In this episode of the M&A Launchpad Podcast, Casey Minshew and Feras Moussa interview Michael and Meredith Schlinkert, owners of BackgroundConnect, as they share their journey of acquiring a background screening company in Houston. They discuss their backgrounds, the search process for the right business, the challenges they faced during the acquisition, and their strategies for growth in the first year.
The conversation highlights the importance of having the right team, understanding the business landscape, and building strong client relationships. They also reflect on their experiences and offer advice for aspiring entrepreneurs looking to make similar moves in the business world.
In this episode
- How Michael and Meredith Schlinkert navigated the business acquisition process while maintaining full-time jobs.
- The challenges of entering the background screening industry and how they adapted.
- Key strategies for post-acquisition growth, including technology investments and client relationships.
- How they financed their acquisition using self-raised equity and an SBA loan.
You can contact Meredith Schlinkert at mschlinkert@backgroundconnect.com
Additional Resources:
- Access our archive of video interviews on YouTube https://www.youtube.com/@MALaunchpad
- 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 (https://equity-launchpad.com/)
- Love this podcast? Join the M&A Launchpad Community at the M&A Launchpad Conference on May 3rd in Houston. Get your tickets here: https://www.malaunchpad.com/
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Transcript
00:00 all right on today’s episode we
00:01 interviewed Michael and Meredith where
00:03 we talked about what it looks like for a
00:05 couple to basically put a plan in place
00:07 to go find a business bet some
00:09 businesses and ultimately buy a
00:10 background screening company you know
00:12 based here in Houston in our backyard
00:14 and really what that first year looked
00:15 like some of the mechanics and
00:16 challenges they faced along the way so
00:18 Casey what some of your takeaways you
00:20 know I love the fact you know Michael’s
00:21 an attorney Meredith has her Finance
00:24 degree and together you know they really
00:25 got to sit down at the table they’re a
00:27 young couple they got they really
00:29 started thinking about future of their
00:31 family how to get there building that
00:33 generational wealth and the smartest
00:36 thing to do in my opinion right now and
00:38 where things are at is to go out and buy
00:40 a company from somebody that’s not going
00:41 to retire sounds like they got an
00:43 amazing deal they’re going through
00:45 they’re getting the Reps but man they
00:47 didn’t spend five years you know it took
00:49 them a couple years to search and find
00:51 it but when they found it they were
00:52 ready to go and they closed just an
00:54 incredible inspiring podcast yeah the
00:56 other thing too to think about you I’ve
00:57 never really thought much about
00:59 background screening as a business but
01:00 it does get you into a kind of a a
01:03 really critical crucial part of a
01:05 business right because their customers
01:07 is usually that HR Director someone
01:09 around compliance that kind of person on
01:12 the other side right that is ordering
01:14 the screenings for people and so it gets
01:16 you to a decision maker that you could
01:17 really done correctly start to expand
01:19 out into so kind of a cool little space
01:21 and probably some interesting things and
01:22 it’ll be see interesting to see what
01:24 they accomplish over the next couple
01:25 years let’s hop right into it
01:34 if you’re looking to buy sell or scale a
01:37 company in the lower Middle Market this
01:38 is a do not miss event on May 3rd 2025
01:42 here in Houston we have a huge lineup
01:45 Walker diable of buy and build we’ve got
01:47 the CEO of Flippa who’s going to be here
01:49 to talk about all the ways that people
01:51 are buying businesses online and we’ve
01:53 got several other people like Roman base
01:55 if you talk about business structures
01:57 how you do it from a legal standpoint
01:58 we’re going to be talking about
01:59 independent spot sponsors we’re going to
02:00 be talking about how to do fundraising
02:02 for your business acquisition how to
02:04 structure your financing and it goes on
02:06 and on and on the information is going
02:08 to be phenomenal we’re going to bring
02:10 value packed this is not a guru session
02:13 this is all about connecting you with
02:15 the right people putting your businesses
02:17 together getting it to the next stage
02:19 this day is full it’s power packed we
02:22 want to invite you out again May 3rd
02:24 2025 here in Houston get signed up it’s
02:27 going to be one heck of a conference we
02:29 are excited about having Meredith
02:32 Michael welcome to the show thank you
02:34 thank you much FIS yeah really excited
02:35 to hear your story about you guys making
02:37 an acquisition I know you guys came out
02:39 to our conference this last year so
02:41 going to be exciting so why don’t you
02:42 dive in and tell us uh yeah maybe tell
02:44 the listeners just kind of you know what
02:45 you guys bought and then kind of we can
02:47 dive into maybe what led you to start to
02:49 look for that business right what did
02:51 you guys do before then and what kind of
02:52 LED you to want to make that change yeah
02:54 I’ll start with my background and then
02:56 we can go from there so I grew up here
02:57 in Houston I uh went to school at in
03:00 Dallas I got a finance degree and I
03:03 worked in commercial real estate for a
03:05 few years and I was enjoying it but I
03:07 was after some time not really feeling
03:10 like it was something that I wanted to
03:11 do long term but I didn’t necessarily
03:13 know what that was going to look like
03:15 and that was kind of when Michael
03:17 introduced me to the ETA space and um
03:20 I’m an attorney I was born and raised in
03:22 Dallas started practicing in Dallas then
03:24 moved down to Houston I did a lot did a
03:26 lot of Finance still do a lot of finance
03:28 and uh kind of m& adjacent type work so
03:30 I did a lot of deals for my clients and
03:32 saw them really being actively involved
03:34 in building businesses building
03:36 platforms it really kind of sparked my
03:38 interest at some point along the way I
03:40 read that famous uh Harvard Business
03:41 review book about you know buying and
03:43 running a small business yourself and
03:45 that really kind of got the wheels
03:46 turning into my head that this is
03:47 something anyone can go do so between
03:49 that listening to podcasts such as your
03:52 own and just reviewing other material in
03:53 the space I got really interested in the
03:55 idea of purchasing a company for us to
03:57 operate as a family you know it’s pretty
03:58 exciting story because I’ll tell you the
04:00 uh you know similar to you guys I I
04:02 spent years in doing Finance startup but
04:05 I was also helping people put deals
04:06 together and I had a client that showed
04:07 me kind of the leverage buyout using SBA
04:10 and I helped them execute and I was like
04:12 oh my goodness I can do this myself and
04:14 so I know that too but I read the
04:16 Harvard Business Journal after I made my
04:18 acquisition I should have read that
04:19 before because I made so many mistakes
04:21 you know so it’s got quite interesting
04:24 clients can motivate us to to jump and
04:26 I’m so glad you guys did it you pulled
04:27 the trigger you did it and speaking of
04:29 you know it’s important we always stress
04:31 having the right team right in terms of
04:33 you know if I don’t know Financial
04:35 structuring I really need to have a
04:36 mortgage broker helping me right if I
04:38 don’t know the legal side I need to have
04:40 someone in legal side and so it’s good
04:42 that you already had that so you already
04:43 knew what to look for you’re able to
04:45 kind of help guide y’all’s acquisition
04:48 right and I think you know that’s an
04:49 important thing for people to understand
04:50 a lot of these deals none of it is hard
04:52 but it is a lot of different pieces and
04:54 it’s about really getting kind of enough
04:56 depth whether you know that or someone
04:58 else on the team knows that to help get
05:01 these deals across the finish line so
05:03 Michael you obviously told Meredith
05:04 about it so tell us about the search
05:06 process so y’all y’all are sitting there
05:07 at the dinner table you have kids right
05:10 I me no kids okay so together you guys
05:13 said let nice so then tell us that
05:15 process how did this come about yeah so
05:18 I had been practicing for a number of
05:20 years at this point and we were actually
05:21 searching while we were both continuing
05:23 to maintain full-time jobs so it was
05:24 kind of a part-time search for two or
05:26 three years you know signing a lot of
05:27 sim or signing a lot of ndas reviewing a
05:29 lot of sim really a brokered search
05:31 because we didn’t have the time to go
05:33 try and Source off Market type deals but
05:35 yeah it was really dinner conversations
05:37 we would sit down and I would present
05:38 here I’ve signed an NDA we’ve got this
05:40 Sim do you want to take a look at this
05:41 and kind of have a discussion about what
05:43 we think the strengths or weaknesses or
05:44 opportunities or threats of each of
05:45 these kind of different business
05:47 opportunities are and were you guys
05:48 looking just in Houston in Texas
05:51 Nationwide what was kind of at least the
05:52 the thesis right in terms of both
05:54 location and asset class or business
05:56 type absolutely so geographically we
05:58 were really kind of constrained Prim
05:60 primarily in Houston I think if we had
06:01 found a great deal into making in Austin
06:04 or Dallas we might have been able to be
06:05 convinced but um you know we were
06:07 setting up to kind of start building a
06:08 family start setting Roots down here in
06:10 Houston so we wanted to stay here if
06:11 possible beyond that we were kind of
06:13 industry agnostic but both coming from a
06:15 Professional Services type background we
06:17 kind of lean towards businessto Business
06:19 Services type deals okay so Meredith
06:22 with your Finance background right
06:23 because we we talk about finance and
06:25 then you you know they teach you things
06:27 in school you learn things and all that
06:29 good stuff andone of really applies
06:30 until you go do a real deal so did you
06:32 get a whole new education going through
06:34 this process and putting the deal
06:36 together yeah it was interesting because
06:38 my background is mainly in real estate
06:40 Finance so it’s slightly different
06:42 you’re looking at it from a different
06:43 perspective but it was definitely
06:45 helpful when we were planning out you
06:48 know looking at financials of different
06:49 companies and figuring out what made
06:51 sense to to move forward with so
06:53 definitely helpful got it and so then
06:55 maybe so tell us about what were some of
06:57 the kind of businesses you did look at
06:58 and then ultimately you know tell us
07:01 about the business you bought yeah so we
07:03 looked at I mean accounting firms we
07:05 looked at uh engineering or
07:07 architectural firms even some law firms
07:09 uh a variety of different professions
07:11 yeah you do have that little check box
07:12 it’s actually for those that are
07:13 listening because I’ve looked into it
07:14 it’s not easy for other people that to
07:16 own a law firm if you’re not a lawyer
07:17 and I’m not a lawyer unfortunately
07:19 apparently there are certain states that
07:20 let you so that’s why there’s no
07:22 publicly traded law firms that’s exactly
07:24 right though I think KPMG or one of the
07:25 big four accounting firms is trying to
07:27 get in through one of those states that
07:28 lets you know yeah so that was a
07:30 particular Advantage there’s just not a
07:31 lot of I would say liquidity in that
07:33 market generally a lot of people who are
07:35 retiring or just kind of shutting their
07:36 business down or handing it to whoever’s
07:37 already in line but on the flip side
07:39 there’s hardly any buyers in that space
07:41 as well so that was really an
07:43 interesting thing that still is kind of
07:44 something kicking around in my head we
07:47 looked at some nonprofessional Services
07:48 as well particularly some retail type
07:51 businesses Spa um stuff like that but
07:54 ultimately we kind of decided that since
07:56 both of our backgrounds were in
07:57 Professional Services B2B seemed like
07:59 the choice to go okay that led us to uh
08:01 background connect which is our
08:02 pre-employment screening Wonder firm
08:05 does background checks drug tests uh
08:08 physicals basically any solution that
08:10 you need to do before you hire someone
08:11 we can help you fix it got it so so tell
08:14 maybe let’s dive into that a little bit
08:15 more though so the company is it you
08:18 know is it a physical store is it purely
08:21 you know remote you know and how big of
08:23 a company are we talking about so it can
08:26 be fully remote we do have a small
08:28 office I honestly work from home most of
08:31 the time so it’s really nice that we
08:32 have the flexibility we can work with
08:34 clients all over the country it’s all
08:37 just on the computer and the company was
08:39 pretty small we had let me think I think
08:42 there was four employees when we bought
08:44 it you know it’s our first acquisition
08:47 and uh we just honestly I wasn’t as
08:49 comfortable doing a huge deal I think he
08:51 would have been more comfortable doing
08:53 it at least from the getg go now
08:56 thinking about it potentially buying
08:58 other ones other background cheack
08:60 companies would be a cool idea in the
09:02 future I’ll tell you that it doesn’t
09:04 matter how big of a business you buy
09:06 it’s the fact that you set out a goal
09:08 you went out and achieved your goal and
09:10 then that starts to create some critical
09:12 mass and then you start to build off of
09:14 that because you guys now have you’re
09:16 gonna figure out all kinds of things
09:17 along the way you know and and I bought
09:19 an oilfield Service Company in Oklahoma
09:22 but I had done multiple startups for
09:23 most of my career so I’m I’m used to not
09:25 like I’m used to being able to barely
09:27 make payroll um that was like one of the
09:29 things you always deal with you know and
09:32 uh you know it was a smaller business uh
09:34 but you know we’re still there we’re
09:35 still we’re still in a great Market I
09:37 think you know it’s gonna be great but
09:39 when I met Ferris and Ben you know for
09:41 us to get our money out and to do it
09:43 right and everybody to be able to be
09:45 bigger we had to go for a bigger deal
09:47 right so now we’re now we’re taking a c
09:49 it’s doing close to four million e time
09:51 we make that acquisition and I had to
09:52 learn along the way right and I look
09:54 back and I’m like man I made a lot of
09:56 mistakes you know no no I would say you
09:58 know big or small I mean you’re just
10:00 you’re just getting different kinds of
10:02 headaches they all have their own
10:03 headaches and own challenges right and
10:05 you know bigger always sounds cool but
10:06 there’s also a lot bigger of problems to
10:09 solve you know then just yeah so Kos on
10:12 getting it done we’re making our
10:13 mistakes on a small scale so that’s good
10:16 but there’s also you know cons of of
10:19 building more uh structures and
10:22 everything in place got it and so why
10:24 was the seller selling right what did
10:25 you guys buy it for and how’ youall
10:27 finance it yeah so it was a kind of a
10:30 classic situation where the seller is
10:32 you know getting up there in age and
10:34 looking to retire and uh he had kids who
10:37 weren’t particularly interested in
10:38 taking over the business so he’s kind of
10:40 trying to figure out what his exit
10:41 options were he had listed it through a
10:43 broker and it had been around for a
10:44 little bit on the market but not too
10:45 long we ended up buying it for between
10:48 three and three and a half times cash
10:50 flow and it was totally self-raised
10:52 Equity financed as well as an SBA loan
10:54 so a pretty straightforward deal got it
10:56 and so so three three and and what was
10:58 the cash flows at the time
10:60 yeah so cash flows were at a smidge
11:02 under half a million half a million okay
11:04 so per perfect yeah I mean good deal
11:07 size perfect SBA kind of down the-
11:09 middle type of deal right yeah exactly
11:12 from a deal structuring standpoint it
11:13 was all very straightforward I noticed
11:15 you say cash flow instead of IA so did
11:17 you did you look at that metrics
11:19 differently or how did you when you did
11:21 your valuation because I know IA is a
11:23 myth right it’s yeah what is it earnings
11:27 before interest tax depreciation I know
11:30 the what’s the unofficial one everyone
11:31 says where it’s earnings before everyone
11:33 throws whatever they can to get in there
11:36 earnings before all your real expenses
11:38 yeah exactly um now I we looked at it as
11:42 you know the cash flow it was producing
11:43 as well as the owner’s salary and this
11:45 uh kind of lower Market a lot of these
11:46 deals are trading on SD sellers
11:48 discretionary earnings which is what the
11:50 business is producing as well as what
11:52 the owner who is a critical piece of the
11:54 employment situation is taking home so
11:57 did y all back into like okay this is
11:59 what this the owner’s making and this is
12:01 what we’re going to keep and then the
12:03 rest we’re going to reinvest in the
12:04 business how did you guys kind of look
12:05 at it from your evaluations doing yeah
12:09 that’s generally right I think uh you
12:11 know our expectation was to kind of do
12:12 slow changes at the start so not needing
12:14 a ton of further Equity further cash
12:17 flow investment UPF front but down the
12:19 road understanding that as the loan gets
12:21 paid down our Equity appreciates we’re
12:23 going to be getting a large irr once
12:25 this is all said and done you know
12:27 that’s pretty amazing and so when we
12:28 look at real estate we buy an asset you
12:31 get you get your tenant in let’s just
12:32 say it’s a a single family resident that
12:34 person’s paying them paying rent you’re
12:37 getting depreciation am you’re get your
12:39 some amortization But ultimately you’re
12:40 paying that mortgage right you’re paying
12:42 it off in time and most of the time
12:44 you’re financing it’s like a 30-year
12:45 mortgage so you’re it’s going to take
12:47 time to really start to see that but
12:49 with SBA you’ve got a 10year note right
12:53 and so really at the five-year Mark
12:54 you’re really starting to to Really
12:56 hammer in a lot of that pay down and
12:59 you’re able to take some of that excess
13:00 cash flow and make decisions in there as
13:02 you build your business hopefully you
13:03 grow that business but you’re right you
13:05 only had to put 10% down and so that irr
13:09 when you’re all said and done should be
13:11 fairly significant if if the business is
13:13 successful even if you don’t grow it by
13:15 Leaps and Bounds no people forget about
13:18 you know people really look at one thing
13:20 or the other they either hyperfixate
13:22 usually it’s cash flow but they forget
13:23 about all the other intangibles right
13:25 whether it’s appreciation whether it’s
13:26 you know depreciation whether it’s pay
13:28 down of the note I mean all that
13:29 compound to give you a good exit but
13:31 maybe to to give people more more
13:34 specifics right in terms of the
13:35 structure that Casey’s getting at I mean
13:37 you know so you said you’re were roughly
13:38 500,000 you know so that means you
13:40 bought it in that one and a half two
13:42 million range right so you probably put
13:44 down 30 300,000 is is that about
13:46 ballpark two to 300 I mean I’m guessing
13:48 all in yeah that’s around right and so
13:51 then the business is Cash flowing 500
13:53 how much is it after Debt Service around
13:56 200 so then you brought two to 300 but
13:60 you know each year you’re pulling out
14:01 200 so your Roi right to kind of stud
14:04 the needle I mean you know you’re 80 to
14:06 120% right depending on how you know
14:08 where the math lies which yeah on year
14:10 one exactly which is very very
14:13 attractive obviously absolutely the flip
14:15 side you’re paying yourself no and
14:17 you’re paying down the note I agree I’m
14:18 talking about just a straight Roi and
14:20 that’s what you know people kind of
14:21 gloss over so my Roi on and that’s
14:24 that’s why you lever up right that’s the
14:25 difference between good debt and bad
14:26 debt right Levering up I now am getting
14:29 a very very attractive Roi on that $2
14:32 200,000 if I had that $200,000 I could
14:33 have put in a CD for four and a half
14:35 percent right or I can go buy a business
14:37 and get you know 100% right which one’s
14:39 more attractive oh and I’m also paying
14:41 that a note and getting other
14:42 intangibles and so so Meredith was this
14:45 kind of the finance conversation you
14:46 guys were having or was it more about
14:48 hey we just need to get a business and
14:50 and get it done and get it going were we
14:52 all having these conversations when you
14:53 were thinking about the investment yeah
14:55 of course we were having both of those
14:57 conversations I think it was down to
15:00 deal size and type of company I think
15:03 that What attracted us to this company
15:05 as Michael was saying is the kind of the
15:08 B2B the idea that this could is remote
15:11 or in office was was something that we
15:14 were more comfortable with we decided
15:17 overall that it made sense for me to
15:19 kind of step in as an operator and for
15:21 Michael to to kind of continue with his
15:23 job so was definitely something that I
15:25 needed to be comfortable running so
15:28 after looking into a handful of
15:30 businesses this this seemed to be the
15:31 perfect fit got it and how long did it
15:34 take you to find it start to finish I
15:36 mean again we’ve been searching for a
15:38 couple of years just part-time search
15:40 trying to find the deal that made sense
15:41 once we got it under Loi I think we were
15:44 ready to close about three months later
15:46 it took a little bit of time to work
15:47 through some uh legal issues licensing
15:50 issues at that point we were middle of
15:52 November and the seller was kind of like
15:53 guys can we just wait until January 1st
15:56 help the tax fill out a little bit so
15:58 ended up being probably 5 months
15:60 got it awesome was there any seller
16:01 carry involved in the deal yes seller’s
16:03 got a note for around 10 or 15% nice so
16:07 y’all did the the standard good
16:08 structure SBA well thought out you know
16:11 that’s hard in the search right because
16:12 you’re gonna you’re talking to owners
16:14 you’re trying to put a deal together and
16:17 there’s there’s always this standard
16:18 issue right why would I carry right and
16:21 then you start talking about networking
16:23 capital and those are the two that just
16:25 get long in the tooth and for some
16:28 reason you know that people that that
16:30 own these companies these Boomers that
16:31 are moving through they haven’t thought
16:33 about these things right so did y’all
16:35 have to go through an educational
16:36 process with the seller or did the
16:37 broker do a good job how was that
16:40 conversation yeah the broker did a
16:42 pretty good job but we certainly had to
16:44 talk through the seller and we ended up
16:46 negotiating that at length ultimately I
16:48 think the seller kept most of the
16:50 working capital and we just ended up
16:51 financing it ended up making sense for
16:53 our deal okay but yeah there was
16:55 certainly a lot of educational aspects
16:57 of getting the seller to understand what
16:59 the deal deal processes I mean it’s it’s
17:00 weird from our perspective we kind of
17:02 consider ourselves somewhat experts in
17:04 the deal process particularly because
17:06 I’ve done just a large amount of deals
17:07 in my professional work so there was
17:09 some education going that way there but
17:10 obviously on the operational side the
17:12 seller knows everything about the
17:13 business and we know next to nothing so
17:15 there’s a lot of Education going both
17:17 ways so it was kind of a good push and
17:18 pull yeah you know and for those
17:20 listeners I mean whenever you’re buying
17:22 from a person that you know they’re
17:24 they’re retiring that’s probably the
17:26 business they’ve done most of their life
17:28 if not maybe just least the most recent
17:29 part of their life that’s all they live
17:31 a know and you know on those kinds of
17:33 deals probably 50% of your time one way
17:36 or another is tied to educating the
17:37 seller right and kind of holding their
17:39 hand through the process of what to
17:42 expect why they’re going to you know
17:44 always get defensive on any change and
17:46 then you have to explain the mechanics
17:48 and oh your appraisal didn’t come back
17:50 what you said it was of course something
17:51 has to change well you know you kind of
17:53 have to work to make we’ve had all these
17:55 issues right but it’s about patience and
17:58 I think it’s these kind of deals are the
17:59 most critical of having good rapport
18:01 with your seller like you don’t want to
18:03 come off as the the slime ball that’s
18:05 difficult to work with that’s you know
18:07 just trying to force numbers to work
18:10 right it’s really about building
18:11 relationship and report and that’s what
18:13 Casey does great I mean he he goes out
18:14 there he goes belly to belly with our
18:16 Sellers and you know we spend a lot of
18:18 time cultivating and nurturing those
18:19 relationships yeah we had a conversation
18:21 yesterday with a guy love his business
18:23 love what he’s doing um he just doesn’t
18:25 know if he wants to sell or not he’s
18:27 kind of just putting it out there it was
18:28 great because you know our our senior
18:31 analyst Ben had really did a great job
18:33 getting that out of him in the initial
18:35 initial call was like hey why are you
18:36 selling he’s like I don’t really think I
18:38 am he’s like Benchmark called me and we
18:40 did this and I’m just looking but when
18:42 we started having a conversation you
18:44 know I told I just knowing that upfront
18:47 I told him I said hey I know you’re not
18:49 wanting to sell right now and that’s
18:51 okay are you okay just starting to build
18:53 a relationship with us can we meet for
18:56 coffee or can I take you to lunch in a
18:58 couple weeks he’s like I’m going to be
18:59 in Houston in a couple weeks would love
19:00 to have coffee with you and just
19:02 starting a relationship last year and
19:05 this is a lot for our listeners guys I
19:07 just last year we had a deal that we
19:09 worked nine months on to close it fell
19:12 out at you know $75,000 later it fell
19:14 out we did not close but the seller just
19:17 texted me the other day um a text of his
19:20 brother who’s climbing Mount Everest and
19:21 he knows that I climb and uh he texted
19:24 me the other day and we started
19:25 dialoguing and I’m going to take him
19:27 golfing in a couple months because we’re
19:29 going to buy that business one one day
19:31 one day you know and it’s building that
19:33 pipeline right it’s like these people
19:35 are going to you can’t force them to
19:37 exit and you can’t force them so do you
19:40 guys when you guys were searching I mean
19:42 any any type of deals that you were just
19:44 kind of like man we wanted it really bad
19:46 it was a perfect deal but just couldn’t
19:48 make it work with the
19:50 sellers um I don’t know that we in
19:53 catched any deals I would say were
19:54 perfect deals we wanted that we couldn’t
19:55 work with the sellers I would there were
19:57 almost some deals that looked very
19:59 interesting but because of issues with
20:01 building rapport with the sellers not
20:03 just issues that we weren’t able to
20:04 connect with them but issues that we
20:06 felt like they weren’t necessarily being
20:07 transparent with us um oh yeah made us
20:10 back off the deal a little bit because
20:12 we were concerned that we not might not
20:13 be seeing the full picture yeah I so so
20:16 then let’s talk about the you know once
20:18 you guys closed right how has it been
20:20 right you’re obviously right over a
20:21 little over a year so 13 months into it
20:23 I think yes how’s it gone so far how do
20:25 you feel what were the changes you did
20:27 what were the things that you regret
20:28 doing right also because those always
20:30 happen just to kind of listeners to
20:31 start thinking about what it looks like
20:33 in that first year yeah of course so
20:36 it’s been going really well we’ve made a
20:38 lot of improvements both with technology
20:40 and efficiency that was kind of our main
20:42 focus for the first year is just making
20:45 improvements where we could and now as I
20:48 mentioned since it’s a smaller company
20:50 you’re you’re building a lot of what
20:53 maybe wasn’t there before so right now
20:55 we’re working on building marketing and
20:57 sales funnels and and yeah it’s been
20:60 it’s been going pretty well it’s been
21:02 very interesting to learn the industry
21:04 uh obviously we both didn’t come from
21:06 the background screening industry so
21:07 that was a a very large learning curve
21:10 in the beginning um but yeah right now
21:14 so y’all were probably going through
21:15 looking at the business and we all have
21:17 these right you’re starting to build
21:18 your 100 day game plan your close and so
21:20 what were some of those inefficiencies
21:22 y’all saw like during due diligence that
21:25 you kind of just picked up right when
21:26 you all closed and started working on
21:28 yeah so some
21:30 inefficiencies the email system was
21:32 pretty old um there was a lot of calling
21:35 for things that could easily be
21:38 automated or done via email or other
21:42 programs the the platform where people
21:45 place orders and where our team works on
21:47 the orders was pretty outdated so one of
21:50 the big things we did was was move to a
21:53 better system that can do a whole lot
21:55 more we can offer our clients a lot more
21:58 and that’s going to help us
21:59 uh scale where we’re going to be able to
22:01 get bigger clients because our new
22:03 system is going to have all these extra
22:06 bells and whistles um yeah just to add
22:09 on to that I would say the seller was
22:11 really kind of running the business like
22:13 a very small shop leanly as makes sense
22:15 but he was running it through his own
22:16 phone so if there was ever an issue uh
22:19 with a client needing an order or with
22:20 an applicant working through an order he
22:22 would be calling that person directly or
22:24 having them call him and just working
22:26 through the issue which I It’s very
22:28 effective to solve the problem but
22:30 certainly not time efficient for what an
22:31 owner and a leader of the company I
22:33 think should be doing if they’re wanting
22:34 to focus on scaling and growing the
22:36 business to where it can be got it well
22:39 so then so that’s probably actually a
22:40 good segue to the question I was going
22:41 to ask which is you’re your year into it
22:44 has cast flows has cash flows met what
22:47 you expected have they get better or
22:48 have they gone backwards because a lot
22:49 of times right that first year you
22:51 actually typically almost go backwards a
22:53 little bit right and then you kind of
22:55 work through what we call the Dugout
22:57 right and dig out and just really you
22:59 know you’re you’re kind of making the
23:01 right changes that give you the longer
23:03 term success but sometimes that means
23:04 investing in in equipment investing in
23:07 software you know getting the right
23:09 people in the seats you know those
23:10 things those things actually have a
23:11 negative impact but then you start to
23:13 come out the backside with a much
23:15 stronger team and you start to kind of
23:16 hum and so H how has it gone yeah um
23:21 it’s as you said we we put a lot of
23:23 money invested into building out this
23:27 infrastructure and 2024 with the
23:30 election year and everything it wasn’t
23:32 as doing as hot as we were kind of
23:35 hoping it would but I think that
23:37 everything that we’ve put in we’re
23:39 excited about and and know that there’s
23:41 going to be good growth from that so
23:44 yeah J curve it’s a little bit of a J
23:46 curve right you close and then you’re
23:49 like you’re a houstonian right Meredith
23:52 yeah I don’t know if you ever went to
23:54 AST world but I always I put it to that
23:55 like one roller coaster where you like
23:57 get on the chair it goes up up up up up
23:59 up and it goes like five stories it
23:60 rolls out and it would just sit there
24:02 and then it drops right the sky I think
24:04 it was called the SkyScreamer yes
24:06 elevator something the SkyScreamer Sky
24:09 elor it was one of my favorite rides but
24:11 that was kind of like us like we closed
24:13 we’re like going up the elevator we’re
24:14 pumped the thing comes out and then it
24:16 just like a freef fall and you’re like
24:17 okay problem solved how do I get through
24:19 it you
24:20 know
24:22 right so then so you know I guess sounds
24:26 like it’s going all right still you know
24:27 working through things getting some you
24:29 know efficiencies what’s
24:32 next yeah I mean so we made our first
24:34 hire towards the end of last year um
24:37 ourselves which we’re very excited about
24:38 that’s going super well so far and I
24:40 think we’re probably looking to make
24:41 another higher in the next six months or
24:43 so um so it’s really building the teams
24:46 out so that the business can operate
24:48 independently of Meredith’s management
24:49 and oversight so that she can focus you
24:52 know on working on the business rather
24:53 than in the business yeah this is
24:55 definitely important to not always be
24:56 the technician right you kind of have to
24:58 do both sometimes but I really harp that
24:60 in people that you have to pause and
25:01 work on the business and then you know
25:03 you you still have to work in the
25:04 business too but it’s important to make
25:07 sure you have time to work on the
25:08 business because that’s the needle mover
25:10 stuff right it’s great a great book that
25:12 dives into what you’re talking about
25:14 isit Revisited it’s it’s it’s a really
25:17 simple book but it really goes through a
25:18 lot of that kind of like man I’m a
25:20 manager to a leader to a Visionary I
25:23 mean it’s all these different kind of
25:24 things kind of I’m the baker that bakes
25:26 great cupcakes my friends tell me to
25:28 make a cupcake shop and I go stub my
25:29 cupcake shop and it usually fails nine
25:31 times out of 10 why right and so there’s
25:33 a difference between working in it and
25:35 versus on it so that delicate balance
25:38 right because someone’s got to work in
25:38 it yeah I do make great cupcakes right
25:41 Casey all right um and then so then any
25:43 plans to acquire another business or
25:45 maybe buy one that you’re going to merge
25:46 into this or is are you guys just
25:48 looking at just doing kind of you know
25:50 traditional marketing sales and just let
25:51 it naturally grow I think currently we
25:54 are focusing on natural growth I think
25:56 there’s definitely a potential for for
25:58 bu another business in the future but
25:60 probably wait you know a year or two and
26:03 kind of reassess from there who’s your
26:05 ideal client who’s your ideal work we
26:08 work with the small to midsize companies
26:11 anyone we work mainly in the
26:12 pre-employment space so anyone looking
26:14 to hire someone we do all types of
26:16 screening for pre-employment got it and
26:18 would you say your biggest competitor is
26:20 kind of the like full HR shop Solutions
26:23 right on the software
26:24 side no because actually a lot of our
26:28 clients have left using those type of uh
26:33 companies because they aren’t as good on
26:36 the background screening you know uh ADP
26:38 is a good example ADP is is known for
26:40 payroll and they have a background
26:42 screening component but we’ve had a lot
26:43 of clients that have left them because
26:45 they were slow or they didn’t know what
26:47 they were doing and yada yada and uh and
26:50 so we’ve been able to to stand out with
26:53 with our customer service with our
26:55 knowledge um with our Boutique if you
26:58 will
26:59 um experience so I wouldn’t say that we
27:03 have we compete with the big guys or
27:06 anything like that so A temp AG would a
27:08 temp agency use your service because I
27:10 would imagine they’re doing all their
27:11 background they need somebody to do that
27:13 stuff is that one of your yeah we we
27:15 have some temp agency clients I mean we
27:17 we’re looking enough to work with a wide
27:19 range of clients we work with offshore
27:21 drilling companies we work with um
27:24 hotels we work with country clubs you
27:27 know everything manufacturing pretty
27:30 much anything under the sun we’ve been
27:31 very lucky to work with got it also and
27:34 actually maybe one last question before
27:36 we we move to the rock around you know
27:38 we didn’t talk about so what was
27:39 revenues we talked about kind of what
27:40 his take home but I’m trying to
27:41 understand like what is the margins in
27:42 kind of the screening
27:43 business yeah so the margins were pretty
27:46 high when we uh bought largely because
27:48 it was being run you know very leanly um
27:52 Revenue was just a hair under a million
27:54 so I think you know margins were pretty
27:56 close to
27:57 50% and then once the average cost of a
27:59 background
28:00 screening uh it depends uh but I would
28:04 say criminal background is 100 to 150
28:08 and then any additional screens so drug
28:10 screens verifications anything like that
28:12 will get
28:13 you maybe $5 to $50 more so typically
28:18 they’re uh slightly under 200 if you’re
28:20 doing a pretty comprehensive background
28:22 check yeah so I can imagine if you’re
28:24 working with an offshore company where
28:25 they’re going to have Labor that’s going
28:27 to come through it’s through seasonal
28:29 right they’re going to come out they’re
28:30 going to have jobs they’re going to do
28:31 the background screening that person
28:33 goes off they need to probably do the
28:34 background screening again because all
28:35 of those have to have drug screening
28:37 back all that stuff has to be done so
28:40 imagine that’s a very good business for
28:41 you are those seasonal or you know do a
28:45 lot of work we should we should
28:47 introduce you to the company we talked
28:48 to the other day they’re hiring 165
28:50 people for literally 90 days please do
28:54 absolutely that’s call on I’m telling
28:56 you I’m I’m going to I’m going to send
28:57 that email to you got the commission
28:59 structure offline you know so good just
29:01 come to the conference all good we’re
29:04 we’re lucky we have a lot of clients
29:06 that will also screen all of their
29:09 employees uh annually we like like I
29:11 said we work with country clubs so some
29:13 of them like really want to screen all
29:15 of the the employees that work with
29:17 children regularly we um have clients
29:21 that want to do motor vehicle records
29:23 annually that helps with their insurance
29:25 costs so it’s very nice because once we
29:27 get a client will have them for years to
29:30 come and they’ll be doing regular
29:32 screens and also as you would imagine
29:34 when you’re about to hire someone you’re
29:36 probably looking at you know a handful
29:38 of candidates for one position so you’re
29:39 going to screen all of them for one
29:41 position yeah and maybe you know and I
29:43 don’t know if you guys are given
29:44 thoughts but thinking about your
29:45 business where it gets interesting
29:47 actually is also leveraging you know
29:49 just the fact that you guys do have a
29:51 lawyer on the team also right and really
29:53 be a compliance company it’s not a
29:55 really just screening as one piece but
29:56 we here we’re here to help you be
29:58 compliant or you know at a higher level
30:00 that’s where you start to really sell
30:02 those same customers a lot more services
30:04 right I mean you know you kind of said
30:06 it drug screening is one of them but
30:07 like what about all the other things I
30:08 like the motor vehicle example right
30:10 like by doing this we actually drive
30:12 efficiencies for you here and you
30:13 already have that Gateway into the
30:14 business and so you know get it gets
30:16 kind of interesting if you start to
30:17 figure out how do you really expand
30:19 horizontally in that space too so right
30:21 absolutely awesome cool we ready to jump
30:24 in the rock around let’s do the rock
30:25 around all right all right this is where
30:27 we ask our guests three questions um so
30:30 guys what do you like to do in your free
30:31 time yeah so my absolute favorite
30:34 activity in my free time is a Brazilian
30:36 jiu-jitsu um though I like most Combat
30:39 Sports um I love Jiu-Jitsu there’s a
30:42 very technical and uh intellectual
30:44 aspect to it while being a very physical
30:45 sport and um I really I think all Combat
30:48 Sports are great about getting you into
30:49 a flow State and being 100% in the
30:52 moment where you are not worrying about
30:54 the bills at home or whatever else may
30:56 be going on in your life I’m not going
30:57 to lie whenever you started I thought
30:58 you were going to say Brazilian
30:59 steakhouse and maybe I’m just hungry so
31:02 you’re
31:04 hungry mared with you uh I enjoy Pilates
31:08 and also we’re lucky enough to have uh
31:11 extended family all in Houston so we
31:13 spent a lot of lot of time with our
31:14 family yeah you guys should come to the
31:16 office come hang out with us sometime so
31:17 we’re not far we’re in the Energy
31:18 Corridor so okay all right next question
31:21 most memorable moment on your business
31:23 journey I would say uh as I alluded to
31:26 earlier when we switch switched to a new
31:29 software system for all of our
31:31 background checks it was definitely a
31:33 large undertaking both my team and all
31:37 of our clients had to learn this new
31:39 software and so it was kind of scary to
31:41 think about um you know what problems
31:45 could could we face with switching this
31:47 huge system over and um we we I’m proud
31:51 to say we did it really well we didn’t
31:53 lose any clients and everything worked
31:55 out really really well awesome
31:59 congrats all right and what your last
32:01 question here is what is y’all’s
32:02 favorite tool or
32:04 resource I would say chat BT which I
32:08 know
32:09 is um I use it every day for you know
32:13 rewording things I use it for creating
32:17 Excel formulas to analyze data for sales
32:21 scripts marketing plans I mean you name
32:25 it you can use it for so many things so
32:27 it’s definitely definitely my favorite
32:28 tool and then i’ I’d add in I might turn
32:31 it back around on you guys a little bit
32:32 here um my favorite tool is actually
32:35 podcasts like this one and there’s a
32:36 couple others in the space but I think
32:38 each episode really is kind of a mini
32:40 case study to think about how someone
32:42 else has done their deal and I’ll tell
32:43 you listening to these types of podcasts
32:45 is what gave me the confidence to kind
32:46 of take the jump and go you know achieve
32:50 on the deal that we wanted to do
32:51 ourselves 100% And I mean heck even us
32:54 hosting I learn something on every
32:55 single podcast I mean it’s super
32:57 valuable that’s why we do it too right
32:59 there’s all you know it’s a big broad
33:00 world out there and some people are very
33:03 like what’s the word you know they they
33:05 they uh small you know small-minded
33:07 right and think oh everybody’s a
33:08 competitor and this or that versus
33:11 people that we track on the show and you
33:12 know ourselves included it’s really hey
33:14 it’s a freaking huge market like let’s
33:16 all learn and grow and go do stuff
33:19 together right and accomplish things
33:20 whether that do deals together or share
33:22 knowledge to go you know learn from each
33:24 other on what we can do because you know
33:26 one little piece of information can
33:28 completely unlock and solve a problem
33:29 for a whole another acquisition I mean
33:31 it’s that kind of thing you know I even
33:33 think there’s a bigger conversation
33:34 around it which is at the end of the day
33:36 there’s a tremendous amount of Boomers a
33:38 big part of our country is small
33:40 business and there’s not enough of us
33:42 the people that are willing to take the
33:44 risk to transition these companies and
33:46 so there’s a whole bigger meaning of
33:48 what I think we’re doing just
33:49 transitioning our country and our
33:51 economy and all these things and by
33:53 everybody taking that risk and being
33:54 able to move that small business and
33:56 keeping it going it’s tremendous I mean
33:59 people don’t realize how much our
34:01 economy relies on small business it’s
34:03 massive and so we’re making a bigger
34:05 part of the day by taking these risk and
34:07 and financially we should win at some
34:09 point um but man just I’m really proud
34:11 of you guys you went out and did it you
34:12 found it you searched and you did as a
34:14 couple and uh that’s pretty impressive
34:17 absolutely thank you thank you both so
34:18 much so Meredith Michael how can people
34:21 get a hold of
34:22 you uh you can reach me by email my
34:24 email is m schlinker at background
34:28 connect.com
34:29 back connect.com is our website and
34:31 we’re both on LinkedIn it’s a an unusual
34:34 last name so we’re probably the only
34:36 ones all right so yeah we’ll definitely
34:37 have that the show notes for the
34:38 listeners I’m sure it’ll be easy to get
34:40 a hold of you guys but hey guys thank
34:41 you both very much really appreciate it
34:44 than likewise thanks guys by thank you
34:47 for listening to the m&a Launchpad
34:49 podcast if you’ve enjoyed today’s
34:50 podcast and would like to support us
34:52 please leave us a rating and a review
34:53 after you listen I’m Casey mchu and I
34:55 look forward to talking with you next
34:57 week
