[EP 250] An unusual acquisition story and the unintended opportunities in growth through acquisition Part 2 (selling 4 businesses)

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[EP 238 ] An unusual acquisition story and the unintended opportunities in growth through acquisition Part 1 (An unusual journey)

[EP 255] An unusual acquisition story and the unintended opportunities in growth through acquisition Part 3 (Innovation)

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Joanna:
Hi, it’s Joanna Oakey here and welcome back to The Deal Room Podcast, a podcast proudly brought to you by our commercial legal practice Aspect Legal. Now today we have part two of our three-part series with serial entrepreneur, John Eric Plamondon. This is such a fabulous three-part series, you can find the first episode in the show notes, make sure you check out the show notes to get a link straight back to Episode one in this three-part series because of Jean goes through his unusual acquisition stories and the unintended opportunities in growth through acquisition in that first episode, and in that episode, we also create a bit of background for where we are going in this episode, episode number two, all about selling a business. And in fact, this episode in selling a business isn’t based on Jean’s experience in selling just one business. But in four, we talked about the background and the story behind his business sales, what he learned from selling these four businesses, what surprised him and what he would do differently, and importantly, the role of systems and processes in making a business saleable. So without further ado, here we go with our discussion today. With Jean.

Joanna:
Jean, I am so excited to have you back on our podcast today. I’m having so much fun recording with you. Thanks for coming back again.

Jean-Eric:
Great to see you again. Looking forward to this.

Joanna:
wonderful, wonderful now, as I will have already said, as I introduced you, we have a podcast that we started on where we talked about your story of acquisition. And that gave a bit of a taster or an introduction to the next topic that we’re talking about today, which is sales. And you have sold 4 businesses, I believe. Is that correct? For businesses?

Jean-Eric:
Yes.

Joanna:
Brilliant. Okay, wonderful. Well, you’re clearly the master coming from your own background of experience. And I think in the last podcast episode, we perhaps touched on the reason for the sale of businesses or the sale of some of the businesses but take us through a quick snapshot for businesses. What were the four businesses? Why did you sell them?

Jean-Eric:
Yeah, so my first company was where I got into a painting company painting franchise and worked myself to a pulp and ended up just selling off the full franchise to the next franchisee. The idea there was, you know, it was a market that was very tough, nobody had made any money for the last five years in a row, I built it up to a profitable state and actually was able to sell it. So that was the, you know, did that at the age of just before I turned 19. So that was my first little one. And then I got into the pinball business where we talk a little bit about that the last episode of or I acquired it on a vendor take back the loan, which means I didn’t pay anything for it, put a bunch of systems processes, found a key acquirer and was able to sell it for three times that price. So I don’t even know what that would be infinite, I guess infinite times return on your money because I didn’t really pay for it.

Joanna:
Yeah, I yeah, let’s go with that. I liked that. Yeah.

Jean-Eric:
Then there was from there, I got into the Boolean company, and I acquired that we grew it. And through that business, we talked, we touched on this shortly in the last episode, you know, trying to acquire more of my raw materials at the cheapest source, which led me down another path of buying a scrap metal company. And, you know, through the whole process, I started a farm cleanup company where we would acquire scrap metal for free and clean up farms in exchange for you know, within a matter of hours. And so that business, we scaled up from zero to 5 million in sales in the first six months, you know, and we were running at a 67% gross margin and we were you know, we had figured out and dial turn the dials quite a bit. So our cash flow delta, which is a term I use now just means that we were getting paid for everything upfront plus add terms to pay everyone out. It was a perfect unicorn business to scale up and grow.

So during that time is when I decided okay, I think it’s time to sell my bullion company. So at the time, I sold it to one of my key employees who took it on and continues to run it as a hobby business because that was like a four-hour workweek business. I read the book, I played the blueprint, I did, it, travelled the world while running that one sold it to her. And now I continued working in the scrap metal industry. And so this company here, we were growing like crazy, we were the king of the hill, we were doing fantastic. We were selling a commodity product. So it was we were affected by, you know, world pricing and stuff like that. But even though the commodity prices were dropping a little bit, we just kept tightening up our systems and processes. And it was a fantastic business. And at the time, it didn’t know how good of a business it was, you know, it’s so easy to just take credit and think must be because I’m so smart. You know, but, you know, we had done a couple of good things, of course, but it was a business that I had no plans on selling, but yet I knew that, you know, begin with the end in mind, build those systems, put those things in place, I invested in my people heavily and ensure enough, you know, in the middle of running that company, I have dropped a petition for divorce. And so that petition for divorce was, you know, normally there are a few pages long mine was like 42. And it read like a really cheap Hollywood script. So it just you know that it was like, it was gonna be a thing. And my company was like 800 kilometres away from, you know, my hometown, so my home city.

So I had in the middle of a really busy season, I had to step away from a company that was still fairly young. We had, and it’s put things in perspective, we had about 18 semi trucks running on the road every day like we were burning $22,000 of diesel per week, just moving stuff around. We had dispatch we had salespeople, we had a whole operation. And this blindsided me. And so I stepped away from the operations and did a few things. Where I brought in some more key persons to kind of oversee the whole operation and had to go to deal with the divorce stuff in court for pretty much the whole summer. And what I had returned, which was really cool. My staff had really dug into all the systems and processes we had given them. And it was really interesting because I worked myself out of a job like I came back and all my staff are better than me and all my areas. And it was a Yeah, it was a fantastic scenario. You know, even though I was never planning on selling that company, it was something where I was able to build it up. So that when something else may have blindsided me later, it was a saleable enterprise. And so maybe a bit of foreshadowing,

Joanna:
I just want to stop and highlight that point, because this is something I talk about a lot the importance of building a business that is running a sale-ready state. And I talk about the reason being you don’t necessarily you don’t know what’s around the corner, you know, but he is he’s an absolute example of that. And you know, and I think these stories work far better than just, you know, just advice from on Hi, here’s where here’s how you should build your business. I think this is such a great example. And so you had no plans on selling the business. And yet this was forced upon you, and you ended up in this situation that you hadn’t anticipated could be around the corner. What did you do? Do you think, in building the business that made it something what do you think the successes were in how you built it to make it a saleable asset when you were least expecting that you would have to sell it?

Jean-Eric:
You know, I talk about this a lot now with how we help companies that want to scale or get ready for scale, it’s the triangle of the business, you know, there are the processes, which are good. But if you focus on just processes, and don’t get the people on board with it, people being the second component, it has to be simple enough that it sticks, and that it works and people buy and want to do it. And so that was something that I didn’t realize but there’s I think a term out there for change management. So getting people to buy in and get engaged with it and understand why you’re doing it. Don’t just talk about oh, it’s because it’s gonna let me go sit on a beach somewhere, that’s not going to get anybody to buy in.

Joanna:
Might be less motivating for them

Jean-Eric:
Yeah. But if you can truly sit down with them. And you know, some of the things we do is when you do sit down with key staff and even just some of the lower like the more technical people that are on the floor and in the field, helping them understand like, what are the things that drive you nuts or that prevent you from doing the things that you really do? Well, so I call that pulling the mundane out of their job. So processes with that, reducing the number of fires that happened in the chaos, the unpredictability and what I had just, you know, it’s interesting, we assume that everyone else does was the things that we do. I was integrating technology at a really early like I was really an early adopter with technology.

So this is now back in 2013, I was already integrating companies like Salesforce into our company. And you know, this was a no tech, low tech industry, where you know, my mentor in the scrap business, he was writing, like, he’d get calls, and he would be writing it on like the napkin off the floor of his truck, you know, and hopefully, we’ll get there one day, where I was integrating that into software and geo-mapping all of our farm jobs across this geo map system and an optimizing our roads because fuel was one of our biggest costs. So things like that, but you know, you have to have the processes first, the people second on board with it. And then the technology component is the amplifier. And I often see that you know, people go, Oh, I love how they have technology as technology. So we’re gonna go buy Salesforce.

If you do that, it’s an amplifier, buying software before it processes before people bought in, it’s just going to amplify the chaos. And so I had stumbled around in the dark, figuring this out the long, long and hard way. But that’s really what allowed us to do all these things. And so, you know, the true testament of, you know, our value of the company, the enterprise value, or how we were able to sell it, we were put to that test, you know, fast forward, you know, my family lawyer sat me down and said, Look, you this is just even though you’ve settled the divorce, there’s more stuff coming up, it looks like you’re gonna have to make a decision here, your company and scat in the province of Saskatchewan, or you come back here and retain access to your son, you can both make the decision because it’s just looking like it’s not going to work with the situation you’re in.

And so that was a total gut punch. Because, you know, these are both my babies, you know, this is I, you know, I both saw these things from the cradle and grew them. And so now I had to make a decision. Meanwhile, what we didn’t know, and our smelters, so the person that we were selling a lot of our steel to, they were manufacturing things for cars and the oil and gas industry. And the oil and gas industry had the commodity prices just completely tanked. And so even though we had a nice big contract, they cancelled it overnight. And so 80 to 90% of our revenue dried up, even though we had a contract. And so now I had to consider selling a company that just lost 80% of its revenue, the revenues were going to come back, it’s a commodity, it will come back. But at this point, it’s the staying power, you know, so if you had finance yourself to the eyeballs, these are the times where those people will go out of business. Thankfully, we weren’t we were fairly Vashi I think we were debt free. We were doing all this stuff. But how do I sell this company when there’s no revenue? And so sometimes when I’m asked, Oh, wow, what was your multiplier? What was your multiplier? It’s anticlimactic.

The multiplier that we got is not fantastic. But the fact that we were able to sell that company in the middle of a recession, for what we did was a testament to the process and to the systems that we had, I was fortunate we had an employee that got to see it from the inside. And so they were they knew this thing was coming back. And so that’s how we struck the deal to sell the company. And so, of course, a couple of years later came back and they did phenomenally well and they’re still doing well. So but that’s to me, you being prepared for that sale, because you never know, you know, and I often hear that, well, I’m young, alright, I love this thing. I’ll never sell it. Well, you don’t always get to make that decision. And I’ve been, unfortunately, put in that position now a couple of times.

Joanna:
Wow. Okay, so So for all of your business sales, what would you say? What would you say were your one or two biggest learnings in terms of you’ve talked about the importance of understanding that you might need to sell your business when you’re not expecting it? And with it. Were there any other things though, about the sale process or the preparation for the sale that you learned along the way?

Jean-Eric:
Yes. So I think there are a couple of things to mention that you know, we didn’t go through the full formal legal processes because I was able to unfortunately sell to fairly trusted buyers. So you know, people that were either employees or people that you know, it was a fairly like a didn’t require a ton of due diligence, so I can’t really speak to that stuff. But what I can speak to is, you know, the first time that I had, you know, at the time I have been served the Petition for Divorce papers I had brought a partner in. And, you know, every time we were trying to sign the documents, he kept throwing more legal documents, more legal documents, and we had to get started, the season was here, you know, and where we are in Canada, you know, we only have you got to make hay when the sun is shining. So we only had about four months of the year to go and do this. Otherwise, we’re covered in snow.

And so, you know, it was one of those things where like, okay, let’s just keep the legal stuff going. And we’ll get started in the company that dragged out, we went a whole season. And he asked, you know, let’s just pay me out some dividends as if I am the shareholder, we’re just about done just about done. And sure enough, he left without being an actual shareholder. And so he got paid like one dividend, like one, and then didn’t have any of the non-compete covenants or non-solicitation. So he ran off with half my staff, all my client lists, all my vendor lists, all my contracts, he set up shop next door, called himself, the pioneer of the industry, you know, whited out my name on all the forms, slapped his logo, and off he went. And so that was a really rude awakening of, you know, we don’t have a justice system, we have a legal system.

And, you know, so possession is nine-tenths of the law. And it’s important to, you know, we if you’re going to let somebody in, have your i’s dotted and your t’s crossed first. But also, you know, there’s even though he wasn’t entitled to get some of this money didn’t matter, he had the money, and I had to now litigate every step along the way, or, in other words, litigate like sue him every step along the way to try to get that. And very quickly, the estimates for litigation exceeded those hundreds of 1000s of dollars. So it was one of those situations where I learned Okay, well, that possession is nine-tenths of the law, for sure.

Joanna:
And get your i’s dotted. And t’s crossed, you know, right, right from the beginning. Yeah. And just a very quick discussion about systems and processes. We talked about this in the first episode where we talked about acquisitions. But I just think it’s such an incredibly important topic, we were talking there about systems and processes in the context of, you know, creating growth in a business post-acquisition here, I just want to highlight the role of systems and processes, I know you’re in the middle of developing some brilliant courses. And we’ll put a link in our show notes to those as well. But just, you know, really quickly, just a quick note about the role of systems and processes in creating a business that ultimately is saleable, can you just give us a snapshot there of the difference that you think it made, that your businesses at sale had these systems and processes that you didn’t put them into?

Jean-Eric:
So one of the things that I often see, and I hear, when when we start to talk about the processes of a company, you know, people start to imagine, you know, one of my favourite watches is the Omega Speedmaster. And so that’s one of the first watches to go to the moon. And you know, it’s iconic, because you look at the back of the watch, they have a clear system and a clear backing. And you can see this beautiful, intricate all these gears, and it’s just an absolutely stunning watch, where there’s no battery. And of course, it can’t run on gravity, because you’re up in space. So they had this crank mechanism where it would reserve energy, 50 hours, etc. When we talk about systems and processes, I see business owners kind of glaze over, especially if they’re the visionary type.

And they go, Oh, my gosh, how am I going to do that? You know, and I think if you take that watch apart, there’s like hundreds of pieces in that little watch work of art. When I turn around, I say, look, it doesn’t have to start that way. You know, it could really be like, what’s the most fundamental truth here in terms of when it comes to a business, and that is, you just have a whole series of inputs, processes and outputs. And a system starts with maybe sometimes just something as basic as a checklist, something that people can adopt, and how does that feed into the next thing? And so we’ve developed a process and a course, of course, developed a process for building processes. And how to do this in your own company. So how to ask the right questions, how to cut through some of the nonsense, you know, because people get caught up on the corner cases, don’t focus on corner cases, and we really help business owners go look for the 80% of the time. How can we do this so we can create predictable results, and predictability for workflow so people know how they’re doing they can measure themselves, which by the way, increases employee morale and helps with retention, yeah, and other things like that.

So we help the business owners see that we started the most, we often start with one area, probably a pain point. And we show them through these courses. And it’s not just like this course where you watch it’s a pause, here’s the exercise, go do it come back. We often do these things live right now. We’re moving towards on-demand, but with a live q&a, so they can come with their questions going, Yeah, but I’m in this weird industry where I do this and that, come online and bring that because we have yet to be stumped on this stuff. But you know, you never know, you got such as really interesting and innovative landscape right now, where businesses are doing things that we’ve never seen before. But nonetheless, that’s what we’re doing is we’re helping put that back into the business owners’ hands so they can make sense of it, implement it right away, and their team gets it so they could buy in as well. Brilliant.

Joanna:
And I just, I love this discussion of systems and processes, because I just, I see, so many businesses come to the sale, that has the value in their business, that’s all in their head, you know, and when the valuing their business is in their head or sitting in a few key staff, it’s, it’s a risk to a buyer, you know, and you know, what a buyer is looking for buyers are looking for the value in the business, they want that certainty that that value will transfer. And if that value is set out in systems and processes documented within the business, and there is something more than things that are just sitting in your head, that is all that is just sitting in key staff members who could leave, then you’re going to have a higher a larger pool of buyers, you’re going to have greater value in the sale value of the business.

And it’s going to be an easier process to ensure that that value transfers and I’m just 100% behind everything that you’ve talked about with systems and processes because I see it every day in all of these businesses that we deal with the sale of the value of the business and the ease of the transaction of business owners who have understood the system and process concept and set that up in their business versus those that don’t. So I’m 100% behind you Jean-Eric. And we will absolutely 100% link through to your courses because I think it’s a huge opportunity of value for businesses, whether they’re buying growing or getting ready to exit huge thank you to you for coming along. Did you have any parting words for our audience? Before we finish up today?

Jean-Eric:
You know, it’s interesting, like like, I guess if anything, when you, if you look up the Omega Speedmaster, watch, and you look at that, you know, how the heck am I gonna get there? It’s all about you know, how do you eat an elephant one bite at a time, right? And so, getting there like, don’t beat yourself up? Because you’re not there yet? How can you start with the most basic things? And so you know, if anybody wants to get a nugget from this and go, well, where would I start in my business? Usually, admin and finance is the easiest one to start with. So go look at your bookkeeping practices. And a lot of times small businesses usually need that anyway, instead of creating that process, what does that look like and that will give you some good small wins, which will snowball into perhaps you know, tackling the next parts of your business.

Joanna:
Well, we will go end it there but I can’t help it I was gonna just I just want to jump on what you just said there because read this great book. I don’t know if you’ve read Atomic Habits by James Clear, it is such a good book. And he talks about creating habits by creating micro-commitments. So a super small commitment in terms of what is achievable in order for you to create that great habit. And I think systems and processes are a perfect example of how you can achieve through micro-commitments. And you know, and I think you know, you just start by exactly as the saying just one step at a time, one bite at a time. But that micro commitment, perhaps that you will start to revolutionize your business by taking one small process or week, a month, whatever, whatever that commitment is, and just get started. So anyway, anyone who’s not read a great book, loves it. Wonderful. So good having you on board. We’re going to have you back on Eric for our innovation series. But for now, I just want to say a huge thank you to you for coming along on the podcast. I just loved it. What a brilliant discussion. This has been. And I’m so excited to have you back soon.

Jean-Eric:
It’s always a pleasure. Thank you, Joanna. Appreciate it.

Joanna:
Well, that’s it for this episode of The Deal Room Podcast. We hope you’re now primed for your next deal with these pointers and have enjoyed these fascinating insights. Now if you’d like more information about this topic, then head over to our website at thedealroompodcast.com where you’ll be able to download a transcript of this episode as well as access any contact details and any other additional information we referred to in today’s podcast. Now if you’d like to get in contact without guests today and the services they offer, you can go ahead and check out our show notes for a link right through to them and their details. You can also book indirectly with our Legal Eagles at Aspect Legal. If you’d like to soundboard your next steps, discuss a legal question or find out more about how we can assist, whether that’s with buying or selling a business or perhaps somewhere in between. Now, don’t forget to subscribe to The Deal Room Podcast on your favourite podcast player to get notifications whenever a new episode is out. We’d also love to hear your feedback. So please leave us a review and rating. If you’re already one of our subscribers. Or even if you’re listening to this podcast for the very first time, every review helps our team produce valuable content for you. Well, thanks again for listening in. You’ve been listening to Joanna Oakey and The Deal Room Podcast, a podcast proudly brought to you by our commercial legal practice Aspect Legal. See you next time.

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