Acquisitions Anonymous - #1 for business buying, selling and operating - $4.4mm Commerical Sign Company / $6.5mm Liquor Store - e34

Episode Date: June 29, 2021

This week we have special guest Devin Wanzor of Stillwater, OK. We analyze two small businesses for sale: - a $4.4mm Commerica Sign Company  - a $6.5mm Liquor StoreEnjoy!-----* Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel.* Do you enjoy our content? Rate our show!* Follow us on twitter @acquanon Learnings about small business acquisitions and operations.-----Past guests on Acquanon include Nick Huber, Brent Beshore, Aaron Rubin, Mike Botkin, Ari Ozick, Mitchell Baldridge, Xavier Helgelsen, Mike Loftus, Steve Divitkos, Dzmitry Miranovich, Morgan Tate and more.-----Additional episodes you might enjoy:#62 Two Landscaping Businesses for Sale - Mike Loftus CEO of Connor's Landscaping#66 Analyzing Software Businesses for Sale with Steve Divitkos, experienced industry CEO#42 $900k Moving and Storage Company / $500k Rural Mini-Storage#61 Two Manufacturing Businesses for Sale - Brent Beshore - Founder and CEO at Permanent Equity#24 $5mm pool services and lifeguard staffing co / $2mm septic services business -  featuring baller @WilsonCompanies as a special guest!#45 $800k/yr cleaning business in Midland, TX / a $565k/yr window cleaning business in San Antonio, TX #48 Two Landscaping Businesses for Sale - Mike Botkin of Benchmark Group--- Support this podcast: https://anchor.fm/dealtalk/supportSubscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

All right, welcome to Acquisitions Anonymous. It is another beautiful Friday. I am one of your host, Michael Girdley. This is our weekly podcast about small businesses for sale. So each week, me, Bill Delessandro and Mill Snell spend 45 minutes or so, sometimes with a guest, analyzing small businesses that are currently for sale. And so we learn a lot from each other. And hopefully folks listening can learn a lot from us and be a

entertain along the way as well. So we have a special guest today, Devin Wanzer, from the sunny state of Oklahoma. We could talk about your personal life choice to end up in Oklahoma, but maybe that's for another pod. But Devin, we're so glad to have you today. Yeah, thanks for having me on. Looking forward to it, guys. So I think we got two deals today. One's going to come from Mills and one from Bill, but that are totally in your wheelhouse of your expertise and how you got up to today. So just maybe to get started, Devin, we'd love to just maybe get a one-minute thumbnail sketch from you, you know, on what you're doing today and how you got there. Yeah, absolutely.

So I've actually been in Oklahoma my whole life. I guess I don't know any better. I'm an Oklahoma State University grad. And then the first seven or eight years of my career, I spent as a commercial banker, which kind of ignited my interest for small and medium businesses. I actually partnered up with one of my customers at the end of my banking career and then went into the sign manufacturing business and then grew an entity there for about the next seven years with him, more or less as an investor in that thing. And I was the operating partner. And then

right at the end of 2020, I left that business and purchased a liquor store. So probably people have seen some of my tweets about that adventure. Relocated back to Stillwater from Tulsa about a year ago right in the middle of COVID. Wanted to raise our family here where we went to school, awesome college town. And so right now I'm just focused on the liquor store. My wife and I also have some mini storage businesses and I'm doing a little bit of consulting for my old business. And then a couple of new clients that I'm talking to on that side as well, just kind of around acquisitions and then helping people prepare for acquisitions as well. So that's what I'm up to right now. Yeah, that's great. Well, welcome. We're so glad to have you. These episodes we think are the best when somebody comes in with a lot of knowledge and experience in a space. So I think we got two deals that are right in your wheelhouse. So it should be cool. Mills, you have our first one, which is a liquor store, I believe. So over to you. Yeah. Devon, glad you're here, man. This is a teaser that we came across a few weeks ago. I knew that you were coming on the podcast. And so we followed it away for you because we're hoping you can teach us all something. It is a teaser.

a liquor store with wholesale accounts and retail customers located in the southeastern U.S. 2021 revenue estimated to be $6.5 million. 2021, Iva da, estimated to be $38,000. The company is a leading liquor, wine, beer, and convenience store that specializes in wholesale and retail customers. They have strong relationships with those customers in a variety of markets, including many bars and restaurants in the area. They have a 10,000 square foot company-owned retail store.

They're located near several highways, and they, let's see, they think that they have, you know, room to grow. Their mix is about 50% liquor, see, 39% beer, 5% wine, and 6% miscellaneous. Been in business for 32 years, over 85 active accounts, seven full-time employees, one part-time. They say that the business is not dependent on current ownership. The company's management is structured optimally with highly qualified and reliable personnel so that it can run without the owner's presence. Their gross profit has been increasing over time from 8% gross profit in 2018 to 13% gross profit in 2020.

And they expected to continue to increase, probably in perpetuity forever. and strong earnings growth. So their EBITs, not EBIT DA, so that's earnings before interest and taxes, not including depreciation and amortization, was $75,000 in 2018, and it's $33,000 in 2020, which means the DA,

the depreciation and amortization is right around $50,000, $55,000 in 2020. And they say that they have, have a strong networking capital. They are unadjusted current assets are $857,000, while current liabilities are $48,000. I love this. They throw in. So in case you get into the math, the current ratio is almost 18. I love this because this basically just means we're sitting on a ton of liquor. Yeah. Yeah. The only last thing on this is growth opportunities, they want to hire additional employee or they say you can hire additional employees you can develop sales and marketing and you can

expand geographically it's so easy of course yeah so devon just the one thought that jumps out about about this i don't know exactly what state it's in because this is just easier but uh when i was kind of thinking about this i looked and you know at any given time it looks like there's roughly 20 to 25 liquor stores for sale in south carolina which you know we've got a population of about four million people for capital, I would assume we consume as much or more liquor than most states. But it looks like size-wise, this is kind of in the top tier of what I was seeing for sale right now, unlike a biz by sale. So consider the sample size. But most of them on average were around 100,000. And the largest, I think, I saw was around 300,000. So curious if you talk about maybe, you know, natural ceilings on growth for single location. And then all. also maybe the regulatory environment for liquor stores. We don't have strict blue laws, but we can delve into some of that more.

But you can teach me more than. Well, I think, I mean, starting with the regulatory environment is probably the most important because, you know, the law state to state really dictate what your risk level is going to be. So let me use Oklahoma for an example, since I just did a deal here. Three years ago in Oklahoma, liquor stores were the only ones that were allowed to sell liquor, wine and what we call strong beer. And so grocery stores, gas stations, things like that, could only sell 3.2 beer. And so that law changed in 2018. And for example, the store that I purchased, which I didn't buy it until the beginning of 2021, they saw about a 20% reduction in their

revenue overnight when Oklahoma's laws changed. Grocery stores and gas stations were all of a sudden allowed to sell wine and they were allowed to sell strong beer. So that was something that I had to get very comfortable with is, okay, well, if all of a sudden they allow grocery stores to start selling liquor, that's probably the number one risk to my business. So I'd have to figure out what state this deal is in and then quickly get familiar with what their laws are. One of the things that kind of stands out to me here, like in Oklahoma, you're only allowed to have ownership and kind of one tier of the distribution. So it's like you can be a manufacturer, you can be a distributor, or you can be a retailer. Obviously, I'm operating as a retailer.

Here, it looks like they've got some retail, but also some wholesale piece of their business, which I don't love the wholesale side of it because it's, I mean, the margins are incredibly low. And also, there are two just enormous wholesalers in the United States. You've got Southern glazers and you've got Republic. Virtually all of the huge brands, I think, within the next couple of years, we'll be using them essentially nationwide. So I'd be a little bit nervous about their opportunities to continue to grow the wholesale side and just because the margins are so low.

Like, for instance, I think it said their gross margin had grown from 8 to 13. We're running at about 27% gross margin, but that's 100% reason. detail. Two of the other things that stood out from the teaser. So they're 39% beer, which in the alcohol space is vastly lower margin than everything else. And it said they're only doing 5% wine, which is the highest margin product in the alcohol space. So I'd like to see that, like for us, is up 25 or 30% of our revenue. It's only 5% of their revenue. So they're really heavy on beer and really light on wine, which is kind of the exact opposite of where you'd like to see that. As far as caps on an individual store size, so again, my frame of reference here in Oklahoma is there's a ton of stores that will do around that one to two million dollar mark.

We have one store in Oklahoma that we don't have, nobody really knows, but allegedly they're probably doing somewhere between 30 and 50 million a year out of a single location. That one's in Oklahoma City. And then there's a store up in Tulsa that would be the biggest up there that's probably somewhere between 15 and 20. but a lot of that they're probably operating in a lot lower margin than what I am because in the big metro areas there's a lot more competition and so you would see a lot lower pricing. So they're just basically trying to blow everybody out of the water when it comes to their prices and they've done a pretty good job of it. But I think the sweet spot is there's probably a lot between one and three. Six, if it were a true retail store, would be pretty good size. But this is not just a true retail operation.

So it's the economics of this look more like a $3 million store when you get to what the cash flow is. Evan, I got a question about margins because this just jumped right off the page at me. I mean, any typical retailer of anything else that's not liquor, you know, you would expect to see a 40 gross margin, you know, maybe high 30, something like that. And they're bragging that their gross margin, their gross margin has expanded from 8% to 13%. and I'm going, this is a distributor, really. Like, this is not, that's a distributor mark. Is this normal? Like, is that what liquor store margins are?

Is 10% gross? No, I mean, like I said, we're running out about 27 through the first half of the year. If we were in one of the larger metros, my guess is that would probably be more like 20 to 22 because of the additional competition in that space. But yeah, eight to 13. I mean, I've seen very few companies that don't have overhead of at least. you know, 10% of their revenue. So I mean, they're operating on on pretty small margins there. You mentioned that wine was the highest margin product and they're only doing 5% wine.

They've got 50% liquor. Like what's kind of the margin breakdown by category roughly? So beer, typically you're going to be looking at like 15 to 18% liquor is more in the 20 to 27 and then wine from 25 to 35. So, you know, beer might be half of what you would make on wine. So seeing, yeah, seeing only at 5% wine, but that tells me, you know, a lot of the wine is probably running through either one, the two big distributors that I talked about earlier, or like in our area, there's two or three that really specialize in trying to find wines that aren't your, you know, grocery store type wines, like your apotheque and stuff like that. So they focus on it.

A lot of their clientele is really restaurants and, you know, secondarily liquor stores, but it's a very high touch sales process. I mean, I have guys that come in to see me every week with a bag of six or eight wines that I've never seen before, hoping that maybe I'll put one on the shelf. I mean, it's,

I don't really see how they're making money doing that, which they may not. So you said the average gross margin profile for all three of these categories, even the lowest, was in like the low 20s. So if they're running closer to 10 on the gross margins, that must mean this is mostly wholesale. Like is that a serious assumption? But also from what I've seen, just in, like I'm a part of some bourbon groups and stuff online just to watch trends.

Pricing on products from state to state can vary tremendously. And so depending upon the laws and the tax structure in a state, I mean, what I'm quoting would be typical margins in Oklahoma. but that could be drastically different. Like I see things, hey, here's a picture of something in Costco and wherever, L.A., California. And I'm going, well, they're selling that for cheaper than I can even buy it for as a retailer in Oklahoma. So it's drastically different from state to state. That's interesting. In South Carolina, your cat, as a liquor store owner, you can't own more than three locations.

Oklahoma actually used to be one. and I think that recently expanded two. Where I used to live in Colorado, it was, I believe, one. Because it was the same deal like you were saying, Devon, strong beer could only be sold in the liquor stores. And there was this one big one in the middle of Denver, probably 30 million plus, just killing it. But it was the only one they could have.

They couldn't expand geographically. So, you know, when I think about liquor stores, like on one hand, you're like, this is a great business because when things are good, people drink. When things are bad, people drink, right? You know, it's stable as hell. So, yeah, like anything that's that stable, you know, it's competitive, like it's kind of a commodity, like prices get compressed, margins get compressed. But, you know, at the end of the day, like, is the liquor store business a good business? You know, is it like, is it an annuity, like a, you know, a cash flow that just keeps on punching out, assuming the regulatory

environment doesn't change, as you said. Is this a good business assuming the regulatory is stable? I would also talk, you know, like geographically where I'm at is, you know, Stillwater is a town of about 50,000 people. But, you know, 15 days a year when we have football games or graduation, I mean, we have some some huge opportunities there. But it also, we're small enough town where it keeps us off the radar from somebody like a total wine coming in. So I don't know that I would want to own one of these things in a large metropolitan area just because, you know, If somebody like total wine moves into one of those markets, then as a small player, you're going to have a hell of a time competing with them. So I think one, you hit the nail on the head first and foremost is you're rolling the dice a little bit on the regulatory environment because there are changes that could happen there that would almost wipe you out immediately. And then two, just kind of picking your spots to make sure you're in a, you want to be in a solid to growing area, but maybe not.

in the middle of a metro area where there's, you know, competition every mile. What are the barriers to entry? I mean, I'm thinking about zoning laws as one from like a location selection standpoint. But also, right, I mean, this is highly regulated. You can't. It's not like I want to open a T-shirt shop and I'm just going to sign a lease. Are there any other kind of, you know, obvious or non-obvious barriers to entry? I mean, one of the big ones would be, I mean, traditionally somebody that says,

I'm going to start a liquor store, unless it's, you know, again, total wine or one of the huge ones is going to be the same person that might be looking to start a t-shirt shop, right? And so it's day one, it's going to be fairly capital intensive because you need to have that store full of product to justify anybody wasting their time to come in there. So like, for instance, my store, you know, we've got $300,000 worth of inventory in there. So day one, you're going to be signing a lease, probably spend, you know, a couple hundred, thousand dollars on fixtures that are immediately worth basically zero by the way and then maybe two to three hundred thousand dollars on inventory to open your doors and hopefully attract a customer in there so it's relatively capital intensive at least on day one can you just kind of call up the big liquor distributors and get an account like is it easy to set that up that's not a buried entry well at least in in our state once you get your liquor license they're they're a essentially obligated to sell anybody product at the same price. Now, there's some caveats to that too, though, because here it's all done kind of through web-based ordering,

but they also have the ability to kind of play some games with a lot of the popular products where we just don't put it into open inventory. So if you're a brand new store, you're going to have a hard time getting any of the really popular products here in Oklahoma because they're kind of holding that stuff back, especially now where there's a lot of shortages due to demand from COVID and then there's also like some glass shortages going on right now. And so getting your hands on products that are going to draw people into the store are going to be difficult if you don't have any history because they're primarily sending that stuff out to their, you know, quote unquote good customers. So if you're brand new, that's, it's kind of chicken or egg right

there. Devon, what about the shift? I feel like there's a growing kind of shift to online, you know, maybe not all just subscription based, but yeah. I mean, there's definitely that too. But, it seems like I get catalogs all the time about, you know, ordering kind of premium, you know, spirits or beer or wine. It doesn't seem like that could ever really totally take over the local retail presence. But is it eating into the industry from a local standpoint? I think in certain areas it is. To me, I kind of classify that as part of the regulatory discussion. At least the way it is in Oklahoma legally, people are not allowed to ship spirits here. And wineries can on a limited basis, but it's, I think the way the law reads is if they have a distributor in Oklahoma, then they're not supposed to also ship it direct to consumer here.

I know some of it takes place because I have friends that are like, oh, hey, look what I got today from XYZ. And I'm like, okay, interesting. That's not legal, but there's really hard to police that, right? So I think it kind of falls under that larger regulatory discussion. But I think a lot of it is, you know, kind of at least for the masses. I mean, I think 95% of it falls more under kind of an impulse type thing where they want to come in and walk around and sort of see what's new. I mean, there's certainly people that are more so on the wine side that, hey, they've been to Napa and they want to get wine from this certain winery and it shipped to their house and we never see them in our store. But so far it hasn't, I don't see it making a meaningful impact on the retail players.

yet. Is there a scenario, Devin, where you're on a business this size, this $380,000 in EBITDA? Is there a scenario where you could own something like this and be hands off? I think yes. Just, you know, the store that I'm operating is we're going to be right in that $3 million ballpark. And I know we're going to get into a sign business here in a minute. But as far as like the number of moving parts, it's drastically less. So I think it's possible. I don't know about completely hands off, at least the way that I'm wired,

because there's a lot of cash involved in this business and then managing the inventory really well is kind of what can make us or break us. But it's like, so right now I'm six months in and I've already gone from, you know, 40 hours a week starting out to maybe 20 hours a week now. You know,

because a lot of it is just making sure that we've got people camped out of the front cash register. I mean, that's 90% of the labor involved. And so I'm able to kind of make the big money making decisions and have, you know, a decent level of just being there in 20 hours a week or so. So it's, yeah, it's certainly possible. I mean, I could foresee a pretty simple scenario to be totally out of my deal in a year from now if I wanted to be, but that's not really where I'm at because I'd just be bored. So, yeah. Yeah. That's awesome. really interesting. Very cool. All right, well, let's move on to deal number two. Before we do that,

we do get requests for updates for deals that we discussed in previous episodes. And in episode 12, we talked about a small publication in a, it was basically in a holiday market in the southeast. So we think North Carolina, South Carolina. And a listener was looking at buying this newsletter, which was one where basically the local realtors would pay to advertise the vacation homes in them, and then you'd see them in cafes and stuff like that, so a free newspaper. And so here's the update from said listener. If you guys are interested in what happened with that deal, and he was going to pursue it. That was the last we heard from him was I'm going after this.

And about a week ago, I got an update from him, and here's what said listener said. Quick update on the newspaper deal side. It started to slump significantly even down. from the COVID rates. So remember, they were doing well. And then COVID hit, and everybody started buying vacation homes, but didn't go out of their house. And so they saw a big slump because nobody was paying to advertise. And so the housing market ended up getting so good that brokers don't have any inventory to advertise. So year over year from last year, the sales are down even another 20 percent. And the publisher was likely just to break even this year. It did make sense to still try

to buy her out without debt at a fraction of what we were talking about. But, it's just not something she would accept at the moment, even if she's going to fund some of the losses out of her own pocket this year. So it made more sense to pull back. So that is yet another deal that did not happen. And hopefully said listener will keep us updated. But it's fun to see these as they're real deals that get sent to us. We talk about them.

I think we didn't like this one that much. And then the listener was going to do it anyway. And so, yolo, I guess. So cool. So that's an update. And that's from that previous episode. What did I say it was episode 12? Yep.

Yeah, episode 12. So check that one out. We did it last December. So pretty fun. So let's move on to our second deal. Bill DeLessandro has that one. All right. So this is a, I'm psyched we have Devin and that we're doing this one because I see these come across

biz by sell all the time. And this is a sign manufacturing company, commercial sign manufacturing company. So, you know, if you want a lighted sign on the side of your building or a monument sign out by the street, you know, or a placard sign or, you know, whatever you need, these guys do it. So this is a sign manufacturing company. They are asking $4.4 million. They've got $3.6 million of revenue and one point, almost $1.2 million of cash flow. So this is about four, maybe three point eight times they're looking for.

It's established in 1999. They said they've got Fortune 500 accounts. Sales are up 21% in 2020. And quote, all equipment is new or not. newer, whatever that means. So that's nice. It says, this business is one of the top three commercial sign companies located in a booming regional economy.

It has never had a down year to current ownership and saw a bump in sales and net profit as a result of the pandemic. It's highly recognized and respected as a member of the local business community and boasts an impressive roster of national sign accounts and works directly with Fortune 500 companies. They've experienced consistent financial performance for well over a decade. They've benefited from COVID. They've grown for years, and it says the regional economic boom has been nothing short of spectacular

and is predicted to continue forever, okay, at least the next 25 years. The company's revenue comes primarily from in-house, parentheses, limited sign manufacturing, outsource custom sign manufacturing and sales, as well as service and installation. They are a full-service sign company, provides interior and exterior signage in a variety of formats. It has capabilities to custom signs of all kinds, including vehicle wraps, and 80% of their revenue comes from repeat customers. They say it's a turnkey business, it's expanding, it could be part of a roll-up, or you could just buy it. They say it's one of the top three commercial sign companies in their geographic territory.

They've got great longevity and everyone knows them. And your expansion opportunities include growing your national accounts, expanding into nearby geographic markets, or offering new services. Or they say the business is well projected to continue enjoying organic growth. in conjunction with a booming regional economy, which means you could also just sit on your butt, and this business will get bigger, and it'll be fantastic for you, and you should definitely buy it. The reason for selling, I've ever seen this one before, pre-retirement. So I don't know what that is.

Normally I see retirement, but this guy is selling for pre-retirement reasons. So you've got 17 employees in 8,000 square feet. So we picked this one because this is like one of the better looking ones, I thought. And Devin, we got a pro here in sign manufacturing. So what do we need to know about this one? Well, so the first thing I would say is if you've never bought and ran a business before, this is not what you want to do. Signs in general? I mean, so the first thing that you need to know is running a small sign business is incredibly difficult.

And I'll give you some reasons why. One, just manufacturing in general as a first-time business owner is very difficult. You know, compared to the retail store that I'm running now where it's, hey, we pick some product, put it on the shelf, people come in and buy it. When you're trying to take, you know, sheets of metal and turn it into, you know, highly finished products, you're talking very skilled labor that especially in times like right now is hard to get. Then you get into the installation side, you know, for us in our sign business, we were doing things spread out over eight states. So just your span of things that you're trying to control and opportunities for things to go wrong is such a humongous area. So you've got, you know, weather, people. And then one of the biggest things, though, is that you are almost always dealing with a construction project.

And you are almost always one of the very last contractors that are going to be on that project. So you've got tons of other contractors that for whatever reason are behind every single time. You've got a customer that more often than not, it's like a restaurant, it's a retail business, and then this mentioned that they have a lot of national customers. So they've got deadlines to get open, and they will absolutely just be riding your ass 24-7. In my experience, those are not fun accounts to deal with. And you've got about 19 guns pointed at you. You've got all the other contractors that aren't done with their work, and the customer just saying, well, why is this not done?

secondarily the supply chain issues that you deal with when I finished up our company was about $10 million in revenue and we had hired a like a big gun when it came to supply chain and still it was not easy because a lot of your supply is coming from overseas you're dealing with tremendous commodities risk especially in times like COVID you would see swings of 50 and 60 percent on aluminum and you cannot update your pricing quick enough with these big national accounts. I mean, their MO is always, how do we build this restaurant at the cheapest possible cost? And so I think we had one massive national account. And in the three years that I was involved with the business that had that national account, we went at them three or four times to try

to get pricing increases over the hump. And it was always, well, have you really? redesign this. Let me talk, let me have you talk to my buddy over here that he can bring these cheaper lights in for it. And it was, they would try to wiggle every which direction to keep from giving you an additional penny. And you're going, hey, guys, we've got, you know, 50% inflation in the main input material here. Just when you add up all those different challenges, this is not a business that would really lend itself to a first time operator, in my opinion. It's, it's all those things that I'm glad I did and the amount that I learned over seven years was unbelievable, but it was kind of like playing a game on hard mode every day for seven

years. It was tremendously difficult. Why are there so many of these, Devin? I mean, there's tons of them that come through biz by sale, and this is one of the bigger ones at $1.1 million in cash flow that we picked. Yeah, that's a big one, which tells me it's probably got some a little bit more sophistication than most, but based on some of the acquisitions I made, and one of the common threads that I saw was it's a it's a business that's oftentimes started by a creative type person. And you see a lot of these that get to, you know, somewhere between half a million and a million dollars in revenue and just, I think they're done because it's, that's about as far as they can drag it. You see a lot of people that have great design skills, but they don't have great business skills. And so there's kind of

this natural lid that that gets over the top of them at that point where there's too many moving parts and too many people, and it's just complete chaos. Some of the supply chain issues that we talked about, they're getting just hammered by some of the larger customers that they're dealing with. And I think a lot of these people, you know, I think this one said pre-retirement. What that is is that somebody saying, I'm done with this thing, and I'm going to go do something else probably, because that's the position I was in about a year ago. Devin, if you had to put sign companies in kind of general buckets, I'm just thinking there's the ones who probably only want to do like screen printing on canvas, like no metal, right? Just like very simple. Like we'll do brochures probably, right? Like they just want to do any general kind of printing and signage. Then there's the middle tier, right, that I would think is like where you were operating where you do some metal. But if it's large or incredible, complex, you're probably opting out or subcontracting it. And you can kind of go down market,

right, to do just a canvas sign if that's what somebody wants. But you kind of play in that middle space. And then I'm thinking there's probably the really big guys that we have one here in Columbia, South Carolina named Colite. They did like signs for American Airlines in 127 terminals in like 20 countries, right? It's just totally on scale. Yeah. So one of the problems that we had is we we kind of played from full left to full right in that spectrum. Like we had some customers where we're doing millions of dollars a year on 600 projects, just a tremendous logistics thing to figure out. But then we also would have, you know,

we did a lot of real estate signage where somebody comes in and they, hey, I need one sold sign to put on the top of a real estate sign and that's going to be 15 bucks. And so we had a little bit of an identity crisis because of all the different businesses that we had merged together of, all right, who are we? You know, we have a $50,000 ticket one day and then a $15 ticket the next day. But this is one of those, if anybody else listen to the other podcast that I was on, kind of goes back to one of my core beliefs in business where people oftentimes get too caught up looking at the top line. Because in that lower segment of the business where you're doing just a lot of like,

cut vinyl, you're doing some vehicle graphics and like basic signage, you can have a sign company that does a million dollars a year and make a pretty good living and not get into a lot of the issues that I talked about. But almost everybody tries to shift upmarket to where, okay, well, I'm going to start using some of these third-party fabricators to do channel letters and lit signs. And then before you know it, you've you've kind of made the cardinal mistake in my book, whereas you've got a lot bigger. You've got a lot more headaches and you're making less money. That's where I see these things kind of start to to flounder and then show up on the market is when people try to grow past kind of that sweet spot that they carved out. And then suddenly it's just they're pulling

their hair out, making less money. They have 10 times more headaches. And it's not really that valuable of a company anymore because they've sort of beat it up. So it's, I mean, it's tough. You see that in a lot of industries. I saw that frequently as a banker where people would go and take on these additional risks to get bigger without really understanding why they were getting themselves into. How about kind of barriers to entry? And like, how asset light can you make this? Because I get the sense there are guys out there running around that hang a shingle and they're not fabricating anything. Oh, there absolutely are. There was a guy that we dealt with some that literally just worked out of his house and you can you can outsource everything from you know a little five dollar sticker that

somebody wants to buy and stick on the back of their car all the way to you know a million dollar sign package for you know like a real downtown upscale apartment community so there's definitely I mean those those guys kind of market themselves as brokers but they're not taking really any of the risk I mean they're going out and selling and then they're trying to offload the risk on the backside to somebody that's going to figure out how to make and install all that crap. There's people that do very well of that. Devin, one idea I've had, I do feel like these businesses transact pretty frequently, and that ends up being like a red flag for me, usually when I'm like, okay, this business

sold maybe three or four years ago, now it's for sale again. Like, what did that got learned that made it want to get out? Well, and you also see a lot of these that are like the franchise shops, too, which typically those are kind of between $750 and a million in revenue is what I almost. always see those look like, like your fast signs and signs now and those type of thing. Sinerama. Yeah, exactly. Yeah, exactly.

I'm curious, though, because I'm just thinking about it from a differentiation standpoint. One thing that I had looked into a few years ago to back somebody on, or it was just an idea and I was trying to find somebody to do it, was this idea of managing the physical signs for commercial real estate brokerage. A lot of that, yeah. So typically when they're, like if they're coming to you saying, hey, look, we need some signs we're running out, right, or whatever, or we maybe have new agents, we need their names printed or whatever. You're printing the signs and then giving to them, just giving them

to them, right? Then they manage the installation or taking them down or moving them to a new site. Is that right? Not typically. I mean, what we did is we manufactured the signs and typically when they're buying it, they have a location where they need us to go. So we'd go out and install it. And then when they sold the property or lost the listing, oftentimes we'd go out and, you know, remove it, bring it back. But the problem was, at least in our market, one, a lot of the time is in going out and installing it and removing it. The market really just didn't bear high enough prices to make money on that install piece. You're tying up a lot of guys and a lot of hours digging holes that you're really not making money on. And then the market really also didn't bear any kind of storage costs.

So it's like we have this huge pile of signs that we're just hanging on to these people that we're not really getting paid for that space utilization either. And then lastly, and I kind of hate to bring this up, but it was a big gremlin in our business, but just dealing with that many real estate brokers. I mean, they all thought they were the most important people ever, and it just made it tremendously difficult. because it's, you know, they're coming in there Friday at 4.58. Hey, I forgot about this open house tomorrow. I need X, Y, and Z. And if you couldn't do it, then, I mean, they're going to just freak out and they're going to,

they'll have a negative review on Google up by 501 and they're going to tell all their friends. And so just the, I guess, level of them respecting our time was just not there. And that was the source of, you know, It was kind of that 80-20 rule. It was maybe 20% of our revenue, but it was really like 99% of the headaches. It was like the 99-20 rule for us. Just an absolute nightmare. It's interesting you say that because I kind of found the same thing with the underlying economics, which is that this was all commercial, but like these guys expected to be done yesterday,

and they really don't perceive a lot of value in it. Now, they hate doing it. And the last thing the guy's going to do in his Tahoe is go take this four by eight sign and, you know, shove it in the back or something or disassemble it or like, you know, fell over and he's going to go screw some more two-by-force to it to make it stand up. Like, they're not doing that, but they're also not going to pay $50 to $100 for you to go have somebody do that. And it's hard to pay a guy, you know, on payroll in a company vehicle with schools to go do

that on a regular basis because there's just not, there's not enough recurring demand and the price point's too low. Oh, yeah. And we do it. And then, you know, we get a picture. five minutes later, like, hey, I think the left side's like a quarter inch, you know, out of level or whatever. Can you go out and fix that? And there's like, you know, we installed it in, you know, grass that's nine feet tall that's covering the whole sign anyway. And we're worried about how level. I mean,

it was just those things were one after another. So if, I mean, you, you did, you did a deal and then you did subsequent deals and add-ons. Was the plan and the thesis for you guys to grow via acquisitions. And I mean, people say that all the time. Hey, we're going to do a deal and I'm going to grow via acquisitions. Was that harder than you anticipated it to be? Day one, that was not the plan. I think, you know, in hindsight, I broke my own cardinal rule, which is, you know, the deals were available and they looked attractive and we liked doing deals. And so we did them. And we didn't have a good enough plan about kind of where we were going to try to end up with it. That's just the honest truth. it was now growing organically past a certain point was pretty difficult just because there's so many

players you know a lot of this is it seemed like because we dealt with say a lot of schools and again realtors and it's just a lot of spots where there's turnover and so you might have a great relationship going at a school and then your contact leaves it's not that much different than anywhere else but it's like well hey I know the new person had a buddy that had a sign company and so all the work we'd put in kind of creating a streamlined program and then that business just disappeared overnight. So there was a lot of that, a lot of turnover on the, on the realtor side. And so they would go to a new brokerage that, oh, well, Betty's in charge of signs over there.

And one time you guys, you know, installed one that wasn't perfectly level. So now I'm not using you anymore. And so it was just, it was, it was kind of difficult to get momentum organically on the, on the revenue side. And there were some things that at least on paper were attractive from a multiple standpoint. But it's also, you know, it's cash flow-wise. It's kind of a tough business because everybody expects to buy things on credit. And then the bigger accounts that you get are stretching you out 90 days, you know, materials.

You're always, you know, going kind of long on materials. And so we made money almost every year, but it seemed like we just never really had any cash. so we weren't spitting off a whole lot of cash. The age old problem, right? Yeah. Well, that's the Munger quote, right? He's like, I try to avoid these businesses where you go visit the owner and the owner's like, they're all my profits and it's like equipment and land and I got one of those.

It's not as much fun as it sounds. You can't spend EBITA on fancy vacations bill, it turns out. But at least you can blow up all your inventory in your case. right very true well guys this has been great i think uh really cool again when we have a guest that we're in their wheelhouse so thanks a lot debon how can our listeners support you follow along on your journey i do you think you're the only member of of liquor twit on twitter uh so maybe we'll get some more of your peers on there but how can people follow along support you to see your journey that sort of thing certainly by following me on twitter i'm i'm more active at certain

times than I am at others. I'm trying to focus on spending more time with my kids now that I have that available. As far as helping me out, if you're not in Stillwater, it might be kind of difficult to come this way, buy some liquor. One of the things I posted the other day, too, is since I'm winding down some consulting work with my old sign business here at the end of June, I'd like to get involved with maybe a few other consulting clients. I'm just, since I have a banking background, I'm used to being involved in a lot of different businesses. So that's just something that kind of keeps me mentally stimulated by having some other irons in the fire, not really a money-making thing necessarily, but just to keep my mind

moving like we did today on digging into some other businesses and problems and trying to see how I can help. Yeah, awesome. Well, people can track you down on Twitter. What is your Twitter username? Just my name. At Devin Wanz are the one and only. Perfect.

All right, guys. Another successful Friday, Devin, thanks again. being here and we'll get this one edited and put out to the internet for all of our loving fans to listen to. So it should be great. We love them as much as they love us, hopefully. Cool. Great job, everybody. We'll talk to you soon. Thanks, guys.