But you know, what has made it successful in 2008? Well, it wasn't in the middle of a big LBO at that time, so it could survive. Right. And so I was very sensitive that I was putting some stress on the company.
Acquiring Minds
SBA Deal Structuring to Manage Risk in a Cyclical Industry
Excerpts · 483 segments · ~1:44:03 long
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And again, you know, it's, it's within the parameters, but you got to recognize what you're doing from that capital structure perspective. So that was one element. You know, the headline news was how much debt are you putting on the business?
And that mattered a of lot, lot. And I didn't take it down to the SBA minimums of 10% equity, you know, call it, whether you want to call that over equitizing it or just calling it, you know, a reasonable amount of equity based on what you thought the business needed. You know, worked really hard on the working capital cycle because there is some seasonality in construction.
So how do you make sure that you're managing the acquisition and how much, how much cash you need at the bank because you're coming right at the end of the busy season and doing that in a fair way to both buyer and seller. I mean, that, that took some time for us to figure out. That was the other element that I would say is big, you know, as you're managing the risk is the working capital.
And then the third element is really a post, call it a post close, you know, post close item, which is don't rock the boat. You know, and so I, you know, from day one, it was really important to me that we talked about. There are a lot of things that aren't changing, right?
Your salary yesterday is. Your salary today. Your benefits yesterday are. Your benefits today are.
The way that we go to market isn't changing. It was not important to me to get out in front of every single customer because in some cases the prior owner has never worked directly with the customers. So why do I need to insert myself in that relationship when it's, when it's working great now, by the way, there were other customers that we had a lunch with very quickly and made sure to hand off…
But, you know, those were some of the biggest risks that I could see as I went through the business was economic downturn and basically you're caught with your pants down and then harming the relationships with your customers and your employees. The third one, and this was important, was, you know, as an SBA backed loan, I was able to get a line of credit as well that we didn't have to dip into…
But, you know, ensuring that I would get the same terms from our vendors that the seller got, the seller was really confident that I'd pick up the same terms.
I was less confident that I'd pick up the same terms, but I knew and sort of, okay, go all the way back to, okay, what's your plan B if, if you don't get those terms well, knowing that it would be pretty nasty, it would be pretty expensive, but I could, at least in the short term manage by tapping into that line of credit. That helped me check that box off the diligence list that, yeah, I can…
By the way, it turns out that the answer was somewhere in between. Our biggest, you know, one of our largest vendors was willing to provide the same terms. That was huge. But some of the other vendors, you know, it absolutely have been to, you know, cash up front or put it on a card.
And it's only over time that you can work back those terms. So, you know, that was a real risk that I'm glad we had some backstop for.
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