The 8-Figure Trigger

 

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Lee Gregory built Sir Lines-A-Lot, a company that paints lines on highways, to 40 employees. It was blue-collar work, so when Gregory learned his company could be worth north of eight figures, he decided it was time to sell. During this interview, Gregory drops dozens of knowledge bombs for aspiring value builders including:

Hang On To Your Equity: painting highway lines requires trucks that can cost upwards of $700,000. Instead of borrowing money to buy a new one or soliciting outside investment to fund his equipment needs, Gregory bought used trucks for as little as $60,000. Bootstrapping allowed Gregory to hang on to 100% of his business and avoid significant debt.

Do Your Pre-diligence: pre-diligence is answering the questions you’re likely to get during diligence before you go to the market. If Gregory had one thing he would have done differently, it would have been getting all of his books in order before soliciting bids.

You-proof your company: once Gregory decided to prepare his business to sell, he brought in a general manager to oversee the business’s day-to-day operations. This hire ensured his business wasn’t dependent on him.

You’ll get lots of other nuggets in this interview including:

  • how to calculate “add-backs” (they could add serious money to your take from a sale)
  • why writing a list of opportunities you haven’t pursued could be as valuable as the ones you have
  • how to get hundreds of private equity buyers interested in your business
  • how job costing can come back to bite you
  • the value of the strategic walk away (and how to muster the courage to employ this negotiating tactic)

Gregory credits his advisor for first turning him on to the value he had created and then for shepherding the sale process through to dozens of offers, including an eight-figure winner. If you’re looking for an advisor to help you maximize your business value, consider talking with a Certified Value Builder™ .

Our guest

Lee Gregory grew up in an Entrepreneurial family and loves all things business. It was this passion for entrepreneurship that prompted Lee to leave the corporate world and start his own company in 2005. Lee founded Sir Lines-A-Lot (www.linesalot.com), a parking lot and highway paint striping business. What started out as a part-time operation with a used paint machine and an old pickup truck, turned into a multi-million dollar, statewide company with a great reputation, and an EBIDTA profile that many PE firms look for. As Gregory’s schedule and work demands increased he decided it was the right time to step away from his role and sell while the PE market was strong. He did so and then took the next 6 months off to travel the world with his wife and 3 children. After the much-needed break Lee re-entered the industry and became an Operating Partner for the PE firm that acquired Sir Lines-A-Lot. For the past two years, Gregory has been on the other side of the M+A table and has helped evaluate and acquire other companies in the industry.

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Transcript

John Warrillow:

Man, I love this next guest. Usually on the show, we have technology companies. Oftentimes they’re businesses that are really hard to understand, takes me about 10 minutes to get my small brain wrapped around what it is the guest does. Well, in this case, I got it immediately. Lee Gregory paints lines on highways. He started off shopping malls and nowadays he’s graduated to painting them on highways. He got the sense from an M & A professional that his company could be worth as much as eight figures, which is when he decided to get on his front foot and prepare the business to sell.

John Warrillow:

A couple of things he did really, really well. Number one, all the way through the process, he hung onto his equity. The machines, the trucks you need to paint lines on highways cost as much as $700,000. Listen to how Lee got his hands on it, on those trucks for roughly 10 cents on the dollar.

John Warrillow:

I asked Lee what he would do differently had he had it all over to do again? Listen for his answer. It relates to something called pre-diligence. The first thing Lee did when he went about building his business on the market or at least getting his business ready to go to market was he hired a management team, someone to run the company day-to-day to pull himself out of the operations. A key lesson for anyone looking to build value. There are just tons of little tidbits and nuggets of information in this interview that I think you really are going to like. He defines what add backs are and how they can really juice the value you get from selling your company.

John Warrillow:

He talks about why your book should include lots of opportunities if you haven’t monetized yet, which may sound counterintuitive, but he’ll give you an explanation as why that’s important. Lee got hundreds of private equity companies interested in what he was doing. He’ll give you the secret for finding literally hundreds of buyers for your company. He’ll talk about why job costing can come back to bite you if you don’t get it right, and in fact, it can bite you in the process of selling your company if you don’t get it documented correctly. And he will also talk about the value of a strategic walkaway in a negotiation process and the secret to having the courage to do that.

John Warrillow:

Here to tell you all of his wisdom is Lee Gregory.

John Warrillow:

Lee Gregory. Welcome to Built To Sell Radio.

Lee Gregory:

Hey, thanks. Glad to be here.

John Warrillow:

So tell me about this company. What did you guys do? You painted the lines on highways, is that right? I thought that was the government.

Lee Gregory:

Yeah, we’re a highway striping company and it’s one of those things people think that the government does or just magically happens. It’s just the simple yellow and white lines on the roads, started out as a parking lot striping company, as a part time job. I worked a corporate gig and painted lines at night at parking lots and started out painting Taco Bell’s and Pizza Hut’s and then it grew into painting most of the roads in Minnesota, all the highway lines, the crosswalk lines and everything in between.

John Warrillow:

Wow. So how did you differentiate your lines from the next guy? Because I’m assuming that everybody paints essentially the same line.

Lee Gregory:

Yeah, you’re right. It’s funny, the recipes for the paint are all the same, so we’re using the same material. What differentiated me is because I started out in somewhat of a more crowded parking lot striping market, I had to give customer service and high quality to try and get the work. When I pivoted into highway work, there was only two or three other competitors in the state and they had all the work and almost more work than they could handle. So they didn’t have to have any of those customer service or quality traits that I carried into the industry, so that really gave me the upper hand. I just started bidding on highway construction work, even though it’s typically a low bid industry, once you’ve proven yourself as a quality operator, there’s often ways that contracts can get extended or there’s preferential treatment. So I quickly established myself as a quality company in that space, highway marking and so it really went up from there and got lots of work that way.

John Warrillow:

Did that require a significant capital investment to go from parking lots to highways? I mean, did you have to raise money to buy all the equipment to do that?

Lee Gregory:

Yes, it is expensive. I didn’t end up raising money, I am a cash guy, all my life I’ve always been able to sleep better at night being a cash guy. So I started out with a very small used highway truck. A brand new highway striping truck is north of $700,000, so I wasn’t able to write a check for one of those out of the gate. But I’m pretty mechanically inclined and I had some guys on my crews that were mechanically inclined, so we went around the country and found used striping trucks that municipalities typically dump after 10 to 15 years, they still have lots of life left, just need a little TLC. So we were able to buy trucks for, 60, 80, a hundred thousand dollars and put a lot of sweat equity into them and then they were decent trucks. So that’s how I got my start and then as we grew, I was able to write those bigger checks for the newer equipment. That’s how I got into that.

John Warrillow:

And so you would compete with the established and coming players saying, “Hey, we offer great customer service.” That value proposition, we offer great customer service, can sound so hollow when buyers have never had a chance to experience your customer service. What did you do to make that credible? How did you demonstrate, before they bought, that that was real, not just a sales line?

Lee Gregory:

For the first few jobs, you have to just go low just to get in the door. But I strategically went to customers that I knew had a lot of other work around them. So I thought, “Get in the door, prove myself, maybe not make as much as I would like, but I really want to establish my reputation.” So the city of Minneapolis for example, is a really big city with lots of bike lanes and lots of things that need striping. So I get in there with a somewhat lower margin job and then I just did the basics. You show up, when you say you’re going to show up, do what you say you’re going to do, put down a quality line.

Lee Gregory:

And that was something they hadn’t seen in a long time, so they really found ways to make it so the next contract had certain stipulations that required things that I had, so they knew I could get these jobs. And it was all above board, but they just really wanted to work with me, for the taxpayer to get a better quality line and I did that around different municipalities and that seemed to be a formula that worked.

John Warrillow:

That’s the other thing that I think about, I have no idea what it’s like in Minneapolis, I think about where I live and it seems like all those contracts, they’re on the take or the municipalities are getting money in the back door. Did you get a sense that your competitors were competing in an unfair way, like they were somehow getting favors, giving favors to these municipal buyers?

Lee Gregory:

Luckily I don’t see that. As a taxpayer, I’m happy I didn’t see it. You’re trying to compete. There was jobs I lost that were $400,000 jobs, I lost by 50 bucks. And the municipality knew I was a better contractor, but they were tied by the strict rules and there was no funny business, which is fine. You lose fair and square. If there’s ways they can put things out to bid or if they can write in the contract, there’s the option to extend at our discretion with no follow on bids, if we get in with that job, they then can say, “Hey, we want Sir Lines-A-Lot for the next four or five go arounds.” And so once we get in, we then have the ability to keep doing the work. So there’s many that these folks, if they want a contractor, there’s ways to do it right, without having some of that shady business you talked about.

John Warrillow:

The option to extend as part of the contract, was that something you put into your proposal or was that something they put into their contract?

Lee Gregory:

That was something I saw in a few contracts and then you get varying degrees of competence, so to speak, with some of these people that are putting these out to bid. So you see the savvy ones have some of these in there, so then when it comes time to talk to the engineers who may not have the experience the other ones do, you can say, “Hey, this municipality often does this, have you considered adding that when you write your bid next time?” “I hadn’t thought about that. That’s a great idea.” Then they add that in. So you really want to help them out however you can, to make it favorable for yourself without bending any rules. And that’s one of the ways was just sharing some of the best practices that the more sophisticated entities used in winning bids with contractors they prefer.

John Warrillow:

Do you ever get young entrepreneurs or new entrepreneurs coming to you and saying, “Lee, I’d love to start a business, you’re so successful, but I just don’t have an idea.”

Lee Gregory:

I get that quite a bit. I’m in this entrepreneur’s organization and every year EO hosts a round table for up and coming entrepreneurs, so we get a chance to meet lots of people who have the desire to get into business. When I was a kid, I never thought, “I’m going to grow up and be a line striper.” It was one of those things that, I knew I wanted to be a business owner, that was for sure, but I didn’t know what it was. So I tell people, it’s just keeping your eyes open for something that interests you or something that you see an opportunity in. I had a friend that did this out East and I saw what he was doing, it seemed like an industry that I could take winters off, I could work in the summer real hard, travel with my family in the winter. So it met some of the criteria I was looking for. It wasn’t glamorous, but usually the not glamorous jobs are the ones that have the best margins.

John Warrillow:

Speaking of margins, what kind of margins would you make? I’m imagining there’s a lot of expenses, right? There’s the equipment, I would imagine insurance is expensive. What would you, on a good year, make bottom line as a percentage, margin wise?

Lee Gregory:

It varied year to year. Sometimes you have these big contracts that dwarf the rest of your margin for the year. But if you’re in the 20 to 30% range, upwards of a good year, maybe 40% range, that’s where I would expect to be. So in my mind, those are pretty good margins and that’s EBITDA. So you get some pretty good margins for this industry and it’s a seasonal business. So you can work really hard in the summer and then all the guys get to go on unemployment and I get to take three or four months to unwind.

John Warrillow:

You’re going to trigger a total onslaught of people getting into the highway striping business.

Lee Gregory:

It’s not as easy, you think it’s just a yellow and white line, but it’s amazing how tough it is to put those yellow and white lines down, even and straight.

John Warrillow:

No, I can imagine. I can imagine. So I mean, how big did you get before you decided to sell, in terms of either employees or revenue or whatever proxy for size you want to use?

Lee Gregory:

Yeah, we were one of the bigger striping companies in the Midwest, so we got to be a pretty good size. We were covering from the Canadian border, all the way down to Iowa and from the Dakotas over to Wisconsin. So we got to be a pretty big striping company, with 40 employees, millions of dollars in equipment and a 40,000 square foot warehouse in Minneapolis. So we’re a pretty decent sized striping company. And so it was to the point where I grew it from just me and a pickup truck and one striping machine, up to where it was. I just decided that it wasn’t as much, the fun of it wasn’t there for me as much anymore. It was one of those things where all the daily grinds and some of the things when you get into a really big company, the HR issues and some of the reporting just wasn’t as exciting for me, which is why I started to think about maybe an exit down the road.

John Warrillow:

Was there a straw that broke the camel’s back? I think everybody will, especially these days with everything that’s going on, relate to this idea that it was just stressful, the HR and the employees, nightmare. But was there one day where you can recall that something went wrong or something went right and you’re like, “Okay, that’s it, I’m getting on my front foot and selling.”

Lee Gregory:

There was a clear day. It was when the entrepreneurs group I was with and we had a meeting that was hosted by a local M&A group at their office. And they give you the 15 to 20 minute overview of what they do and how they evaluate businesses and what they do. And there was a sidebar conversation just before I left, where I mentioned high level what my business was doing and where I was going. And then they said, “Well your businesses, you could easily get into the eight figures for your sale price.” And I said, “Wow, I had no idea that what I was doing was worth anywhere near that.” So it wasn’t the stress, it wasn’t the grind that really pushed me. It was like, “Wow, I have something that has a ton of value, that actually could be life changing and maybe I should think about starting to head that direction.” So the straw that broke the camel’s back, so to speak, was just knowing what I didn’t really realize before, what I had. And sometimes you just think, “Maybe I should probably get out while gettings good.”

John Warrillow:

What was your perception before that EO meeting, where the M&A guy said, “You could maybe get eight figures for this.” What did you think it was worth? Maybe a different question would have been, how did you think it was going to be valued? Was it the value of the trucks or were you thinking it would be a value like a multiple of profit? What was your sense of the value before he told you?

Lee Gregory:

It was pretty blurry. I didn’t really have a good sense, I thought maybe out of all my trucks and maybe some of the contracts I have, maybe there’s a value there in a few million bucks. I didn’t really have any idea of how this whole M&A world worked and how they evaluate based on a multiple of EBITDA. So this was very informative learning from this guy that gave us the pitch.

John Warrillow:

I would imagine. What were your hard assets worth at the time? When I say hard assets, I’m really referring to the trucks and equipment. If you had had to sell that stuff at auction for its fair market value, what do you think that would have been worth?

Lee Gregory:

Maybe four million bucks, maybe four or five million, maybe four million bucks if I sold everything I had. And I owned the building separately as a separate entity, so it didn’t include the real estate, but just the trucks, about $4 million of the smaller equipment and trucks.

John Warrillow:

Got it. Got it. That’s helpful for sure. So I understand the triggering event, somebody tells you that your business could be worth a whole pile of life changing money. What was the next step for you? What did you do next?

Lee Gregory:

Once that seed was planted, it really changed my outlook on what I was doing every day. Before, I was just coming in every day, trying to get the next contract, really shortsighted approach to how I viewed my business. And I thought, “Wow, if I can really get this set up in a way that I could sell it, this could really be life changing.” So for the next six to eight months, I really worked hard on bringing in some more management and to try and do everything I possibly could to not be part of the business or not be the secret sauce to why Sir Lines-A-Lot was successful. So I brought in some key people, spent a ton of time, as they say, working on the business, excuse me, on the business instead of in the business, just trying to make it so it was really a great package for someone to buy.

Lee Gregory:

I did that over the next six to eight months. And then halfway through that, I engaged the group that I met with, Madeira Partners in Minneapolis. And they helped me with some of the fine tuning of how things should be set up to be more marketable. And then it was almost like pushing a piano down a hill, once the seed was planted, everything was going towards getting that across the finish line.

John Warrillow:

What were some of the fine tuning … You said the company, the M&A guys were Madeira?

Lee Gregory:

Yeah. Madeira Partners, actually based in Wayzata, it’s just a small shop, a couple of guys. And Jake Fishman was the gentleman that I worked with and really a sharp guy that knows this kind of a space and knows what they’re worth. And I think more importantly with a M&A broker, is what’s their network of people they go to market with and they were able to bring us to a lot of names.

John Warrillow:

You mentioned they did some fine tuning of your work. Can you recall any of the little things, I’m really curious about, even the little small things most people wouldn’t care about, that they did to help you get your business ready to go to market?

Lee Gregory:

One of the terms add backs is something I didn’t know before this whole process. So an add back, as you probably know, is something that is probably not going to be needed after the company goes forward, so it’s something that you get credit for at sale. Like if my wife is on the payroll, she’s obviously not going to go post sale, so there’s some credit towards the purchase price. Well I had a whole bunch of those kinds of little things that I didn’t realize at the time, are all legitimate business expenses, but they really messy up a deal. So it’s trying to clean some of those up in the process of, maybe you have a home office that I was working from, some of these little things that just are all valid, but they just make things a little bit messier.

Lee Gregory:

So he helped me clean some of those little things up. Get this out of here, get this cleaned up, move, you don’t need to be part of this professional membership group that you never go to. This is probably an expense that, some of these things that just aren’t necessary for the next owner to be part of, so get that cleaned up before you have to go through the due diligence process.

John Warrillow:

And removing all those expenses, of course, has the benefit of increasing the profitability you’re able to show, right?

Lee Gregory:

Absolutely. You don’t realize that now you buy a $10 ream of paper and if you’re at a seven, eight or nine multiple, that just becomes a very expensive ream of paper. If you’re going to be bringing it home to use at your home for your kids, it’s like, “Wow, I probably should really make sure that everything I’m buying in the business, is truly something that is needed to go forward.” And it’s not something that, while it’s a valid business expense for tax purposes, probably isn’t needed for this business, and the go forward plan.

John Warrillow:

You went through this process, you brought in some management, you went through the add backs process. What was next? Did market the business, or where did you guys go from there?

Lee Gregory:

Yeah, what they did was they actually spent a ton of time getting to know my business and I was really impressed with the depth in which they learned about what the market was, who my competitors were. They put together what they call, a book, so it was a 60 page book about Sir Lines-A-Lot and everything in the market and the industry. So someone could take that and read that and really get a good handle on who I am and the business, Sir Lines-A-Lot and where the business is going and what the market’s like.

Lee Gregory:

And when I first read it, I said, “Man, this just seems pretty negative. There are all these things that I’m not doing in my business, even though I’m doing so much.” And he said, “What they want to do is they don’t want a business that doesn’t need to get anything done, they want something they can put some juice behind and really ramp up.” So they’re highlighting all these things that can be added to, more trucks, more of this, this, and this, to really get the growth, which is what private equity wants, they don’t want just a stable, no growth business. So seeing all that was really enlightening and how they put together this book.

John Warrillow:

How do you do that though without looking like an idiot? I mean, it sounds so counterintuitive, you’re putting together this book that’s making you look like this great business they should buy and there are all these low hanging fruit opportunities that Lee hasn’t taken care of or gone after. Is there a way to do that without sounding like you’re just looking at all these opportunities and not taking advantage of them?

Lee Gregory:

I have learned in the process, it’s just about, what’s your story? For me, the first thing was, let’s go out and buy this new piece of equipment, which was a $780,000 piece of equipment. I said to them, “How much more money and stress, did I really need to take on buying this truck?” I was making enough money, I had a comfortable life, adding this whole other piece of equipment just wasn’t something that excited me. So I haven’t done it.

Lee Gregory:

Now under new leadership and less of a thing worrying about sleeping at night. This is a no brainer, go out and buy this truck and it’ll make a tone of money. Excuse me. You have to swallow your pride a little bit and say, “This just isn’t what I wanted to do.” And it’s just having to do that and without those M&A guys, I would never would have known to do that. I would’ve just said, “This is a great business. Nothing needs to be done. It’s turnkey.” So that opened my eyes and the whole process was just being humble enough to say, “Hey, here’s what needs to happen to make this better?”

John Warrillow:

Got it. So what next, did you get offers or how did the next chapter unfold?

Lee Gregory:

So they went to market, they went out and M&A brokers have somewhat of a network and they went out to a ton of PE groups, hundreds of PE groups. And then they said, “Here, sign an NDA.” They send out a teaser, “Sign an NDA if you want to know more about this industry.” And they sent out probably, they got back 150 to 200, requests for information. So there was a ton of people interested and then it was a matter of getting some indication of interest back. In my industry at that time, which was 2017, I think we ended up with 20 indications of interest and it was really a ton of interest of varying dollar amounts, all within the range that they thought they would come in at. So my brokers were right in the market.

Lee Gregory:

And then it’s just a matter of weaning down, who do we think is going to be the horse to go with to get us across the finish line? Who do I want my employees to be working with longterm? Because I care about their future. And as this is somewhat of my baby, I want to make sure this is someone that is good culture, good character, goes to the right people. It’s not just about the dollar amount.

John Warrillow:

The indication of interest, the IOI, are you drawing a distinction between an IOI and an LOI or a letter of intent?

Lee Gregory:

Letter of intent, LOI, excuse me. Yep.

John Warrillow:

Okay. So you got more than one letter of intent. Sounds like more than a dozen letters of intent. What was the range Lee, when you looked at them low to high on a percentage basis, would you say, were they 10% different, 50% different?

Lee Gregory:

Probably almost 50% different. Some were very different, some had different structures, some had more rollover money, some are all cash, some had me staying on board, even though it was clear I didn’t want to be. So there was all different ranges. So you had to pick which one suited me the best.

John Warrillow:

Can you describe what you mean by rollover cash?

Lee Gregory:

Yeah. So with the private equity world, what they want to do is they want to have you, let’s just say it’s a $10 million purchase price, they want you to roll 20%. So they give you eight million at closing and then you’re an owner of this entity with the extra two million in equity. So you actually leave closing with eight million and then you’re an owner. For someone who wanted to be out of the industry, the less amount I had to roll, the better. Because even though I know they’re going to do well, I don’t know how well they’re going to do and what other factors may play in to how well they handle my two million. So that’s a big decision a lot of folks who work with private equity have to decide is, how comfortable do I feel with these folks running my business, to determine what that roll over amount is.

John Warrillow:

So you’ve got a broad swath of offers ranging in value, but also in deal terms. How did you ultimately narrow it down to a smaller list? What was your criteria?

Lee Gregory:

I started out with a dollar amount, the first screen, is it within this range? And yes, these three companies met that group, which is what I weeded it down to, actually four companies. They met this dollar amount, they seem decent, in the interactions or the phone calls my broker had with them, they seem like these and people, do we want to go to the next round of management interviews with them? And so I weeded it down to four and then least amount of rollover money was the other criteria. So I weeded it down to those four and then it was a matter of, did we get along, they come in and spend five or six hours with us learning about our business, did we get along? Are these people I want to own the business and then deal with down the road if there’s any issues? And I narrowed it down to one that was really good people and they have actually remained decent people and good people to work with. So it worked out having that as one of my criteria.

John Warrillow:

This qualitative, do we get along? Are these good guys and gals? Got it. Got it. And so in the end, in addition to this qualitative overlay, did they ask you to carry over some or was it an all cash deal?

Lee Gregory:

No, I had some skin in the game. It was a single digit percent I rolled over and it was enough to make it meaningful, that I cared about how the business did, but it wasn’t enough where if the business folded in a year, I’d lose a lot of sleep. It was enough so I’d answer the phone and be happy to help and encourage them to do well, but it wasn’t that I was cashing checks against it.

John Warrillow:

What was the diligence process like after you signed the letter of intent?

Lee Gregory:

I think mine wasn’t as smooth as it could have been because my own fault, I didn’t have organized books. So I used books in the past as basically the means to pay my taxes, not a means to drive the business. So that was because I didn’t have really organized books, I’d say, it was slower because they’d ask questions and I’d have to dig and generate information and it wasn’t at my fingertips. So I think the process, had I had much more organized books, it would have been smoother. And they use KPMG, which is a big accounting firm and they’re very thorough and they went through everything and it just took me a long time to generate some of these reports and dig up the data, just because it wasn’t at my fingertips.

John Warrillow:

I mean, most owners, they’ve got a QuickBooks or some accounting package, they get their net income at the end of the year, they know how much money they generated and how much profit, et cetera. What are the sorts of things that you would get asked for in diligence that wasn’t at your fingertips? Just give people a sense of the depth of question they might anticipate, or they might get during diligence.

Lee Gregory:

A lot of the PE world is utilization of equipment and job costing. For me, the job costing, which is basically what I made on each job, was done before I bid a job. I bid a job, it’s going to be a $500,000 job, I’m probably going to make 200,000 on this. And I do very thorough planning before I win the bid, but then post bid, I don’t look back and see what it actually made. So I didn’t have a lot of that data. All I ended up with, basically all the revenues went into a pot and I just had my expenses against that and I didn’t have a lot of granular detail on what each job looked like. So if I win a $500,000 job, I don’t really know what it ends up making me, it just adds money to the pot.

John Warrillow:

How did not having that information impact your deal?

Lee Gregory:

It just took a lot longer because the information is all there. We know what we did in that job, we know how much paint we used. It just means you have to grind, go over all these jobs over the last 12 months or even two to three years and say, “Here’s this big job. Let’s go through every payroll record for the two months we’re on that job and dig out that data and dig out the amount of paint we used.” It just slowed everything down and then it makes them wonder, how can a business run like this without better analysis.

John Warrillow:

Did they try to come back to you and lower the price they initially offered?

Lee Gregory:

No, that’s one of the things, I think, starting off with quality people, is they didn’t try and re-trade anything. It was more of, whatever the EBITDA multiple was, that’s what it was going to stay. Now, the amount of our EBITDA may go up and down and we haggled back and forth on some of that, is this truly your EBITDA or is it this? And so there was a little bit of back and forth on that, but in the end of that I felt it was very fair. And a lot of it was my own doing, I just didn’t have as organized books as I should have had.

John Warrillow:

As you went through the diligence process, you signed the letter of intent, there obviously is a big number on the piece of paper, how would you characterize your appetite to get the deal done through the diligence process? Were you more and more anxious to get it done or were you starting to get cold feet as it dragged on?

Lee Gregory:

I never got cold feet. Halfway through when we were back and forth on this EBITDA number, I said to myself, “It’s amazing, I’ve done all the things you need to do to have a business that I don’t need to be part of. We’ve got the management team in place, I’ve got the numbers looking great, things are organized. You know what, let’s just walk from the table and they’ll have a business they don’t need to run anymore because I have the management team in place.” But then knowing my personality, I just carry the stress of the business with me wherever I go. So even though in theory, it sounds great to have a business that’s turnkey and they’ve got somebody running it and no one needs to oversee it, my personality is such that I wouldn’t be able to really leave it behind. So for a few days I wavered just walking away and just keeping the business and owning it as an absentee owner, I dug back in again and went through the process and got to the finish line and I have absolutely no regrets and I’m glad I kept going.

John Warrillow:

And did you communicate that reticence or second thoughts to the buyer? Did you say, “You know what guys, maybe this isn’t for me.”

Lee Gregory:

Yeah, through my broker. So one thing that’s nice is working with Jake Fishman, the Madeira gentlemen, everything went through him. So all these concerns and frustrations I had, I bounced off of him and he’s been through a lot of deals, he obviously wants to get the deal done. So I did say to him, “Hey, you know what Jake, they want to go to this level. I don’t want to do that. I’m just going to walk.” And he said, “Let’s just play a few things out here and see what happens. And this is part of negotiation. Your willingness to walk away, actually may help our position in that they’re this far along, and they’ve spent this much on due diligence. They might give a little bit and get us across the finish line as well.” And unknowingly, my willingness to walk actually got them more excited and we came back to the table and they came up and I came down and we made something happen.

John Warrillow:

That’s fantastic. And to what degree did having three other shortlisted buyers embolden you in those conversations? Because you had other people that you’d even shortlisted, that had similar value expectations, did that enhance?

Lee Gregory:

It was reassuring. If there had only been one seller, I might’ve been willing just to say, “Hey, I’ll give you all these concessions, but I just want out.” But knowing that there was three other guys standing behind with their hand out ready to give me money, I said, “Let’s just keep going with these guys and if it doesn’t work out, I have these other folks as an option.” But it’s a grueling process, at least it was for me. So I wanted to get to the finish line because all of these back and forth happened at the 11th hour and I just said, “I do not want to go through this whole due diligence again. So if there’s a way we can get across the finish line with the ones we have, I think it would be great.” And it wasn’t as easy as just saying, “Not these guys, but I’ll sell to these guys tomorrow.” It was, I got to start the whole process over again.

John Warrillow:

I’d be curious to know how you are handling things with your spouse. So in your own admission, early in the process, you were really surprised at the number like, “Oh my gosh, I never thought it could be like that.” Did you let your spouse know what the numbers were they were throwing around and what’s the pillow talk between you guys during the diligence process?

Lee Gregory:

Yeah, when I first came home and told her the number, she was just blown away. She sees me going away and come home covered in paint and dusty and then I’m saying like, “Hey, we could actually be multi multimillionaire here, painting lines on roads. Can you believe this?” And she was just blown away. And so she’s always been very supportive of me in everything I do. So during that period when I said, “Maybe I’ll just walk away from this whole thing and keep it.” She was supportive of all of it. She said, “If that’s what you want to do, then I’m fully supportive. Or if you want to sell it, I’m also fully supportive.” So at no time was she saying, “You got to sell this thing.” She was always, “Whatever works the best for you and the business, then I’m behind that.” She was really helpful.

John Warrillow:

That’s fantastic. Well, that’s great. And of course it does have a happy ending because you did consummate this deal and got it done. Did you buy yourself something? Did you buy a fancy car or a house or what did you do to celebrate?

Lee Gregory:

I did celebrate. I sold it in the end of ’17 and one of the things I really wanted to do was spend more time with my family and running a business that’s seasonal in Minnesota in the summers, really tough to have time off in the winter when it’s cold and the kids are in school. So for years, we didn’t do a whole lot of traveling. So as soon as I sold the business, that next spring, we got a one way ticket to Europe and my wife and our three kids, we just went over there for three months and traveled all over Europe and all the things that we had wanted to do for a while. And it was great not having to talk to anybody back in the States, I could just leave my phone off and really be present with the kids. And we just did everything we wanted to do. We rented the cars we needed to rent, we didn’t go on the cheap. So did I splurge? Yes, but it was, I think things that were great for the kids to learn and we had a great family experience.

John Warrillow:

Okay. What did you drop on the three months? Give me the round ballpark number.

Lee Gregory:

Oh, it was probably well, 40,000 bucks.

John Warrillow:

I love it.

Lee Gregory:

Cheaper than a car. We stayed in B&Bs, that kind of thing. So it wasn’t too bad, but we really had a good time.

John Warrillow:

Good for you. Those are precious moments, for sure and your kids will remember. How old were the kids at the time?

Lee Gregory:

11, nine, excuse me, 11, eight and five.

John Warrillow:

Fantastic. Well, certainly the two older ones will remember that forever and hopefully the younger one as well will have some memories. That’s fantastic. That’s fantastic. I’m so grateful for you sharing the story, you’ve shared a ton of value today. What’s the best way for people to reach out if they wanted to make a connection with you? Do you do LinkedIn or what’s the best way for people to reach out?

Lee Gregory:

Yeah, I’m on LinkedIn, you can certainly reach out to me there. And I can give you my email, I’m at Leegregory1@Gmail. And I love everything business, so if there’s anybody who’s contemplating the process or going through this at all, I really enjoy the business aspect of this and everything, that entrepreneurs who are willing to exit. So I’m happy to share my experience with anybody who’s interested.

John Warrillow:

Well, that’s very generous. Lee Gregory, the number one or O-N-E.

Lee Gregory:

Number one.

John Warrillow:

The number one. Awesome. Well Lee, I appreciate doing that and also extending that offer to our listeners. Thanks again for doing this.

Lee Gregory:

Thank you very much for having me, John. I really appreciate it.

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