Mark: Welcome to unsuitable on Rea Radio, the award winning financial services business advisory show that challenges your old school business practices in a traditional business suit culture. On this show you’ll hear from industry professionals who will challenge you to think beyond the suit and tie, while offering meaningful modern solutions to help you enhance your company’s growth. I’m your host, Mark Van Benschoten. Buying a business can be quite the process. In many cases it takes years of research and due diligence before you can even decide if buying a particular business is the right move for you.
There’s a lot of information out there for those looking to sell a business, but we don’t hear much about what to consider when you buy a business our guests today are Ryan Dumermuth, one of our principals here at Rea, and Kirk Spillman, the president and CEO of Eagle Machinery based in Sugarcreek, Ohio. They’re going to talk to us today about the importance of a strong business relationship and what it’s like from the buyer’s perspective when it comes to the business acquisition. Welcome to unsuitable, Kirk and Ryan.
Ryan: Good to be here.
Kirk: Thank you Mark. It’s good to be here.
Mark: Great to have both of you. In my intro, there, I made reference to relationship. It’s evident to me that you two have a very strong relationship. What do you attribute that to?
Kirk: I think it’s evolved over a long period of time within the development of our business here at Eagle Machinery and working through the years with Ryan as a key support person for our business, that our relationship has flourished from there. I think the trust has been developed and it’s all been great.
Ryan: If I can add too, I’ve said several times over the years, I work with good people. You know it when you work with someone that has similar beliefs and thoughts and similar core beliefs, I guess. Relationships are easier when you’re working with someone you enjoy.
Mark: That’s a great point. Kirk you said evolved. When you first meet somebody it’s not the same as when you know somebody 12, 15, 20 years later.
Kirk: That’s true, Mark, and I think we’ve all heard often, you never really know anyone until you work with them. It’s because of the experiences that you work through together, the time spent, and that trust develops through challenges and successes as well.
Mark: We’re three minutes into our podcast and you have mentioned the word trust twice. How important is that?
Kirk: That’s very important, particularly in business. As an entrepreneur when I started our company, I knew that I would need professional services above and beyond just the core market and the product line that we were embarking on at Eagle Machinery. Rea & Associates was a key player in our success and we just have been very appreciative of the resources available.
Mark: How did you get to meet Ryan? Maybe you should answer that Ryan. How did you get to meet Kirk?
Ryan: Going back 15 years ago now, Kirk was looking to acquire the business and in Tuscarawas County the Rea & Associates name is very well established, having been found there in 1938. Kirk called on Rea & Associates, may have known one or two of our principles, one of our partners and it evolved from that day.
Mark: Kirk, anything you want to add to how you got to meet Rea?
Kirk: Yes. As Ryan shared, just through the needs of our business and as we talked today about acquiring or buying a business, it’s very important to share that, regardless of the nature of the business that you may be embarking in, it’s really important to think about the type of help that you may need within your business that’s not necessarily directly related to your product line or your customer base, but just the common issues that businesses face and as Ryan shared, the reputation that Rea & Associates has, that was appealing to me as an entrepreneur and I knew that I would need those professional services. That’s how we meet and through that our business has been able to grow and sustain itself through advice and help from Rea & Associates and all the services they provide.
Mark: Seeing you two operate together I would say you guys are friends?
Kirk: Absolutely, from my perspective.
Ryan: Absolutely.
Mark: A little model that I have, if you’re a client of mine you’re a friend of mine. That’s the attitude that I have. We have that at Rea. We care about you. Trust, as you’ve been mentioning, that trust that we’re going to do the best we can and sometimes we might fail a little bit but we’re behind you and your concerns are our concerns. We want to see you succeed.
Kirk: That’s been evident. I can share as a privately owned business, not only myself but my family is very thankful for that type of support and the trust and it’s been very good.
Mark: Enough of a love fest here. We’re all feeling good about ourselves. Can you talk a little bit about your experience about this acquisition that you did, Kirk?
Kirk: In late 2003, at that time I had been working for a local firm and the owner at that present time asked me if I would be interested in acquiring the business. I had an opportunity to do that but there was a key supplier that was a Canadian firm, who I really believed was a key factor in being able to offer a complete package to the industrial woodworking industry that we supply. The timing of those things was very interesting in that the key supplier in Canada was ready to sell their business. That was a good fit and a need with the local firm that we merged with the Canadian firm that became Eagle Machinery.
Mark: The day before this individual approached you, were you thinking about buying a business at that time?
Kirk: Not at all. It’s one of those things in life, we all have dreams and we think about things that we’d like to accomplish and we never know when those are going to pop up. That was a bit of a surprise. It’s worked out very well.
Mark: That’s nice to hear. We’re talking about the buy side and as we go through my career, somebody’s trying to sell a company that seems to get a lot of attention. We’ll help you sell your business. Here’s how you want to structure. You don’t seem to get a lot of attention of service offerings to somebody on the buy side, to a buyer of a business. There’s more risk there. Ryan, any comments on that?
Ryan: Sure. We talked before the session here today and some of the reasons I think that’s true is because when you’re selling a business you’re obviously getting an infusion of cash and able to pay for professional services, whether it be attorneys or CPA’s or particular wealth advisors. That’s very popular to be marketed to for most professionals, and rightfully so but on the other side, the buyers most likely are not very flush with cash and are probably concerned with spending. There’s going to be lack of marketing in that area.
Mark: What type of things did you help Kirk with, in looking at this opportunity?
Ryan: That’s a good question but again, it’s been a long time ago.
Mark: You can go ahead and make them up. It’s all right. We won’t fact check this.
Ryan: At that time it was a perspective maybe where myself and particularly the other principle involved had been through this process before, had seen it, had a different perspective on things than Kirk had. Not better but just different. Kirk brought his knowledge and expertise and we brought ours and that’s what makes a good team.
Mark: Sorry to challenge your memory here but do you remember what those might be? Kirk, maybe you might, what those might be? This differences, your focus versus Ryan’s focus?
Kirk: Sure, Mark. As I reflect on those times I learned very quickly how much I did not know about business. I was fortunate enough that I had a number of years’ experience with a previous firm. It was a manufacturing company as Eagle Machinery is and I thought I knew enough about operations and customer service and marketing and all of those things that I could just step into this business and be very successful. I recognized that there were going to be things that I would need that I didn’t have experience or resources for. Some of those things were the entity itself. How do we set this entity up? I knew nothing about that. Bear in mind one of the firms that we merged was a Canadian firm, as we mentioned.
There are situations around those things and from my perspective I didn’t have any experience in those areas. Just setting the entity up, key factors that I believe all businesses look to help manage their company such as tracking sales and tracking costs and margins and so forth. I had some experience in that previously but all of those types of things were very key needs and Rea & Associates has been very good at providing a lot of that support.
Mark: Ryan, again challenging your memory here. You can make it up. Again, we’re not going to fact check this. Do you remember what value-add you had? What was your concern for Kirk when he was buying that business?
Ryan: Sure. Obviously how the purchase was structured, particularly with what are we buying here? Are we buying equipment, inventory? Are we buying intangibles, and to the extent possible structure it to help Kirk in any way we could. I remember a lot of that and as Kirk mentioned, the entity structure. Starting a business you’d think a lot of it could come easy, but setting up payroll, it’s as easy as that. You have to be able to pay your employees, day one. If you have a retirement plan …
Mark: They get mad if you don’t.
Ryan: It could turn into a problem.
Mark: I think buying a business is a lot of risk. What are you buying? Due diligent, process, I assume Rea helped you out with that and to destructure, you mentioned that Kirk, but the operational. Can I really make money at this? Do I have enough? I would think that’d be huge. I’d think that’d be a huge concern.
Kirk: It certainly was and with the opportunity and the timing of it, just the funding to buy the business. We are we going to get that? How are we going to do it? In our case, we basically laid everything we had on the line to launch our ship.
Mark: It’s nerve wrecking.
Kirk: A little bit, yes. We had a solid employee base there and we believed in the capabilities and the product line and we saw the niche in the market that we felt we could fill but as Ryan mentioned there were a number of things that we had to figure out and that was interesting. When you’re in the workplace for years as an employee you learn a lot of valuable things but you don’t fully realize until you need to step out on your own, what are you really facing here? How deep is the water? Those are some of the questions that were probably unfair to bring to Ryan as, can I make it? If I put everything I have on the line is this a good venture? How can we make this? You look for a lot of support and professional advice and experience that I didn’t have at the time.
Ryan: Mark, if I could maybe add a little bit to that. Part of our topic is the aspiring business owner and what to do, how to go about doing it, and Kirk mentioned, we put everything on the line. That’s huge and a key point. It’s a family venture for almost all of our clients, being family owned and having that support from a spouse, from children, if they’re of age, but how important that is to have a stable family relationship going into something like this, because there’s going to be ups and downs and that support, whether it’s active in the business or active at home, that support structure.
Mark: Huge
Ryan: Huge.
Mark: That’s a great point. When Kirk said, we, I thought also we as Rea family, we. We want you to succeed, not that we got a receivable out to you, but we want you to succeed because we care about you. I can see that between the two of you guys care about each other.
Ryan: That’s correct, Mark. At some level the relationship has to be there. We look for that from the relationships that we have as a company with our customers. Those are partners to Eagle.
Mark: Sure.
Ryan: It’s the way we view things. We have Vendor partners. We have professional partners in our legal counsel, in our CPA and tax support, and all of those things, the business management support, we receive. Those become partnerships.
Mark: You mentioned, Kirk, the relationship with your employees and how important that is. We say the accounting firm, I say in your business that’s your greatest asset.
Kirk: It absolutely is. Our employees are our biggest asset and frankly having the opportunity to work with some of those employees prior to purchasing the business made that, and I remember that clearly, when we signed the line for the company. The final discussion that my wife and I had and it was her comment is, where are we going to find better employees? You’ve always wanted to have your own things. Now is your chance and we’ve got the most important aspect of any business and that was the employees.
Mark: That’s powerful. That’s really powerful, the valuation of the business as a workplace in force, and you had that, a committed workplace in force is what it sounds like.
Kirk: We certainly did, Mark, and we’re proud to say that most all of those employees are still with us today nearly fifteen years later.
Mark: That’s awesome. We’re talking about advisor relationships. In any relationship there is a give and a take and there’s a development of that. Any comments between you guys about honest or difficult conversations that have occurred during the years?
Kirk: I’ll let Ryan share but I would like to comment. Forming a business in the early to mid-2000’s prior to the economic downturn that we all faced …
Mark: It was hard.
Kirk: It was very hard and in some of those hardest times are the times that you learn the most. It makes you far better. I’m forever grateful for some of the hard discussions, the reality of where we were, and I know it was hard for Ryan to share that. He did it out of concern, just to be certain that we were eyes wide open and we might not make it through but we did what we needed to do and he was supportive of me through those hard times. I’m sure that wasn’t easy for you, Ryan.
Ryan: Initially it is never easy to be talking about the company surviving perhaps, but I went into it with great concern. At that point we had had a relationship for eight years or so. It was already a good relationship and being genuinely concerned, but as nervous as I was going into conversations or maybe concerned with how they would flow with Kirk, he’d always made it easy and that continued to make our relationship flourish. Those difficult conversations weren’t all that difficult. They were honest and he helped me as much as I helped him.
Mark: That’s great. That’s inspiring because it’s probably not difficult, it’s just honest. We’re going to have a honest conversation. Not going to hold anything back and that probably makes it more palatable. Kirk knows that you’re concerned about him and he knows that. He knows that Ryan’s watching out for me. Kirk’s probably concerned about Ryan also. That’s the definition of a relationship.
Ryan: I think it is. If we spend a couple hours together, as we did today …
Mark: Drive him down and drive him back.
Ryan: Maybe four hours together, today. I’m guessing that half of those hours are not going to be exactly talking about business. In fact we had lunch here just a little while ago and three fourths of the conversation was about family and that’s what really matters and that’s what a relationship’s about.
Mark: That’s great. Very inspiring you two, to see the relationship that you have. I hope other Rea & Associates people that and they can aspire to have that with their clients. Before we wrap up there’s a question we like to ask every guest. Kirk, we’ll start with you, since you’re the guest, put you on the hot seat. If you could one super power, what would it be?
Kirk: I’ve had many blessings in my life, through family, and friends and people who have supported me, but the Lord is my superpower. You learn how much your need really is in some of those most difficult times. I remember very vividly in those economic times that I proclaimed to a number of our key employees that there was going to be a miracle occur. I believed that. I didn’t know what it was and the beginnings of many miracles was the receipt of a nice project order from a client on Valentine’s Day, believe it or not. My wife said that was the best Valentine’s Day gift she ever received.
Mark: That’s great.
Kirk: Prayer is powerful.
Mark: That’s great. Ryan? I don’t know how you top that, but go ahead, give it a try.
Ryan: No, I’m not going to be able to top that but as if was sitting here thinking, if I could have a superpower I guess it would be to have the opportunity to work with more companies and individuals like Kirk.
Mark: That’s great. That’s our show for today. Kirk, Ryan, thank you for sharing your expertise and your experiences with us. I wanted to give a shout out the Association for Accounting Marketing for recognizing unsuitable on Rea Radio with two awards at its annual conference a few weeks ago. We certainly appreciate your support and look forward to continued success with this podcast, while helping entrepreneurs everywhere find continued success from your business endeavors as well. With that being said, if you’re looking for even more business advice, you can find it at www.reacpa.com/podcast. Don’t forget to check out on iTunes or SoundCloud where you can subscribe, rate, and leave a comment. Until next time, I’m Mark Van Benschoten, encouraging you to loosen up your tie and think outside the box.
