In this episode of the M&A Launchpad Podcast, hosts Feras Moussa and Casey Minshew welcome special guest Seve Divitkos, discussing the challenges of launching and growing a search fund. Steve shares his experiences as a first-time CEO, the emotional toll, strategic decisions, and the eventual exit from his company. Steve dives deep into what it’s like to be a CEO. For example, the challenges he faced around the perception of young CEOs, as well as the decision process between firing and hiring top talent. At the end of the day, Steve states that the path to growth is not line, smooth, nor easy.
The podcast also highlights Steve’s current venture, Mineola Search Partners, his own podcast “In the Trenches”, and his perspective on investing in search funds. Steve is the type of person that, if you are looking to acquire a business, or invest in one, is a great guide/resource to talk to. The episode provides valuable insights if you are looking to acquire a business or invest in a search fund.
In this podcast episode, we discuss:
- Life as a CEO
- Self-Awareness as a Business Leader
- The ETA Community 10 Years Ago
- Leveraging Your Network
Time stamp:
00:00 Introduction
01:26 Importance of Financial Health in Business Acquisition
01:52 Introducing Steve Divitkos
06:18 Raising Capital and Early Challenges
14:24 Acquiring and Running the Business
17:32 Making Tough Leadership Decisions
23:08 The Journey to Exit
24:20 Personal Reflections and Mental Health
30:55 Investing in Search Funds
32:33 Rocket Round
You can connect with Steve by his podcast: In The Trenches Podcast – Apple Podcasts
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
00:02 interviewed Steve deitos and we talked
00:04 about really what it’s like to go do
00:06 your first search fund right and grow
00:09 that business all of the challenges that
00:11 you face as a CEO right it is Lonely at
00:13 the Top both in terms of you know being
00:16 able to vent to somebody being able to
00:17 digest and very few people really
00:19 understand what it’s like to be a CEO
00:21 unless you’ve been one and then really
00:23 shift to that conversation into search
00:25 fund that he’s currently doing right and
00:27 how you know what are some of the traits
00:29 that he’s looking for both in seers and
01:30 what is some of the value that he can
01:32 give his you know Searchers that he
01:33 invests in so Casey what was some of
01:35 your takeaways yeah I mean there was a
01:37 lot right compassion and all of those
01:39 things like Steve’s the kind of guy you
01:40 want to be your investor and your
01:42 straightforward like straightforward
01:43 like and he’s you tell very smart guy um
01:46 but to be able to take a company from
01:47 Soup To Nuts basically I I bought it I
01:50 searched it I sold it I raised money and
01:52 I and I built it seven years and I
01:54 exited and and recognize that you’ve
01:56 done all you can do for that business
01:57 right so it’s time self awareness to be
01:59 able to say it’s huge and then we even
01:01 get into some of the nuts and bolts of
01:02 like what is a step up and why does the
01:04 initial investor that doesn’t choose to
01:05 participate in why do they get a step up
01:07 these little Newan is that I think are
01:09 really important if you’re searching if
01:11 you’re thinking about raising a fund I
01:13 just think overall what a great podcast
01:14 I completely agree I mean searching is
01:15 hard operating is hard selling is hard
01:18 and investing is hard so lots of
01:20 different facets of the business being
01:21 poked on in this one so definitely
01:23 listen
01:25 in welcome to the m&a Launchpad podcast
01:28 with your host Casey and Ferris with
01:30 equity Launchpad on this podcast you
02:32 will gain insights on acquiring
02:33 investing in and selling profitable
02:34 businesses in the lower to Middle Market
02:36 whether you’re a business owner investor
02:38 or Spa entrepreneur at Equity Launchpad
02:40 we will provide you with the knowledge
02:41 guidance and capital to navigate the
02:43 world of emergers and
02:44 Acquisitions hey guys go ahead and just
02:46 pause the podcast for a second when
02:48 you’re buying a business you need to
02:50 ensure the financial health of the
02:51 company the quality of earnings is
02:52 Mission critical it doesn’t matter what
02:54 size business you’re buying Patrick
02:55 oconnell Advisory Group they’re dynamic
02:58 they do a great job they’re going to
02:59 look over your shoulder they’re to make
02:00 sure that you’re doing the right thing
02:02 and this guy’s done over 200 buyers
02:04 successfully just like you so reach out
02:06 to him and it’s oconnell advisory
02:08 group.com click the link in our show
02:10 notes can’t live without this hey Steve
02:12 welcome to the show thanks for having me
02:13 guys that was great I mean I think it
02:15 sounds like we saw you a few weeks ago
02:17 at Harvard with Casey and it was good to
02:18 kind of hear a little bit more of your
02:19 story and share it with the audience
02:20 yeah and that ETA conference is pretty
02:22 cool like to go it’s my third time and
02:24 we like to say you know Harvard uh Casey
02:26 never attended Harvard forly but he’s
02:27 been there for three years so that’s
02:29 right that’s got to count for something
03:30 right yeah awesome so Steve tell us a
03:33 little bit more about you know obviously
03:34 you kind of you’ve done the traditional
03:35 search you’re on the search front side
03:37 so it’ be good for our listeners to
03:38 really hear a little bit more about your
03:40 story and maybe let’s kick off with just
03:42 how you got into search to begin with
03:44 sure so coming out of undergrad I began
03:47 my career in private equity and worked
03:49 there for a couple of years and though I
03:51 enjoyed that experience as much as the
03:53 next person it never really struck me as
03:55 like what I was meant to do for the rest
03:57 of my life it very much always just felt
03:59 like a job to me a good job but a job
03:01 nonetheless and at the time I had very
03:03 entrepreneurial Ambitions but I didn’t
03:04 know exactly what form they might take
03:06 so I I left in 2010 to go to business
03:09 school and for me business school was
03:10 two years to explore experiment be
03:13 introspective as much as it was anything
03:15 else I had never heard of search funds
03:17 going into business school once I did
03:19 learn about them I got intrigued for a
03:21 number of different reasons that I’d be
03:22 happy to discuss if that would be of
03:24 interest but long story short I raised a
03:26 traditional search Fund in my second
03:28 year of business school which was 2012
03:29 and then started a search out of Toronto
04:32 which is where I’m originally from and
04:33 and still I am to this day um pause
04:36 right there really quick so private
04:38 Equity right what was the company doing
04:40 was it focused on buying businesses and
04:41 you kind of got that visibility into the
04:43 space or was it something else so I
04:46 worked for the Canada Pension Plan
04:48 investment board which is the
04:49 independent entity charged with uh
04:52 managing the assets of 20 million
04:54 working Canadians and I worked in their
04:56 private credit group their funds group
04:58 and their infrastructure private group
04:01 so I think like folks who come from
04:04 Consulting and private equity and
04:05 Investment Banking there’s a certain
04:07 desire to like get on the field so to
04:09 speak after standing on the sidelines in
04:11 a way for a number of years and that’s
04:13 what really really attracted to me I
04:15 often joked with my wife at the time I
04:17 think I said something to the effect of
04:18 like I’m tired of being a food critic I
04:20 want to be a chef and so that that kind
04:21 of maybe encapsulates the analogy and
04:25 you interact with some people and you’re
04:26 like if that person could do it I could
04:27 do it too kind of thing right so yeah so
05:30 yeah the the desire to be an operator
05:32 was certainly there I think like most
05:34 Searchers I didn’t have that one big
05:36 idea and For Better or For Worse I’ve
05:38 just never been the Venture funded
05:39 startup guy nobody I know would ever
05:42 describe me that way and so when I
05:44 learned about the fact that I could buy
05:46 my way into the entrepreneurial career
05:48 that I had been seeking that was very
05:50 appealing to me yeah and I think you
05:52 went to Harvard for your MBA is that
05:53 right yeah and I think that’s an
05:55 important thing because 2012 the really
05:57 ETA was still a very new thing right and
05:59 you know I think Harvard is one of the
05:01 people on the Forefront of all of that
05:03 and
05:03 so just had the 10th they just had the
05:05 10th so it must have been a small
05:07 ecosystem and then you also took that
05:08 and went to Toronto so you’re probably
05:10 one of three people in of Toronto doing
05:11 a search fund right yeah so you know you
05:15 guys mentioned the fact that we had just
05:16 come home from the search conference a
05:19 couple weeks ago there’s probably like
05:20 1,200 people there when I was there in
05:22 2012 a there was no conference B there
05:25 was no ETA club and C it was the first
05:28 year that the two professor who were
06:30 still teaching the course offered an ETA
06:32 class and at the time there was 12 of us
06:35 in the entire section and now I think
06:38 there’s two sections of 90 and it’s
06:39 among the top three most requested
06:41 courses within the second year so
06:43 certainly it has come a long long way
06:45 since then how lucky were you because so
06:48 the older gentleman that that teaches
06:49 that also was a Searcher and a buyer his
06:52 name is j Shar yeah man he to have that
06:56 guy as like your your teacher I mean
06:58 that’s got to be worth its waiting gold
06:00 I mean yeah I I was fortunate to be
06:03 taught by Jim Sharp who’s been a
06:05 lifelong mentor to me and still is I
06:07 think we spoke yesterday and Roy hitov
06:10 and Rick rubach who are still teaching
06:11 ETA class at HBS today yeah yeah so uh
06:15 to to know each of them personally has
06:18 just been a huge blessing so Steve
06:20 you’re you’re an OG right and for those
06:22 that don’t know because I thought my
06:23 cfone didn’t know what an OG was I guess
06:25 previous generation means Original
06:27 Gangster so one of the first people
06:28 there so you know you got of got see it
06:30 all happen and so walk us through you
07:32 know that Journey right you got exposed
07:34 to Eta you okay I’m going to do a
07:36 traditional search fund got to raise
07:37 money and you went back to Toronto and
07:39 you know how did you raise the money and
07:41 then what was the goals of the search
07:43 and then what did you ultimately find
07:44 yeah so search was certainly less
07:47 established back then than it is today I
07:49 wouldn’t call me an OG I think that like
07:50 the real ogs came 20 years before me and
07:53 those are the guys and gals that I still
07:55 talk to and lean on for advice today so
07:58 I don’t want to suggest that I I am a
07:00 Pioneer in any way shape or form but
07:02 like I said I moved back home to Toronto
07:04 to do a Canadian Focus search at the
07:06 time I think I was maybe like the third
07:07 or fourth or fifth Canadian search fund
07:10 now there’s a lot I wasn’t looking at
07:11 any particular industry I came from a
07:14 generalist Background by way of my
07:16 private Equity experience and so I
07:17 didn’t necessarily have the luxury of
07:19 saying something to the effect of I have
07:21 a lot of experience in Industry XYZ
07:23 therefore I want to acquire an industry
07:24 XYZ so almost by default I took kind of
07:27 a agnostic Approach at the time software
08:30 was a very unpopular place to acquire
08:33 within the search ecosystem again 14
08:35 years later or whatever it is that is
08:37 totally flipped on its head but I ended
08:39 up buying a software company from a
08:40 fatherson co-founding team the company
08:43 was 20 years old when I first knocked on
08:46 their door and the father and son had
08:48 been running it since they founded it in
08:50 the basement of their family home and I
08:53 think I caught the right people at the
08:55 right time who were looking to sell for
08:57 the right reasons and from SE to finish
08:59 the search took just under two years and
08:01 then I ran the company for about seven
08:02 years as the CEO got it and so really
08:05 quick right before we kind of dive into
08:06 the company walk us through that search
08:09 that you put on so not only where did
08:10 you search but I’m actually asking at
08:12 the time right very few people knew what
08:13 a search fund was right how much did you
08:16 raise and you know kind of how did you
08:17 raise that money right it’s a lot easier
08:19 now right and similar to what you’re
08:21 doing today right it’s it’s easier for a
08:23 Searcher to build relationships and
08:25 Source money how did you do it back in
08:26 2012 yeah so back then it was actually
08:29 much more common to raise some portion
09:31 of your cap table from folks in your
09:33 personal Network now I don’t come from
09:35 money I don’t have a rich uncle that I
09:37 can call and so my my network was
09:39 limited largely to like the people with
09:41 whom I had worked and so my first call
09:43 was my boss at the private Equity Firm
09:45 and I had to explain to him Adit you
09:47 know understandably for quite a while
09:49 like what the hell is a sech fund for
09:51 reasons that I still can’t articulate to
09:53 this day he did decide to invest and
09:55 he’s actually an investor still in my
09:57 current fund and at the time that was
09:59 actually pretty important optically for
09:00 search fund investors to see that hey
09:02 someone who knows you intimately has
09:04 decided to invest in you again in Canada
09:06 there was almost a non-existent search
09:09 ecosystem so I did what any good
09:10 Searcher would do which is roll up the
09:12 sleeves and start cold calling and I was
09:15 fortunate to Leverage The HBS alumni
09:18 database and you know for for some
09:19 reason when you’re a student people are
09:21 infinitely willing to speak to you and
09:22 then the minute you’re not a student
09:24 that totally changes uh but I cold
09:27 emailed cold called Canadians in the HPS
09:30 database and I spent my second year in
10:33 business school flying around both the
10:35 US and Canada trying to sell people on
10:37 this idea so about half of my cap table
10:39 were people who didn’t even know what
10:41 search funds were before me reaching out
10:43 to them and the other half was like a
10:45 pretty familiar cast of characters by
10:48 way of like the search investment
10:49 community and and Steve in you’re when
10:52 you say traditional search so you’re
10:54 going to raise and and I’m more for our
10:55 listeners right so you’re going to raise
10:57 enough money to support you to do a
10:60 search right you’re gonna you’re going
10:01 to pay yourself a salary so you got to
10:03 raise that first trunch yeah and then
10:05 then once you raise that first trunch
10:07 you’re then going to start searching for
10:09 a business and then once you find that
10:11 business you’re then going to call those
10:13 investors and sayy I’ve got a business
10:15 and then it’s time for you guys to
10:17 basically participate and they can
10:19 either choose to not participate or to
10:22 put in the money that they need based on
10:23 their on their original investment to
10:25 then fund the overall yeah that’s
10:27 correct and so I raised you were you
10:30 also were you using leverage in your
11:32 acquisition or were you raising the
11:33 whole thing as to to buy the whole
11:35 business out yeah no we used we used a
11:37 little bit of debt at the time the the
11:40 the complexion of a typical software
11:41 acquisition was very different from what
11:43 it is today and so we had lots of even
11:45 against which lenders were willing to
11:47 lend and so I think as far as I remember
11:49 I think our capitalization going in was
11:51 like roughly 50/50 mix of debt and
11:53 equity in
11:55 2012 I raised 12 units in my search fund
11:59 of those 12 units nine elected to
11:01 participate in the acquisition and three
11:03 declined and then I what happens to
11:05 those three and how much is a unit for
11:07 those listeners to kind of get a sense s
11:08 to like what we’re talking about we’re
11:09 curious we love it so the average is
11:12 probably somewhere in the neighborhood
11:14 of like 30 to $50,000 per unit there
11:17 there’s some variation and and folks
11:18 structure it in different ways but on
11:20 average that’s a reasonably safe
11:21 assumption I think I was directionally
11:23 in that ballpark though it was it was a
11:25 long time ago the amount of money that I
11:26 raised was was quite a bit lower than
11:28 what folks are raising today and so what
11:30 happened to for you to be Scrappy right
12:31 I mean some people are able to raise
12:33 infinite money and that’s actually a
12:34 detriment so yeah fa to kind of have it
12:37 a little bit less my parents kind of
12:39 joked maybe maybe it wasn’t so much of a
12:41 joke that like I was the only person
12:43 they knew who went to Harvard Business
12:44 School to take a 50% pay cut from what I
12:46 was doing prior to attending HBS but uh
12:50 sounds like my conversation with my
12:51 parents about me leaving and quitting
12:53 Microsoft so I know what you’re talking
12:54 about yeah when you’re an entrepreneur
12:56 you do what you got to do right yeah so
12:57 12 participated in units nine nine move
12:00 forward to the next round and then what
12:03 happened to the the three that did not
12:04 participate did their does their money
12:06 just go what happens to their money so
12:08 the three units that don’t participate
12:10 their Capital contribution gets stepped
12:12 up by a factor of 1.5x so for example if
12:15 they originally gave me $30,000 even
12:18 though they elected not to participate
12:19 in the acquisition that $30,000 gets
12:22 multiplied by1 and a half to equal
12:25 $45,000 and then they are issued 45,000
12:28 partnership units in the partnership
13:30 that acquired the company and so is that
13:32 typical actually didn’t realize that
13:34 there’s a step up for the people I don’t
13:35 elect yes very typical that’s been part
13:38 of the search fund world you know
13:40 substantially for its entire history the
13:42 reason why that exists is to give the
13:45 folks who took the largest risk and gave
13:48 you Capital at the earliest possible
13:50 time with some source of upside to
13:52 reflect that additional risk that they
13:54 assumed nice that’s awesome got it and
13:56 and then maybe side question did they
13:58 elect to not invest because they didn’t
13:00 like the business or you know was it
13:02 just Capital constraints so funny enough
13:05 I guess there’s two things right so at
13:07 the time the three that chose not to
13:09 invest explicitly chose not to invest
13:11 because it was a software company they
13:13 said at the time hey software I mean
13:15 they didn’t use these words but
13:17 effectively what they said is that like
13:18 software is not a suitable place for a
13:20 search fund to invest and at the time
13:22 that was generally the prevailing wisdom
13:24 you know fast forward to today alongside
13:26 Healthcare software is by a mile the
13:28 most popular place in
13:30 searchs invest so it’s it’s come a long
14:32 fault and like that’s like my background
14:34 and we’re far from that and I’m just
14:36 like so many of these guys that’s all
14:37 their siipping the Kool-Aid on right now
14:39 yeah so that that was kind of the reason
14:41 that that it happened in my case now as
14:43 an investor in search funds and with the
14:45 benefit of 14 years I mean I could say
14:48 Equity gaps are very very common and you
14:52 know what I’ve learned over the years
14:54 and this will sound very obvious to say
14:56 but you know reasonable people when
14:58 presented with identical information at
14:60 the very same time can reasonably
14:01 disagree with each other and so with the
14:03 Searchers in whom I invest today will
14:06 sometimes disagree on whether or not a
14:08 given Target company is suitable for
14:10 them it doesn’t mean one of us is right
14:12 or one of us is wrong it’s just
14:13 reasonable people disagree so you know
14:15 folks who are listening to this that
14:17 might have an equity Gap it doesn’t mean
14:19 you have a bad deal it doesn’t mean much
14:20 of anything it just means that investing
14:22 is as much as it is science maybe more
14:25 so and again reasonable people can and
14:27 very frequently do disagree great if
14:30 all right so now you’ve got your nine
15:32 people participating you’re going in and
15:34 you’re closing the deal so this is after
15:36 two years of searching got it yeah now
15:38 you’re ready to go you got a little debt
15:40 got you got some debt you got some
15:41 equity and now you’re in the business so
15:44 how’s that first year yeah and how many
15:45 employees was it to to get people kind
15:47 of size I think it was 33 employees when
15:50 we bought it the first year was an
15:51 absolute hurricane you know I often say
15:54 that like you’ll learn more in your
15:55 first month running a business than you
15:57 will in the eight months of due
15:58 diligence that preced ceeded the
15:60 purchase and and that is true even if
15:02 you run the world’s greatest due
15:04 diligence process which no Searcher does
15:06 obviously and nor should they be
15:07 expected to run such a process you know
15:09 it’s funny in my first week on the
15:11 advice of a mentor of mine I did nothing
15:14 except for meet with every single
15:16 employee oneon-one for an hour and that
15:18 took two weeks and I guess human nature
15:21 being what it is all I heard was
15:23 negatives right here’s what we suck at
15:26 here’s you know what we need to change
15:28 etc etc and I just remember kind of
15:30 emerging from the conference room the
16:32 conclusion of those first two weeks and
16:34 ask myself like gez like what the hell
16:36 did I just buy it’s just problem after
16:38 problem after problem my goodness what
16:40 I’ve come to learn since then is that
16:42 that’s you know not necessarily
16:44 reflective of reality just human beings
16:46 being who we are we tend to focus on the
16:48 negative when when asked for feedback in
16:50 that type of context not on that you’re
16:52 you’re your seat that you are in is the
16:54 seat to solve problems right and you
16:56 know the best example I like to give is
16:58 so I worked on Microsoft I was on the
16:59 Windows team it takes three years to
16:01 ship a version of Windows right so
16:03 you’re working on this thing for three
16:04 years and guess what the entire time
16:06 you’re working on it you’re working on
16:07 problems you’re not working on the good
16:09 stuff and so you get close to release
16:10 and you’re like this is a dumpster fire
16:12 nobody in the world is going to use this
16:14 piece of crap right and then you go to
16:15 launch and there’s the Press there’s
16:17 everybody seeing all the good stuff and
16:19 you almost forget about it because
16:20 you’re so deep in solving problems and
16:22 so as an entrepreneur as a CEO as an
16:24 executive right the goal is not to bring
16:26 hey look at the great things and put it
16:28 on your plate it’s actually hey let me
16:29 bring the challenge the problem to you
17:31 to help us to solve it and that’s the
17:32 seat that you’re in and you have to be
17:33 comfortable with that and some people
17:35 aren’t made out for that right it’s a
17:36 lot of negativity sometimes and people
17:38 just can’t handle that and you know
17:40 those those are the people that can’t
17:41 Excel so yeah there’s two quotes that
17:43 come to mind neither of which I came up
17:45 with the first is rolls uphill
17:47 which is probably a good encapsulation
17:49 of what you have to deal with as a CEO
17:51 and the second is that companies are
17:53 almost never doing as well as they seem
17:55 to be doing from the outside looking in
17:57 nor are they ever doing as as they seem
17:60 to be doing from the inside looking out
17:01 and that was definitely true in my
17:03 experience not heard that second one but
17:04 I do like that one that one actually
17:06 kind of resonates with a lot of stuff
17:07 that I try to say yeah like like all
17:09 good quotes that come out of my mouth I
17:10 did not come up with that all right so
17:12 now we’re in your you’re you’re in your
17:13 first year did you so let’s just say
17:16 like first couple things as a Searcher
17:18 like you yeah what was some biggest
17:19 changes you made yeah big changes a lot
17:22 of the changes that I made were the
17:23 changes that I was entirely unready to
17:25 make I think the the prevailing wisdom
17:27 in the search community rightly so is to
17:29 take a pretty light touch in the first 6
18:31 to 12 months not disturb too much Etc
18:34 that is generally the right thing to do
18:36 however my experience taught me that
18:38 like problems do not wait to present
18:40 themselves until you are ready to handle
18:42 them because you are taking over a real
18:44 business with real employees and real
18:46 problems and real bottlenecks and
18:48 whether you are ready to handle them or
18:49 not they still need to be handled and so
18:52 early on in my tenure a couple of things
18:54 I had to deal with was we had to make a
18:57 very meaningful change within our senior
18:59 leaders leadership team the one-on-one
18:00 interviews I had with the employees
18:02 yielded the conclusion very strong
18:05 conclusion that a particular team had
18:07 lost faith in their leader and I had to
18:08 make a change even though I was entirely
18:11 unready to make that change but it was
18:12 essentially forced upon me another thing
18:14 that I tried to do bit C can we dive
18:17 into that really quick because this is
18:18 something that I think is important for
18:19 young entrepreneurs to learn and I’ve
18:21 been in that same seat multiple times
18:23 and was your experience the same that
18:25 I’ve had which is you kind of dread it
18:26 dread it dread it you make the change
18:28 and then like a week later you’re like
18:29 man this should have been made 6 months
19:31 ago right and we all tend to reflect on
19:33 hey if this person is gone now I have
19:35 all these other challenges to solve but
19:36 we also similar to your quote actually
19:38 you forget about if this person’s gone
19:40 look at all the things that have
19:41 improved and that outweighs the work
19:43 that kind of gets created from from
19:44 making that change yeah I mean with that
19:47 specific change I was so new to the
19:48 business that I couldn’t have made that
19:50 decision six months ago even if I wanted
19:52 to because I was not yet working in the
19:53 company however I can tell you from
19:56 hiring and firing successes and mistakes
19:58 that I had while I was the CEO in every
19:01 single instance in which I had a gut
19:04 feeling that said I should move on from
19:06 this person I was never once wrong and
19:09 the mistake that I made every single
19:11 time I made it a lot less in in the
19:13 years 5 six and seven a lot more in
19:15 years one two and three is I waited too
19:17 long to make the change and so you know
19:19 the biggest regret of most CEOs is
19:21 waiting too long to make a change I’ve
19:23 almost never heard a CEO say I made that
19:25 change too quickly yeah and I would 100%
19:28 agree and resonate with that and so then
19:30 you were going to go down the second
20:31 other change you you about to mention
20:33 making yeah I think just for first time
20:35 CEOs for whatever it’s worth uh it might
20:37 be worth saying this to focus on like
20:40 quick and small wins remember that like
20:42 when you are a new particularly like a
20:44 young in experienced CEO most people
20:47 look at you reasonably skeptically and
20:49 again human beings being who we are we
20:52 tend to interpret change through the
20:54 lens of like fear right so most
20:56 frequently we’ll ask what does this mean
20:58 for me and how might this put me in some
20:00 sort of danger I.E am I at risk of
20:02 losing my job and so really really early
20:05 I always encourage Searchers and CEOs to
20:08 try to just begin the process of
20:09 building a foundation of trust with the
20:11 employees and importantly people are
20:13 going to watch you know listen to what
20:15 you say but most importantly watch what
20:16 you do so for example are there small
20:19 quick wins that you can jump on so in
20:20 our case like our customer support team
20:22 was using a crazy outdated piece of
20:24 software it was preventing them from
20:26 doing their job effectively So within
20:28 like first 30 days I tasked the manager
21:31 with like finding a replacement and
21:33 ripping it out and replacing it within I
21:35 think 90 days from the date that that
21:37 decision was made support team was
21:39 thrilled right small change an even
21:41 smaller change was we had a
21:43 Administrative Assistant who’s actually
21:45 very very important to the business and
21:46 she sat by herself in the reception area
21:48 and she kind of just innocently
21:49 mentioned hey you know it would be nice
21:50 if I had like a radio or something to
21:52 keep me company because I get kind of
21:53 lonely right I went on Amazon that night
21:55 and I bought her radio it cost 40 bucks
21:57 and you know she was absolutely thrilled
21:60 we had a employee social event within
21:02 our first two weeks right and the
21:03 company didn’t really do a ton of that
21:05 prior to my arrival so not saying that I
21:07 deserve a bunch of credit because these
21:09 are very straightforward changes but I
21:11 guess the the takeaway for me for for
21:12 new CEOs is do not underestimate the
21:15 power of a large number of seemingly
21:17 small changes just in the interest of
21:19 building that Foundation of trust that
21:21 you’ll really need to lean on once you
21:22 start making real changes yeah 100%
21:25 agree I mean it’s important to show
21:27 positive momentum for people right and
21:29 then you can it’s gets much easier to
22:31 get to buy in later for the more complex
22:33 nuances that’s so I did a solo
22:35 acquisition in 19 October 19 and I did
22:39 not get a chance to make subtle changes
22:41 because we bought a commodity based
22:43 business I did not use a a Searcher
22:45 mentality I didn’t even read a book I
22:46 just had done some things and oil prices
22:49 collapsed on us uh became pure duress uh
22:52 and then Co happened right and so all of
22:54 a sudden you know as a as a as a new
22:56 owner it’s just like hair on fire it’s
22:58 like oh my God what do you do now so you
22:01 know didn’t get a chance at now when we
22:03 did we closed on H&M in May our deal was
22:08 a chrome plating company so you know
22:10 boring Blue Collar dirty grimy kind of
22:14 facility 160 employees right so with the
22:17 the husband or the brother and sister
22:19 that ran the business and sister leaving
22:20 she was admin I focused on changing over
22:23 payroll getting the benefits right I
22:25 focused that first six months to just
22:27 improve really the employees life
23:30 quality of life with better things and
23:32 uh rode that for about six months and
23:34 then we brought in an operating uh
23:35 partner that came in and kind of took
23:37 over the Reigns and I think we might
23:39 have gone a little too hard too fast on
23:41 change right because at six months we
23:43 were like hey let’s go to work and I
23:45 hindsight you know we probably could
23:47 have just sat in let him sit in for like
23:49 another six months before we start going
23:52 into these operational change because we
23:53 got into the deep stuff and maybe
23:55 hindsight it’s that 12 month might have
23:57 been that window for us so it’s it’s
23:59 just a it’s a learning thing you know
23:00 but all of a sudden it’s like you get
23:02 into it and it’s like starts happening
23:04 it’s a life of its own yeah yeah it’s
23:06 it’s a delicate balance again like I
23:08 think that the prevailing wisdom is the
23:09 correct wisdom which is take a light
23:11 touch listen more than you speak Etc but
23:14 again the countervailing force to that
23:16 is you’re taking over a real business
23:17 with real problems and real
23:18 opportunities and real decisions that
23:20 need to get made and those again those
23:22 problems do not wait to present
23:23 themselves until you’re ready to handle
23:25 theme all right so take us down a few
23:27 roads so you you this was in 2014 and
24:30 then it sounds like you had an exit in
24:32 2020 yeah right so tell us the the
24:35 exciting part the backend of the
24:38 journey and were you looking to sell I
24:40 mean kind of how all that came to be
24:42 yeah the path from entry to exit and the
24:44 growth and all that stuff it was not
24:46 linear it was not smooth it was not easy
24:48 it was it was uh it was you know I I
24:51 often say being a CEO and being an
24:53 entrepreneur in that context was the
24:54 hardest thing I’ve ever done and I hope
24:56 it is it will remain the hardest thing
24:58 that I will ever do in my career I often
24:00 say quite unapologetically that nobody
24:02 knows what it’s like to be a CEO unless
24:04 you have been one full stop so we
24:07 actually tried to sell the business in
24:08 2018 unsuccessfully we hired an
24:10 investment Bank we ran a full process
24:13 from start to finish took about a year
24:15 very very timeconsuming process but the
24:17 deal ended up falling apart with a
24:19 private Equity buyer in 2018 and at that
24:21 point we kind of had a choice as a board
24:23 do we re-engage with the second place
24:25 bidder that we haven’t spoken to in six
24:26 months or do we put our heads down and
24:28 just keep building and making the
24:30 changes that we learned are particularly
25:31 important throughout the course of of
25:33 trying to sell a company we chose the
25:34 ladder so we ran it for another two
25:36 years in 2020 probably like mid 2020 I
25:39 think the decision to sell was honestly
25:41 mostly a personal one more than it was a
25:43 commercial one I had the pleasure and
25:45 the benefit of working with a fantastic
25:47 board of directors and I was very honest
25:49 with them about struggles that I was
25:50 having having personally at the time I
25:53 was battling with like an unhealthy
25:55 level of anxiety at the time I think
25:57 covid plus 7 years of you know being a
25:60 CEO had just led me down a path mentally
25:02 that I never thought I would be on and
25:04 so I just kind of made a personal
25:06 decision and I said look I’ve I’ve given
25:08 everything that I can to this business
25:10 it’s been seven years I feel like I’ve
25:12 hired the people that I think needed to
25:13 be hired made the changes that I think
25:15 needed to be made and I’m kind of done I
25:17 don’t really have you know X more years
25:18 left in me and I told my board that and
25:21 they were very supportive as they always
25:22 were and they continue to be and they
25:25 basically said I think they might have
25:26 used these exact words they said like if
25:27 the conductor wants to get off the train
25:29 then I want to get off the train
26:30 something like that and I just got super
26:32 duper lucky that there was a strategic
26:35 in our industry that was just
26:37 competitive enough and just
26:38 complimentary enough that was looking to
26:40 grow obviously and they were looking to
26:42 grow specifically inorganically we were
26:44 looking to sell and we had kind of you
26:46 know touch base with them a couple times
26:48 over the years but we at least you know
26:50 directionally knew each other and we
26:52 reached out to them and said hey we we
26:53 might be interested in selling they said
26:55 hey we might be interested in buying and
26:56 you know fortunately I think it was like
26:58 two months or three three months after
26:60 that the company was sold so the impetus
26:02 to sell was was very much a personal
26:04 decision led by me as opposed to like
26:07 something that was purely commercial
26:09 though obviously we we did have our
26:10 commercial rationale for it no that’s I
26:13 mean absolutely I love I love the the
26:14 clear honesty about your your your
26:16 journey because you know I will tell you
26:18 man I have take in daily meditation I
26:19 mean the amount of intensity stuff I do
26:22 mornings I mean I will not not do it
26:24 because just for me I found that that
26:26 helps me just kind of just have that I
26:29 don’t give a I don’t give a
26:30 attitude for a moment and just like hey
27:32 I’m gonna take the day and uh it’s just
27:34 a lot I mean it’s Spitfire I’ve been an
27:36 entrepreneur since I was 21 years old
27:38 doing startup and thinking that
27:40 Acquisitions would be easier and uh holy
27:43 you know the day I close on my
27:45 business I have a picture in in
27:47 literally November of 2019 by the by the
27:51 the big screen my in my my living room
27:54 of oil negative oil prices on MSNBC or
27:56 or what up CNBC and my wife took the
27:59 picture and she said why am I taking
27:01 this picture she’s totally pissed right
27:02 we personally guaranteed everything and
27:04 I said because this going to be a great
27:05 story we’re going to tell one day and
27:07 she was like I hope so and I mean the
27:09 tension between she and I for the next
27:10 like year and a half and we we
27:12 ultimately survived and and and the
27:14 business is still there but it’s just
27:15 it’s constant like bar said at the
27:17 beginning problem solving over and over
27:20 again problem solving without Clarity on
27:22 like you know like right now you’re like
27:23 in a waiting game I mean right now I was
27:25 literally enumerating this yesterday I
27:27 had lunch with a with a friend who’s a
27:28 bank I was like here are the 15 really
28:30 crazy things going on across our you
28:33 know our company and all the things that
28:34 I’m just waiting I don’t know which way
28:36 the cards are going to fall and you’re
28:37 just waiting you know for certain things
28:39 like whether this approval or this thing
28:41 and you know and you have anxiety is a
28:44 serious problem right in our space I
28:46 mean it’s you have to be comfortable
28:48 having it right and it wears on you over
28:50 time so Steve I think I think at the end
28:51 of the day for our listeners that you
28:53 know that really helps people understand
28:54 right you did everything in the process
28:57 you even got to an exit right and even
28:60 though you made a personal decision you
28:01 still got you your exit because You’
28:02 already been looking for that right yeah
28:04 but man what like the amount
28:06 of the amount of pressure and the amount
28:09 of things that you had to deal with in
28:10 those seven years even from the point of
28:12 VI Define the business search the
28:14 business close the business raise the
28:16 money for the business run the business
28:18 and exit the
28:20 business man that’s why you’re raising a
28:22 search fund right yeah is a lot and and
28:25 now as someone who’s lucky enough to
28:26 invest in search funds and the companies
28:28 that they acquire I like purposely go
29:31 out of my way to be the investor that I
29:35 know I wanted to have when I was a CEO
29:39 I’m very happy and and very frequently
29:41 discuss commercial issues but just as
29:44 importantly I try to like purposely go
29:46 out of my way to create a space to
29:47 discuss personal issues because I know
29:50 what it’s like to put your head on the
29:51 pillow at night as a CEO to feel that
29:53 immense pressure and illiquidity and
29:56 uncertainty and anxiety and their weight
29:57 of the world is on your shoulders and I
29:59 just think that as a community in search
29:01 we’re getting a lot better at talking
29:02 about it but I still think that there’s
29:04 a lot more room for us to talk about the
29:06 realities of being a CEO and I I often
29:09 say that you know managing your own
29:10 psychology is just as important as if
29:13 not more important than managing your
29:15 business um and I did a lousy job of
29:18 managing my own psychology when I was a
29:20 CEO and now I I try to go out of my way
29:22 as an investor to ensure that the CEOs
29:24 that I work with don’t fall into the
29:26 same trap yeah because the other thing
29:27 we’re not talking about is you know as a
30:30 CEO you’re pretty much everybody else’s
30:33 therapist right but then it’s like who’s
30:35 your therapist that’s the the nice thing
30:36 I’ve always had is I’ve had Partners you
30:38 know Casey Ben and we were’re able to at
30:41 least amongst us just both strategize
30:43 then debrief and kind of get another
30:45 lens and that helps but you know if
30:47 you’re doing it alone at the top it is
30:49 Lonely at the Top and so we’ve all heard
30:51 the phrase and there’s and that’s why
30:52 every CEO and every entrepreneur ought
30:54 to have a literal therapist it took me
30:57 probably I don’t know four four five
30:59 years into my CEO journey to finally get
30:01 one but yeah all that emotion all that
30:03 stress that’s got to go somewhere and it
30:05 can’t just kind of stay inside of you
30:07 and so hiring in help as you would hire
30:10 a personal trainer to improve your
30:12 physical health you ought to hire a
30:14 therapist or a coach or something like
30:16 that to make sure that your mental
30:18 health is where it ought to be CH
30:20 completely agree so St yeah really quick
30:24 actually before we put I just want to
30:25 put a bow on this we can go to the
30:25 search fund because I do want to talk
30:27 through that a few minutes but really
30:28 quick you know during the seven years
31:30 right you took the employee count from
31:32 what to what and maybe if you could
31:33 share revenue or iida how much you grew
31:36 it whether that be dollars or multiples
31:38 or just to kind of give people you know
31:39 a gauge as to what happened over those
31:41 seven years yeah so when like I said
31:44 when we bought the company it was about
31:46 33 employees when we sold I think it was
31:48 like directionally 75 employees like
31:50 somewhere low to mid 70s and we
31:54 increased uh Equity value on a growth B
31:57 on a gross basis by about forx so
31:60 thankfully it was um it was a it was a
31:02 successful outcome I will not even come
31:05 close to like the Mount Rushmore of
31:07 search fund outcomes I’m pretty like
31:09 average in that regard but it was
31:12 fortunately it was a it was a good
31:13 economic outcome at the end of the day
31:16 so tapping on before we we get into the
31:17 rocket round talk so you currently have
31:20 a search fund that you’re raising money
31:22 so you’re raising money to participate
31:24 with other Searchers right talk to us
31:26 yeah so I’m on I’m getting close to fund
31:28 two now so fund one the firm’s name is
32:31 minola search Partners we we’ll link
32:33 that in the show notes for the listeners
32:35 yeah thank you we we invest in search
32:36 funds in the companies that they acquire
32:38 across Canada and the US that was
32:40 started about three years ago uh and
32:42 fortunately it’s worked out reasonably
32:44 well so we’re soon to be on to fund two
32:47 where we will continue to invest in
32:49 Searchers across North America and the
32:51 companies that they
32:52 acquire um and again the goal there is
32:56 in many ways
32:59 you know on one hand to replicate the
32:01 best of what I got from my investors and
32:03 on the other hand to kind of be the
32:05 investor that I wish that I had and and
32:07 and I know that former CEOs like I said
32:10 know what it’s like and and hopefully
32:12 you know we conduct ourselves
32:13 accordingly when we’re on the other side
32:15 of the table yeah no and I mean from
32:17 just our conversation Steve I think you
32:19 are the kind of investor I’d want as a
32:20 Searcher right get it there’s lots of
32:23 ups and downs in the attorney and you
32:25 know the last thing as a Searcher and as
32:27 a CE you want to be dealing with is you
32:29 know an antsy investor right and I mean
33:31 even on you know we do a lot of real
33:33 estate our best investors are the ones
33:34 that aren’t antsy right the ones that
33:36 hey give us the breathing room to kind
33:37 of go do what we need to do and perform
33:39 compassion too man that you can see the
33:40 compassion and that’s pretty awesome uh
33:42 that’s what that’s what’s needed you
33:44 know it’s not like hey it’s not
33:45 handcuffs right we’re we’re wanting to
33:47 to to grow something special together
33:49 and I get that from you very much yeah
33:50 alignment of Interest all right now onto
33:53 our rocket round so uh we always ask our
33:56 guests three questions just to get the
33:58 learn about them personally and learn
33:59 about a little bit more all right so
33:01 Steve what do you like to do in your
33:02 free time this is a very boring answer
33:06 but uh I play golf as much as I can I
33:09 have two kids so I can’t golf that much
33:12 disappearing for six hours on a Saturday
33:14 is no longer something that my wife is
33:15 willing to to tolerate uh but to the
33:17 extent that I can sneak out on a weekday
33:20 uh I like to hack around and and play
33:22 golf as much as I can it’s a good way to
33:25 get outside you know directionally
33:28 a form of exercise I suppose uh but it’s
34:31 a good hobby that you can totally geek
34:32 out on so that that’s my answer to that
34:34 one that is awesome see you know I
34:37 promise to my to The Listener sometime
34:38 in the next three years I’m gonna learn
34:39 to play golf all right myself a
34:41 three-year window because we had
34:43 intervie Bill snow and he said if you’re
34:45 buying businesses you have to be doing
34:46 golf you are not serious in the business
34:48 in the space if you’re not a golfer it’s
34:49 pretty much for for how how he put it so
34:52 all right next question what was your
34:54 most memorable moment in your business
34:55 Journey
34:58 most memorable moment in the business
34:60 Journey that’s a good question I would
34:03 say maybe I I’ll re I’ll answer a
34:06 slightly different question which is
34:07 like the scariest moment or one of the
34:09 scariest moments was when we bought that
34:11 company we were selling software to five
34:12 different end markets um Health Care
34:16 Insurance Financial Services
34:18 transportation and education I think
34:21 there was a point in 2015 I think it was
34:23 we made the decision basically to fire a
34:26 very large percentage of our customer
34:27 base and F Focus exclusively on
34:29 transportation and Logistics there was a
35:31 whole bunch of reasons why we thought we
35:33 would be better why we thought we would
35:34 be better served as a vertical software
35:36 provider as opposed to a horizontal one
35:38 so we did that you know whatever six or
35:41 seven years later it ended up working
35:42 out but that was a very scary
35:43 proposition to basically call a very
35:45 large percentage of our customer base
35:47 and saying we don’t care about your
35:48 requirements anymore and if you want to
35:50 change that button or add that feature
35:52 unless you’re a trucking company our
35:53 answer is no that is gutsy I will give
35:56 you that fortune favors the bow right
35:59 all right and last question what is your
35:01 favorite tool or resource I have a bunch
35:04 of them I use calendly a lot I know
35:06 that’s a super lame answer because cly
35:08 has been around for a very long time and
35:10 it is not necessarily a particularly
35:13 newer novel resource but I don’t have
35:15 like an administrative assistant and so
35:18 the amount of hours that that tool has
35:20 probably saved me is worth it’s weight
35:22 and gold so I’m going to go with a super
35:24 boring vanilla calendly for those that
35:27 don’t know been thinking about start
35:28 I’ve tried and I just now I’m I’ve been
36:30 thinking about it yeah and for those who
36:32 don’t know what it is right it’s
36:33 obviously a way that shows availability
36:35 for people and you give them a link and
36:36 they can go schedule so no it’s it’s
36:38 definitely super
36:39 convenient awesome well you we’ll call
36:42 that a wrap so Steve how can people get
36:43 a hold of you best way to uh if if if
36:47 anything that I said resonated best
36:49 thing to do would be actually to check
36:51 out my own podcast which is called in
36:53 the trenches uh I’ve done it for about
36:55 four years now I do my best to talk
36:57 about the realities of buying a business
36:59 running a business selling a business
36:01 and also managing yourself and your own
36:03 psychology and do my best to talk about
36:05 all the mistakes that I made of which
36:07 there are many and for any areas in
36:10 which I’m not particularly well suited
36:11 to talk to through personal experience
36:13 I’ll interview third parties uh on on
36:16 various topics spanning again you know
36:18 managing your business but also managing
36:20 yourself so if anyone is looking for an
36:23 ambient replacement to put them straight
36:25 to bed that that might be where I direct
36:27 you all right perfect Steve wolf Steve
36:29 just fantastic really glad we had a
37:31 chance I know we had a chance to talk at
37:33 the uh at the conference but this was
37:34 really this was great so very nice to
37:37 meet you again thank you for having me I
37:39 appreciate it thank you Steve thank you
37:40 for listening to the m&a Launchpad
37:42 podcast if you’ve enjoyed today’s
37:43 podcast and would like to support us
37:45 please leave us a rating and a review
37:46 after you listen if you’re looking for
37:48 guidance on your next business
37:49 acquisition or sale Capital to support
37:51 your next business transaction or to
37:53 invest in a private Equity opportunity
37:55 visit Equity launchpad.com to learn more
37:58 and to connect with our team if you know
37:60 of an individual who would be a great
37:01 guest for the show head over to equity
37:03 launchpad.com
37:05 nominate where you’ll have the chance to
37:07 refer yourself or someone else to be a
37:09 guest on our show I’m Casey mchu and I
37:11 look forward to talking with you next
37:12 week
