Colin and Brent discuss buying Scout, the leading dog walking and pet sitting software.
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All right. Hello and welcome back. This is Colin Keeley here, and I'm Brent Sanders. We are two guys buying and building wonderful internet companies. Yes. And we acquired a new company. Yeah. Yeah. We need sound effects for this. Ding, ding, ding. We are progressing. I'm really proud to announce that we acquired, Scout for Pets, which is a, what we consider the premier dog walker software or dog walking software.
So this is software within our, I don't wanna call it a thesis, but our model, which is gonna, after B2B sas. So we're selling two dog walkers that usually have more than one dog walker as, as part of their organization, and it allows them to do scheduling, billing appointments, everyth. Related to their job and do it in a really efficient way.
So, we closed what, a week, a week and a half ago or something like that? Yeah, about a week ago. So it's classic vertical market software. So it's everything you need to run, like a small dog walking business, small to medium size dog walking business. I'd say most of 'em have a number of walkers.
And just to clarify, the name is Scout. So our customer service guy keeps saying it's scout for pets. Oh, the name's. Name? Scout. Scout. Yeah. Sorry. We haven't gotten, we haven't had the brand meeting yet. Yeah. So I, on this episode, I think we just want to, should we start from the beginning or we should we start at the end and work backwards?
Probably from the beginning. Yeah, I wrote the timeline out, so let me bring it up. We just talk through it so this is like the simplified timeline. So everyone asks where you found it. So this one was found on micro acquire. So day one I sent a message, no response.
Day three, no response, followed up with an email. Day four, no response followed up again. So this is three contacts, just for perspective. And then day five got the first response, two days. Wow. I, I had no idea there were, cuz I remember seeing it in, in like bumping it and being like, Hey, didn't we talk about this?
And I, I, I don't usually read the micro choir emails. I get 'em every day, Which by the way, They do a really good job of like keeping that in front of your face and I remember I had no idea that you reached out multiple times. Okay, so persistence pays. Yeah. So this is something that's, I think it's becoming more common on micro aquire is like, And I think they're trying to do this is like vet sellers more cuz they just get like an a monster amount, like a tsunami of inbound and people have no idea whether it's legit or not.
Yeah. And James said basically he had some bad experiences and he is just like, Yeah, I'm gonna keep the listing up, but I'm just not interested in selling. So he said eventually is like, No, the third one is like, who's this guy? Why does he keep reaching out? And he looked at our website and I looked at my website and he is like, Oh, I kind of like these guys that kind of like what they're up to.
So yeah, it's not, super straightforward. It's not buying something on Amazon. Yeah. Hard to even get a response sometimes. So, after that, We had the first meeting with, it was just me kind of getting the basics out of the way. Second meeting with you as well, tech and product questions.
This is like day 14. Not sure what happened in there, but it was a bit of a delay. And then day 14 we also sent the first offer, which was quickly declined. Day 15, offer decline. And this is a quote, especially regarding the deferred funds. So yeah, that kind of set the tone actually, looking back that it's gonna become an issue later on.
Yeah, and, and so like a little bit about the seller, he is technical, like he had a partner, so this is really cool. I, now that I am hands on on the product, now that we kind of have full access to everything, seeing from a product management perspective, seeing somebody partner with a subject matter expert, so his partner, Rich, I believe.
Ran a dog walking business and they, they were out of Denver, I think both of them at that time and just, we're, we're working on, okay, well what do you need? Like what's, what's the requirements and working on this thing together. And then they opened it up to other people. Other people had this similar working style and pattern that, when you use one of these systems, I don't wanna call it like an expert system, but it's one of those where it's like very prescriptive.
You're gonna use it the scout way and there's no other way to. Adapt it or adopt the, the, the pattern. So it's great if you aren't really sure how to get started and you wanna like kind of hop in. So, it was cool to see the, the kind of integration that he and his partner had. But yeah, going back to the deal, from the get go, we usually structure some form of seller side financing on all of our deals.
And, and yeah, he wasn't having it. So this was two weeks into to kind of talking to him and then I feel like it kind. How long did we wait before making another? No. So just back to that, like some of our favorite founding teams, I'd say is like the industry expert and then like the technical person.
Yeah. And that's like the best recipe to launch these vertical market software. And this is a classic one, one guy actually ran a dog walking, business or pet sitting is what they call it generally. Mm-hmm. , And then a developer. So that was like just a classic situation. But so day 15 we're at, offered declined.
Day 21. We had another call to talk through, offers or like just to talk, basics. And at that point we learned of two previous offers. One which was, higher than ours, initial one, and that was from two guys like us, one technical, one marketing. He really liked it, but it was the first offer he received, so he turned it down.
And then another one, which was from a financial buyer that was much higher. And he turned it down because he didn't like that it was a financial buyer, basically. Hmm. And. And so those were like, that gave us kind of a range and we ended up, the final accepted offer ended up within that range, closer to the higher one.
But throughout this whole time, I was on profit well, and I would get like the daily notifications, like, Oh, went up this, $200 yesterday an mri, $300 anr. So definitely felt, the push to close something here. So that was day 21, day 31. I may have missed some stuff in here, but call the talk through the updated app, in state of the product.
So, throughout this whole time, there's a new version of the app that's in preparation and, getting further and further along. So, day 32, we made another offer. Second offer was made. One thing to hop in there and like the, I remember this now. Yeah, the, the. Thing there was like giving us the, the license to offer more.
Cuz I think our calculus here was like, okay, we we're gonna need to put investment into this to get, this, this new version of the app done. And so can we build a model and a budget and everything that that nets out where we can get all these things done that we still need to. Cuz what I think he had offered is like, hey, I'll, I'll finish the app.
I think there was some idea of like, Hey, if you meet this price, maybe we can, we can work something out where I'll finish the app. I would never wanna do it. Like I don't, I would never do a deal where, there's a deliverable hanging after we, I, I can't even imagine after doing all the legal work we did to then have like some arbitrary kind of vague acceptance criteria around an app getting delivered in a certain amount of time.
And, and mind you, the seller, he's in a position where he has a, a full-time job in addition to this. So like, I didn't wanna tie. To it, but we were trying to gauge like, okay, could we offer a little bit more because this app's further done. So I think he, at that point he did, may have granted some access to both, like run the app like, test flight, but then he might have also add, added some access to the code.
Yeah. Backing up, we maybe should have covered this, earlier, but, so James, the main founder, I guess you'd call him, and like the CEO and CTO kind of running everyth. So dog walking got crushed over Covid. Yeah. So people started walking their own dogs, right? They're working from home. So he, in that time period, I think also had a kid or two and his wife's like, you're, startup that was going well, kind of got crushed.
You should go get a job. So he got a job chief product officer or something at a series A company. And then it recovered, it really recovered post covid. So this whole time he's doing like customer service kind of after hours and like, building features after. Which is brutal, like, and I would say the volume of customer support is 10 times what we have on any other business.
It's constant. And so doing yourself is just anxiety inducing. It's a lot. So back to, we're like a month in, It's a day 32. We made that second offer. 33. We got clarification on the offer. 34 asked for how long the offer was good for. They, so, and the reason they said this is because they took money from a public company.
So a a few hundred thousand, And they wanted to negotiate the debt. So this is an issue when they, have to pay some money back that they fundraised. We said day 35, we said we're flexible. No deadline. Day 36, Request for arbitrary deadline.
We said that. End of the month. Day 49. Finally got another update. Said he's working through the debt situation with his lawyer. Day 54, offer accepted. Asked for an loi, so making progress almost two months. Day 55 LOI sent over. We targeted close for the end of July. Just for perspective, we're at the end of October now.
So, preview for the days ahead. The day 62 lawyers still reviewing said, ready to start DD in a few days. Day 67, they thought that the debt had a right of first refusal, so in theory, the deal was dead. Yeah. Oh, I'm remembering this whole soap opera. Yeah. So the deal, Exactly. So there was this other part that we've, I've kind of blocked outta my mind that that was like, the main thing that was, was blocking us because they, they had this, this other dependency, right?
It wasn't a partner, but it kind of was like a third silent partner that had some implications. So I forget how was that resolved? Like, it was like they, they're gonna have to deal with. , but it wasn't gonna have to be right away. I think that was the, the conclusion. So that was day 67. We found out about that day 69, they actually read the document and figured out right of first refuses bill actually doesn't apply here, so, Okay.
Yeah. Okay. That's where that ended up. I think the whole thing is like they took this debt on from this public company, but I don't think they, the public company had any like rights to information. Yeah. So to my knowledge, they wouldn't even know if he sold, like they would have to. Here's the corporate veil or something like that.
Mm. So I, I really don't know how it settled, but we also, didn't wanna know , where we ended up. It's not really our problem. Day 74, they said they want the debt sit situation figured out. So the deals put on hold indefinitely. Day 84. So we, we did a pretty good job of like just staying in contact.
So we set up another meeting just to update on the product and another potential offer. So day 87, almost three months in, we made a third offer with, more creative financing to get to a larger amount, let's say more creative structuring. That one sat out there for a while. Day 1 0 3, we got a counter, with kind of different payment structure.
Day 1 0 4 was, our. Offer made. So still in between those two other ones that he kind of set is like boundaries of things he's received in the past. Day 1 0 5. One note on this though, like at, during this time, I, it's important I think to, to articulate that our mindset was like that we kind of had, we felt like we had an agreement and every time, he came back with like, ah, like I wanna do.
But I feel like there's a thing. Do you guys have any advice? And like, it was very collaborative and I think he wanted to talk through with us, cuz we, we have some literacy around the space. And but again, we kept saying like, it's really not our, our relationship and we can't really tell you.
Like, you gotta talk to a lawyer. But there was this underlying sense that we had an agreement. Like we, I think we had enough trust in each other that like, hey, this feels like a good. Especially on like the tech and product end. Like we had walked through and done diligence on the products and like, I was really excited about doing this and I, I think we both were mentally getting to the point where we were planning the future together to an extent of like, but there was still this roadblock and, and so I don't wanna make it sound like we were desperate for this deal there.
It felt like we, we had kind of like already. Crested the mountain. We were on the way down during this time because I, I do feel like we were, we were there, but there were these, these landmines that were like in front of us. Like, Okay, well these things could blow the deal up. And like, I don't think we really got into legal at this point, cuz we still didn't wanna incur any, real costs.
I, I don't, I don't recall. Yeah, generally, so just a, like a peak on how we operate. I generally create the lois myself. So we had, lawyers create Loy, in the past, and I just, you replace certain segments. So yeah, no leave was engaged to date, at this point. But, So this is a question on you at this point.
What was your confidence level that we were gonna, acquire this company by the end of the. So we're three months in, right? I was like 65, 70%. I was pretty confident. But shit happens. Like, this is the thing where like so many innumerable amount of things can happen. Get in the way of this. I was, I knew we were gonna get this done at some point.
That was kind of my mindset and that's how I, I still kind of feel even though we're done. But like I knew even with the roadblocks that came up, even if we, right at closing time, got derailed for whatever. Like, we would come back. I knew that we were kind of like the right fit for this. However, we've had situations which we've talked about on the podcast, where other people come in with, all cash and double our o whatever it is.
So that, that does weigh on me and I think we're coming off the heels of that a little bit. And I think we kept meeting him at the middle, like I don't think any other deal where. Bullish on, like most of the ideas, I don't think we would keep coming up because A, the relationship was forming the perspectives into the code and into the product and into the business were, improving every month.
Like things were getting better. So it felt like we were getting a deal each month as MRR was in, in increasing. But yeah, like I, How, how about you? Like where, where were. I was pretty confident. Probably ended up in a similar place to you around 70% likelihood I thought we would get it, but like a longer a deal is out there.
I mean, there's a wooing phase, so that's fine. Right. It's like, you're getting comfortable with each other. I've talked about in the past, it's really hard for a seller to find like, Oh yeah, these guys, I trust them, they're gonna take care of my baby. That matters a lot. But the longer it's out there, it's like you, this seller goes on vacation and is walking on the beach and he is like, you know what?
Goal is, it's like I'm gonna make the best dog walking software ever. , So I, I hate, I hate deals that take too long. I don't like it. Yeah. Like it, yeah. It's an inverse relationship. The number of the days, the, the actual closing, like the ability to close it. So I think that's where, we kept, so you can keep on with the, the timeline cuz it does get much.
Fantastic. We can talk about that. Cause with that is like, the main thing that's on our minds is like, the longer this is out, the worst chance it's gonna get. And then every, every day that goes by, I'm going from like, Hey, we're 90% there. It's every day it's going down a percent or two. Yeah. So we're at a 1 0 5.
So we. He countered with a larger amount. We set basically meet in the middle, which not how you know's, supposed to negotiate, but anyway it worked here cuz it was such real amount. And so we met in the middle, settled on the deal structure and we were, LOI was sent over all good to go, in theory.
And then we got back, pretty extreme red lines from their lawyer. So generally with a loi it's like just, . Alignment of what we're talking about. Yeah. So it's just listing things out. So it's not like we're not negotiating legal words here. Like this is non-binding.
If either of us wait, 60 days or whatever exclusivity is, it's over. So that was unexpected. They also demanded earnest money, which is not something we entertain nor anyone else really should for a deal this size. Not common at all. So that was like our first hint that, oh, this is maybe not a great lawyer to be dealing with on their end.
And like one thing to note there is like, it just felt very much like a commercial real estate attorney. Somebody who, knows corporate law, knows transactions and, and we kept saying this to the seller, and I don't think I, I, after a while we kept saying it was just like pointless to say. We kept saying, Hey, this doesn't feel market.
The first thing we said once we signed the loi though, it's like, Hey, here's our philosophy, which if I paraphrase from the email, I wanted to like spend some time to try to educate or, or even set expectation, like, here's the process that we typically run. We've done this a couple times, here's how we like it to go.
But like overall, we're trying to be fair. Like both sides. We wanna be fair to like, obviously we're gonna negotiate for ourselves and you're gonna negotiate for yourself, but we want do what's fair and we're just shooting for something down the middle. We not trying to like, Tweak the terms because the, the business is in that state.
If it was distressed, if it was, in a different state, that might be appropriate. But, we probably wouldn't come up with that up front and it wouldn't be a, a similar type of closing. And I think from the get go, we immediately kind of put ourselves in like the, the good cop, bad cop from once the LOI was, once we started dealing with legal stuff, I think it was, it was clear.
Brent was gonna be like the, the nurturing like time. And, and by the way, like I felt a lot of empathy for, James. I'll just say really briefly, like I sold my first business was an agency, sold it to a, a venture capital group who, somebody who's done like a dozens of deals and like ready to rip through them.
I wanted to go slow. My attorney wanted to go slow and. Upon retrospect, it was, probably misconstrued as like maybe a weird negotiating tactic or being smarter than I actually was, where I was just like, I don't know. I'm just doing what the attorney says and attorney's jobs are to bring up every way which you're gonna get screwed, which, is a, a precursor to the next what, 30, 40.
Oh man. No, we have two months to go here, , even though there's 60 days we haven't covered yet. Okay. But it's worth mentioning like this offer that was in the loi, and this is how we always operate, is like nothing changed. So like all this APA negotiation, all this like kind of crazy terms that they were trying to insert.
Like we didn't wanna change anything and nor did they really get anything in. Ended up with them getting more money or different payment structures, anything like all that stayed the same. It was more of just like the legal battle of, couple thousand words across like 10 pages or whatever that works out to.
Yeah. So they requested back to, our timeline. They requested that earnest money cuz they wanted to pay off the loan with it early and like try to negotiate. And we replied the next day basically saying, no crazy requests. We're not doing any of this stuff. Crazy requests are my word. Not like the nice guy Brent words.
. And then, you actually said, not me. To be fair. We're not talking about the loan anymore. We're paying you more. Yeah. And we're not doing this. Right. Like, that was, that was a good distinction. And that was like for us to come up in price. I think this is before the LOI was signed. Right. It was like, Hey, we're gonna, we're gonna meet you.
But like, we'd never want to hear about the loan again. Like, because it's, it's just not fair to us. Right. And, and I seller totally understood that. He was like, Yep, got it. I won't mention it. And, it, it came up that one time and then was squashed. It was just like, Hey, we, we're, we're trying to, to get past that thing.
And it's been, it, it had been, now that I'm remembering, it had been months of like this obstacle or landmine in our way and we, we cleared it and then it tried to peak out again and we just said, Hey, Come on. We, we, we don't want to deal with that. That's your, your, your side of the house, your domain. We didn't, Yeah.
We got nothing to do. So this is great. So that was day 1 0 7. We sent that email day 1 0 7 as well. He's like, Okay, gotcha. You Makes sense. Day 1 0 8, immediate next email, he asked for advice on the loan again. So that was hilarious. And then he also asked for like the crazy red lines to be added back in, even after our phone call.
And so what we did, I, I hopped down with, with the phone with them again that night to be like, We don't really negotiate Lois. This is like just alignment of terms. We're not adding, an extra page to this one page LOI document. Yeah. So eventually, we talked 'em down. That's always the best.
It just like, get on the phone instead of being combative by text. And so day 1 0 9 LOI is signed. So we have, at that point, we've got alignment of terms. We know the purchase price, we know the seller financing amount. We know what we're buying from a high level, like where we're gonna do the deal in the us what states, I think from, from a high, maybe not even that, but like, that's it.
Yeah. And that's it. And so then we move to put an APA together, which we have, the one we've used for all the other deals, and use that as a starting. . Yeah. So diligence starts day one, 10 start APA draft same day. Using a previous deal as a base that, had the comments from a previous seller as well.
So it was like a middle of the park APA draft. So 1 16, 6 days later, we sent a draft to their attorney, set the closing date for. I don't know, 15 days from then or something like that. And then about 15 days later we got, very extensive red lines from their lawyer, once again with a new collateral pledge that was longer than the original purchase agreement.
Oh, right. Yes. So again, this, this attorney strikes again with like, and I, I, I defended the attorney over and over saying, it's just his job. It's just his job. But our attorney was like, This is just over lawyering. Like it's, you're creating longer documents so everyone's fees go up. So it just didn't feel.
Great. We shared that with the seller and he's like, Yeah, not into that either. I feel like we got some alignment with him on this stuff of like, Hey, if we can just capture it in a simpler version, like I. We had a good rapport, I think in talking about like, just simplicity. And that's something as being a, a developer, I think we both value.
It's like, hey, you can, you get way more with three lines of code than you will with 15. It's gonna be less to debug, less to deal with. And he totally understands that. And I, that's why I think about legal. It's like if you can be more impactful with one sentence, go with that. That's the succinct is better.
So that was day. Where do we go? ? So we're, we're. We're in. So I'm remembering this now. We're getting closer so I can actually remember what was going on. I got, alright, I got, I gotta know. So day 1, 39, this is signing day, number one where we agreed to sign, we sent over, whatever red lines they had that we agreed to, and then that.
Like noon, I think. James said he was sick and then he wanted, he was going to Hawaii. He wanted to delay closing for three weeks, and we said, maybe, which we knew, like we knew that he was, he told us way in advance, he's going to Hawaii, he's got this plan for ages. And I was freaking out because I'm like, I really don't wanna let this, I think I said, These changes are severe.
This was like a couple days before that point. It was the beginning of that week and I think he was leaving on that Thursday. I think we spoke on Monday or Tuesday. And I, I had said an email like, These are severe changes, and he got kind of freaked out by the word severe. But I said it's severe in the sense that like, we don't wanna be bugging you.
We don't want this to carry over to your vacation. We want you to be, I had just had this thing in my mind where it's like, this guy has been building this thing for seven years or so, and. He's gonna go on vacation with his family and he is gonna get this big fat wire in his bank account. And it's like, that's the, that's the closing experience I wanted him to have.
So I, I got a little carried away with that because I guess it didn't really matter and he didn't seem to care that much. So, but yeah, we got a little baity about this thought. You've scared the crap outta me. It's like he's me walking on the beach and being like, Why should I sell to these schmucks? Like keep this thing for myself.
And yeah, like at that point we had already invested in legal, We had already put tons of time into it and be. Catastrophic if it, it didn't close. So, Backing up a little bit here, like, the way I negotiate and the way I think everyone should is like, kind of everyone put their cards on the table. Like, what's most important to you?
This is what's most important to us. Like, let's find a deal that kind of works for everyone. And so with this final apa, we incorporated all the things that are most important to him. So we gave, a a significant amount, and we got, the kind of the things we wanted. So at this point, I felt like the negotiation was done.
Everyone, kind of made their trade. So this is where I, I sour afterwards with further requests because like, this is classic actually, I had a negotiation class in business school, and it was negotiating this and this guy, So this is how it works, is like you get the, primer, whatever the topic is, and then you go wander around the building and you like find seats and you negotiate against each other, and then you come back to class.
So like you, go sit in chairs, you negotiate, you shake hands, deal's done, then you walk back to class. And this guy, he actually became a venture capitalist. He's venture capitalist today, but I, I'll never deal with him again because he pulled this where we like did our negotiation and then we were walking in the door of the class, which is like the way booth is structured.
It's like downstairs, it's like kind of a far walk back, chitchatting and chitchatting. And we're like walking the door and he is like, Oh, I need, he switched up the offer on me. He's like, You gotta gimme like, 20% more, or I'm not gonna, you sign this. I was like, Dude, we already shook hands like, a hundred paces ago, we're not doing this.
So that is the way I, do things. Like, it's unacceptable to me to like shake hands and then like, Hey, I gotta change a bunch of things on you. So I'll always hold that again, but this is where I differ. So the, the, the points that came up over the next, what, three weeks? Cause so one week was shot cuz we were like, Hey, we're not gonna bug you.
He's like, Yeah, I'm gonna be in Hawaii the second week. I'll be kind of working. Like, we were able to, to circulate a revised document, but everything that happened, like that document was ready to sign. But the attorney kept bringing up these like gotchas and over the next three weeks it was him coming up with ways that the attorney coming up with ways that like, we were not going to do this or not perform that.
And in the end, I don't think anything material got like some, there was like maybe six words that ended up changing over three weeks. Right. Like there was, Am I right on that? Cause I think it was, it was all about, just one area. What happens if we default on the seller side financing? That was like this kind of question of like, Okay, well, the seller side financing represents some percentage of the total equity, the original deal contemplates that you'd get that equity back or, or whatever.
Like in our minds we're like, not pay the seller for financing. Like if that happens, like the business is gonna be shuttered. Like, I, our careers are. We're never doing another deal again. And this business for sure is like something happened, which is where mind, mind goes is the reason we have this seller financing, which is like, okay, you didn't disclose something, it blew up, the servers melted and we can't get a backup.
And all, all ther goes to zero. And even then, like we could probably rebuild, but even still like something absolutely catastrophic that was withheld from diligence or withheld. Us as, as the buyer. So it's almost like that's where there is some risk in seller financing, but that's also where we're able to, to achieve a, a, a price that, that he wanted to, to close at.
So there is a little bit of risk, and I think there was just a, a lot of technicalities around, Okay, well if this doesn't happen, and for us it's like we just didn't even go there. Which, but again, it's, it's a attorney's responsibility to go through that. But they essentially wanted a form of control.
Liquidate the company and like in the end, I think it was just a matter of getting the seller comfortable with like, what is that scenario? How would that look? And then what ended up getting added? I don't, I don't really feel like it was material enough to, like, nothing really changed. I feel like it was just kind of walking through in, in the, on the closing day or the day before the closing.
I remember talking to the seller like, By the way, I. By this time he started emailing me individually. Yes. I calling. All right, I'll go through the timeline. Sounds annoy with me cause it's worth, I'm gonna talk to you. Yeah. So we're day one, 30 something. Day, day 1 47. They request some, like fairly large APA changes.
This is on his vacation. We give in to the reasonable ones and say no on unreasonable ones. They come back with more change. So this request for absolute control. , and then day one fifty three, we had another call to like try to calm 'em down. I made it clear that I was tired of the, additional demands.
I felt like the deal was already done. I didn't appreciate it. And then the next day it's like, okay, I'm just gonna talk with Brent, going for forward here. So is day 1 54? Yeah. What bothered me so much about it is like, these things are kind of zero sum and so negotiation was done and so like continuing to ask for more things kind of had no cost for him.
And we even to some, and then it was just like, it just kept coming. It was like there was just more and more requests for changes and it was a bit of a slippery slope. So, I don't know, maybe we were overly nice or like overly open to his changes, but. So that's day 1 54. Seller tries to only talk with Brent.
Day 1 59. We give in once again, set a closing date for the following day, and then signing day number two, day one 60 seller requests more changes in the morning, once again, and then, Day 1 64 seller signing, day number three, seller requests. Fairly large changes to control and our operating agreement, which was quite a shocking, request and not something I've ever even heard of happening before.
Right. Day 1 65, we compromise and give in to their unreasonable requests by any real standard. Day 1 66, they ask for another change and we give in and they, day 1 67, signing date number four, APA sign money Wired company transferred. So 167 days later. Yeah. And I, I. We would've been a lot further.
It's just a matter of attorney choice. That's the number one thing. Like, and going back to these things you're saying, we gave, gave in, and I might be recalling it, looking at history with rose colored lenses, but I don't really like, these were all things that were, I don't feel like what actually was reflected felt like anything like a big deal.
Right. A lot of this was, trying to find security. Around control of the business if we didn't pay the seller note, like that was the biggest thing. And that's where a lot of the seller had one thing that he want. He wanted to maximize his cash up front and then make sure that the cash that he wasn't getting up front was for sure going to be paid.
It was really important and that was like, and everything else didn't feel like he, I don't feel like he cared about much else other than, Hey, I wanna make sure I'm gonna get the seller financing. On that the day before closing or the day of closing, , we got on the phone like four or five times just to kind of, I, Cause at that point, the reason I think this was taking so long is it was he and I would have a conversation, come to agreement, and then we would go to the attorneys and then they'd be like, But what if this, or what if that?
And I was like, Let, our attorney did a, a, did us a favor and just emailed everybody on that last day and was like, Hey, we're going around in circles a little bit. Let's just, here's what we're proposing, James and. Talk and I think at the end, like they agreed to terms that were similar if not the, the same as they weren't too dissimilar from where they started.
And it was, it was just coming down to a matter of trust. Like that was the last piece that I think we didn't earn that trust until spending enough time. I mean, my conversations, they were just like open brain line of thought. Okay, let's walk through together. What happens if we don't pay the seller note?
What's the situation? How much control will you have on the, the corporation on the business? And I think what they were trying to do is start down that path of like, okay, now let's define all those legal terms. And I was just saying it's like it's, that's a whole other thing that. Would, it would take months and your legal bills are gonna be huge.
So we just need to kind of come up with high level terms that we can agree on. But the main thing you're gonna have to do is like, trust that, not trust that like, Oh, we're gonna pay you, but like trust that we're gonna work in your best interest. If for some reason, and, and this is where we went, we're like, if I died, if I got hit by a car and that's a could happen, Colin could die.
I could die. These are. Kind of situations that can occur that are catastrophic, that would result in him not getting the seller financing or a disruption in that. And it's like, if that happens, here's what you can reasonably expect. And so we just went down that and maybe spent an hour out on, in, in a, in total, in these like 15 minute calls going through that.
And I think just exhausting ourselves and being like, Okay, well we just have to leave some up that like we're gonna act in good. And both sides are gonna act in good faith. And like, I think had we gotten to that a little bit sooner, maybe it would've been less, but I, I really do think this attorney was doing these, like throwing grenades at him.
But like, but what if this, then you'll have no control. You're not gonna get this. Like, it's just a tough thing to, you're taking risk with a seller note, but you're also getting a higher price. So , I think he, he did a fine job. Like articulating that and his discomfort around that.
But then, it's hard to expect a seller to find a good attorney cuz they don't really have these people lined up unless they've done it two or three times already. Yeah. I mean that's kind of where this whole thing went wrong. I think it's kind of a paranoid seller is the, way of saying it.
And then attorney that is definitely inexperienced in this exact type of deal, he's like a larger real estate attorney. So I. What do you think we could have done better? Or do you think any of this, was preventable? I, he asked very early on for deadlines, and I think, there is a chance that you blow the deal up because a deadline gets missed.
But I think putting it on rails, I noticed FE does this sometimes they put a nice schedule together of like, here's where we expect to be. Yeah. And if we're flagging, like we need to. Escalate this in a way. And I think we never did a good job. We were always like, Hey, you're the seller. Let us know.
Like we can't tell you. I think we didn't ever want to put an ultimatum out there cuz we really wanted the deal done. And again, we kept seeing the, the business improve. And so, I think that would've been, playing a little bit harder ball earlier. I think the other thing that would've. Helpful is like, he's in Philly, I'm in Cleveland, you're in Chicago.
We should have gotten together. Yeah. That would've been a way to build some trust and like, I think it's like we've never met him and we've never met anyone else that we bought a business from, but I think in some cases like this, when it's the bootstrap founder who's brought this thing where, where it is, I think meeting people is, is really important.
Yeah. It's probably something we should think about doing. My other idea is of what we could have done better, I thought we could have explained recourse if things went poorly a little better. Like I think we could have more of an educational component to this. And just like explaining the basics to folks.
It felt like maybe his, his attorney didn't do that at all and we kind of missed an opportunity there to kind of take the reins and explain things. Yeah. yeah. This is something we've talked about in the past of like, can you just recommend better attorneys to folks? I think, yeah. Gotta send micro require or something like that.
Trusted attorneys, we could have introduced them to like previous sellers that have worked with us in the past, just to be like, Hey, we worked with these guys. Talk to them, you know about seller financing. Talk to them about the whole experience with us and what happened to companies after. And then we'll podcast about the whole thing after.
Yeah. , hopefully like this is not received as like us griping about it. I think it's the intention of, of having this is one for us to do a postmortem, but two for the audience at large to like, hear what, what is an actual deal, How does it go? And they're not all perfect, like, we think we're good at this.
I, you could somebody have come in and closed it, hardball closing in in 15 days. Maybe, but like, keep in mind like we're not working with a, a fat stack of cash. Like that's where I think we have the desire to, to have funds at the ready, to be able to close things faster. We're still asking for seller side, we're asking for, for a lot, in all fairness.
Like we're asking, we're paying a price, but then we're also, making this stuff. By rubbing two nickles together, frankly. so that's standard though. So seller financing is in like 90% of small deals. And there should be some risk on their side. So like making it a situation where the risk is basically zero, kind of negates some of the purpose of seller financing.
Yeah. Of like, we want them to be kind of on the hook. Like if the business crashes and burns, we kind of want, them to not be incentivized for that to happen. We want them to help us. So like taking away all, I mean, we gave them some teeth and then we just kept giving 'em teeth and teeth and teeth to our eventual detriment.
Like, I, I don't think there's any real chance that we don't pay the seller financing and it's gonna matter. Yeah. But there are costs, there are real downside costs for us of giving, giving, giving. I also like legal costs. Yeah. No legal costs as well. I also want to, I don't know how you ever get there.
We've talked about in the past of just. This is the APA contract. We've used this for like the last 10 deals. Your inexperienced lawyer isn't gonna dictate the terms like, this is set, I, I want to be play harder ball. But it's like, we wanted this company, we kept giving in little things that didn't really matter.
I don't know. This is something I could talk about. I feel like on every podcast, I don't know what the solution is, but it's a, a real irri. Yeah, I, I think that there's something like Michael require, could do that. We talk about this a lot. It's like, and I think they're working on it is like a transaction pipeline that they could put you on where it's like, it could be escrow, right?
Honestly, like I think that's what, I don't really want to do escrow or in all these deals and it's a pain. But like, I think there are some things that are, if there's a third party that's trusted, could totally smooth this stuff out cuz it's. It's not even the legal fees. Like our attorney wasn't happy doing all this stuff.
Like she doesn't wanna do it. Like, she's like, Ugh, this stuff keeps coming up. And that the other attorney, he's trying to do his best to not, to, or to protect his, his client. But, it's just, putting it on rails would, would certainly help put it on like a more, more like, here are the, the milestones, here are the things that we will cover.
Here's the point at which we will cover them. But again, every, every business seems to be a bit of a snowflake. Yeah, I think you have a very nice interpretation of his attorney. I think he was clearly racking up fees on his end, and I think all attorneys do, like if you let 'em talk, I mean they're paid by the hour.
Like what do you think the incentives say to do? It's like negotiate to that time mean that's, There is no attorney that will disagree with that. My other thought in something I wanna do better next time is, like I kept saying, or we kept saying, this isn't market. Like, we're not gonna entertain this stuff.
And you could bring like there's stats on what is market like, what percent of deals have working capital adjustments, what percent of deals have seller financing? So just bring in those reports and even like, I actually posted this question to Twitter of like, how do you help through a bad opposing attorney?
And it's you basically, you. Show them how other deals are done. Yeah. And support that all with facts. So that's something I wanna do better next time of like, and James actually said this with like Colin's word saying this isn't market is in gospel and our attorney has to look it up every time, which is a bit of a clue that their attorney, didn't know what market was.
Yeah. He just was like, had to go and figure it out as well. Yeah. I mean, if you were to be able to look at these and say, Hey, here's what typical terms. Even if it's like anecdotal consensus across attorneys, that's valuable. Like that's, we use that, that's our, our benchmark. We're not trying to do anything weird.
We're just trying to not get kind of played on a, on a, on a deal or get disproportionate terms for, for something. So, yeah, I don't know. The, the, the ethos is the same. We're trying to go down the middle and be fair, and it's like we're, I'm more concerned about like, working on the business than working on the, the apa, but I think that's why we do what we.
Yeah. So it's all done now. Business is great. Excited. It's over. It's just like, yeah. Throwing up, figuring out guardrails to make it not as painful in the future. Cool. Anything else you wanted to cover? No, I gotta run, I gotta go to my next meeting. Oh, that's right. Yeah. Okay. Long one. All right. Take care everyone.
Thanks for listening and watching. Right. Bye-Bye.