What I Wish I’d Known Before Getting Into Small Businesses | Trish Higgins

Brent: All right. So we met, we were comparing notes. We met in 2016 for the first time. I think we've been following each other for a while. And I remember we met in Arizona at hotel and we had grand plans back then, 2016. Uh, both organizations were a lot smaller and we knew what we were doing. Like we knew how to do it.

It was going to be straightforward down the middle, like we were going to grow. It's gonna be easy. Um, hard cut to a narrator. [00:01:00] It was not easy. 

Trish: No, no, it was, I mean, it was, I think, actually pretty interesting that We did both have a vision of what we wanted to do. And we're pretty clear on that. Um, but then, you know, real life happens.

And we talked about this a little bit. You're hearing people talk about probably building any type of business. It sounds really easy and they kind of gloss over things. But I think in our experience, the day to day It can be quite difficult, and I think people have to really understand what they might be getting themselves into when they get 

Brent: into this space.

Our talk is going to be titled, The Wet Blanket for Small Businesses. Is that a good title? That's a great title. The Wet Blanket. Yeah. So, I want to dig in. Um, you've, uh, Uh, You've bought businesses. Now you've operated businesses. You've unexpectedly operated businesses. Uh, walk us through what has been the progression for Chen Mark.

And like, just how has it been? Like what's been the real on boots on the ground? The rough stuff in the [00:02:00] weeds? 

Trish: Sure. So when we started out, we came from a finance background. So, you know, everything looks great in the whole co model and excel file. Just, you know, cash compounds and you buy more companies and then it compounds and it's all great.

And then we bought our first company. And, you know, you realize, oh, very, very quickly in the early days of the Holdco model, first of all, cash is tight. Because you are every, it's a zero sum relationship between the cash that you take out to pay yourself and the cash that stays in the business to compound.

So, you know, we started out and we had this first business in landscaping and snow removal. And I remember very clearly we had just paid off, you know, the deal legal fill. fees and, you know, started to generate some cash and we thought, Okay, you know, maybe we'll pay ourselves something because we haven't paid ourselves for quite a while now, and that would be nice.

Um, and then, um, it became apparent that we needed a dump truck. And a dump truck [00:03:00] costs about 100, 000. And, you know, I remember just being like, Oh, man, like, clearly we need to buy a dump truck. Why, at the time, we didn't think about financing is another thing that we had to learn. But, you know, we took the 100, 000 to buy the dump truck to grow the business and still continue to not pay ourselves anything.

So, you know, those early days, I think the big thing is the cash is tight if you want the flywheel to start going and you need to make, you know, we made That personal decision over and over and over again in those first couple of years to grow the business. 

Brent: I remember, uh, when we were chatting before, we were joking about, uh, before we bought your first business, it's like, Hey, we're going to go in, we're going to implement a new ERP system, we're going to launch a new sales team, like, it's going to be amazing.

How did you spend your first, like, three or four months? What were some of the challenges you faced, and how did you actually spend your time? 

Trish: Yeah, the first couple months when we bought our first business, I remember very clearly waking up the next day and thinking, like, what, what do we, what do we do now?

And, um, it was a [00:04:00] lot of us figuring things out. And we did come in with these big grand plans of, you know, newer ERP systems, you know, wonderful sort of talent management things, um, all this stuff. And then we realized that the internet company didn't work. So that's a challenge. Yes. So then, you know, the first little while was figuring out, okay, how do we actually get internet?

And then how do we, you know, introducing a new system to a company is not just like a thing. Like first of all, you have to create the buy in you have to, you know, evaluating a system when you don't know anything about the industry is difficult. So you need to partner with people in the company to figure out what, um, You know what?

You're actually looking for getting people to change their behavior, you know, in a lot of blue collar businesses. Um, you know, A lot of ERP systems rely on tablets. We have a lot of people who hate tablets and won't use them under any circumstance. So there was a lot [00:05:00] of just the process of change management.

Get, you know, working with people and, you know, learning pretty quickly that if you just say, Oh, well, we're going to use this new system because it's far superior to how you've been doing for the past 20 years. It's like not really a great way to like win friends and influence people. 

Brent: Yeah, I've had, uh, Same experiences.

We, as we bought companies, I remember one time, um, the internet kept going out at one of our companies and they're like, this is so weird. Like, what is happening? Is the internet not, I mean, it's a major city, like it's not that reliable. And uh, so we asked the, uh, the IT guy, we were like, Hey, is this something that you've been facing for while?

And he's like, absolutely. He's like, yeah, it's a, it's definitely a, a challenge. And we were like, wow. I mean, you know what, what's wrong? And he's like. Because the internet goes down and we're like, well, how do we, how do we do anything? And he goes, oh man, shoot, I bet the spike bar got, uh, the duct tape came loose.

And I bet the spike bar dropped on the floor again. We're like, what? You were duct taping a spike bar to the side of a file cabinet? He's like, yeah. And we're like. Could you [00:06:00] get an extension cord and like put the thing on top and he's like, that's a great idea. 

Trish: Yes, those are the value added things that we bring to the company.

Yeah, yeah, I mean 

Brent: this is the hard hitting stuff. We had another one one time where, um, we were on a platform that's supposed to generate sales. And it showed that there was like, should be a lot of leads coming through and all this stuff. And just nothing was happening. This is like the strangest thing.

They're like, yeah, it's been going on for quite a while now. And I mean, no one knows. I don't think the data is right on there. And it's like, okay, where is it going to? I was going to a fax machine that was unplugged. Yeah, 

Trish: that's tough. The amazing, the fact that fax machines are actually quite prevalent in our world is surprising.

Brent: I mean, I really do think there's maybe an investment strategy of just like buying companies that are heavily relying on fax machines as just like a core strategy. Very 

Trish: true, very true. But then when you start introducing email to people who have never used it before, it turns out they don't respond to you all that 

Brent: often.

Yeah, we've seen 20 million free cash flow businesses that still have zero digital systems that write everything out on paper 

Trish: and [00:07:00] hand it to people. Right. So we, um, I'd say a common thing is going from a handwritten payroll to using a payroll system. And the thing is, it sounds so easy in a room like this to talk about it and even sort of say it in this sort of like flippant, condescending way.

But then when you take it and you're working with people who've worked that way for 20 plus years and it's working just fine, then getting them to make the change that they don't think is necessary, that's going to cause them to do more work and potentially make things easy enough that they don't have as much to do, like that is really where I think the work in.

The small business space comes from like, that's what takes the most time and where I think you have to be like for us, we've learned you really have to come into it from a place of sort of, you know, empathy and understanding. And for us, we're not a sort of command and control [00:08:00] type. So it ends up taking a lot of time to sort of go through the change management process.

But I think at the end of the day, it's very worth it to get people who are bought into the systems and everything. Uh, but things that sound really easy to say on a stage, in my experience, tend to be the, the hardest to actually implement in the real world. Yeah, 

Brent: it's people. I mean, I think that's the thing that, that, that I didn't figure out until too late, I mean, oftentimes was, you know, it's like obvious what she's be done.

And it's like, well, yeah, but I'm busy. I'm doing 15 other things. And oh, by the way, we're still making 5 million a year. We're still successful. So like, if we can do this, why not do 

Trish: it? Just keep doing it. Absolutely. And I think one thing that I've really learned is, you know, not to project my own personality onto people working in the companies, because I'm the sort of person who likes to always improve things, likes to make it better, you know, sort of always pushing.

And I've come to realize that a lot of people who are working in a small business space, you know, they're there often for a reason, [00:09:00] and they don't necessarily want a lot of change. And they don't necessarily want to progress in the same ways that I might think. And so we've heard a lot of people, you know, just saying like, you know, we're just tired of change.

Like, do we have to implement this new system? Do we have to review? pricing again. You know, why can't things just be so? It's sort of having the ability to balance like the desire to improve and make things better while also not sort of forcing it on a culture and a group of people who, if you're too hard, charging will just fully revolt on you and you won't have a business anymore.

How 

Brent: would, uh, new fresh finance Trish versus grizzled veteran Trish now, uh, respond to somebody who's pushing back on you? Are those different responses you'd had back then versus 

Trish: now? I think that I now expect it, so I think that at the beginning I would find it sort of baffling, and almost, um, like, I, [00:10:00] I, I might have been condescending about it.

And I think now I go into it in a much more thoughtful, nuanced way, and I think that it's just, okay, now we're at the stage where everyone's pushing back, and we gotta do this, and I think I'm just much more attuned to how change actually happens in companies and before I probably would have been much more irritated at what now I just expect us and accept as a reality.

So 

Brent: you're talking about what I would call proactive change. There's a whole nother side of it, which is reactive change. I'm sure you've not dealt with much of that. What are some of the, what are the some of the things you've had to react to that are unexpected? You're sitting on this audience. You never run a business before you're thinking about investing in this.

What are the things you'd never expect would pop up? 

Trish: You know, again, it's all people stuff, but, you know, drug problems. Um, it is, it is common to have to deal with people stealing from us. Um, you know, we had one situation where there was one line item on the P& L that was just sort of a little bit [00:11:00] higher all the time than we, you know, it should have been.

And we kind of dug in a little more. And it turns out one guy was going to Home Depot and buying like 100 gold. You know, Visa gift cards. Every time that he was there buying legitimate, he was buying legitimate stuff too, but also Home Depot cards. And he ended up stealing like over 10, 000 in Visa gift cards to fund a gambling problem.

And so then you're like, okay, well how, you know, I'm going to fire the guy, but then he's a key leader, how are we going to backfill it? How are we going to do all this stuff? Um, so. You know, drug problems, gambling problems, people stealing from us, people having, um, really, uh, poor personal financial management capabilities, and having to come to us for loans, and that sort of stuff, um, and then also just people making some pretty bad decisions, so an example would be One of our company's managers have company [00:12:00] vehicles.

One night, one of our long time managers took his, on a Tuesday, took his company vehicle to the local strip club, got very, very drunk, and then had gotten into a fight with somebody and decided to resolve the fight by a drag race. I mean, really, what other way 

Brent: is there to resolve it? We've all been there, right?

Let's not judge. I mean, 

Trish: every Tuesday night. And, and then, um, perhaps unsurprisingly, ended up totaling the vehicle. No. Yeah. Um, but, as it turns out, our insurance carrier Doesn't like that very much. That's weird. Right, so then it re rated, you know, vehicle insurance across the board. Oh. For everybody else, and we're still dealing with that.

Well, for all the 

Brent: strip club drag races. Absolutely. 

Trish: Yeah, yeah, yeah. But that's the sort of thing that you learn about at two in the morning. Right? And, and you're working with it. And those are the sorts of things that were not on our radar. Because you go into it thinking it's sort of [00:13:00] this PowerPoint Excel world.

But then to actually make it work, you have to, you know, get that call, you know, whenever it is. You have to then be working to, you know, deal with it. And then, I think the other part is that you actually have to enjoy that. Right. It's a blast. 

Brent: Yeah. 2 a. m. 

Trish: It's awesome. It sucks in the moment, but to me, like, all of those things that we talk about, it is giving our life texture.

And all of those things that give our life texture is exactly what makes this world so, you know, rewarding and appealing and interesting. And so, it's, you know, okay, how do I think about this, you know, an example would be we've had numerous situations where really talented people who We give promotions to and then about a month later, they come back and say.

I really would not like to have this promotion. It's stressing me out. I just want to go back to doing what I was doing before. And, you know, [00:14:00] please just don't make me do this anymore. Um, And I'd like to keep the 

Brent: race. 

Trish: Well, yes, exactly. Yeah, yeah, yeah, yeah, of course. Um, but, you know, dealing with all those things and thinking about them and interacting in what I call the real world is what makes this such a great space.

Brent: Yeah, I like that. I like the texturizing your life. That's a good way to make it feel less painful in the moment. I'm gonna use that, I'm gonna use that with my Actually, I'm gonna use that in my home, too. We're getting texturized a lot, so. Yeah, it's great. It's a great thing. It's fantastic. Yeah, I remember, um, uh, you know, before raising the funds, I would basically just take all the money that we had and just put it into the next deal.

And so, you know, every deal was like, uh, felt life or death, um, and, uh, just invested in a company, and, uh, we, we hired people to go into people's backyards, and, and I remember getting a call from the, uh, the, the seller and the CEO, and he said, Well, we, we got a little challenge and I said, okay, you know, what, what, what's going on?

He said, well, uh, a woman's alleging that one of our employees pooped in her backyard. No, that's a thing. Yeah, that's a thing. Yeah. [00:15:00] Didn't know that was a thing at the time. And, uh, I was like, that's ridiculous. Like, Kyle, he goes, well, she has video. 

Trish: Yeah. Yeah. 

Brent: Oh. And he was like, well, what do you want to do?

And I was like, what do, what do you, what do you, what do you do? And, and, like, we kind of looked at each other and I was like, Does she want free stuff? 

Trish: Yeah, that's a real. 

Brent: Yeah, that's like margins. It's the things that eat up margin that you didn't you didn't anticipate, you know, exactly 

Trish: Yeah, you I mean to be honest like the whole bathroom break thing in a workforce That's out all the time is actually quite a thing that you have to think about.

Brent: It's quite a thing It's quite a thing. So you You've operated some of the companies as well for various times talk about the decision to step into a company. Is it voluntary? Is it involuntary? How do you get yourself back out? Like, what's the 

Trish: bad process? So, um, so my, um, one of my partners, Palmer, also my brother in law, um, he stepped into one of our companies because we had to terminate the person who was running it.

Um, they [00:16:00] had an exceptional ability to grow revenue while also losing money. Um, so It's a heck of a combo. Yeah, so we were focused on the wrong metrics. And so he no longer works for us. So we didn't have anybody to run it and that was a look around and he was the best suited to run the company. Um, and so he stepped in and it did a great job there.

I ran one of our companies starting, um, in 2020. It was a tourism business that we bought one week before COVID. Super easy. 

Brent: Yeah, it was great. We did aerospace in 2019. 

Trish: Oh, that's good. Yeah. Yeah. Um, and so, uh, that was really, I had always wanted to get in the seat. a little bit and have that experience. And we also have nobody run the company.

So, it was about an hour away from our house. And I said, this is a good opportunity to kind of step in and do this. And, but I always kind of went into it knowing I'm not doing this for 20 years. So, when I hired a general manager, um, and, and some other people, I kind [00:17:00] of was hiring them not just for that job, but with an eye of training them to, to take over.

So, and that has been, It's not like a, Hey, by the way, you're in charge now. Like, I'm going to do other things. It's been a very slow progression over over a couple of years and kind of handing over the reins there, um, 

Brent: to wrap things up. I want to ask, um, what I think is a question that's on a lot of people's minds, which is, you know, if you think about buying a small business, um, usually you're probably in the mindset of like, I know what I'm doing financially, I know diligence.

Um, documentation. I get it closed. And then there's this, like, giant blank space of, like, what happens after close. So, for all the people who are well educated, who have a clear plan, they know how to sell, they know how to develop business, they're excited about financing, all that stuff, the moment of, like, congratulations, you just now bought yourself Uh, job for a very long time.

That's a liquid. Um, what would you advise? Be the top advice for that person. First day closed 30 day closed six months closed. 

Trish: What would you [00:18:00] advise them to do? I mean, before they got into it, I'd advise them to go spend some time in a small business to see what they're getting, you know, getting themselves into after the close.

I'd go in, you know, with, you know, uh, not saying a lot and listening a lot. I think you can learn a a lot and gain a lot of trust by just showing up every day, showing up early, staying late, and just asking people, not just about their jobs, but take an interest in their personal lives. And I think that if you don't want to do that work, then you probably shouldn't be in this world, because ultimately it's all about the people, and caring about the people, and growing with them, and building something with them, and they don't care about your Excel spreadsheet.

And if you don't really want to, like, build relationships with people, I don't think this is the space for people to be in. 

Brent: And that's a heck of a way to end it. I think it's fantastic advice. Trish, thank you so much. 

Trish: Absolutely. Thanks for having me.

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