In today’s episode, we have an enlightening conversation with Chris Williams from System Six, delving into his journey of entrepreneurship through acquisition. Chris shares his insightful experience in identifying and acquiring his first business, an accounting firm, and the myriad challenges he overcame in growing it. Chris discusses his background in investment banking and private equity, his education at Stanford, and the pivot to entrepreneurship. With lessons on patience, persistence, and the unexpected turns in acquisition, this episode is a goldmine for anyone interested in buying and running a business. Also, hear about Chris’s first-hand experiences, including client retention, employee management, and effective strategies that doubled his company’s revenue in just three years. Tune in for valuable insights and to learn how you can apply these principles to your own entrepreneurial journey.
Time stamp:
00:00 Introduction to Chris Williams and System Six
00:19 Key Takeaways from the Interview
01:52 Chris Williams’ Background and Journey
04:12 The Entrepreneurial Path and Challenges
06:30 The Search and Acquisition Process
15:12 Structuring the Deal and Investor Relations
17:34 Navigating Early Challenges and Building a Support Network
19:05 First Year Hurdles and Employee Transitions
22:21 Adapting to Change and Growth Strategies
28:37 Expanding Services and Future Plans
32:10 Personal Insights and Reflections
Additional Resources:
- Access our archive of video interviews on YouTube
- Checkout our upcoming Conference – https://malaunchpad.com/
- Get in touch with show hosts Casey Minshew and Feras Moussa at – info@equitylaunchpad.com
- Looking to invest in M&A opportunities or partner with an advisor to acquire, scale or sell your business? Visit Equity Launchpad
Transcript
00:00 all right on today’s episode we talked
00:02 with Chris Williams from system 6 and
00:04 really talked about his Venture into
00:06 kind of getting into entrepreneur
00:07 through acquisition identifying that
00:09 first business and ultimately what it
00:10 looked like to go buy an accounting firm
00:12 you know and some of the challenges that
00:13 he kind of faced growing that company
00:15 and so they successfully grow it he’s
00:17 about doubled his Revenue in about three
00:18 years and so really great content so
00:19 Casey what was some of your takeaways I
00:21 think it was a great interview for any
00:22 one of the people thinking about buying
00:24 a business because it really got down to
00:26 the things went to Stanford he did the
00:28 traditional ETA programs learned all
00:30 about it and and they really want those
01:31 entrepreneurs to focus on a certain
01:33 thing $2 million perfect this perfect
01:35 that perfect that and you know after his
01:37 search he was just like I’m not going to
01:38 find this type of business so he went
01:40 and found a company similar but it
01:42 wasn’t perfect he pulled the trigger and
01:44 it was actually a company he had seen
01:45 previously that he passed on right so
01:47 Fortune’s in the follow-up right it’s
01:48 that followup and and being patient in
01:50 the process so a lot of the basic
01:52 principles that it requires to find some
01:54 success in this space man this guy Nails
01:55 it no absolutely I mean again I think to
01:57 drive your point home it’s about not
01:59 looking for perfection everybody has
01:00 that Perfection mindset and over time
01:03 you realize that now I’ve done many
01:04 deals today up and down the Spectrum and
01:06 I’ve never done a deal where I’m like
01:08 this deal is no questions asked no
01:10 problem everything about is perfect
01:11 right there’s always going to be some
01:12 challenges and it’s about having the
01:13 confidence to work through them solve
01:16 them and push it forward and that’s
01:17 where you ultimately do find the Real
01:19 Deals and the real opportunities to grow
01:20 and so again I mean I think lots of good
01:22 nuggets about this one and what it looks
01:23 like to kind of work through it so
01:25 listen
01:29 in hey everybody it’s Ferris and we’
02:31 love to see you at our upcoming m&a
02:33 Launchpad conference in Chicago October
02:35 26 at a conference we talk about what it
02:38 looks like to value a business how to
02:39 buy a business how do you manage a team
02:41 right and ultimately we’re big Believers
02:43 in the buy then build concept so we’re
02:44 going to have one of our friends Walker
02:46 diable the author of Biden build there
02:48 as well as one of our Keynotes and many
02:49 more so love to see you there to kind of
02:51 get exposure to the space and network on
02:53 today’s episode we have Chris Williams
02:55 here to talk about accounting and kind
02:57 of his journey into his first business
02:58 so Chris welcome to the show thank you
02:00 guys for having me super pumped to be
02:02 here and thanks for uh what you guys are
02:04 doing in the small business acquisition
02:05 ecosystem Houston was a great first
02:07 conference and looking forward to many
02:08 to come awes we enjoyed meeting you yeah
02:10 we got to meet you at the conference
02:12 right so we have our next one coming up
02:13 in Chicago in October 26 for those that
02:16 are listening but you know it was a good
02:17 chance to kind of meet Chris face to
02:19 face and learn a little bit more about
02:20 his journey right and really talk about
02:23 you know kind of the paths that people
02:24 go down in terms of their first
02:25 acquisition and really what changes on
02:27 their path so Chris for the listeners
02:29 you want to give a little bit of an
02:30 overview as to maybe your background
03:32 right you’re going a finishing your NBA
03:34 and really what sent you down this path
03:35 versus what traditional NBA is hey I
03:38 want to go work at a corporate company
03:39 somewhere in the finance space exactly
03:41 yeah 100% so that was my career before
03:44 going to business school I worked in
03:45 Investment Banking and then private
03:46 Equity um and went to business school to
03:49 kind of explore what other Pals were out
03:51 there and discovered this idea of hey I
03:52 can go buy a small business and grow it
03:54 and build my career building something
03:56 um and that’s what attracted me to this
03:58 ecosystem and then ultimately that from
03:00 seeing like a billboard in school or
03:02 what made you real uh so I I was at
03:05 Stanford where this is one of the like
03:07 real really common h i mean Stanford’s
03:09 famous for being a big part of the
03:10 search fund ecosystem so it’s hard yeah
03:14 it’s kind of I mean you know first world
03:16 problems that people shouldn’t debate
03:17 over some people say it’s Stanford some
03:18 people say it was Harvard but it’s one
03:20 of the F it’s one of the first two for
03:21 sure we’ll be at the Harvard ETA in
03:23 October as well and we definitely make
03:25 it out to to Stanford they’ve got a
03:26 bigger conference than Stanford does uh
03:29 so it’s it was in this you know it’s one
04:31 like venture capital is a hot thing and
04:32 everyone looks at search funds small
04:34 business Acquisitions and honestly like
04:36 look for me like why did I pull the
04:38 trigger um the best business kind of
04:40 career advice I ever got was hey assume
04:43 you’re going to be successful in
04:44 whatever your kind of next 20-y year Arc
04:46 is what gets you more excited and for me
04:48 it was like yeah go work in corporate
04:49 finance in an investing role and be a
04:51 you know partner at an investment firm
04:53 or buy a small business and grow it from
04:55 small to medium you know and be running
04:57 a several hundred person organization 15
04:59 years from now
04:00 that just got me more jazzed it it was
04:02 really that simple so you know if you
04:04 look at it on paper I think it’s hard to
04:06 like maybe rationalize doing something
04:08 really entrepreneurial but you kind of
04:09 either feel it or you don’t and and
04:11 that’s what got me going yeah no I mean
04:13 being an entrepreneur is fun but and
04:14 there are days where it’s just like such
04:17 a pain you know you have 200 employees
04:18 and 200 people’s problems become your
04:20 problems but you know it’s the fun of
04:22 the bigger picture in the long term of
04:23 it so it’s you know and I I I tell this
04:25 people all the time like it is more
04:27 stressful than my prior life for sure
05:30 more long-term stress but also more
05:32 energizing and I feel like doing
05:34 something that gets you energy is worth
05:36 it in the long run um yeah you either
05:39 have it or you don’t you know it’s
05:40 either you have you either have it or
05:41 you don’t I mean that that is the truth
05:43 I mean and and not one is better than
05:45 the other totally because this is a hard
05:48 journey there’s nothing easy about it
05:50 and you know like one thing I really
05:52 didn’t appreciate and now I feel it is
05:54 you know there’s no off in this world um
05:58 do I need I can work whenever I want
05:59 right and sure I take weekends and take
05:01 time away but it’s still it’s still in
05:03 your mind and you know as opposed to
05:06 even in a long 80 90 hour Investment
05:08 Banking job like when you’re off you’re
05:09 off and um yeah if you’re going to do
05:12 this you got to be comfortable with
05:13 stuff like that you know there is
05:15 reality too if you’re doing your own
05:16 thing you have autonomy and freedom but
05:19 you also have something constantly
05:20 rolling and yeah that’s not for
05:22 everybody like sometimes hustle porn you
05:24 know is like everyone should be an
05:25 entrepreneur like if you want to go out
05:27 to W2 and make six figures whatever and
05:30 have a great career like go for it
06:32 that’s a very valid path because you get
06:34 the shut off at times you know I mean
06:35 there there there are some big tradeoffs
06:37 in in entrepreneurship and working you
06:39 know I’ve had one I’ve had one
06:41 traditional job in my career and um you
06:44 know I I did some some sales and did
06:46 some stuff and I’ll tell you what man it
06:48 was pretty awesome you know I mean I
06:50 closed a deal I made some money I moved
06:52 to the next but Saturday or when the
06:54 weekend came I didn’t think about
06:56 anything until the Monday morning sales
06:58 pipeline meeting yeah I mean that’s the
06:00 thing I miss the most is like yeah
06:02 Sunday afternoon every minute of the day
06:04 when you’re an entrepreneur is somewhat
06:05 a decision hey do I want to go work and
06:07 or do I want to not work and you
06:09 recognize there’s a little bit of
06:10 opportunity cost in that time and of
06:11 course you know you can’t work 247 um
06:14 but I do miss Sunday monitoring always
06:18 even even if I’m vacation I get stressed
06:20 out about all the stuff I got to come
06:22 back to and catch up on so I’d rather
06:23 just monitor Loosely and just kind of
06:25 minimize what I gotta catch up on later
06:28 yeah so anyways um so maybe let’s
07:30 continue out so you knew you wanted to
07:31 buy a business right I guess during your
07:34 your MBA kind of got exposed to Eta
07:36 further and you know got really learn
07:39 the ropes of what it looks like and so
07:40 you know walk us through the path I me
07:42 did you do a proper search fund did you
07:44 have a specific industry targeted did
07:46 you have a you know something entirely
07:48 different in mind I mean how did you go
07:49 about that path yeah so when I was in
07:51 business school you know the very common
07:53 path is the traditional search fund you
07:55 know you raise a couple hundred thousand
07:56 doar to keep your lights on for two
07:58 years you know and you’re going to go
07:59 try and buy larger business usually two
07:01 million of earnings and above um
07:03 generally you need to look pretty
07:04 nationally that wasn’t a fit for me I
07:06 wanted to be a little bit more
07:08 Geographic focused with my wife and
07:10 where her job is here in Northern
07:11 California um and you know I also had my
07:15 eye a bit towards I want to do multiple
07:17 Acquisitions over time and sort of the
07:20 traditional search model is generally
07:21 more focused on hey I just want to do
07:23 one and kind of really truly run that um
07:26 so I started working I didn’t raise a
07:28 traditional fund I started working with
07:30 with two investors they weren’t paying
08:31 me anything but it was we were having a
08:33 conversation every couple weeks um and I
08:38 was just using them as sounding boards
08:39 as I started looking at Industries
08:41 evaluating themes or kind of ideas to
08:44 then go find Industries to go create
08:46 opportunities so my search was yeah not
08:49 funded and I did mainly direct Outreach
08:52 a lot of people do heavy broker work
08:54 which has a lot of Pros I think there’s
08:55 also downsides I decided I want to focus
08:58 more on like top down find some
08:60 industries that I’m interested in build
08:02 lists of small companies in those
08:03 Industries send emails it’s a sales job
08:06 cold call and then you know from there
08:08 try to build a relationship with a
08:09 seller and do more of a direct deal
08:10 versus a broker deal so my search was
08:13 about a year long um and ultimately did
08:16 kind of the SBA self-funded structure
08:18 took a little bit more of a winding path
08:20 to it because I was you know exploring
08:22 multiple acquisition strategies along
08:24 the way got and you weren’t focused on
08:25 accounting specifically were you no I
08:28 wasn’t directly focused on accounting I
08:29 was focused on anything that I had felt
09:32 like I had some tangential relationship
09:34 to so my prior career had been real
09:36 estate private Equity basically so I
09:38 looked a lot of Real Estate Services you
09:40 know Commercial Services home services
09:42 and then I did look at a wide variety of
09:45 financial services businesses so
09:46 accounting Insurance wealth management
09:49 you know I know Med spas or dental
09:51 clinics are great acquisition
09:53 opportunities but I was just like if I
09:54 don’t have a some story to tell I’m not
09:57 going to spend my time there so um it
09:59 was one of several Industries I looked
09:01 at so did you go so you you you actually
09:03 did Outreach so you identified them you
09:05 pulled list you gave calls and yep and
09:08 so what happened you you found somebody
09:10 in the accounting space yeah so it’s you
09:13 know B2B sales job right build a list
09:15 and go attack it with emails and cod
09:17 calls and yeah I sent an email to Jeremy
09:19 he had built system 6 from kind of
09:21 started in 2009 and but when I got to it
09:24 it was about 18 people couple million
09:26 bucks in Revenue we had a our initial
09:29 conversation yeah he responded to my
09:30 email he was like I get a lot of these
10:31 emails but yours sounded a little more
10:33 personal it was a little bit less kind
10:35 of clearly automated um and we had our
10:38 first conversation and he wasn’t quite
10:40 ready to sell and I was still kind of
10:42 early in the game but we stayed in touch
10:43 and then we’ll get into it some things
10:45 changed on both of our ends and then we
10:47 put a deal together but yeah it came
10:49 from an initial cold email that got a
10:51 got a response and that’s really a great
10:53 point you know I talked to another
10:54 friend of mine that’s in the search side
10:56 looking for his you know one of his AC
10:58 acquisitions and he was like you know he
10:01 started his direct Outreach last year
10:03 when I was like hey man just kind of
10:04 identify and start doing some calls in
10:05 your area I mean like do it yeah and he
10:08 told me literally yesterday he’s like
10:09 I’ve had five of those guys that I spoke
10:11 to that were trying to sell her at a
10:14 seven multiple and all these things and
10:16 they’re starting to realize like it
10:18 ain’t gonna happen he’s like I’ve had
10:19 five call followback calls on deals and
10:23 it’s it’s that longterm it’s that
10:24 relationship you’re building right 100%
10:27 And it’s like if you get someone to
10:28 respond to an email or cold call like
11:32 even if it’s not a fit then as long as
11:33 you don’t think it’s a terrible business
11:34 or a bad you know man or woman seller
11:37 like reach back out because you did the
11:39 hard thing which is you got them to
11:40 respond to you now you have a
11:41 relationship yeah keep that keep that
11:43 warm you know you never know timing is
11:46 everything if it’s gonna come back or
11:47 not yeah and you usually gotta be you’re
11:49 not top of mind but you just want to
11:51 reach out to them whenever it is
11:52 relevant for them so yeah so you’ve you
11:55 know so Chris you you you’ve now hit
11:57 your point where you you’re now into
11:59 analysis right you’re you’re saying okay
11:01 we found a business I’m doing my
11:02 analysis you’ve got an investment
11:04 banking background and I imagine you you
11:07 did you run your whole process yourself
11:09 yeah so I mean I did a lot of the leg
11:11 work um but I think it’s very important
11:13 to have third parties around you that
11:16 have seen a lot more volume like have
11:18 seen a lot more deals in this size range
11:20 because even if you have Investment
11:21 Banking background like I did is a much
11:23 bigger scale i’ never bought a$2 a half
11:25 million dollar business before i’ never
11:27 been around a$2 and half million dollar
11:29 purchase one like if you show up with
12:31 the same La laundry list that you can in
12:33 investment banking with 200 diligence
12:35 points like sellers is going to laugh
12:37 you out of the room like you know
12:39 there’s a lot of stuff that sellers
12:40 aren’t going to have in these types of
12:42 businesses and you need advisors that
12:44 are going to tell you what’s acceptable
12:46 and what’s not acceptable I would say I
12:48 did all of the customer concentration
12:51 retention sort of p&l analysis um but we
12:54 still hired a firm to do a quality of
12:56 earnings report even though this is an
12:58 accounting business and pretty strange
12:59 straight forward we hired somebody to do
12:01 insurance diligence we hired somebody to
12:03 do tax diligence because we had
12:04 employees in a bunch of different states
12:06 and then I had investors along the way
12:08 before the deal and then who ultimately
12:10 invested in my deal that were giving me
12:12 their perspectives as well um I would
12:15 not yeah could I have done most of this
12:17 on my own probably but like I signed a
12:19 multi-million dollar personal guarantee
12:21 like you kind of only got one shot um
12:24 spend the money on diligence yeah that’s
12:27 great I learned a lot tremendous amount
12:29 from my first acquisition to my second
13:31 one big difference uh you you just it’s
13:34 like man you kind of hindsight you know
13:37 and even on the second one we’re now
13:38 moving to our third one here and it’s
13:40 like man what are the things that I
13:42 learned from the second one and the you
13:43 know it’s like it’s a constant re you
13:45 know going back through and when you’re
13:47 looking at these companies that are like
13:48 you’re saying they’re they’re small to
13:50 mediumsized companies they just not
13:52 going to have every one of those due
13:54 diligence items that you have on your
13:56 the spreadsheet the checklist you have
13:59 totally and and I think like think about
13:01 it your first acquisition you’re
13:02 probably buying in an industry that you
13:04 don’t know super Well you certainly not
13:06 run a business in that industry so you
13:08 don’t you may not know what the most
13:10 important things to look for are like
13:12 you may know General spreadsheet
13:14 analysis but like what are the true
13:16 industry nuances you know to be aware of
13:19 and now as I’m looking at additional
13:20 Acquisitions inside accounting and tax
13:22 it’s like man I’m so much more well
13:24 armed and so like could I do one on my
13:26 own now but yeah you better have people
13:28 around you in the first one because
14:30 they’re going to have that industry
14:31 experience that you don’t have that can
14:33 tell you what to look for yeah and
14:35 you’re not even you know do you have an
14:36 accounting background or are you CPA or
14:38 anything like that no no start to finish
14:42 exactly like I’ve got Finance background
14:43 but I mean some of the stuff around like
14:46 mix of tax returns you know how many
14:48 1040s those are individual Returns
14:50 versus 1120s you know those are business
14:52 returns there are like industry ideals
14:55 there you don’t want to ton of 1040s
14:56 because those are kind of individual
14:57 customers lower margin like need an
14:59 industry expert to tell me that in the
14:01 first deal you know what I mean no
14:03 absolutely so then maybe for the
14:05 listeners right it sounded like it was
14:06 about two and a half million of Revenue
14:07 right whatas price equity and multiple
14:11 kind of would the acquisition take it
14:13 yeah so you know couple things one is
14:15 back in 2021 so a little bit of a
14:17 different Market this business is fully
14:19 remote and
14:21 we’re 85 90% of our revenue is fixed fee
14:24 recurring Revenue kind of ongoing
14:26 Services contracts we don’t do any
14:28 annual tax so we look a lot like kind of
15:30 a managed service provider sort of it
15:32 business I say all of that you know
15:34 margins were kind of 30 to 35% when I
15:36 bought it so that ended up meaning I I
15:38 was sort of in a five to six times
15:40 earnings multiple you know earnings were
15:42 around a million dollars and also you
15:44 know I was able to get a five% interest
15:46 rate on my SBA loan so that allowed me
15:48 to pay more you know that’s not the
15:50 reality anymore not the reality what
15:53 it’s not the reality anymore yeah yeah
15:56 and like what the interest rates are
15:58 impact multiples and if you have sellers
15:60 who still want 2021 multiples it’s like
15:02 it’s not going to happen guys we hit
15:04 that issue all the time in the
15:05 commercial real estate side I mean oh
15:06 especially in real estate where interest
15:08 rates you know prach to Theo got yeah so
15:12 I was say 75% SBA
15:15 loan uh 15% seller note and 10% cash
15:18 down which is very typical sort of SBA
15:21 purchase structure so roughly five six
15:24 700,000 of equity so was that
15:27 self-funded or did you actually back to
15:29 those investors and ask them invested
16:31 maybe how did you Str if you want to
16:32 share kind of how you structure their
16:34 return profile from that yeah so um I
16:38 put some of the capital in and then
16:40 raised some of that sort of $600,000
16:42 total and so I some of that there were
16:43 some of it but you know we’re both
16:45 investors let’s say in that investor
16:48 component of the deal um I have an 8%
16:51 preferred return so investors need to
16:54 get paid back you know 8% a year
16:56 compounded on top of their invested
16:58 principle and then um then it splits and
16:02 that basically they put in around 11% of
16:05 the total purchase consideration they
16:08 get 20% of the equity common Equity once
16:10 the preferred is paid off and then I
16:13 effectively get the remaining 80% so a
16:16 lot of people talk about a step up in
16:18 this world of hey if your investors put
16:20 in 10% of the deal how much do they own
16:22 of the common Equity we have effectively
16:25 a two time step up and then you know I
16:28 own I mean obviously I’m in that
16:29 preferred Equity as well but when it
17:32 gets down to Common I’m about 80% which
17:34 is is relatively common yeah I mean it’s
17:37 all about the structure that’s what I
17:38 love about this business I mean our
17:39 recent acquisition we basically gave
17:41 investors a 15 pref but they also
17:44 brought 100% of the equity and got 10%
17:46 of The Upside right of the actual
17:47 ownership y so we gave them a higher
17:50 pref and it’s almost like debt right in
17:52 lie of essentially a little you know
17:54 kind a little basically a smaller
17:56 position on as an equity kicker more
17:58 than there anything else so that’s um
17:00 yeah like you said that’s what makes
17:02 this fun it’s all about what can you
17:04 structure whether it’s reducing your
17:06 debt because it’s you know 5% instead of
17:08 9% today right to getting better terms
17:12 and kind of options with Equity where
17:14 you give them maybe more up front but
17:15 you’re getting more of that upside on
17:16 the back end yeah I mean the end of the
17:18 day everything’s kind of risk adjusted
17:19 right so your investors are like hey I’m
17:21 taking less risk because I’m getting 15%
17:23 return today so maybe I need less upside
17:26 I think the other thing I’d say to
17:27 listeners around that is you know you
17:29 need to make a decision are your
18:30 investors like just primarily dollars
18:33 are they just capital or are they
18:35 advisers in my case board members and so
18:38 like I probably could have got more
18:39 aggressive on my terms you know maybe
18:41 less of a step up but I was like I want
18:43 these guys to be in my camp they’re on
18:45 my board they’re going to be a big part
18:46 of me being successful so let’s just
18:48 kind of go with down the Fairway Market
18:50 terms yeah and that’s critical because
18:52 you know on my first acquisition I did a
18:53 solo and yeah not having not having
18:56 partners like Ben and Ferris to to have
18:58 to talk to to work with and all that
18:60 stuff I mean it’s it’s it’s Priceless
18:02 you got to have it because you know when
18:04 it’s hard you can talk to them you can
18:06 say hey here’s what I’m dealing with
18:07 what are your thoughts and you get that
18:08 other side when you’re by yourself and
18:10 you’re just trying to take it all um it
18:12 becomes very challenging yeah and then
18:14 even just t braining or even tapping
18:17 into the network of people right like
18:18 you may have know someone that could
18:20 help solve it I may know someone that
18:21 could help solve it or we know someone
18:22 that know someone
18:24 so yeah yeah yeah for me where it’s been
18:27 super helpful um you know the first time
18:30 you get punched in the face if it’s your
19:32 first business that you’re owning you
19:33 think the world’s going to come down
19:34 like we had a senior manager quit six
19:36 months in and I was like oh you
19:38 know she manages 30% of our Revenue um
19:42 you know and I got on the phone with two
19:43 of my investors that night like what do
19:45 we do and you know they were very
19:46 calming and now three years in I
19:48 recognize that like that stuff happens
19:49 all the time it’s not going to break you
19:51 but you may not know that out of the
19:52 gate and then it’s just really helpful
19:55 when you’re making big decisions I don’t
19:57 call them for little things but big
19:58 picture decision ision you need someone
19:60 who understands you and understands the
19:02 business to bounce things around with
19:04 yeah yeah so what were some of those
19:06 challenges so you you know you got the
19:08 closing right you took on the PG you got
19:10 the equity you got the capital you know
19:12 all sorted out you know step in day one
19:15 what did it look like and then what were
19:17 some of those first those big challenges
19:18 you did hit that first year yeah I think
19:21 um you know one of the benefits of kind
19:24 of doing a direct deal where I built a
19:26 relationship with a seller I got to meet
19:28 a lot of the people ahead of time like
19:30 the rest of the leadership team there’s
20:32 actually a company Retreat a couple
20:33 weeks before the deal
20:34 closed so I didn’t have some of the um
20:40 really scary employee moments day one
20:42 where employees are like oh my gosh
20:44 there’s a new owner um some of the
20:46 challenges we did have out of the gate
20:47 though were you know customers having to
20:50 you know talk to customers about hey
20:52 there’s been a change in leadership
20:54 change in ownership and you know while
20:56 Jeremy the previous owner wasn’t
20:58 involved day-to-day with a ton of
20:59 customers some of them have been around
20:01 for a long time and knew him personally
20:03 and so there was a bit of uh you know we
20:06 had some customer churn in the first
20:07 year I think that was primarily related
20:09 to they just being a new owner and you
20:11 know people had maybe stayed with system
20:13 6 because they liked Jeremy but maybe
20:15 they weren’t happy with their actual
20:17 services and then once he was gone they
20:18 sort of went some decided to go
20:20 somewhere else so there was some I would
20:22 say uh you know client retention
20:25 challenges related to change in
20:27 ownership um relatively small the bigger
20:30 challenges that I faced in the first
21:31 year were um yeah the first time we sort
21:35 of lost a senior manager who managed a
21:38 team and you know the way we operate is
21:41 we kind of have senior managers that
21:43 manage teams and they’re almost like
21:44 their own little businesses within our
21:45 business and so when she left now we had
21:49 um you know a bunch of team that we
21:51 needed to go reallocate some custom
21:53 client work that she had been doing that
21:55 we had to figure out if we wanted to
21:56 continue to manage or not we ultimately
21:59 decided that work was too custom for us
21:01 and we didn’t want to keep it and then
21:02 honestly we we started growing pretty
21:04 quickly and when you start growing F
21:07 faster than the previous owner had been
21:08 growing it that just more work is coming
21:12 in people need it’s a change of feeling
21:15 inside the organization and just
21:17 understanding where we needed to get
21:18 better if we were going to start growing
21:20 faster was um something honestly we’re
21:23 still working on primarily on the hiring
21:25 front like we we need to get better at
21:26 hiring still today but I mean
22:30 one of the biggest improvements we made
22:31 in our company was getting HR fully in
22:34 house including a full-time recruiter
22:35 and it makes life so much easier to have
22:37 someone whose job it is to just focus on
22:39 getting the best people you can get I
22:41 mean it makes it easier to get the right
22:43 people in to grow and just life is much
22:45 better so yeah and I I think a thing
22:48 I’ve learned on that in particular is
22:49 like HR manager is not necessarily a
22:52 recruiter like we have a fantastic HR
22:54 manager that I’ve asked to do a lot of
22:56 recruiting and interviewing and that’s a
22:58 different skill set you know internal
22:59 versus external um retention of
22:02 employees versus really kind of quizzing
22:04 perspective employees for lack of a
22:06 better word to figure out if they’re
22:07 going to make you know if they’re going
22:08 to be a good fit so don’t assume that
22:11 you know if someone’s doing part of a
22:12 role they can necessarily do all of it
22:14 like you you really got to think about
22:17 do they have the skill set for the next
22:18 thing not just kind of give it to them
22:20 just because they’re adjacent to it so
22:21 then quick question before I I do want
22:23 to move on I do want to go to understand
22:25 kind of what the growth looked like
22:26 sound like you did start to get that
22:28 swing but you mentioned earlier on that
23:30 you spoke to the seller and then you
23:32 followed up with him later and things
23:34 had changed on your side and things had
23:35 changed on their side what had changed
23:37 that kind of ultimately led to being
23:38 able to do the transaction yeah so for
23:40 me it was like stop looking for perfect
23:42 you know I was looking for that $2
23:44 million EIT business that was you know
23:47 all recurring Revenue growing at 25% a
23:49 year that I could pay five times you
23:52 know ebit for and it’s like that’s not
23:53 out there um and then on his side yeah
23:57 timing is everything like he had a
23:58 family track try where you know he lost
23:60 his father kind of unexpectedly and that
23:02 made him realize like you know maybe I
23:05 don’t want to be working as hard and
23:07 spend more time with the family I still
23:08 do have he he had young kids at the time
23:11 so I mean kally that was it it was like
23:13 he and I just stayed in touch I sent him
23:15 an email every couple months hey how are
23:17 things going and then one of those I got
23:19 an email back from him being like I’m
23:21 actually thinking more seriously about
23:23 selling right now and then I was more
23:25 interested at that point because I
23:26 realized it’s harder to find perfect and
23:29 yeah I mean sometimes those
24:30 life-changing events change I mean
24:32 that’s those are the selling indicators
24:35 right things happen and people make a
24:36 decision you hear a lot of stories of
24:38 stuff like that you know hopefully it’s
24:40 not always something like that but it’s
24:43 you know my wife got a new job and I’m G
24:45 to move or my kid you know is I need you
24:48 know going to college and want to be
24:50 closer to him like you know small
24:51 businesses are parts of families so
24:53 sometimes there are you know events
24:55 outside of the business that trigger a
24:57 sale and if you’re around the business
24:59 and you’ll get a call back so before we
24:01 move on I just I I wanted to kind of get
24:03 this idea from me so when you were doing
24:05 your due diligence right you’re getting
24:06 up the close did you create like a 100
24:09 day game plan did you see like things
24:11 that you could fix in the company or did
24:13 you go in sit for the first you know 90
24:17 did you just learn and then did you
24:18 identify things like oh my God because
24:20 obviously you grew the business and
24:22 where though you know how how did that
24:24 process work for you yeah I heard a lot
24:26 of people say like look the 100 day plan
24:28 you throw out the day one um and I knew
25:31 I was buying a solid business that
25:34 didn’t have any massive urgent issues I
25:36 think if you’ve got something where
25:37 there’s like a mess you probably do need
25:39 to build a very sophisticated plan to
25:41 come clean it up immediately but for me
25:43 it was much more hey come in and how can
25:46 I learn his role as quickly as possible
25:49 and I knew I would see things through
25:51 that um but I I didn’t have a super
25:54 sophisticated 100 day plan just because
25:56 I knew like like this thing is doing
25:58 well it’s growing a little bit margins
25:00 are good I don’t want to come in and
25:02 make a bunch of decisions immediately
25:04 not having true context like I just
25:07 started hopping on seller call you know
25:09 sales calls with him immediately started
25:11 shadowing him and all of his meetings
25:13 and you know we got him out of here
25:15 pretty quickly honestly um but I didn’t
25:18 have I I took the yeah perspective of
25:20 like just comeing and learn for a little
25:21 bit and then start making decisions it’s
25:23 great got it and so then you know what
25:26 were some of the biggest changes you did
25:27 make and then let’s talk about kind of
25:28 of how you start to get that that growth
26:31 momentum yeah I mean I think that that
26:33 is the biggest change I made was just
26:34 spending more time and more energy and
26:36 more dollars on um trying to get more
26:39 customers coming in the top of the
26:40 funnel and um that’s really how we
26:44 accelerated growth I mean there’s a lot
26:46 of demand out there for small business
26:48 accounting services and the previous
26:50 owner was like happy to hop on sales
26:52 calls when referrals came in but wasn’t
26:55 as aggressive um about trying to
26:58 generate leads and that’s really where I
26:60 spent a lot of my time and then I was
26:03 more aggressive in followup with
26:04 opportunities when they came in so the
26:07 biggest change we made was um yeah more
26:10 energy from the CEO at the time owner
26:12 kind of salesperson um just to start
26:15 growing the business faster you know
26:17 we’ve lack of sales and marketing
26:18 strategy right is really kind of great
26:21 and I think you know he did a great job
26:24 of building this business then he got to
26:25 a place where it was like still growing
26:27 but uh
26:29 he was also cash flowing a lot and he
27:30 was at point of his life he was like I’m
27:32 happy to you know be a little bit more
27:34 relaxed and not work as hard and you
27:36 know you come in as a new owner you’ve
27:38 got a bunch of debt you want to grow the
27:39 business and that’s part of the beauty
27:40 of this whole model is it’s just like it
27:42 breathes more energy into really good
27:44 businesses that maybe just have slowed
27:45 down a little bit um you know there’s
27:47 lots of like little operational tweaks
27:49 we’ve made over the three years but the
27:52 biggest thing has been more energy on
27:53 sales and marketing and then as a part
27:55 of it going after bigger customers um
27:57 which has allowed us to you know grow
27:60 faster even without bringing on
27:01 necessarily more clients per month so
27:03 you’ve doubled in three years which is
27:06 double Revenue in three years which is
27:07 incredible man yep double Revenue I I’ll
27:09 be the first to say we have not doubled
27:11 earnings it costs money to grow you know
27:13 we’ve we’ve made a ton of mistakes along
27:15 the way and and you know as you get
27:16 bigger you got to build out more GNA
27:18 like I have a sales guy now you know I
27:20 didn’t have that when I bought the
27:21 business so that that eats in the margin
27:23 but it also allows us to grow faster so
27:25 if you’re going to grow make sure you
27:27 you know you set up your deal so that
27:30 you don’t have so much pressure on cash
28:31 flow that you can’t afford it yeah me
28:34 not offering a 15
28:36 prath yeah or like you see all these
28:38 guys on Twitter who are like I want to
28:39 you know use 99% leverage and I’m just
28:42 I’m not sure that’s the best idea if you
28:43 want to grow your business no I mean we
28:45 I’ve done enough transactions to realize
28:47 the value of just 65% really is a sweet
28:50 spot of Leverage so it’s kind of it’s
28:52 made our life so much easier especially
28:54 with this interest interest rate
28:55 environment that we’re in now right I
28:56 mean a lot of these deals that got for
28:58 closed on collapsing I mean those are
28:59 the guys that did go 80 85% leverage and
28:02 it’s tough to service if you get any
28:04 sort of you know faltering in the
28:05 business and so well I thought
28:06 everything perfect in the I thought
28:08 everything was perfect in the first year
28:09 is that is that the whole idea in this
28:11 thing Chris projected it out he was
28:13 gonna double revenue and he therefore
28:15 double earnings and he got the revenue
28:16 part he just kind of missed the we got
28:18 we got half we got half done um yeah and
28:21 you know I think debt is like you got to
28:24 also pay attention to your business
28:25 right if you’re a construction business
28:27 That’s Heavy project oriented don’t put
28:29 a ton of debt on it you know we were
28:30 able to use more debt because this is
29:32 kind of more recurring Revenue um but no
29:34 matter what it’s always going to cost
29:35 money to grow yep got it and so maybe
29:38 you know for those listeners right who
29:40 is your ideal customer and what are the
29:42 services you provide yeah so we serve
29:44 generally I’d say two to10 million
29:47 Revenue small
29:48 businesses and our job is to handle the
29:50 day-to-day Finance operations for that
29:52 small business so that the owner the GM
29:55 can focus on hiring growing you know get
29:58 out of the
29:59 part of their business so what that
29:01 really means it’s bookkeeping payroll
29:04 processing it’s invoicing it’s you know
29:07 bill pay um you know if you’ve got
29:09 multiple locations we consolidate your
29:12 financials um you know creating policies
29:14 around AP we’ll train your staff on how
29:17 to use expense management you know if
29:19 you’ve got guys in the field with credit
29:20 cards and they need to start scanning
29:22 receipts with expensify like we’ll we’ll
29:25 teach them how to do that so yeah our
29:27 job is to set up and run the finance
29:29 department for generally $2 to $10
30:31 million small businesses we have some
30:33 that get up to 15 we have some that you
30:35 know are down to a million in Revenue um
30:38 but our sweet spot is kind of 10 20 30
30:41 employees and growing and an owner that
30:43 doesn’t want to spend their time in the
30:45 dayto day awesome very nice perfect um
30:49 no another Exposition in the Horizon are
30:51 you are you hunting yeah I I’ve got a
30:53 I’ve got an Loi right out right now
30:55 actually um so we don’t do taxes it’s a
30:58 very obvious add-on service for us you
30:01 know we have 180 small business clients
30:03 every single one of them
30:04 files usually several tax returns a year
30:07 um so I’ve got an Loi right now on a tax
30:11 firm that would really become system six
30:13 tax the the medium-term goal is we want
30:16 to do tax we want to do day-to-day
30:18 finance and then we want to do CFO kind
30:20 of strategic advisory work and then that
30:23 would be the whole system six Finance
30:26 umbrella um longterm we want to do
30:28 insurance and HR Consulting and just do
31:31 sort of full
31:32 service Professional Services for small
31:35 businesses but it it starts with system
31:36 six Finance which is going to be
31:37 accounting tax and CFO um love and the
31:41 other thing I’ll say that that’s been
31:42 fun is a lot of our new customers are
31:45 people buying small businesses so that’s
31:47 you know kind of how I met you guys is
31:48 it’s fun to still be in the community
31:50 serving people that are on the same path
31:52 I’ve been on no absolutely and like I
31:54 said accounting is a critical function
31:55 and you know like the vision I mean you
31:57 it’s kind of the same vision we have an
31:58 equity launch pad is really you know we
31:60 have the things that most companies
31:02 don’t focus on which is sales marketing
31:03 hrit accounting and legal right those
31:06 are six Departments of the company that
31:07 we could then apply towards any
31:09 portfolio company to help make it better
31:11 stronger and learn you know between the
31:13 different companies what’s working well
31:15 what’s not hey we rolled out this you
31:17 know uh this Health Plan here and people
31:20 love it and it’s 20% cheaper and it’s
31:22 20% better great we should you know get
31:23 that across the rest of the company or
31:25 hey we’re negotiating a big hub spot
31:27 contract here but we have six across the
31:28 different portfolio let’s go consolidate
32:30 and get better pricing I mean it just
32:31 you start it starts to self- fulfill
32:34 itself right in a lot of ways so it’s a
32:35 good Vision yeah I mean a lot of people
32:37 WR this idea of multiple Acquisitions
32:39 and then creating a shared services kind
32:41 of Department up top I think it’s it’s a
32:43 model that’s becoming you know it’s
32:45 relatively new but it it makes a ton of
32:47 sense because at the end of the day
32:48 these small businesses their core
32:50 competency is not negotiating with
32:51 HubSpot or doing accounting you know
32:54 their core competency is whatever the
32:55 product or service is and then
32:57 delivering that to C customers and you
32:59 know why should 10 different small
32:00 business owners learn how to do all
32:02 these other things when you guys can
32:04 learn it really well and then distribute
32:05 that to you know the 10 businesses that
32:07 you guys are gonna own one day abolutely
32:09 so awesome let’s go ahead and move on to
32:12 our rocket around all right love it here
32:14 we go all right Chris so let us know
32:16 what do you like to do in your free time
32:18 um right now uh golf uh golf is my like
32:22 favorite hobby passion I grew up playing
32:24 golf uh it’s a great release my wife is
32:27 expecting our first child so hobbies are
32:29 going to change a lot uh coming up here
33:32 in December and I so I’m playing a lot
33:33 of golf right now because I know my I’ll
33:35 be playing less once we welcome our
33:36 first daughter but um or you’ll be
33:39 playing nine holes you’ll just be
33:40 playing nine holes you won’t get the
33:41 whole 18 yeah nine holes early in the
33:44 morning and maybe that’s okay you know
33:46 it doesn’t it doesn’t need to be all 18
33:47 it’s like me I I go flying early in the
33:49 morning because before the family
33:50 realizes that I was kind of gone for two
33:51 three hours and try to just really
33:53 squeeze it in first thing so yeah it’s
33:57 still look it’s still important have
33:58 hobbies no absolutely I mean it’s it’s
33:00 it’s a way especially that’s that I tell
33:02 people that’s why I like flying because
33:03 they forget about everything in the
33:04 world because you’re focused on flying
33:06 the airplane and making sure you don’t
33:08 you know hurt yourself so yeah yeah feel
33:11 like off yeah all right so let’s go to
33:12 the next question so most memorable
33:14 moment in your business Journey honestly
33:16 the the first time I met a customer at
33:19 an event that I didn’t know was a
33:21 customer of ours that to me this
33:23 happened about eight or nine months ago
33:25 I was at a small business acquisition
33:26 happy hour in Tampa and and I was
33:28 talking to a guy about what we do and he
33:30 kind of cut me off he was like yeah I
34:31 use you guys and I was a little
34:33 embarrassed but it also like that’s a
34:35 that’s a testament that we’re growing I
34:37 hired a sales guy you know leads come in
34:40 they go to him he closes a deal and I
34:42 don’t need to be involved in that that’s
34:43 the first thing that jumps out of like
34:44 yeah we’re we’re starting to get moving
34:46 if we have customers that have never
34:47 even met before yeah that’s a great
34:49 story and then last question what’s your
34:51 favorite tool or resource um so we have
34:53 a system called carbon it’s sort of
34:56 email task management and basically
34:59 every client email that comes in gets
34:02 tagged based on that client and so I can
34:04 kind of go see if occasionally hey some
34:07 client wants to talk to me about
34:08 something I can just go get to it really
34:10 quick um so our team uses it for task
34:13 management I can see you know who’s
34:15 behind on tasks who’s ahead on tasks so
34:18 that’s the backbone of our business um
34:20 it’s accounting industry specific but I
34:22 would say is every person out there
34:23 should be thinking about you know task
34:26 management combined with email
34:28 as a unified system that that’s where
35:32 your company should live and there’s a
35:33 million products a monday.com my
35:36 background is software and I tell people
35:37 email is an infinite stream of
35:39 information and the taxs are the buckets
35:41 of water that you scoop out of the river
35:43 and put aside so you can go process them
35:45 and so it’s about how do you yes
35:47 constantly scoop more of those buckets
35:48 and put them aside that you know you
35:49 have something to do versus the infinite
35:51 stream information so yeah if you just
35:54 live an email and you can never go you
35:56 know look at it and Report around it
35:58 it’s really hard to know what’s going on
35:60 awesome that’s great Chris how can
35:01 people get a hold of you yeah reach out
35:04 uh Chris system.com si uh our website
35:08 system 6.com I’m on Twitter
35:11 ctws smv LinkedIn uh look it’s been
35:15 really fun to buy a small business and
35:17 be growing it and people who are
35:19 thinking about buying a small business
35:21 have bought one you know if you want to
35:23 talk about accounting services great if
35:24 you just want to talk about the roller
35:26 coaster that is running a small business
35:28 um reach out I’m I’m happy to talk to
35:30 people because I’m on the same Journey
36:31 you know I’m I’m dealing with the roller
36:33 coaster I had to talk to people when I
36:35 was trying to buy my first business and
36:36 get advice so please reach out awesome
36:38 yeah we’ll have links to a lot of that
36:40 in the show notes so Chris thank you for
36:42 being really enjoy story awesome guys
36:44 thank you Casey thank you Ferris no
36:46 problem thank you thank you for
36:47 listening to the m&a Launchpad podcast
36:49 if you’ve enjoyed today’s podcast and
36:51 would like to support us please leave us
36:52 a rating and a review after you listen
36:54 I’m Casey muu and I look forward to
36:55 talking with you next week
