And look, I think oftentimes what I found in hindsight is that business owners that roll equity are used to a certain lifestyle and oftentimes the seller note is frowned upon because they aren't getting their cash out up front.
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However, if you kind of tearing them down back to a traditional base salary plus bonus that is market related, that cash salary to them is often a lot lower than what they were pulling out before the seller note and paying that back over time, that kind of bridges the gap on the cash flow for them.
Yeah, so this is something that I'll hear from time to time that one way of, of framing the seller notice maybe more palatable for more appealing to the seller, is that it's going to give them an income stream and they're probably used to high income from their years of ownership and this is a way to get that. So it's not all Bad having the enterprise value delivered piecemeal over the years.
Right, let's just, let me just repeat some of this back for the audience's sake. Justus that this is a great takedown. Thank you so much for the transparency.
The. So you're having trouble filling the debt piece of the deal. And so what you do is you go back to the investor, your equity investors, and you say, why don't you guys put in, lend me money. So for the debt piece that I can't fill, it'll be a different instrument to your equity and it'll be 12% versus what I'm getting out on the market at 15% and why.
And, and, and, and so you ended up actually iterating on that to get to the convertible note. We'll double click on that in a second. But why were they willing to do.
12% if you're telling them that the market people who do this, do this professionally say the price should be 15. Why were they willing to sell debt to you for market?
Look, I think, I think some of it comes down to pragmatism and, and knowing that they, they have the downside protection of, you know, being on the board and, and having certain, you know, legal rights that somewhat de. Risk their investment. You know, but a lot of it came down to just, you know, pragmatism of, you know, if you are an equity investor, you should be thinking like I am.
Yes, why would I go, why would I go out to the market and you know, put, put an onerous, onerous clip on, on the business? And so it kind of forces you to speak from both sides of your mouth. And then, you know, it's a, it's a risk adjusted kind of call at that point.
A risk adjusted. Yeah, a risk adjusted call. Gotcha. Great. And then, and then. So it was Nicholas James, right, the previous guest in Acquiring Minds, who's not only a previous guest but now my in Mines Capital. So work with him very closely.
Who proposed to you the convertible note? So define a convertible note and explain why it was the ultimate solution here.
Right. So the convertible note works like a debt debt piece. However, if that debt is not repaid within a certain period of time, the outstanding balance of that converts into equity at a preordained price. The convertible note solves two problems there where obviously this is all based on the precedent that you hope the business does well in that they could have the cash flow to repay that debt.
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