybe the technical experience than somebody like myself. And so being able to overcome those obstacles, and I think a really good SBA banker. This essentially the salesperson on the bank side is going to see where your weak spots are and help you prepare for those weak spots. And so send all the documentation in you go to loan committee. There were still some questions, had the head of credit, had another guy with the bank, they met with me and the business owner and we talked about the business and one of the things that's unique about our business we got to explain was it's really not a remodeling business. People are not calling us to this They are in some regard, but but the vast majority of customers are calling us because there's a problem that needs solve, we are not selling them windows, they need the window is telling the homeowner, you need to replace me and they're looking for the right company, you know, call that 70% of our business. And so really getting the bank to understand that, and then share how my business mind will help grow the business and I had a great transition plan with the owner who was going to stay on for three months, his son was going to who ran the operations was going to stay on for six months. And it just went you know, farther and farther and farther and farther along, you know, that you're gonna have to pledge everything, you're gonna have to personal guarantee it. But when you are, when you're stepping out from a very comfortable corporate career, and buying a small business, I mean, your chips are in the table, a personal guarantees, just a signature. I know there's a lot of debate new in my real estate, do you guarantee it or not?
You know, I'm the way I felt. I'm all in them in my life, you know, life wise, I'm all in it is more than investment. For me, it's part of who I am, who my family is. So it was it was long, difficult and stressful, but it came out we so the Cares Act, I think there was a program where all the the SBA loan payments, or any SBA that was taken out with by September 23 of 2020 got principal and interest taken care of for six months, and we closed on that day. And it was, you know, it's pretty, it's pretty stressful at the time, like going through it, I look back, and I chuckle and but it was incredibly difficult from anxiety standpoint. In reality, it's paperwork, one thing I'll share that the banker said was incredibly valuable was I hired a CPA firm to do some forensic accounting and do an analysis on the books. And she was able to produce a quality of earnings report. And so you have this independent, this independent company validating what's in the books, and they did a nice job with the books of the previous ownership, there wasn't a lot of noise that was run through the books. And that was one of my criteria. It was, you know, solely focused on the business. It wasn't lifestyle business. And so she could validate what was observed in the earnings. And so that, that really helped and I would cost a few $1,000. But well, well worth the money to get the loan done. So long answer on my process. If you got anything you want to explore, let me know. But it helps a little bit.
Ronald Skelton 37:33
Well, you said something like March till September was What's the timeframe? Like it took you six? Oh,
Daniel Lee 37:39
yeah, yeah, it took now that that is not average at all. I think 90 days would be is what the banker was taught telling me about. So I think we first got our APA done, and maybe March of one A and it closed September of 20. So that was a good six months. But there's I went through two, you know, two processes. And so I think at least doubled, doubled the time, and everybody's looking I mean, banks, really, really stressed at this time, just surely front on on what to do, how do we met help all our existing clients verse compared to, oh, here's a new guy want to buy a business? Let's take care of our own loans first, which makes a lot of sense.
Ronald Skelton 38:19
Right? So I picked up two things during that conversation you were sharing. One is perseverance. You didn't take no for an answer from the first guy. And, you know, I've had a lot of people on the podcast talking about what you did was referred to as an LBO, a leveraged buyout. And they would you know, I've had a couple of guys that really know the SBA process, and they they will tell you over and over again, stay in your lane. So buy a business that you've got familiarity with, in other words, the SBA won't approve it. You just proved that you can get past that, right. It's a it's an experience with local individuals that you need to present to and convinced that you're the right person to own that business. So that's a good takeaway, because I've had, I've had at least three guys that like train in this space. Tell us if you're going to do the SBA route, you're going to do an LBO with an SBA loan, you have to prove to them you have industry experience. So
Daniel Lee 39:18
you know, so I will do though it is in if you go to a bank that is that has authority delegated by the SBA, you're really looking at local decision making, not SBA decision making and from, you know, my real estate portfolio, I learned that small banks are much more flexible than a big bank. And so the bank that I chose were all they weren't small, small, but they were big enough and I forget the term that has the delegated authority, but they essentially can approve another guidelines just like a home loan. Freddie and Fannie have some guidelines to make it a conforming loan, but it is do the people in that room want to put their nickel down there. Yes, you have to check all the boxes. But do they want to put their nickel down. And as a banker, I really feel the banker mentality is let's not lose, they're trying less to make money and more trying not to lose it. And so you can criticize that you can say, there's another way to think about it. Or you can embrace it and help the banker do her job of shit. Given this information where my soft spots are, I don't have industry experience. So what am I going to do, I'm going to pull in a partner, I'm going to develop a succession plan or something like that, to make it work.
Ronald Skelton 40:40
Awesome. And then the other thing I heard inside of that is, you know, you went from, you know, you made a list of all these guys that kind of evaluated who had capacity. There's one of the guys out there, and I haven't had him on the show yet. He's, he's an interesting, gentle gentleman. But you know, he's big on the LBO model. And one of the things he always says on his, you know, on his YouTube channels, and on his on his coaching and training, is there are so many people out there with money. And he's kind of crude about it, like somebody who has more money than you and stupider than you with their money, they're gonna loan it to you. He goes, I honestly think that somebody could have got the pet rock funded. I mean, yeah, I bootstrapped it or whatever. But you know, there's somebody out there that will do it. So the perseverance, I'd like the fact that you took a logical approach to it, you, you wrote this down, and you went through the book Buy then Build, you looked at his step by step, a lot of the things you were talking about, I've no, I know that, in that book, I read it, you know, so you really followed that process. And you know, when the first big told, you know, you're like, Okay, I'll just make a list of every bank in town that can do this, and figure out who my top contenders are, and go work with them. I think if your second mate would have told you, no, you still would have pulled this off. And that's not not that's not what everybody do. Right? You'd have found the third rank, I don't think that, you know, you have the entrepreneurial spirit that says, I'm going to solve this, to where a lot of people would have been told no, the first time and Okay, well, I guess I better go sell some more insurance or something. So there's some.
Daniel Lee 42:16
Yeah, I mean, that's, you know, that's, that's a great observation. You know, it's kind of it's kind of formula in life, too, right? You know, just, can you keep going one step for one step more than, you know, your competitor than the guy next to you or just or just not, not given up? I don't know what I would have done if the bank number two had said no, would I have packed it in at that time, unfortunately, I don't, I don't have to make that decision. I appreciate your confidence in me. The you know, it was interesting is that the it was really the the owner, he was about ready to give up because it was just so totally stressful on him to just tons of time, you know, it doesn't make any money at the moment, and they were really ready to pack it in, they're gonna scale down the business and make it workable for them and the broker talked them into, hey, come talk to this guy. And you know, you know, I think you'll find them interesting, you guys will hit it off. So there's just a lot of fortuitous things that happen by just not you know, kind of, you know, there's, you make your own luck, or you're, you're in position to take advantage of the luck.
Ronald Skelton 43:18
I get that. And there's so many businesses out there currently that need a succession plan, they need somebody else to come in, buy it, take it over run it, that I am a big believer that if you talk to enough business owner, you'll eventually find there's there's owners out there where you can't say the wrong thing. Right, they, they really need to do something. And they've made decision in their mind. And to be honest, if they stay in there much longer after they've made that decision, they'll deteriorate the business, they'll do exactly what you were talking about, they were about to do, they'll scale it back. But that's not as easy as a lot of people think it is. A lot of times when they start that scale back process. There's an ebb and flow of oh my gosh, we just scaled it back too much we're hurting and then trying to build them back until the finding that balance you know, it's kind of like a locomotive train, right? It's you can get one going and it's going pretty well. But if you try to stop it, stop it stop. You try to you try to stop it. And then it's not Oh, I stopped going too slow. Now you need to be backed up. There's there's some time lag to get it back up to speed. So I'm glad they didn't go down that path. I've seen business owners come to me like, oh, well, we tried to sell it two years ago, and then we scaled it back. And now we're just really going to try to sell it. And it's half the business that used to be but they still want the price that broker told them it would be worth when it was twice the business. Right? Right. And my favorite thing to do is somebody calls me and we're on the phone if they bring I don't bring up numbers at the beginning. I just want to get to know the human being. And then when if they bring up well, I want 1.5 For my business like great, let's see how we can get you there. Right. You know, and for that realm sometimes getting you there's like look, you know, kind of have to double your income to get you there because you just not only will I not buy it at that rate, you know, I don't think there's gonna be on the planet that will, but you know, love finding. But the other side is, you know, the business brokers out there, I'm glad that you've not had a whole lot of people on there, like had had great luck with business brokers. There's a reason why I think the statistics is like 80% of all businesses listed by brokers never sell. Some of it is on the business side. And some of its on the broker side, it sounds like you had a broker that was like, could see what you were looking for, could match that up, and would move out of the way to let you guys build rapport, build a connection and get the deal done and only help you when you're needed. I find that too many brokers actually try to stay in the middle of control everything. And, like want to be on every single call want to be like, I've been on calls where I just told the, the business broker, if you're on the next call, I'm not interested. And they're like, What do you mean, I say like, I asked the business owner questions, I want to see their response, I want to hear the tonality of it. Right? You're purposely stepping over there cutting them off and answering questions I'm asking them, I'm not asking them the question to get a yes or no answer or a, you know, numerical answer, I'm asking to get a gauge of where they're at. I can't do that without hearing, seeing their posture, seeing their, you know, emotional state when they answer it. And the guy was actually kinda honest, it's like, well, my job is showed them from making that mistake. They don't, they don't need to show emotions during this conversation. Like, you're not going to sell that business because you think he wants money. And I promise you right now, by talking to him twice, he has no interest in what you're interested in. He's interested in the legacy being taken care of is your ticket, you and your commission are interested in the money more than he is. And you're killing this deal. And, you know, I think I got mad at me, we didn't, we didn't talk any more the business never sold. As far as I know, I bet if I looked it up right now, it still hasn't sold. And unfortunately, the paperwork I signed with that broker on my NDA said, I can't contact that business for seven years or some crazy number is big, like, you can't contact him to buy it after that, you know, it was it was crude, I won't sign those anymore. But it was one of my first ones I looked at. But, you know, I we joke around inside of the space guys are very active in the the entrepreneurs, you know, acquisition entrepreneurs, and what we're buying and selling multiple businesses are jokers, brokers, brokers kill deals, right? Your broker in your lawyer, when the broker when it goes to the broker and the lawyer most of time that'll kill the deal. They'll give the owner bad advice, they'll give the owner misdirection, or, like tell it you just stop the they'll get in the middle of it and mess it up. And I'm really glad to see that we've got somebody here who has bought one through the broker system. And I know, you know, I know some other people that are like, you know, Walker here, Walker Deibel. That's what how you bought his, what he works with, right? But I think more often than not, like you did, you made a list of banks that you needed to work with. I
think if you're gonna go down that LBO model, you kind of got to, in your criteria, what you're looking for, you almost have to have a criteria of what the broker has to be, right. You know, I want a broker who will make the introduction who will set up the calls, who might be on the calls, but he'll keep his mouth shut, and let me talk to the business owner would be one of mine, right? I really want to know, I want that report. I want that thing that you had with him where, you know, you guys trusted each other. And he's going to tell you when he had some, hey, there's, there's a hiccup over here. You know, don't create this lever this way. It's bad when you do all right. Yeah, I'm out when you've got a broker shielding those types of conversations,
Daniel Lee 48:41
you know, never occurred to me that that was out of out of character. And we just, you know, we just, hey, we can deal with this ourselves. Right? Yep. Okay. And, you know, the business broker he had hired. So, you know, it was him asking the broker to step aside, and, you know, they don't care what I want. And so, you know, I think I think that it started with having the rapport, you know, hopefully, to how I, you know, introduce myself and caring about the business and explaining what I wanted. You know, there were goals, I would I would write down right, when I get out of this meeting, I want this owner to have this feeling of, like, this guy is credible. He's appreciative, you know, I want him I want him to have this business. And when you achieve that, and I want your business and then we can move forward. The one thing that I was a little cautious against is as you become emotionally attached with that person, is that you but then still maintain your objective decision making. And you can get so romanticized by the business, the relationship with the story that you could overlook that what some of the numbers are telling you, maybe you overpay for it or maybe the business just doesn't do what you thought it would do or something like that. So I was I think there's a fine line. So far. I don't think I stepped over that line. I think we paid an appropriate price. We definitely got a sustainable business was everything You know, as as expected, but I can definitely see somebody like yourself that you know, has done this regularly, you know, need the business broker at all. And in my situation was first timer stepping out, it was helpful to go to where the businesses were listed. And that's what kind of I was attracted about and attracted to, because what the broker does do on the front end is helps the good broker helps the business owner gets his books, his business, his house in order, you know, he stages it for buyers, that's kind of what I needed is I go into, you know, for look to acquire another one down the line, I don't know, if I take the same approach, it might be more networking and might be more, you know, talking to people like you less about going to the broker and asking for some broad data business, I would see it be more industry connections, or just other entrepreneurs that I happen to, you know, run around with or have in my network.
Ronald Skelton 50:50
So you've already been down the path where you hired a forensic CPA to give you a valuation of their books, I would say that you keep that, that tool in your arsenal, if you go the networking route, probably nine out of 10 businesses I look at that don't come from brokers, I have to, to weed through things, they've just I think there's a no magical number, I've seen a few businesses over the $10 million in revenue. At that point, they really have systems processes, and things start getting cleaned up, they start running like a corporation and stop playing a lot of the weirdness in their books and money moving around and, you know, paying for dinner and movies for their family out of their personal account. And I know I've owned business, I've done it. I don't do it anymore. But like years ago, I've like, I just paid for whatever, until one of my CPA like you make so much more for me, like you need to stop all that.
Daniel Lee 51:48
Well, and that's how you build the business to sell it to, you know, I don't know that my plan is ever to sell it, but my plan is to build it. So it's sellable. And that it can be looked at objectively by somebody the outside in the same way that I looked at it and run and run and all that type of stuff through just clouds, clouds your books.
Ronald Skelton 52:09
Absolutely. So I appreciate you here, it's, we're pretty close to the top of the hour, I have your contact information up on the screen for everybody. If you guys want to reach out to Daniel, it's uh, let me pull it up. So I can see it here on the screen. It's tiny. It's Daniel Lee, on LinkedIn. And it's actually the normal linkedin.com/in D, G, Lee one. So, D, G, Lee, one. If you're going to look at that, it'll be in the show notes. And it'll be in the description. When this goes live. I appreciate you being on the show. I asked you a lot of questions. We talked a lot about topics in the last couple of minutes. Did we miss something or something? Man, I wish we would have talked about this or, Hey, we need to tell these guys?
Daniel Lee 52:53
No, I mean, I think you did a great job of just, you know, asked me a couple of questions and let me ramble on about the process. You know, as you've talked to probably many people or people ask you about your business, you can just go on forever. And it's, you know, I haven't thought about the whole SBA loan process. You know, it's one of those things you compartmentalize and forget about so it's kind of interesting, reliving some of those feelings with the conversation. So I appreciate you letting me do that. And if you know I don't have you know all the answers, but I certainly have had a path for myself and happy to help anybody if this podcast or reach out to me directly or if you want to check out our company at Windura.com, happy to help any way we can.
Ronald Skelton 53:32
Awesome, awesome. So we'll end the show with that and hang out for a few seconds after the show. We like to chat for a minute. All right, and I appreciate your time. That's the show today guys. The investors and entrepreneurs professional mastermind. The investors and entrepreneurs professional mastermind combines that or traditional peer to peer mastermind introduce first in Napoleon Hills famous book Thinking Grow Rich, with accountability partnering, where your peers help you ensure that you set goals take action and get results. If you want to scale blow past roadblocks and achieve success faster than you might think is possible. I suggest you take a visit over to tiepm.com That's T i e. P m.com. And check out the investors and entrepreneurs professional mastermind