Episode 3 - Brenden Van Buren, Co-Founder of Generational Transfer Entrepreneurs and President of Pro Max Fence Systems

My wife had a convention that was about an hour from here. So we ended up driving down for the convention and I was like, oh, I'll pop up while you're on a Saturday. Figured I'd talk to him for an hour or two. Ended up talking five hours about both the business and just our personal lives.

So the big question is this. How are entrepreneurs who aren't scaling tech startups or building lifestyle businesses from scratch doing it? How do acquisition entrepreneurs find businesses, buy them, and then create generational wealth while taking on less risk? Welcome to Search Fund, the Entrepreneurship through Acquisition podcast. Today our guest is Brendan Van Buren. He is not only a successful search fund entrepreneur who's acquired Promax Fence Systems, a fencing company in Pennsylvania. He's also the co founder and principal of Generational Transfer Entrepreneurs GTE for short, a search fund investor that has been around since 2017. You have a really interesting background in what you're doing with GT and also the fact that you have your own business that you've acquired at the same time. I think an interesting place to start maybe would be if you could just give a background on what led to you and your family starting GT and how that led to Promax eventually.

My family has owned their own business for I guess five generations on my mom's side. So we were running a large, heavy Iowa construction construction management company. My dad was the chief operating officer and decided he wanted to go pursue his own entrepreneurship journey. In doing so, he did a search. We didn't know search funds existed and that's what started our process. He ended up buying a precast concrete manufacturer doing what we call old lazy man searching. And in doing that we were going to let's go buy more businesses. And so it was, hey Brendan, go to business school and let's learn how to do that. Still, once again not knowing anything about search, his search journey was networking and just trying to reach out to people he knew to see if any anyone was going to sell a business. In the end I showed up to Carnegie Mellon and first week of class ran into classmate Rob Souther and his dad is Jim Southern of Pacific Lake and he's like hey Brendan, you got to check out the search fund thing. He sent me over the search fund primer. I quickly read it, was really fascinated, was still looking at entrepreneurship as well. So did a couple startups or advice and startups laws at cmu, but really spent most of my efforts at school just learning everything I could about search. The summer between first and second year I devoted to just Networking and that included going and talking to any searcher that would talk to me. I actually learned how to search by doing that process because I'd go and just look on websites and try to find searchers email addresses and send them emails. And it's amazing how helpful the search fund community is because they were all open and willing to talk to me and then also was talking to private equity companies just to learn how they bought businesses and talked to a bunch of alumni and people that had done self funded, traditional any method of search that I could. And in the end my dad and I came up with this hypothesis that there might be some inefficiencies in search. And we started building our own platform to try to take advantage of that. The biggest thing is you build this giant platform and then you go and search and you buy a company and then all of your pipeline goes away. And we were really hoping we could allow searchers to pass that pipeline from one search to the next in the most economical way. And so a classmate of mine, Gabe Chick, myself, tepper alum from 10 years prior, started searching under the GT platform, build out some CRMs, tried a bunch of different stuff out and that led me to buying Pro Max. And so we were introduced to search. Not knowing what search was is really how we were introduced and quickly started buying other small businesses. The platform was working really well. And then in 2021 we had a large liquidity event and started really saying this platform that we're running, we're going to have a bandwidth problem. Do we want to hire more people to help us manage that bandwidth or do we like being hands on? And we really like being hands on. So we decided, hey, let's, let's pivot and we can invest in more searchers and buys more searchers by investing in traditional funded searchers. We kind of made a big pivot in the beginning of 2022, after the liquidity event in 2021. And that's how we jumped into search. Not knowing about it until we'd already kind of been in it. And so that's the cool part, I think about our journey.

Totally. Yeah, that's super interesting. So how much of that work, reaching out to searchers and so on while you were in business school, ended up being useful in your own search and then also building out the pipeline for GTE and the work that you do with the searchers now I think that.

Was probably the most valuable thing possible. For starters, just reaching out to searchers, you learn, hey, here's how you gather Email information, you lose the intimidation factor of sending out random emails to people you've never met before. But on top of that, I would go into a conversation with a searcher with one very specific phase of the search. So, hey, let's talk about CRMs. Hey, let's talk about how you set out cold calling. Hey, let's talk about what goals you set for yourself. And in doing that, that's what I use to build a lot of the methodologies we use. Quickly learned that there is no perfect CRM. So any CRM can work. Talked to a couple people that had closed quicker than other people and it seemed like the people that had closed the fastest had the highest goals of communications per week for themselves. And so we quickly set or I set very high goals for myself with three to five hundred letters or emails a week on the proprietary channel. And I think had I not had those calls, you, you just don't know what's a good number. And so it was those early communications with the searchers that really not only gave me the, I guess the, it gave me just the confidence to know that it was possible to go search. And then on top of that, it helped us build little tiny parts of the system and, and the goal setting, which I think is really important. Also learned I made a giant decision matrix on all the different types of search and the pros and cons of each one. And that was really what pushed us. Hey, let's start GTE after running the pros and cons of every model, the traditional self funded, the other accelerators that are out there or starting our own thing. And so I was in a unique situation that I could explore all the options. Not everyone can do a self funded search and not everyone has the capital or family backing to go start a platform up. But we just kind of jumped in and started running. But a lot of that came from the mentorship that I received from those that had been successful before.

Sure. And it's really valuable advice. I think for anyone listening that's a great place to start, is with reaching out to people. And then if you are a searcher, volume of communication definitely sounds like a great way to put yourself in an advantage. So maybe you could talk a little bit more about what GTE's approach is. I mean, you talked about the pipeline that they provide, which is a bit different from other investors. But what else would you say sets GTE apart from other platforms or investors in the search fund field?

As far as I know, we're the only ones that pivoted from having a platform and then going and being like, no, let's, let's invest in traditional searchers. Where that gives us a little bit of a unique advantage is we managed a whole bunch of searchers and so we have a lot of experience in the search phase. I think everyone probably has pretty simple, you know, the funds out there and the people out there, a lot of them have very similar background in the mentorship and advising business as we do. But since we had eight searchers over a four year period, we had a lot of experience sending out letters, we had a lot of experience talking to business owners. We have a lot of experience negotiating or what we actually call is adjusting the balloon of what the deal looks like. And so you know, that's how do you adjust your seller note or how do you adjust your earn out to make it so that the price matches what the owner is trying to get. But a lot of it's the search. So we are very good at hey, here's how many letters you should send out. Here's different ways to set up your letters. Hey, you know, there's no perfect CRM, but here's things you should think about whenever you're picking your CRM. And so it's, we call it a playbook. So we created this playbook to try to help searchers in the early phases of their search to allow them to start off on a run or a sprint instead of a walk or a meander. Because the first three months of search a lot of times are spent like figuring how to search. If you can already be searching on day one. That just gives you a huge advantage because you only have 24 months to find a company if you're doing traditional search. And so making if it takes you three months to ramp up, if it only takes, if it takes you one day to ramp up, that get buys you three more months of searching. I think a lot of people have experience searching, but that's just something having managed a whole bunch of searchers inside the platform and then pivoting it going in traditional. I think we have a lot of advice to give or to help with on the search fund side.

Totally. Can you talk a little bit more about your own search journey and how you chose promax and what techniques or skills you might have learned on that journey that now you use to help the searchers that you invest in?

Yeah, I guess it started out I said how many letters do you send out a week? And it was advised to be back into it. So if you want to get A hundred no's before you get a yes. That means you got to talk to a lot of business owners. And how do you talk to a lot of business owners? Send out a lot of communications. It was recommendation. Hey, I sent three to 500 out was something a searcher told me. So I was like, okay, I'm going to send three to 500 out. What you quickly learn is if you're sending that many out, you're going through a lot of industries or you're going through a lot of industry lists. My background was in construction, so I was trying to find all the different auxiliary industries to construction, whether that was providing services to construction, being a subcontractor, providing materials construction, which also is a little bit different than a traditional searcher because that space just doesn't have the high recurring revenue. But I felt that it was a really strong space for my background and my experience. And that's where I just started. And so is sending out letters to different. I mean, we got creative with our list. So we'd go on to like Department of Transportation websites and figure out who's allowed to supply to that Department of Transportation and pull down those lists and I'd have my interns start working through them. I'd also go on Nexis, Lexus and pull down company lists as best I could and send out communications to just random naics codes that were in that. One of those is other specialty contractors, which technically is where Promax falls. I can't tell you which list Promax came from because I honestly don't remember. But I ended up sending a letter, a written letter to Promax. It was typed, but it was a handwritten envelope. And the owner of Russ reached back out to me in October. So I started searching in May. So about five months into my search is when I first talked to Russia. Ended up coming down here pretty quickly after the first two phone calls just to meet him, because there seemed to be a lot of correlation between, you know, his business size, the type of work that he did, what I was familiar with. And we just, we ended up hitting it off. I was expecting, hey, I'll be over at Promex for, you know, an hour or two. My wife had a convention that was about an hour from here. So we ended up driving down for the convention and I was like, oh, I'm coming up while here on a Saturday. Figured I'd talk to him for an hour or two. Ended up talking five hours to him about both the business and just our personal lives. Ended up saying we had A whole bunch of similarities and hobbies and I think that just kind of allowed us to start a really good relationship. You know, we both really like skiing. He's actually skiing this week. He and I still talk pretty regularly. But just having that relationship early on allowed us to get the clothes because it still took. I think I met him first week of November here at our office. And we didn't close until June 22 of 18. So it was almost a whole eight months from the first in person meeting till the time we closed. And that's just because you build the trust there. You get the financial statements, you start to negotiate on offers. I like to have the deal really firm before I go to an alloy. So just about every term worked out that we could. I went to LOI and then it still takes 90 to 120 days to get through the asset purchase agreement. There's just always a back and forth on all the little terms. A lot of it was just our attorneys would be button heads like, no, you know, hey Russ, you really should have this. And Brandon, no, you can't accept that. And so the two of us would have to jump on a phone call. And I think the relationship that we had allowed us to build trust to like come up with a common ground on some of the minutia terms and asset purchase agreement. And that's really what pushed us over lines. I mean, even just ironing out all the reps and warrants in an asset purchase agreement is a lot. And so, you know, we're going through all that, but along the line, still trying to build that relationship, coming down and visiting him pretty regularly. And like I said, we just hit it off. I ended up joining the country club to play golf that he belongs to. We both are very avid skiers. I finally convinced him to chase a snowstorm, which is why he's out skiing this week actually. But that's something we just work together really well. And I think that's why I chose Pro Max. Whereas some of the owners or businesses I talked to had good businesses, but the relationship just wasn't building. Which just made it so that we never, whenever we ran into a disagreement on the negotiations, we weren't able to push it across that term because the relationship wasn't there to push it across.

Sure, that makes a lot of sense. I think a lot of times with Search they say that you should find a business where you're the son or daughter that the owner never had or basically do it based off of the relationship. But I think as you're saying it works both ways. That should also be a business that fits you for I was wondering if you have any tips on ways that people could speed up that process or more quickly identify a business that is one that fits them in one where the relationship would make sense like you did.

I think a lot of it comes to just be yourself, right? You can't be someone you're not. And so you go meet an owner and you start trying to talk for one, they're going to call BS on you right away if you think you're not being genuine. But by being as genuine as possible, you're going to see whether or not a relationship exists. And so that first call, be genuine, be yourself. What I like to do is on the first call talk about, hey, why you start this business anyway? Or how do you get into this business? And you know, I think in that process you learn a lot about the owner and not just about the business, but a lot about the owner and why they started the business up or how they got into that industry, talking about those things early on and not just jumping into valuations. Now on the first call, I do always try to make sure that I'm going to be in the same range as someone, you know, in terms of size and in terms of multiple. But that's a very last thing I mentioned. I always dive into the relationship side of it or learning about the business side first because you're going to tell really quick, hey, this isn't going to be a fit. Like it could have the perfect business characteristics, but if it's not going to be a fit, it's not going to be a fit. And if you're not being genuine yourself, you can take yourself down a path that either a, you're just not going to have as much fun running that business if you do get to close. But you're also going to run into a lot of hurdles during the closing process if you're not being yourself.

Sure, yeah, that makes a lot of sense. You said earlier that you found this business by sending physical mail rather than like an email to them. I was wondering if you found that one medium of communication worked out better when it came to reaching out to businesses, whether that was calling them on the phone or snail mail or email.

I had very little success with cold calls where I had pretty equal success on cold emails and cold letters. It wasn't a high return rate, you know, single digit percentages, but it was, you know, whether it was a letter or an email, I got very similar response rates. I do really like letters. I mean it, I guess it fortunately promax came from a letter. So I always tell people, hey, don't be afraid of sending out snail mail letters. Where I like the letter is now that I'm a business owner, I see how much email you get and most of it's just immediately hit delete, like delete, delete, delete, delete, delete. And whereas a letter, you get something that has a handwritten address on it to you, you're going to open it up, you're probably at least going to skim the letter, right? And so like that's why I like letters just a little bit more. Although I think I got very similar hit rates from letters.

Yeah, sure, that makes a lot of sense. I think these days you're just getting bombarded with stuff online and if there's something that you can touch and feel that comes in the mail, you're probably more likely to pay a little bit more attention to that. Switching gears a little bit, we talked about the search process and how you provide support there and ways that searchers can do well in the search. But in terms of once the acquisition is made and the searcher's taken over the business, what's something that you see that searchers typically need the most help with? And also for you, after you took over promax, what was most surprising or challenging for you?

There's multiple parts to this, but I think what's most challenging, and I think it's possibly because it's the least taught and it's the hardest thing to teach, is just general HR principles. So how do you hire people appropriately? How do you let go of an employee? How do you work through a substance abuse problem with an employee? All those things are really tough and you end up mean. I bought a blue collar business, so maybe I ran into them quicker than others, but maybe not. I mean dealing with people, that's the hardest part. I think, you know, the HR aspects of dealing with people are the least taught skills. And so that's where I reached out to people most often for advice and help and consulted with, I mean my advisors and even paid advisors, you know, accountants, attorneys, was on the HR aspects of running a business. And so that's where I felt it. I think that's where we feel it the most often is people just don't have a great grasp of what they can do, what they should do in terms of dealing with human resource issues. Managing people is the toughest and most fun part of running a business in my opinion. So we now have about 86 employees at Pro Max and working with them is a lot of fun, but then you also get the headaches of managing people. And so there's fun aspects and there's tough parts. And so that's where I think a lot of it comes into play, is just dealing with managing people. Both from a how do you legally do all the HR aspects of managing people? And then the other side, how do you run a business? You know, how do you manage them? How do you incentivize them to work hard? How do you, I mean, we just had a really fun bowling event. How do you get people to show up to the fun bowling event? And that just all of it takes time so you can have fun both inside and outside of work.

What would you say is the top skill necessary to be good at managing people?

Probably communication and just ability to adapt, adapting both from a mental standpoint. How do I work through this issue with this employee or just adapt? You just got yelled at by an employee and your instinct is I want to let this good person go right away, but they're a great employee and they're just having some type of issue. And so just learning to adapt yourself to almost a Zen state as you're getting yelled at so that you can then work with employee through that process. And I'm not saying everyone gets yelled at, but that's still what happens in some days. And so you're just, you know, how. How do you work through those issues and enjoying both the ups and the downs of that management process makes a lot of sense.

So now that you have so much knowledge about the search process and also managing a business, what characteristics do you look for in searchers when you invest in them? Like, how do you know when you find a searcher that there's someone that you believe would be a good entrepreneur?

I guess one thing we like to really talk about what type of conversations they've had with family members relating to the search journey. I think that just shows their ability to manage situations and discussions and how that process goes. We try to look for skill sets that look like people will be good managers. It's also the hardest thing there is to figure out at this point. We've talked to dozens and dozens of search run investors now that we're also investors inside of the traditional space. And I think a lot of people it's. What are you looking for? We're looking for great managers and people that are going to be great operators of the business. Well, how do you find that you know, and then you get kind of silenced because it's a gut feel thing. You're just, you're talking to them. Like I said, we get some of that feedback just from I guess a little off the shelf questions talking about, you know, how did you communicate your idea of search to a family member or to a close friend or you know, and what type of reaction did you get and how do you work through that reaction with them? A lot of people have never heard of search fund. So a lot of the responses are really, you can do that. And so like how'd they explain that to a family member about the possibilities of search? And then so, you know, there's no perfect answer. I don't think. We like to see people's resumes that have signs that they're going to manage people well, that they've dealt with difficult situations relating to employees. But it's the most difficult skill set. And a lot of times that's why search fund investors, you know, I've talked to search for investors, they some search for investors see it as an option, right? Like hey, I'm going to get to work with this person for at least a year, maybe two years before they buy the company. And in that time period I'm going to learn a lot about the searchers management styles. And so that's, you know, I think where a lot of search search fund investors also determine just how good a searcher is, is during the search process.

Makes a lot of sense. Yeah, I guess it's a kind of a two year trial period to see who the, who the person is and how they'll handle things. I guess following up on that, how would you recommend searchers pitch investors? You've mentioned the questions that you have for the searcher, but what have you liked most when searchers have approached you or what has been an approach that you felt has shows that the person would be competent.

I think maybe that's just my management style because I'm already, I like seeing people that are coming across as genuine as possible, you know, so I, you know, the standard, you know, almost scripted answers aren't necessarily what I want to hear. I want to hear the genuineness of the person, their real love of search, the love of the idea of searching is something that we really try to look for whenever, whenever we're talking to searchers. Not necessarily. Can you follow the script of the search front primer? You know, it's more of hey, you know, is this person genuinely their self? You know, how eager are they? And that goes Back the conversation with their family. You can tell how excited they are whenever they're discussing their conversation with their family members about the idea of search. It'd be great to actually be able to fly in the room while they're having that conversation with a family member. Hey, yeah, I just got my mba. Yeah, I could go get a really good, nice, high paying job but instead I'm going to go buy a business. And yeah, that business might be in Kentucky. I don't know where it's going to be yet. There's a lot of unknowns really, to be honest with you, family member, but this is what I'm going to do. And so it'd be great to be a fly in the room in those conversations, but just to see the genuine passion towards search whenever you're talking to someone, which I think is harder now that we're all on zoom versus being in person with someone. But that's really, I think one of the keys is how excited is the person relating to the search function.

Totally. I think asking about family conversations is a good way to get people to open up and really see who they are rather than just asking what's your industry thesis? And so on.

Which yeah, I mean you get very. We still ask that but we get pretty sickly the same answer from everyone if they've read anything about search. And so it's how do you get past the standard stuff? And we have a couple other questions that we ask relating to their ideas about search and just try to iron those things out. But really it is a feel thing. It's just like interviewing anyone else. You know, I just interviewed someone here for a administrative position and it was, you know, do you have the skill sets? But then it's also how are you going to fit inside of an organization? And so you're trying to get both in your communications with someone and it's no different, I think than talking to a searcher that you're going to invest in.

When it comes to the industries that the searchers are targeting, do you have any limits? And I know you mentioned that most of your investments have been in more blue collar type industries. Are you just sticking to that because that's more of where your wheelhouse is or are you open to different industries?

We're open to all industries. I think we're probably more open than most to all industries. Each industry has a different way to mitigate risk. And so in certain industries you need high recurring revenue to or reoccurring revenue to, to invest in that business in Other industries, you need to adjust the price or the seller note or something to hedge against bad cyclical years. Because it's always great to invest in something that's not cyclical. And different investors, I think have different philosophies on how well some businesses will perform in cyclical economic environments. I would always challenge anyone, you know, how do you ensure that the revenues are sticky to the people that you're selling to if the economy turns to the bad? But we're always looking at, hey, let's pay a price in a manner and method that allows you to account for bad downturns. If you're going to buy something that could have some cyclicality to it and you got to build that in your model. And so we're open to different industries. We're not going to pay the same or we're not going to, I guess, invest in someone that's going to pay the wrong multiple.

Sure, yeah, I think that makes a lot of sense. Clearly the quality of the industry and business matters the most. Just so I can learn a little bit more about your model, how do you interact with the subsequent investors? I know that you've mentioned that GT is in a way sort of a consortium where you'll take some part of the investment but then it's still a traditional model in which you're not going to be fully funding the business. So I was wondering how exactly your investment works and then what support you after the searcher in finding other investors?

So we are new to the traditional search fund space, but we have been quickly networking and there's a group that have been providing us with searchers and we've been providing them with searchers as well. So if someone's looking to fill up units, we're happy to pass them to the people that we know or pass them towards people that we know. So that side there's other search fund investors. We're all, I mean we're communicating with more and more of them as we've been in this space. Actually just had a call yesterday with someone has been in the space for a while that we didn't know because we're really trying to meet as many as we can to help pass each other opportunities on the. So that's part of the question that how do we invest? We like to be about 15% of a company and that's the general the GT team, it comes in different units, so we've got our families units and then we've got other LPs that invest in different portions as different units. And so that's how it comes together and that's how it's structured. But from the searcher side, they're going to see GTE in some form coming in about 15%. Whether that's a unit, a unit and a half, two unit, three units, depends on how many units people are raised.

Awesome. So, yeah, I think that sums it up. I think it's a great intro to GT and what you do. How can Surgery found you online and what advice do you have for them if they're planning to reach out?

I mean, they can find us at our website, gtontrepreneurs.com you can also find me on LinkedIn. I'm one of the few Brendans with two E's. So if you literally type in Brendan with two E's and LinkedIn, you're probably coming with my name, but Brendan Van Buren. So that's the easy ways to find us. You can reach out to also our operations manager, Ryan Leckie. But if you go to our website, you know, it's the, there's a contact us screen and, you know, reach out and contact us. Ryan's also very active on Search Funder, so you can find us on Search Funder as well. Anyway, you want to reach out to us if you find us. We love talking. Even if you just want to reach out to me because you want to talk about search and you're not sure if you're going to raise a traditional fund or if you're going to go do a self funded search, I'm happy to talk. I think any method of search is a viable option, depending on you want to do. And so, you know, I love working through that with searchers or giving my advice to searchers. I was on the phone yesterday with a buddy of mine who's doing almost like a quasi ETA thing and he was just generally asking for some advice relating to it. So I'm happy to talk and, you know, I think it's a great, exciting space to be in, no matter what methodology you end up searching under.

Amazing. Thanks so much, Brendan.

Yeah, thank you, Nick.