My guest in this episode is Searchfunder member‌. Badge started his search journey with Stone Pump & Trench that was on the verge of bankruptcy when he acquired it. After turning it around, he acquired another company called Perimeter Security. He sold both and then co-founded WSC & Company, which is now one of the most active search investment firms in the US. It’s backed over a hundred search funds and over 50 operating companies.

WSC’s seven-person team is based in Charlotte, North Carolina and is investing and of its second fund, a $100 million fund closed earlier this year focused on the traditional search fund model.

During our discussion, we talk about turning Stone Pump & Trench around, lessons learned from over a hundred search fund investments, a few notable companies, he’s been a part of, what’s typically missing in a new company, and a wide range of discussion on board construction and usage for entrepreneurs and investors alike. This episode is fantastic and I learned a ton and I think you will too.

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If you are under LOI, please reach out to August to learn more about how Oberle can help with insurance due diligence at Or reach out to August directly at in sponsoring? Send me an email at transcript:

It’s great to finally chat with you Badge, but I was looking forward to having you for quite a while now, ever since Colin Hathaway recommended you. So, really excited to chat about your search investments, stone pumping trench, perimeter security, and all these other businesses that you’ve been a part of. Can we start with your background and work up to the point where you are today?

Yes, that’s great and Alex, thanks for having me on. And thank you for what you do, too. Thank you for the podcast and inspiring people. And certainly, Colin is a hard act to follow, but I’ll try. I’ve found that as I get older, this story gets longer, but I think it’s important to go back to the beginning.

So, I was born and raised in Eastern North Carolina. I’m a farm boy. My mom and dad started our farm over 50 years ago. We mainly did cotton, soybeans, and wheat. I joke to people that growing up on a farm was my motivation for higher education. But the truth is, it was my best. My father dragged me around to the bank. My mother taught me how to treat people, have an impact on the community, put people first. And so, I was very fortunate, and I think it’s in my DNA to be an entrepreneur, to be in a small business. But also, there was a lot of dinner table education. I think of some stories of the past with my mom and dad. You know, my dad, he was 21 years old. My mom and dad came from humble beginnings but had a very loving, supportive family. My dad walked into a bank when he was 21 years old. They lent him $25,000 to start his farm. And that always inspired me. How do you do that? And my mom and dad were living in a trailer, and my dad shows up with a brand-new cotton picker. And for people that don’t know what that is, is a harvester that collects the cotton when it’s time for harvest. And it’s very expensive. It’s very big. And so, he pulls up to the trailer and my mom comes out. She’s kind of upset. And she says, “Honey, I thought you were going to build me a house”. And he said, “Honey, this is going to build our house”. So, those types of learnings for me and what my parents did for me were invaluable, though. My dad said I didn’t really work. I have W2 income when I was 10 years old, 70 hours a week. And so, I can prove it to him, even though he says, I didn’t work very hard. There are no child labor laws on farms. So, he made it through with that great community, very rural, good people.

I got a scholarship to go to the University of North Carolina at Chapel Hill called the Morehead Scholarship. I don’t want to do a disservice to my family, but it really did change my life. It opened my eyes to a broader world. Before that scholarship offered me the chance, I’d never fallen on a plane. I had never been on a train. I had never been to Europe, Central America. They just exposed me to so much more. And I had this strong, solid foundation of what my family had taught me. Like very simple things. Do what you say you’re going to do. Work hard. Have high integrity. All the fundamental characteristics you would want. And it just allowed me to expand on that at Chapel Hill. And so, I was a business undergrad, a great business school there. I minored in Spanish. And when I was looking for a job, I really didn’t know what I wanted to do, but I’m very much a contrarian. And a lot of people were doing investment banking. A lot of people.

Going into consulting. And I didn’t really want to do that, but I was contacted by a guy that was in a small boutique sell-side, M&A shop called Bowles Hollowell Conner, that was based in Charlotte, North Carolina. And he said, “Hey, I’ve got an open slot tomorrow. You should come talk to me”. And I just loved the guy. I loved what he offered. I loved the culture of that company, and it was a small business. And frankly, I wasn’t very good at finance, and I felt like I could learn a lot about finance and that’s important in any business. If I went there, buckle up for a hundred-hour work weeks, the irony is from the day I was hired until the day that I started First Union bought Bowles Hollowell Conner. So, on the first day, our class started was, it was in this big, massive building in this big, massive bank. First Union became Wachovia. Which ultimately became Wells Fargo. While I liked the product. I’m just not a big bank person. And so, after a year, I left to help start McColl Partners. And it was founded by several of the people that were originally from Bowles, but also Hugh L. McColl, Jr., who was the CEO of Built Nations bank, ultimately bought Bank of America. I think he took over when he was maybe 33 years old. And by the time he was 66 years old, he had grown the assets of the bank from like USD 3 billion to like USD 650 billion. And so, Mr. McColl went hunting in Texas for three days, he got bored, came back and said, let’s start something. So, I got very lucky to join there.

His first day at McColl partners, there was a fold out card table and one computer we passed around. So, I felt back to my entrepreneurial roots and really that home in on situation, we built that business. And actually, today that business is now Deloitte Corporate Finance, and one of the original founders is now CEO of Deloitte corporate. But after a couple of years of being there —I love the people, but I just didn’t love the transactional product. I miss the impact that I had on the farm and the managing of people in the fields. And really providing that for people. Really wanting to get back into operations, which is very difficult to break out of the investment banking, private equity business, full track. But I really wanted to do it And I bumped into a guy who introduced me to a guy. As serendipity would have it, I landed at VF Corporation. At that time, it was about an $8 billion public company. And you can scratch your head and say, ‘I thought you didn’t like big companies. But this company had a very small SGNA. It really didn’t have a lot of administrative overhead, which meant as a 20 something year old, I could do things that I shouldn’t have been doing at that age and had a platform to do it. So, I really enjoy my time at VF and really saw a path to potentially being a CEO. Love the people, by the way, VF is an apparel business, Nautica Jeans, Port, Wrangler. So, a lot of names you hear of. People typically don’t hear of VF. And so, I moved to Nashville, Tennessee. Really learned from the management team there. It was a sizable business, but they were turning it around the division I worked in, and I learned a ton about firing bad customers, hiring the right people, reading balance sheets, really operating at an excellent level. The management team of VF and still continues to be just exceptional leaders and developers of people.

And so, my father came to Nashville, and my father doesn’t come to concrete very often. But when he did, he said, “I realized that when you got out into the working world, you would do so well. You would never go round up your education”. And it really struck a chord because you have to know my mom and dad and that they just never forced state. They let me make my own path, my decisions. And so, my dad, when he said that, I really considered it. I applied to Harvard for Business School, thinking there’s no way I’ll get in. I love VF. And somehow, I got into HBS and I had a chance to run a small division of VF or, go to business school. And I said, I can always come back to VF, but I can’t go back to business school. I was getting older, so went to business school and decided not to interview. I said, I’m not going to interview here because I knew I might end up back in Wall Street and I know I’m attracted to different things. And so, I said, “I’m either going to start my own business or go back to VF”.

And I found out about Search Funds, and this was in###-###-#### And for me, it was love at first sight. I just couldn’t believe that people would give me money in their time, which I didn’t have any money. I had a lot of energy, not a ton of experience, but they would give me their money and their experience too. It sounded too good to be true, but it was in fact pretty amazing. So, I launched a search fund in the teeth of the credit crisis. With one of my section mates from business school, we searched for about 14 months. And after our OTT deal fell apart, we picked our heads up and looked around and said, “Gosh, the world has changed. We’re stewards of our investor’s capital. Do we think we have a high percentage probability of closing a deal?” And we felt like in the next 12 months, which has all the capital we had, the probability was a lot lower than we thought was good for investors. So, we socialize with our investors and said, “Hey, we think it’s going to be an unbelievable buying opportunity in the next 24 months, but we only have 12 months of capital”. And they just said, “You’re right. You only have 12 months of capital”. And so, we just decided that “Hey, we need to send the money back”. And so, we sent the second-year capital back in, and that was a failure. That was —we set out for a goal, but our investors were incredibly supportive and remain supportive.

My partner became the youngest operating partner at TPG and is now CEO of business. He did. And I started looking for a real job and I found two companies that I was considering, and they were bigger companies. Actually, both were public companies, and I just didn’t fit. It didn’t feel right. I tell people like four walls can’t hold me in.

As luck would have it, one of my investors, after a lot of peanut butter jelly later. And actually, a very supportive girlfriend who is now my wife I had no money— especially at this time. I think I got down to like $500 in my bank account. I was at the edge of the emotional and financial edge. And so, one of my investors kicked me to this company. And I bought it. It took two and a half weeks. So, after two and a half, three years of searching, it was only two and a half weeks from the day I found out it was about to close. And I felt like my life had prepared me for that moment to be able to close this company. And this company, I tell people it’s a crap business. It is a crap business. We pumped sewers. So we did diesel-driven pumps that moved a lot of sewers and a lot of entrance safety products to protect people and underground. So, I’m certified in dirt. So, from there, I thought this was going to be the rest of my life. This is what I wanted to do. This was my dream. And I operated that business for about five and a half years in total. But I was approached two separate times. So, I sold the Carolinas, and then I sold Tennessee to two separate strategic buyers that were going to come to my market. And it was all about the families of those businesses. And I felt like it would really hurt all of us if they came in, and they had a lot more capacity to weather the war than I did.

So, I ended up selling the company to them. And as luck would have it during my operations, well, I guess I wasn’t very lucky. I lost a lot of equipment to theft, and I put in this electric monitored security fencing system with an eye towards, “Gosh, it’s really solving my problem. I’d love to buy this business”. So, after I sold the equipment rental business bought operated, sold, that was over a five-year period. I bought this security business. And I ran that for a year, and it does electric monitored, security fencing. And from there I ran it for a year. Then I put a Marine in charge, and he ran it. And then I was approached by our competitor. We sold that business all the while I was doing search fund investing at night, beginning about###-###-#### So, about 10 years ago, I was doing private equity co-investing and then I had these operating businesses. Then I was CEO and operating, and frankly, I wasn’t doing anything very well. And I decided I need to focus.

I love the search fund community. I love people. It gave me a platform and capital to be able to have an impact in communities. And I said, “Gosh, I think I can amplify my impact”. Actually, go out and help people in learning from mistakes I had and did during my search and operations, and help them. So, that was a Genesis of WSC & Company. I partnered with Ed Weisiger Jr., who was my search fund investor, who kicked me to the company. You need to use a prince of a human being and a guy by the name of Macon Carroll. We started WSC with the whole thesis of, “Hey, we want to be additive to this already incredible search phone community. And we also wanted to bring the south exposure to schools. But also, the exposure of aggregating and curating the talent of people from the South could help us with geographic knowledge or industry knowledge to fast-forward. And so, amplify even our search fund-backed companies and allow them to sit on the board. So, that was the Genesis for WSC. We’re over five years old now, but we’ve been investing out of it for over ten years. And we’ve invested in over a hundred search funds, little over 50 operating companies. We don’t only invest in the Southeast; we invest in the traditional search fund asset class in general, as you would read in the Stanford Search fund study. And we invest globally. But our focus is the United States, probably 75-80% plus. But we do also look in LATAM, mainly Brazil, Columbia, Mexico, and our whole goal is just to support operators and searchers to pursue their dream much like people did for me. This is a payback model, and that’s what I was fortunate to do. And now I’m fortunate enough to do that, I’d love to.

First off, how did you close your first business in two and a half weeks? Had the process already started, and you came in midway? Or near the later stages of it? How did that happen?

Yeah, it was really fortuitous, I guess. But different from the traditional search fund model. It was actually a turnaround. So, I think Professor Gros, Becks, and others would say, “Hey, you need to avoid that. It’s got complicating factors”. I do agree. You need to avoid it, but for different reasons of why they think, and I can expound on that. But basically, when my partner Ed Weisiger called and said, “Hey, you should take a look at this company”. I said, “I can’t do it. I’m done”. And he said it’s literally two and a half weeks from chapter seven. And so, it’s going to either go out of business or we’re going to buy it. So, we had the capital, didn’t need to secure debt financing. That was helpful to be able to do it very quickly immediately because of how dire the situation was. There were 53 employees. They gave me complete access to everything. So typically, a lot of time is wasted by people trying to have information, and you can’t meet employees. I was given the entire roster with phone numbers of employees, and I called every single one of them. With the exception of one guy who never let me live it down as far as not calling him. But I had to go through and come up with a plan of how to fix the business very quickly. And it was really interesting. It was like a 10-page PowerPoint. And after six months of doing, I look back, but there were two beautiful buildings. One was like a Taj Mahal, corporate headquarters. And other was like build a suit building. It was on an awkward size yard. You could be in equipment rental for five minutes and realize you need a square yard. And so, the plan to turn it around was very quick and very formulaic. Unfortunately, a lot of hard decisions were made as far as we went from 53 down to 22 employees on the first day. So, here I am. I never had a direct report. I had never fired anyone. And on day one, you’re sending home half the families. And my wife is very experienced, like the executive VP. She built a tremendous business. She talked to me about feeling nauseous and basically throwing up in a trashcan, which is exactly how I felt that day. But the reality is that those 22 families wouldn’t survive. So, I think it was just a combination of all those who survived in the business world. And so, we were able to turn it around, but it really was the preparation of —I understood exactly how to get the deal done and to paper it on the legal side. It was the longest, but it was, again, it was in pretty dire straights. So, it needed to be correct quickly. And that’s what I loved about a turnaround. Like you had no time to waste on decisions. So, you just made a decision whether it was right or wrong, you just had to go with it. Yeah.

Can you talk more about what the business was run beforehand, and then what made it such an interesting opportunity that at the edge of bankruptcy, you were willing to buy it?

So, I think I have to talk about the great recession because it was being impacted by that. But I think a lot of it was because there had been multiple people in charge of the business, and they made different decisions that were not good decisions. They invested in the wrong equipment. There was not a server in this business. So, there was no coordination, like I’m big on people, process, and technology. There was none of that. If the salesperson left, the salesperson took their entire book of business. Implemented Implemented as a server with a central file-sharing system. And they had none of that. And what was worse, actually, Alex was that they had two liters and really that three liters because there was a small private equity guy, and they were not aligned. And they divided the culture in a way that was so toxic. Look, they were good people. They had good intentions, but when you get into tough situations, like the great recession, it’s challenging, but what I saw behind it all was there still great people as I had those conversations that just wanted a shot, it’s amazing.

Like when we go into a recession, what happens? People pave roads. They can see that. What you can’t see is that Eisenhower and what happened in the development of our underground infrastructure, in the planting of trees, which have now matured and infiltrated our underground. And so, the ability like that, see that and say, “Gosh, Knoxville, Tennessee, Charlotte Charleston, these cities are going to have massive changes in their infrastructure. And we basically rented the equipment to the people doing that. So, I didn’t care who did the work. I just wanted to be the equipment they used in the type of —we were very special. So, it was more engineered systems. It wasn’t like what you call yellow iron, like a caterpillar tractor. You throw them the keys and you rent it. You had to have technical knowledge of flow and of pressure and things that added value to your customer. And that really attracted me to the business.

We have a few examples of what kind of equipment you would be renting. I have no idea what a pump and trench type of equipment looks like or even does. Can you explain just a few fun examples, perhaps?

So, if you’ve ever seen a tractor, like a big diesel engine on a tractor-trailer, so take that diesel engine. How? Put it on a trailer and attach it to a pole. Like a valve that you can move liquid through. And so, you’ve got the ability to move thousands and thousands of gallons per minute. If you’re doing a stream restoration, and you need to divert, the easiest way to think about it is to think about repairing a sewer rehab. You have manhole to manhole and the pipe boost between, we basically would do a bypass, like a heart artery. You take this diesel-driven pump, you can connect it to a pipe. And you would go from manhole to manhole and replace the sewer pipe underground because it’s not going to stop flowing. People are still going to be using the bathroom. You’re basically creating a temporary bypass while the ones being fixed. And so, we would rent the pipe. We would rent the couplings. We would rent the machine that was on the pump side. On the trench safety side, which, I thought, was just a phenomenal side of the business as well as if you dig deeper than four to five feet in the ground, OSHA requires you to have protective systems. So, we would rent these systems that are basically like metal walls that are engineered. That if you’ve ever seen someone digging beside the road, you will sometimes see these are metal pipes, metal stuff. We also rent road plate, which I’m sure you’re familiar with because road plate is the things that you run over when they’re working on the road. You think it’s going to burst your tire like that’s a rib. So, we rented a lot of that as well. So, those are the types of products. It was a massive amount of accessories that go with these as well. And it’s a pretty neat business. And so, when a hurricane came to New York, we sent 50 pumps up to New York to actually get the water out of the parking lots and get them out of the system in a way.

So, you have all these interesting applications.

Yeah, that’s wild. And you mentioned earlier that there had been an investment in the wrong equipment or wrong types of equipment. What do you mean by that?

Yeah, when you have, maybe a sales leader that says, if I rent it once we should buy it, you should be concerned. So, if there was a customer that needed a certain product, then they would go buy it without thought how many more times this is going to be. There also was a lack of data and transparency amongst the entire group, what does this cost? How much is it going to rent for? I’ll never forget. I went to set up. My first sales meeting, went to the mountain, that everyone there. I pulled at random 25 contracts with all this different equipment, and of the 25, 17-ish were unprofitable if you added the cost of the equipment onto it. But no one ever knew that. They didn’t know that the salespeople were allowed to charge whatever they wanted. There was no governor on. And it’s very hard for a salesperson to say. So, there were simple things that we had to do to fix, to bring control of pricing and equipment. And some other things that were happening were just— they were robbing Peter to pay Paul. They were taking off because he didn’t have a lot of liquidity or money to reinvest in the fleet. They would take pieces off of certain pieces of equipment and put it on the other until there was just a graveyard of the massive amount of pump. And so, you were slowly whittling away your usable asset base. And so, what we had to do was come in and actually replace all of that. And another thing that I did, and I’m a Chapel Hill guy. So choosing red for NC state was very different. But luckily, my partner was from NC state. We painted everything, we took it, and we invested in the equipment. We made it as new again as possible. We branded it, painted it. It was a rainbow of colors. And it was just that had no message when it showed up to your customer that— is this really going to work? You’re pumping sewer, right? If sewer goes out, you have to contact the EPA. So, for someone to use you, they need to be confident that your equipment is solid. So, we shut branches down. We had five branches, went down to two. Reinvested in all of our equipment. Brought that back up to speed, invested in the right equipment that certain pump sizes were used more than other sizes. So, selling off the ones that didn’t and just reallocating that capital. Gotcha.

You mentioned a rainbow of colors. So, when parts will be taken from other pieces of equipment, do you mean that this machine they would rent out to someone had lots of different color panels or pieces that looks thrown together?

Yes. And if you looked at the fleet, if you had five pumps on one job site, one might be blue, one might be rust. Rust was a very popular color. And so, that’s what I mean. It was not a coordinated effort, and it didn’t inspire confidence if I were a customer.

Can you talk a little bit more in-depth about the actual business model of equipment rental. It’s an area that I haven’t spent much time learning or having on the podcast. I’d just love to hear how does that business model work, and what are the key factors to keep in mind as you’re running that?

It’s hard to believe that united rentals didn’t exist in the mid-nineties but now is a massive business. But in my opinion, you have to choose the niche because the only way you compete with the big guys is you pick a niche product. Like a turn safety or something like that. And now they’ve bought and gotten into that as well, you have service. And so, what was interesting is I went through the life cycle of my business. I felt it all matters about the rental rate, right? You got to give service, but you have to have a rental rate. And the big guys were able to buy at such a scale and provide so much coverage of geography that you weren’t going to really beat them at that. The little guys were mom and pops that didn’t have systems but could do really good service, but they didn’t really have any overhead. And so, all those costs drive the rate. I felt like at times I was in a teenage state. So, you would have to really figure out how are you going to win? How do you win? And it’s a tough business. The CapEx in a lot of the search firm world really shies away from Cap. And there’s a real good reason because it’s super complex to manage. And I think in other countries like LATAM, that don’t have access to credit as much as we do that real value in they’re still behind the curve on this rental market. There might be, but in the United States a bit tougher here, we don’t do as much rental in the United States.

Can you talk a bit more also about the different challenges you had taking over the business that was struggling? You mentioned theft being one of them. I’d love to just hear more about what kinds of skeletons did you find in the closet that you had to fix into a more usable?

Oh, well. So, I mentioned earlier, taking parts. There had been a bad process of even our new inventory was just being put on machines and not being spent through. And so, what I ultimately had to do was put a cage around it with a lock, and you had to sign in and out every single time you went in. To make sure, reinforced the process to go back through. So, it sounds like a simple thing, but it’s really important when you’re dealing with banks and making sure that your inventory and everything is running through your P&L and being expensed properly. I think as far as other things I can think of, a culture was just at the heart of all of it. Right. Are you going to bring people over? And I’ll never forget. One person told me, they said, “Gosh, you have to let them eat out of your hand, but you have to throw it to them at first to bring them onto the porch, to get them closer”. And that visualization always stuck with me. So, culture was a big change that we had to do as well. Then I think it was incredibly important because I wanted to the first day, as hard as it was. I had been in banking where people are always fearful that they’re going to be cut, and I wanted to cut deeper at once and then come back out of it if I needed to. Instead of dragging on the cuts and having the culture suffer. So, I think that’s another thing that we really tried to fix and drive forward. And I had great people. I started getting great managers and great people that believed in the vision and want to drive it forward.

You also spend a few minutes on the perimeter security business, too. That was interesting, the one that you were a customer of and then found that it was pretty useful and helpful when decided to go by.

Yeah, the irony is when I was searching prior to equipment rental and everything, I had found this business that was called electric car dog, and it was in Columbia, South Carolina. And that’s what they did. They did the electric monitored security fencing for transportation equipment rental, anybody that had big fleets that sat outside a chain-link fence. It’s only so protective. I always found it ironic that the insurance company would charge you or give you a $35 break if you had a security system on your building. We had millions of dollars sitting outside with a chain-link fence, and tons of scrapyards around us, like an interior alarm system, didn’t matter. And what this system did was provided a protective barrier that was electrified inside the chain-link fence. It was all solar-powered. And if someone penetrated and cut that barrier, first, they wouldn’t because these are deterrents, and they would move to the next victim. But if they did cut it, alarms would go off in dispatch. People would come in and try to protect it. I lost a hundred thousand dollars in one week. And once I installed that system, I never had a problem again. And so, I just love that. And I’ll never forget my wife, I was lying in bed. Before I thought about installing the system that I had discovered five years ago, I had installed cameras, and I was watching on an iPad and my wife was like, “This is not sustainable. It’s not going to work. You have to do something different”. So, the next day, I called the electric guard dog. And in under two minutes, they quoted me his three-year contract. Here’s what it is. It’s going to solve your problem. And I said, “Gosh, I’m going to do it, but let me Google. So, I Googled, and I found this company called perimeter security, and they just had done a website refresh and an SEO. So I discovered it. And so, I chose Dean Lauder as a gentleman’s name. I chose his company because I felt like I might have a chance to buy it in the future. And so, when we partnered together, it took me probably two and a half, three years to convince him. It’s very much liked a marriage in a dating game. And he really was not attracted to me at first, but ultimately, he became a great partner. And we built that business, and we sold it actually to electric car dogs. So, I came full circle from my search fund day.

And how does that business work? You mentioned that there’s an installation component and there’s a contract. Is that surveillance, contractor maintenance or something like that?

Yeah, it’s $0 down. It’s like a SaaS business. It’s a beautiful recurring business. And so, you basically, like perimeter, we went in. Installed the system and, basically, we charged a monthly fee and people never took it out because it worked.

That’s outstanding. And then once you sold the two businesses, you mentioned how you were thinking about what you wanted to do? What you wanted the next phase and chapter of your career to be? What sorts of things did you weigh in your mind, and what became really important to you after you sold the businesses?

Yeah. Look, I have a lot of friends that when they sell their business, go through this period of self-discovery. And frankly, I had all along in thinking about. Doing something in the search fund world. And I did it pretty quickly. I think September of 16 is when I sold the security business, and we were pretty much open for business the next day and had been investing in search funds. So, I didn’t have that lag, I guess I know myself. I just have to work through it. I was exploring, do I go buy another company? Do I take time off? Which to me that just seemed like a recipe for disaster. Or do I do an incubator model before the incubators had started off where you just have an entrepreneur residence? Or do I do the traditional search fund route? And the more I thought about it and the more I came back to it. When I owned my businesses, I would go to these trade shows, and I would try to fit in with the equipment rental people and the security people. And I did. And I enjoyed it. But in the background that traditional search foreign community always just felt like home, that people were always there. They were always supporting. And I wanted to be a part of that. And I saw the groves with my partner and my partner make him. He saw what was coming and just said, “Gosh, this makes perfect sense”. And in our businesses, we use, I don’t know if you’ve heard the book traction or the entrepreneurial operating system. But it’s all about focus. What gets me out of bed in the morning? What I do is that I think the search fund model is fascinating in that you take people that are recovering bankers or recovering consultants. That all they want to do is operate. Have impact. Make no mistake. I’m a capitalist, but the driver for me is like having impact. And I felt it personally at Stone Pump Trench and in the security business of some temperature. I had a guy. He lived in a trailer. His kids didn’t go to the best school. And by the time I sold the business, he was making over a hundred thousand dollars a year. He bought six acres of land. His kids were going to a better school. That’s what life is about. And the search for a model takes. And as soon as structure attracts that talent and puts it out into the communities, into these businesses. That the owners have become, in their decision-making, for all the right reasons. By the way because they’re 70 years old, and it injects that new energy in that capital, and it unlocks this real talent. And frankly, I know it sounds cheesy, but that’s what we need in America. We need people to come into these communities and make changes. And for me now, we have over 6,000 employees in our portfolio companies. And to me, I know though, I personally don’t touch that or give the check to the guy when I sold the business, I know all that’s happening. So, it just crystallized for me that this was what I was made to do. And frankly, it’s what I wanted to do for the rest of my life. And people often ask, they say, “What’s it like being an investor versus being an operator?” And I’m like, “Make no mistake. I operate like I’m going to operate our whole group. Here are just operators through and through. It’s just, just a different industry than I’ve operated in.

Certainly. And with over a hundred search fund investments, there have to be a few key themes or lessons that you’ve pulled from that experience for now 10 years of it. You walked through some of the most important lessons you feel you’ve learned from all these different investments in all these different situations and companies and entrepreneurs?

Who’s been a part of, I think the first thing that pops in my mind is that I put so much pressure on myself and I think most of our searchers put so much pressure. And they feel like the outcome is binary, and the outcome is not binary. And what do I mean by that? Oh, if I search and I don’t find a business because 30% of people don’t find a business, I’m never going to find another job. That’s not the truth. I failed in my original search. And I was still able to find my path. The CEO and so did my partner. And then when I was selling my business, I thought I was either going to be, make $0 or multiple millions of dollars. And it just wasn’t true. I think to me, that’s one of the things I try to work with our searchers too. Don’t try to focus too much on the outcomes. Chop the wood, carry the water, do day to day, work hard, do the best you can do. But that’s one thing. I think there’s a lot of other things like market size matters. But one of the key things I think a lot about and inserts, there’s lots of things on recurring revenue, there’s industry growth and there’s industry size. That all is critical as criteria. But one of the most important criteria for us here is these situational dynamics. And it goes back to, do you have the ability in your search to be the son or daughter that this person has never had to connect with them to take care of their legacy and their families or their business? Do you like to do that? And then the same goes in your operations, in having good sellers. Like we think, one of the keys to determining success is, is that situational dynamic net? It would be that searcher, buyer and seller to make sure that they do care for you. And they do leave you in good hands with the company. That’s one thing I really focused on. And the last point I’ll bring out is that I was terrible at sales. Luckily, my wife was a really good salesperson. But I did not understand what it took. And I was very relational, and I should have been a bit more, not lose in relations, but be a bit more transactional and understanding the metrics. And what drives through that? I’ll give you an example. I had the same sales pitch. Like I would go to a year-old owner and tell them I’m looking to buy one business to take care of it. And I would go to a broker and say, “Hey, I’m looking to buy one business”. That broker will say yes. Okay. All right. And then hang up the phone and move on because the broker wants a serial buyer. They don’t want to sell me one business. We’ve taken those learnings and applied those here just for our searchers because now we drip brokers for our shirts because we are this year-old buyer. We have bought over 50 businesses. So, the CEO seller is going to get what they want from you, but there is going to get what they want from us. And so, that’s one of, some of the other learnings I’ve learned. It just takes a lot of serendipity, a lot of hard work and good partners, good investors, good vendor partners in the diligence, in the legal side to really make it successful because you want to buy a good business. The worst thing you can do is end up in a bad business.

There are a few example companies that you’ve invested in where that demonstrated your concept of situational dynamics really well.

A lot of it is just the investor of the CEO. I think of Edward McDonald at Botanical Designs in Seattle, where the seller didn’t have kids. But Edward had formed a great relationship with him, and the seller got cold feet. And Edward flew to Seattle from Chapel Hill and said, “I’m standing the extended stay, and I’m not leaving until you sell me your business”. And that relationship was there. Also, a great company Health Mark, where a seller is just a good person and just knew he connected with the searchers and really wanted them to take care of the business. He wasn’t trying to squeeze every, last dollar out of the business. He just really trusted them. They trusted him, and it turned out to be phenomenal. Those people that are that good speaks to the culture of the senior management in the culture that you’re going to step into. That is super important.

Yeah. Certainly. And Brent Beshore has this rule of only investing in companies where the company has made the owner wealthy. Are there characteristics, like that, that you look for in owners to determine if they’re going to be a good partner with you? Or are going to sit for an acquisition? I love that you always want to see how they’re living to understand what was really coming through the cash flow and the profits of the business.

I don’t think you can structure around integrity. And I’ve had this conversation where I went with a searcher. Went to visit and turns out like between the two owners that day I happened to be there. The bank was there as well, and we got the background checks on the two owners, and there were like 32 criminal instances between. And it wasn’t very obvious that they were bad people for me, it is all about integrity and doing your work on that. Another one I think of is a guy, Marcus Scott, who flew down and visited before he bought the company. And we just got in and said, “Gosh, we just can’t trust the seller, but the company is so good, and the industry is so good”. So, it’s worth doing it. Like the day after we bought the business, the sellers started competing with Marcus. And for two years he fought that battle and spent a lot of legal dollars and a lot of wasted time. And then after two years, he just said, “I’m going to focus on the business, forget about this person”. And that’s when the business took off. So, for me, it is about, are they trustworthy? Did the people like them, it just has to be consistent integrity across the board that you feel? And that’s why lots of times we like to fly and meet with those owners to provide more of the second set of eyes and ears. Given our pattern recognition, is this a trustworthy person or not?

I know you’ve also been involved in quite a number of boards, and I’ve thought a lot about board construction? Both just as a board member, but as an entrepreneur trying to help construct a helpful board and communicate good information back and forth. Can you talk a little bit about some of the lessons learned building boards, both as an entrepreneur and as an investor?

I think what’s really interesting is most every business that we buy, and probably every business that we buy, typically has two problems. One is a sales problem, like a lack of commercial sales effort, and the other is financial controls. And so, I think part of being a good CEO with a good board is to make sure you have context’s reporting mechanism. So, your board can understand the instrumentation on the plane. Because if you don’t know what the data are saying, it’s really hard to make strategic decisions. And the goal of the board is to really develop you as a CEO in the search fund world is notorious, sleeves rolled up. When you need to fire your first person. We have books that we have done in the prior companies that we try to leverage off, you know, always have two people in the room and just little nuggets of wisdom like that. One of the things that come to my mind from your question, Alex, is that I learned this from one of our CEOs. He walks in the first day of our board meeting, and he slid across to all of us his personality test. And he said, “Look, I want to be the person in this room with the longest view. Like, I want to be the most visionary person. This is me. This is who I am to develop”. But he was just so good, asking you to drive forward. He even asked me to go on sales calls. He was like, we had sales calls here in Charlotte, and he just really asked of his board, and we worked for him. And he was very humble. As one of the guys he asked me one time, and I’m sure my answer was very inadequate, but he said, “Do you know the difference between a good CEO and bad CEO? Yeah, I haven’t got the slightest. I can list everything. And he said, and he was referring to a good CEO and the interaction with the board. And he said a bad CEO will not listen to you. A good CEO does not have to listen to you, but they will. And I always thought that was like a key element of this meeting in person. And the board is critical in the beginning. Seeing the business is critical in the beginning because you’re trying to jumpstart. This is your team is very important to drive. And so having them there and having steady cadence. I love financials that are off-quarters, l meaning get them monthly. So, you don’t spend the entire time of the board meeting talking about just financials. You really need to answer one to two to three strategic questions per board meeting and drive your board for it that way.

That’s fantastic. Are there some other helpful tactics that you’ve seen entrepreneurs use when interacting with their board to when sharing information or asking questions with their board that has been notably helpful?

You said it in communication is really critical, and it depends on your personal style. Right? That’s what I love about the traditional model, is you can take all of these menus of choices and make it your own. But some things that I’ve seen that have been really helpful is to send out the deck and we can advance that. Let’s say you send it out on a Wednesday. That Wednesday, the next week, is the board meeting. Hey, by Friday at 5:00 PM, I would love to have any of your questions. And so, if there are tactical questions or details, to understand the context, the board will respond and will respond to everyone, so everyone can see it. And that way you don’t waste time in the board meeting on trying to understand every little nook and cranny up. And you can focus on the real meat of the matter. So, that’s something that I really love when CEOs start to do. I’ve seen other CEOs that have done individual one-on-one pre calls, where they will actually talk about that. I think another good piece of advice would be to work with one of your board members to talk about the content of the meeting and make sure you’re on the mark. And developing, you really do need to get as consistent in your materials as early as possible. So, you can establish trends over time and be more effective in your decision-making.

When you say consistently in materials over time, do you mean just the format of a meeting should be the same? Or, the types of information you provide should be consistent. Could you dive into that just a little more?

Yeah. So, a lot of it is like financial reporting or how you’re going to attack two questions again, to go back to Bart and Matt, how they did the Amazon letter, right? Which letters are so much harder to write than the PowerPoints. And so, the narrative that they had was five or six pages. You had financials that we had a meeting night before on financials. Any other questions? Dinner. The next morning, you went through the meat of the narrative. So, to me, that set the tone initially. And that’s the expectation was every single meeting we were going to have the same. They weren’t developing an on the fly, and frankly is the one when you’re a first-time CEO, and you’ve never had this structure before. How do you standardize? And so, leverage your work through that in your quarterly reports and all the things that have worked very well. It’s all about minimal time and administrative production. Maximum time in the content.

And then when a CEO is thinking through the numerous issues in the business or challenges to overcoming, what types of challenges tend to be? You’ve talked a few times about the two or three things that are most important for a CEO to work with his or her board what are some examples of items that are really helpful. And important to talk about if a board, and then where does that cut off? And those topics below this line just should be handled either one-on-one or just with the CEO’s team.

Have to really think about what’s the board’s role in strategy. But what search is a bit different, it is more hands-on, especially in the beginning. In the beginning, you really do need to feel open. Like, I’ve gotten feedback from boards. I’ve been on it that the searcher and the first couple of board meetings were just scared to death of the board. Because the board can fire you. And that worst-case outcome. Nobody wants to do that. I think in the beginning, it is educating your board, talking about people in the structure of your transition. So, in the beginning, it was like, where are we having problems with the transition? Don’t screw anything up. He bought a good business with good people. As a first-time CEO, searcher, we are inclined to action. The goal of the board is actually to pull the reins back and just say, be patient, take your time. More data, more information, better decisions happen. And so, a lot of that is the beginning, but its people is a big part of the discussion, always. And what industries you’re attacking, how you’re doing that. So having your org chart, that what it is now and what it looks like in the future. I love seeing that because to me that map, the plan EOS, is a great tool that allows you to get that. Ten-year five-year one year quarterly, weekly. Look, you’re not going to bring the weekly tactical things to the board. You’re not going to bring all the minutia, but you’re going to bring them that high-level strategy. And how can I point to this area and get to where I want to go?

We’ll get to some closing questions. What college class would you teach? If it could be about any subject you want to?

I would teach about entrepreneurship through acquisition. And in fact, I feel very fortunate because I do that now. Like I’ve helped set up classes, Kenan Flagler, Chapel Hill would at UVA Darden. There are great professors there. And I get the luxury of going in there and actually talking about these stories. And so, for me, there’s nothing else I would rather talk about. I went back to my fifth-year reunion at business school. There were like 50 of us in the room. And the president of our section asked how many people are happy and only like five people raised their hands. That was very sad for me. And I just feel very fortunate that, I’m doing what I would love to teach. And by the way, I think most people in the search fund world do it for it’s a mentorship first model. They kind of want to be professors anyway. Ultimately, I may find myself on that path, but now I get to do it a few days, a semester in the fall and the spring, That story is that I hope you did raise your hand.

What were some of the most common reasons that folks felt unheard?

I think being in bigger organizations that they felt like they were having as much impact as they wanted to. Like, it seemed that to be a common theme. I think there’s been a huge shift that most people ultimately just wanted to run their own business. That seemed to me that they just felt like they were having the change in the back that they wanted. That’s been 10 or 15 years since I had that conversation. So, it’s hard to kind of remember everything to that kind of sticks with. Yeah. I hope more would raise their hands today.

What strongly held beliefs have you changed your mind on?

This is interesting. And by the way, I think I’m not fully developed on this yet, so it’s going to be pretty rough here. But we talked a lot about work ethic and working hard. And I’ve always been taught and believe that everything worth having is really hard and hard work will get you all the way there. And that’s not the case. I’m not saying you shouldn’t work hard. I think you have. But you have to think about it. Like, I’ve seen people work really hard, and by businesses in the industry wins turn on them, and they’re just unlucky. And so, you have to think about strategy. You have to think about the luck of being in the right industry. I always thought hard work was the most important. And as long as you kept doing that, it would be great. And I’m not sure if that’s the case now. I think you just have to work. And I know its cliché, but the hard and smart thing is very important. I think a lot about grit and what Angela Duckworth writes about, the persistence of effort, consistency of interest in those things. I’m not sure that everything in life is worth having is hard. Sometimes the view is just as good on the easy hike as it is on the hardest.

I like that answer. That’s a good one. What’s the best business you’ve ever seen?

You know, these stories haven’t completely played out either, but I’ve been fortunate and worked with some great people and see some great businesses. And we talked about a lot of them in the episode from the security business was a great business. But I probably would highlight two businesses that we’ve invested in that I’ll draw commonalities between the two. So, Health Mark is one with how brothers debt, I think I would highlight through what Health Mark does is healthcare release of information. So basically, if you go into a doctor’s office and whether it’s an audit or a legal request or a transfer from doctor to doctor, your patient records need to be transferred. And lots of times a doctor’s offices or hospitals spends so much time administratively moving that around. Health Mark solves that problem by technology in people. Provides that lift off your front desk person of having to manage that and takes really good care of that. Those records because HIPAA and those things are super accorded. So having the specialization focused on that, it’s a very neat business. And then Agassis, and then I’ll talk about why both of them are successful in my opinion. Agassis is a Brazilian-based hardware as a service business. And I served on the board of both of these businesses in what is hardware as a service. Let’s say Brinks moves into Brazil they have a thousand people, and they need to outfit them with a Lenovo laptop and an iPhone. Then our company can actually buy the computer. We finance all of that and we set them up, and it is pretty amazing because you think about the IT person. At least I do. When I was VF, the IT person that would do the individual laptop set up. And then have all these laptops in the quarter, you walk into our company in São Paulo. And they have like hundreds of locations that are all loading the software at once and like really efficient. Very effective. Really good for the client, and they’re renamed Yao in both of those businesses. We’ve talked a bit about people, process technology. So, Health Mark, they bought from a good seller. Like people-wise, like Scott Bagley, who now actually is an investor in the search fund community. He is a great person. And he had set the business up for success. It was high growth, high margin. And he had already installed EOS. It is one of the few businesses that we had bought that actually had EOS already installed. And then Matt and Bart just added onto that. And people-wise brought in, they were able to paint a great vision. I think in business school, I learned that I studied all these people and there were only two things I could figure out that made them great. And they were great storytellers. They get painted. And then the other thing is they did it. And I think Bart and Matt paint that vision. To paint that story, and they could attract period talent. And they incentivize them, and they word them. And then they have a value proposition to the customer that is incredibly compelling. Oh, you want to take this administrative burden. This wasteful non-core thing off and allow your people to spend more time with your patients. Sign me up. That was one that I participated in a couple of sales, and it was one of the easiest sales I’ve ever been on in my life. Because they were just so good at their business, in a technology process to a whole new level, to be able to scale those businesses. Same with Renee. And now, like people-wise, they have created this culture of incentive structure. I’ve never been a part of a business where the date, you stretch with the budget, and you push on the budget. And then they go to the people and say, we’re going to beat the budget by 150 bucks. So, they take the budget, which is already a great goal. And then they just stretch it even further, and they reward people. And so far from good sellers, some sellers are still in the business. So some people, things, and they made a comment. One time, they believe in low profile CEOs and they don’t have so much humility, and they take us to a whole new level. Like every person I think they’ve run from, I’m going to get this wrong. They’re going to kill me. But 40 people to like 250 people in a very short period of time, everyone knows exactly what they’re accountable for and the vision that they’re all marching forward. And it is crystal clear, and they’re motivated. They have this ability like Matt and Bart to motivate people and reward. And the value proposition to the customers are really compelling. So, for me, those are the two best businesses that I’ve been a part of and seen. And it’s really cool to be a part of the journey when you just see exceptional people who are exceptional leaders. Frankly, I learned more from them than I’m sure they learned from me. And I’m just lots of time, just grateful to be on that journey that I love

That comment about, them being low profile CEOs. It sounds like perfect podcast guests.

Yes, they are fascinating people and very thoughtful.

Well, thank you Badge so much for sharing your time. It’s been so much fun to hear about the companies you’ve run before, lessons learned from investing in searchers building boards. This has been such an all-encompassing episode I’ve been, I’m so grateful. You’re able to share some time with us.

Well, thank you, Alex. I’m grateful and humbled and honored to be here, too. And I appreciate again what you do and providing a platform, people to kind of be inspired and educated because of entrepreneurship. It’s just such a wonderful thing.

We’ll have to have you on again.

Absolutely. Man, look forward to it.