When a $2.8m Acquisition Is More Like Zero-to-One

There was a variable comp to their compensation. And that changed right after we closed. Not, I don't think it was seller's intent to change it, but just the way the revenue was set up changed right after we, right after we closed.

So there were some nuances to the business that was, that were tough to surface when we were doing our due diligence. Tough to surface in the quality of earnings. We missed it. The bank missed it, investors missed it.

And as I looked, those were the, those were the discrepancies that the add backs for the benefits, for the salaries for the cfo, variable comp. Those were the things that were different when we closed versus when we thought, well, we were starting, we were getting before.

So, so let me repeat that back to you, Dave, to make sure I have it. The, A lot of people working, being paid by the business and the sellers argued that a lot of that was just kind of family benefit and they weren't really doing much in the business and so that those, those payments could be added back to the business. And were actually should be considered profit to the business.

And you discovered late later that in fact, no, what those folks were being paid for were real costs that needed to continue to be paid for.

Yeah, and, yeah, yeah.

And then, and then the other piece was the change in, the change in your, your own fee structure. Like the model of the fee structure changed. Right. As you took ownership or just before you took ownership.

Well, we had news. So there were some new CFOs in the company and so their variable comp was starting to kick in. And also some of the existing CFOs, the variable comp, the way they were paid, it had a new threshold right after we closed. So there was an increase in variable comp for them that was not factored into the analysis before we closed on the business.

So the tough thing about this is we really needed to dig into the compensation a little bit further. And the way it was structured, it was, it was really confusing to me. I mean now that I know how it's set up and how it works, it's, it's, I understand it completely and we've completely changed it now, but when we bought it, it was a very confusing comp model.

So that was, that was tougher to, to get through. Now the, the add backs with the family, I, I don't think if I bought another company, I would buy another company with a lot of family involved. Not that that that can be a blessing and a curse, I think.

And not that I wouldn't do that myself. You know, if I had a company, would I have family work with me? Maybe. I mean, I've had really bad experiences with that and not sure that I would.