Looking Down the Barrel: Quintin Graves on Scout Security, Cash Flow Crises, and Comebacks

Hey everyone, welcome back to another episode of Bought the Biz. I'm really excited to have Quinton Graves on the show today. He is the owner and CEO of Scout Security here in Denver. He closed on this deal a couple years ago. He tells us the story all about his transition and how he brought in a GM, how he lost that GM, and then looking down the barrel of losing $50K a month, calculating his runway, having to contemplate shuttering the business. and he talks all about these dark moments and how he got through them, the things that he did. So stick to the end. You're not gonna wanna miss his takeaways. Bought the Biz is a podcast for ETA entrepreneurs who've gone from searching for a business to actually running one. It tells the real story of what happens after the deal closes, the day-to-day operational, emotional, strategic, and leadership challenges that just don't show up in the highlight reels.

The show is story-driven and practical, sharing real experiences from operators along with clear, actionable mega ways you can use in your own business today.

I'm Garth Fossano.

I'm Christi Loucks. Welcome to Bought the Biz.

Welcome to Bought the Biz. Really excited to have you on. You are a searcher who acquired Scout Security, and you've owned and operated that for a couple of years now here in Denver. And I am excited to have you on so people can hear about your story, some of the ups and downs. And so let's jump right in. So to kind of just tee things off, tell us a little bit about your search and how you found Scout and, you know, how that all progressed.

Yeah, thanks, Garth.

I'm super excited to be on this podcast, feeling famous a little bit.

Yeah, yeah.

I started with, uh, I bought into one of those courses to teach you how to buy a business and taught me everything I knew. I didn't even know what Biz Buy Sell was when I bought that course, so And I was just reminiscing with somebody about this earlier, but I didn't actually finish the course. I got so excited that I was already like in the search, which is like, you know, they talk about like structuring your deal, I'm sure at the end, which I totally skipped that I know I shouldn't have, but I just got excited. I have this like bias to action, which I think like really favors entrepreneurs in this space, but sometimes it can get you in trouble if you don't have some discipline around it too. Um, so I got excited, I went searching, I did the BizBuySell thing, I was considering going off-market. In fact, I did go off-market a little bit. I bought a license of Salesforce and I was like out there building leads within industries just from Google searches and then kind of tracking my correspondence with them to like basically treating it like sales. Um, I had an interesting deal that I found on BizBuySell that was a security guard company. Um, But, uh, the seller posted it. He didn't have a broker yet, and he was just kind of kicking the tires of the market to see if there was interest in the company. And there was, but he wasn't responding to anything. And BizBuySell used to have this bug where if you reply to your own messages, it'll reveal the first name of the person who posted the listing. And so I just, I just Googled Doug security guard Denver, or security company or whatever Denver, and, uh, boom, just popped up. And it was, uh, so I stalked him like, like a good salesperson does. And I, you know, just slipped into his DMs on LinkedIn and called his company. And I didn't actually drop by the company. I didn't go that far because he did end up returning a call because I was kind of vague, kind of made it sound like I was a customer looking to do business.

So he called me like pretty quickly.

And I told him I saw his listing, I was interested, and he just kind of played ball from there. And the very first meeting was in person. I came prepped with questions.

I was—

I didn't like I didn't interrogate him. I slipped the questions in conversationally, you know, and so he was kind of impressed. I was taking notes. I took it very serious right away, and I think that made me stand out as a buyer. It doesn't hurt, uh, not having him not having to pay the broker fee, so I think that helped me win the deal. It's essentially the same thing as going off-market, you know. People shouldn't be afraid about getting sellers excited off-market because if they do end up finding a broker, your relationship's still outside of that and you're probably still going to get the better—

going to get the W because the seller won't have to pay that broker fee.

When did you close on the deal and when did you start running the show basically at Scout?

Yeah, I closed on it in June of 2023.

Okay.

We—

the deal died originally in like March of 2022 and then it resurrected in like in October of 2022 and then it took all the way into June. Yeah, to close.

It took a very long time to close.

Had to do with taxes and, you know, sometimes these things drag out. But yeah, I closed in 2022, then I jumped in, or excuse me, June of '23. So 2 years ago, just about, just over 3 years, 2 years ago.

What was it like when you took over?

What did you, did you have a plan? Did you sort of like, hey, in the first 90 days, these are the things you're going to be doing?

And I'd love to hear a little bit about that. And then like, because by the way, I had a plan. I sort of wrote some stuff down that I was going to do and a lot of things I did totally differently. So like in terms of communicating to employees and customers are a big one that I think is a really interesting topic.

Yeah. I actually have a book here somewhere called like called The First 100 Days or something. First 90 Days.

Yeah.

Yeah.

Yeah. And has tons full of tons of ideas and I built quite the plan coming into the business, way overprepared. Um, I didn't do half the stuff in my plan. As soon as you get in, you're just sort of reacting, you know. And, um, I planned a really short transition with the seller, 2 weeks of training only. Um, and mostly because the management layer was in place.

There was an ops person running the show. There was— there were supervisors for the guards with HR person, admin, sales, client success.

So it was already kind of set up for me.

Did you do it the same way again?

That sounds really short.

Like, I don't know if I've ever—

I mean, I've seen people trying to do 2 weeks, but I've heard like 3 days.

Or did you like that or not like that?

I did like it. I did. Why? Anybody who's done a transition knows that it's so brutal to be a student in a classroom where the teacher's not a professional teacher, you know what I mean? It's just so painful being taught by the seller because it's not what they do. And 2 weeks is plenty of that, you know what I mean? So like as short as possible. But we, you know, it wasn't too short because I I've never called the seller in 2 years to ask for help on something technical. I've asked for some sales advice, some customer stuff, but how the company operates, no operational questions I've ever asked him.

That's amazing. All right, so what were some other things in this 90-day plan?

Yeah, so a lot of it is getting in, interviewing your key people and getting to know what's important to them. Letting them get to know you. I did, I guess I did a lot of that.

Um, it's just some other—

so that was sort of like that, you did the standard listening tour?

Yeah, yeah, yeah.

How far down did you go? Did you just do like the management layer? Did you go to like every single employee?

I went down to the supervisor level. I didn't, I didn't interview any guards. I had intended to later, uh, but we have such high turnover and I got into it.

I met a couple guards and after that they were gone suddenly, and I was like, you know, maybe there's better, better use of my time.

Yeah, I did go down to the frontline level at my company. It took me 3 months to do that, and I had 30 employees at the time. I mean, maybe you had a lot more. How many employees did you have in total?

Yeah, we had, uh, probably 50 total.

Okay, so that would be a lot. That would be basically double what I did.

Would you do it again?

I think, I think it was really good.

I think that people were nervous about the change. And the company I purchased, people worked virtually, so it was a little bit more disconnected than I think maybe how some of your employees felt. And I think it was a really good thing to do to help give people more of an explanation and understanding what I was doing and why. So I would do that again in this case, but if I had had 50 employees, I think that would have been hard to do. And so maybe I would have had to maybe do it in sort of a group setting, something like that?

Yeah, we did have an all-hands, uh, okay, and that was the first kind of introduction to everybody after the executive team learned about it.

And so people had a chance to meet me and ask questions, and there's a little Q&A there.

Did you practice for your all-hands?

Yeah, yeah, uh, I, I even recorded a video that is so robotic and terrible, and I—

oh, I have my video recorded too, so actually At the, the CU MBA ETA course that I teach, we, one of the sessions is about on the transition and we talk about, you know, how would you do it? What would you do?

What would you not do?

And then we play my video recording of me practicing.

I would love to see yours too, because yeah, no, I think it's gone already. I think it's deleted for real. I might show you if I can find it. I might show you, but it's bad. Yeah.

What are you doing?

She helped me write it and it's like so eloquent, but I can't, I feel like a presidential robot. I don't know. I've just never script read before.

So how did you—

did you actually read it like a robot or did you sort of loosen up and not read off the script?

I tried to loosen up and it just made it so much more weird. So I didn't actually distribute the video.

I didn't do the video at all.

Okay. So you did it all hands, you announced it in a really awkward robotic way. Okay, great.

So things are going pretty well so far. So tell me, What else was in the 90-day plan? We talked about customers, employees.

What else did you have in there that you did or didn't do?

Well, I, when I bought the business, my plan was to jump out immediately, hire CEO, and go kick my feet up on a beach somewhere. And so right away I got to work taking things off my plate and putting them on other people's plates and being very clear about the stuff that's left on my plate is a CEO type of stuff because I was going to backfill myself with a CEO, a GM essentially.

We run traction in the company and they call them CEOs, so that's what we do.

So I hired that guy, got him training in the first 90 days to take over CEO role.

I actually put him in as a salesperson first because I want my CEO to be sales-minded and understand how to sell because I want the company to keep growing after I'm gone.

And everybody wears multiple hats in small companies, you know, so I actually wanted my CEO to do sales. Like, I, like, today I Now that I'm back in the business, I do sales more from a strategic promotional aspect with higher, more strategic customers, regional managers and stuff.

And I do, I have a salesperson now who handles direct customer face-to-face stuff.

But I spent a lot of time training that guy.

Would you do this the same way? Like, you know, first of all, would you recommend bringing in a GM as quickly as you did? And did you like the approach of bringing them into sales first?

Yeah, it wasn't, um, catastrophic, uh, but it wasn't— it wasn't— I don't think it was a great idea. It could work in some businesses, and the business did grow. Um, he did— he teed up a lot of good sales. He brought in new clients. He saved accounts that were trying to leave. Um, and, uh, frankly, by the time he left, he left a good pipeline of sales that we continued to close on. So he brought a lot of value.

He did good.

So I think that can work for a lot of companies. He had to leave for personal reasons. It happened to coincide with a J-curve in the revenue in the business. So it was a bit of panic situation, but I don't think it's because I was gone.

I don't know if I could have even done better than the work he put in for the sales stuff.

So, I mean, that sounds like really high praise for bringing in a GM, starting them in sales, getting it going like this.

Any other tips or tricks for people thinking about that approach?

Yeah, so I don't— I think you better know who that guy is. I happen to know just a really high-performing, intense person who is persuasive, and I've known him for 20 years. And so I, I can't imagine you could just launch a search and find somebody who can do that. You know, you might get lucky, but it's—

that sounds really unique. Was it better or worse bringing in somebody that you had known for so long? I mean, because there was great, but there was some sort of amicable breakup. You said he had to take off for personal reasons, and I know that that left you in a little bit of a bind.

Like, there's this— you and I were both on a panel for the Denver ETA meetup one night, and I think you had literally just come back from the beach like the Caribbean with your feet kicked up, and you were telling everyone how this is like really great. You're actually an absentee owner, which doesn't exist. And I think like that night on the drive home from that panel, your sort of world got rocked.

Yeah.

Yeah. No, I got the call while we were on the panel.

Got a voicemail.

Everything I was saying on that panel wasn't true.

I didn't know it yet.

That's crazy.

Yeah, so yeah, the— some lessons there for sure. So, um, I don't know that it's not possible. Look, I'm— I think I'm— the, the business is growing better and I have a better grip on the culture, um, our quality of service, um, our more strategic sales relationships, like promoting it. As the owner, I put in that work better and, and more than, than I think than you can hire out. And so I think when you first get a business, you probably should stay in it.

You should—

it's, it's fun too. When I got out, it kind of sucked. Like, I was sort of getting it, getting depressed. This is a really common story too with entrepreneurs, you know, when people sell their business or for whatever reason, when they're out, they have nothing to do. It's not good, I think, mentally, just for most people.

Um, some—

something about human nature. So when I jumped in, I was happier. The business is performing better. Um, we're growing more strategic cultural initiatives, rolling out new services. We want to open new markets. That's stuff that I think a CEO would've had a hard time doing, even a professional CEO, somebody who has experience doing that kind of stuff.

So—

Is your goal still to bring in a GM or a CEO, or are you now saying, hey, I'm gonna be running this business now?

Yeah, I am gonna bring in a GM, I think eventually, because I do want more time to, uh, freed up to be more strategic on the business. But I'm not checking out the way I did last time. I'm still going to be like the promoter-in-chief, essentially. I'm going to promote Scout with customers. I'm going to promote it. I'm going to try to help get employees and new hires. And so I'm basically going to do that, and then I'm going to think strategically about the growth and help kind of some of that stuff.

Got it. Got it. I think that, that sounds like a good, good fit.

What was it like jumping back in? Was that an easy transition or was that hard? Any lessons learned from that? Did you get, I mean, it sounds like you feel like you got a little bit too far away, then something unexpected and unplanned happened and you had to hop back in.

Any, like, if someone's hiring a GM or following that play, like any, anything from that experience?

Yeah. It's, um, it is easier to get into a business than it is to build yourself out of one. Um, so the business kind of sucks you in essentially as soon as you're like available.

I know everything.

Um, but I did have to put out some fires. I don't know that everybody would have to put out fires. Like, um, like I mentioned, we were in the—

we just hit a J-curve.

Um, this was about 12 months post-acquisition and revenue started going negative.

No, sorry, profits are going negative. Negative. We were almost like $50K negative per month.

It was just a full panic, and I was like calculating runway. It was, it was crisis. And so I was also figuring out where we could cut, what cuts we could make.

I'd make hard decisions. There's a book called Corporate Turnaround Artistry that got recommended to me at one of the ETA conferences, actually, when I was describing this, to help you help people make those difficult decisions about what cuts to make.

And you know your business best, and you probably—

it's probably already obvious what cuts you would make if you got desperate.

Um, because this is, as everybody knows, this is a no-fail scenario.

You can't, like, you know, you just took on a giant multi-million dollar PG, and unless you've got that cash sitting around, if it comes down to it, you're doing the sweeping and the gardening and the, you know, payroll, you know, hiring.

So figuring out who you're going to cut and when, luckily Everything recovered and we're doing way better now.

And our revenue is going to be 60% higher than when I bought it, on track for 2025.

So we're just doing so much better.

I mean, I know you're doing great now, which is awesome. And so you've sort of come out of that. Tell me a little bit about the mental state though of being— stepping back in, big transition in the leadership of the business, plus you're negative $50K a month.

Like, I think this is a really important thing for potential ETA entrepreneurs and all the searchers out there to hear that you are going to have these types of moments.

Like, you are— the standard structure of these acquisitions is highly levered with debt, and, you know, that is going to be incredibly scary when you have a PG on it. And so, you know, how did that affect you?

How did that affect your family?

How did that affect your decision-making? Talk us through that a little bit.

The, the big lesson here is there's a mental game of sticking it out and doing the hard thing and making it work, uh, leaning in, working longer hours, making the cold calls yourself, you know, doing the, the key things that are, that are, that have made the, you know, that will make the road less bumpy so you can pull the business up out of that. And it seems like everybody, everybody hits a J-curve, um, just about everybody I've talked to.

The, the, the, everybody seems to understand that that's, that's what happened to them also.

Um, so it's mental. I just had a kid too when I jumped back in, my first kid, and I was so sleep deprived and I had to jump in and like grab the business and put out the fire. And I thought it was staring down the barrel of bankruptcy, you know, because I YOLO'd everything on, as most people do. When I bought this business, you know, it was my life savings, my wife's life savings. We just had a kid and I'm 40, you know, you can't have a financial reset at 40.

I mean, you can, it would have been fine, you know.

Um, but the, but the fear is very real, and I didn't appreciate that when I was buying.

So what would you do differently now, having gone through that experience, either in the search or, you know, post-acquisition? Like, you know, because you were looking down the barrel.

Yeah, well, I did some, I did some bad things on the deal structure that are, that are total lessons learned. Like, one, I didn't, I didn't into a working capital adjustment, which like, it's fine if you're getting a low multiple, which is what happened. I got a 3x multiple. But if you do a working capital adjustment on that, it's really a 4x multiple for a regular deal. So that's fine if you don't do a working capital adjustment, but you better have a plan for working capital.

And I did not.

So I came in way undercapitalized.

I'm sure everybody's heard that story.

And so it was hand-to-mouth for a long time until we built up basically the AR, our operating account and our reserve account, to the point where we were comfortable. And then like literally almost the next month, boom, the J-curve hits.

And so it's suddenly negative and all the reserves we built up were digging into immediately. And I'm calculating runway, you know, we're thinking we're going to close the business by the end of the year and just a full turnaround operation in that business.

The other thing I— so structuring your working capital in your deal, that just made the problem worse.

You know, it probably wouldn't have been so scary in such a crazy dip if I had reserves.

And the thing is, once you're in it, you don't know if it's going to end. You know, luckily now looking back, I saw, oh, that was only like a 3-month stretch.

But dude, I mean, who knew?

Like when it was happening, I had no idea.

Right now, Do you think that that kind of thing is going to happen again? I mean, I have a perspective on this, but like, I think that this is just part of entrepreneurship, like, and small businesses. Like, you are going to have these moments and you need to plan and prepare.

Yeah, I was thinking, oh, this is a seasonal dip, we're going to hit it every year. Um, hopefully we won't go negative this year, but we will see a dip. And then when we hit it this year, we were like way better, like way super positive on, on the net profit. And so I was feeling great about that. So I was like, okay, there was a dip, it's not as bad. And then once I got past that, I started sitting there and I was like, you know, are there just dips and rockiness and scariness in business ownership over time for other reasons too? That like, is there another scare coming my way?

You know, did I learn a lesson for something in the future that I need to be able to Conquer, I guess.

Yeah, I mean, I've, I've looked down the barrel on some of these things and it has had nothing to do with being negative. It's been total other things. And so, you know, it can come for a whole variety of reasons. And I think it's hard to be— anytime you experience one of these the first time, it's going to be difficult. And I think you're not going to exactly know what to do about it and have to go sort of work through through that both intellectually and emotionally. But once you've been through it a couple times, one or two times, I think, you know, you're able to handle that sort of similar type situation better the next time around.

So yeah, and you know, you know what else I want to say too? It's so important to have a support network. And people say that all the time, and I was always like, yeah, friends are cool just because they're friends, because friends are cool. But there's support there, and there's real advice, and people have been through shit. You and I know, you know, I talked to Adam when this was happening and he basically talked me off a ledge because at first I was like, Adam, buy this business. He's like, well, let's take a look at it. And so he kind of like, he knew what was going on. And so he kind of helped me recommit to making the business work and getting in there and taking the fight to the enemy, you know, and just leaning in on saving, on turning the business around and saving it. Which was so valuable. I don't know, I was trying to get out of it. I don't know if I would have, you know, maybe at a loss or something if I didn't have my network to lean on.

I think having a peer group is really important. I think a lot of people have encouraged searchers to go look at EO or YPO or things like that. I think it's a little different when you have a PG. I don't know if you sort of fit into one of those categories as cleanly. I think it is pretty different. Other than sort of our ETA community here in Denver, did you find this anywhere else or anything that we would point people to? No, just build your local community.

Yeah, yeah, I've, I, I recorded a video, um, an interview kind of thing for the course that I bought and I took, and they did like incredible SEO on that video, I guess, because people were hitting me up on LinkedIn a lot. So I actually built like a healthy network of people all over the country who were buying businesses. A lot of them did successfully buy a business. And so I sort of had a little bit of a network there. My financial advisor built a network because a handful of his clients were buying businesses.

So they're around, you know, you can get on SearchFunder, you go to conferences, and I was doing all that stuff. But those feel way more superficial than the one that's in person, the meetup here in Denver. That's just a completely different level of closeness.

Well, I think that the takeaway for searchers out there is to find your group in your community where you're going to get face-to-face. And I think that that's been important for a lot of us. This is awesome.

Any other advice or things that you've encountered post-close that you want to share with folks?

Yeah, do your— pay for the Q of E. I didn't do that. I probably would've seen this revenue dip, you know, if someone did a QoE and I would've seen it coming.

And I probably should have discounted that particular line of revenue and would've prevented a lot of this stuff.

Get your working capital in order.

QoE should help you figure out what that needs to be.

And lean in. Yeah, don't be scared. I mean, it's scary. But choose to take the fight to the enemy when things get hard and scary and you're losing sleep. It is the best of times and it's the worst of times. It does work the way everybody says it does. It is the thing, it is the path, it is the wealth, but it is not easy. And so my, I think, parting words would just be words of encouragement for everybody who's thinking about doing it. You should do it. It is fun. It's super risky, but You know, that's, that's life. You can't take this with you anyway, you know. And if you think about it, if you're on your deathbed and you had been thinking about this for years and you wanted to do entrepreneurial things or whatever, you're going to be so mad at yourself if you don't do it.

Absolutely. That's 100%. All right, if you want to get in touch, how do they reach out to you or Scout?

Yeah, hit me up on LinkedIn, uh, Quinton Graves, Q-U-I-N-T-I-N G-R-A-V-E-S.

And then scoutsecurity.com if you're interested in checking out the—

Awesome.

Thank you so much for joining us.

This is great.

Thanks, Garth.

This is great. It was awesome.