Reg Zeller
@RegZeller
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7x biz owner. Rolling up foundries now @canekast , moving to other SMB manuf soon. Sharing W’s and L’s … most tweets lessons learned from L’s
Minneapolis, MN
Joined August 2010
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Pinned Tweet
HoldCo’s are all the rage right now, but there are disadvantages too.
A roll-up doesn’t have those disadvantages
👇
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@SkolCapital
Oh I have so many …
First one that came to mind … HR manager of our leadership development program wouldn’t let a female coworker and I (we were both recent college grads) go on an overnight trip together, we had to go at separate times for a visit to our facility
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Real estate investing can be awesome, especially if you buy at the right time in the right place for the right price. We did all of that, and still lost millions of dollars. A 🧵
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Had lots of DM’s asking about how we source deals, our process, etc. Happy to share, so here it goes …
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@SkolCapital
Just so insane
Funnier part is we had a tight knit group and we all went skiing together in a rented house within maybe a month of that …
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All … I want to make this an open post. No matter what you’ve PG’d. No matter how bad things seem.
This is a short term issue. You can recover. Don’t make a permanent decision to a short term problem.
Lots of us have been there and are here to tell the story. Reach out
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Overheard a guy in the locker room (he was on speakerphone b/c he’s important) talking about his quarterly board meeting, how the power point looks, how the culture is trending, and about 1000 buzz words that sound impressive but mean nothing 🤦♂️
Holy hell do I not miss corporate
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So both of my work trucks in NH have had the catalytic converters stolen, about $3K each. The thieves get at most a couple hundred bucks from each (literally don’t know)? They stole these 10’ from a “help wanted” sign where they could make $60K+ a year if they simply showed up.
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Had a call today with an SMB owner ~6 months in. I could literally hear the stress/fear in their voice, I’ve been there and know a lot of other people that have been there too.
Asked them what they’ve done so far and found out they had made the
#1
mistake …
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Contrarian opinion:
When someone buys a biz, that’s not the time to say “congrats”
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Since lots of people have asked why I caveat what I say & that SMB ownership isn’t for all, why I’ll call ppl out, etc 👇
This DM shook me. Things go bad, shit gets real. 3am in the fetal position on Tue is no joke, but it’s still not life/death. Reach out if you’re in this spot
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@Jason
Hire someone that is bonded and insured. That’s a lot more work and a lot more risk than you think.
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When you build in public, you share W’s & L’s. Today was a huge loss, my
#2
quit. While it has an obvious impact to the biz, on a personal level its brutal. That said, the biz still has to run and everyone has to step up. This is why you build a bench, nobody can be irreplaceable
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It’s easy to come up with ideas. It’s really hard to execute on those ideas and make money.
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Just chatted with a buddy, he said his kid was assigned a 1000 word essay that’s due next week
Is this not the exact opposite of what we should be teaching? If the kid can provide a great paper in 400 words, that’s far superior to the kid who does it in 1000 …
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@SMB_Attorney
Just went and looked online … k-cups are $0.44 each if you buy 80 (I assume this is high)
$7300 (unsure YTD but let’s assume full year); at $0.44 that’s 16,500 cups, or 45 cups every day. Unsure how many in HOA, but that machine isn’t handling that kind of volume
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An aspect of SMB that isn’t talked about enough is the toll it takes on relationships. I know ~10 owners pretty well that have gotten divorced, and while an SMB purchase obviously isn’t the only reason, it’s at minimum a contributing factor due to the stress, time, money, etc
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At a minimum, what we’ve had to deal with as a community the last 24 hours reinforces that not everyone should own a biz, jump into RE, etc and quit their W2. Or even pursue ETA. Don’t ever listen to anyone that tells you this is easy. It’s not. It’s absolutely miserable.
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Reminder: after first few mo of honeymoon period, your first ~18 mo as SMB owner is brutal. As in, curled up in the fetal position on the BR floor at 2am on a Tue. We all have it. Then you learn/get used to it. Then you thrive.
You’re not alone, find your crew & keep grinding 👊
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W’s & L’s
I took a shot this morning and emailed a company that I have no business buying, and they already rejected me 3 years ago.
Then I got a call back and it’s go time.
It legit changes the trajectory of our company and the industry if we make this work
Shooters shoot
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@girdley
LFG!
We just need to ensure we don’t let the politicians and squeaky wheels ruin our natural advantages
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@ElliottEHolland
How I’d look at biz:
Add everything together = $750K
Take off what we’d need to run:
GM to replace owner ($120 + 40% benefits) = $170
Catch all for wife ($60K + 40%) = $84K
Adj EBITDA to us: $496K
Then I’d create cash requirements for everything we need, give offer from that
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“I’ve made $1M in 10 months doing …”
No, you’ve SOLD $1M in 10 months. If your costs and expenses are $1M, you’ve made nothing. Or, more likely, those scam artists probably had $1.2M in costs/expenses but made up for it with a million from their course
Ignore these charlatans
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Once you get in the SMB game, networking is essential. Chatted w/ a guy this morning & he ended w/ “let’s grab lunch, I’ve got some ppl you should meet, they’ll love your US SMB manuf plan & can help”
Those “ppl” are public manuf CEO’s and govt officials that can move mountains
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My best advice to new SMB owners is to find your peer group. We just got done w/ a retreat for ours, & it was an incredible mix of personal & biz. Nothing this group can’t help me with. So fortunate to have them
I’d tag, but
@StrongpointRich
says I can’t talk about fight club
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Headed for our annual planning session in Breck. We’ve been looking forward to this for a long time & it’s needed to level set everything. Maybe have some fun
Find a good biz partner. It makes everything easier. Especially when that person makes you feel better about yourself …
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Randomly got a few DM’s to stop personal posts, keep to biz or ripping on people. So, for those … I guess unfollow
Wife on her bday weekend w/ her trophy husband enjoying the warmth, dog pouting it’s -10 at her daycare being asked to go outside, and Fastball (yes?!?) live
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One of the hardest aspects of SMB is it isn’t the big ideas, the bold strategies, the major risk taking, etc - that’s the easy part to get excited about … it’s sticking to it and grinding it out year after year, day after day, hour after hour, often in the dark of night without
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If you are buying a SMB to make a lot of money, escape a bad job, have an easier life, etc … don’t buy SMB
Buy SMB because ultimately you can’t fathom doing anything else in your life
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We’ve finally felt the impact of no controller/CFO, and I have to admit the results weren’t what we expected …
@joshuamschultz
ripped out all of our ERP’s, completely redid the processes/training & team went through first monthly closing
Ended up closing May last night at 8pm
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For those of you who have owned biz for 2+ years, what was your first 18-24 months like? I get asked this Q a lot, figured I’d get others to comment (if X cooperates)
Mine: incredible amounts of stress first year (infamous fetal position ~6 mo in). 3 steps forward, 2 back, over
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Lots of lessons learned for me (don’t do investments out of your core, don’t do investments when you can’t pay attention, etc.). But the biggest lesson is mental health is a real bitch and everyone in SMB needs to take it seriously. It’s why I tweet frequently about …
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As you start owning/operating SMB, you will think everyone else has it figured out and their business models are better, you should have bought in their industry, etc.
The truth? All of these SMB’s are just hard and take a lot of work. Keep grinding.
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Contrarian opinion
The ultimate goal and preferred outcome of SMB ownership is to not sell
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You can recover from anything in a small business except for running out of money
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Every time I get on a plane, I’m reminded of early in my career how I strived to be those people riding in the front of planes with fancy clothes on, hammering away on something important on a laptop.
Now I just wear my Jordan’s with a brewery t-shirt and watch HBO
Now >>> Then
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Doing deals: 5% finance, 20% knowledge, & 75% psychology/relationships … then the real work starts once you buy it
Don’t be fooled thinking SMB acquisitions are about fancy tools or sitting in an office pounding away at capital allocation models; that’s quite literally 1% of it
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When you buy a SMB, it’s easy to find problems that need to be fixed. The 🔑 is taking the time to map all of the problems and determine the optimal effort/upside of each. Then take action.
1/x
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Our seller transition:
4 weeks on (see full month cycle)
1 week off (see what the team has learned w/out owner)
1 week on (fix whatever we missed during 4 weeks)
1 week off (ensure we’ve gotten everything fixed)
1 week on (tie up any loose ends and make a go-forward plan)
✈️🏝️🍹
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I realize Ayn Rand is a polarizing figure (this is not a comment/endorsement of her), but seeing failures in our formerly great institutions and much of the craziness in our government (not just current administration and both sides of the aisle are guilty) reads like Atlas
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The comments are wild about the BigLaw expectations slide that came out yesterday. While I don’t agree with all of it, at a minimum being open about expectations and holding people to a high standard is admirable, assuming it’s disclosed up front. People can self select in or
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A 🔑 aspect of our roll-up is every time we acquire another biz, we allocate the cash flow to:
1. Paying off debt
2. Upgrading equipment
3. Hiring the next c-suite role
Never has it gone to additional money for me. Invest and compound
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In reality? I would have handled the biz just like them and they’ll be fine. But they didn’t have an outlet to chat with. It’s the biggest miss new owners make.
SMB ownership is the loneliest job in the world. Get a peer group, and mentors ~5 years and ~20 years ahead of you
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No matter how many people on here create narratives to overpay for your first biz, resist. SMB can be found everyday <4x. The people that say otherwise have a vested interest to disagree, they are helping their clients and future clients
Hard pass
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Doing deals in SMB looks like a sexy role from the outside, especially the way it’s taught (cash flows, tools, etc). The reality is it’s about 75% interpersonal, 20% checklists/busy work, and 5% modeling.
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How we handle day 1 (this works for employees in a location like manuf - not if they’re getting in trucks like
@WilsonCompanies
@StrongpointRich
)
This is done on Monday or Tuesday, never late in the week so employees go home and catastrophize over the weekend:
1. Let employees
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Was asked why I est “new hire” costs as salary + 40% of salary for benefit ($100K salary = $140K total cost) & what I all include in the 40%
When we’ve looked at taxes, insurance, 401k, etc then add in travel, training, IT devices, etc … it is >40%
What does everyone else use?
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Holding people to high standards, having hard conversations with them, and giving them feedback are signs of a good leader, not a bad one.
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“SMB ownership sounds fun/sexy”
“I hate my corp job”
“I am going to hire an operator and collect money”
“We’re going to do a HoldCo/roll-up”
Based on replies/DM’s to my tweet last night, and my experience, let’s chat about those perspectives …
Had a call today with an SMB owner ~6 months in. I could literally hear the stress/fear in their voice, I’ve been there and know a lot of other people that have been there too.
Asked them what they’ve done so far and found out they had made the
#1
mistake …
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Lots of advice to hustle and get ahead between Xmas and New Years. I did that the first couple years in SMB. It was terrible.
Now? I enjoy as much time as possible with friends/family, reflect a bit, etc … and come back refreshed in the new year
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My career and SMB journey is a winding one. When I was in corp I’d get asked how people could get my job (biz strategy & GM). I didn’t have an answer, because I simply focused on doing my existing job and took opportunities as they came up. SMB is different, that was “planned” 🧵
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Talked with 4 owners the last week. They’re confused why their teams have been bad the last 6-18 months. They were so good before, now biz negative margin and good chance of BK. No explanation from them and the teams have no idea how to solve. Especially in the spaces with bad
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Doing everything yourself just sucks in SMB ownership. It is so much better once you have people you can trust and rely on to take care of their own roles & responsibilities. Do whatever it takes to get those ppl in your org ASAP
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I’ve never, not one time, had a major “ah ha” moment when I’m overworked. Every time, the game changing insights come when I get away & turn off the noise (long runs, long showers, steams, etc)
60+ hour weeks are great for getting tactical stuff done, never step function change
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For anyone I haven’t told “think forward and reason back” to, it’s a method of strategic planning I’ve moved to most aspects of life.
Conceptually, you choose where you want to be in 5 years and then figure out what you need to do in year 5, year 4, year 3, etc all the way back
Have a big audacious goal or lifestyle you want?
When I was in college, I got some of the best advice, but most of it was what the adviser would do.
Life is different for everyone and so you have to…
“Think forward and reason back”
-
@RegZeller
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This platform is mind blowing, don’t be afraid to jump in and share. The value you get back is 🤯
Latest example?
@realrookieceo
introduced me to someone he knows, and long story short it will end with an article going in Forbes about CaneKast (no, not the “pay us $2000”
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My favorite part of owning my own business is to find early career people that want to make a difference and are great. Then hire them and give them more than they can handle
Corporate tries to repress them. It’s totally the wrong way
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Interesting insight … most of the people (from this app) I chat with looking to buy a SMB say they want to be a HoldCo/roll-up CEO, while most of the people I meet IRL (not on this app) looking to buy a SMB are far more focused on successfully running their first SMB purchase
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Two exceptionally powerful truths that when combined, can have incredible results for SMB’s
1. The best performance comes from a slightly starved system
2. Nature hates a vacuum
An old professor and multiple-time biz owner used to say “if you can throw money at a problem in
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Saturday morning PSA: Don’t lose a deal over trivial aspects
$25K when you’re 100% right and the other party is 100% wrong means absolutely nothing in the long run of a $2M deal. Lose the battle, build the relationship, win the war.
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Twitter in a nutshell
Me: this is what we’re doing, why it matters, how we’re using it, maybe it helps you, but figure it out for yourself
Randoms: you’re totally wrong you can’t do what you’re already doing. And have you thought about these 500 reasons it can’t work?
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Was asked for advice for a first time SMB buyer
These were my major mistakes off the top of my head, other SMB owners jump in 👇
Remember it’s highly likely if the biz has been around for a while, it will continue to be (see Lindy Effect) and we all go through the anxiety
1/x
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An observation for people searching for a biz…
The vast majority of times I talk with potential buyers of SMB, their objections to not buying are inconsequential in the grand scheme or they are just part of buying SMB. Normally I think to myself “hell, if I wasn’t rolling up
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Another massive upside to roll-ups
We are buying a piece of equip to serve our entire network that competitors can’t afford b/c of volume. The upside profits are 10x more impactful than the cost savings; & we can pay the 5 year note for the machine on cost savings alone🤯
#moat
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@SMB_Attorney
This is corporate America as well for any executive or wannabe executive, they just don’t say it out loud. Unlimited vacation days and work/life balance are just words on a page, zero chance you’re moving up by actually doing it
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After ~18 months or so, SMB ownership gets drastically better. It is some combination of learning the biz/industry, having risk tolerance increase; generally speaking everything just gets easier and you don’t worry as much. What was huge month 3 won’t even register month 30
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@sweatystartup
Nah. The 20 year is underproofed and overoaked, coke doesn’t ruin that. Next time you want to shit post about bourbon do better
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Every single place we’ve bought, I’ve been told “you don’t understand, it’s different here” as an excuse for why they don’t perform like our best plant. Typically it’s some version of the workers suck. I hear a similar story from most other foundry owners.
What I’ve found? It’s
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Y’all have no idea how hard I’ve worked to get females at our SMB HH, but we finally got a table of more women than men. I couldn’t be more happy … now we just need about 50 more.
👊
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Pretty confident no one has ever achieved greatness or made a dent in the universe by playing it safe. I also hear, on their deathbed, no one has ever loved playing it safe. They do however regret not taking the risk
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There are suddenly a lot of bad takes on SMB inside of some portions of social media
1. SMB ownership is not for everyone
2. Any concept of “get rich quick” is about 99% false
3. If you are built for this, find people who actually do this for a living, you don’t need a course
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You don’t have to buy every business in your industry
(This tweet is mainly for me)
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@chrisxmunn
I’ve chatted with a fair number of owners, CEO’s, managers, etc that think WFH is substantially less productive than being in the office, and they don’t think they’re seeing the creativity/teamwork/etc and relationship building; they’re not liking the lack of camaraderie. All of
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I don’t know who needs to hear this, but a biz can run without ppt
🤯🤷♂️
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Got a buddy looking for SMB ($1M+ EBITDA), self funded (SBA, may be interested if right partner to get larger). Said I’d post here and ask others what they would do if just starting out (advice, what websites/services to source, how you would do off market, etc.) Comment away👇🙏
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If you’re a leader who talks about your workers as incompetent and has a general level of disdain for them, stay in a W2 and be part of the corporate, big company issues. Don’t take that to a SMB, especially as an owner.
Holy hell that was a really hard listen
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If you don’t have 100% market share, you should care less about the economy and more about sales
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A convo I had trying to greenfield a foundry (summarized):
Me: I heard you cleaned up an old factory and have open space in an industrial park
Gov’t worker: yep, hundreds of thousands of square feet, with subsidies for the number of jobs you bring in
Me: I’d like a sizable piece
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Many of the best opportunities come when you simply stay in the game
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I am convinced that having too privileged of an upbringing or too much success early on is one of the hardest hurdles to overcome for LT success/happiness. I don’t believe I know anyone that didn’t have to grind on their own to be ultimately fulfilled
Knowing this will get my
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We want to hire a head of sales, someone who starts by calling on customers today and as they gain knowledge of the industry and company, they build a team, processes, etc in their likeness to run
Very interesting role to hire for, as they need to build a function that 5x’s the
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When you own an SMB, you need to understand at an obscenely granular level what levers to pull that matter
Spent today with a relatively new owner cutting out 90% of his duties to focus on only what matters. He’ll go from $150K loss to $50K gain in 2023 b/c of it
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As you go through SMB (& life), a huge shortcut is to meet new ppl & learn from them … esp ppl that aren’t in your direct space. Day 3 (of 5) doing this on a ski trip, absolute gold mine of ideas already. Recharged & excited for new ideas/friendships from this baller crew
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Don’t follow the herd
When we bought US manuf in 2017, it was near unanimous that I was an idiot (I am, just not for this reason). But, what others saw as risk I saw as oppt’y & eventual moats. They saw the past, we saw the trends
Do your own analysis & pick your own path 👊
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I highly encourage those who own SMB’s to start a local SMB group in your community where you get together plus provide advice, mentor, answer questions, etc via a group chat. We started this locally ~1.5 years ago and have ~80 people, most of you have seen me post about it that
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making time for friends and family, lean on other people who have done this, and holy hell ask for help. This is money, this isn’t life and death. Worst case it blows up and your friends/family will be there. Need them to give you perspective.
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Far and away my
#1
piece of advice to SMB searchers/owners is to find a peer group that is at a similar point to you in the journey, then find mentors that are ~5 years and ~20 ahead of you
Also, you don’t need to pay an exorbitant amount of $ to a 3rd party; utilize this
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Buying SMB b/c corp is miserable hours, soul-sucking, and anxiety-inducing is bad logic. SMB ownership is far worse when it goes bad
So? Go work w/ the SMB owners that can’t fathom another day in corp. Good exp, good opt’y, much more fun/fulfilling … and we need great help
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@lawyer4SMBs
Whoa whoa whoa whoa
Let’s not start down this path again on SMB Twit that “worst case” is finding a job if everything goes bad. Buying a biz is (relatively) easy. Running a biz is really f’ing hard. The mental toll is brutal, especially the first 18 months, and when things go
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Most of the tax tips I see from gurus on social media boil down to one of two things
1. Obvious/well known
2. Fraud
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W2’s are really nice, they shouldn’t be shit on. But they come with a lot of risk that’s not obvious
Owning an SMB comes with different risks.
Figure out which risk you want
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No idea if this is something the community wants to hear, but anyway …
Looked at some lake houses yesterday. Wife and I have been looking for years. Were they great? Yeah, they would be. Could we afford it? Sure. Are we buying one? Nope. At least not right now
Why? When I
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