Acquisitions Anonymous - #1 for business buying, selling and operating - Searching with a thesis with search fund investor Steve Ressler - Acquisitions Anonymous Episode 94

Episode Date: May 13, 2022

Michael Girdley (@Girdley) & Bill D’Alessandro (@BillDA), are joined by Steve Ressler (@steveressler) to talk about best practices when running a search, his search fund The Brydon Group, buying opportunities in the SMB space, what do the best search funders do, top CEO’s skills,  and more.-----Thanks to our sponsors:* https://Cloudbookkeeping.com - Cloudbookkeeping specializes in bookkeeping solutions for everyone from start-ups to mature businesses. Check them out & mention our podcast.-----* 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:(01:09) - Cloudbookkeeping.com(2:20) - What do the more intelligent search funders do to pitch you?(4:14) - What are good reasons to do a search fund?(6:24) - How would you segment the search fund prototype?(8:29) - How can you tell if a senior executive will be an operative one?(11:22) - What do you look for in a searcher?(14:14) - Tell us about the Brydon Group and what you’re doing (19:40) - What’s the profile you look for? What type of deals do you look for?(21:40) - How do you structure deals? What about the financing?(25:08) - How do you think about debt for this kind of search? How does the equity side work?(28:34) - What do you look for in a searcher?(33:52) - Why do you go for $2 to $5 MM EBITDA range deals?(36:47) - Where are the winds blowing in the private markets?(38:45) - Do you think that Covid put pressure on the sellers, burnout syndrome, that kind of stuff?(42:04) - What are the craziest things you’ve seen from searchers?-----Links:* https://www.linkedin.com/in/ressler/ * https://www.brydon.com/for-searchers * [e-mail] -----Additional episodes you might enjoy:#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]

Hey, Michael here. Welcome to another great episode of Acquistersonsonymous. Today we had my buddy, Steve Ressler, who Steve is a great guy. He has spoken to more search funders over the past few years than anybody else that I know. And if you don't know, a search funder is somebody who raises a little bit of money to go out and buy a business. And so Steve has invested in those people for the past few years and recently turned around and has parlayed that into a professional career where he and some partners have launched a fund called the Briden Group. So you can find that at B-R-Y-D-O-N.com and check out what they're doing. They're doing a really unique model to help searchers get into the space.

With Steve, we talked about all kinds of cool stuff, best practices when running a search, so looking for a business to buy, trying to get it funded, finance and invested in. He talked through that kind of stuff, their model and how they're doing stuff for the Briden Group and then some stuff about things that he has seen happen in the industry and opportunities for people who are maybe outlooking for a business to buy. So super cool one with Steve. We'll get right into with him after a word from our 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. Steve, so excited to have you here today on the podcast. I'm very excited to get back with the dream team. Hell yeah. That's going to be great. So let's go first into, you know, I don't think anyone I know has talked to more search funders

in the past several years than you. You had to have seen some stuff from these people. Like, you know, maybe start with the positive. Like, what are the smartest things you've seen search funders do when they pitch you? Like, what if things are you like, man, these guys, like, this was really impressive? That's great.

No, and I probably talked, I think I was counting the other day, like 400 searchers. Often, like I do during the day and then after my kids go to bed at 830. So I apologize for anyone as I'm like strolling the mean streets of D.C. talking to searchers with sirens in the background. But that's often how it's done. Honestly, the best searchers, you can tell real quick. And I think they have a plan and a reason to win, if that makes sense. And so they have like a sector focus potentially.

And so maybe they have a background in health care and know this niche very well and they're ready to go. Sometimes geographic works very well too. So like the best would be, you know, hey, if Bill's best friend who was like the top banker in Charlotte and worked the local bank and had seen hundreds of small business deals and had a defined network and a tax strategy, I think those are the ones that win. And then I guess last is you feel like they are doing it for the right reason. And so, like, they've thought about it a lot. So they've obviously listened to this podcast, and they've listened to many podcasts. They've read all the books. They've talked to 50 searchers.

And I think they have a pretty thoughtful reason of why they're doing it, not just, like, I hate my job and my boss is normally not a good reason to do it. So what are the good reasons to do a search fund? I mean, as you think about your lens on it, like, why should people do it? Yeah. What's a good reason for them to be doing it? what's a good one? Like, love it when like family small business, like here's some like green flags, green yellow, green. I grew up in small business. My family talked about small business in the dinner

table. It's been in the blood. Another good one is like maybe they had their own small business sometime, maybe in high school or college or maybe even at a startup. And so they have it in the blood in reason to do it. I think is definitely a great reason to do it. I think another one is like they really have a strong reason, like a thesis, right? And so, like, they see, like, in the market, there's this opportunity. They've been around a certain type of businesses. And this is probably more for, like, folks that have been at private equity or banking or been at a private equity-owned company.

And so, like, for me, I was in GovTech for many years. And so, like, if I had a thesis around a part of GovTech that was moving in a certain direction, I like those as well. So, Steve, I got to ask, are people, how many search funders a day do you talk to who are trying to roll up HVAC or plumbing or electrical? I mean, I feel like this has been like the vibe for like a couple of years now. It's got to be played out. Like is that, does that still, is this all happening in search land? Yeah, it's funny. There's, there's a lot of iterations, right? There's that, you definitely start there and then hopefully they have evolved over time or they have a reason to win in HVAC. You never like the former investment banker living in New York who's never touched an HVAC that randomly wants to buy an HVAC business in Florida because it's warm and no taxes.

That is generally not a good strategy. But yeah, it's amazing to see how the home services industry has attracted both so much private equity money and search interest over time. Who would have thought it would be cool to own a pool construction company, but I guess it is. Well, we're doing our part. We've had like several pool construction owners on this podcast, in fact. There you go. Exactly. So, Steve, I'm curious.

You know, to me it seems like there's probably three segments of kind of age group and experience for the people that are coming and doing search. Like you have, to me, I kind of think about this prototypical late 20s, maybe straight out of an MBA program, came from an associate or some sort of role beforehand and got exposed to ETA, you know, in their, in their 20s. Then you have the 30-something who maybe went and took a job after their business school program and has been worked their way up to middle management. Then you have this 40-year-old senior executive, 45-year-old senior executive. And that's like a different kind of thing. Like, well, first of all, is that a reasonable segmentation of the type of people you're seeing or are you seeing something different? No, I think there's reasonable. It's a reasonable breakdown.

I think each of them have different reasons to search and also probably different types of search that fits with them. often like that that last type which i you know i've talked to a number recently um they're they're doing it often they've actually experienced a number of they've created something out of nothing maybe they started a new division at a g-e type business grew it from one to 50 million in revenue made no money or we know we're involved with a private equity roll-up didn't make much money they've done something where they like were a key part of growth uh and they didn't have any equity value and so they've kind of seen the value of equity and so So they're wanting to be part of that in this next phase.

The risk on those folks I have is it's hard to search, right? And so often those folks are used to managing large teams. They're not used to basically being like, you know, an enterprise sales rep, right? That's what a lot of searching is, is like, you know, doing thousands of emails, phone calls, managing a demand gen funnel to book enough meetings to write enough LOIs to close a deal. And if you're 50 and you know, you got three kids, you're used to manage a huge P&L, you know, what you really want is to be appointed as CEO. You don't really want to do search.

You want someone to find the business and put you in charge of it. How can you tell, by the way, this is a personal interest because I've started to help a couple buddies that are like mid-career senior executives. They're like, I want to own a business. I'm like, great, I will help you. Which may, you know, may be a personality flaw in might. But anyway, they seem to be getting their head around this idea. And I'm early with both these folks, but they seem to be getting their head around the idea of,

oh, I'm going to have to get my hands really dirty and, like, hire some persons in the Philippines, the middle lead list for me, and then I'm going to have to keep calling people all day. Like, is there a way you can tell if that senior level executive is going to be comfortable getting in the muck? Or are they going to be the people who have a hard time, like, getting their hands dirty? Yeah, good question. And I would say some of it applies to one and two around, like, have you ever run a funnel? It's pretty simple, right? Like, so if you've been in, you know, I used to be a CMO of a SaaS company and it's all funnel, right?

You know, you're driving kind of interest that leads to meetings, which leads to proposal, which leads to close. If you've been in sales anywhere, you think in a funnel math. Honestly, if you've been in, you know, real estate person trying to find opportunities to buy, you're probably thinking of funnel. And what I found is just like, I don't. I don't know. I don't know what the percentage are. A third kind of quickly grasp the funnel and understand inputs, you know, kind of inputs lead to outputs. And then two thirds, that's just kind of not how they've done most of like their work and career. And those are the ones that are kind of hard to train, if that makes sense.

Yeah. So do those people just kind of fail? Like or like, does it just take them longer to because to me there's like, you know, I think there's this like entrepreneurial mindset people and it's a handful of the percent of the people out there. And then everybody else has this like employee W2, Big Corp kind of thing on them. And like I see some people able to make that mental transition, but a lot of them just find it impossible and go back to taking a job.

So is that other two-thirds just go back to the bucket and take a job? Or how do you think about that with these folks? Yeah, I think the hard part in those buckets are very few of them do full time. So they're kind of passively looking, right? So it's kind of like looking for another job. It's how I think. They read the books.

They get interested. They start kind of passively looking. But, you know, if they're working 50, 60 hours a week in a job that's relatively big, plus have a good couple of kids, like it ends up life happens and they don't get around to do an deal. I see that as more of a failure than they buy a business. They cut all the cords and I went sideways. Does that make sense?

It's more of the, it's really hard to find a business, get it to L.O.I., get it closed. And so most, if you don't do it, if you don't do it full time or at least have like a significant like 20, 30 hour a week commitment to it, just kind of never get across the finish line. So that's that's sort of who, how you got to search. But how do you think about, so you, the dog catches the car, right? Now the job changes completely. And you have to be CEO of an HVAC company in Florida or whatever, right? And it seems to me like those two skill sets, you related to enterprise sales, the best enterprise sales guide does not very often get promoted to CEO necessarily, especially in a small business, right? So to me, these seem like opposite skill sets in a lot of ways.

So when you vet a searcher, how do you kind of weigh the two skills? Yeah, I mean, you're really looking for a person that can be a learning machine and kind of can learn new things. and fit the role, right? That's what you're looking for, someone who's flexible enough to, like, you don't want someone that's only a sales rep, right? You want to find someone who can learn how to sell, maybe learn to sell, learn enough about how to be a, you know, private equity analyst, like how to do a mini-LBO, which is what you're doing, and understanding, hey, you know, buying it four times is really a, you know, 25% IRA. And, hey, if I put debt on it, it's going to juice the returns, but it's more dangerous. You have to, like, get smart enough on that.

And then third to your point, then you got to run the thing, right? You know, like you got to deal with people like, you know, employees quitting, drama, et cetera, learning where like, you know, of the five products you sell, which one actually has the real margin, which ones to kill. And so I think on that side, I think a couple things, one would just be, you know, some people, I don't do the, what is it, cultural index that Gurdley does. But I think a lot of that stuff probably plays out on, you know, how is their EQ? How do they think through the emotional intelligence of understanding their employees, the differences, employees for that business, what types of folks do you need to hire? And then at the same time, like, not be in the business, be, you know, be out of the business and think high level of like, where does this business want to grow and in the future?

Yeah, yeah, makes sense. And so that's why it's like a unique skill set and not for everyone. I mean, I think the idea that, like, I love the democratization of search that is not just like Harvard and Stanford, like the WizKids, you know, come in that only they can do it. But there's a reason why it started with the Harvard and Stanford WISK is like it's a really hard thing. Like if it's not supposed to be like your average, you know, GM job of a $5 million P&L that, you know, you can slot a lot of different folks into. Well, Bill has joined the church of the personality trade assessment. Yes. It's a big 10.

I'm converted. Many of us here, many of us here, but Bill has joined me at the church. We go every weekday. It's great. I pass my C-Cat when I was at Vista, so I'm on board. Super funny. It would be interesting, and maybe this is a good chance to go into what you're working on next with the Briden Group, which we're excited to learn about. And I think the word needs to get out about what you're doing because a lot of people need it.

but it would be interesting to do your first cohort and do CI on them. And I bet you I can predict who's going to be the most successful. There we go. We got to like bet a bottle of bourbon or something, you know. I'll give you odds, dude. Oh, there you go. In my favorite. In my favorite.

So why don't you tell us about the Briden Group. What are you guys doing? Yeah. So my background in the last few years is background as a serial software entrepreneur, both as an entrepreneur, startup guy, and then as PE executive. And fell in his search and just loved it. And so me and a good friend Alex Mears have been investing individually, just kind of off her own balance sheet for the last four or five years

and made over 70 investments across all the flavors of search. And so super fun, got to meet lots of smart, interesting people. But what we saw kind of as we kind of explored what we wanted to do next was, as an investor, you would have two approaches. You could either make a lot of small bets, but you're loosely involved. You can't really roll up your sleeves or make fewer bets and kind of get in the trenches and get with the searchers. And so we launched the brighter, brighting group to do the latter. And so it's me, Alex Mears, and his career was, you know, McKenzie, Blackstone, Carlisle,

and Navy SEALs that they're on top to make me feel worse about my life of what I've accomplished. And a third partner, George Dutthal, who also is SEAL and was at Goldman and JP, more. again. And so the three of us are basically backing five searchers a year in a cohort model. And we're looking for mid-career folks. Ideally, kind of two to seven years post-MBA. So maybe went to Kellogg or Wharton, did McKinsey. And out of that, you did a lot of work in healthcare, for example, or GovTech, and you have a thesis to buy businesses in those areas. And we'll back basically 90% of the search and we'll wrap around kind of the best of large-cap private equity. be resources. So think like great inside sales, demand gen engine, uh, transaction experience. And then

really just like being the best of being part of a cohort. So four others in the trenches with you plus us. And then, um, as we all know, like we don't make decisions alone. So if you have a partner, we also have like a shadow partner cohort, kind of like our experience with military wise where they, they all matter more than the actual searcher. So getting, uh, the whole team involved in the search. And so, yeah, we just launched and applications are due June 15th. And if anyone's interested, just reach out. Yeah, that's great. So why go after that kind of mid, senior, you know, junior, senior, whatever it is, that thing, like, the thing that I am part of your career, why go after, where I go after people with this kind of 20-ish years of experience?

Yeah. As you said, there's got three buckets, maybe fresh out of, you know, an MBA kind of analysts, the mid-career that we're talking about, and then there's kind of the more experience, kind of senior career. When we look at it, we kind of said, hey, folks, senior, they're great and fantastic to kind of put in as a CEO, but probably less kind of in the trenches searching day-to-day, and less geographic flexibility. So often those are even best for kind of a self-funded geographical search. And then the first part, while great being right of MBA, what we're saying is just with

more searchers and more private equity coming down, it's really hard to win when you're just kind of a generic 27-year-old, got a top MBA, don't really have a strong thesis to search. We kind of think you need a right to win these days, right to win the deal. I like to say like a cheat code in the industry. And so that's why we like folks kind of two to seven years post-MBA or mid-career if they didn't do an MBA where you build a network of folks, you know an industry cold. You're respected to the sellers. You know what looks good in an industry, but you're still kind of in the life course of your career that you haven't made kind of like ideally the wealth you want to create. And so this is the opportunity to do that and really get like real ownership

in a business. And then I think from a risk-adjusted return, a lot of those folks look at self-funded and it's like no, you know, no salary. You're kind of yelowing it. You're kind of putting it all in black. And so, you know, we'll pay 150 to 200k a year, give you a bunch of resources, still give you strong ownership's a good fit for those folks. So that's a huge differentiator for you guys, right? Because if you're looking for these mid-career folks, they got families, like they've got,

they've got burned, right? They can't just live in like a small apartment and, you know, eat ramen every day while they search. So that's, I would imagine part of your thesis is now you can get higher quality folks who might jump out of the plane if you offer them a parachute. Yeah, yeah. I think that's part of the thought is like, hey, those folks have higher burn and honestly a higher opportunity costs. So like it really matters that they find a deal.

And so, you know, being part of something that has more of an infrastructure on the CRM and deal sourcing side is worth it because they have that high opportunity cost to get into a business as fast as possible. So are you looking, let's talk about kind of the, so we talked about the input side. So it sounds like you're mostly looking for late 30-something's early mid-career, so less old compared to May I'm 47. You're looking for that kind of 30-something who needs kind of a soft landing to get into entrepreneurship by acquisition.

If that's accurate, then I'll stop there. But on the other side, like what sort of deals do you want to do? Like what sort of size and then industry and D-Sies and that kind of stuff? Yep. But as Alia said, age is nothing but a number currently. So I would not put an age number on it. But I think you're in the proximity. But yeah, in terms of types of businesses, we want the searchers to have thesis-driven search.

And what that means is like you're searching kind of in a lane, right? So not, hey, any business with the recurring revenue, I'd like to buy. We want, hey, based on your background, you have a thesis. And so there's certain thesis will always kind of look for searchers to search in because of our backgrounds. One's vertical SaaS. I spent a bunch of time in vertical software. So is Alex at Carlisle-Abein. Another is kind of Gov-related, which government is like 20% of the economy. So that could be, you know, selling a K-12 or local government or federal or Intel. But we've done a ton in that place as well. So there's a couple of the thesis we'll always do as well as kind of

regulatory compliance work how we've done. And then we want the searchers to bring their thesis. So think like, you know, hey, we'd love to back the, we helped a Navy nuclear submarine or look at nuclear services businesses. We've helped like a niche, a niche person, kind of the auto space was doing a roll up in a sub segment. And so we're open on that. And then the business type is is broad from kind of a financial characteristics. So average deal size is probably 10 to 15 million enterprise value. But, you know, we'll go as small as five and as high as 50 million. So in terms of structuring those, those are, you know, the SBA loans and stuff like that.

Those tap out sub 10 million significantly, eight or nine million if you're doing it, you know, if you're doing multiples of earnings there. So, you know, how were you guys structured these? Are you going to be doing kind of more conventional financing and some equity comes from you in the searcher? How does all like it put together? Yeah. So it would be conventional debt. So no SBA, no personal guarantee on you. It would be, yeah.

So say, you know, raise that initial search capital, you know, we'll provide 90% of it. We can provide 100%. We'd just like to say 10% if, hey, you want to bring your former boss or some river guides that know a sector well. And then say you find that 10 million enterprise value deal, say half is conventional debt. You know, the other, you know, five million be kind of equity that we would provide and cut into the deal. Got it.

And then, I mean, is there, you said sometimes the searchers will bring friends and family in and stuff like that or raise a port. of it on their own. Is there any expectation for them to have skin in the game in terms of putting in personal capital or that's totally optional? It's really optional. So basically we decided to do 90, not 100 just to allow the searcher to do that. Some folks mid-career, they may have made a little bit of money and they're like, hey,

I want to throw a little skin in. Probably less like the crazy uncle to invest. But some folks say, hey, my boss was the former blah, blah, blah, blah, at Oracle or Accenture and knows an industry really well. And, you know, we think that helps kind of the odds of the success on the search. And so that's kind of how we do that. Yeah. And on the debt side, I mean, it's obviously, as Michael said above SBA.

So do you have like a preferred set of banks that have kind of said, yeah, we want to do this? Are they more private equity style cash flow lenders? You know, do you help prearrange that as part of the value add? Yeah, that's part of that value. It's kind of prearrange on, if you think about one of the unique things about traditional search is you're building this machine and then tearing it down. You never talk to a lender in your life and you talk to 20 lenders, then you close the shop. You never talk to a lawyer. You find five lawyers and bring it down.

And so we'll do that. So we'll have kind of a few preferred vendors that we always work with. And it's a repeat game for us with the vendors, which helps you. And so it can just move it a lot faster and reduce friction. And I think that also is helpful when you think of, you know, we like to say like we want to arm the rebels, right? And so as P.E. is coming down, they can move really fast on these deals. And we want to enable the searcher to move just as fast. And so if you have a whale on the line, you know, they're really ready to go. Propriety deal. There's a P.E. sniffing around. Like you can't wait, you know, 90, 120 days to talk to your 12 investors, to talk to six lenders, to talk to, you know, four lawyers who have, you know, bigger accounts to work with. And so we want to speed that up in that process. and give you credibility. I mean, it's helpful when, hey, you're walking in with the seller,

and we can walk in and say, hey, we had, you know, a thousand applicants. We picked Bill not just because of his stunning good looks, but because he's, like, done three or four great businesses. He's a good steward of his community. He's going to do right to this business, and we have the capital behind us to get this deal done in 30 days. Okay. Yep.

Huge advantage, I imagine. I also noticed you guys said, probably about 50% of the capital would be debt capital. That sounds reasonable compared to the amount of SBA debt people put on things. How do you guys think about how much debt is right for this type of stuff? Yeah, for folks that are doing SBA, I mean, the prone con about SBA is you can lever up 80, 90%, right? And so the good news of that much debt is that on a model, it makes it look good, right? You put, you know, buy it 4x, put 80% debt on something. It looks pretty crazy. But at the same time, these are small, fragile businesses, as you know, and so you don't want to

overly burden these businesses. And so we want to put enough debt that, like, hey, the returns look good for you, the searcher, because partly your returns based on IRR. But at the same time, want enough room to invest, right? And so you're not like stretched on debt covenants day one, or, hey, you're hiring your first VP of sales and you can't pay the comp you want to get the right candidate. And so when you overburdened business, sometimes you're always kind of playing that catch-up game. You're always behind because you can't quite reach for the candidate. You can't quite hire ahead, et cetera. And so we want to be thoughtful about that. Yep. Yep. Makes total sense. And then on the equity stack, kind of how does that, I know it probably even vary depending on

the deal, the searcher, et cetera, but roughly, you know, how do they step into sweat equity over time, which I guess is what it is? How does that kind of work if they're not bringing any capital? Yeah, I think for folks that are familiar with traditional search, there's kind of been this kind of tried and true system for years of a searcher can earn up to 25%. As a solo searcher, 30% and a dual searcher, and they earn in three tranches, like a third when they find the deal, a third time best as CEO, and a third based on IRA hurdles. And so we think that's a great. There's a reason why that model and setups worked for years.

And so, yeah, we're basically traditional search. So we give you the full economics, but like additional support, higher salaries, and off to the races. Awesome. With an IRA hurdle, that must mean that, you know, you're driving towards an exit at some point, right? A lot of searchers, I think there's something that's hot these days in search, which is they, you want to build a whole code. You want to buy the first business. Yep. You know, it wants a cash flow forever and you want to spend that cash off and buy another one, et cetera.

But when you have outside equity, you know, it's kind of a pickle because your equity is got to get their money back. So are you guys explicitly upfront saying there's a whole period and we're going to exit these things? Yeah. So I guess two things, right? So I think, hey, you have a great business. There's a lot of ways to get money out of business. You know, you can dividend recap the business. You can, you know, profit back.

But generally they are. Yeah, we are a fun. You know, it is a five to seven year kind of general hold. You know, we also find kind of life course. Like it's interesting the rise of hold coes. And I think they're great. I think it's thoughtful. I am a little bit skeptical as someone who's had a couple different exits that like, you know, after you run a business for five to seven years, especially in this life course, you know, people generally want to check to kind of pay off at, you know, buy a house, fund the kids $529.

And sometimes honestly, like if you're smart, like that problem set that you've worked on for seven years, like you've worked on HVAC rollups for seven years. You might be sick of HFAC roll-ups and be okay, kind of trading it up the food chain and getting on in the next thing. And so, yeah, like I think hold codes are great, but that's not kind of the core to our model. What do you think about, you know, I've heard people think about search, especially for mid-career and late-career professionals. And you kind of, you hinted about it. Sometimes people just have struggles turning from big corp to entrepreneurship. You know, what sort of things are you guys going to look for as you look at candidates to try to find those the one-third as you described it who's able to get their hands dirty and change

kind of their mindset and attitude to be right for the flexibility that this kind of work requires. Yeah, that's a good question. So we're big believers in like assessment process too. So, you know, we're in the process kind of formalizing ours. And obviously like, you know, Alex and George have gone through some of the toughest government assessments getting into SEALs. And so a couple of our advisors are who've done assessments, whether at P.E. side or in the military or, helping us put together the assessment process. But I think a couple of things I always looked for. And I think this is a little bit in, I think it's the GH Smart Books you like. I love the track record of success. I love the bottom up top grading interview of understanding why you move to the next

job. And then especially like when an old boss has like pulled you through. So really kind of understanding, hey, did you work at McKenzie or were like you were a top performer so much that your former boss when they went to be the CEO of Pepsi pulled you over, for example. understand like how, you know, it's easy to get with fancy resumes to understand like where were you really in that cohort. I think we really look for places where you're like, you're driving change. That makes sense. So a lot of this in search is you're coming into business and driving change, right? Like you're buying a business. You want to make sure you don't mess up first, but then you want you do want to drive some change, right? So you want to improve

finances, do hiring, et cetera. And so whether that's, you know, you started a new division in a large core you were at a small business you're at a peaback strategic i think driving change is a is a core piece um to what we're doing um and then three i think we we bet a lot on um that kind of like why search and why this thesis and so once again like you want um i come from more the startup entrepreneur uh area and like you want that burning drive of like i have to do this i will win i will step on glass to make this work versus like, eh, you know, I kind of bored one day, you know, I could do X, I could do Y, you know, it's more of like, oh, they're kind of like, I'm doing search whether or not you pick me or not, and I'm buying a business in this thesis,

whether you're not going to me or a lot. And I had this track record where I've had success everywhere I go. And, you know, you're lucky to have me. Then I'm like, okay, I like this. That's kind of what I'm looking for. Yeah. Well, it's something, you know, it's the adverse selection problem that I've, it's cool to hear you recognize that's the problem. It's the other thing. But when I was a kid, there used to be the, and maybe it's still, I don't know, is this still a kid's book or it'd be like, are you my mommy? It'd like, there would be the little animal that would go around the farm and be like, are you my mommy? And it was a chicken. And then they finally found a chicken or a horse. I don't know what we're, but there's some people that are like that. Like, they'll come to you just because they're looking for somebody to be their boss.

Yeah. As opposed to what you really need is somebody who's ready to be the boss. Yeah, they just is a challenge, you know? Yeah, they just want, they want a framework. Like I always say, they're the Formula One race car driver, right? They're riding the race. They have to have the ambitious to be the number one in the world. But, hey, we might as well, like, you don't need to build the car yourself. We can, like, help you get the good car and get you the good tires and the equipment

and occasionally help you, like, say, hey, don't, don't run that race. Like, that's a bad industry. It's equivalent of, like, skip the St. Petersburg track this year. It's a bad race. But, you know, you're the one feeling that. the bumps and bruises, you're the one that's going to win the race or not, not us. We're not on the court every day. You are.

Yeah. So are you potentially going to be in a place where you, like, hopefully doesn't happen, but if somebody gets in and that kind of makes the deal happen, but then phase two, you're going to be the majority of the equity in the deal. Like, how does that shape out if the person underperforms? Like, are you going to be having to do, like, private equity and go make changes sometimes? No, I mean, I think, you know, we all want to win, right? We all want this to work, right?

The searcher, the business owner and employees. And so, like, yeah, I mean, I think it's our responsibility. And so that's part of our, like, ethos, right? Kind of no man left behind. And so that's what we'll do. We're all push sleeves and make it work. And that's kind of what I've done when I ran large organizations. And, you know, if our accounting manager quit, I rolled up my sleeve and became the

county manager or vice versa with my partners. And we'll do the same here. I have a buddy who started a micro private equity first. and, you know, they had 50-od million under management. And once I was having a drink, so that he's like, Gurdley, I've been the CEO of every one of these companies for a while. And I was like, oh, man, like, that sounds terrible. You know, if you...

That should be called the Gurdly line that he does not cross. If I have to do something in the operations, I'm out. That's, that's culture index, right? I mean, we'll do culture index. It's fine. It was nice to do it. No, I mean, to build, for full disclosure, I have jumped in and do it.

I have jumped in and do it, but the first meeting is, okay, how do we find somebody else to do this? So we're doing this wrong. So super cool, Steve. So one more question, specifically on Brighton. So why this size? Why not go smaller where you could do SBA? Why not go bigger where the economics potentially are more interesting?

Why pick this kind of two to five million-ish EBITA range? What's so great about that? Yeah, I think three things. I think when we looked at the search ecosystem, I think like, as a searcher, you have to find what model is right for you. And I always encourage folks to do that. Like self-fund is great, SBA is great, hold co is great, traditional. And so I think for us, really just personality, we wanted to like, you know, get our hands more

dirty and roll up our sleeves more. We thought there was kind of opportunity with this kind of like size and talent pool that's like not, you know, kind of ambitious folks that want to do big things, but like, you know, have the risk adjustment that they do need some more help and support. And, and honestly, there's not usually like Carlisle principles willing to wall up the sleeves and JP Morgan folks and, you know, serial SaaS entrepreneurs. Most of the help is, it's good, but it's kind of former searchers who are kind of, you know, helping out, but not kind of the top tier PE. And so that's why we think kind of in this middle lane. So, you know, we're not at mid-market P.E. fun and don't

want to do that. And if we're going to do that, you know, Alex would have stayed in his job, right? But also, you know, at the SBA level, I think that's great. But it's hard to be an investor and small SBA for a variety of reasons where it's hard, you know, can't own more than 20% economic ownership. The searcher owns the majority and it's really their baby in vision. And then third, I would say a lot of searchers that buy in that range who have investors, I think in the end goes to your whole comment bill, like do. kind of want to have their own baby, you know? And so I've seen just like investments in that area where like in the end, they're like, you know, I really don't want to send up monthly like,

you know, investor updates or quarterly board meetings or do all of what it takes when you take outside capital. And so I think that made that part of the ecosystem a little tough from an investment standpoint. But I think it's a great, fun place to play in. I encourage, you know, as investors, if you're doing small individual checks, I think it's fun. I think as a searcher, it's great too. Interesting. So that's the different, the differentiation between the person who wants to be an entrepreneur and just needs a little bit of structure and the person that wants to be a CEO. And you're looking for the person and wants to be CEO. Yeah, we want somebody who wants to be a CEO. Like that, that's been their dream, you know, and they're like, maybe the head of corp dev at some

place and how else are they going to be CEO and that's their dream. And they're ready to kind of like, they want to jump in the race car and go for it, you know. Um, the, the person. person who wants to go hang out and fishing and hang out and own the little barbecue by it. That's awesome. And that's a great life too, right? Yeah. Yeah. So, Steve, as Michael said, you've talked to so many people, you said about 400 folks. I imagine you've got a pretty good thumb on kind of where the market is these days. The public markets are a little crazy. It's May, early May, 2022 as we're recording this. I'm curious if you would opine a little bit on where are the winds blowing in search, you know, in kind of the smaller, smaller market

transactions, you know, interest rates are up, you know, banks are getting a little squirrelier. You know, where are the winds blowing these days in the private markets? Yeah, I think, you know, definitely just huge wave of, like, interest in search. I think, like, just the classic, like, it used to be taught at five schools, now there's 15 to 20 schools, so more interest at the school level. Podcasts like this and others and search funder and Twitter, I think, are just, just getting more people aware that this is a concept, right? And so I think a lot more folks interested in getting involved in search.

I think you'll see a lot more like variations of the model, right? So I think in the past used to be like buy an SBA, do traditional search. I think there'll be more variations of the model like ours is an example of that. And I think that's good because half of it is aligning like what you want to do with the resources you want to do. And then I think the fun part is like, you know, a lot of search is recurring revenue. And so like it moves a little bit of like it used to not do software and search now that's popular. You know, home services not used to be popular now. It's more.

So I think you'll find more kind of random niches over time that kind of get in popularity. And they'll kind of blow up like, you know, the version of like a smaller version of our, you know, self storage for search. Right. There's always like a little thread of like, okay, you know, IT asset, you know, is interesting or, hey, behavioral health is interesting. And if someone divides a good business, like a lot of searchers talk and connect or, hey, accounting services is a good interesting one. And once a couple of searchers buy in there, then people look at it more. Do you feel like COVID impacted the market at all? I mean, anecdotally for me, you know, talking to a bunch of CEOs, I feel like people have experienced a lot of burnout.

I mean, there's a lot of data out there also that on the older end. of things. People are retiring early. People are looking for a way out. Are you feeling that in search? Or more and more businesses for sale now post-COVID? Yeah, I think COVID was like a stress on everyone, right? And so yeah, folks burned out. I think the like the tax increase that never came, I think it's still lingering of folks of like, hey, that could come at any time. And so I think the folks that were on the fence are more active on the seller side. I do think, especially now that we're getting kind of numbers post, I don't know when people consider post COVID, but there's some that people like, hey, now we have full 21 and visibility in 22.

You're also able to get, you know, better multiples than, hey, if your 2020 went down 20%, and then 2021 it was up 20, like you're kind of unsure what to buy on. But now that those numbers are back, there's more visibility. I think the interesting one will be on the searcher side too. I think a lot of, there's been a lot of part-time searchers with folks working at home and kind of white-collar jobs that could kind of, you know, a little bit like play the fantasy. And so we'll be interesting as, as folks kind of come back in the office in these kind of like 50, 60-hour, big consulting PE jobs of how many of those will kind of like quickly get in and

cut bait and they should apply to our program or how many are like, actually, I like the salary and I don't have time to search anymore and health insurance and 401K match and, you know, is worth it. So that would be interesting. I think that's starting to hit. Kind of cuts both ways, right? Because on one hand, what you describe is people can't kind of dabble. They can't be the wantreferferger anymore, right?

On the other hand, we also have this great resignation going on, right? Where people are saying, I'm reevaluating my life, what I really want to do. Maybe I don't want to go back in the office, you know, at Big Four accounting or whatever. And now's the time to make a leap. So people have met, are they resigning into search also in some ways? Yeah. No, I think that there's definitely, you see that of folks that like kind of the moment. they have to go back in the office and, you know, do the hour commute.

They're like, okay, now it's time to pull the rip cord. Or vice versa. Like, you know, sometimes the fantasy is over and, you know, they're kind of back to the grind. It is interesting. I'm seeing more and more sellers with the negative kind of sentiment going around being much more reasonable. That's what I'm hearing from people. And talking to them about it, they're like, well, maybe. Maybe now's the time.

Yeah, exactly. You know, it's like, hey. Get in well again. It's good. Getting good. And then, you know, like that Florida no state income tax and good weather and, you know, Margaritaville and Jimmy Buffett RV land, it's all sounding very good. I think every searcher, especially the mid-career researchers, go through this phase where they're like, you know, I looked at this sailing tour company in Key West. And I was like, you know, 600K EBITA, Key West.

Like, you got to get them out of that where it's like, dude, this is not easier than you think. Have you talked to anyone at QS? No comment. So you've seen, we started the podcast with a lot of the good things that searchers do. I'd love to close with what's some of the, like, what's the craziest thing you've seen from a searcher who was pitching? And don't name any names. But like, what's some of the stuff you're like, oh, man, like, this is, this is not what I was, this is not what I signed up for. Yeah, I mean, you definitely have like the crazy family ones where they're like,

buying this small business. And they're like, oh, so tell me about the owner. Okay. And they're like, who else is there? And it's like, and the wife and the cousin and the sister and the this. And you're like, that business is definitely falling apart. You walk in. You definitely get the crazy customer concentration or you're like, you know,

hey, why is this one customer 50% and you're like, I don't know. Then you call back a week later and you're like, oh, they golf together at the same country club. They're good friends. Like the deal will be fine. And you're like, nope. So it's just kind of the stuff. It's kind of deal heat, right?

So people want to, you know, it makes sense. It's like you're kind of you're starting to see yourself in the life. You want the deal to work or some of them. And then as you said, there are some definitely like destination ones where you're like, I've met some folks that I'm like, you, why are you searching only in this like little geography? Like you don't live in that country. You don't like live in that state even, you know, like what's going on? And you're like, well, I really just actually kind of want to, like, you know, move to America.

And that's why I'm searching to buy a business. And it seems a little odd way to do it. But good for you if you can pull it off. Super cool. Yeah, it must have been a wild ride. Yep. Awesome. Cool.

Anything else for Steve? Well, we got him. I feel like it's, I love when you come on, Steve, because I pump you for so much inside search information. You like this, the one-man searcher index. It's great. I could make up anything. You'd believe it. It'd be right.

That's true. So Steve, how could people find out? It sounds like you're definitely interested in getting applicants for this round of this cohort with Briden. How could people find out more about that and possibly get it in front of people who should apply? Yeah. Awesome. So if interested, just reach out to me. I'm Steve at Bryden.com, B-R-Y-D-O-N.com.

I'm also on Twitter, Steve Rustler. and then the website's BRYD-O-N.com has all information, has the application link to June 15th. So I definitely encourage you to apply. Or if you know someone that you think is a good fit, send them my way. And thanks for having me on the show. Yeah, amazing. And then you're still doing your newsletter? Is that correct?

Still doing the newsletter. I write a monthly Musings newsletter on all things, ETA, and search highlight kind of some of our investments, some good content, actually job openings and internships, which are quite popular. And you can get to that at bitly, b-it-t-l-Y-slash-E-A-Musings, ETA Musings. I'm a subscriber, Steve, is very good and very information-dense. If anyone is at all interested in search, this is the one newsletter to subscribe to it. It's very good. That's great.

There we go. I send it at the end of every month, except the months where I don't. So, very good. Awesome, guys. All right, well, great job. Appreciate you, Steve, and we'll catch you next time. All right. Sounds good.