A Peek Behind the Curtain: What Small Business Ownership *Really* Looks Like

0:00 Speaker 1 This episode is brought to you by Boulet. Now for those of you who operate within the search fund ecosystem, you probably already know that Boulet is the standard when it comes to quality of earnings reports, tax and audit services. But for those of you who are newer to the community, consider this. 0:15 Over the past 20 years, Boulet has worked directly with hundreds of search funds from capital raised to exit, currently assisting over 150 funds in the search phase and another 125 in the operating phase. They work with searchers across the entirety of the ETA journey, from issuing K ones to your investors during the search phase, all the way through to helping prepare your books for an exit at the conclusion of the operating phase. 0:39 They are the industry leader in performing financial due diligence and creating QOV reports that your investors can rely on. They provide a full suite of tax services both for your search fund and for the acquired company. They perform the annual audits required by most debt and equity investors, and they also perform outsourced accounting services, acting as a fractional bookkeeper and controller for those companies whose needs might not necessitate full time in house resources. 1:05 In short, you can safely assume that these guys get it. They've grown up in the search find ecosystem over the past 20 years, and they have the reputation to prove it. To learn more, go to bouleygroup.com. That's BOULAY group.com. 1:29 Hello everybody and welcome to another episode of In the Trenches. I am your host as always, Steve Dvitkos. Since the first blog post that I wrote in April of 2021, I have been rather public with my opinion that nobody knows what it's like to be an entrepreneur or CEO unless you have been one. 1:47 Personally and professionally, we face both challenges and opportunities that few others can relate to. Though many understand the rewards of company leadership, things like compensation, decision making, authority, and independence, very few understand the sometimes arduous journey that's required both to get there and to stay there. 2:07 This is why it can feel genuinely lonely at the top. In spite of their best efforts, our spouses, our direct reports, and our friends simply don't understand what it's really like. More accurately, they can't be expected to. The point of today's episode is to give the uninitiated a peek behind the curtains, so to speak, and to provide but one example of what leadership really looks like at the ground level. 2:32 My guest today, Rishi Sahel, is a great example of Aceo, who has withstood more than his fair share of punches to the gut, as you'll hear in our discussion today, these punches included. But certainly we're not limited to an acquisition of a manufacturing company in the middle of COVID, when lockdown orders were in full effect. 2:52 A post COVID supply chain crisis, a post COVID runaway inflationary environment, a lost warehouse, an attempt to buy their primary manufacturing facility from underneath them, wire fraud, tariffs impacting a global supply chain and global customer base. 3:09 And one unforgettable presentation to members of a local City Council. All of which is about 1,000,000 miles away from the comfortable confines of Bain, where Rishi spent many years prior to pursuing his dream of acquiring a small business. As you'll hear, despite all of these challenges, the company that he has built has enjoyed incredible growth and success. 3:30 But hopefully better understanding the details of his journey will give you pause next time you're tempted to get too enamoured with what seems to be an unambiguously positive headline. And in presenting Rishi's story to you, I don't at all mean to suggest that leadership is all downside and no upside. 3:46 Quite the contrary, in fact. Instead, I'm providing you with this dose of reality only because I assume you're much more familiar with the upsides of entrepreneurship and leadership and much less familiar with the price that you're likely to have to pay in order to receive those benefits. 4:01 But before we get into any of that, allow me to conclude with my usual reminder that I am an active investor in search funds and the companies that they acquire through my firm, Mineola Search Partners, which is now investing out of its recently launched second fund. So if you're looking to raise a search fund yourself or if you have an equity gap, I'd welcome the opportunity to speak with you. 4:21 But for now, I hope you enjoy today's conversation with Rishi Sahel. Rishi, welcome to the show. 4:38 Speaker 2 Steve, thank you for having me. Long time listener, first time. 4:43 Speaker 1 Interviewee, long time, first time. I love it. Yeah, I'm, I'm excited to get into it with you. And, and as as we were talking about before I hit record, I'm, I'm excited about the idea of this episode giving folks who've never run a business before a look under the hood of what it's like to be a leader and what the realities of leadership look like, particularly in a small business context. 5:09 And some of the challenges that we are asked to deal with before we feel necessarily equipped to deal with those challenges. But before we get into your time as a leader and as a CEO, maybe you can just walk us through your life and career before you became ACEO, maybe some of the major stepping stones before you became the CEO of of your company. 5:32 Speaker 2 Yeah. So, you know, I think it starts to when I was a kid, I had grew up in a family business environment. My dad had a manufacturing company growing up and I, there's a lot of studies on this, but I think that plants a seed of one day I'm going to be an entrepreneur, one day I'm going to run my own show. 5:51 You know, I took a lot of odd steps to get there. I was a computer engineer at first, which feels very risk adverse. But in the back of my mind, I was always thinking about what skills and lessons do I need to learn and acquire so that I can, I can be in the seat. After spending seven years at a medical software company, you know, I realized I need to make a, a pivot. 6:13 I need to drink from the fire hose for a while, learn how the big guys do it, which was my MBA, and then transition to strategy consulting. So I was at Bain for four years here in Toronto where, yeah, I drank from the fire hose. You know, you know the background, you know the drill. 6:29 And I, you know, learned a lot of lessons at, at around the four or five year mark is when I realized I'm, I'm on a conveyor belt and this is going to lead to a life that, you know, may be great, but it's gonna stop me from being an entrepreneur. 6:47 And I looked myself in the mirror one day and I said, if I don't make a move now, I'm gun shy and I'm never going to be an entrepreneur. And that's OK. But I got to decide. Coincidentally around the same time is when I met Martin, my business partner, also family business background. He came from investment banking, private equity. 7:03 So we had a complimentary skill set and it was over beers. We looked at each other and said let's do it. And that was 2019. And here we are. 7:14 Speaker 1 Fantastic. So you purchased the business that now you are leading and have been leading for many years. We're going to get to the timing separately because you bought it at a very interesting time, May 2020, which is probably self-evident as to why that was an interesting time to buy the company. 7:32 But before we get to timing, I want to talk about the business itself, because the business itself is super unique and from a distance, 1 might be forgiven for thinking that it is quite different from what search funds typically acquire. So tell listeners, what does the company do and why did you think it was a good asset to take a big bet on all those years ago? 7:56 Speaker 2 Absolutely. Yeah, So required in in 2020 we acquired at that time it was Orion Rope Works and Canada Cordage, 2 sister companies. And now Orion Cordage is a domestic manufacturer of industrial rope. So just for context, that's not garden rope or rope that you'd use for camping or tie down a tarp. 8:16 This is special D cordage for industrial applications. So end markets you can think of would be big power utility. So for lifting transmission and distribution, scaffolding and pulling power lines across the country, big telcos for pulling fiber optic cables under the ground, commercial marine department, defense, you know, basically anywhere where there's big heavy physical work being done, there's likely industrial cordage being used, right. 8:43 So that, and if you trace back its roots, you know, Orion cordage, this year it turns 170 years old. So it's a, you know, a staple part of the origin story of North America, right? We acquired 6 years ago. 8:59 So that was, you know, peak COVID. Have made five acquisitions in total now and have 120 employees across two of our big facilities, one in Ontario, Canada, one in Maine. And so that's some context about the business. 9:14 And you know, I, we did face a lot of these questions upfront, as you can imagine of is this off the fairway from a search perspective. And I think our thinking at that time, you know, it's, it's best framed up and I tell this story all the time by a conversation we had with Gerald of TTCR when he was asking a question about the business. 9:34 He asked the same question, you know, he was like, you know, in the community we've got a general set of criteria that we look at when we evaluate a business. And while we want to back you guys, I see a bunch of XS, right? 9:50 It's manufacturing, so there's complexity, it's non recurring revenue. You do have commodity exposure. So externality, complexity. You've got a roll up thesis, you know, right out of the gate I see a bunch of XS. So you know, what excites you about this business, You know, and, and my answer Gerald, at that time was, you know, Gerald, we've got these rules for a reason, right? 10:12 This is rules based thinking. The principle that they're solving for the, the root truth we're looking for in one of these businesses is we're looking for the unsinkable ship. We're looking for a business that's going to stand on its own and buys the entrepreneur some time to find their sea legs while they find the angle to improve, transform, grow the business. 10:34 And what we see in this business is 160 year old company, you know it's older than Canada decades long customer relationships, low single digit churn. Clearly there's some product market fit and while the revenue is not gold standard contractually recurrent, it's highly actuarially repeating rope is a consumable so people use it and then they buy it again once they've consumed it. 11:00 You know, it's very sticky business and at the same time while it's got this, you know, long standing durability, they've really under invested in brand building and hunting and we just saw a lot of opportunity to take those bones and improve the business. 11:19 So, you know, in a way it was checking those boxes of repeating revenue, you know, high margin, low customer concentration, just, you know, in a way that your intuition wouldn't expect. 11:32 Speaker 1 Yeah, yeah. I like that idea of there are rules, but then there's like a general spirit that those rules are trying to uncover. You use the phrase unsinkable ship. I wrote a blog post on this a couple months ago called Hard to Kill and I basically said that's what a search fund ought to buy a company that's hard to kill. 11:49 So admittedly at the time you had questions about non recurring revenue, about complexity because it's manufacturing, commodity price exposure etcetera. With over six years under your belt, looking back, which of those concerns were founded and real and true, and which were actually unfounded and not real and not particularly true with the benefit of hindsight? 12:12 Speaker 2 It's a good question. So I, I on reflection, you know, I think this simple, uncomplicated business, what it's really doing is this, you know, when you are diligent in a company from the outside, one thing you can't get a good view on is how good are the systems. 12:31 And that's not systems from a day-to-day perspective. How do you respond to new novel existential crisis, right? And when you have a simple business, you're kind of reducing the externality exposure, right? There's less things that can knock you out at the knees when you have a complex business. 12:49 The systems have to be good enough to, to adapt in those situations. And most of these middle market businesses founder run guys playing hero ball. The system is not good enough to to handle that type of stuff. What I would say is, and you know, we'll talk about some of these stories, all the things that could have happened, happened, right, because we bought a a company in a very unique time to run a domestic manufacturing business. 13:16 But you know, while there's risk in not having a system that can keep up with the complexity, there is opportunity because if you can be the one to build a system in that complex market, you can be the one in that industry who's faster to mitigate risks, one that's able to keep customers happier during times of volatility and keep or win share. 13:40 You know, you can quickly take advantage of opportunities. And that's kind of the story of our six years. We got, you know, punched, punched in the gut several times. And we'll talk about some of those. Some were foreseeable, some were not foreseeable. But in each situation it taught us a lesson and allowed us to build a system in a way that was going to be able to solve that in a repeatable, defensible way in the future. 14:03 So, you know, I think we've built a company that now is seen a lot of things and can adapt in that area. So, you know where there was risk exposure at the beginning and I think we've cleaned a lot of that up. 14:17 Speaker 1 Yeah, you use the word crises, which I think it was was an interesting choice of words, especially, you know, being a CEO myself, I faced my fair share of them. The bulk of our conversation is going to focus on those challenges that you had to face as a CEO, but I'd love to contrast where the business was when you bought it. 14:34 And then towards the end of the episode, we'll talk about where the business is today. So just at a super high level, whatever you're comfortable sharing when you bought it, just give listeners a rough sense. It's like, what did this company look like? 14:47 Speaker 2 Yeah. So you know around, I mean it's a pretty sizable business, one of the biggest domestic cordage manufacturing companies in North America. We're doing in the mid 20s of revenue. We're in the roughly 20% EBITDA, right. 15:05 So reasonably well run company from profitability perspective, stable and, but I mean, what are the search criteria that we were not hitting? And you know, this one I've, I've spoken with many investors about ends up being an important thing is growth prior to close. 15:27 I think that's a metric that a lot of investors are looking at closely. Now, this company been flat for five years. So what that forces you to do is believe that you can develop a growth engine when it has not been demonstrated. We we have been able to do that. 15:42 So I'll, I'll talk about some of our successes and where we're at when we get to the end of this. But you know, that was one thing that you know it, a growing market can cure a lot of ills, right? So Warren Buffett quote, you know, when a bad market meets a great manager, the market wins, right? 16:03 And if you got a pretty flat market, we found some angles where we are growing very well right now. So we've pivoted and found some interesting things. But at first, you know, it required us to find those. It wasn't. It wasn't in the bones of the business at first. 16:18 Speaker 1 OK, so let's begin the process of peeling back the curtain on what small business leadership and ownership really looks like. And in your case, you got dropped right into the Shark Tank. 16:33 You acquired the company in May 2020, which was about as acute as it got in terms of the early days of COVID. So tell us a little bit about the realities of acquiring a company during such a tumultuous time for everybody, and maybe some of the major lessons that you extracted from dealing with such a very real challenge so early in your tenure as a leader. 17:01 Speaker 2 Yeah. So, you know, you hit it on the head. Our original close date was February 15th. I think 2020, maybe the weirdest time in modern history. The product company were all shut down. We didn't all believe that it was going to be a real thing. 17:18 If you can take yourself back to those days, you know, we thought there's a chance this is going to be a couple months when somebody had first said this is going to last until we have a vaccine and people are going to shelter in place for a year to year. I don't think we really believed it at that time. 17:35 The owner didn't believe it. So he was putting a lot of pressure on us to close during that time, right? The owner who we were buying the business from, we were continuing to try and stretch out to get more information about the company and just get data to see how the world was going to unfold and how the business were going to hold it. 17:55 And I'd say this, you know, while it was a turbulent time for society, it ended up being a pretty good validation of Ryan's business model, right? So demand completely held up and what we tried to push the owner, we didn't have much of A leg to stand on because a month, two months, three months went by and orders continue to come up. 18:14 They were able to produce. And I guess it turns out that, you know, when you shut down the world, infrastructure still needs to be maintained. You need to keep up power and tell me communication lines, you know, humans still need to eat. So we fish, right? All that, all those critical services and critical industries, they stay on. 18:34 So, you know, the, the business proved during that time it was a great positive stress test. That demand was durable and predictable. So we acquired in May, right? During that time, we faced all the challenges that ACEO would face and all the questions, do you have to mask? 18:53 Do people have to vaccinate? You know, who's allowed to come into the office? Are we allowed to travel across border? So we dealt with a ton of those challenges and it wasn't, I mean, I mean, we were still getting our feet underneath us in the business, but it kind of became a rallying cry for us in the business. 19:11 We kind of used it. You know, one of our values is our customers are heroes, right? And what we mean by that is, you know, we're making rope, right? We're not saving lives, but the rope that we make, you know, hours of cities we live, live in builds a bridge and bridges we live on provides the food that we eat. 19:32 So we did those speeches in the company at the plant when we first acquired. I mean, that was our big speech. Orion is 160 years old and has a place in this world, right? It's one of the pillars of our society. People don't see it. 19:48 It gave me a sense of purpose to use that language, right? It made me excited about running the business. I think it allowed us to pump up our employees. And I mean it, I think, allowed the company to coalesce around new ownership and a vision. 20:02 Speaker 1 So in our ecosystem there is wisdom that I think is well founded of when you go into a business as a rookie CEO, don't change too much too quickly, diagnose before you prescribe, don't make irreversible decisions, etcetera. 20:18 That's all perfectly reasonable, consistent with my experience. The only nuance I would add to that is that the reality of buying a real going concern business is that the business doesn't wait to present you with problems until you're ready to handle them. 20:34 Which is to say you're taking over a company with like real problems, real employees, real challenges, real questions that need to be answered. And it basically creates a situation where the CEO has to make decisions that he or she would otherwise feel unqualified to make. 20:50 So can you bring us into your own psychology at that point in time? Like, if that was me having to make such critical decisions so early in my tenure, I mean, imposter syndrome would have been running rampant through my head. 21:07 A sense of like, I don't know what I'm doing. I don't feel qualified to have an opinion on this. Can you just bring us inside your your head at that moment in time? 21:15 Speaker 2 Yeah, I would say this, Martin and I are were gunslingers. So we came in and immediately we had ideas and things we wanted to do. You know, we just came from consulting. 21:32 So my bane drum beat was still driving real fast, right. So how do we learn the business as quickly as possible? How do we come up with opportunities? You know, we were, you know, it probably, it's probably inefficient use of time, but it's a good way to think making slide decks for ourselves and how we think about this. 21:52 What are the scenarios bringing it up up to our board? I mean, at that time we were having monthly meetings and I often weekly calls on specific items, but I I think it taught us a lot about the business. When I say we're gunslingers, I mean we're guys don't like to sit on our hands. 22:10 So, I mean, in our, in our, our first quarterly board meeting, I remember Bill, Bill Egan was one of our board members at that time. You know, he's like, I like being in this position because you know, I'm holding you back rather than telling you guys what to do, which is where I'd like to be, right. 22:28 So we weren't going to sit on our hands. I think making decisions and learning about the business was something we were excited about. The team was good. We had a president and he's still with the business, who had been in the business for quite a while, came from an operations background, automotive operations background. 22:45 He had seen a lot of things and was willing to get in the room and just debate things with us so we could structure conversations and do the consulting, thinking of OK, what are the scenarios, what do we need to believe? And we had this gentleman Steve, who, sorry, Steve is his name. 23:02 I know it's, it's also your name. I like him already. He'd seen a lot of things and, you know, lived a lot of lives. And we were able to take that thinking and and get to a high confidence decision. 23:19 Speaker 1 This episode is brought to you by Overly Risk Strategies, the insurance brokerage and insurance diligence provider that's been trusted by investors, lenders, searchers and CEOs for over a decade now. The company is led by August Felker himself A2 time searcher within both the funded and the self funded models. 23:36 He personally runs over these dedicated search fund practice that works with searchers across the entire diligence purchase and post close process. 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I also love the the reframing of an otherwise once in a generation challenge actually being proof of the businesses resilience. 24:47 I've never thought about it that way, but that's super interesting framing. So you begin your leadership journey having to deal with COVID. I also had to deal with that. I was still running my company during COVID, and I remember I still have some of the battle scars that I incurred during that period of time. 25:06 Fast forward roughly a year, you had to deal with a couple whiplash effects, for lack of a better way to put it, of COVID. One of them was the supply chain crisis that followed the particularly acute periods of COVID. So tell us about that, what actually happened, what challenges presented them themselves to you, and then we could talk about what you learned from those challenges. 25:29 Speaker 2 Absolutely. So I would say this is the challenge where we we carry scars from right. So COVID we got through, learned a lot about the business, the supply chain crisis and I mean related runaway inflation of 2122. 25:46 That was a lot for our business. You know, if you recall, just for context, when we turn the world back on the, the engine stuttered quite a bit, right? Inventories had been depleted across the system, so you couldn't get supply and raw material and the stuff that was available. 26:06 Prices shot through the roof because everybody was trying to get their hands on what the was available while manufacturing booted back up. This led to runaway inflation across the supply chain. It also led to intense competition for labor because everybody been in there had been at home. 26:23 And now people are slowly getting back to the economy. So domestic manufacturing means hard to get people. Wages are also increasing. And then because manufacturers and distributors were trying to, you know, go to from zero to 60 at A, at a cold start, it put enormous pressure on the global logistics systems. 26:44 So freight prices shot through the roof as well. As an example, I mean, getting a shipping container from from Asia used to cost us 1500 bucks in normal times. And during a period it was 10 thousand, 11,000 bucks to get a container and you know, we're manufacturing. 27:00 So that is a ton of margin compression right overnight. Not only that, we're a cross-border domestic manufacturer with a global supply chain. So we're exposed to every one of these shocks, getting raw materials, freight prices, labor, what's going to happen to market demand in the different industries? 27:19 How do we prioritize customers, all those things overnight. I'll give you one example, not to bore you on this or your listeners on this, but to make it real, just to see how we felt. Polypropylene is a really good example of this insane inflation. 27:37 You know, polypropylene is one of our raw material inputs and for decades it sits in this 6065 cent predictable range, right? And during COVID, manufacturers shut down, manufacturers shut down South polypropylene demand reduced and polypropylene went down from 65 to $0.50. 27:56 And we were printing right because our demands up, raw materials down, that's all our margin and we thought were geniuses. Our investors like, ah, you guys are great, amazing EBITDAS flying. And then when the world turned back on polypropylene went from the 60's, the 70's, the 80s to the highest it had ever been in human history, $0.95. 28:17 And this company had not done a price increase in years. Prices are all over the place because we serve all 50 states, different markets, different distributors. Doing a price increase was a massive undertaking that the system was not built to do, especially overnight. 28:33 So we were sitting on our hands for a bit hoping this was going to come down. And then the Texas ice storms happened and all petrochemical production shut down across North America. And polypropylene went from 95, highest in human history to $1.40 overnight. And I mean, we're bleeding at that point. 28:49 So we had to immediately do a probably propylene surcharge. It taught us a ton about customers who buys from us, what their supply chain looks like, how much notice they have, you know, how we interact with them. It taught us a lot about international sourcing and spot buying and how we think about what we buy, when we buy, what we store. 29:10 These are, I mean, this was a crisis the business had not faced before and it all happened at once. So, you know, we had had a about a year, a little bit more than that of experience. So we understood the business, but this is when we had to make a ton of fast, hard overnight calls and that that was scary. 29:30 We still carry scars from that, but I think the business massively, massively improved since then. 29:36 Speaker 1 What did you learn about either the company's pricing power or just the idea of pricing power in general as a result of that experience? 29:44 Speaker 2 Yes. So part of one of our theses at the beginning was this business is sticky low churn because it is a, I mean we used to say low part of the cost bar, high criticality of failure. So like a power utility for example, that buys 1,000,000 bucks of rope from us a year. 30:04 Yeah, you can go to Vietnam and save 10%. So OK, you saved 100K. No engineer is going to risk their career on 100K project when their OpEx spend is $10 billion a year. And if the rope doesn't show up or if it's not exactly right, you stall projects or somebody gets hurt, right. 30:23 So we, we believe there was pricing power. It had not been tested. We were new CE OS, So academically we believed it, but I was horrified to pass through this price increase. So we passed it through and what we did, and I mean I, I love data. 30:41 So what we did is we put together a great dashboard on every customer. They're buying patterns, how they historically buy. And we were monitoring it weekly to see was there any change in a customer's order patterns due to this surcharge or prank price increase to preemptively signal are they shopping? 31:01 Are they holding off? And if so, we would go and jump on it because the long term relationship to me was worth more than the temporary margin. So we solved it with data. We learned a lot. We learned we do have more pricing power than we expect. 31:18 Even though it was our thesis, maybe it was a reconciliation of our academic belief that it was there and our intuition about can we raise prices and have people hold on. 31:30 Speaker 1 Yeah, That was pretty much exactly my experience as ACEO. We also bought a business that had a lot of intellectual reasons to believe that it had pricing power just like yours, just like so many small companies we see had pretty much never raised prices historically. 31:46 So there was a very big and in hindsight rather obvious pricing opportunity. But like you, I was terrified to execute on it. My only regret, and maybe this is just one of those lessons that you can only learn and appreciate after having done it, is I wish I moved faster and I wish I increased prices more than I actually did because I clearly under did it because I was fearful, but in retrospect that fear was largely unfounded. 32:16 I'm curious if you had any similar lessons. 32:19 Speaker 2 Absolutely, I feel the exact same way. I mean that what I would believe, I believe is one of my big learnings during that time because we ate it for a while on EBITDA while we were waiting and there's a ton of lag from our perspective. So if you think about our supply chain, I'm not selling to a guy who's out there hanging from the rope. 32:38 I'm selling to a national distributor who then is maybe selling to a regional distributor or a contractor and then it's going to a in the end user. So there's several layers in the supply chain. Our customers value our relationship because we are predictable and steady. 32:55 We, you know, don't prices don't change month to month, so they can build a business on us. So when we raise prices and ended up being for some customers, we've got to weigh 153090. We have a large customer who has an annual price cycle contractually, we're contractually bound by that. 33:11 We were able to push it in this scenario because polypropylene was doing crazy things, but it taught us a lot about, you know, we got to do this fast because there's a cascade effect. We're going to not going to get the benefit right away. I do agree with you. We had more pricing power than we expected and if you are providing more value and you're not pricing to value, that's a missed opportunity and closing that missed opportunity allows you to invest in growth and do a lot, a lot of great things especially earn your early in your tenure. 33:44 Speaker 1 Yeah, Yeah. Like I said, some lessons need to be experienced to be understood. This probably falls under that category. OK. So the second bullwhip effect of inflation that you had to deal with as a new CEO was the inflation that followed COVID. This is related to the idea of pricing power. 34:00 Talk to me how it netted out in your business. Presumably your raw material costs were subject to inflation, but presumably the price that you charge your customers also followed in some way the trend of inflation. So tell me, like how did that challenge kind of net itself out in your business? 34:17 Speaker 2 Yes, yeah. So we were able to pass through prices. To your point, we were new. The business had not raised prices in quite a while. So we were, we were slow on the draw I think and we think we were still learning about the, the strength of the business and the resilience. 34:35 But that led to a leg effect, right. So there were several months where when I say we carry, we carry scars from this. Those months were were scary, right. We just bought the business. We had a quite a bit of debt on it at that point and not had the chance to pay much of it down. 34:52 All of a sudden EBIT does thinning out, thinning out, thinning out. The, I mean the bank was very receptive and we worked with them pretty closely. So you know the, our bank has been banking on us for I think over 100 years. 35:08 So we work with BMO up here in Canada. I think we're one of their five oldest clients. So anyways, we faced a lot of challenges during that time during getting gross margin, studying EBITDA. In the end we got there and margins did recover right. 35:25 So we were able to pass that price increase. Customers were understanding and I mean it was a great lesson. We didn't have to suffer during that time. And right to your point, we didn't have to, we thought we did. But if we'd been a little quicker on the draw, I think, you know, it could have changed quite a few things about how we operated for the next year and change after that, right, with more confidence. 35:47 Speaker 1 So your next two punches to the gut were real estate related. These two happened roughly 2 years into your tenure as ACEO, So we'll start with the first one. Effectively your warehouse, which is critical to your day-to-day operations given that you're manufacturing rope, was kind of snatched from you out of nowhere. 36:08 As far as I understand it, your landlord needed the space with no indication that they ever needed that space and this was just totally out of left field. So tell us what happened there. 36:19 Speaker 2 Yeah, let me, we've had a number of funny real estate situations. Well, I I say they're funny now that we're past them. 36:27 Speaker 1 Well, 'cause if you don't laugh, you have to cry, right? 36:30 Speaker 2 Yeah, so I'm gonna, I'm gonna tell you both stories because they involve the same person, right? So listeners are gonna hear about this guy and maybe shake their fist. But so our primary facility in Maine, it's owned by the town. 36:49 The town generally wanted it off the books, and previous owners did not want to tap the capital. They figured nobody's going to buy this customized rope manufacturing plant in Winslow, ME, right? So we operated that way. 37:05 We just bought the business. Then one day, one Sunday, our HR manager sends us an urgent e-mail with the meeting agenda for the upcoming town council meeting. And one of the items on there was discuss the Johnny Seeds proposal to buy the Orion cordage factory. 37:24 And we're like, wait, we're, we're the Orion cordage factory. Like, what is this? So Johnny Seeds is our neighbor in Maine, the one you're referred to, and also our landlord for our, our warehouse. And turns out during COVID, everybody became a home gardener and Johnny Seeds business started booming. 37:43 Hey, everybody wanted seeds. So, you know, it was the the seed rush of 2022 or whatever. And so we quickly made some calls that Sunday, got a hold of the town's real estate agent. And, you know, he tells us, I don't think it's a serious offer, but, you know, we're on high alert. 38:00 We mean, if this plant gets bought from underneath us, it is a monumental undertaking to move this business. Our machinery has installed in the plant, right? This is not just like a a machine you can pick up and move. So Spidey sensors are tingling. 38:15 Something weird is going on. I get on the next plane out, meet with the town manager that morning on Monday and then get a slot to speak at the town council meeting, right? So speak in front of the town. And I mean, if you can imagine, this is, you know, we're in Winslow, ME and the other items on the agenda are, you know, they're talking about should we buy a new fire truck for the town? 38:37 And one of the neighbors, you know, their hedges wasn't a code. So they're going through these items. And then they introduced me. They're like, OK. And here we have Co CEO of Orion Cordage who's come to address the town, Right. So, yeah, I, I mean, what's funny about this is, you know, if you're if you're an entrepreneur and you want to and you want to build a business, you kind of have to live for these moments. 38:59 Yeah. 38:59 Speaker 1 Right. 39:00 Speaker 2 Get to come in and do the big speech, right? And I, you know, you get to come in and say Orion has been a part of the town of Tapestry of Windlow for 40 years. You know, our employees, the town of Winslow, our business is, you know, critical importance. You do that. 39:15 My family's watching on live stream on Facebook or something like that, sending me texts, You know, John Williams should have scored this speech. But I, I got to do the big speech was it was really fun. It worked out well in the end. The town didn't sell it Johnny Seeds. They sold it to us. 39:30 And that has worked out, worked out really well. So that was our, our main primary facility. And then I mean, there's the the Johnny Seeds saga continues because not only did they want to buy our plant as you referred to, they were also our landlord for our warehouse, which was joining our factory so deeply integrated into our operations. 39:54 Again, scene seed rush of 2022. So Johnny Seed says I need this space back, even though they've been renting it to the business for 10 years without any questions to lose the warehouse. And then we get the force to immediately find more square footage. 40:12 The closest one we could find is a 20 minute drive away. So we have a truck going back and forth every day. This is must have been eight months or something like that. We have this secondary warehouse, we've got a truck. We have to set up a logistics system over there, but had to do it just on the fly overnight. 40:30 So the, I mean these again, your point, these are the kinds of challenges you, you don't hear about when you get the flyer or how the business went, you get these, OK, we lose a warehouse, we got to make a plan 30 days, we got to move everything all hands. 40:46 And fortunately we have got a great team who's able to handle that. And you know, they've learned a lot of lessons over the past couple years. But those are the kind of things that that you know a business operator has to face. 41:00 Speaker 1 So on the surface, these sound like highly idiosyncratic challenges that are very specific to your situation. Like some listener might be saying, well, you know, the town or some seed company doesn't own my warehouse, so I don't know what I can learn from this lesson. 41:17 Maybe you can talk about like, what generalizable lessons did you extract from this experience? Is it about, is it something tactical about real estate? Is it something more general about making the best of a bad situation and controlling what you can control? Like what generalizable takeaways should a listener extract from your experience here? 41:36 Speaker 2 Yes, you know, I think that there's that there's that root point which I think this refers to is when you when they say, when you say business complexity, right there is externality surface area when you're manufacturing, you've got plants, you've got equipment, you got a real estate, OK, you got commodities, you got labor. 41:55 So you have all these things and it is tougher to diligence the resilience of the business and how buttoned up those risk mitigations are. So in a business like this, that has to be worth it, right, Because it takes work. 42:12 I mean, now we've really built up the business, so we understand all those areas of exposure and because we've seen a bunch of them, we had to do the work to really build the system. But I mean, that is an important point. When you have a complex business, you're not sure what externalities are going to hit you. 42:29 You can't predict, right? You're yes, you're not in Winslow, ME. You don't have a factory. Maybe you're somewhere else. You believe it's there, but there is potential risk exposure. So you just have to make sure you have your hands on the system. And I I would say an important way about running the business is when you solve the problem once, try and solve it forever. 42:50 So now we're in a situation where all our real estate is, you know, either under our control or under our very long term locked in contracts, right? We know the landlord and those are no no longer something that's no longer something that has to keep us up at night. 43:07 Speaker 1 Yeah, like that idea of solve a problem forever. On this issue of complexity, if let's say you were an investor and someone brought to you an otherwise attractive opportunity, but it screamed operational complexity, right, just day-to-day complexity, some investors would dismiss that opportunity out of hand. 43:29 Doesn't sound like you're one of those people. Sounds like you might still be interested under the right circumstances. So in light of your experience, if you were to look at a business that has high day-to-day complexity, what other elements have to be there to make it an attractive opportunity for you? 43:46 Speaker 2 Yes. What we liked about this business is just I would say that asymmetric risk, right return, if you look at a business like this, the chance of either losing money or having pretty subpar returns like I was, I would say it was low, right. 44:10 Business had been around as long as Canada. You know, if we come in and we tank the business, then maybe we just shouldn't be in business, right? The business is going to continue, continue, continue being a going concern. It is also pretty cash generative. 44:28 So you can put a healthy amount of leverage on it and just do leverage and debt pay down your floor of return is quite solid, right? Yes, externalities are going to happen. It's going to cause you to have to work pretty hard, but you've got this nice foundation. 44:44 It was also, I would say reasonably sizable business, right. So you know, running it well continue to pay down debt in in the face of leverage was just a, a reasonable outcome, right. So I, I've been, that's what we liked about it. 45:00 The heavy downside protection I guess, if I had to synthesize that. 45:03 Speaker 1 Yes, yeah, that creates that asymmetry. OK, interesting. 45:05 Speaker 2 What's funny now is I think if you think about it, businesses like this are really becoming on vogue, right? There's this talk about the Halo businesses, right? The high asset, low obsolescence in the face of AI, you know, SAS companies were all the rage. 45:23 I was a computer engineer. I would have loved to buy a software company in 2020. But now there is externality disruption risk there that, you know, rope is one of humanity's oldest inventions. I don't, I don't think it's going to be disrupted. 45:37 Speaker 1 That's right, yeah. AI proof businesses are suddenly very popular. OK, let's go on to your next punch in the stomach. In 2022, I think the same year that you were dealing with all of these real estate adventures, there was an instance of wire fraud in your company. 45:53 Tell us about that. 45:55 Speaker 2 Yeah. I mean, this was worth talking about because it's, it's so, so sophisticated and bizarre. As we were acquiring our new warehouse, so we had a temporary warehouse and then we actually acquired the building that was adjacent to us. It actually came up for sale. 46:10 So that was a a godsend for us because now we've got a warehouse again adjacent to our primary factory. When we were buying that, making the wire transfer for that purchase to our lawyer in Maine, unbeknownst to us, somebody had hacked one of the emails in the company and they didn't do anything with it. 46:33 They were probably monitoring it for months and didn't do anything. So just a little ghost parasite basically in the background. And when the transaction actually happened, they must have known that this is happening. 46:50 They caught the e-mail from our lawyer before it went to this person's inbox. They changed the PDF to change the wiring instructions. They changed the phone number on their confirmation phone number. They had set up a fake website. 47:07 Well that looked like our lawyers website two weeks in advance of this, so they knew this was happening. One letter changed in the name. So when this person got this PDF, they had the wrong wire instructions. They called the number which was in the signature of the lawyer. 47:23 It was in the signature of the IT was in the PDF. It was on the fake website. Talk to a person, confirm the wiring number, got the wire, got it approved by somebody who's followed the same process. 47:39 And I mean, it was wirefront. We, we, I mean, what's nice about this is we caught it. So we waited a day, information that the wire didn't get through. Waited two days, wire didn't get through. So we reach out to the bank and all of a sudden this person's e-mail address, e-mail box blows up with a bunch of spam because this person was monitoring, making sure they didn't reach out to the bank. 48:03 So they just blew up their inbox. You know, we got on the phone. This is like me, Martin Seema, my wife was like looking up the number for the FBI, all this type of stuff. So I mean, to your point, when you buy a business, it's a it's a family affair, right? And we, we informed the FDFBI, we were not able to put a stop-payment on it. 48:24 This wire went to five different accounts, but the FBI, you know, was able to seize those accounts in time because we got this out Friday. If we had waited till Monday, it probably would have been gone which, and this was a significant amount of money and we got all the money back so. 48:40 Speaker 1 It was. How long did that take from start to finish to get that money back? 48:44 Speaker 2 Oh, it was almost a year. Must be nine months, something like that. Because the process is complex. The FBI has to go and essentially sue the individual banks for the money back. Because the principle is you don't want the FBI being able to come to a bank and just take money For some reason. 49:02 They have to follow a hard process, right? Otherwise, you know, people are worried about what stops the FBI from seizing my account. I mean, we learned some lessons from that, I guess too. You know, now all e-mail access addresses have multi factor authentication. We're required to change passwords. 49:19 You know, we every time phishing emails and things like that come up, we, we track them. We've got an MSP now who manages a ton of our IT. So I guess, I guess we did, on reflection, solve the problem once and solve it forever. But that was also one of those times where you're white knuckling in or just feels like you're in a movie. 49:39 Is this really happening to me? 49:44 Speaker 1 Among your stable of advisors as a searcher and CEO, your legal team has to be among the most important. If your experience is anything like my own, you're likely to find that your relationship with your legal advisor will span at least a decade and will touch on every single aspect of the journey. From creating your first legal entity, to issuing your first LOI, all the way through to due diligence acquisition, day-to-day legal questions that will arise during your tenure as the CEO, and finally through to the sale of your company. 50:12 For these reasons, who you partner with isn't something to take lightly. This is why I'm thrilled to be partnering with Kilpatrick, a law firm that is continuing to build upon a foundation that was created over 160 years ago. The firm has more than 650 attorneys across 22 offices worldwide, with clients ranging from startups and search funds to more than 1/3 of the Fortune 50. 50:34 Kilpatrick is very active within the middle market, having closed more than 3 1/2 billion dollars in transactions in 2025 alone. The firm has a dedicated search fund team who works with searchers across the entire life cycle of the journey from inception through to acquisition through to exit. 50:50 When you work with a Kilpatrick Search Fund attorney, you'll have the confidence of working with someone who has seen it and done it many times before. To learn more, go to kts-law.com/ETA and tell them that you're a listener of In the Trenches. 51:09 What's most frustrating about that? From the outside looking in, as it seems like you did everything right. You, well, not you personally, but your team. They verbally confirmed wire instructions. You know they went on the website. Seems like they did everything right and yet the worst outcome actually happened. 51:26 Speaker 2 Yeah, it was, it was wild. You know, fortunately we were able to stop it and we don't have to look back and and think about what would have happened if we didn't get the money. But yeah, it was a, it was a wild time. Just sheer, sheer disbelief at one. 51:44 This is sophistication. And then two, that it, you know, it really happened to us. 51:49 Speaker 1 Right, Unbelievable. All right, Well, the fund does not end there. In 2025, tariffs started to become a very real consideration for a lot of companies, not just in Canada and the United States, but across the entire world. 52:07 You mentioned that you have a global supply chain, you have a global customer base. So clearly tariffs were very relevant to you. Talk to us about what happened inside the company once tariffs started to become a real thing. 52:20 Speaker 2 Yes. So this was fun. So again for context, we've got a global supply chain, meaning we buy raw materials from the United States, from Canada, from Europe, from Asia, right. 52:37 We've got shipping containers coming from all over the place. Not only that, we're a cross-border manufacturer with segmented manufacturing. So they're not, it's not redundant manufacturing each of our plants, they produce different product categories. 52:53 And what that means is stuff that's made in Canada could go to Canada or the US Stuff that's made in the US could go to the US or Canada. Some products are partially made in the US, shipped to Canada, finished, shipped out of the country, and also the reverse. 53:09 So, you know, deeply, deeply integrated companies or manufacturing plants. And in 2025 when there was, I don't know how you say it, a complete upending of the global trade landscape. 53:27 It was a series of curve, curve balls. And I would say it was mostly the uncertainty that was so jarring. If one thing happens, we can plan around it and our business can handle this. But if something happens and then it gets overturned the next day and then a week later it gets overturned, how do you plan for that? 53:45 And the outcomes for us were, I mean, there were several different outcomes. 1 is, you know, where we going to get hit with tariffs on raw materials that we imported. And we've got a diversified supply chain so we can adapt. But the quantum and the timing was changing every day. 54:01 If you remember, China was like 20%, thirty percent, 50%, a hundred percent, 120% tariffs and we've got shipping containers that are on the port and this is going to cost us a a ton if we actually end up shipping it. So just daily second was, you know, USMCA, right, the US, the United States and Canada have an agreement and was there going to be some disruption in that agreement and was going to leave us with internal tariffs that we would have to adapt around? 54:29 And then 3 was what would the macro effects on this be, right? We can handle our internal operations, but what's going to happen to customers? Is it going to cause a recession? Is it going to change customer demand or shift customer demand? So we ended up having to, I mean, the team was putting together scenario after scenario of what we do here, what would we do here, which I mean, that's how we operate now, right? 54:52 We, we knew we couldn't wait until the data was here, right, because it would require big changes. So we were scenario planning. I remember I was overseas for part of this time and I was up till two or three in the morning waiting to see what tweet was going to come out after key meetings, which was, I can't believe I'm saying that it was crazy, was on Twitter refresh, refresh or sorry X refreshing and refreshing to see what the outcome of, you know, the latest meeting was going to be. 55:20 But I'd say, you know, in the end itself, it was a lot of work, you know, for the team, a lot of bandwidth for us, it was a ultimate test I think that we've been waiting for, right? So all the systems we built around supply chain resiliency, looking at a customer's, how they're ordering, all that type of stuff, spot buying, holding inventory, all that type of stuff, all those tests that kind of built us into a company that could manage this, right? 55:51 So could we use our strategic sourcing to hold on to margin or maybe as an opportunity to where our competitors were having to raise prices us not have to do that? Could we gain share where there are tariffs on import product or our competitors, You know, if other competitors could get supply, you know, could we go use this an opportunity to go in and pull share? 56:15 I think this this upending is still evolving, but there is a real push to reassure domestic supply chains. People have said that for years and it's never, it's been, it's been, it's been talking hasn't been action in the past, but I now we're getting a lot of receptiveness from prospects that we hadn't heard from for years because they're looking to get more predictable supply, you know, predictability on costs, reduce their storage fees and things like that. 56:46 And honestly, keep jobs at home is a is has become an important point for both Americans and Canadians. So you know, I'm excited to see where this one lands. It did require a lot of blocking and tackling, but I mean it was a test of our, our, I believe our new resilience does it at all color. 57:07 Speaker 1 The way you think about the merits and risks of like an international supply chain or an international customer base, or is this just like an inescapable cost of doing business when you have either of those two things in a company? 57:23 Speaker 2 Yeah. I, I think now we're in a place where we've got redundant supply for ourselves. So when there were tariffs here or there, we can adapt. We've got supply in North America, we've got supply in Asia. 57:39 So I mean, it just means you've got to be smarter about the supply chain, more resilient, right? I think when we bought the business, it was done a lot more casually and again, a little bit more hero ball where somebody was like, I can get a good spot buy price. Now we have a raw material tracker that comes out every month, which helps us, tells us what the forecast is for the next several months on individual items. 58:04 If it's going to spike, we start reaching out to our diversified supply chain. You know, I think that's part of the system we're talking about. But diversification, I guess is, is the answer. And part of diversification is international sourcing. 58:23 Yeah, OK. So let's move on from. 58:27 Speaker 1 Some of the more acute gut punches, although maybe there's gut punches contained within the following topic, which is Bolt On's acquisitions, integrations, etcetera. At the beginning of our conversation, I think you said 5 Bolt On acquisitions since acquiring the company six years ago. 58:42 Before we get into the details of all of that fast or pardon me, rewind to 2019-2020 when you before you had bought this were add on acquisitions. 58:55 Speaker 2 A meaningful. 58:55 Speaker 1 Part of your original investment thesis, Yes, so. 59:00 Speaker 2 Day one, when we acquired, we acquired Orion Rope Works and Canada Cordage together. They were sister companies. So those are our two first acquisitions. We've done 3 bolt ONS on top of that. So it's five in total. We we had one essentially lined up and we did close on that within six months of our first, you know, our first primary acquisitions. 59:25 OK, So it was part of the original investment thesis and your. 59:28 Speaker 1 First bolt on was made six months after the platform acquired, correct? Correct, right. So that is. 59:34 Speaker 2 A little bit of us being gunslingers again, we don't like this in our hands. We see opportunities and we feel like we can move fast and figure it out. Yeah, I part of this, you know why? Why roll up the rope space, I guess is a logical question. 59:50 You know, you wouldn't think it, but there are many subscale cordage manufacturers across North America. These guys started up in the 70s, eighties, 90s somewhere. Hobby shops, some developed niche products to serve a few regional customers. 1:00:07 Many didn't make it and the few that did grew to, you know, low 7 figures in revenue. They were, you know. Sticky. It was sticky business because it wasn't worth it for a customer to to shift right again. 1:00:24 A low part of the cost bar, criticality of failure after after overhead and owner salaries. They're not enormously profitable, but they're nice lifestyle businesses. Hard for an independent sponsor or someone else to buy because, you know, did. 1:00:42 They're not making a ton of money. It is a lifestyle business with the way that they operate. Kids often don't want to go and run their dad's robe company. Right. But. But you're bringing Orion and, you know, Yeah. Unless, unless their names are Arisha Martin, right. 1:00:58 You're bringing Orion. And we've got these two large facilities with excess capacity, excess space, North American wide distribution, a good name, right, in domestic cordage, existing back office. We can just absorb these, right? And you know, we think naively we've got skilled operators. 1:01:17 These guys can do this in their sleep. We're I mean, those guys are doing this in Franklin, TN. Of course we can do this in our plant. And it has it did prove to be a challenge, right? There's a, a little bit of, you know, consulting or private equity arrogance to that. 1:01:37 All those guys are doing that in rural Georgia. Of course we can do it. The challenge baked into that is that in those niche manufacturing companies, their production process has a ton of weird tribal knowledge and quirky manufacturing processes baked into it that is built through tinkering and adapting over the course of decades. 1:02:02 And you cannot learn that stuff by just watching a guy make things unless you shadow them for truly months. Because some stuff comes up here, some stuff comes up there. Weird example. The one we acquired, one we acquired last year out of out of rural Georgia. 1:02:21 There was an operator who, unbeknownst to us, lived in the plant. No kidding. So he was like. 1:02:27 Speaker 1 You know a key operator had been. 1:02:28 Speaker 2 There a while, he got divorced and he was going to move and the owner was like, I can't lose you come, I'm going to come live in the plant. We're going to change the office upstairs to your apartment. And he was just a great operator. And because of that, you know, it takes us, it took us at the beginning, sorry, 1 1/2, two times as many operators as it did them because the throughput was just very different on how those guys were able to do things because they've been doing it for decades. 1:02:56 So you know, it ate up our margins at the beginning doing those integrations. So I mean a ton of lessons learned there on bolt ONS and not as easy as you think, right? There are a lot of lessons you can't learn from the outside. But to our point from before, how do you take a lesson and then solve it permanently? 1:03:17 You know what, what we've done with that is at first what started off as a program to get gross margins up to where that we expected them to be for these bolt on integrations. We kind of now have this full newly designed operating system for manufacturing using just a ton of data where every week we get a report on throughput effectiveness for every operator, machine cell department company. 1:03:44 There's a gross margin SWAT team that meet one meets once a week and looks at every cell and says, how's this going? How's this progressing? What's the next continuous improvement opportunity? And I mean, these are things you probably could have had in the company before, but it took this challenge for us to wake up and say, OK, we're going to solve this seriously and we got to solve it permanently. 1:04:04 Yeah. Yeah. I I love that idea. 1:04:06 Speaker 1 Of like, I think you used the word arrogance. I often say like the person who founded the company on which you've bet the next 10 years of your life is probably not as unsophisticated as you've been led to believe. That was certainly my experience. 1:04:22 Sounds like it was yours. Let me ask you a question about pacing, though, because you said you bought your first come first bolt on six months after you bought the platform. So admittedly, I'm probably more, I don't know, conservative than the average bear. So if an entrepreneur brought that opportunity to me, I would probably say that's too fast. 1:04:42 Why don't you run the business for 12 or 18 months, figure out where all the bodies are buried, and then go by your first one? Given that you actually lived through a situation that I would have deemed to be too fast sitting in the Nosebleed seats, tell me about your response to my gut reaction. 1:05:00 Accurate. Inaccurate. Somewhere in between. Yeah. I. 1:05:04 Speaker 2 Would say. I would say accurate not because for us it worked out well, the timing worked out well. But to our original point, there's a lot of externality exposure in businesses when you and when you buy them. 1:05:21 You can't diligence that. So you don't know what's going to happen and when it's going to happen. If we had had that supply chain crisis or tariffs or something like that happened while we were trying to do this bolt on, that would have been very tough. Fortunately for us, we were in that period where demand held up, raw material prices were low, gross margins were good. 1:05:44 So we had quite a bit of buffer when we acquired that business. I think that also talked us into and you know, allowed us to convince the board that we're doing really well. Ebitda's growing, demand's growing. OK, let's go to the next one. 1:06:01 Our plan at that time was not by you know a bolt on and shut it down and do an integration which would have been a lot. I think at that time it would have been too much. But what we did do is we bought that business and we continue to run it as the past owner had remotely and we maintained that business which was out in Richmond, BC and we kept that there for four years really running as well as it had run, learning it and then finally making the decision of integrating into our primary facility. 1:06:37 So it was more of a secondary side investment that we could continue to run. It wasn't large enough to be too much of A distraction and you know, we thought we could get our hands on it and and that situation, it worked out well. Can you talk about some of the benefits? 1:06:53 Speaker 1 That you guys have received as a result of your acquisitive growth strategy. I mean, obviously there's been organic growth, but obviously there's been inorganic growth as well. So specific to that inorganic growth piece, can you just talk about like what benefits have accrued to the company as a result of buying some other related companies? 1:07:12 And the reason why I ask that is because, as you know, as somebody who's been in the search ecosystem for a long time, roll ups are like the new shiny toy in our ecosystem. Recently, particularly through the use of committed capital vehicles, I tend to be reasonably skeptical of these things. 1:07:27 Like I think it's, you know, being 10% bigger doesn't necessarily mean you're 50% better, though I do see a lot of decks that seem to suggest that. Talk to us from your real life experience, what benefits have accrued to you as a result of this inorganic growth strategy? 1:07:46 Yes, absolutely. 1:07:47 Speaker 2 So, you know, we mentioned before business had been pretty flat when we bought it, so we had to find ways to grow. What's nice about those smaller bolt ONS, and maybe this is not a translatable lesson, but it was true for us if those guys were really hamstrung by capacity. 1:08:08 You've got solo operator, he's got his eight. So so you know, entrepreneur, he's got his eight operators. He can only make so much. In many of those cases, they're bursting at the seams. They are turning away orders, right, because they have a niche product over time, they just haven't reinvested in the business because it is truly lifestyle business. 1:08:33 So by acquiring those ones, we've found a growth lever, right? So we bring them into our business and while it takes twice as long and cost twice as much as we anticipate it's going to in the end. 1:08:50 Now we've got this engine that we could grow from and we can take this product and you know, get the revenue synergies if you want to use the consulting language of take that product and apply to our book, right? One of those is working out very well. The one that we acquired last year, I mean once we're at full scale production, many of our customers buy these from other people and if we offered it, we would get them to move immediately. 1:09:16 So there's a ton of opportunity in that one. And the, you know, the third one that we integrated last year as well, very, very unique product. And I think there's a ton of opportunity to gain interesting new share that we hadn't had in the in the past. 1:09:33 So I mean, there's, there's, there's growth potential. And then I mean, you're also buying them in this case, Steve for pretty great prices. Yeah, given that they've got depressed EBITDA from overhead and then you're also putting a lower multiple on that EBITDA. Yeah, yeah. 1:09:49 And that that. 1:09:50 Speaker 1 Like rate card increase benefit is a very real one. One of My Portfolio companies, we just did an add on, we bought a similar company selling similar services to similar customers and both benefited from high switching costs, but their prices just happened to be 20% lower than ours. 1:10:08 And you know, four years ago when we first bought it, we under did the price increase. We did the same. We, we made the same mistake that you made, same mistake that I made. So now we are more confident in our pricing power. So basically overnight we just moved their prices to our prices. We didn't lose a single customer and there's a 20% uplift that bought down your multiple the first week that you owned it. 1:10:29 Yeah, and. 1:10:30 Speaker 2 You know, I on that one, Steve, I go back and forth. Maybe it's because I, I don't want to learn lessons. Who knows there The benefit of raising earlier is you know you get some additional debt pay down, maybe you get some cash to fund growth. 1:10:47 But if you get to where you get and it takes a little bit longer and it was slightly less risky because you understood the business and got more comfort around the price. I'm talking myself into it. See if you're right, we should have raised price. We both know so OK, so we just. 1:11:02 Speaker 1 Articulated a very real benefit that we've seen in your experience than in mine. What are some of the what was unexpectedly hard about acquiring and integrating these companies? What would Rishi of 2020 be surprised to know was so darn difficult about inorganic growth? 1:11:25 Yeah. 1:11:26 Speaker 2 Particularly in manufacturing, if you're doing an integration, these niche manufacturing companies, they, there are lessons that you just cannot learn from the outside on how to make things right. And I could give you dozens of them, right where there was one guy in one of the plants who was super tall. 1:11:48 Because of that, he worked in one of the departments which allowed him to do go up and go down pretty quickly. Odd. You know, one of the steps required spraying mineral water on the fiber so that it didn't stick and break. 1:12:03 Nobody knew any of this stuff there. And there are dozens of those things. So when you're acquiring, know that you're going to have to learn these lessons that these guys took decades to learn and you're going to have to learn them fast. Maybe if you get a chance, go and job shadow for have an engineer job shadow for weeks. 1:12:22 Maybe bring one of the operators from there and have them come and work with you for three months to teach you those lessons. But you know, it, it is harder than it looks. And you just got to be very humble that you know, you're you're not going to be able to solve it. 1:12:41 We're not, we're not better than them. They're very good. And that business has existed for decades for a reason, Right? That's fine. OK, so let's bring the conversation. 1:12:54 Speaker 1 To the present we talked about in 2020 had been run by an owner who had owned it for a very considerable period of time. I think you said around 20 million revenue wasn't growing all that much. You had six years of gut punch after gut punch after gut punch. 1:13:10 We talked about a business that's hard to kill. Sounds like you've got one. Talk about what? 1:13:17 Speaker 2 Does the business look? 1:13:18 Speaker 1 Like today, even in spite of the fact that you were dealt all of these tricky hands. Yeah. 1:13:26 Speaker 2 So I'd say the biggest thing was mostly, mostly timing right. You get you get punched with this and it causes team and you to shift your focus to handling that situation rather than the growth. But I mean on, I mean, if I talk about it on our on, on the face, you know, we were mid, mid 20s in revenue when we bought. 1:13:47 And I mean we're on track. We've landed a a big customer here that's running right now and when that's all in the business, we're going to be beating base case revenue. So we'll be ahead of where we were predicting the SIM with our new OPS program. 1:14:03 Once we get gross margins up to where I believe they need to be in these integrations, you know, we're on a path to beat on GM and EBITDA as well. So we we got to where we wanted to. It was not a linear path, right, as we just talked about. 1:14:20 I mean, we've got a ton of other stories that we haven't covered. And if you or any of your listeners wants to grab a beer and talk war stories, I'm happy to do it. But wasn't a linear path. But we, I mean, we got to where we wanted to. I would say the other point is I think we underestimated the importance of having a really good system in a business like this. 1:14:43 And now we have built a very good system that was not in the SIM, right? That was an unknown to us. So I mean, if we talk about how we got there, you know, we, we rebranded, it's fully Orion Cordage. We've built a hunting engine now for organic growth. 1:15:00 When we bought the company, there was not even ACRM, right? There was account managers who would manage their territory and keep their customers happy and handle inbound requests when people truly called them because of word of mouth. 1:15:16 But now we've got outbound marketing. We presented trade shows, obviously, we do pipeline tracking and very detailed customer reviews and things like that, all the basic business hygiene stuff. We've developed a few new product lines which I think are going to be the growth engine for years to come. 1:15:33 I'll give you a small cocktail party story. I've stayed out of rope for the most part, but I'm going to go on. Let's do it. I think it's fine. So yeah, even though rope is is older than the wheel, there is still innovation in rope, right? 1:15:49 So general you make rope out of nylon, polyester, polypropylene, old world synthetics. We're now making rope out of high modulus polyethylene. So if you think about it, this is like a Kevlar type material. We can you make bulletproof vests out of this. 1:16:05 So that fiber is a, you know, a very modern technical fiber. It's stronger than steel and an eighth of the weight. So when you make rope out of it, it is replacing chain and steel wire because you know it can lift 100,000 lbs or it's got a tensile strength of 100,000 lbs. 1:16:24 But it's so light that it floats dramatically reduced, reducing injuries, making it much easier to handle. It lasts way longer because steel and wire abrade, chain and wire abrade against itself and rust and this stuff. 1:16:40 You know when they did an exercise where they put it on a big mooring vessel, wrote the chain you have to replace every three to five years. This I think in some cases lasted longer than the boat, right? So it is a market because it's taking share from chain and wire that's growing at high single digits and we did not have a place in this market. 1:17:01 So we're now on a push to earn our fair share. We've developed the catalog and it's been growing very nicely over the last two years. And I think it's a growth engine for the future. But cocktail party story for you, there's rope that's replacing chain and wire. It's crazy to me to believe. 1:17:16 I'll bring you to the factory one day and you can have a look at it. I love that. So I I love that and. 1:17:24 Speaker 1 It led to a question. 1:17:25 Speaker 2 That I wasn't planning. 1:17:26 Speaker 1 On asking you, but I feel like I have to now because I what I heard behind your answer is a passion for the product that you're selling. So I want to ask you about this concept of passion because in our little ecosystem, this is a recurring FAQA lot of people say with the best of intentions, go buy a business that you're passionate about. 1:17:46 Make sure you're passionate about the product or service. I don't know if that's the right. 1:17:52 Speaker 2 Question to be. 1:17:53 Speaker 1 Asking because I sold software to trucking companies. Guess what? I was not passionate about software. I was not passionate and am not passionate about trucking and logistics, but I was passionate about entrepreneurship. I was passionate about the idea of building a business. I was passionate about control and independence and freedom and autonomy and making decisions that others could rely on. 1:18:14 Like I was passionate about that stuff. It sounds to me like you've developed a passion. 1:18:20 Speaker 2 For the. 1:18:21 Speaker 1 Product that you're selling. So if some based on your experience, if some young entrepreneur came to you and said Rishi, I've been told to buy a business that I'm passionate about, what would you say to that person? 1:18:35 Speaker 2 Yeah. I mean very interesting question. I think passion, purpose, mission driven, all those kind of things, they can mean many things. I think the value is, you know, you need to have a, a, a vision or a beautiful destination that you're changing, that you're chasing because during hard times, you just need something that's going to uplift you. 1:19:02 And during good times, you need something that's going to help rally the team in some cases. I mean, you know, now all these tech companies and software companies, their vision is, ah, we're changing the world, all that type of stuff. What I found for ourselves in this business, and I mean the, I guess the root point is you got to find your passion in the business. 1:19:20 You have to do it. You have to find something. And I mean, it came from that thing that I talked about earlier on, right? I sat down and I honestly, I struggled at the beginning. I said, what, why do I love this? What do I care about here? And I care what I learned to develop a passion for is the company, right, As as itself, the people and the business and the legacy, right. 1:19:46 I mean, there is a story that we can tell around Orion being 100 and now 170 years old, serving the people who make the world work. Yeah, right. Yeah. We did it during our first speech. Power, The power we use, the building, the bridges we drive on, the food we eat. 1:20:03 We did that and by having that vision. And just sticking firmly to it and wanting to see Orion win and wanting to see my people succeed. I mean, that is that absolutely what gets me up in the morning and gets me past the, the obstacles and the challenges, right? 1:20:24 I mean, that's kind of what being an entrepreneur is, right? You got to love the business, love the process, right? And I mean, looking back now, I'm, I'm, I'm so proud of the people on the team and how they've grown. You know, you see them as a, as an entity that you can have, you know, passion and pride. 1:20:44 Speaker 1 Over yeah 1 concluding question for you. Almost all of the. 1:20:52 Speaker 2 Challenges that we discussed. 1:20:53 Speaker 1 Today somewhere in your answer, you said something to the effect of I couldn't have known this, I couldn't have prepared for this. I couldn't have diligence this away. Another FAQ that I get is, hey, I've never been ACEO before. 1:21:08 How can I prepare if I can prepare at all? In light of your experience and in light of all the gut punches that you guys have had to navigate as a team, I'm curious, what would your answer be to that question? 1:21:23 I think it's. 1:21:26 Speaker 2 Twofold upfront during diligence, find people who've lived that experience as as closely as matching as possible to people who've been in the same industry, serve the same customers, same geography, all that type of stuff. 1:21:44 I mean, your, your podcast and thank you for doing this is great for that. You're passing the wisdom of the community to everyone. But try and find some people, test the business with them, ask them what am I not thinking about? What am I not thinking about, what am I not thinking about until you get to the root and you have your laundry list of things that you should be prepared for, right? 1:22:05 So that's .1. And then I mean .2, as we know is prepared to be unprepared. Things are going to happen. You know, there is this great saying that I love the obstacle is the way, right? It just, there's no linear direct path. 1:22:23 And the guys who do find one, it's very easy for them to screw those guys. But you know, generally there are going to be ups and downs. And if you believe that the obstacle is the path, you know every time you have to make a left turn or a right turn, you are learning something. 1:22:41 As an operator, your business is learning something. And if you can consolidate into a lesson or a system, I mean, the business is better, right? I, you know, one of our, our board members, Ryan Robinson, you probably met him, he said at one point when we had a big challenge and you know, and we were down in the dumps for it. 1:23:03 He said all you can do is think about what world do you have to build so that you're happy that this challenge occurred. How can you use this so that you're better off And I when when we see those challenges, we that's that's how I that's how I view them now. 1:23:19 So I mean, talk to a guy upfront wisdom of the community. Prepare to be unprepared. Yeah, love it, I. 1:23:27 Speaker 1 This is probably clunky wording, but I often say entrepreneurs are superheroes. And I think people who have never run a company before, who have never been an entrepreneur, not only do they not understand that, they almost can't be expected to understand that. And hopefully our discussion today, which is the tip of the iceberg in terms of the challenges that you faced, I faced every CEO faces starts to give people like a little bit of a taste of what leadership really looks like. 1:23:59 And it makes me feel even stronger today than I was an hour and a half ago. But the fact that entrepreneurs are superheroes, and I think you're one of them. So I appreciate you joining us today. Thank you so much for your time. 1:24:09 Speaker 2 And again, Steve, thank you for everything you're doing for the community. I I appreciate it and I've learned a lot from you as well.