First 4 Weeks Post Acquisition #2

Today at a Glance:

• A one person business can be incredible. No employees, flexible time commitment and low overhead. There are major drawbacks to the transition. It makes it extremely challenging to have only 1 point of contact / failure point
• Cash is king but cashflow is God. I’m not a finance person but learning the ins and outs of cashflow in a business is critical and could be the difference of success or complete failure
• Patience persistence is the best cure for a transition of your first acquisition. I’ve experienced 3 years of learnings in 30 days. Keep chugging a long.

Build your Side Hustle Now

I decided to go all in on consulting exactly 12 months ago this week.

It’s completely changed my life.

I built a business selling my knowledge online with nearly zero overhead.

I’ve helped a few others in the last 30 days sign their first contracts of >$12k as a side hustle.

I packaged all my learnings up into this course.

I’m a huge believer of reducing your risk on a single source of income and building multiple streams.

Might as well start by selling your experience online.

Black Friday sale is live for 50% off. Expires December 1st, 2023.

Use code: BF2023

I had a dream the other night.

I was taking my wife to see a $1.2m couch we were buying.

But not a fancy, amazing $1.2m couch.

A used, 38 year old one that had been in someone’s house for all these years.

We were set to close on the couch the next day and drove to the sellers house to meet with him and the broker.

When we walked into the house, the smell of smoke hit my face.

The shag carpet on the floor was dotted with stains and didn’t extend fully to the baseboards in the living room.

Kinda like having rain gutters inside your house.

We turned the corner and saw the seller and broker sitting on this huge couch.

Definitely a 38 year old couch.

It was a mixture of beige leather and black suade. It had drawers, gadgets and drink holders everywhere.

As the broker and seller bounced from cushion to cushion describing how comfy it was. My heart began to race. I started questioned everything…

“Why was I buying a $1m couch, this doesn’t make any sense…”

“Why the hell are we closing on this tomorrow and I’m seeing this for the first time”

My wife stared at me blankly as if to say “what the actual F*** are we doing…?”

She walked around and began to open drawers on the couch. Most wouldn’t open.

The seller sat up in his cushion and suggested “we could run down to RC Wiley and find some matching drawers today to replace those…”

Then I woke up.

If you think buying a business sounds fun, easy and a quick path to a lot of money, think again.

Did I buy a $1.2M, 38 year old couch that’s stained with smoke and drawers that don’t work?

No, but it’s sure felt like that a few times in the last 4 weeks.

There’s a lot of pros and cons that come with an acquisition of a 1 person SMB.

Many of which become obvious during this transition.

I’ll outline the details below, week by week.

Let’s dive in.

Week 1: Reality sets in

Closing was most uneventful thing ever. I expected something so much cooler.

Expectation: (obviously I’m the one with tons of amazing hair and beautiful beard)

What it actually was like (I wish I looked this good):

Then it was silence for 2 full days.

The seller was on vacation and didn’t return until the third day.

I knew he was out of town, but I assumed we’d at a minimum start tackling things on day 2 per my transition outline doc virtually.

Legit, I was very confused.

I reached out to the seller to begin transitioning IP at least, he’d reply with a very casual “don’t worry, we’ll tackle that on Wednesday”…

Day 3: we met for 5 hours in Park City.

The seller is a great guy. He’s done this a LONG time. Knows it like the back of his hand.

We spent the first 45 minutes trying to turn his computer on and get him logged into a VPN to access into his desktop computer at his house…

A few realizations started to set in.

I had my word cut out for me.

We spent the next 5 hours talking about customers and orders he had placed.

At times, he’d get emotional telling me stories of specific customers he had worked with for over 30 years and how they helped him feed his family year after year.

When they say finding ‘off market’ deals is the way to go, these are the types of emotional bonds sellers have that you’ll have to be aware of.

It was pretty cool seeing the impact of someone doing the same thing for so long would have on a family, father and husband.

It reinforced my desire to be a small business owner and help others experience the same.

Towards the end of our session, he pulls out a manilla folder 1” thick and slams it on the table the same way a stock trader would after landing a huge order.

“Here you go my friend, this is ~$180,000 of outstanding purchase orders that you’ve now inherited into FQ4 next year”…

As I skimmed through the stacks of papers, I tried to piece together what the hell I was looking at.

It was clear he had a seamless process that he had executed on for many years. And it worked well, obviously.

I couldn’t really wrap my head around those yet, I just wanted to make sure no balls were going to get dropped during the transition.

This was my biggest concern.

Acquiring a 1 person business amplified this concern. After all, it was 100% on me.

If I messed up, it was on me.

If I didn’t learn fast enough, it was on me.

If I didn’t figure out ordering, shipping, invoicing, and all the other things fast enough, it was on me.

And nobody else to validate me, but the previous owner.

Tom was ready to retire.

He informed me at the end of our 5 hour sync that there was a good chance he’d be leaving the country for a few weeks by mid-October but would be available by phone when I needed him.

I spent the next few days trying to get access his email which contained the last 15 years of customer communication.

This was critical to see previous price quotes, part numbers and who he sourced product from.

Turns out, it’s not as easy as just using their login to get this information.

No, that would be too easy.

What lied ahead was a lot of uncharted territory for me.

I realized that when he was logging into his desktop computer during our 5 hour session, he was also getting access to his outlook and quickbooks account because they were getting backed up locally for the last 15 years.

None of it was in the cloud.

Little did I know the headache this would become over the new few weeks…

Week 2: Slow, painful steps…

Week 2 is the cloud migration from hell.

I curse Codie Sanchez who makes could transitions sound so easy.

“just buy an older business from someone who’s 65 and implement some tech and make a fortune…”

Nah, doesn’t work that way.

I needed to figure out a way to execute the way Tom had for so many years, learn the ropes and then slowly implement it in the ‘Blake way’…

At this point, I’m just trying to see his emails and get access to quickbooks.

You see, quickbooks desktop 2015 doesn’t migrate to quickbooks online very easily.

In fact, QB will tell you they are completely different products.

I’m also beginning to realize that Tom and I are speaking difference languages. He doesn’t understand what I need and isn’t sure how to help…

1. Access to domain hosting sites
2. Email migration from outlook to gmail
3. QB desktop to QB cloud migration
4. All QB reporting data in desktop and how that translates to online
5. Access to his website
6. etc.

We finally agree to download his entire QB instance onto a flash drive (15 years of customer data) and overnight it to me.

As I begin the migration into online, I realize that most of these fields don’t map.

I spend 6 hours that Wednesday on the phone with Quickbooks. Screen-share after screen-share we finally get it uploaded.

The next day, I realize we did it wrong. 😑

We brought all the financials with the business. This doesn’t make sense as it’s a new business and would make financial reporting a nightmare in the future.

I spend another 4 hours the next day on the phone with Quickbooks undoing all the work we did the day before.

Then quickbooks crashes…

They tell me it might take up to 3 days to fix a bug on their side and get this uploaded…

I’ve now spent 7 days dealing just trying to see customer data in a simple format.

I’m also still stuck without access to Tom’s emails.

I now need to transfer OST files to PST files and upload them to Google.

Of course, it’s also not that simple.

Converting OST files stored locally to PST on a mac isn’t possible.

And Gmail doesn’t ingest them except through certain software you have to use.

All of which I’ve never used, look sketchy as hell and grant access to my laptop…

So, I’m now 14 days in, still can’t see his emails or see any customer communications previously.

I’m spinning my wheels.

Late Friday evening, I call it quits for the week and try to shut off for the weekend.

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Week 3: Cloud migration saga, entity docs and incorrect payment information, cashflow issues…

By Tuesday on week 3, I finally get my quickbooks in a working spot.

I have a QB desktop account with all historical data and my online account has all my customer, product data with his sales history. Not ideal but it works.

I finally get access to Tom’s email via our hosting provider. It’s the most archaic system I’ve ever seen and it’s not ideal… but at least I can search historic conversations.

Every time I search an email through his inbox, it takes 3 minutes to load.

I’m still trying to get this imported to Gmail but need to move onto other projects for now.

On Monday, I realized I needed to wire out another ~$20,000 for parts.

Not something I was expecting to do.

As I dive into the receivables on these, I’m realizing that our largest customers are on net 60.

If you’re not familiar with this, it means I’ll wire out $20,000 today and won’t get paid for those parts for 60 days.

Not ideal.

Luckily, I had the cash. But we’re cash strapped right now.

We have a small window of a few weeks where we have less money in all accounts than we ever have…

Honestly, it’s scary as hell.

The amount of pressure this adds is not ideal.

All I could think was “I’m 3 weeks into this and I’ve done nothing but try to get into the emails and access quickbooks, let a lone focus on selling”….

Inbound orders feel slower than I anticipated.

My email inbox is quiet. No inquiries from customers, no communication at all.

Did all the customers find out he sold it and now want nothing to do with me?

Did I overestimate what was actually built here?

I have to start calling customers, I have to find business now.

What if it’s not as easy as just calling customers and getting orders?

I’m beginning to panic.

Another $20,000 out the door and we already are down to 1 month of runway.

I’m completely banking on 1 large receivable that’s due the first week of December.

I hope these customers pay on time.

I keep telling myself, this will all work out. It won’t fail. We should be in a better spot by January.

All of which I still believe.

But that pressure of a 1 person business, zero cash and having spent nearly 30 days in the business not focused on selling anything is adding up.

As I’m emotionally working through all of this, I realize I fucked up all the entity information and bank account I set up.

I assumed I could setup the bank account with a DBA (which you can)…

But any wires in or out would have to have the main entity name on the account. I was using Harber Electronics, DBA Appleton Electronics.

This wasn’t going to work or I would have to update every supplier and customer information with a new operating name and would defeat the purpose of the acquisition in the first place.

I originally set it up this way because I needed to open the bank account and my filing for Appleton wasn’t going to be done in time.

At this point, I’ve already updated most suppliers and customers of a change in bank account information…

I begin the re-filing process which takes at least 7 days and have to open a new account.

Second time is a charm…

In the mean time I have suppliers starting to call me saying, “we just received a wire from Harber Electronics, is that you?”

and then customers calling saying “why does the new account name not match what we have on record, you’re going to have to reapply with new supplier paperwork...”

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Week 4: CRM Implementation, first big step forward…

My weekends feel short.

All I can think about is using Saturday and Sunday to try and get ahead of the week.

It’s exhausting and overwhelming.

At the same time, we’ve poured over $450,000 of our own cash reserves to get this thing off the ground.

We started with $20,000 working capital because I failed to fully understand the necessary cashflow to keep things alive for a few months.

Thank god our debt service payments don’t start until January.

All the chaos and dis-organization has forced me to do something that feels like taking a step closer to being able to focus on selling.

I decide to implement a CRM.

This isn’t typically my style, I’m more of a ‘sell now, figure it out later’ mentality.

But honestly, I think any more disorganization at this point would have pushed me over the edge.

It didn’t take much but after 2 days of data clean up and refining, I imported it into Hubspot.

Surprisingly, it was seamless.

I guess that makes sense, it’s the only tool I have experience using to this point.

By Wednesday I felt like I could make some cold calls.

It was the most refreshing feeling ever… to get to do what I bought this business for… sell.

I only got through 15 cold calls. It’ll take some time to figure out a rhythm.

I decided to call customers that hadn’t ordered from Appleton in >10 years to get the feel for it.

I got 3 people on the phone and replies to 4 emails.

Pretty incredible.

During due diligence, I found that the industry doesn’t have reps making cold calls.

It’s mostly sales focused emails (just advertisements) or pretty bad emails like this:

These 15 cold calls paid off, already.

The first sign of good news that the bet was right.

Could I build relationships and sell better than 1% of the market. That’s all I need and we could scale this to $10M.

These 15 cold calls have turned into >$30,000 of orders within 3 weeks. 🙏

From customers that haven’t ordered from us in over 10 years! It’s a huge win.

For now, these only count as bookings, but the revenue should reflect within the next 30 days.

I’ll just need to come up with another ~$15k to support these purchases.

We’re close, but we aren’t out of the thick yet.

As you can see, it’s been a rodeo the last few weeks.

I can honestly say, if this wasn’t a 1 person business I don’t think many of these things would have felt as intense or scary as they have.

I think that shared weight of knowledge transfer becomes a bit easier.

The downside is that I have 1 failure point. If it fails, the business fails.

That’s kinda the crux of “Harber Holdings”… to reduce the risk of single failure points. Whether it’s monthly income, knowledge across the businesses, etc.

An insurance policy of sorts.

If I die, my wife and run things. And eventually, my wife or our operators can run things.

The upside of a 1 person business is that it’s a 1 person business.

My cashflow issues only affect me.

If you found this insightful or interesting, I’d be forever grateful if you shared it with anyone considering entrepreneurship through acquisition.

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