Acquisitions Anonymous - #1 for business buying, selling and operating - Do Title Insurance Companies Make Bank?! with Industry Expert Mark Fleming Jr. - Acquisitions Anonymous Episode 81

Episode Date: March 29, 2022

Bill D’Alessandro (@BillDA) and Mills Snell (@thegeneralmills) are joined by Mark Fleming Jr. (@MarkFlemingJr) to discuss 2 Title insurance companies for sale. We talk about the notary business, margins, risk & risk ownership, software investment impact, revenue sources, insurance premiums, and more.-----Thanks to our sponsors!CloudBookkeeping offers adaptable solutions to businesses that want to focus on growth with a “client service first” approach. They offer a full suite of accounting services, including sophisticated reporting, QuickBooks software solutions, and full-service payroll options.-----* 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.-----Show Notes:(0:00) Intro(1:49) 1st Deal: Maryland Based Title Company(3:58) What stands out from the notary's point of view?(5:52) Is the owner currently receiving a salary? How would that impact margins?(7:05) What is a Title company?(8:42) Is the reported revenue insurance premium income? How does that work?(10:52) Who carries the risk for the insurance?(11:59) What is the title search industry? When do they operate?(13:36) Who is acting as a referral source? Lenders? Attorneys?(16:58) What is the durability of the referral sources? Is there a risk to bear?(20:55) What are the barriers to entry into the business? Where can you find opportunities?(22:50) Cloudbookkeeping.com - Focus on your business instead of your books.(24:00) Deal 2: Title Insurance Business for Sale(26:23) First thoughts & valuation(28:43) Is technology relevant in this business? How does software impacts process management?(31:51) Residential vs. Commercial, what are the main differences?(33:58) What is one of the main advantages of a larger business?-----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, an experienced industry CEO#Subscribe 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]

Welcome back, everybody, to another episode of Acquisitions Anonymous. I'm Mills Snell, one of your co-hosts, joined today by Bill D. Alessandro. Michael isn't with us today, but we're going to try and fill his shoes. He leaves some big shoes to fill. But we got a fun guest today, Mark Fleming. Mark, thanks for joining us, man. Thanks for having me, guys. Appreciate it.

We've got two fun deals to talk about that are kind of in your wheelhouse and in your background. So maybe, if you don't mind, give us kind of the 60-second version. of who you are and what you're doing, and that'll be a good lead in to these two deals we're talking about. Yeah, absolutely. So my name is Mark Fleming, as you mentioned. I founded a company called Signature Closers. There's a long story I can get into all bypass all the details today of that

about how that came to fruition because I was a finance major, kind of something I backed into, let's say. And over time, we grew the business. So we have a network of notaries across the United States that manage real estate transactions. So if you've ever bought a house, gotten a refinance loan, basically any type of loan,

we may have been involved in the process of assigning the notary, making sure they have their docs, answering basic questions, paying them 1099. We background check them. So we have a whole process. And then we also have technology people used to kind of do that process using our database. So very interesting business, I think,

very niche business. And I was fortunate to sell it to Stewart title, Fortune 900 company last February. So I'm currently running kind of that division within the bigger parent company. So a little bit about my background. This is so awesome. I love a niche like this that, you know, a lot of people touch and have used but have never paid attention to. So hoping you can teach us some some fun stuff today. Bill's got our first deal. And I think as we get into this, we'll get you to educate us a little bit about the space and how it gets used and where some of the areas of value, some of the nexus of value are.

Sounds good. All right. Cool. I'm excited about this, too, because this whole title insurance, notary industry, I is having bought a house, or two houses at this point now in my life and a couple of businesses, all of which needed to be notarized, I thought, man, like, this is kind of expensive and there's clearly a whole economy behind this, so I'm interested in unpacking it with you, Mark.

And we're going to do that through two deals. So the first one is a Maryland-based title company that is for sale. They have gross revenue of a million dollars and cash flow of half a million dollars. So the margins look pretty sweet, 50% cash flow margins. And they are asking $1.48, so basically $1.5 million or three times cash flow for it. The listing says this Maryland title company has been in business for over 25 years and does an average of 30 to 40 closing per month. It's 99% residential real estate closings and 1% commercial closings. And they receive referrals from realtors, banks, and mortgage companies. And they say they have unique access to

realtors of co-op settlements in the area as the sole source for real estate titling. Maybe, Mark, you can help us break down what that means here in a minute. They have an in-house attorney for deed recordation. And the seller has four full-time long-term employees that will assist in the transition and maintain your existing relationships, and they have a licensed notary on staff for off-site closings. The seller is willing to stay on for a year or more after the sale, which is pretty surprising, especially for a business this small. The seller does little to no marketing, so there's plenty of room for growth, as there always is, along with the untapped opportunity to do virtual closings and branch the license, their notary license into other states.

Mark, I'm sure you can tell us whether that's feasible or not. It's a great opportunity for a new owner-operator to maintain and scale this rare business find. the broker today. And that's all we've got. So, Mark, I was hoping you could help us unpack. If you were looking at this business for sale, what are some of the questions you would ask?

Well, so I think my first question would be maybe just gathering an understanding of what the owner's responsibilities are today. I think the margin looks very good, but that makes me think

that the owners probably doing a lot. You know, with that high of margin, I think in our industry, you know, I would say in the neighborhood of like 15 to 20 percent is considered a pretty strong margin. So when I see something like 50 percent, I go, oh, well, that's good. But that could also be bad if, you know, there's, I guess, a gap in staffing potentially. So I want to understand that a little bit better. You had mentioned like the co-op settlements in the area. I have kind of a general understanding of that. I mean, I think it's more or less just an opportunity that they have where, you know, there's a group of realtors that are in some type of organization together and they have,

you know, kind of a partnership with them. And so that's a good source of business. I think the fact that it looks like they're doing a lot of purchase business right now. I assume that, and that would be a question I would ask, but that would be a positive as interest rates climb and, you know, they're creeping up for sure. They're 4.4% I think I saw and they've been as low as three in the last 12 months. I think, you know, refinances are going to start to slow and have already started to slow. So that would be a big piece of this, too, is understanding, okay, so what percentage of your business is purchase business? It looks like it's pretty heavy based on the fact they're saying they get referrals from realtors, banks, mortgage companies, you know, so that would, that would lead me

to believe those are purchased transactions. So, you know, and then also just the seller willing to stay on. I would want to understand, I see down on the notes here, transition to retirement. That's great. the fact they're willing to stay on is huge. So I think that would be a piece I want to dive into a little bit more as well. Yeah, I wonder with cash flow margins of 50%, my first ask always is, owner, are you paying yourself? You know, like my first flag is owner probably taking a full-time employee seat and not paying themselves, which makes the margin look artificially high. It also creates a little bit of a dilemma, right, where if the owner's staying on, So like the new owner, the buyer is going to come in and probably going to want to make more than, you know, $50,000, $100,000 a year.

But you're also going to have to pay the other guy, right? If he's going to stay on for a year and maybe he'll get to a normalized salary. But that earnings number, you know, you can't just straight project that out against your debt service. You'd have to account for the fact that you're probably going to have you and the seller working there. Right. Yeah, totally. It does say seller's discretionary earnings, it looks like, underneath cash flow. So that would lead me to believe they have backed in the sellers or the owner's salary.

That would be my thought. So that's still a very high margin, though. I mean, if you think about, let's say the owner is making $100,000 salary, you know, you're still looking at a $400,000 margin outside of that salary. So that's still a very high margin. So I just want to understand that a little bit more in terms of the analysis of the deal. Yeah. So, Mark, I realized we jumped ahead a little bit here.

Can you unpack for our listeners, what the hell is a title? company? What is the title company? Yeah. Well, and I'm guessing a lot of your listeners have used title companies or at least have some experience with them, may not even know. So title insurance is sort of an interesting business, right? Because most insurance products you buy are protecting for future risk. You know, you buy, you know, auto insurance, you're protecting against potentially a crash. Your health insurance is a future health risk. Title insurance is actually insurance that is protecting you and your investment in a home. kind of backwards looking. So it's all about chain of ownership. If there's liens on the property,

the title company, a big part of their job is to figure out, okay, just the seller own this house or not? And is it free and clear? Are there liens? If there are liens, they get paid off as part of the transaction. So, you know, the big responsibility for title is, you know, to understand that aspect, they sell you an insurance policy that in the event that somebody does have a lien or there's an ownership, you have some protections. You can go back and use that. that policy as insurance and either be made whole or paid out, offset the lead, whatever it might be. And then the last piece they manage is really the escrow and the disbursement. So if you're a seller and you have a loan on your property when you sell, they're responsible for managing that process

where they call payoffs where, you know, okay, I have to pay off XYZ bank because I have a $500,000 loan. I got a $700,000 payment for this house, et cetera. So that's sort of what they do by and large, I guess, just high level. So they take a fee at closing to ensure against the risk that, you know, something hasn't been done wrong in the past. It's going to come back to bite you and they ass later. So my question then is they've got a million dollars of gross revenue. Is that essentially insurance premium revenue? So with title insurance companies, it's interesting. I would say the vast, heavy majority of their revenue is probably what they call the premium or insurance premium revenue. And the way that that works, it's kind of an interesting, not to dive

too deep into the weeds, but so our parent company, Stuart Title, is one of the major underwriters in our space. And so they will basically be the paper that this title company could write their insurance policy on. And so if you're familiar with like health insurance, I always tell people in Ohio, there's Anthem, Etna, Medical Mutual, United Healthcare, United Anthem, Blue Cross Blue Shield, or kind of universal across the country, those would be sort of comparable to like the Stewart titles of the world. And then there's all these independent agents that are out there selling that product. So this company, in theory,

could be working with a company like Stewart, writing on their paper, and then they split that premium. You know, usually it just depends on your volume. That's all negotiated. But they also make money from services. So actually a good example would be our notary business, right? So we may charge, and I'll just rough these numbers because they vary by client and deal type. but let's say $125 for a refi, we're going to pay the notary probably 100, usually $76 to

78 percent is kind of our cost of goods sold right out the door to the notary. So that's an interesting discussion for another day on our margin. But, you know, the thought process there is the title company may actually charge the customer $150, $200 for a settlement fee, pay us $125 and pocket the difference. So there's a number of little services and charges, recording fees, deeds, title prep, deed prep, things like that, that they're going to mark up and make a little bit of extra money on as well. So it's definitely a mix. It's not just the premium, but I would say, you know, I couldn't estimate exact percent, never run a title company, but I would imagine it's a heavy percentage of the

revenue is the premium, and then the fees make up the bulk of the difference. So despite it being premium revenue, though, it's more like commission revenue on selling a title insurance policy. They're not carrying the risk for this insurance. Correct. And there are some situations where, you know, with the underwriter, they may come back on the agent or the title company if, you know, if there was some type of negligence. I mean, that gets into the weeds in terms of contracts between the two. But by and large, the risk is going to be on the underwriter. So I think that's fair to say, typically they're not going to be carrying the risk. It's more about, like you said, a sales commission or marketing or what have you. Yeah, this would be an interesting, if you're buying this company, the risk matters here, right? You want to be. make sure that you don't buy, you know, risk of poor underwriting in the past. So you're probably going to do an asset deal, which should protect you, you know, to a large degree, but you're probably going to want indemnities against any prior business seller has written in case it comes back to buy

you and the ass that they're going to indemnify. It's that. Sorry, Mills, you want to say something. No, you're good. To me, the nuance here is kind of important. So the, like, I'm just thinking about a real estate closing, right? You buy a building, whether it's a house or a commercial property and I'm dealing with a bank and an attorney, right? I really don't have any interactions with the title company. It's all kind of mediated right by somebody else. Is it the attorney who is going back and checking the chain of title and making sure there's no liens or they're subbing all of that out to the title company? So I'm going to blow your minds a little bit. There's a whole industry that exists for title search is what they call it. So there are so many different ways. A lot of

This happens electronically now where, you know, records are searched online. Some of it's outsourced, huge companies will use even offshore resources to do some of this. But there's also people that literally go into the county courthouse, open a book that's like this thick. And, you know, they scroll through, they find your property and they look at the chain of title. So I would say, you know, that's a very similar business to what we do. We actually looked at at one point in our history, a couple points in our history. You know, is this a service we want to offer, you know, in addition to the notary service. because it does align so well.

It serves title companies. We never did it because there is a degree of risk there. I mean, ultimately, if you're doing the search and you mess up, you're on the hook. You know, there's some potential liability there. And so you do carry insurance and that sort of minimizes it. But yeah, so that's typically, I would say the majority of cases, they're going to be subbing that out to whoever that might be. A company like us that has a dependent contractors or employees in some situation.

So if they're a small title company, they may have one employee that goes down to like courthouse and does that type of work for them. Yeah, yeah. It's just interesting because, you know, obviously you deal with that in a real estate transaction, but like I'm just thinking me, right, as the end user who's paying for it, I'm not shopping around. I'm not saying, hey, I got charged $250. Could it be more or less? It's interesting, though, in this listing, they say that, you know, it's, you know, lenders and I guess, you know, the referral sources are kind of one thing, but is it mainly lenders or attorneys who would be your referral sources? That's the part I can't totally make sense of. So it could really be a combination. I would say attorneys to the

extent that, you know, it really depends on each state. So I think, Mills, you said you're in South Carolina. An interesting wrinkle there is that you have to have an attorney involved in a purchase, really in a refy transaction, kind of like end to end. They even have to be the notary for your transaction. So like a notary cannot close a loan in South Carolina. So for us, we do have some partners and we do some work in attorney states, but mostly, you know, we're dealing with properties that are like, oh, I'm buying. So when we bought our prior house, we were in South Carolina. We were able to use a notary because it was an Ohio based property. So, you know, that piece of it, I think really just depends. So depending on the state,

you know, an attorney may or may not be more involved. If it's a high, high net worth or value transaction, you're more likely to see an attorney. I would say for the vast majority, I would think that their business comes from realtors. You know, one, that's a big piece because if the realtor has a relationship, there are joint ventures and affiliated business arrangements and things that happen in the industry today where realtors may even have some type of joint venture ownership in a title company, that gets to be a little bit murky in terms of like you have to balance that with like kickbacks and inducements. And so you'll see it, emotionally, companies get dinged for doing that and doing it incorrectly.

So realtors are a heavy referral source. And then lenders as well, I mean, if you think about if a lender has a partnership with a title company, you know, that's going to be a big driver. And if this business was more refinance driven, I would say lender for sure drives that because there is no realtor involved. But I would say in the purchase world, your realtor has a pretty heavy involvement in most cases, I would say. when you think about the spectrum of, you know, of regulation involved in any business, right?

Like window washing is on one end of the spectrum where like you can just show up, say, hey, like, do you want to give me 50 bucks? I'll wash the windows for your business. And then somewhere in the middle you would have like other skilled trades that are still regulated and permitted and licensed. So like construction, roofing, plumbing, electrical, all those things. This is way past that. It's regulated by the state by like maybe the Department of Insurance, right? There's a lot of regulation. And I mean, even just hearing you talk, Mark, it shows how little I know about this industry and how little I know about all the different regulatory hoops that are involved.

So you think about, you know, this listing, it looks good, right? And you say, wow, 50% margins and maybe those get compressed a little bit when you dig in. But there's a lot that would have to be understood. And the learning curve for something like this is a lot different than, you know, hey, I want to go buy a business where there's not as many regulatory hoops to jump through. I'm just fascinated by where a business would fit on that spectrum. One thing I wanted to is the durability of the referral sources, because as you mentioned earlier, Mills,

you as a customer don't shop for this service, right? So you can't really advertise to the consumer. So if this business is a relatively small business, a million sales, if owner goes away and the only reason they were getting all these referrals was because owner had a relationship with these realtors, took the realtor to play golf, all the time. You've got material risk here that these realtors just find another title company

because they're kind of all the same, right? I mean, for the most part. So it's a total relation game. So I think you've got you got to figure out a way to get your arms around the risk of relationship transfer, especially in a business this small. Yeah, I agree 100% Bill with that assessment. I think relationships are huge in our business. Like you said, it's the golf game. It's Oh, you know, we meet up and we, you know, have lunch. And again, there's things they have to tow the line in terms of like inducements and things like that because of the insurance regulation. So in this business, yes.

I think A would be understanding what is that risk in terms of like who is, is there a sales rep? It doesn't look like it. So I'm guessing the owner probably does have those relationships. And that would be a key understanding, okay, is there some type of tie-in or some reason to believe that we're going to keep the business after this owner leaves or retires. So maybe they're like chairman for a few years and sort of just, you know, checking in every now and then and still golfing with their buddies.

I don't know. You know, but then I think the second aspect is like you said, I think it would be hard for an outsider to come in and run this business. So you would really need to find either a sweat equity partner or, you know, somebody that understands the business or at least can train you up on it. I mean, if you have the seller for a year, that's a pretty good window. But it is a pretty nuanced business. So I think it would take some time to really understand it and to be able to grow it.

Like they talk about growing to other states. I mean, yes, you can do that, but there's licensing. There's things you have to do that are not just as easy as like, oh, you know, we're going to open an office tomorrow in Virginia. You know, okay, well, that's great, but you have a licensed title producer in Virginia. Or do they have reciprocity with Maryland where, you know, that works like. So I have a bunch of insurance licenses. I'm licensed in Ohio. I don't really use my title producer's license, but I can't just open a shop wherever.

And it also doesn't mean I know what I'm doing running a title company. I'd have a rough idea based on my experience. But even I have a big learning curve, I think, jumping into something like this. Yeah, I think it was funny that you mentioned all the inducements, the playing golf, the taking out dinner, all this stuff that might go on. I think this is an opportunity for like a classic novice business trap where if this is your first business, you might say, as you did, Mark, oh, well, there's laws against inducements. So I don't need to worry about that.

No, the fact that there are laws against the inducements means it's rampant and goes on all the time and this is a huge part of the business is why the laws exist and it's still happening under the surface. So the fact that there are laws tells you the inducements are happening probably still and you need to get your arms around it, not that you can write it off as a thing that doesn't happen. Yeah, I would agree. And I'd imagine that the smaller the company, the less I don't want to say concern, but the less likely that they're going to have a hammer dropped on them in terms of inducements because it's just, you know, usually if you see somebody gets in trouble for it, the bigger companies or somebody

be under the radar, or on the radar, I should say. So not educating for it, but I think it definitely happens in the industry still. I think it would be naive to say that, you know, it's natural. I think just human connection. So it doesn't even have to be like, oh, this person gave me something. It's, I'm spending time with them, or I know their family or they know my family, and that's a big piece of it. So that would be a huge, huge piece to understand here for this business. I mean, that would be probably a deal killer if you found that you're not going to be able to maintain the business, obviously, you don't have a business at that point. On the flip side, though, if you are able to maintain the business, like, if these

relationships are transferable, it seems like they would be very defensible. Like, I don't know how you would break in to this market as a new title company because all the realtors already got their guy and he takes them out to play golf and like, why upset the apple card? They're all the same. Like, oh, you're 10% cheaper? I don't even pay for it. The customer pays for it.

Right? Like, it seems impossible to get me to switch my business unless my carburetor pisses me off, basically. Yep. Yeah, barrier to entry is high in this business. I think the relationship, as you mentioned, you know, believe it or not, not notary is messing up and can drive business away. So that's been, you know, a stressful existence. Our business grew to the point where we had over 60,000 transactions in a month. And so if you think about, if you think of like Amazon, right, if somebody delivers a package and it's wrong and they're upset, they just return. turn. It's 20 bucks. Nobody's worse for the wear. In our business, if a notary messes up, which by the way, they're all independent contractors for the most part in our world, you know, that's a huge deal. There's a realtor that has thousands of dollars on the line. There's a lender. There's somebody who's home that, you know, they may not be able to get their keys that day because the notary forgot to send the scans in a time of a manner. It sounds ridiculous, but that's the nature of the business. And so, you know, the barrier to

entry is high, but there is an opportunity, I think, when, you know, you just have to strike at the right time. And I think that's been, you know, one of the things we've done in our world is we grew, we just were persistent in maintaining relationships with companies that said, I love my vendor, things are great. And if we happen to catch them on the right day, then, you know, now there's an opportunity because, shoot, we lost this big lender customer because this notary messed up. And now we can help solve that for them. So I think that's a big piece. Yep. All right. Do you want to do anything else in this deal or move on to the next one? I think let's move on. All right. Let's move on the next one. The next one is even bigger.

and Mills is going to read it. But first, a pause for a sponsor. Hey, guys, Michael here. I want to talk to you about one of our sponsors in our never-ending quest to make Acquisitions Anonymous break-even. And that sponsor is cloudbookkeeping.com. It's actually run by my neighbor, Charlie,

who's a great guy, and he has been our longest tenured sponsor, and we're super grateful for him to support the podcast. So what Cloud Bookkeeping does, It is a set of cloud bookkeepers that if you're a small business person, help you get out of the business of doing your books and let you focus on the business of taking care of your customers. So they do all the complexities, bookkeeping, payroll, and they come across in our very client service first. That's their phrase, but I know that's true because I've spent time with Charlie and dug into their business. So full suite of accounting services, sophisticated reporting quickbook software solutions, and full service payroll options.

So definitely talk to Charlie if you want to get out of doing bookkeeping and outsource that to a trusted third party. And you can find them at cloudbookkeeping.com. So thanks again for sponsoring today, cloudbookkeeping.com. All right. All right. Deal number two. This is a title insurance business with over $4.4.4 million in sales. We've got it on biz by sell.

Bill, do you want to share your screen while I'm reading this? I will. It's in Hudson County, New Jersey. The asking price is $4.4. $4.8 million with cash flow of $1,125,000. Gross revenues are $4,480,000. So kind of like Mark was saying, kind of in that 20-ish percent range that is maybe more in line. This business was established in the year 2000. All the people who work in the business have over 30 years of combined practical legal experience and real estate and title insurance experience, which

which means that you could have, right, depending on the number of employees, see if it tells us. It doesn't tell us. So it could be 10 people each with three years' experience. This is just a pet peeve of mine in listings. Sorry to derail us. The title company offers a variety of specialized services. Title insurance is the essential aspect of the business, accompanied by other integral services necessary to meet the needs of the most demanding customer. In addition, their offices are fully equipped with state-of-the-art technology and will be continuously upgraded as necessary to meet the ever-changing needs of the title insurance industry. This progressive company fully understands that the needs of prospective clients, attorneys,

mortgage lenders, and real estate professionals are a vital part of their business. To qualify professional staff that has worked both in and out of the typical law and or real estate office, they have firsthand knowledge of the title insurance business. It is imperative for their clientele to have committed title insurance exports. This basically isn't saying anything. So there's, you know, it's just, Yeah, yeah, exactly. It's a bunch of, so it does look like the business is listed by a lady named

Darline from Moxie Brokerage Group. She is not wearing a hat or touching her face, which Mark is one of one of Gerdley's pet peeves. He just says it's like a tell that they're not being honest. I love that on this listing, if you scroll down, it says the detailed information is just the location. support and training, yes. So it doesn't say, you know, we'll stick around for a month or two weeks or a year like the other one.

It's just, yes, support and training. So we don't know a ton about this one, but it is bigger. And, you know, the margins maybe seem a little bit more in line. Mark, does anything jump out at you about this one? So, you know, my perspective on this one is reading the business description, I think it's clear that they want you to understand, you know, Their staff is very capable. And, you know, if I'm the business owner and I don't know, I don't think it says on here why they're looking to get out of the business.

But if I'm the owner and I'm looking to get out of the business, you know, I think it's going to be very important for me to communicate to a potential buyer that my staff's capable, right? So I see that as kind of the big driver. I mean, there's multiple times where, I mean, the first line talks about 30 years of combined experience. And then it talks a little bit about, you know, everybody qualified professional. staff. They have firsthand knowledge. It's imperative. Extremely knowledgeable staff works with passion, devotion. So obviously they're trying to sell that. It's all the idea that their staff is capable and that, you know, you don't need

the owner. And that may be true. I think from a valuation perspective, I don't think we really got into this in the last deal, but I think in our world and when we went through kind of our process, you know, I view title insurance as sort of a business service business. And so it's not a tech company. You're not going to get, you know, 10, 12 multiple. I think four to six on EBTA. tends to be in line. So I think in this case, looking at their cash flow, they're asking price.

It's pretty close. I think they're in line with kind of a fair price. I think the previous deal was actually a pretty good deal in terms of what you saw. I think it was only three times. Maybe their EBIT up or seller's discretionary earnings. So there's the big things that stand out. The state of the art technology is interesting to me.

I'd like to understand what that looks like. I know enough about title production software because we've done some integrations with them. So there's like Resware is one of the biggest ones in the industry. They were acquired by a company called Qualia that has their own technology. Those are two of the better, in my opinion, technologies. Others do custom build. So I would love to know what that looks like.

But I think those would be the big things. Then it also, to me, it looks like, you know, there's a big element of a law office here. They talk a lot about the typical law, real estate office, et cetera. And it is typical in New Jersey for attorneys to be a little bit more involved. They don't have to close the loan. But I would say on purchase deals, they are oftentimes used to close the transaction. So that'd be my assessment. Yeah, I think it's interesting.

They really hammered on technology as you touched on. The other company did not mention technology at all. And this strikes me as one of those kind of classic businesses that a searcher will drool over because the very standard value ad playbook applies here, which is historically this is probably a very paper business. And in some cases, some documents required probably to be paper. in these transactions. But probably a huge opportunity, I would think, to bring in software to process manage. So as you said, Mark, like, notaries can drop the ball. Like, if they don't

scan those things in and send them within one hour of the signing, you probably need software that starts to text them. And if they haven't sent it in 90 minutes, it probably needs to start running it up the chain automatically in your organization. And I would imagine there's so many process touchpoints that you could really streamline with software in this business. Yeah, well, it's funny you mentioned that. I know we didn't dive too deep into the weeds. I think that has been part of our special sauce. So I was in a conversation with another company essentially in our industry that they managed one tenth of the volume with the same staff. So they were doing maybe 6,000 orders a month with 30 employees. And we were able to manage over

60,000 with a similar number of employees. And we were able to do that, just like you said, like we have various, we kind of break it down into cues or views in our system. So an employee might be assigned to a view where, okay, we have a closing, we need to assign a notary. That's one view. We have a mobile app that automates, I think 92% of our orders get scheduled through the mobile app. So notary gets a notification, clicks the button, accepts, declines, lets us know what's going on. They can confirm the appointment with the signer. So that's a big piece. they can click a button and say, yep, I've confirmed, I texted, I called, whatever. We're tracking if they've downloaded documents.

So to your point, Bill, like three hours before the signing, if they don't have their docs, we're going, hey, what's going on? You haven't downloaded. We have an automated phone call that goes out. Then we have, you know, text messaging in some instances. So there are so many touch points in this process. And I think for us, you know, we definitely would not have been able to manage the volume that we manage, managed and manage currently without those touch points and without that

technology and mapping out those processes. So, yeah, that's so huge. I think there's definitely an opportunity. You know, kind of roughly, I would think at this kind of revenue, depending on how much of that is maybe tied to the law office, I'm assuming this is all title. You know, I would say they're doing a couple hundred signings a month, maybe, something like that.

So there's definitely an opportunity to leverage technology and kind of figure out what they're doing there to manage the process better. We talked a lot about how many clicks do you have? And that sounds ridiculous. list. But if it takes you 10 clicks to do one step and you're doing that 200 times a month, let alone 60,000 times a month, that adds up. So, you know, it's as simple as looking at even little, little things like that and making sure you document those processes and look at how you improve them. So totally agree. That's fascinating to think about that in the, in the technology

aspect of what you're doing. I am a little bit skeptical of this listing because a lot of Main Street businesses and lower middle market businesses will say, you know, we, we are, you know, rapidly adopting new technology. They might just be using like Microsoft Office. I would not be surprised if they're overhyping their technology. And, you know, they're like, we use spreadsheets now. Like, you know, it could be, it could be very, very misleading. Mark, a question. The other listing referenced the difference between residential and commercial. is there an inherent strength or kind of favorable characteristics between one or the other? I would think transaction size is typically bigger on commercial, but does that dictate,

like if you're a predominantly commercial business, are you going to have higher gross margin or something like that? So, you know, in my world with the notary piece, I think commercial transactions tend to be more complicated or higher value. So you might have a $30 million property instead of a, you know, $100,000 house, whatever that might look like. So there's definitely an element of, I would say, more expertise. You're going to see more attorneys involved in commercial transactions as the notary, as opposed to like one of our notaries. Now, we do have notaries and we do commercial transactions, but I would say, you know, 98 plus percent of our business is residential in terms of what we deal with.

As far as the title company is concerned, you know, it varies by state. Some places, you know, there's like fixed fee schedules based on the volume, others, there's a little bit of a scale or things you can do to kind of make more or less in terms of your premium to be more competitive. But I would think commercial transactions would drive higher revenue because you're going to have a higher title premium. I mean, if you're insuring a $30 million risk, that's going to be a different premium than, $100,000 house.

So I don't know about a margin necessarily. I think that comes back to managing processes effectively and, you know, just how you're managing that workflow and process. But definitely revenue, I think it would drive. Very interesting. And with the scale this business has versus the first one, four times the revenue and twice the profit, assuming the profit on the first one was accurate, this gives you a lot more room to invest in process and technology from a financial standpoint, which kind of

illustrates why buyers like larger businesses. Because you just have more weapons, more margin, you know, to spend $50,000 or $100,000 on a year on software is not a big deal or a relatively smaller deal if you've got a million or two million and even dot. And that's why I think you see a large business like this trade for a hire model. Totally. Yeah, I agree. And I also think from the business owner's perspective, if I'm buying this business,

it definitely gives you more to work with in terms of incentivizing existing staff or finding an operator so that, you know, if you want to be a little bit more passive, you can be. And I think for a lot of business owners or people that are looking to acquire, that may be something that they're considering or concerned about. And you have $200,000 to work with. That doesn't give you a lot of margin to buy, you know, to pay for an operator that's going to be quality. You have to service debt potentially. That gets to be tight.

But if you have, you know, a million, two million, whatever it might be in terms of cash flow. Like you said, there's just a lot more opportunity there, I think, in terms of what you can do. Yep. I think so, too. All right, Mark, any else to add on this one? Will we wrap it up? No, I don't think so. I think we've covered it.

What can our guests do? Mills, take us home. Yeah, thanks. Mark, what can our guests do to follow you and follow along with your journey or any asks that you have of them? Yeah, and I appreciate that. I'm pretty active on LinkedIn, probably going to be a little bit more active there and on Twitter, so feel free to follow me, search me up on LinkedIn.

It's just Mark Fleming Jr., J.R. And then my Twitter is at sign Mark Fleming, J-R. So Fleming's F-L-E-M-I-N-G. In terms of supporting our company, you know, like you said, a lot of times you're not really shopping for these services. So, you know, there's not a ton, I would say, individual consumers can do to really move the needle for us. I mean, honestly, I'd love for them to throw our name out there.

Signature closers is the name of the business. Use Stewart Title Company for your underwriter when given the opportunity. But that's about it, I think, on this end. Well, thanks for joining us, man. It was really cool to have you on and to learn a little bit more about this space. And we'll have to find some way to hear your full backstory on how you grew the business and the exit and everything. That's really cool.