The Most Overlooked Way to Build Wealth Right Now

If you've ever thought about buying a business, then this episode's gonna be for you. Because on the internet, there are a lot of people telling you about how amazing it could be to just go buy a business that's already working. You just take out a loan, you put very little money down, and boom, you're cash flowing and you're working passively. But those are also people that are kind of selling you the dream. Now, my buddy Dan is one of my best friends from college. Just actually did this a couple years ago. He bought a business, a very random, unsexy business that he had no experience in. He didn't have a lot of money coming in. He had never bought a business before, but he did it. And it's actually worked out pretty well. And I asked him to come on and tell the real story. So tell us, like, what was it like? What'd you do the first 100 days? How did you actually find— buying the business? How much money did you have to put down? How much money did it make? What are the downsides? What are the traps? All the real stuff. And, uh, I love it because Dan was very honest. He was very open about all those things. And then at the end, he actually brainstormed a couple of business ideas that he saw. Because when you buy a business, you look at hundreds of businesses. Um, he actually saw— has a couple of his favorite spaces that he thinks people could go into, and we brainstormed that at the end. So this episode, I think, is gonna be a lot of value for anyone who's ever thought about buying a business. And then we have a fun brainstorm also at the end for other businesses that people could check out. All right, enjoy this episode with my buddy Dan. All right, this is a special one. My buddy Dan from college is here, and me and Dan, we've started a sushi restaurant together. We've owned a pet mouse together. We've tried to bring down the house at a casino together. We have gone through many schemes and dreams. And then Dan called me a couple of years ago and I convinced him to try to buy a business. And then he, he has done it now. He bought the business and he's here to tell the story of that whole journey of going from a guy who never thought that he would ever buy a business to now owning one of the most random businesses that you'll ever hear about. And then I got Sam here who doesn't know Dan. So it's me and my college buddy, and then Sam, you're sort of the third wheel on this date. Are you ready for this?

Yeah, sign me up. This isn't the first time it's happened, but I'm gonna ask questions that usually what I think is what the audience thinks. So I'll ask some questions.

Yeah, exactly. All right, so Sam, where do you wanna start? Just maybe first question is like, who the hell is this guy? Who are you?

Yeah, who are you?

Sertner, Dan Sertner. So I wasn't his roommate in college, I was like the next door neighbor. So for the Seinfeld references, I was like the Kramer. I'd show up from time to time unannounced. Lived with this guy for 4 years. So, uh, I go way back with Sean.

And by the way, Sam, the funniest part of meeting Dan, uh, the first day of college, I walk in and Dan, the way he looks now, he looked exactly the same at age 18. And so Dan is standing there and he used to wear a visor cuz he's like, I don't know, cool guy from New Jersey. So I thought he was someone's dad. I was like, this guy with a visor, I saw him from the back and he knew everything. He was like, laundry's down there. Yeah, you have to do this. You know, your meal plan's not gonna work until you activate it. Uh, you have to go to, he knew everything about the campus and I was totally clueless. I didn't know anything about going to college. And, uh, so, well, he was, and he had a, he had a single, he was like one of the smart guys. He like requested having a single room, didn't have to have a random roommate. So Dan's been ahead of the game for a long time.

And, uh, okay. And what business did you end up buying, by the way?

Uh, so I bought a company called Fleet Packaging. So it's a, a packaging distributor. Uh, so effectively we work with large retailers in the US, uh, who need, uh, any sort of packaging. So if, you know, you go to a mall, you know, you leave with one of those to-go bags, uh, we help companies buy those. Um, and then we help with warehousing, distribute, distribution. We make it easy to buy bags overseas.

So he is Dan the Bag Man now, which is all you really need to remember, Dan the Bag Man. But to get there, I think it's a fun kind of journey, right? So we're gonna skip the part about me and Dan in college and then the company we tried to start together. We're gonna skip that. That for now. We can go back there later. The, I think though, the buying a business story starts where, um, in actually kind of a funny way. So after we, after we kind of try and fail at our first business, we go off and do different things. Um, I go move to Australia. Dan moves to San Francisco and he goes and gets a job at Facebook. A few months later, Dan calls me and, um, he's like, oh yeah, uh, sorry. Like, he's, I don't know, I don't know what he said, but he was like, Yeah, I was just, uh, quickly just fixing a bug. And I was like, fixing a bug? What are you, what are you talking about? And he's like, yeah, I'm coding now. It's like, your code? You're a— he was like an economics, fine. He was like our finance guy. Why is the— why is our finance guy— what are you doing in code? And basically what he did was, I don't know if you know this, Sam, but I guess at Facebook they have just like a coding academy internally at Facebook. Dan, is that how you describe it? Like a boot camp? Basically any non-engineer could go like become an engineer just while on the job. Is that how it works?

It's not explicitly, so it's actually for engineers when they show up. So when you show up, and I actually think they just got rid of this like a few weeks ago, so this might be old news, but you know, for the first 20 years of Facebook's existence, you know, when you get a job as an engineer at Facebook, you go to this 8-week crash course on how to be an awesome Facebook engineer. And it's not typically open to non-engineers, but you know, why accept the status quo? So I was actually one of the few people who early on was able to take classes there. So I started in fraud.

Do you have a good FarmVille fraud story? What does an average person like us not know about like fraud on a farm? Like FarmVille sounds like the stupidest thing in the world. The fact that there's even fraud going on, it's like, you know, am I stealing crops from Sam's farm?

You are stealing crops. Well, what you're doing is you're probably— you're wanting to make a better farm than Sam, but you don't have time.

Is this for pride or money?

It's, well, the fraudsters are doing it for money. So the, the buyer is doing it for pride. They're like, I want a bigger farm than Sean, but I don't have time to actually spend my time playing the game. So I'm gonna go online to the black market, wherever that is, and someone's gonna sell me whatever, 200 mushroom seeds to plant in my farm. And they've procured those illegally 'cause they've stolen someone's credit card. And there's this whole world of Facebook Games fraud that existed.

So, so FarmVille was basically like I don't know, is this called— is that the laundering part? Basically, the guy steals the credit card, uses it in FarmVille, sells the FarmVille stuff to me, which looks harmless, and he gets cash out the other side.

Precisely.

This is like a much less cooler version of The Wire.

It's pretty much— well, there was also like real money laundering too, where like people would make their own app and then launder money through that. That one was, was a little more intense.

Dude, Sam, one time, uh, I was like, Dad, what are you even doing at Facebook, dude? What do you mean fraud? What is the Facebook fraud? And he goes, have you ever opened up your timeline on Facebook and just seen a dick? And I go, no. He goes, you're welcome.

No, that was, so no, that, that, that was the later iteration. I moved on to community, uh, community tooling.

Yeah, yeah.

But effectively preventing, uh, porn on Facebook. So that, that was my go-to line.

And, uh, what'd you do after Facebook?

So after Facebook, I all of a sudden, you know, had transitioned into engineering. I went to a startup, uh, called Namely. Uh, it was a payroll company and I joined as an engineering manager, eventually worked my way up to be CTO of that company.

You gotta tell Sam the, uh, the brilliant, uh, so Dan's, Dan's actually a marketer at heart. He just never worked in marketing for some reason, but the way he, uh, framed himself in the job market was amazing. So he's, he's at Facebook, he becomes an engineer there, right? So it's not like he's like MIT computer scientist, right? Like when you think about like who would be—

I'm a Duke Spanish major.

He's a Duke Spanish major. When he was at Duke, he kept, he kept taking this class called lemurs where he was going to the zoo and looking at lemurs all day. Like Dan was, that's what Dan was doing at Duke. But then he trains himself to be an engineer. And then when he goes into the job market, he has this brilliant way of framing himself so that he ended up becoming a CTO of this like fast-growing startup.

All right, so I leave Facebook, Um, as you will see, most of these things are schemes that Sean and I have done in our lives that slowly elevated to good ideas. But I left Facebook, um, you know, basically the best of the best at the time. Like it was, you know, still is, you know, one of the best technology companies. Um, but I'd say, you know, I was, I was, I joined Facebook, there were 3,000 people. I left when there were 60,000 people. So I saw a lot of things and I'm not like old school Facebook rich. I missed that. And I wasn't an engineer in the beginning. So just want to clarify that too. but I left and I had, you know, kind of this weird amount of experience. It's like I had whatever, 4 or 5 years of coding experience, which is cool. Maybe enough to make me like an Eng 1 or Eng 2 at a normal company. Um, but you know, I had moved into management while I was at Facebook and, and the way that I positioned it was, you know, I am a Facebook manager. I know how things work at Facebook. Let me come into your startup. And let me whip your team in shape. Let me help your team run like a Facebook engineering team.

All right. So I've built a few companies that have made a few million dollars a year, and I've built two companies that have made tens of millions of dollars a year. And so I have a little bit of experience launching, building, creating new things. And I actually don't come up with a lot of original ideas. Instead, what I'm really, really good at, what my skill set is, is researching different ideas, different gaps in the market, and reverse engineering companies. And I didn't invent this, by the way. We had this guy, Brad Jacobs. We talked about him on the podcast. He started like 4 or 5 different publicly traded companies worth tens of billions of dollars each. He actually is the one who I learned how to do this from. And so with the team at HubSpot, we put together all of my research tactics, frameworks, techniques on spotting different opportunities in the market, reverse engineering companies, and figuring out exactly where opportunities are versus just coming up with a random silly idea and throwing it against the wall and hoping that it sticks. And so if you want to see my framework, you can check it out. The link is below in the YouTube description.

But Sam, isn't that great to just be like, how to re— how to rebrand yourself to be like, I'll make your engineering team run like a Facebook engineering team. And if you're a startup founder who's, you know, sitting like Nameless in New York, right? That's kind of aspirational to have somebody say that versus just, I have 5 years of experience, right?

Yeah, man, that's great.

Yeah, it was all about storytelling.

So the story is so far is like, you know, whatever, pretty good. You're stumbling into things.

Just a smart guy. Just a smart guy. A smart guy with a dream and a little bit of scheme.

And now you're in a position where you're like, I'm at this startup. We just raised a bunch of money at a good valuation. I'm the CTO. I got these shares. I'm going to be rich.

Trying to be rich.

What happens?

Didn't get rich. Second time, Facebook. Cool. Really didn't get rich. This time didn't get rich. Uh, you know, the, so, you know, long story short, we found ourselves in a place where in order to do what we needed to do, uh, we needed to sell the company or in order for the company to do what it needed to do next, we needed to sell the company. And it became very clear that this wasn't going to be kind of this massive windfall that I had been expecting. Long story short, the company sells, I find myself out of a job because as part of the transition, the acquiring company is like, we have a CTO, so we don't need you. So it's like 5 years of hard work and kind of that dream of like, hey, we're going to take something and turn it into something else kind of goes away pretty quickly. And that's kind of where things start to get interesting because, you know, I have Sean on speed dial. So had a, had a fortuitous conversation with him that day.

Was he the one who inspired you to do this, or did you listen to the MFM, or how did that insight come to be? Because like, it's not normal for a Duke Facebook unicorn startup guy to buy a business. Correct.

So no, it was, and it wasn't even like a, hey Sean, I need advice.

It was just like a random, like, you were just doing a college catch-up call.

Yeah, let's just catch up. It's been a while.

Wait, so Sean, did you say like, I use this bad company?

No, no, no. We're on this college catch-up call. What's going on with you? What's going on with you? Dan tells us this story. We got acquired, you know, there can only be one CTO. They already have one. So great. I'm going to be. And so he was just saying like, if you know any cool companies, let me know. I'm going to be looking. And then I kind of just mentioned to him, I was like, dude, Dan, you're so like, like ever since I known you, you've been entrepreneurial. And I think like Naval said this once, he goes, you know, other people sometimes see your gifts easier than you can see them. So he was saying for Naval, he also used to think I'm going to be a scientist. And his mom was like, no, no, no, you're going to be a business person. He's like, what? Oh, science, right? And she's like, oh, like every time we walk by a pizza shop, you're telling me all the 3 different things that they should be doing to run their business better. Like, you're always doing that. You're naturally— you're a natural fit for a business person. Like, that's what you're good at. And so Dan, same thing. Dan was always somebody who was like shooting his shot. Like when our freshman year at Duke, all of a sudden there's like this huge package and Dan has like a lifetime supply of Stride gum. And I'm like, Dan, why did you buy this much gum? He's like, I didn't buy it. I won it. And he would always be entering contests. I went, you know, one day with Dan, I go to, um, I go to work and Dan goes, uh, hey, I gotta get off early. I got an audition. I'm like, what? What are you doing? He's like, I'm going to try to get on Wheel of Fortune right now. And so we, I went with him and we both got casted on the Wheel of Fortune.

Well, you, yeah, you, you leave out the point. We like, we came, we were doing the sushi restaurant all the time. So we like, we're both like been working all day. We have these bright green headbands. Like we have not, like we came in with knives. Like we had our sushi knives on our belt. We come into the interview, like, no wonder we got cast. It was like, this is good TV, man.

Yeah, these clowns. But he was always doing this. He was always like, he early on, he started, uh, recording like product review videos for like, I don't know, 2 cents a pop or something like that. Like he was just doing random shit all the time. So it just seems strange to me that he was like going to get a corporate job. Like just didn't, it's not like the vision I had. So I was like, Dan, you ever started, thought about starting a business? He's like, ah, I don't really have like a killer idea. I feel like I need like a killer idea if I'm going to like put my whole life on the line for something. I go, oh, that's fair. I said, you know, I've been doing this podcast and it's not something I was doing a lot of, but like, we've met a few people who go and buy businesses and it honestly seems like a little bit of a cheat code. Like, as in the business, if you find a business that's already working, you don't have to come up with a genius idea. It's already validated. It's already working. It's got years of profitable history. You can buy it at a fair price. And then if you're good at executing, like you can grow it over time. And you know, there's retiring business owners like there's reasons these are up for sale. And so I just kind of like planted that seed. I was like, would you kind of like consider that? And Dan, I don't know what your first reaction was, but I bet it was probably just like lukewarm. I don't know.

It was lukewarm. I mean, it was two-part. One, you know, I, in the beginning I said, Sean, you know, always knows what he's talking about. Seems to, seems to have his life figured out. My first response is like, Sean has no idea what he's talking about. He's never bought a business before. Uh, to this day, that is still my first, you know, my, my main thing is like, you don't know, man. But the second one was like, but Sean is a pretty smart dude. Like, and he, you know, if he's saying this is a good idea, it's a good idea. But you know, my real, my second reaction after that was, with what money am I buying this business? 'Cause let's recall, missed the boat on the Facebook riches, missed the boat on the Namely riches. But it actually turned out, and you know, we'll, I'll get into this more later, like you don't need that much money to buy the business. That's the crazy part. And I think it, it took a little bit of digging initially. to figure that out. And I'll talk more about that in a minute.

So let's do a quick Tarantino. So let's give the ending first. So let's say you buy it, you ended up buying a bag business as in like literally if you go to a shopping store and you buy something and they have a custom branded bag when they check out, like there's a decent chance I made that bag.

So it's, it's, it's, it's that big.

It's that big. I unfortunately can't, I like, I'm under confidentiality agreements with most of my clients, but if you go to a mall, there's a pretty decent shot that you're gonna touch one of my backs.

We're gonna get it outta you somehow. We're gonna, we're gonna get it outta you.

I mean, I'll tell you after.

I'm not bound by any confidentiality. Maybe I could say some things. All right. So, but, but Dan, let's give the headline. So you buy a business. Let's, we're gonna, we're gonna work backwards for like, 'cause it's gonna sound cool and then we're gonna be like, here's the crazy journey of how I got there. All right. So how much did you buy that business for?

I bought the business for $3.4 million.

So he buys a bag business for $3.4 million. That business had been around for how long and about how much money was it making when you bought it? Yep.

So it was about 15 years old. The business had been making anywhere from— and it was right after COVID, so it was a weird few years, but it had been making anywhere from $8 to $11 million a year in revenue. In revenue. And it was doing on average about $800,000 in profit.

And what's the URL? What's the URL?

Fleetpackaging.com.

Best bags in the business.

Best bags in the business.

Do you have like a, do you have like a slogan yet? So a jingle? We're, we're working.

Oh, maybe we could come up with it later. I'll brainstorm later. It's like, no, we're working on rethink your packaging partner or rethink packaging partnership. 'Cause what we're trying to do is, you know, there's a lot of people that sell packaging, but what we're trying to do is just do it better than everybody. Just kind of go that extra level of like, let's make your life easy as a packaging buyer.

So Dan, explain. So you said you bought this business, this about 18 months ago. It was doing $11 million in revenue, about $800,000 in profit that the seller, that the guy who owned it was able to— that was his living. He's making $800 grand a year. And now last year, how much revenue did it do? You grew this.

Last year we had a record year. I think we did. We did about $13.8 million.

And that was, that was pretty, pretty easy to get the information out of them. Then he'd just say he can't tell you.

No, I just thought I can't share client names. I'll share everything else.

He can share his own information. How much money did you put down to buy this business? Because again, you talked about like, most people assume if I'm going to buy a business for $3.5 million, cool, where am I going to get $3.5 million from?

And really quick, how much profit does it do now on the 13?

On the 13, we did like $1.7 million profit last year.

So you, you, you've creamed it.

I mean, you've crushed it. You've, you've killed it from the—

Suck on that, Zuckerberg. I don't need you anymore.

There you go. Got it. So you bought a business at made $800K in profit to—

you've more than doubled it.

Yeah. And there were lots of— and, you know, was it every, you know, things that I did that doubled it? Certainly that was part of it. A lot of it was getting out of COVID and figuring out how we position it. And it turned out, you know, the business had not kind of reached its potential yet.

And back to what Sean said, you bought it for $3 million or so. Where'd the money come from?

$3.4 million. So we did it through an SBA loan. And we ended up putting $200,000 down. I say we because I say me and my wife because we put our house on the line like we went, we went all in on this business. We spent $150,000 from our savings and then my wife took a loan off her 401 for the other $50,000. So that was the, again, house on the line, 401 on the line like this was it.

Was she just down from day one to do this or what did you— did it take a lot of persuasion? How did you position this with the wife to make that happen?

She was down. I mean, she has a similar kind of philosophy on, you know, we should do something that's going to be kind of a step change in where we're at. You know, if we're gonna bet on someone, we should bet on us. And, you know, she knows Sean, she knows what we've been up to for the past, you know, however long.

She knows she married a stallion who just needed to run.

So this wasn't like, oh my goodness, where did this idea come from? This guy's crazy. It's like, no, that That sounds about right that this is what you're doing.

How much of the loan have you paid back now?

But Sam, so he put, he put down $200K, he got an SBA loan, and then he had a seller note also, which I think is a key part of this. So you want to explain where the rest of the money came from? So $200,000 from you, where'd the other $3.2 come from?

Sure. So $1.8 came from the bank, $200,000 came from me, and then the other $1.4 came from the seller, which effectively we said, hey, like, You know, we're not gonna pay this upfront over the next 5 years, assuming the business continues to do well, you know, we'll pay this second part of the business, or sorry, second part of the debt. So it's a forgivable seller note, which means effectively if the business doesn't do what it's supposed to do, that debt's forgiven on any given year. So that was part of what made me feel better about the deal. You know, 'cause you run all these scenarios when you first buy it, it's like, all right, we're gonna put our life savings and house on the line. What happens if things go bad? And it's like, all right, at least half of this debt, if things go bad, will go away.

Why'd they want to sell the company? That seems like a—

he was retiring.

He just wanted out. He was—

he wanted out. And that's kind of the— what I loved about kind of this world once Sean kind of turned me on to it is like the baby boomers are retiring, like the past few years to the next 10 years. I forget what the window is, but like a lot of them don't have kids or they have kids that don't want it. This guy had 3 kids. None of the kids wanted the business.

Dan had told me, he goes, anytime I ran into a business that looked really cool and the guy who owned it was 26, he's like, I don't want to buy this off a 26-year-old. Why are you selling this business? He's like, I want to buy from a boomer. That is my goal.

Yeah, I want to buy from a guy that wants to move to Florida and play golf. Like that to me is like, this business has been great to me and now I'm done. I've made my money. I'm ready to go. Like that's the type of business I want.

And he would probably still answer your phone calls when you had questions. Exactly.

Like, and you know, Spoiler alert, I found like the nicest buyer in the history of the world. Like I, I got incredibly lucky.

Well, tell the story now. So now I wanna go through, so to me there's two kind of good things outta this episode. One, I get to hang out with my best bud. All right. The second would be for other people who are listening to this, that they hear what I'll call like the real life take of this because Dan's not selling courses. He's not telling you you should do this. He's not like a business buying guru who's got a book and a, and a mastermind. None of that. I think he's got good opinions and like a real story of like, all right, where do you start? So to me, this episode would be interesting if 'cause if, if I'm interested in buying a business, I kind of wanna know what is it like from a person who's smart but came in with no experience, um, no money and no like kind of clue where to start. 'Cause even though I was like, hey, you should do this, it's not like I was there helping you every day or, you know, you, you were wandering around figuring this out, you know, by yourself. So he, he told me this, uh, I, I called Dan like last week to be like, all right, what do you wanna talk about? He had said something great. He goes, he goes, all right, I started and I was high excitement, and low knowledge. So I bought the book.

You ever heard this framework? Like, like D1 through D4? It's like you start high, high excitement, low knowledge, and then you become, you know, you kind of go up in knowledge and down in excitement. You kind of enter into the pit of despair, which is low knowledge, low excitement. And then you learn more and you slowly kind of get out of this, this pit.

His quote was, this is great. It's going to be great. It's going to be easy. I'm going to be rich. And he goes, then I started and I realized this is not easy. This is not going great and I might not be rich. And so do you want to talk about like how you actually like what'd you do your first maybe 100 days? What'd you do?

Well, first, how did you find the company?

So I ended up finding the company through a broker.

Got it.

So a lot of what I started to do, and I'll go back to the beginning in a second, but, you know, there's a ton of business marketplaces out there. Acquire.com, probably the most known for tech. BizBuySell for kind of more of those main street businesses. But there are these brokers that effectively represent buyers and kind of put together these packets of like, hey, I have this bag business, here's what it does. And most brokers, I was telling this to Sean, hate searchers because they just assume like, you know, people are, you know, they just saw Cody Sanchez video, they're about to buy a business, like they're pumped, you know, this morning they saw the video and now they're ready to buy the business. So they reach out to the broker. This one broker actually like understood. He was like, I get it. I understand this jump from tech to this. And then like several months later he calls me back, which is rare. Like most people didn't. He's like, I got this business, you know, check this guy out. So it ended up happening through a broker. But—

and to go back to Sean's thing, the first 100 days.

So the first thing, you know, hit Google, started reading books, started watching videos, started to just learn like what is a search fund? That was something that like Sean didn't use that word. Um, but eventually I found it where effectively there's kind of a few models to do this. One of them is, is kind of a search fund where someone will actually, you know, you get someone to finance you looking for a business and then you take a small piece of it and they effectively own most of it. Um, like there's lots of courses now in business schools, um, you know, teaching entrepreneurship through acquisition is kind of the fancy way of talking about it. And then there's kind of like this other model of, you know, you just do it yourself. You know, you effectively bootstrap it, find the money yourself, do it through an SBA loan. So first it was kind of like educating myself on the different models. You know, I thought a little bit about getting the funding, uh, but at the end of the day, it's like, no, if I'm going to do this, like, it's got to be me. I don't want to answer to anybody. And then it was really like finding this community. And there's a really cool community in search. It's been growing pretty steadily over the past you know, call it 5-ish years, I think. Um, but there's a, there's a, there's a website called searchfunder.com. Um, like those were my people during the time because, uh, search is like, it's a very lonely process.

When you guys say look at 100, what does that mean? Does that mean browse a website with 100 or does that mean actually due diligence on 100?

So it's something in the middle. So you, you basically see kind of like the headline on the website. It's like laundromat for sale, you know, $4 million. Like usually you'll get like the flashy headline and, and not much more information. Then you kind of got to double-click in and request information. And so you usually sign kind of an NDA and you'll get something called a CIM or a Confidential Information Memorandum. So it's kind of look at like 100 of those because that's really going to show you like, here's the finances of the business, like here's kind of the story that they're putting together.

It's like a summary of the business today. And so that's the one where it's like, you know, I think, I think a mistake is people think you fall in love with the first the few businesses you see, you're like, oh, this is great. Yeah, I could buy this. And you kind of really like, I mean, you're just like a teenager that just went through puberty and you just fall in love with the first, you know, the first set you see. And you're like, well, no, that's probably not the right way to do this. Let me, let me actually just plan that it's probably going to take me over 100 to even find one good one. And let me have that mental expectation and let me start counting how many I'm looking at and not just like being desperate to find, you know, the one right away. And then you're saying like, you know, like you're looking at an HVAC company, you're like, I don't know what HVAC is. You're looking at the financials, you're like, I don't know which number to look at.

It's overwhelming. But you got, you kind of got to go through those reps and figure it out before you even have any idea of what you're looking at. I kind of liken it to looking for a house because I think that's, that's a pro, you know, or an apartment even, because that's something that, that most everyone goes through, even if they're renting. You know, usually the first time you see it, you have nothing to compare it to. So you end up kind of getting to a place where you can spot the winners from the losers faster. But like Sean said, when I first started, it was like super exciting because it's like the ultimate career fair. It's like, oh cool, I'm going to be a landscaper. I'm going to be, you know, I'm going to own, you know, a scrap metal recycling center. It's like you just get so excited. And again, the business brokers especially, like they make these things sound amazing. It's like, of course I want to buy this business.

So what were some of the cool businesses you saw? Like, what's one— give us an example of one that you kind of liked, but you didn't end up pulling the trigger.

So my favorite example is I got pretty close to buying a sausage company. It did about like $10 million a year in sausage. You know, my favorite anecdote on this—

Sam is also a fellow sausage man, actually.

I know, I know that.

Kindred spirits.

If we held an event, it might also be a sausage fest. We don't know.

You're, uh, you're almost a purveyor of fine wieners. That could have been.

I, I could have been and still maybe.

So you went, but you, you did just like look at, you didn't just read the same, you're like touring.

No, I went there. I went to this Austria, I went to this, I'm like walking through like pretending to know what I'm talking about. Like, you know, how hot does this oven get? Like, it's like, that's the biggest thing. You gotta like figure out what questions to ask.

This is a really common, have you guys heard of, uh, the secretary problem?

Yeah. Somebody tell, explain it. Somebody told us that on the pod.

So I used it when I was looking for an apartment the other day and it was actually pretty magical. And so the thing is, is that— so I'm repeating from memory, so I might get it wrong. But basically, if you have— it started with the secretary. If, if you were hiring a secretary, you'd want to interview. Let's say you had 10 interviews lined up. You wouldn't want to pick who to hire until you saw at least 37% of the applicant pool. And so, for example, if you saw 10 or if you had 10 to see, 10 interviews, you'd want to go through the first 4, and then after the first 4, you would select the first person who you met that was of equal value to or close to the highest person you saw in the first 4. Does that make sense? So for if you see an apartment, let's say you go and see 100 of them, the first 37 you don't do, but the next one after the first 37 who you— that you see that is as good as the best one that you previously saw, that's the— that's the one you select. And that's called the secretary problem.

So you can't go back and buy that first one.

You can't go back. You cannot go back. But you need to like, you need to spend time like exploring the first third to see what all is out there.

That's fair. I bought the house that I found on the first day of touring, so I just want to make sure I didn't like violate the secretary problem. But I did.

Yeah, you did. But you didn't with the business. And so you wouldn't with the business. And so what of the 100 or so that you saw, were there any that looking back you're like, that was a winner?

Um, no, it wasn't until we saw, and you know, there were a few close ones where like, I think I was under LOI maybe 3 or 4 times.

For example, that sausage company had like one huge client.

They had one huge client and no contract. No contract.

But you thought they were amazing. That's kind of my point is you thought of some were so good that you were under LOI.

Uh, yeah, but then you get, you know, you're under LOI and then you get, you know, the full amount of information and then you very quickly see like, LOIs are also in this business is like a very, it's kind of like agreeing to a first date more than it is an engagement.

Um, people, people make LOIs, they'll have 3 LOIs out at the same time and it just says it's an agreement to, it's, we agree to look more, right? We agree to take this seriously to, to, to show you some interest here. Uh, but it's not like, it's not binding in the way that you would, that you think when you first go into this or if you're the seller, you're like, oh, we got an LOI. It's like, Well, hang on. I would bet the LOI to close ratio is probably, I don't, I have no idea, but I would guess it's like under 20%, you know, in terms of just LOIs received during a process. Yeah.

Because, uh, you know, you're not giving the, a lot of the information you're not even getting until that point anyway. So, you know, you're checking all the boxes up until there. You're like, this seems good. I think this is going to be good. Um, and then, you know, you get their financials or you go tour it and you find kind of that, oh, this is why, you know, you're selling it or this is why it hasn't been bought yet. That's another thing.

One thing you did that, that was great. I think, I think I kind of was like the one piece of advice I think I was pushing on you was like, hey, write a memo for every one of these deals that you like. Basically, he would write me like a one-page Notion memo that was basically like, what is the business? Why does it, you know, like how it like what is the current state of it? Just speak in numbers only, right? Why is the seller selling? You know, what's the one reason that you would buy this business? What's the one reason you would not buy this business? you know, what are the kind of— and you would just go there and you would write these memos. And I feel like that was key because I remember you would call, you were like excited about, let's say, uh, like, I don't know, what was an example of one you were excited about that then after the memo and we talked it, we beat it up and then we were like, no, this is not worth doing.

It was a Clover app. I remember the conversation. Uh, so basically like, uh, so the Clover point of sale system, like when you're like checking out of a restaurant and it's like, you know, they flip it and you're like, what's your tip? this guy made different apps for it. So like, you know, like when you round up for charity, for instance, I think that was one of his apps. Um, so it was actually pretty interesting. It was like, hey, Clovers are growing.

Super niche.

Yeah, very niche. Um, but he owned 20 of these things. It was, you know, more up my alley in terms of tech. But, you know, when I actually hashed it out with Sean, you know, it was kind of like at the end of the day, it was very niche, very small, and there wasn't necessarily a good path. To grow that business. It was just something that like was interesting now, but probably didn't have the longevity of, hey, you're about to swing, you know, this is gonna, that's another thing you said to me, Sean. You were like, this is gonna be, you know, don't listen to all those like blogs out there of like, yeah, you're gonna buy this, flip it, and then next year you're gonna buy 2 more businesses. Like, no, you're probably gonna be working in this business for a little bit of time. Make sure it's good, make sure it's lasting. And I think that first one was an example of like, sure, if I was going to buy 10 businesses, maybe that was one of them. But like, that's not the game we're playing right now.

A couple other, I thought, like key points. One was don't buy a job. So I think early on when you go to search, you see big price tags and you get scared a little bit because it's like, how am I going to afford this? And like, this is too risky. And so you gravitate towards things that feel like kind of safer and more achievable. But it's actually a bit of a trap because it's like Yeah, this is safer, more achievable. It nets $100 grand a year of profit. I can buy it for only, you know, he only wants $180 or something like that, you know? And so you get excited because it seems cheap. But the problem is it's still going to take all of your time to own, to buy this business, to run this business. And you basically bought a job versus the thing you bought, which was like $11 million in revenue, doing $1 million a year in profit.

Real dollars.

Yeah. That's not a job anymore. Now that's like an asset. That's like a real business. And yes, it took more risk and it took more time to find a good one. Of those, but it was like well worth it. So I feel like that was another kind of like key learning I think we both had during this process, like became blatantly obvious.

Yeah, not rushing the search and you want to trust me, like call it like 5 months in, you know, when you really hit this pit of despair of like, I'm never going to find anything. Everything under $5 million is trash, you know, private equity scooping up, scooping up all the good stuff and anything that's left, you know, under this point, like there's a reason it's there. You kind of just get to this place like you're never going to find it. It's easy to want to just grab one and say like, those things are fine. Like, we'll kind of ignore those. Yeah, those holes in the business.

I've made so many bad decisions, like almost all bad decisions that I've made.

It was—

I could like— it's like I had principles leading into this and I got fatigued and I didn't stick to my principles.

Fatigue. Yeah, exactly. Exactly. There was one that was like an SEO business. It was actually like a good business. But what was the— the situation with that one?

Yeah, so that one was, it was like a competitor for like, uh, SEMrush. Um, you know, it was a solid business. It made, I think it did like a million, uh, it was like half a million to a million a year in profit. Like it was a nice business. Um, but this was right as, um, you know, AI was really starting to becoming kind of the center point of the conversation, especially as it relates to search.

I helped a friend buy a company that was in the SEO space and anytime an SEO company wants to sell, it's sort of like at a time— do you guys remember Bitcoin miners? Like the— it's like, so if these are so good, why are you selling a money printer? Yeah. And SEO is sort of the same way where it's like, wait, so if you're just getting like a fountain of traffic and customers, why would you want to get rid of this?

Well, that's the same thing. It's like when you meet a 30-year-old selling a business, it's like, you know, why? And that was exactly that. And I think going into you know, let's call it the AI headwinds. It was like, there's a lot of reasons this business might be completely different. And I think Sean said like, unless you feel like you're the best suited to take this SEO company into the, you know, the next 5 years, there's more risk than upside. And it's like, that is not my background. So, you know, that's not the game I wanna play. And funny enough, I was actually in LOI with this SEO company when I found Fleet. Um, and I, I was, I almost wrote off Fleet. Like it seemed really interesting and I like, there was some part of me that you know, didn't have me rejected even though I was kind of in very late stages with this other company. Thank goodness I, you know, I made that pivot.

So let's tell the story. So you, you, the broker calls you, says check out this business. What happens from there?

So from there, I think this was before I was under LOI, but, you know, effectively Fleet looked very different than a lot of these other companies. Like the finances at first glance, like were super clean. You know, the story made a lot of sense. Like a lot of these Sims and a lot of these brokers, like, you know, yes, they're padding things and trying to make things sellable, but there was always like a blatant gotcha in a lot of these. Like, let's take the sausage example. They're like, oh yeah, this makes half a million a year. Oh, and by the way, he also makes another $400,000 in cash. But we don't pay tax on that. So like, you can't see that anywhere. And it's like, a part of me is like, that's kind of cool. Also sounds a little dangerous, like selling $400,000 worth of sausage on the side of the road. Um, but like there's always something like that, uh, with a lot of these businesses. But, but Fleet was like very clean, like everything was kind of buttoned up. The story was really tight and it kind of checked all the boxes of like, this is a recurring business. Like people are rebuying the bags several times a year. They have these amazing clients, they have these amazing factories that like, it looked very different than, than these other, than these other companies.

Sort of sounds like Dunder Mifflin of bags.

Exactly. Yeah, exactly. I am Michael Scott. You know, it's, it's, it's a, it's a necessity that these companies need.

So what'd you do? You go, you meet the guy?

I was actually going to say no to the broker because again, this SEO thing was heating up. I hadn't had my, you know, come to terms talk with Sean yet. He's like, hey, the seller wants to meet you. You know, let's all go out for lunch. I was like, all right, like free lunch. That's cool. So we meet for lunch and like my goal was like, you know, entertain this business. But at the end of the day, like I'm under LOI, so I really shouldn't.

Free lunch.

Yeah, free lunch. I should, I should break up with him after this lunch. But we start talking and like, you know, just had this instant connection with this guy. Like he was the most stand-up guy. I had met in the past few months, especially when it comes to like the business ownership. You know, he wasn't trying to, you know, pull something over my eyes. Like he wasn't trying to spin the story. He's like, this is the story. Like a lot of people like, you know, put lipstick on a pig. This guy was like selling a rabbit or selling a different animal. Like it wasn't like, he kind of said it as it is. And it was very refreshing. And like, In that moment, it was like I kind of abandoned the, like, I'm going to break up with you. And like, we kind of went the other way. We started talking about like, okay, well, how are we going to work together during the transition? How are we going to grow this? And then my favorite part is they, you know, they asked if we wanted any dessert and he's like, oh, do you want to share a tartufo? And I was like, yes. And we shared a tartufo. I don't think I've shared dessert with my wife ever, but I shared a tartufo with this guy. And like, I remember calling my wife after, and I was like, you know, I didn't do what I was supposed to do. Like I was supposed to break up with this company, but like we shared a tartufo and like, I think we're gonna buy a bag business now. Um, and it was just like this like complete 180.

Um, but in hindsight, literal Michael Scott, right? Doesn't he have a scene at Chili's that's like exactly this?

Yeah, exactly. It would be like a, a lava cake or something like that. Yeah, exactly.

A tartufo.

A tartufo. She has very, I don't, I, I don't think that was my first tartufo I've ever had too.

Who knows what a tartufo is? I had to Google it. You're my type of people, Dan. I'll tell you that. There you go.

And then, you know, from there, I, you know, I broke it off with the SEO guy. You know, we ended up like diligence took a while. That's like the second part was like, okay, like now you're committed to buying a business. How are we going to do this now? And like, it actually took 4 months because again, like I'm signing my house away, signing my life savings away. Like I needed to be damn sure that this thing was going to be solid before I did that. And then like the world of search like took on kind of like that next chapter of like, all right, well, how do you actually like figure out, you know, are the assumptions you've made in this quick few-week period of dating, like, are they correct? And we kind of transitioned to that, that phase of the process.

What, what, what was wrong and what was right for your assumptions? And what was the difference in his asking versus the paying?

So we actually negotiated the price of it pretty early. Like that part actually happened during the LOI for the most part, or like 99% of it. And there were actually 5 bidders, which I thought was a lie. Like I kind of assumed this was, um, them bluffing because they were like, yeah, we got 4 people in the packaging industry that want to buy and then there's you. So, you know, it's going to be competitive, blah, blah, blah. But again, I just figured that was a tactic to try to drive the price up. Um, but to this day, the, you know, the seller maintains that that was the case. So at this point, I have no reason not to believe it. We ended up taking, I think they wanted $3.5 or $3.6 for the company. So we ended up, uh, agreeing to $3.4. The part that took the most negotiation was that forgivable seller note. Uh, so the biggest kind of, uh, red flag in the business, uh, was that one client was over 50% of their revenue. So my biggest fear, rightfully so, was, you know, everything's great today. They've been a client for 15 years. You know, what happens if next year they leave? All of a sudden there's a very different business. So what we did was, you know, kind of ran the numbers of the bank and said, hey, in order for us to finance this, like, this is, this is the number that we'd have to have if for whatever reason we lost that client. So that part was probably the, you know, the most intense of the negotiations. But for better or worse, like, most of what he said ended up being true. Like, there weren't any of these— and he said that in the Sim. Like, that, that wasn't news.

What was surprising to you, or what was different than the dream that gets sold on social media? So if you watch the videos and you see Cody Sanchez telling you to just buy a laundromat, it's gonna— you'll be rich, whatever, that, that type of shit. Like, Was it in line with that? Was it different than that? What was the difference if there was one?

Yeah, it's not nearly as easy as Cody Sanchez makes it seem. And I probably went a little more overboard. I think like when I think about the amount of time I spent in diligence, the amount of money I spent in diligence, you know, I like, I'm a risk taker for sure, but I'm a calculated risk taker. So it's like before I make this gigantic gamble on the rest of my life, I wanna make sure I've done everything humanly possible. And I think when you watch a lot of these videos about buying the business, like they make it seem like, you know, you can just find one and then kind of transition right away. And, and the whole process is really easy. Like the process of getting the loan, like, uh, some people liken it, actually I think Cody Sanchez likens it to this. So maybe, uh, maybe she actually isn't setting unrealistic expectations, but it's like, it's a financial colonoscopy. Like they want to know everything about you. Um, and like that part's tough. And then you give the company a colonoscopy, uh, to try to figure out everything about it, quality of earnings, that sort of thing. And one of the things that I did, um, I think that I'm happiest that I did, because it got me the most comfortable outside of, you know, paying for accountants and lawyers to scour things, was, um, I shadowed the guy. So every week, because he happened to live in New York City too— oh, the whole thing was serendipitous. Like, he lived 20 minutes from my house.

Wow.

And I, the, the, you know, before I signed the Sim, it was like packaging distributor in, in the Northeast. So like, you know, it could have been in Boston, could have been wherever. This guy lived 20 minutes from me. That's how the tartufo was so accessible. But I literally went to, I went to the office every week, sat with the guy for several hours and just, he walked me through packaging. He walked me through his day to day and it just gave me, it, you know, it started my training of like, okay, well, how am I going to run this business? But it allowed me to really kind of take what was on that paper and figure out, you know, okay, this is, these are the skills that I will need to run this business. This is how I might be able to grow it. This is where I might need more help. Um, it made it more real. And I think I was lucky in that I was able to do that because I've talked to other searchers. I was like, you know, let's go back to the laundromat. You know, you buy a laundromat. I would imagine day one, you kind of walk in and the machine breaks and you're like, oh crap, like, what do I do? I know nothing about these machines. Now I need to find a mechanic. Like everything is a little more complicated and nuanced, uh, with regards to even like how laundromats are, you know, I went down the laundromat path, like I spent a while thinking that was gonna be my destiny and it's like, well, no, like valuing a laundromat like actually has a number of facets and you need to kind of really get into the weeds there. So, you know, I'd say like the biggest takeaway is like, it is hard and it takes time. It's not something that you can just do, you know, for a few minutes a day. Um, like you really gotta invest in making this happen if that's what you wanna do, or you're gonna end up you know, with some surprise down the road. I think that's probably my biggest relief is like, I've been waiting for, you know, the shoe to drop somewhere and like, this is what I missed. And like, you know, knock on wood, haven't had that yet.

How many hours a week are you working on it now? And how many hours a week was he working on it?

He was probably working, let's call it 25 to 40. I think he definitely was working less. He kind of had it on autopilot. I think he had started to, you know, kind of tune out a little bit, but not in a way that like he neglected the business. It was just like he'd been in packaging all his life. Like he could run it in his sleep. He wasn't as focused on kind of doing the growing or renegotiating things with suppliers, building the supplier base. Um, you know, I'm probably working on, you know, 50 to 60 hours. Like I spend like a bunch of time on this.

Um, how much were you able to take home?

So that's the, uh, the million dollar question. Uh, it's like, okay, cool. Your, your business is making all this money. You know, at the end of the day, 2 years in, I'm still only making, you know, $150,000 a year. Like I take the minimum amount that I need to for, you know, IRS compliance because I'm saving the rest in Able to finance growth. Like I, like I've made enough to pay back the loan, but I'm not paying back the loan because I need that cash to fuel the growth. It's a very cash intensive business and I'm not in a place quite yet where I can, take as much off the table. Although Sean has been giving me some other frameworks saying like, hey, you actually should be doing this.

What's that framework? Which is like, if you want to replace yourself, you have to pay yourself the replacement costs.

No, not that. But basically I did this in one of my businesses. Not right for everybody, but I think it's easy to go into rainy day mode as a business owner when you play like too conservative. So, you know, several of our businesses right now have just like like one of our businesses is like $2 or $3 million just sitting in the bank account. And the bank, like, it goes up every month. It's not like we have this like wild swings where you need this big cash reserve buffer. It's not like a heavy inventory business. It's like, you know, you're— all of your operating expenses is salary and you know your salaries. So there's no surprises coming next month. And even if there was, like one of my friends, our buddy Sui told me this, I was like, how much do you keep in there? Like 3 months of working capital, 6 months, 12 months? Like I think I have like 12 months of working capital sitting at the bank right now. He's like, no, I just take it all out. I'm like, zero months? He goes, yeah. He goes, I own this business myself, so if I ever need the money, I just lend it back into the business. Like, I just— I could always write the check back.

It forces you to make a profit as well.

Yeah. And so Andrew Wilkinson came on this podcast and had this book. He was talking about Profit First. I really like the philosophy of it, which is basically with normal business, you have your revenue, then you have all your expenses, and then it's like surprise, here's how much profit's left over after all that. And usually what actually happens is there's not— there's less profit than you would have guessed. And it's why? Because expenses were a little higher, blah, blah, blah. And you're always in this profit comes last. Profit first was basically you decide upfront, you say, okay, I want to have a 20% profit margin. So you take your revenue, you set aside money for taxes, which you know is going to be, um, uh, you take your revenue, you take your profits, you set aside an amount for taxes. What's left is your expenses budget. So instead of making profit the thing that comes last, you make the expenses come last and then you have to say, all right, cool, then my marketing budget can only be this much because I've decided to take this much as a, as a profit, um, a set profit margin out of my business. And I don't adhere to it 100%. I don't think it's right for every business, but I do think that, you know, Dan in this case, I think he's being a little overly conservative as to how much cash he's leaving in the business. I did that too. And the longer I delayed it, I took away one very valuable thing, which is if you have— if you pay yourself every month out of the business and one month that's light or another month it's heavy, the body just reacts to it. If it's light, you're like, yo, what the hell? And you will go fix a part of your business that was broken. If you just leave it in and it's just like a P&L, it's just numbers on a spreadsheet. It's not money you actually receive. You know, you'll wait 15 months before you end up correcting that problem because it's all fictitious money anyways. It's not money you're actually getting. And so I think that actually getting that check every month creates this feedback loop that's actually like quite valuable to a business owner. It'll, it'll cause you to scrutinize unnecessary expenses or like go after it because once you taste a big month like Sam, we have this with MFM. If we have a big month in the next month, I'm kind of like, well, I kind of like the feeling of that one.

Let's do that again.

What do we need? One extra episode too? Should we go get a guest? What's Mohnish doing today? Let me see what's going on over there, right? Like you start to think about what you could do to go to go drive it back up. And I think there's an unhealthy version of that, but there's some healthy components to that.

Yeah. So I think I, that's a lesson learned for me. I think I'm still in the very conservative, um, you know, what if I need this money? And I do have high working capital costs, especially around now, kind of pre-holiday. I'm about to have to write a bunch of checks. Um, but very soon I should get to a place where I can take more out, um, and or start paying back some of the debt a little faster.

So Sam, I'm curious, what's your reaction to this whole thing?

So I think that for people who have your personality type, which is you, you're a very serious person, I think like, like you're a person like if I was a broker and I met you, I would not think you were kicking tires. I'd be like, oh, this guy's for real. Like it's— you have that very obvious for real energy. And if you have that very obvious for real energy where like, no, I'm going to do this, this makes sense. I think that the path that you're taking is so wonderful. And I— my assumption is that you're going to be wildly successful. And so I think it's very wise to do. I think that if you, if you are an unserious person where you are not willing to put your house up or something like that, that's kind of like one of the tells. Like if so, if you're like not serious like that and you are not willing to do the diligence and say, I'm willing to look at 100 things, I would say do not do this.

Yeah, I think there's also one, I think you said it perfectly. There is one more thing to it, which is what situations do you shine the most? And so like for Dan, I think he always had an entrepreneurial streak that was used as like random side quests in life. Like we would go try to win the McDonald's Monopoly game every year. Like we tried to like actually win it, not just like hope we were going to win it.

We thought we were going to win it.

We were like dumpster diving, trying to win this stupid thing, right? Like, or, you know, We started a blackjack club on campus and we're running simulations to see how much money we could make if we started a blackjack club. Like, we were always trying to come up with ideas. It was more fun to come up with our own idea versus just like, go get a job and do the thing. And so I feel like if you know that you actually turn up the most, you're the most version of you when you're doing this type of shit, when you're like in control of your own fate and you have your own project. Like, as arbitrary as like, you know, bags are, doesn't matter. It's like, I'll take bags super seriously. I took— he took gum seriously, blackjack seriously, sushi seriously. Like all those things. I think that that's the other part, which is not only the part you said, but then also if you really are like at your core more entrepreneurial and you're more switched on doing that, then you're going to have a better result doing this than you are if you, you know, stay in a more traditional job. That's my—

and I think, I think people, you know, when I tell them about, you know, first it's always like the unbelievable, wait, you do what? But then the second, like their mind goes like, oh, I should do that because, you know, it sounds great in hindsight, right? Like when everything works out, it's like, cool, of course this is easy. Of course anyone can do it. But, um, I think people miss the point that there's a lot of ways that this doesn't go like that. And it's not necessarily the most glamorous.

I also think most people shouldn't do this. So for example, this is not something I like, this does not fall within my skillset. So my like, if I had to guess, you, when you were buying the company, like you guys were negotiating over $10,000, $20,000, $30,000, $40,000 things. Like if I had to guess, you were incredibly anal about the paperwork. You were asking, you're like, what's this $300? What's this $3,000 charge? What's this? That is not what I do. I do not do that. That kills me. That does not fit my personality type. So I have bought and invested in, done a bunch of real estate stuff in my time, and I lose on all of it because you make your money when you're buying it and when you sweat the details upfront, which is not— that is not what I do. I don't think necessarily that is what Sean likes to do. And I think that if you are the type of person who plays a board game and you memorize all the rules and you like sweat the details and you have that attribute, then this buying a company is it could potentially work well for you.

I'm the guy that takes the rulebook out of the box and reads it to explain to everybody.

Exactly. If you have that trait, this could be awesome. Life-changing.

Yeah.

So Dana, one of the other cool things about doing a search for a business is you realize how big the universe of businesses is. And I asked you, I said, you know, usually we try to brainstorm business ideas with people like, what opportunities do you see? You said you would come up with a couple ideas. Give us a couple of your ideas of what you think other people could go do. This is just like the sort of random section.

Yeah, I think the, I mean, the biggest takeaway, like from buying a business before I get into, into the ideas, like everything's a business, right? Like you walked, you know, go look at any store, you know, every little piece of that business is something that someone sells. Like that display that says for sale, like someone sells that, like the, the holder for the gum on the store. Like that's a business. Like I don't think I really appreciated how random and how basic some of these businesses can be and, and people make really good money doing it. Even packaging. It's like you don't really think about that.

By the way, I'm pretty sure Robert Kraft, the owner of the Patriots, he owns the Kraft Group. I think that's a packaging company.

It could be. There are so many packaging companies.

They make corrugated cardboard, I believe.

Yeah, cardboard.

Okay.

One of our best episodes ever, if you want to go listen to a great episode, is the Sarah Moore episode on this podcast. And she's the, I think it's called the Egg Carton Queen. And her thing was she did the same thing you did, basically. She went and found a retiring guy who owned a business that sold egg cartons, like not the eggs, the carton they come in. And you don't even think that's a business. Like when you go look at, you're like, eggs. Yeah. Okay. There's a farm that sells eggs. You don't even realize that the farm has to then buy egg cartons and there's somebody whose job is to make egg cartons and they sell it at the best price and the best value, blah, blah, blah. And so her episode, I think, is amazing. And you see that the other example, Sam, that I always give when I explain what this podcast is to people, is I talk about like everything you see is there because someone sold it. Like nothing gets there by accident. And so I was like, you know, even in the workplace, if you go to your break room and there's a poster on the wall that's like the labor code, there's a guy in Minnesota that sells that. He makes $1 million a year selling you the poster every year. Once I heard that, I was like, oh shit. It's like a physicist when he learns about string theory or some shit, you know, it's like, oh, it's everywhere. I get it.

Oh, the waves are particles. You see the world of the components.

Yeah, all the components themselves are businesses too. And then you realize like, if you're not making it in business, it's mostly because of a lack of creativity and effort. It's not because of a lack of opportunity, because literally every item everywhere is itself, you know, a business that somebody is running to get it there. And so, you know, there's no lack of opportunities in that sense. Yeah.

So now I'm like hardcore on the other end of the spectrum of like, as unsexy as possible. I want to do that. Like, I want to, I want to be the guy that has like the most random thing. Like, packaging is pretty random. Like, like, you know, in a future world, once I, you know, if and when I'm done with this, like, I want to go even further.

Yeah. By the way, do you have— when you lay out— when you're laying in bed at night, what do you think? Like, in 10, 20 years, we're gonna— we could be this. Like, do you have— do you think this could be a $100 million company? Do you think you could sell it for a certain amount? What's your sort of North Star that excites you?

So, you know, at this point, I don't have any plans to sell it. I do think it could be $100 million in sales company easily. Like there's so like some of these big packaging players are huge. And we're able to compete with them. That's kind of the, you know, we're small in the scheme of things. Like it's a nice size business, but we're small in the scheme of things. But what I'm finding is as we work with these brands, like we actually do have a pretty differentiated offering because we are small, we're scrappy. And people love that. And you know, as we've been able to kind of add clients, I'm like, oh, this thing can really take, like we can really scale this up and, and, you know, start to gain more traction with these large brands. And, you know, the crazy thing is people spend tens, you know, these big companies spend tens of millions of dollars on their packaging. Um, so you could easily get like 5 clients to get you to $100 million, like, like that if, if it's the right 5. So my goal is to grow it. I, I do think in a few years I'll, I'll hire an operator to run it. One of my biggest pieces of advice to people searching is like, don't assume you're going to hire the operator day one, especially if you're putting your house on the line. Because there is not a single person that I trust to run this business when I'm going to get kicked out on the street if it fails. When I get to the place that I feel better about that, like only then will I then decide, okay, well maybe I'll hire someone and just do more strategic work. But yeah, the, like, I'm loving doing what I'm doing now. So I think it's eventually scaling my time. So it's not like I'm very involved in all the processes right now and I designed it that way because that's how I learned. You know, I'd love to be able to go away and not have to take a call because the blue isn't blue enough. Like, you know, I got a lot, I do a lot of color matching.

When we were doing the sushi restaurant, um, Dan was not only sweating the details on the finance side, but we were like, dude, we don't really know how a restaurant works. None of us have ever worked in a restaurant. So Dan went and got a job at Noodles and Company.

Oh yeah.

And he studied them from the inside and we treated it like it was like Ocean's Eleven. Like every day he'd come home and we were like, what did you learn?

Wrote a report. Yeah.

Yeah.

He was like, draw the, he'd like draw the workflows or he'd like, what What did you learn and what did you bring me? Give me the pesto cavatappi.

Yeah, then he'd bring the pesto cavatappi and he'd be like, trust me, do not eat the tomato basil soup. We're like, why? It seems just tomato soup. He's like, don't eat the tomato basil soup, guys.

And so he was like, went undercover and he was like willing to go like the big reveal, like the big Undercover Boss reveal at the end when I quit.

Yeah. By the way, were they blown away by the fact that you're like, I am creating a sushi chain?

I think I tried to hire the GM and she's like, I was like, all right, like, that sounds better than what I'm doing here at Noodles and Company. Like, she was like, like, I thought you'd like, you betrayed me. It's like, cool. You're like, oh, you're trying to move next door? Great. Like, we can trade food at lunch.

So Dan, you, um, let's do, uh, let's do, actually, do you have that, the business plan that we made? Do you still have that binder?

Yeah, one sec. Let's find it.

So the story here is that Uh, not only did Dan work undercover at Noodles and Company, at some point—

also, this was not a— I didn't just put that there. Like, that's lived there behind.

You just keep that there? I don't have one. I need to get a copy of this.

All right, so this— I also like our Sabi Sushi hat is right there. Oh, nice.

Yeah, so basically the first business we, me and Dan, uh, and our buddy Trevor had out of college was to create this brand called Sabi Sushi. The idea was to create the Chipotle for sushi. So go get sushi the way you eat Chipotle, where you just walk down the line, you pick your ingredients, and you get the thing. This is our big idea. And, um, which was not only—

How do you maintain a good idea, uh, over time?

It's been proven.

It's been proven it's a bad idea, but like, I still want it.

Okay, so, so we, not only did Dan work undercover at Noodles and Company, we then go and, I don't know how, we get a meeting with the founder of Noodles and Company, and we show up to this meeting with this binder. This binder is our business plan. We had been working on this for months while we were searching for a location. And can you just hold up the thickness of this binder so people see?

It's thick. Uh, let's see.

Yeah, like this is probably a couple hundred pages of a business plan in there. And there was stupid things. So part of it is what you would expect, like here's the startup cost, but part of it was dumb stuff like the uniforms and how we're gonna like progress people from, from entry level to manager and what their values are and all. We had not sold a single roll to a single customer and we're worried about all this other shit. So, but what we think, we're tricking ourselves into thinking that planning equals productivity and, you know, spoiler, planning did not equal productivity. Uh, we were basically doing a very fancy form of procrastination. And so we get to this meeting with this guy from Noodles and Company. I think his name's Aaron, if I remember correctly.

And he, uh, I forgot that guy's name.

He's like, all right, so like, what's the plan? And we think, We're about to wow this guy. And we're like, plan? Oh, funny you should ask. Whip out that binder, slam it on the table, and it's basically like, here's our plan. Look how great this is. And I remember he looks at it and first of all, it looks like a kid's project. Like even, even the COVID is like, we inserted this colorful thing in the front plastic thing. And then he flips through and he's like, realizes pretty quickly, oh, these idiots wrote a 250-page business plan for their sushi restaurant and they don't even have a location. They don't have any customers. They're starting on, you know, from scratch. And I remember the look on his face. And then I remember like the moment that was rock bottom for me and the whole sushi journey, which was that he should have just ripped us and been like, guys, what the hell are you doing? This is so ass backwards. Like, why don't you get out there, start testing your concept, see if people actually want this, and then like, you know, you'll learn by doing. And instead he kind of took pity on us and didn't say that. I could tell he wanted to say something and then he was like, uh, and then he just tried to be nice about it. And I was like, oh my God, we're so bad that he feels like he needs to be polite about this. That means we're even worse than just being bad. Um, and I just remember realizing like, well, I don't know what the right answer is, but whatever we're doing is dead wrong. I could tell you that right now after that meeting.

I just remember years later, years later, someone did tell us that though. In Boston there, you know, we were talking about, we were about to sign a 10-year lease and we literally just met this guy like 10 minutes ago and he, oh, he was, it was a guy, he like owned a bunch of Boston Markets. I don't know if you remember this.

Yeah, John Prendergast. Prendergast. Oh my goodness. I don't know how you say it.

Nice call.

That's his name. He was not, he was doing a tech company now, but he was like, you know, early in my career, I owned 20 or 30 Boston Markets. And, um, he's like, so I know a little bit about the quick service industry. Let me, you know, be your mentor.

Yeah. But he basically just tore the whole thing to shreds, like within 5 minutes. It was like, this is wrong. Don't sign that lease. And like Trevor, like, wasn't in Massachusetts with us when we, when we were doing this. We like, he was like about to sign the lease. We like called him.

We're like, wait, no.

Yeah.

Um, well, this guy had, this guy was great. 'Cause he's like, you know, so like he asked us a question and we gave him the answer we'd been giving everybody else. So I think he was something like, like, you know, so what makes you think that there's like, there's demand for this? And we were like, well, you know, sushi's been on the rise. We gave him this like spiel. He's like, all right, so is this gonna work or what? And he basically cut through the nonsense and he's like, how do you know? Are you testing this? You're just gonna sign a 10-year lease with a personal guarantee with no clue if this, if the market actually even wants this? Like, doesn't that seem insane to you guys? And he gave us real talk and I'll forever be grateful for him, uh, for giving us that real talk cuz he saved our ass. From signing that lease. And he gave us a different plan and he was like, why don't you test this? Rent out a commissary kitchen like bakers and caterers use. There— what turned out they were like $20 an hour. It was like super cheap. No, and no long-term commitments. And he's like, rent those out, do a delivery only, validate the demand, see if people like your recipes, see if people like the price points. You'll learn so much by doing that. And then you'll know what you need out of your first location if you're going to go there. And that saved our ass. That advice saved, saved us. And, you know, Whenever somebody asks me for like any advice or help, I just remember like, can I give them 1/10 of the value John gave us is the new like north star for that situation.

Yeah, I remember he introduced us to like Lean Startup and, you know, actually figuring out, you know, we used to poll people. We're like, you know, would you eat sushi once a week? Like how many times a week would you eat sushi? Which is a badly phrased question anyway. In hindsight, they're like, oh, I'd come 2 to 3 times a week. And it's like, we, we did this proof of concept, um, on the cheap, um, as, as quickly as we could. And like, the answer was like, not even once a month. Um, like night and day.

Right. Outside of, outside of like LA, SF, New York, the answer is like, if I eat sushi at all, like, right, to make a concept like this work, it needs to work in Texas, Colorado, you know, it needs to work everywhere. And the answer was, if I eat sushi at all, I eat it about once a month and I'm happy with that. I'm not trying to eat it 3 times a week.

And I'm gonna go to the nice restaurant to do it.

Right. And we were looking for like the 3 people who validated us rather than ignoring the 97 people who were saying no. We were like, yeah, see those 3. He also did one other amazing thing that as an entrepreneur, I now see like this pattern over and over again. So he suggested to us, he's like, do it delivery only. And we were like, ah, but he like saw the look on our face. He's like, what? And we were like, delivery just sucks. And we, we started, you know, he's like, why? So we're like, delivery, I mean, you order food, you don't even know when it's gonna come. This is before DoorDash, by the way.

This is before DoorDash. I think the biggest thing is we, we probably invented DoorDash, uh, and didn't know it. And we were fixated, didn't know it. We were fixated on the sushi, but we really, you know, came up with a better model.

Exactly. So, so this is before all those. So we were like, you You know, you call in an order, you don't know when it's going to come. It shows up an hour later. The packaging is all shitty. The food is cold, it's leaking out the bottom and just feels cheap. And we're like, that's why, like, it sucks. And our takeaway was, therefore, no. And his was, wow, looks like you found all the things to improve to make this a 10x better experience. And like, since then, now I see this all the time. If you talk to entrepreneurs, it's like you think about a space and you're like, oh, that's horrible. It's horrible for these reasons. And like the entrepreneurial response, the customer response is it's horrible. The entrepreneur response is, wow, what an opportunity. Because if I just change those 4 things, I now have created this huge, like, you know, level up in the customer experience. And so we ended up doing it where our delivery times were sub-30 minutes. You knew exactly when it was going to come. We stamped on the food when we made it, so you knew it was fresh. We put a webcam in our kitchen so you could see us working on your order. We did like all these other things to try to make delivery actually a cool experience. And the bar was so low by basic delivery standards that it, that kind of actually worked. And so I thought that was the other, like, really brilliant thing that John did for us. Yeah.

Rethinking, rethinking what, you know, everyone kind of assumed we would make with a restaurant and kind of flipping it on its head. And it allowed us to fail faster.

So back to the business ideas. You had a few here. Are there any that you think are cool or interesting that you think somebody could go do?

I am very into what I'm calling fun-to-run businesses. So I actually looked at a few of these towards the end. I think I found Fleet when I, when I saw some of these like laser tag, bowling alleys, like kind of these family entertainment businesses. And I have kind of two hypotheses around them. One is like, I think I saw like one or two P&L. Again, do your own research. Don't just blindly accept that this is a good space. The one or two I saw, like wildly profitable, very low cost. There's probably a high startup cost in the beginning, but like climbing gym or something like that. It's like once you get it set up, they have like these autonomous ones now too. You don't even need that much labor. But also as a dad, I have two kids, like I'm always spending money on these things. Like my son had a laser tag birthday party. There's like one person working at this laser tag thing. They like own the laser tag game in town. They charge you for the adults standing at the birthday party. And I'm like, wow, like I could do this better. I want, you know, they—

and they have you hostage.

Have you hostage all the arcade games? You got to buy their food. Kind of these very easy to run, like almost a single person, but, you know, let's call it like a teenage business. So you hire teenagers to work there, like anything that they're not going to mess up. Yeah, like a bowling alley. And then how do you find things that like have multiple purposes? Like there's a bowling alley in my town and I, you know, it's, you know, during the day it's for kids, like they have the kids activities and like after-school activities. And then at night it's the bowling league for the adults and they have a bar. So it's the local dive bar. It's like, You know, then there's like 5, you know, 5 vending machines in there. Again, teenager working like the no-frills. But I have to imagine if you can find the right business like this, kind of great to be able to just go bowling at your bowling alley. I can't do much with my paper bags. Like I go and I check them out and maybe walk around with them, but like not much.

Like why family entertainment? Why this out-of-home entertainment?

Why now?

Like, is there anything that's changed in the market? Why? Because, you know, these have been around forever, laser tag, like a public bowling alley, whatever.

My hunch is they've been profitable for a while. Like, I think a lot of these are like sneaky businesses that you don't think of. Um, you know, I think there's also kind of more of a trend. I was reading about this, like, you know, millennials, like, don't drink as much. They want more, like, sober events. Um, I think this idea of doing more, like, games is starting to take on— again, you know, small sample size of things in my town, but like, you know, you go to these, like, unlimited— you know, there's an arcade in my town. It's like you pay, like, $8 for an hour. You can play unlimited arcade games. This place is packed. Um, you know, that sort of thing never really existed, but I think there's like this desire to like leave the house and do things. Maybe it's a post-COVID thing. I'm not sure. Um, the thing that I think is really interesting about this is like, and this is probably true across the country, like if I think about, like, I always drive by like these large commercial real estate, um, you know, old malls, you know, these big buildings that no one wants to buy anymore. Uh, and then when I see one, when I see what people put in them, like it tends to be kind of like these newer, you know, more interesting things like, um, pickleball courts. Like, I think I read something, it's like, oh, they're taking all the old bed baths and turning them into pickleball courts. Um, so it's actually like, take something that maybe you can get that's not being used and, you know, make a climbing gym, make it a ninja course. Um, but I think is like the most incredible marketing, uh, where they like just marketed gymnastics to boys and now all of a sudden they've doubled, they've doubled the amount of like demand for this. And then there's like the climbing team and like, this place is packed. All the time. So that one is one.

So, so one of my biggest investments over the past 2 years has been in my brother-in-law's commercial real estate. So he does what everybody thinks is dying but is actually like thriving. So for example, these kind of like mall, like strip mall locations, not like a mall, like an indoor mall, but basically a shopping center and a shopping center with a grocery store, you know, maybe a So there's got a Trader Joe's, there may be like a Crunch Fitness, there's like whatever, there's a bunch of these types of locations. And then how do you fill up the rest of the boxes? And people think that shopping centers are probably dead because e-commerce or whatever, everything's on Amazon now or whatever. These things have like 97% occupancy. It's like really, it's like higher than multifamily and office. Like it's a really great category. And even the few concepts that are like kind of going out of business, like a Bed Bath Beyond or like Joann's Fabrics, like he's replacing them with trampoline parks and pickleball and Tesla charging networks. He's like, there's just new tenants that are always there. And he's like, the best part of this entire model, because the returns are bananas for this thing. Like, it's like, it is by far like the thing I've been most bullish on in the last 24 months has been investing into this. I basically took all my spare cash, put it over here. And, um, the reason why was A, he's a good operator, but B, there's no supply, so nobody builds any new shopping centers. So like, even though, like, you know, every— everything else, people build more, they build more condos, they build more stuff. Nobody builds new shopping centers. And so it's all just retrofitting existing centers. You buy them usually like below the actual build cost of the, of the center themselves. And so I've seen this. My kids go to this thing called Little Kickers. It's in San Ramon, like a little town, like like, you know, in the Bay Area. And it's exactly what you're describing. A teenager runs it. Like, I asked to speak to the manager, and, um, the manager was 17 years old. He had like a chain on and like the fboy haircut. And I was like, what, you're in charge of this? And he was great, by the way. He was actually like a really good, uh, good manager. But everybody who works there is young. Like, he's young. He's like, you know, probably— he's definitely like, I don't know, under 23 years old. And all the coaches, there's 2 coaches per class, and they're all, they're all also like just kind of soccer players who were high schoolers probably. And, but this thing is packed and it's just like one large venue for kids' soccer. And, um, this thing has to be printing. Like I just doing the rough math on it. This thing has to be printing. They have, you know, definitely over 1,000 members. It's like $200 to $300 per month. Um, you know, this is, this is a, a very big business that's basically like you said, sort of like a fun business that's teenager, right?

Yeah. And it's, you don't need to, and it's AI-proof, right?

Like, so like if you're looking for where do I do business if I know the whole world is changing with AI, well, AI's probably not gonna like do a trampoline park or, you know, do a, a kids' soccer center. You know, like those are, those are pretty safe businesses.

Yeah.

And they're predictable. I mean, like there are kids are always gonna wanna jump. It's not like you're buying a product that, you know, all of a sudden you don't know if it's gonna last.

Um, right.

You put a bullet point on here, the least sexy businesses possible. Touch the taboo. What do you, what do you mean by that?

So this is, I start again, when in the pit of despair, you start to, you start to go crazy with ideas. You're like, all right, well, what are, what, you know, I started looking at like medical ambulances, which I still think could have worked, but effectively, you know, the government subsidizes medical transport for disabled and elderly from, you know, nursing homes to their medical appointments. So it's actually government contracts. If you have a fleet of, you know, these special handicap accessible vans, you know, you effectively can, you mobilize this fleet every day. You kind of fill up your appointments with people and you just transport them to and from. Super simple. You don't really think about it, but like the demand is, is there, especially as, as the population's aging. That's a, that's a good example of an unsexy one. I would love to buy a funeral home, like something that's just like, oh man, like you work in that. It's like, how do you, I mean, all of the deal, like if you want to find a deal that's kind of like, you know, punching above your weight, if you will, like there's going to be some hair on the deal, like at the lower end of the market. Like, like I said, like private equity is going to scoop up the easy ones. There's going to be something like if that's something can be that is just like weird and like no one really wants to touch it or think about it. Like to me, that's a great, a great reason to buy it, right?

Because, because it might mean that, you know, let's say there's a really sexy business on one side, right? There's a business that's like maybe it's like software only, you don't have to run it. Um, you know, it's low operations, blah, blah, blah. And it's, it's about whatever, party planning or something fun. The hair on that deal might be, it may be just that the valuation is extremely high. So it's going to take you a long time to get your cash back. Or it might be some other, something else like, you know, users are very fickle, the competition is very intense, whatever. There's going to be hair in every deal. The good thing about what you're saying is that that if you choose the hair that it's not the most fun thing to run.

Well, yeah, where the hair's gonna be like, you gotta cremate someone. It's like, actually, like, I don't actually know if I wanna do that. Like, now that I'm saying it out loud, like, that's, I mean, I'll hire a teenager to do it then. Uh, but like, that's a better hair. That's about a better amount of hair. Like, you kind of know what it is. It's like the hair is the thing almost. It's not just like—

versus like the P&L has hair or the, there's a lot of debt on the business already. There's other problems in other areas.

Exactly. So if there's something that like, Yeah, like if 20 people are going to flock to the software-only party planning one, but only like 2 crazy enough people are like, well, let me roll up these funeral homes, try to like aggregate. And I'm sure people do this. Like, you know, I'm not the first one to think about this. But I like that. The other thing I really like right now, Party City just went out of business. Who's buying? Where are you buying balloons? There is a guy like 20 minutes from me. He had a fireworks store. His fireworks store happened to sell balloons. The day Party City went out of business, he rebranded, man. Now his store is called Balloons. It used to just be called Fireworks. Now it's called Balloons. He's taking out all the ads on the street. And we went there, you know, for my, for my son's birthday and he's doing awesome. So it's like, how do you like kind of— and don't copy Party City. That clearly didn't work, right?

But the demand for balloons still exists and will continue to exist.

Exactly. The supply just shrank like a whole lot.

Right.

And I imagine as things change, like the landscape for better or worse is changing very rapidly these days. You know, maybe something goes out of business because they can't compete because of tariffs or whatever. Like, how do you think about being, you know, opportunistic in that sense and doing it? And you can do it like you don't even need— like you could start selling balloons, like get a permit and start doing delivery-only balloons like that. I actually saw a truck doing that when I went to Mohnish Pabrai's house.

He's a great investor and he— on his desk there's a— like where you have a name placard, Normally you just have your name engraved on it. Engraved on it, it just said, trouble is opportunity. And he just had it on his desk. So, 'cause at all times, you know, he's reading the news or he's hearing something as a reminder, trouble is opportunity.

Uh, I love that.

Yep.

That's awesome.

Cool. Well, Dan, dude, awesome hanging out with you as always. I'm glad you got to tell your story and congrats, man. I'm blown away by what you did with the, with the business that you bought. You are officially Dan the Bag Man. Thanks for telling the story.

Yeah. Thanks for having me on. It's, uh, exciting to, uh, to be here.

Cool.