Ready to Sell, But Ready to Leave? What the Buyer Sees

Because if you solve a problem by yourself, who do you high five? So how do you sell a business that the owner doesn't want anyone to know they're for sale? A deal fell over it just after halftime of a Carlton game. Welcome to My Shout, the podcast where we have candid conversations about family business transition. Today's guest is Will Strange. In this episode of My Shout, we're gonna talk about what a buyer looks for in an unglamorous business and how you go about selling your business without telling anybody you're selling your business.

Well, thanks for joining me, mate. Cheers. Thanks, Shane. No worries. So for those who are tuning in, bit of a brief background about why I wanted to have you here today. So Will's a graduate of Scotch College. He's done some time on the bar at the Metung Pub. Was a real estate agent at one point in a past life. And a participant on the Shark Tank, which we'll get to. He's also a startup founder who's since exited of a business. That's pretty exciting. We'll probably talk a little bit about that and now is a founder and owner of a PE firm and a couple of manufacturing businesses.

So thanks for being on - the show, mate. - Yeah, thanks. A pretty standard career arc, isn't it? Yeah, just run of the mill. - Everyone does it, right? - Yep. So I, I'm going to just ask you the really pointed question. Three65 - undies. - Yeah. That's a throwback. Yeah, so I think it was my first business, well, outside of selling cans of soft drink at school, it was my first actual business where I paid tax and GST and other things. I wasn't buying my own socks and jocks.

Someone else was, and then suddenly they stopped, so mum stopped buying them for me and I had to figure out what I'd do from there. So. So what did you just go, I like the idea of Dollar Shave Club, but I'm not shaving - yet, or what? - Pretty much, yeah, I haven't shaved for a while, so, and hadn't shaved back then, but, yeah, loved obviously that had a really viral sort of marketing campaign. And the same challenge exists with razors was with socks and jocks. And so we came up with a concept, me and a couple of mates, one that was playing AFL at the time, Cyril Rioli, he was quite big at that point in time, so I was like, great, I can leverage his brand.

He was a good mate of mine. And another mate decided to bring Three65 to life. So it was three pairs of socks, three pairs of jocks delivered to your door every three months for 30 bucks. So, try to be a little bit innovative but copy a bit of a trend as well. Yeah, right. And so you pitched on Shark Tank? Yep. And if I understood, Janine and Naomi offered you what, half to buy? Half the business? Yeah, it was a little bit less than that, but, I can't actually remember the exact details, but yeah, I did the Zoolander on national TV, so I remember walking past the TV at home when the first episode aired 'cause you don't know when it's gonna come out.

And sorry, the first advertising and marketing part aired and I was front and centre of that week's campaign. So I can't tell you how many people text me or messaged me or MySpaced me back then or whatever it was, photos of me doing the Zoolander on national TV. But, yeah, subsequently got a deal with Naomi and Janine and what they dunno about the show is basically once the show's done, you go into a due diligence programme, and a negotiation programme. It basically becomes its own kind of secondary over a few months.

And at that point in time, I had some pretty honest conversations with them and we decided not to progress the deal and I subsequently sold the business to an individual who bought it for his partner. Right. So the show's effectively what, a non-binding - offer? - Yeah. So, before you go into the show, so flown up to Sydney, land at, you know, in their studios there and they basically say, are you ready? And that's about all you get. I walked out and just before I was about to go down through the tanks, they said, just make sure you're interesting 'cause if you don't get aired, you are not gonna sell anything.

So I sort of realised, okay, I've gotta do something here. Walked down and just quickly before that, I shoved some undies down my pants. I didn't actually take them off. So a bit of trickery, but, yeah, pulled them out. Went through about an hour and a half of being grilled nonstop. So there's - no time for pausing. - So there's 30 seconds you see on the - telly is... - Yeah, I think it was six minutes of air time. Came from almost 90 minutes of conversation about lots of different things.

But free flowing, you gotta know your stuff. Got the deal and then they basically come and say, all right, we'll go through the rest of the details later on. There's a bit of a handshake and, but then it comes to the actual terms and they've gotta check that what I'm saying is real. For me it was, for some others, it wasn't quite as true. Yeah, right. So you didn't end up selling it then, but you sold the business - later on anyway. - Yeah, I sold the business about six months after it aired.

So the website crashed on the day it aired, which we were promised by our developer it wouldn't, but it had quite a significant number of people going to it. Back then it was close to a million people watching the show. We got a lot of subscriptions through that period. So you were ready to start your next big thing. Or you'd already started the next big thing. Was that SPT? Yeah, it was. So whilst the concept of Three65 was essentially manufactured by looking at what others were doing and being successful, SPT was a lot more organic.

So I was playing local footy, in the Ammos and again, Cyril, my friend, was coming back from a hamstring injury into a grand final, kept spruiking about how he was using this GPS technology to train and was the year, can't remember, year 2014, that he did a 12-week hamstring. They brought him back straight for the grand final, his first game back. And everyone was saying there's no way he's gonna get through, what a ridiculous decision. But this GPS data behind was basically saying that his performance was better than what he was doing at AFL level at that time.

So they were really confident. From that story, I was like, well, I want this tech, how do I get it? I approached the incumbent, and they basically said, it'll never be affordable for - you. - So I'm guessing back then the incumbent would've been what? Catapult? Something like that? Yeah. So I approached them and said, Hey, I wanna start this division for you, amateur, private school, non sort of elite, and then take that globally. They sort of laughed at me. So I said, I'll build it myself.

And that's where SPT sort of started. 'Cause I just wanted it myself and didn't understand you could buy a Garmin watch, you know, that wasn't unusual. So why couldn't I put one on my back in a game of footy - and track it, - do the same - thing? - Yeah. - That's what I did. - So it's spawned from a, let's call it a spite decision. Yeah, a little bit chip on the shoulder, but, no, it was probably me just, you know, I think people would say, I don't often take no very well unless I'm convinced that no was the right answer.

So I went out and tried to figure it out. And I remember a bit of a story around JB Hi-Fi. I used to walk into JB Hi-Fi and buy these Magellan GPS watches. So the same way I've got a watch on now, now the ugliest watches in the store. So I said, all right, I'll take that one. They weren't selling very well. I ended up doing it for myself, taped it to my back, and then the same manufacturer that made my undies, I decided, I got them to make me a vest.

Wore that in the game, had a couple of my teammates say, Hey, I'd like to wear one of them as well. And then it kind of went around the league and within sort of three or four months had teams ringing, saying, Hey, can we get it? And I thought to myself, oh, I've got something here. Went back into JB Hi-Fi and they said, we're outta stock. And I said, okay, what's the other product? And they said, no, we're not allowed to sell it to you anymore. We've had to take it off the shelf in South Yarra.

And I, and they said, look, we want your phone number and some, the guys that own that company, so it was TomTom Magellan at the time, wanna speak to you. And they basically said, we don't sell these units to anyone but you. So we, I'd bought, I reckon probably 40 or 50 by then in the space of two months. And they were hardly selling them 'cause they were quite ugly. So, flew up to Sydney, had a chat with them, they're like, we've got a business here, would you like to work for us?

I was like, I don't wanna work for anyone. So, knew I had a business there. And then I invested my time into finding software developer, a bank and a hardware developer. Told each of them I had each other. Bit of the Spider-Man pointing meme. You know, I've got this guy, I've got this guy, that I really didn't have anyone. And they all fell into line. I got someone to build the hardware, I got someone to build the software, and then I got a bank to support the initial seed capital.

And SPT - started. - And then a couple of seed rounds, I'm guessing, beyond that? Yeah. So raised about 8 million bucks over four, five years, through high net wealth and institutional investors in Melbourne. Catapult had just listed at that time. So there was a little bit of a wave around GPS technology, sports tech, and yeah. So I was pretty fortunate to bring on some really good investors there. Had a journey with them. We hit COVID, everything was going quite well. And then customers disappeared for 12 months.

Which I thought was gonna be okay. But then so did the product disappeared for 12 months after that because of the semiconductor market. The triangle of problems, which was Texas freezing over, Taiwan running out of water, and the pandemic turning to everyone buying electric vehicles, meant there was nothing left for little old me. So we had no product for a year. Essentially got to a point where we either had to choose between going under, me buying out my shareholders and giving them a loss and then taking the risk that it would come back.

And that's what I - did. - When did you offload - SPT? - So I ended up selling it almost 18 months ago. So off the back of COVID, the US decided COVID wasn't a thing. Texas where we had our offices decided COVID wasn't a thing and got back up to playing pretty early. So we started seeing a little bit of revenue once we finally could get some supply. So we actually just put up our price and dampered supply there. But once we could get supply from our partners, everything kind of returned to normal pretty quickly.

And a few of the other competitive brands all disappeared, so suddenly people were wanting this technology didn't have many options. So SPT kind of returned to normal levels much quicker than I expected. And then throughout 2024, we had a couple of different parties come to us and approach about an acquisition. And as of the end of March, a company out of Italy called K-Sport, who do all Serie A teams, so Inter Milan, you know, they partnered with all the best teams around the world, said, we'd like to buy you.

So went through the journey of that and still going through it, consulting back to the - company. - Yeah, right. And so did they go looking for businesses like yours or do you go shopping - around? - Look, it's a small industry. We all know each other. So it didn't take too many phone calls both ways, but we actually got approached, one of our US guys got approached by one of their US sales team, I believe, and said there'd be an interest that came through to me and probably six or seven months worth of work on that.

And then probably the most hectic week of my life when the Italian owners of that business flew out to Melbourne to close the deal. And it fell over and revived about a hundred times in the week. There was a, an interesting story at the MCG, I took them to watch Carlton, Carlton Hawthorn, maybe. I know it was Carlton, 'cause they're Italians. And I was like, great, you'd love to go and watch Carlton. Anyway, we're sitting next to each other and still negotiating at nine o'clock at night.

Different terms, different elements. You know, what's gonna work, what's not gonna work, how it's gonna work. And I took a call from my lawyer around one part that I was pretty staunch on not changing. And the deal fell over it just after halftime of a Carlton game. I stood up, walked away. I'll tell the Italians this as well. Came back and the two Italians were having a bit of a bust up on the phone and having some conversations in Italian. I don't speak Italian, shock horror, but they walked off, and the guy in front of me and said, Hey, do you wanna know what they're saying?

Because he is Italian, he is a Carlton fan. I said, yes, please. So he told me the whole kit and caboodle, which was great because it pushed the leverage back towards where I wanted to go. And to be honest, it was real as well. Like I was walking away at that stage. They weren't meeting what I needed, and what the business needed. So it's a bit of an interesting story there. Bit serendipitous in some ways with an Italian in Carlton and the Italian telling me what they were saying, but look, going through that sale was really interesting.

So I've seen it on that side of the fence a couple of times. And obviously a couple years before that I'd seen it as a buyer. So the deal's done. What's the first thing that pops into your - head? - What's - next? - Yeah. Look, I was fortunate that it was a good financial deal for me. So it enabled me to make some decisions for my family and for my life, that just took away a little bit of stress and a little bit of pain, and we were able to move into the area we wanted to live and bring our kids up.

But it's funny because it doesn't change much. It doesn't change a lot of your drive and your effort. At my age, it was just like, all right, now I know I can do - it. - So you've been on the journey of the deal that didn't get done with, or initially anyway with Three65, then you've got the deal that eventually got done with SPT. So you've lived, I guess, both those journeys and now Spark, where you're on the other side of the buy side. So part three of the journey.

So what's the, how do you go from I create things and build them to I'm gonna buy somebody else's. Like what's the leap there? Oh, I think it's respect for how hard it is to build something from scratch. And I mean, statistics are pretty clear, is don't do startups, but if you're doing a startup, you don't care about statistics. My experience was, you know, going from nothing to something. You know, that first million dollar worth of revenue is by far and away the hardest. So after I'd done it a couple of times, my view was, well, I do it again.

Get it to a level that is already established and take it further. So that's essentially what Spark was. Throughout COVID, I saw a lot of my network, investors, others, basically saying, I'm throwing in the towel. I'm over running this business. I'm over doing this, doing that. Lost a lot of energy and I think something like 70% of businesses owned by 55-year-olds or older, yeah, in Australia. So for me, I was like, I'm a business owner. It's who I am, and I'm an operator. Spark was born on the fact that I wanted to swim against the stream.

And the stream is selling and there's not that many buyers, which means there's downward pressure on prices. Banks aren't overly supportive of business acquisitions, especially in the space that I'm targeting. So it can become quite tricky. There's a real skill in managing that. But yeah, Spark was born to do the opposite of what everyone else was doing. And it's also important to me as a business owner and someone that respects that really highly, I don't sit behind a spreadsheet. You know, I'm not an investment banker. I haven't come from management consulting.

I've come from operating businesses, hiring, firing, turning on the lights, turning them off, and going through that journey. So Spark is a permanent equity business model. So the desire to buy businesses and keep the name on the door forever, that's our goal. So we look against private equity and they've got their model, but their model is to financially engineer, increase debt, take some risk, and sell it within five to seven years. Our model's different. We want a safe pair of hands on good quality business. We don't rebuild them, we improve them or we keep 'em going as they are.

A lot of the time it's just the energy of the owner that's gone from that business. And as an owner, there's no one, there's no one that drives more energy into a place than the owner. If the typical PE investment thesis is exactly that, right, buy it to flip it, you're going after something different. I know of at least one of the acquisitions being Ultralift, 'cause you owned that for a couple of years now. So let's talk us through that, the journey of buying your first business as a equity firm.

It's interesting. It's an equity firm. It's myself. You know, I've got some support and some consultants around me, but it's really just Will Strange, my capital that I've accrued, and the bank that will lend it to me. You know, we don't have a Collins Street address. You know, it's not a big, it's an operator going into these places. But the thesis is really interesting because my experience so far, so I've got four businesses I own at the moment, two of them that were acquired. So Westberg Sheetmetal and Ultralift Australia.

So Ultralift Australia do premium TV lifting equipment. So you see TVs popping out from ceilings, popping up through the floor, popping outta cupboards, doing backflips, coffee tables that transform into TVs, 75-inch TVs blocking your view. The problem is 99% of people don't have that problem. They don't have the amazing views, the Sydney Harbour views, or they don't have a super yacht, but they're our clients. So it's a really niche business. We do projector lifts for Hoyts cinemas. We do, you know, Crown Casino, the MCG, like very high-end clients for TV protecting equipment and prisons, hospitals, all that sort of stuff.

But the journey buying was really interesting 'cause I fell in love with the business. You don't get a lot of access to the people, and people are the business. So my journey whilst trying to buy Ultralift Australia, I probably didn't get access to where I needed to. And that's a lesson for me in my buying side of things. I understand it from a selling side 'cause you wanna protect the conversation, you wanna control the conversation. But from a buying side, it's really important to get that exposure.

And I probably didn't as well as I'd like. Through that journey, had an interesting relationship with the owner. To be honest, I thought I was really respectful of all the processes, but understand decoupling someone that's been running the business for 30 years and suddenly goes from, I make all the decisions to now I make no decisions is really challenging. But that journey has been, again, a lesson for me because my goal is to house these businesses for a long period of time. It's to, you know, we don't change the branding unless we really need to.

We don't change the name. We want to pay homage to the brands and who's built them. We wanna be the safe pair of hands that takes them, continues operating them, and then maybe improves the system. But yeah, it's certainly been challenging at times because decoupling the personality from that business changes behaviour. And we, we've certainly seen that. When you're looking at some of these deals that are crossing your table without getting into specifics of what they are, how many of these are like a failed family succession in disguise?

What I mean by that is, how many of them going, you know what, I thought the kids were gonna take this off my hands. That's not gonna happen. So now I need to find a buyer. I haven't looked at too many where it's, you know, the goal was to give to the kids. I think that's sometimes circumstantial, but overwhelming majority is that that's not even an option. Never was a consideration. I look at some of the businesses I'm looking at and you know, if you look at size, you're a million to $2 million a year in profitability, free cash flow.

If you compound that over 10, 20 years, which a lot of these businesses have done, yeah, there's some significant wealth there. And then you go and invest, what has happened in Australia, you invested into property. The warehouse that you put the business in, you probably made more money out of that than you did the business. So there's significant wealth there. And often that means that the second generation or the next generation have had better opportunities than that growing generation. And often that means they don't wanna work in the places that we're going after.

So, you know, working in Thomastown, Heidelberg in industrial facilities, it's not for everyone. It's, it can be long, long days. It can be hard work, it can be pretty taxing dealing with, you know, a pretty demanding industry, whether it's construction, whether it's government, and a lot of people are going against that. They'd prefer to work from home. They'd prefer to work in the city or work at co-share offices with gyms and saunas and spend a bit of their day working. So that's not me. That's not - us. - Yeah.

So whereas founding generation probably started off building a job, not a business. Second gen, like, I don't need to be on the tools here. I've got other - opportunities. - Yep. I've got an education. I've been to university and we know our education system says, go to university, get a job, work for someone and pay your taxes. That's not business ownership, right? There's a stark difference between being a, an employee, a stark difference between being a manager and an owner. There's just a significant amount of responsibility and for many, that's not the right choice because you have to be pretty resilient at all - times. - Yeah, no, fair enough.

Alright, so I might take you back to something you said earlier, which was, you know, the interesting dynamic about not being able to necessarily see under the hood and how that plays out. Let's talk about the bigger thing that's going on this. What is it that you, on reflection was happening or not visible from the outside that like struck you as, I guess, most starkly? I think there's two challenges as a buyer, and I'll come back to that question because I think it plays a part of the first part of the answer.

The two challenges are that the owner doesn't want anyone to know that they're for sale. So how do you sell a business that the owner doesn't want anyone to know they're for sale? They don't want their suppliers to find out that they're selling, they don't want their staff to send, find out that they're selling. They don't want their customers to find out they're selling. So most owners are petrified about people finding out that they're for sale, you know, NDAs and approvals and all these processes. It's, you know, it's hard enough to find a buyer, a needle in a haystack, that's gonna suit that industry with the amount of capital behind them with the skills, everything.

And then they go, I don't wanna tell anyone about it. So that challenge remains when it comes to going through DD. You found the buyer, you found the business, and then they go, I don't know what my staff are gonna say. I don't know what conversation you're gonna have. I don't know if my staff are gonna tank this. So I don't want them to know that I'm for sale because this could still fall over. So I get it from the seller's side, you're apprehensive letting a buyer come in and have a look everywhere because you probably haven't told them.

And then when you have told them how late is it and is that the reason they pull out? And so the lack of control, I think is the biggest element. So I actually dunno if it's a lesson that I had that I can even fix, but I have looked at one, we've got a long way down the line of a, another acquisition just recently and had the same structural challenges of, I'd like to meet the staff, I'd like to speak to your key people. And the pushback is okay at a certain time, but I've made it very clear that I'd like to speak to them with no one else in the room, because that was what I experienced.

I spoke to the general manager, I spoke to some of the key staff, but he was in the room, the individual, the owner. And ultimately that just changed answers. Right. So people obviously sitting in front of their boss that's trying to sell the business and he's, you've been brought into the tent, you know, you don't wanna be the bloke that tanks the deal and then loses your job. So they're already scared enough with a new buyer coming in, trying to protect themselves and be the guy that's speaking all, you know, positively about the business.

And a lot of the time they're right. But there's a lot more politics at play during that sale and acquisition process, that may be almost impossible to stop on a small scale. On a large scale, it's a lot different. There's a lot less risk. I suppose there could be multiple reasons for that, right? It could be, I work for Jim, not I work for Company X, and now that I'm in the tent that Jim's selling, I'm nervous about you. I don't know you. I'm, that could be that, or the alternative, if you don't buy this thing and I say something bad about Jim, I'm out the door.

There are multitude of reasons why the third person in the room's uncomfortable too, - right? - A hundred per cent. Yeah. And that's why I say it's potentially structural because they're sizing the new buyer up. They're sizing, is the deal gonna get done? Am I protecting my job? What's the new buyer gonna do? There's a whole bunch of reasons why that person in the room can't be honest. Or can't be direct. And that's a challenge, that's a big challenge in coming into a place because you're most likely gonna inherit the people.

The old owner's likely gonna go, yeah. So can you run the business without him? And is this the person you can run it with? You are sizing them up. They're - sizing you up. - Yeah. And the reality is, the new, if you do buy it, the old owner is gonna leave. So then you are kind of go, well, can I work with you? Are you the right type of person that's gonna help me - build this thing, right? - Yeah. And I think there's a second opportunity there.

And I think this is a bit of advice I've given a couple that have, I've spoken to about selling and what the experience is like, and as a buyer and as a seller. A lot of the time, they think they want out. They think they want out, they think they can get out. And there's two reasons. As a buyer, you wanna tie that owner into the business as long as you can, right? Risk, and you can always, you know, release them. Most of the time they're like, great, the second you tell me I can go.

So through the acquisition process, always the conversation around how long will the owner stay around for? And in every ad and every time a broker or an adviser speaks to you, they say, oh, it's a generous amount of time. And that's a subjective word, generous to who? But I actually think a lot of owners should look at taking a small stake in the business moving forward, take something off the table because it still connects them to the business that gave them energy once. And again, I've seen it in conversations even this week where the owners thought they wanted out and they get to settlement day and they're like, what am I gonna do?

Who am I now? It's part of my identity, right? Yeah. So decoupling that identity, decoupling that ego to that business. And then, you know, for some reason, some people then suddenly start wishing bad about their own business because they don't want it to do better than what they were doing. Or, you know, these types of things don't make sense to me, but sure, people are - comfortable with that. - I suppose if you built this thing over 30, 40 something years, your kids have grown up in it, whatever, it's different to, I built a startup, but it's five years in and I'm not floating it, right?

There's probably a lot more emotional attachment. - Absolutely. - Which could end up in, if I'm hearing right, and like, I thought I wanted it out, now I don't. Or alternatively, you put the golden handcuffs on and then the person sitting there going, I've mentally checked outta this and I'm not useful to you anymore. There's not, you know, that, but there's probably also, depending how it plays out, please get rid of the old boss. Or alternatively, I didn't, I don't wanna work for you. I only wanna work for Jim and Jim's still here, so I'm not gonna pay attention to the new owner.

Is a multitude of ways that could - play out. - Yeah. Speaking from experience and also anecdotally, there's kind of two edges to the sword and one edge is an owner that the management team kind of said, we want him out. And the other edge of the sword is we love the owner and I think both of them are hard. Yeah, no, that's a fair point. Something you said a minute ago, I'd like to pull the thread on a bit, which is, I'm glad to see the back of the owner almost to the earlier conversation.

I'm in the room, what happens if I say a bad thing and the deal doesn't go through, I wanna make sure I'm looking after my job, but equally the deal's done, now is my opportunity to go, I hate this old bastard, or whatever the conversation's like. I'm reading between the lines here, you've been on this, you've had part of this conversation. How does that end up playing out? It's really interesting. Don't say anything you're not comfortable. No, no, no. I'm just thinking what I'm comfortable saying. I think either of the two people that I'm talking about in this situation are no longer in the business, nor do I speak to them.

But it was, it's really interesting. I think the really interesting experience that I had was during the sale process, I met some of the management team of one of the businesses and I got an anonymous message from one of the staff. At the time, I didn't know who it was, I subsequently found out who it was, but it was an anonymous message trying to communicate to me certain things about the business that I wasn't being exposed to. Oh. During the sale - process? - During the sale process.

Again, I knew it was one of three people. I didn't know who it was during the time, but after the sale found out. I kept going with it. The interesting mindset is, as an, as a buyer and as an owner, what does that mean, right? If someone says, Hey, here's some problems with it, and they weren't illegal or anything like that, it was just, you know, cultural issues and other things. And straight away I was like, great, there's someone telling me information that I'd like to know.

But at the same time, there's a bit of a character flaw in someone willing to do that. And so you're walking into a business with a problem, and some people would say, that's worthy of pulling out. I assessed it as worthy of fixing. And I thought, if that was happening and the business is still performing as it is, imagine how good it would go without those problems. So again, two edges of the sword, right? His, the individual had given me information that he thought was trying to either tank the deal or help me.

I don't know. I don't know his reasons, but certainly from my perspective, I looked at it on both ways. I was like, great, do I trust this individual now? Because if he's willing to do this, what else is he willing to do? And great, I've got this information, but does this also mean an opportunity? And that's the thing. You're assessing in - real time. - And yeah, as you say, the insider might be trying to steer you away 'cause they want you, they don't want you to take over.

Or alternatively, I can't in good conscience let you think what you heard in the room that I said to you is actually what's going on, and I'm coming - from a good place, you know. - Which I believe was the latter, was the intention. I'm not entirely sure. But fair to say, that individual didn't last too long once I took over the business either. Fair enough. You go out there, you find the ideal business. You can see the upside opportunity. You go through the deal, you find out this insider information and you go, I'm still gonna go ahead with it anyway.

I'm assuming put the golden handcuffs on the owner so that they can't disappear on you. What does the first 90 days look like? A perfect plan that never plays out. So I remember you sort of sign contracts and then you've typically got two to four weeks before settlement occurs. You take control. Day negative one, day zero and day one are pretty hectic, 'cause you're day negative zero, you're basically going, all right, tomorrow's the day. I've gotta make sure our true-ups are right. I've gotta do stocktake, I've gotta go through all the processes, I've gotta check all bills that have been paid, what hasn't, and try and get that clean balance sheet.

And when you're, you know, you're doing it on the smell of an oily rag, you're doing it yourself, but it's also the best way to learn. Day zero, you kind of walk in, you go, this is kind of mine today. At some point in time it transitions from the old owner to me. And then day one it's really, all right, what do I need to deal with? And at that point in time, you've got unfettered access to staff, you know, so for me, I was like, to the old owner, take the week.

You know, I'll figure it out from here and we'll have a chat on Monday. And that cleared him out of the space, gave some oxygen into the building, and I could walk around and have conversations with everyone. So sit down with the management team. So, you know, lay out a little bit of our plans. I have had conversations with others that walked in there with a big presentation and you know, they've got the factory floor guys in there talking about the three-year journey and the brand control mechanisms and you know, where we're gonna go and how we're gonna win and they don't care.

I kind of went the other way as an operator. I was just like, I just need to learn the people. And probably took some time doing that. There was certainly some lessons in that first 90 days because you are either seen as someone that's saving you from someone, someone that's getting rid of someone they liked, or a lot of the time they see them as an opportunity. And staff see it as an opportunity and they try and leverage their positions. So they'll go, okay, great. I wanna pay rise 'cause you can't lose me right now.

Or, you know, they'll be sizing me up as an individual, as an operator. Is this business gonna be successful? Is it gonna fail? Do I get out now? Do I double down here? So there's all this kind of going on at the one time. So it's quite an interesting, and I find it really fascinating first 90 days 'cause you are trying to get an established trust with the staff. They're trying to establish it with you, you know, you're trying to share credibility. I'd come from tech, I'd come from sports tech and underwear.

So going into industrial manufacturing, it's a different place. So how do I walk into there and say, Hey, you know, I've - earned my keep. - Yeah. I'm a credible - owner. - Yeah, exactly. So, you know, my journey every morning was thinking about how I could do that, how I could convince them. That was me transitioning industry. And I think that's what you have to do. If I was to do it again, it'd be very different because I know what I'm doing now. I know exactly what I'm doing.

And if I did it again, I'd reckon I'd make that 90 days, about seven days. And I reckon I'd identify who's on the team very quickly. Because looking back you can, but yeah, there's certainly owners that suddenly wake up on Monday morning and they ask themselves, what do I do now? And I've spoken to some that goes, I wish I didn't do it. And that's an interesting - conversation. - Oh, spoken to plenty of people who were, you know, talking to someone today, she said, my sister and I, we're in our sixties, we're ready to retire.

We are still running Dad's business, Dad's 89. He doesn't wanna let it go. He just thinks he's still able to run it. He doesn't realise he's got dementia, so he can't, that's a big problem. We don't want the business and we're ready to retire. Our kids don't want it. He won't hand it over to, you know, you can see how that could happen. Yeah, absolutely. I mean, owners typically like control and letting go of control and ownership is generally really difficult. So we, I, I've seen it.

It makes people behave differently. It makes people become irrational at times, but that's the landscape. That's your product. So you've managed to negotiate a, I guess, might not be an earn-out, but some sort of relationship where you've gotta hang around and help me onboard this business. He takes a week off, you start to understand the staff. Did you get any sense of, you know, we want, we don't want this guy to go, we're uncomfortable with you. Like how do you make the call as the new owner when it's time to let the old owner go?

Or do you just wait the time out? Like how does that - play out? - Yeah, look, typically when you're acquiring a business, and I think this is not necessarily drilled by the brokers, advisers, corporate advisers, and others as well as it should be from the start, is that it's never a clean exit. It's never a fast exit and you don't get all your money up front. That's very rare. I haven't seen it in this size because you walk in, you go, how much risk does the owner walking out actually have?

Whether it's relationships, whether it's people, whether it's key people, and replacing that person. You can't go in there and do it straight away. An owner can, I suppose it's all individual in terms of what that means and how you navigate it. Being someone that hadn't come from behind a computer and a spreadsheet, but from a real operating position, I kind of knew a lot about what's required, the conversations, how to have them, how not to have them, what you can and can't say. You know, how do you communicate a story and a, an expectation and a trust layer, to get information. 'Cause I find a lot of the time people would judge you for asking, judge you for asking silly questions.

I know I'm asking a silly question, but I'm concerned that that silly question actually might not be answered by you. And I've seen it, I've actually had conversations with people like, mate, you ask some stupid questions sometimes. I'm like, I already knew the answer, I was making sure you did. I was making sure you've got the same mental model for what we're trying to achieve here. So those, the ability to ask those questions and the confidence to ask them, I think is the really interesting place to come from.

And you've gotta do that from establishment of trust. And when you're going through that process with the owner in the room around you, you kind of can't because they don't wanna sit there and say, I don't know, but I always thought it was stupid because the owner's there, or the manager's there, or the decision maker's there. So trying to individualise that. But yeah, it's an interesting journey. I don't think I can give enough quantum of evidence around the best way to do it. And I think it's all how the owner, the exiting owner acts and it's all about your capabilities as well. 'Cause there's a pretty large trend of people leaving investment banking and corporate finance and management consulting, getting into buying industrial businesses or boring businesses.

The conversation I've had with them is they didn't realise the reality. They didn't realise the day-to-day reality of owning a business. Exiting owner, I'm guessing, I'm making up a number, say it's three months. Do you, did you ride out the three months? Did you pull out early? Like what did - that look like? - No, look, it was in this case it was very quick. I had some conversations with management staff. I had conversations with the owner and it was pretty clear there was a bit of a disconnection around roles and responsibilities.

And at that point in time, I had to make a decision between the owner and the management team and how I was gonna put my stamp on the business. So very quickly with the two businesses, the owner was out within weeks. Would've it been nice to get some better support and other things? Yeah, sure. I'm sure he has his reasons for his reactions. But it did throw some challenges early on. I was fortunate that my management team at that point in time were behind that decision, and supportive of it.

So inevitably, I kind of put it on them and said, if this is what we're doing, we're doing it for the right reasons. I need your support when I ask you for something. And they did. It certainly worked for a period of time and the steady handover wasn't as steady, but it was still a handover. But I also had done a lot of DD on the business, and I had decoupled the owner from what I thought the value in the business was and is, and I was right.

Would it be safe to say much like the hypothesis we had about some of these businesses that the owner was mentally ready to go, do you think? Look, I can't answer that because I think my experience is maybe the behaviour wasn't as I expected. And that may have been the reason, and that's how it showed up. I think most owners think they're ready more than they are. And again, from conversations, I think that's a common thread. There's probably a couple of misconceptions out there is how much money they make out of it.

If you say you're buying it for X, do they, how much of that do they actually see? And they only really learn that once the accountant comes in and tries to tank the deal by telling the realities of how much tax being taken and, you know, day one working capital requirements and all that sort of stuff. But also, you know, the connection to the brand, the every morning getting up at 6am to go to work and you've been doing it for 30 years and you don't do that.

Great, you last three weeks on a holiday, four weeks on a holiday, and then you come back and you kind of lose that purpose. So, I certainly think that's why I spoke about earlier, you know, owners having some sort of stay or some sort of contract. I actually don't think it's a bad thing. I think as long as, you know, the buyer, and this is probably where private equity struggle in this space, because they come in and they wanna lever risk and everything, and the owner's like, whoa, hang on a minute.

You're basically ripping apart my good people. You gonna either just bring someone else in and do things completely differently because you've got a five-year timeline. Whereas the way I'm doing it at Spark is really about an owner that goes, Hey, you know what? I want out. I wanna de-risk myself. I'd want to remove myself as a director, but I'd actually like to stay involved in some way and work on the parts that I like. And I reckon that's an opportunity for a lot of owners to go, what part do I like?

Because there's a lot of parts of the business you don't like doing and that's why you wanna sell. You don't want the risk and you don't want the hard work or the difficult work. And that, that's different for every person. Some people are great at sales, some people are great at technical, some people just wanna sit in the factory and tinker around and, you know, solve problems. Structure it in a way that suits, you know, what they want. And there's a business I'm working on at the moment that I'm having the same conversations.

It's on pause at the moment because the owner's got a lot more energy again, and it may very well disappear. I've got a very strict requirement to acquire the business. And I think he would be a great asset to stay on as a consultant for a period of time. But he got his energy back based going through the process and what we could do and how we could do it. And that's great. Good on him. I'm not here just to, you know, buy businesses off people and stick it to them.

I would love their support. To the point you were making earlier, does that not also the double-edged sword of that mean this person's only hanging around one day a week, but I can't every time they turn up, the leadership automatically just defaults to that, what that person said, therefore, I'm gonna do that and kind of steer you off ship. Yeah. I think there's an element of that. I think that's where alignment with the owner, and communication, I think communication almost stifles every possible problem. So having really clear guidelines around what the owner is and what the owner isn't.

People know who the owner is, people know who's paid for it, people know who's signing their cheques, their payrolls. No one signs cheques anymore. But, you know, people do know that and they know it pretty quickly. I think you've just gotta position that, hey, there needs to be a time of separation. There needs to be a clean break for a period of time. Let us fail, let us make mistakes. Let the management team know either the capabilities or not, and then come back in and start supporting in the areas that you like.

Do that in conjunction with the - owner and... - No, that's fair enough. I'm just reflecting on the story of the intergenerational business where the kids take over and it's great for the next three weeks and then dad pops in to say g'day. And all of a sudden they're like, what are you doing that for? Oh, well because no, no, no, no. That's not how we do things around here. And a week later, son comes out and goes, what are you doing there? Oh, well your dad was in last week and he told us to do something different.

And that's a conversation you guys need to have at home, but you're upsetting this all in the, along the journey. Yep. I could imagine that. I've got a father, he was in manufacturing. He owned the Metung Pub for 20 years. I worked for him. I certainly can understand the dynamic of that. And how challenging that would be. I unfortunately don't have that problem. I was thinking the extension of that is you've still got the owner around, they turn up and people change direction just because the old owner's here - for the day or... - Yeah, I do think if there's no connection between the new owner and the old owner, that staff and people and suppliers and others will know that.

When it becomes family, because people don't know all the information, right? You know that the son or daughter who's taking over the business might have full authority, but the dad just can't help himself or the mum just can't help herself. There's that reality, but the staff and the suppliers and the partners and the stakeholders don't know that. So they're like, hang on, who am I answering to? This person said he is the boss, but he's always been my boss. So I could imagine the challenge there. Fortunately, I won't have to go through it.

So - yeah. - The distinction there is it's clear to the staff, albeit we might have a really strong and great relationship with the previous owner, but I know now where my cheques are cut from. - Therefore... - I think part of the acquisition journey is you make that clear. You have to make that clear. 'Cause any ambiguity is where problems start. So from day one, I think you've gotta make it really clear. And sometimes that's through actions. Sometimes that's through conversation. But people need to know that there's someone in control and they're willing to take control.

Ultralift and Westberg, your first investment, if you like, for Spark. What's the biggest lesson you take out of that, that you lean into for your next deal? You'll probably like this one. It's the lack of tech capabilities in these businesses to enhance their operating systems. I think I've got a huge advantage, fortunately because coming from tech, right, and built hardware, built software, scaled it globally. So you kind of have to build systems to be dynamic and scalable. Then you walk into the fabrication floor and it's a big, thick bank of paper, and you kind of look at it and you go, how do you make data-based decisions off this?

How do you get insight? How do you do it actively? How do you automate it? And in the modern day, everyone's selling AI. Everyone's an AI specialist. Everyone's been doing AI for 20 years. Even though it's only been around for like two or three in its current sort of frontier model way. The ability now to adapt that into it and go, all right, how do we take away the paper? Well, you can't take away the paper, right? You just can't in a lot of times. So how do we augment it?

How do we bring a trail of data that follows that paper digitally, and then we get to look at that information and make decisions on it? So I've built a fully bespoke system from end to end on our fabrication floor, our assembly floor, powder coating. Anything that touches from a customer goes into design, goes through programming the fabrication floor after powder coating into assembly, then into a box off to a customer is almost entirely automated now. But I look at industrial businesses and they're just ripe for this.

These small medium ones are still running CRMs, ERPs that are 20 years old, that are clunky, that have no automation. So I look at that and go, what I've seen with us in the last six months, operational efficiencies, is setting us up for a foundation of growth. These companies aren't built for growth, right? They're built to stay, they're built to last, but they're not built to grow. And that's the layer that I think I'm really fortunate coming from that tech mindset. I've spent the last 10 years building a market that didn't exist.

I'm now moving into a business that has a market that doesn't get served, and it's a different - challenge. - So then if that's the biggest lesson that you take out in terms of what you, what do you take forward in terms of your next acquisition? What's the one lesson you wish or the question you wish you'd known to ask before you got into the... Why am I doing this? No. I do ask that occasionally of myself, but I don't think I could do anything else. I still do love it and hate it and love it.

I think the one reflection I'd have is it can be pretty lonely. Running, owning a business independently has great benefits, control, but it can be pretty lonely to solve problems, people problems, product problems, market problems, and no one's in the trenches. Understanding the quantum of information that you have as the operator, you obviously can't share a lot of it because you don't wanna break trust of staff, that one told you this about someone else and this told you that about someone else. You've got all this information, you've gotta figure out how you use it.

And for me, probably in hindsight, partnering with someone to come on the journey. Three years in, it's absolutely fine. I've got mechanisms around that, through supportive networks and, you know, Entrepreneurs' Organization and these types of things. But there's no one, no one better than someone else in the tent with you. So I wish I probably spent a bit of time thinking about who would come and do it with me, but at the same time, I make the best decision with the information that I have at the time.

And at that point in time, there's not many people that were willing to take the risk that I was willing to, that would've come on the journey anyway. So there is, well, I had one person that was very close to coming on it and just couldn't get to the risk level that I was at. And that's what people don't realise, especially in the position I'm in now. Being a buyer that does it all himself, I'm not old enough to have, you know, compounding capital behind me. I've had to go out and either initially seeded all myself, take all the risk, put everything on the line.

People don't realise what that takes and what that takes from you. And what that takes is effort to make sure that you don't lose it all. So having someone else in that journey to appreciate that with, I think would be, would've been something I would've liked. So not necessarily just to share the risk, but also to share the mental, you - know, - the journey. - Journey. Yeah. - What I found out about SPT wasn't the outcome. It wasn't what I cared about. It's the journey of it.

Who I worked with, you know, who I did it daily with, what problems we solve together. Because if you solve a problem by yourself, who do you high five? - No one. - Yep. Fair enough. Mate, I reckon we might wrap there. Thanks for being on the - show. - No worries. Now, as is tradition, this is the part of the show where I'll tell you about what today's shout was. Well, I left that up to our producer, Derek, and we ended up with water. - It's filtered. - Oh yeah, filtered.

Cheers. Thanks for listening to My Shout. It's been amazing having you on board. If you like the show, I'd love for you to share it with your friends. Join us on the socials, hit the follow button, and let everyone know about these great family business transition stories. Thanks for listening.