How To Grow In A Shrinking Industry, With Jeff Charlton

Don't get hung up on worrying about if everything gets delivered or if you get a few bad addresses back or if the guy accepts it or not. Mail is you're throwing darts at the wall is what you're doing. It's a numbers game, so you're going to have a certain amount of wasted money. That's just the nature of the business. Well, it doesn't matter who doesn't respond. What matters is who does respond. That's what matters.

You're listening to Business L with Roland Fraser. This is your seat at the table. Welcome to the show. This is the producer, Darren Clark, now on Business Lunch with Roland Fraser. We talk a lot about acquisitions. Not only is this subject one of Roland's superpowers, but it's also arguably the fastest way to build wealth. Today's episode demonstrates that perspective with a conversation between Roland Fraser and and Jeff Charlton. Jeff has been in a shrinking industry since day one, but his company, an expert direct response marketing publisher, has been able to thrive by acquiring businesses along the way. But before we begin, I want to say congratulations to Elizabeth in Atlanta for winning our Apple AirPods giveaway. But the good news is that we're going to do it again this week. So head over to businesslunchpodcast.com contest to enter. And you're going to want to use this secret password. Yes, we're having a little bit of fun with this. The secret code word is scalable, S, C, A, L, A, B, L, E. And if you enter that secret code word that only listeners of the show will hear, then you're going to get an extra 10 entries. All right, let me hand you over to Roland and Jeff Charlton.

Hey, everybody, Roland Frazier. Welcome to another episode of Business Lunch. And why don't you, Jeff, just tell us, number one, a little bit about yourself and your business.

My name is Jeff Charlton. I own a company named Graphic Connections Group, and I've been in business since 1992. We are in the printing, graphic design, and direct mail business. Basically, I say if you want to put your name on anything, we do it.

And you can probably say this better than me, Jeff, but I'll try to say it succinctly and you can correct me if I'm wrong. So Jeff's company is a mailhouse which basically, for one of our businesses, Real Estate Worldwide, sends out solicitations for our customers to real estate people. So we sell in Real Estate Worldwide a software as a service subscription that aggregates data about vacant houses and cash buyers and things like that. And Then those people who buy that data then use that to identify a target list of people whose homes might be interesting to buy. And then they contact them in several different ways. But one of the best is direct mail. And so Jeff owns a mail house that sends those direct mail solicitations. The other cool thing about Jeff is that I know Jeff. As a result of my deal with Kent, So I own 20% of real estate worldwide with Kent Clothier, which I paid no money for, because we know the things that we know that you guys have all learned. And then Kent, at the intensive that I first talked with them about these kinds of things, talked with Jeff and said, hey, we're sending you guys some business. How about if you give us some equity in your company as well? And then Jeff said yes. So what's really cool is that was because he saw that we were sending him a lot of business and that it would made sense to give us some of his business and cause us to be even more focused on sending him business. So we're always looking for opportunities to send Jeff business. And so, just so you guys see, it's like this is a deal after a deal. So it's kind of a double no money deal, but everybody wins. Kent's very happy, Jeff is very happy, and you can absolutely do these things.

There's one more benefit to that, too, that you didn't mention.

Go ahead.

Kent is now more obligated to send me business.

Yeah.

Not obligated. Before, we were just another vendor.

Yep, you're right.

We did a good job. We had a good relationship. But at any time, he could have said, I'm going to find somebody better and cheaper or faster or whatever. Now he has no motivation to do that.

Yeah, exactly.

Good for me.

It is, it is. So that's cool. Just so you guys see, you know, these are deals that we absolutely do all the time. But what was really cool is Jeff is in the. In the process of acquiring another company, and we're trying to finagle that to be this kind of deal too. And when I was on the phone talking with him about it, he said, you know, I've done a ton of these no money down deals I've done. I think it was 18 acquisitions over the last 10 years or so, and about 10 of them have been no money down. And I was like, well, why don't you just come on and share what you've done? And he's like, I'd be happy to. So that's why we're here for Jeff. To share his wisdom. So I'm super excited too, Jeff, because once we get the next no money down deal done with you, then we've got like a triple no money to no money to no money connection. And it's just. Just super fun. So would you give us a little bit of, you know, your thinking on the companies you bought and kind of break down some of that stuff for us?

Sure. So let me give you a little bit of background so you have some context. I'm in the printing business. I've been in this business now 35 years, and it's been a shrinking industry since day one. And I knew that the day I got into it, but I liked it, so I stuck with it. So in a shrinking industry, you constantly have companies going out of business. So I have bought 18 companies. It's actually been 20 years, not 10 years. But I did most of the acquisitions prior to five years ago. So it happened in about 15 years. I started out as a broker. I bought and resold everything. I had no manufacturing. So the first acquisition I got into is I wanted to get into the graphic design business. So I found a graphic design company, was actually a freelancer that I was doing business with. They had a graphic design company as well. And I made a deal with her, and it wasn't no money down, but it was very little money down to basically get her to come to work for me and start a division within my company for graphic design. That was my first deal. Second deal is I bought a print shop. And I bought that was a straight cash deal. And I bought his entire company. He came to work for me with his entire shop, and that got me into the print manufacturing. Since then, every other deal was when times got tough, and which was a lot of those times in the printing business over the last 20 years, we started looking for companies that were failing to acquire. And in every case, well, almost every case, I was able to do it for little to no money down. And my typical deal was I give them some small token of money, like $5,000, just to make the guy feel like he got something in cash. And I'd pay him 10% of sales that he generated that we generated from his clients over the next three years. And our objective was to grow those sales, and he would get whatever we would make happen. He would get a cut of that. So if I tripled his sales, he got 10% of triple the sales. And so he was incentivized to help me maintain those clients. But it was no risk for me because if it didn't work out. All I was out was that minimal amount of money up front. I did make about. I'd say about eight of those deals were literally no money down. And it was completely a betting on the future type of deal. One of the things you mentioned earlier, Roland, is about me sending letters for these guys. That's one of my strategies. Okay, I sent. I just did it. In fact, this deal we were talking about came from a letter that I just sent out about three months ago. When the COVID hit and times got tough, I figured there's going to be more printers hurting. So I sent a letter to about 750 printers and ad agencies in the St. Louis area saying if you're interested in cashing out for whatever reason, and it was a letter that laid down a bunch of gee, you're probably in pain type of thing. And I said, I can help you. I specialize in creating win win scenarios where we both walk away happy and maybe I can help you out of your bad situation right now. And I had three people respond to that. One was a deal was not. I wasn't interested in all. One I actually tried to make happen, and the guy was just not reasonable. So that didn't happen. And then the third one was an agency, which that deal just fell through as well. But we were close on that one. But they don't all happen. Of the 18 deals I made, I would say looked at 50, and I was able to actually close on 18 of them.

So let's, let's talk just so people can understand the direct mail, you know, kind of the response rates and stuff like that. So how many did you send out?

750 letters.

Okay, and where did you find the list?

I just bought a list of all the printers and ad agencies in St. Louis. That's a very simple list to buy. You can buy that for any industry you're looking at.

Okay, where do you buy the list from?

I have a couple list companies. One I use is called Accudata. But you. There's. Oh, there's probably 10 national list companies for. That's that type of simple data. It's available anywhere for 4 cents a name. It's very cheap.

Okay, great. So you spent well.

There have been no more than 150 bucks. So I spent 150 bucks.

150 bucks. You sent out 750 letters, which probably, well, cost you less, but how much would somebody expect normally to spend for.

That buck a piece? So you got 750 bucks. You're all in for under $1,000.

Okay, now, so you spent $1,000, sent out 750 letters and you got how many responses?

And three.

Three responses.

I'm setting the world on fire. But these are very specialized responses, very interested people. It wasn't just some guy fishing, you know.

So are these people who are expecting to have a conversation about selling their business to you?

Yes, that was in the letter. Specifically said, I am interested in acquiring your business in a, you know, some sort of a win win creative situation. And I gave my personal cell line and my email and they contacted me directly.

Okay, great. And then you said, over the past those 10 deals, you've talked to about 50 people. You've had about 50 responses.

I didn't do them all through direct mail. I did. That was one of my strategies. Other strategies just to go to the Internet and look at the various business for sale websites out there and talk to business brokers and just look for things that are available. I'm doing that right now. I spent an hour right before this call fishing on the Internet looking for available agencies.

I love it. And on the business broker side, do you find how many of the deals, of the 10 deals that you did had a business broker involved?

Four of them did.

Okay. And how were those deals to do versus the other deals more difficult? About the same. Less difficult.

I thought they were more difficult, frankly, because the business broker added a level of legality and policies and all this stuff that made it more difficult. They want to be in the middle of the whole thing. And I'm a guy that likes to negotiate directly with people. And so having them in the middle I thought was a pain in the butt.

100%. Okay, so now let's talk about. I know, because you and I talked about the agency deal and those people just had a kind of an unrealistic value expectation. Although remember that the deal that you don't do today is very often the deal that comes back and is even better when they come back.

Right. You cannot get too hung up. You have to be ready to walk away. You only make the deal that's good for. I mean, I almost said just for me. I believe in win win scenarios, but I try to put forward a win win scenario at all times. And if they don't see the win, then you can't force it. You can't put a square peg in a round hole. So you just got to be willing to walk.

Yeah, exactly. And so you said then one was not didn't work out, one was that deal which will very likely Come back because they, they need you. And then what was the third one? Without saying what the company was. Just. What company?

There was a small print shop that it was. He had two franchise. Two locations. He's a small franchise. He told me up front in his. The opening conversation I had with him, I talked to the guy for about an hour and he basically cried on my shoulder for an hour and said he was failing, he was losing his ass and his wife's mother was sick and blah, blah, blah. And he said, I'm going to close this business no matter what, whether I make a deal with you or not. So if you could do something for me, that's a bonus. So I thought that was going to be a slam dunk. Well, it turned out wasn't a slam dunk. And the guy, we started talking about it, he just had these expectations, even though he told me I'm going to close no matter what. And when you close no matter what, you lose everything. He had this feeling that his business was worth way more than it was. It wasn't worth anything.

No.

He was closing it.

Yes. And it's zero problem. Money. Yes. So, I mean, I was disappointed because there actually was. I wasn't interested in his business. In fact, in all these deals, other than the first two deals I made for the print shop and the graphic design studio, every other deal I was buying customer lists. It wasn't. I didn't care about the equipment. In fact, in most cases, we backed up a dumpster to their office and threw everything in the dumpster or called the scrap guy because it just. This old equipment in the printing business isn't worth anything. So we just. But that was one of the hooks. Most of these guys were stressed out, they're losing money. They got this massive mess on their hands. And part of the win was, look, we're going to come in and take care of everything. You're just going to walk away and let me take care of it. And a lot of people that were to a point of ready to close, that's attractive to them. And so that's a lot of what the house flippers do. They say, hey, we'll take your house over and you can just walk away.

If they were failing, how did you handle their debt?

No debt. I've never taken any debt. It's an acquisition. I mean, a asset purchase only. That's part of the negotiation, though, because when people have debt, that's a problem for them. So if you can't find a way to solve that debt problem, the Deal probably won't happen, but one way to solve it is for them to file bankruptcy or to walk away a lot of the debts. In the printing business, where people had leases on equipment and those are not secured debts. And the worst thing can happen is they take the equipment back. So people don't like to walk away from debt because they like to pay their bills. And I get that. But when you're at a point where you're, you know, you're losing your ass, you have no choice, you know, look, it's simple as this. I'll do this deal, but I'm not taking on your lease. So you either can keep paying it because you're a nice guy, or you can walk away and that's up to them.

Did you find the broker represented deals through the broker or did the sellers bring in the broker after you showed interest?

I started with the broker. That was always the case. Yeah. Cause I, that's how I found the deal is through the broker, which is what's happening now. When you go online right now, most of the things you'll find online will have a broker representing them. And that's who you get the information from in the first place. So you can't get rid of that guy cause he's there in the middle of it. And I wouldn't try to. I mean, he deserves his commission. But what I do when there is a broker is I try to talk to the people directly anyway and make the deal and go back to the broker and say, here's the deal, write it up.

I agree, it's like no problem, whatever deals you guys have no problem. I gotta talk to the seller though, because I don't want to have anything misunderstood. And I need to know straight from the horse's mouth, Jeff, did you value the equipment at anything? Even if it was only going to.

Be trash the equipment. I mean, I may put a value on it just to make the guy feel good, but really, I mean, every business is different. But in the printing business, old printing equipment is a boat anchor. So there's just nothing. It has no value. So I found the key. Frankly. This is my opinion I can't speak from. I haven't done this for anybody else. But my experience, when you're writing this type of letter, this is different than your typical marketing thing. I'm trying to pull on the heartstrings of the people I'm writing it to. So it's a sales letter. That's a very personal sales letter. Yeah, it's a picture of. Hey, I know you're in pain and if you can relate to what this pain I'm talking about, you need to call me. I mean, it's just if it's a simple one or two page letter, assuming it's only personalized on the first page, actually the format is either a front and back single side, single piece of paper letter or a 4 page 11 by 17. Either way, those can be both fully personalized front and back. The eight 9x11 is about a buck apiece. 11x17 is about a dollar 20 apiece. That's all in postage. And everything that would be mailing at standard mail. If you want to go first class, add another 15 cents to that.

Yeah, I find that like the pre canceled certificate bulk stamps deal works the best. The first class, it just doesn't. It's not worth it. Even though I agree with that.

It doesn't matter unless you're in a hurry. But you know, it's only gonna, it's gonna add about another seven days onto the mail. Time to go bulk. And we use these, we use stamp and we fake. We have kind of a fake first class stamp we use. It looks like first class and nobody knows the difference.

Yeah, that's cool. Okay, so, and what's the minimum number of letters that somebody should send out in your opinion?

Well, I mean, if you take my numbers of all, I've done this mailing probably 7 or 8 times over the years. I've never gotten more than 3 responses and I never mailed less than 500. I mailed between 500 and 1000. Now that depends on your, what you're going for in your territory. You can't control list. So that's somewhat out of your control. But you know, anything less than 500, you're probably not going to get much because again, this is very specialized finding someone that's ready to sell their company. It's not a high percentage of people that are in that position.

Have you tested doing multiple mailings to the same list?

I haven't had to, frankly. I've always been able to do one mailing and get a deal out of it. So I've been able to get a deal out of every mailing I've ever done. So I stopped at one deal. I can't. It's not like I'm this guy that can handle three deals at once. So one deal is usually good for a year's worth of effort and then I go to another one.

So if I, if I'm you guys, I would, I would I would get my list identified, I would test multiple letters. I'd plan on spending, you know, at least 3,000 bucks and mail a thousand pieces three times to the same list and try different approaches because you just have to be in the right place at the right time. So let me talk then, Jeff, about the specific deals. Will you break down some of the deals that you've done for us just so we can kind of get a flavor for it?

Well, I think I'll use that. The agency, the first one I did, the first deal I did with that gal that was at the design studio, she was a graphic designer that she was a freelancer that I worked with for years and was good. And she decided to start her own little small agency in a print shop. And she didn't do well at that, and she ultimately was failing at that. So I was able to get her to agree to come to work for me as an employee. And I gave her. I separated her company off as a separate division within my company and said, you can have your own little company within a company because she wanted to have her own identity. So I actually let her name it and everything, treat it like a separate company, treat it like its own entity, and I gave her a cut of the profits out of that entity. And I took all the risk off her plate. So I. In her case, she didn't have any debt, but she had a lease and everything. So I helped her get out of the lease with her landlord and solve all her financial problems. She came to work with me for nothing and was an employee and it worked out great. She worked with me for a couple years and she got my graphic design department off the ground because I knew nothing about it at the time. I knew how to order freelancing, but I didn't know how to run a graphic design studio. And she did all that and we were successful and got me into the graphic design business. I've been there ever since. She ended up going after two years, she ended up wanting to get back into her own deal. And so I helped her to actually do that, to get back in her own business because it was a win win situation and she'd helped me. So, you know, it worked out good. She got me into the business and we both got something out of it and got her through a tough time and it was a win win thing. So it's really important when you're thinking, especially if you're going after a company, that somebody is. There's two reasons somebody would want to sell their company to you Number one, they can't. On most businesses, the people that run a business, they're good at a trade and they start a business, but it's really a job and they're doing what they're good at. And that's usually whatever it is they're good at, whether it's running a restaurant or being a graphic designer or running a printing press, but they're not good at learning how to sell. And so a lot of people hit a, what I call a glass ceiling where they grow to a certain point they can't get any bigger, they can't figure out how to sell. And they try and they fail, and they try and they fail. And so that's somebody that wants to be in the business, but they need some way to expand. So they might, if you have a way to help them sell or help them get more business, they might be interested in that. The other kind of person, if somebody just wants to get out because they're either retiring or they're losing, well, there's two different issues there too. Someone that's retiring, that has a successful company, that's when you're probably gonna have a hard time buying for no money down, I would think. But somebody that's failing, that wants to get out because either they're retiring or they're just fed up, that's a different scenario too. That's also definitely a candidate for a no money down deal because again, they don't have a lot of options. There's not a whole lot of people lining up to be by failing company.

Did you use only direct mail for your reach out this time?

Yes.

What do you normally use? Just so we have all the things that you do.

Well, again, direct mail is one of them. I go online and it changes all the time. But there's probably 20 different online business broker, not really brokerages, they're just online malls for businesses. And I just, there's no one that's any better than the other. They're all about the same. A lot of these business brokers list their listings on all these different places anyway. So you get a lot of the same listings with the different places. But literally it's not rocket science. I just literally go online and start searching these different things for, you know, keywords. Like I'm right now I'm looking for an agency. So I use marketing agency, digital advertising agency. Digital marketing just put a bunch of keywords. Just like you do a Google search and all you're doing on the websites of these broker websites and you see what Pops up and then usually you have to sign a non disclosure agreement and they all have. Every broker has his own non disclosure, which is no big deal by the way. If you've never done that before, you don't have to worry about a lawyer. It's a simple thing that you're just basically agreeing to keep the information private that they give you.

What would you like to acquire next.

Again, this agency thing? Well, I'm open. In fact, I told my people I'm open minded right now. My situation right now is I'm about to. Before COVID I was on track to do about $8 million in sales. I have 45 employees and I want to get to. I'm about five years away from being either retirement or cashing out, whatever. I may not retire, but I want to cash out in about five years. And so I want to get my company to $2 million in net profit. Get the maximum multiple for my company. Well, depends on profitability, but I think I can do that. Somewhere between 15 and 20 million dollars in sales. So I've got about triple the size of my company. And we've got the sales thing figured out. So I'm looking for people right now that need sales and we do mainly printing and direct mail. I don't do digital marketing, so I'm looking for an agency that does digital pay per click advertising or websites or combination thereof. I can add that service to our package of services. And also usually those people have people that order printing as well. So it's a way to expand my product offering. And they make much higher margins than we make in the printing business. So that's what I'm doing.

How do you value the quality of the list?

Really? This isn't. When you're talking about finding names, this is a very low end list. Okay. We're just looking to find the names of businesses and industries and the owners and their contact information. It's not like I'm looking for motivated sellers in real estate or anything like that. I just want names. So it's pretty easy to get that from just about any list company. And that's why it's cheap, because it's not anything specific. Now if you did have some inside information in your particular industry that you know, wow. I use real estate because I'm very familiar with it. We know in real estate we can find people that are motivated sellers or they have high equity, things like that, you know, that kind of thing. You might be able to identify a list that's more targeted for your particular objective. But what I'm doing, I just need the people that have a business. That's all I care about. So it's not like it's a real scientific deal.

Do you mail the owner at their office address? Do you send the mail to the owner at their office address or their home address to reach out or do you know which is which?

Whatever, I don't know. The list usually have the office address, but I do put on the outside of the envelope personal and confidential. I do think it's important to have it look like a personal letter. And we do that. I have a brown craft envelope I use that says personal and confidential. Looks really official. And I think that's important because it is something a lot of business owners don't want. You know, if they are interested in selling, they don't want anybody to know about it. So you got to keep that secret. And plus, personal and confidential tends to get to the owner without the secretary opening it. So you want that.

Now, what are the geographic parameters that you mail within the state or nationally or what?

Well, again, that was me. It was just locally in St. Louis area. I was looking to buy something in this area. Now I've opened my mind up to national. That would be different. So to do a direct mail campaign nationally, I would be looking to narrow that down way more because the United States is a big place. I'm not going to mail 50,000 pieces of mail. Try to find something. So I would probably use some other method nationally than mail, but in a geographical area, absolutely. Mail is a good idea. What would.

What if you wanted to go internationally? How would that work?

I have no experience with that, so that would. Mail's tough. I can tell you. Mail internationally is almost impossible. You can mail it, but it's very expensive. And there's no chance it might take six weeks to get someplace. So I can mail to Canada cost effectively, but nowhere else. We have a contact in Canada we can mail to though mail through.

But this is really simple. There's a whole bunch of data companies that will just provide you with you. You say, here's my selects, here's the information that I want. And then they'll give you the list. And just for those of you that don't know what the terms are, typically there's a list and then if you want a part of the list, like a subpart, like you want people that have been added to the list in the last 90 days, or you want to know if it's people that own a brown Lexus or whatever, Those are called selects. You're going to select a part of the list and they charge you for each time you select a more refined version of the list. So do you want to chat about that at all?

The answer, the general answer is it makes sense to spend more money to narrow your list down to more targeted people. However, again, that all depends on what you're trying to do and what your objective is. If all you're trying to do is find people that are in a certain business, that are a certain business size, and you want the name and address of the owner, that's only a couple selects, and that's very inexpensive. When you get into consumer lists, we're trying to sell a product. You want people that have a credit card that make $100,000 a year and they, you know, they live in a certain neighborhood and you got all these things. Yeah, those things can go up. But that sounds like if you're trying to buy a business that's not we're talking about here.

Yeah, absolutely. Very, very, very simple.

Let me make one last point about this mail. Don't get hung up on worrying about if everything gets delivered or if you get a few bad addresses back or if the guy accepts it or not. Mail is. You're throwing darts at the wall is what you're doing. It's a numbers game, so you're going to have a certain amount of wasted money. That's just the nature of the business. Just like any kind of marketing, not everybody responds. Any kind of marketing, that's just what it's. That's the nature of the game. So don't get hung up on that. Realize if you mail a thousand, you're going to get a few back. And it's just the way it is. Don't get upset about it because there's nothing you can do about it. Just part of the deal. It doesn't matter who doesn't respond. What matters is who does respond. That's what matters. So if Roland can get you 10 to 15 leads, that's what you care about. Who cares if 90% of the mail gets thrown in the trash? If you get 10 to 15 people and you get a deal or two out of that, that's what matters. So I'm not saying get bad lists, but the same token, nothing is perfect.

Love it. Awesome. Dude, thank you so much for taking the time to come in. Really appreciate it. Why don't you give everybody your contact information? For those that are listening on audio or on Facebook that haven't seen it.

Yet, my Email address personally is J.C. just like my initials J.C. at G J C F R O G dot com. That's JCFrog dot com.

Thank you again. Really appreciate it. Thanks again. See you soon.

Good luck to you guys.

You've been listening to Business Lunch with Roland Fraser. If you're enjoying the show, let us know by subscribing and leaving a review. And for more information go to businesslunchpodcast. Thank you for listening.

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