Turning Chaos into Opportunity: Jon McLaughlin's Approach to Business Turnarounds
Today's conversation dives deep with Jon McLaughlin, the CEO of TBX and General Partner at Emberline, exploring the intriguing world of SaaS businesses. Jon's journey from the bustling finance scenes of London and New York to trekking across Switzerland, Nepal, and India is nothing short of remarkable. He shares how he transitioned from fixing struggling companies in sectors like aerospace and defense to now focusing on acquiring and revitalizing SaaS ventures, particularly in aviation safety and compliance. We discuss how software can address overlooked processes in traditional industries, making them not just more efficient but also safer. Jon emphasizes the importance of finding unique opportunities that others might miss, as well as the need for thoughtful processes in business that drive continuous improvement.
Discover more with our detailed show notes and exclusive content by visiting: https://bit.ly/42uhzxD
Jon McLaughlin's journey from finance to software showcases the power of pivoting in one's career, leading him to create impactful solutions in overlooked business sectors.
Emberline focuses on acquiring niche SaaS businesses that address real-world issues, emphasizing that technology can enhance efficiency and safety in traditional industries.
The importance of having strong processes in place cannot be overstated; they significantly reduce errors and improve throughput in any business environment.
Business success heavily relies on finding passionate individuals who truly care about their work, as they are more likely to persevere through challenges and drive innovation.
Jon McLaughlin's unique journey from finance to turning around struggling businesses emphasizes the importance of adaptability in career choices.
He discusses the significance of niche markets and how they often present overlooked opportunities for growth and innovation.
The conversation highlights the critical role of processes in businesses, particularly in aviation maintenance, to enhance safety and efficiency.
Jon shares insights on how empowering teams and fostering a positive internal culture can lead to external success and customer satisfaction.
The discussion reveals how software can simplify operations in traditionally complex industries, making them more efficient without significant cost increases.
Jon emphasizes the value of trust in business transactions, noting that strong relationships are essential for successful partnerships and collaboration.
Today's guest is John McLaughlin, CEO of TBX and General Partner at Emberline, an investment firm that acquires and revitalizes SaaS businesses. Currently he leads Aviation Data Group, or ADG, one of the most interesting aviation safety and compliance software companies in the world.
John's journey has been anything but typical. He began his career in the fast paced world of equity derivatives, bouncing between London and New York.
But after a few years in finance, he made a hard pivot, selling all his belongings to walk across Switzerland and trek through Nepal, Burma and India. That chapter led him into one of the toughest corners of business turnarounds.
John cut his teeth fixing struggling companies in aerospace, manufacturing and defense, all under private equity ownership, before co founding Emberline, where he now acquires and builds SaaS companies for from the ground up.
Born in Costa Rica and now living just outside Santa Fe, John is also a private pilot, a former business school professor, and someone who knows what it takes to lead companies through both chaos and calm.
Freddy D:
Welcome John from Emberline to the Business Superfans podcast. How are you this afternoon, John?
Jon McLaughlin:
Good, Freddie, thanks for having me.
Freddy D:
So tell us a little bit of the backstory of how Emberline kind of came about.
Jon McLaughlin:
Yeah, happy to give you the origin story.
So I was working after business school in private equity operations, helping turn around companies for private equity firms and did that for a couple of years and at some point was curious if I could break out and do it on my own. So I found a business partner that also had the same inklings.
We started to raise money and do deals and it's been about five years now that we struck out to look for interesting niche opportunities or niche market leaders that were underappreciated, that were really too small for venture capital or too niche and then also too small for private equity.
And we found there was a, maybe a large fragmented space of companies out there that were doing interesting things and solving interesting problems that just needed a little bit of capital and some elbow grease.
We found an interesting opportunity in Wildfire Software that was a rapidly interesting space for us based on the macro drivers we're seeing what's happening with la, and we knew that these things were going to happen. What if there were software tools to help mitigate that risk or help first responders?
So we found an interesting opportunity there and that's been a good deal for us. The other area we're pretty active in right now outside of public safety is in aviation maintenance as a pilot.
Aircraft were flying really old aircraft. There's a Lot of maintenance shops, highly fragmented. How do we get the right tools for them to be to do things safer?
We saw the 737 Max incident a couple years ago and then now in the news in the last couple of weeks, we've had a couple of plane crashes this week. Right. And I think safety is again, do mechanics and maintainers, air traffic control, whoever, do they have the right tools to do their job?
So our thesis is really predicated on finding opportunities that are like that. It's these things that are hiding in plain sight that have these interesting trends behind them.
And can software help be a part of that story to help simplify the world, make the world safer, have a positive impact? And we're having a lot of fun doing it on our own. Right. So that's how I kind of fell into it.
There wasn't any plan, but it's true because software is.
Freddy D:
Before we got on the show, I talked about my background when it got into the software industry, when it really began. And over the years I've seen things just exponentially change because of the technology. Things that took months to design.
For example, in a drafting world, an engineering world, now you get done in days because of the technology that's involved. So it's really kind of a space that like you say, can bring a lot of great things to the world.
Jon McLaughlin:
Yeah. And it's interesting you mentioned that.
So like a lot of people are noticing what's happening with the shifts in the last call it 150 years adoption curves are getting steeper and technological change and innovation seems to be happening faster from my standpoint, rather than try to get in that race that almost like an arms race of innovation.
What really gets me excited are places that don't change as fast, that perhaps are more staying the same, where software can fix more processes and the way they're already doing things versus trying to disrupt an industry. Right. I wouldn't say we're a disruptor because it's hard. It's a really hard game to play.
Especially now with AI and massive teams of very smart people and lots of capital behind it. We can't really compete with that. So where can we compete? We were looking at just these interesting niches.
Like the other day we were looking at a water bottling plant, software. How many water bottling plants are there? No one's really going to go after that.
Can you create an interesting business around bottling plants and then maybe move out to other things? Now that's not an opportunity. It was too early stage for Us.
But those are the sorts of things that grab our attention where it's like, what are some underserved markets where people are pulling out their hair because they're doing way too much paperwork. There's complexity in the process. There may be a regulatory situation. Right.
Compliance where they have to do something and it's just more red tape or more checks and balances. That's really good for software because it helps you stay organized, it helps coordinate activities, all those things. And it's cheaper.
We can get the price down with cloud software. So for us, I really get excited about. It's not boring. Some people throw out the term hey, boring industries, but they're not really boring.
It's just industries that maybe haven't gotten a lot of love because they're doing some sort of work that people may not be familiar with. So part of the joy in my job is finding out what those things are.
For example, that we're looking at a pallet manufacturing ERP business and like looking at pallet manufacturing. There's a couple of software providers in that niche that service that industry. Wow, that's really exciting.
Pallets aren't probably going away anytime soon. We need to move goods and services around the country. What would it look like creating a software leader around that? Right.
It's a job that takes you down these roads. And that's the fun part for me is always learning about some new industry or submarket or sub niche.
When they say things like this is really hard to do or I hate, you know, this is a pain in the butt. That's when my spidey sense goes off where I'm like, huh, I wonder if there's software that's solving that problem. Person's problem.
That's where I start to pull the thread and go look around to see if there is a software provider that potentially could be a market leader for that service or niche industry.
Freddy D:
That's a really unique approach because you're looking at that unique situation that's actually helping businesses thrive.
Because you're implementing technology into something that is overlooked and you're in turn really helping that business scale by implementing technology without really increasing costs.
Jon McLaughlin:
That's right. And people are more aware.
We have gravitated toward industries that are very computer illiterate by I don't know if it's by default, but public safety. Some people say I'm not good with computers. You gotta make it easy to use. And intuitive. Aviation maintenance has kind of been the same thing.
A story I like that I was telling Last week to some folks was that we sold a two year subscription to a 93 year old guy. I was trying to get him to buy the month to month just because I did it right. 93, you know, you can turn it off if you need to.
And he was like, how much is a year? Does the price go down? And I was like, yeah, it's a little bit cheaper. And then he goes, well, how much is a two year? Like it's even cheaper.
And he goes, I want to do the two year. So we get a little bit of that and that makes me happy. Where it's like older folks staying active in their niche or their industry.
We see that in public safety, we see that in aviation. So any age. And a lot of folks, they used to say, hey, I'm not good with computers, but they really are.
When you talk to them, they're psyching themselves out to some extent. I have a lot of customers that say that.
But then when you walk them through a product, any SaaS product, they can pick it up really quick and they're almost jumping ahead of you. And I tell them, hey, you're pretty good with computers. You're not like, you don't need to say that anymore. Like, trust me, I've seen worse.
And it's really around software there are those little impediments that are more personal actually that when you really get down to it, it's not because the industry doesn't want to adopt it or there's friction around the buying process. It could be as easy as that. There's people psyching themselves out on the DTC side, or at least the B2B2C side we call it. So we've noticed that too.
In terms of user adoption, I think it really is like a golden age. Some of the questions that people bring up are like, is Enterprise SaaS dead? Is AI going to kill it with all these low cost tools?
And I think it's still going to be around for a while because people, a tool is a tool, but what people really want on the B2B side is a whole solution, a whole enterprise solution, which is, yep, it's more than just product leading. You really have to lead with the service support, implementation and training. All of those things are important. And AI is not going to be.
Maybe people say AI is going to be able to do that, but from what we've seen in our markets is that you want to deal with a person at the end of the day because when you try to call a company like Your bank or one of these larger enterprises that have gotten rid of all the people and you're dealing with a machine. I want to pull my hair out. So why would anyone else want to do that?
Freddy D:
I mean, it can be used for initial conversations and initial engagement, but then you can switch it off and you can switch to a real person. But to your point, when I worked with an interpreting agency, interpreting and translation, they had no technology in there whatsoever.
They didn't even have voicemail. We put in some technology, some systems, and some project management tools and everything else.
And with the same people, we ended up doubling, tripling the amount of workflow that we could handle. So the cost didn't really increase, but we were able to increase the throughput because of leveraging technology. And that helped that company scale.
As I mentioned it before, that positioned that company to be acquired because of the technology that was implemented, because of the throughput that it could do, and because of the profit margin that we were able to generate out of that. So what you're doing is same thing in spaces that are, like you said, have been overlooked.
Nobody thought same thing with the interpreting and translational company. Now, AI is helping in some of that space, but you still need human interaction.
Jon McLaughlin:
Yeah, you hit the nail on the head on throughput because we bought these aviation. We bought a couple businesses in aviation software. I'm running those businesses now as the CEO gone in there to put them together.
And what we noticed is that I was trying to figure out why there was variability around sort of the quality of. Of the maintenance work. Right.
Everybody really cares about doing a good job on aircraft, but sort of the work product that you see, at least on the paperwork side, there were a lot of errors across the board, at least in general aviation. So I was trying to figure out why that was.
And the last three months I was on the road talking to shops and asking and interviewing people all across all the stakeholders, the faa, teacher, ias, they call them inspection authorities. And I was asking them, like, why is this happening? What I realized is it's not that people don't care.
Errors happen in our industry because they don't have a process. Right. Shop won't have a process. And because they don't have a process, they get overwhelmed when there's like a influx of orders and complexity.
And when there's an influx of orders and complexity, there's no consistency. So they miss things. And they start to miss things. Mistakes happen. When mistakes happen, people in our industry die.
So what I realized is, hey, I actually was like pushing our software solution around more. Here's why.
Here's the best practices that are out there and shifted away to putting in a process for folks where it's like, hey, if you're overwhelmed, you need a process. Because a process brings in more throughput, it reduces risk type of business.
Or that could be quality problems, that could be mistakes down the line or warranty issues, all that sort of thing, whether it's manufacturing or software. And the last is continuous improvement, which people don't realize.
You can't get better until you have some sort of process to start shaving off minutes. Right. And then like once you put that in, it's like, okay, from start to finish, it takes us X.
You do it a few more months and people get better at it. Fine tune it and then it's like 70% of X within a year. That's where your real gains come.
It never ends that throughput increase because you're always getting better. And if you don't have that process, you can't get better. So I've shifted my whole spiel.
It's like not really a sales pitch, but it's more how can we partner with firms to help them adopt software. My whole adoption spiel is now really around process power.
Freddy D:
Goes back to the E Myth book where it's basically processes that it's teachable and repeatable. You look at a McDonald's, you can go any McDonald's in the US and it's. They have a same process.
It comes out the same way, same amount of time, and anybody can be trained because it's a documented process.
Jon McLaughlin:
Yeah. The other McDonald's analogy that we throw around, by the way, you can't run a McDonald's if you don't do all the jobs in the McDonald's.
It's easy to talk about. The other analogy we use is watching a movie versus making a movie.
You get someone who's watched a few movies, but then they think they can make a movie this time around with this company, I really tried to go into the business to understand all the different pieces from the most granular level to the most highest level. It's really yielded interesting insights.
So I think for the McDonald's thing is a lot of business owners, or at least business buyers in my world, they think it's like beneath them to go down to that level. I have people who have people who do that.
Freddy D:
But you, I agree with you a hundred percent because you can't put your hand on it and really understand and appreciate even what that individual is going through. If you've never experienced it, I mean, it's impossible.
Jon McLaughlin:
That's exactly, exactly right.
Keeping an open mind, doing those sorts of things has really helped influence my thinking around process around where software can really help, how to interpret that to an owner. Because a lot of folks, when we bought our first business, we were sort of using the classic playbook. It was like, here's a playbook.
Here's what you do. You hire, go to market, you have these pods, you get the messaging, right? You go through this funnel.
It was just sort of this thing that everybody does without thinking about the perspective of the client or the customer. Right.
So for me, doing the work, like almost literally almost getting to the point of turning the wrenches and doing the actual work has really influenced a different way or shift in thinking. Where I'm not selling, it's not like a demo. When I'm on the road, I don't really have to talk much about the software.
It's more about what are the real value, the value props here.
And how can you interpret it for a customer in a way that makes sense to them and not you're like you're some AE account executive at a software firm just spitting out some canned playbook. How can you adjust that versus the man on the street? Right? That's really our customer. It's someone who's just working every day.
They got a challenge, software can really help fix it. But they don't know where to start.
They can get overwhelmed like we talked about, or they don't want to have to go to the boss and ask for permission to buy it. How do you build a relationship to get through that?
Freddy D:
Yeah, well, that's one of the things that I did in that propelled my success in the CAD cam world, which is computer aid design, Computer manufacturing is.
I would meet with the business owners and first off, I'd neutralize everything and says, look, their software, the other guy's software all does the job. Otherwise they wouldn't be in business. So let's get that part of the equation out of the conversation.
Where do you see yourself in three to five years? What's your business challenges? And so I got into the business conversation. Kind of like what you're doing is where do you see yourself?
What are the challenges? And in some of their cases is scrap of metal was a $20,000 waste of money because you can't.
You use this, you bought this metal, and then the milling machine scraps it and et cetera, especially in the aviation, same thing. The Part's got to be high quality.
So we started talking about the challenges and then it's like, okay, how does my solution help you get to where you see yourself wanting to go?
And at that point in time, we laid out the process of what it would be together because then it set the proper expectation of what it would take to implement a technology. Because you can't shut down what you're doing to bring a new technology, you got to run two concurrent systems, old way and a new way. Right.
And then from there you've got to phase out the old way, move into new technology, and that's how you grow the business. And that's one of the things that I would do.
And I would blow away all the other sales guys because they were busy talking about features and functions and capability. And I'm out of that conversation.
I'm into the conversation of what do we need to do to help you scale your business and achieve your business objectives?
And that's kind of what you're doing at the same time is you're looking at that business and say, okay, how can we help this business improve the processes, solve the problems and make it much more efficient?
Jon McLaughlin:
Yeah, it's interesting. Do you feel like people are, were more resistant to change back then than they were today?
Or how did you help when you're like, hey, these are parallel paths, we're going to like migrate things over, things are going to be a little bit different. Did you get a lot of pushback from folks on the change element with things they can control versus the unknown?
Freddy D:
Curious in some cases, until I started to switch into having that conversation.
Because initially when I got trained in sales and stuff like that, my conversation was, here's the features, here's the benefit, here's how cool we are, buy our stuff.
And then I got some higher level education sales and strategies, and I started looking and talking about business strategies and conversations of that aspect.
And so once you had that level of conversation with the owner or the principal of the company and help them see the picture, it changed the whole dynamics. And more importantly, what I ended up getting is buy in from all the people because I took the spotlight off the back of their head.
Because most businesses have the mindset, at least back then, was, hey, I bought this new technology, how come it's not making me any money?
Well, you bought it two weeks ago and so you lay out the expectations that says, okay, you want to make your return on your investment isn't going to be in six months, it's going to be in 18 months, because here's all the steps that need to take place. And then all of a sudden they would work with them on it. Is this reasonable? Is this your timeline?
And so what I was doing was subconsciously they were getting buy in because it was their timeline that we were putting up on the marker board. So now it's not me with my timeline.
I turn around and says, okay, John, based upon your timeline that we just worked together to lay out, you want to achieve this, right? I need to have a purchase order from you today to meet your timeline that you just got done laying out.
Jon McLaughlin:
That's awesome. Sometimes in our world, our folks have trouble even visualizing what a timeline.
Timeline might even look like where they're like, this is so foreign to me. If we can bite off in those chunks where it's like, okay, let's just get you going on this part. Get your feet wet, then we can advance over here.
That's really helped us on the public safety side. Public safety has no shortage of needs. You can turn on the news and see how we're fighting some of these wildfires.
They're passing around physical papers. They have like boards with a map on it and stuff. It hasn't really changed a lot because it works, the system works. It's how they were taught.
And they're very nervous. You can't change everything at once.
Freddy D:
You got to set up the process. You got to get everybody's buy in too, because otherwise you shove it down someone's throat, that's not going to fly.
So you got to get the buy in from everybody and get everybody on the same vision. And that's what I did with the interpreting company. Here's our goal as a company.
And we got everybody into one of those racing rowboats where everybody's in a row and everybody's rowing in the same direction at the same time, synchronized. Once you accomplish that, then you can start scaling and everything else because everybody's on the same page.
Jon McLaughlin:
The other thing that you made me think of is you're like me. We're sort of similar in where we started because I started outside of software, kind of fell into it. I was on the manufacturing side too.
And people are like, oh, manufacturing, that's totally different than software. So like, you don't know software. And at the end of the day, when I think of business, right, and we talk about super fans, business is business.
The real purpose of a business is to create value for someone or add value for someone. And they're. It's a Positive experience that they're willing to pay for. Right.
And it doesn't matter if you're selling welding equipment, if you're selling a boat, if you're selling widgets, or if you're selling software. I see it all as sort of the same thing. Now the way those business models are, the values delivered may be a little bit different.
The way you convert raw material to a widget and goes out the door and you service it might be a little bit different. But to some extent the main like rails of these businesses aren't so dissimilar.
So when I came out of manufacturing and fell into software, it didn't feel like a foreign environment to me. It was like, oh, this is just a little bit easier to deliver value. Cause I don't have to build a factory to change the widget per kipped.
You can just have code do that. So it was just, it just felt like it was just all the barriers of getting stuff done and your classical manufacturing sort of went away.
You have the ability or the power and flexibility to solve problems in a new and unique way. That just doesn't take as much capital and time really. So they made me think of that.
Freddy D:
On that note, can you share a story of a company that you guys stepped into and turned it around, got rid of it. What was that whole process?
Jon McLaughlin:
We haven't gotten rid of any companies yet. We're holding them and we have no real set timeline. It's really dictated on the strategies of why we acquire something which are.
I'll talk about those. And we really are a thematic investor. And this word is getting thrown around a little bit more.
But a thematic investment is one in which you're making an investment in rising tide lifts, all boats type of market where you have favorable trends. And Charlie Munger likes to say, you want to surf the wave. 30 year wave. What's a wave out there that's 30 years in the making?
And they're all around us. Those are things that just aren't going away. It could be as simple as hey, people need homes to live.
They're more affordable to hey, Wildfire is going to be a risk because the world's getting hotter, precipitation is going down like that was why we did Wildfire. Hey, aviation safety, it's going to be more complex in the future. It's not going to get simpler, it's going to get more complex.
There's drones, there's urban air mobility in the air, taxis, there's old aircraft.
So we like to find areas that we get long the trend, part one, part two is finding an opportunity where you have a name brand or you have the trust of the market really helps things in B2B world. So B2B, we're selling to other businesses and there's always a contingency of the market that wants to be the first to buy something.
You know, we don't want to be too early. We want to see hundreds of customers, if not thousands of customers. Right. In a company that's really.
That there's proof that people like this, they've told their friends it's a thing. It's not going to. There's less risk of it, like not being a thing. It sort of works.
So we really like that as number two and then number three to keep it simple is there's really a growth strategy. Growth strategy can be as simple as, hey, let's add these features, let's go into this market. Like, let's give it a facelift, let's start marketing.
Some of these companies don't even market because there's so much goodwill and trust in the market. They don't have to. But what happens if you did turn on marketing? What would that look like?
So we need a defined strategy around what are we going to try to do here and what's interesting. And I would say the fourth one is actually what's interesting to us.
No one talks about this one, which is there's a million things you could do with your life, with your time. Why, like, why work on this one?
So we get a lot of calls from people who are like, I'm gonna go and buy this, like, cement plant or the cement mixer plant, or I'm gonna go buy this, like, plumbing services business. And you're like, okay, sounds interesting from the dynamics. Well, let's say they have a strategy, they have a trend. Right?
Do you really wanna work on that? Are you passionate about this? And if they.
Freddy D:
That's the key word right there, is that you're passionate about it. Because if you're not passionate about it, it's not going to fly.
Jon McLaughlin:
That's right. And that's what keeps you going.
In the hard times we've had, I'd say one of the things that we really didn't appreciate as much is finding people who are passionate about what you're doing. How do you attract them?
Because passion will always trump the mercenary style people that you can bring in because the minute things get tough, they'll bail on you. Right.
And that everybody in our space has a story of someone that they hired that had talked a big game and then they bail the minute things get tough. And figuring that out is a learning for everyone on the path of owning or running a business, right?
You talk to any business owner, it's finding those people, right? So that's definitely a thing. But we hold them and we grow them and we have fun doing them.
If any of those things change, then maybe it's the time to be like, okay, maybe we should sell the business.
Selling the business process is very similar to the buying the business process because I do a lot of education, or at least our team does, around talking to a business owner of how to sell a business, because it's not something they do every day. They might be working in a company for 20, 30 years. Their whole life and identity is wrapped up in it. They have employees that they care about.
Maybe they're burned out or they're tired or it's time for new blood, right? I have a lot of respect for business owners because it's not easy to start a business and it's not easy to run one for, let alone decades.
And they're in it for the long haul. So when it comes time to sell, they need an education on the process. When I first meet a lot of them, I act like an advisor, meant capacity to them.
Where I go, I'm interested in your business. But hey, if you have any questions on how to sell a business, ask me and I'll walk them through the stages of.
People require information enough to know about your business model, how it works, profitability, history, those sort of things. Your customer base, who are your customers, why are they buying it, the basics. And then I tell them, people are going to ask for financials.
They say, I need a QuickBooks, export, whatever, the accounting system, that's easy. People want to look at just a financial picture. The third is important. It's. Are there any red flags that you want to tell us about?
If you've had a business for 30 years, some bad things have probably happened to you. It's totally normal, but it's good to get those out of the way. This is what happened. People got sued out there.
I've seen some terrible things happen to folks. Get those out of the way.
And then the last part is walking them through the actual sale process, which is you find someone that you like, you give them that information. There's a letter of intent, which is an offer and a structure to align both parties.
Once both parties align, a lot of owners think the loi is the sale of the business. So there's a lot of times there's just way too much negotiating and it's like it's not a done deal. There's a lot left to do.
Are we aligned on structure? Are we aligned on the key terms? Once there's alignment, it's a phase of trust but verify.
So more information is required, customer contracts, those sort of things. And at the end of the day, you want to work with a partner that has a simple purchase agreement.
A lot of people in my world really overcomplicate it with really complex purchase agreements and all kinds of funny stuff that I even I can't really decipher. And over the years, we've done a good job of trying to figure out what those are and cut them out. It's if you don't really trust the other side.
We've had a few deals break over the last couple of years and the ones that broke we've learned a lot about, which is you really need both sides to have a lot of trust to make sure a deal goes through. It's a really important transaction and you can't approach it from a transactional level. You need a lot of trust.
So luckily the last two deals we did had a high level of trust. And I could have told you we could have probably bought those businesses without an lli.
That level of trust was so high and it really made a difference in the transition. Coming into the business, everything was clean, the strategy was easy, the handoff was easy, and there was minimal impact to employees.
So that process is the same on the way out.
Freddy D:
People think that their business can be worth X and really it's maybe worth M because of the fact that they don't have things in place, they didn't position the business for acquisition and they have their own perceived value. That's why I said X versus M. They're thinking it's worth X, but in reality it's only worth M at the point that they're looking at selling it.
And what you're doing is you're coming in and saying, okay, you need to do some things before it's even ready to be sold as well.
Jon McLaughlin:
You're exactly right. A lot of folks, our market and small business transition, or lower middle market transition, wherever you everyone is on their journey.
3 million in revenue to 50 million in revenue if they're on LinkedIn. If you're somewhere, you're getting hit up by a banker or regional broker to sell your business.
And what we see is a lot of those guys, they really want to get the letter signed up. Because once you sign them up, you're kind of locked in for two years with this person to sell your business.
And the way to get that lockup is to be like, oh, your business is worth so much. And they really talk a pie in the sky game without even understanding the business.
Freddy D:
And a lot of a sudden it's, we overestimated because we got all these surprises.
Jon McLaughlin:
Yeah. And they get a free look. So they sign somebody up, they overpromise underdeliver, and a lot of them even don't do the work.
They just connect you with someone like me, and then they step away. A real advisor helps you through the whole process and does the work, helps you figure that out.
And we've gotten advisors for businesses that we bought just to help the seller through the process and have another person even. But it's. So there's that part of the thing, and then the second is what you said, which is, what are the things that you can do?
And the way what we like to do is we do this all the time is, hey, you think it's X, but by the way, we can get closer to X. But you have to do these three things. We offer them a plan like, you can do them or we can do them. It doesn't really matter to me.
But what tends to happen is there's only so many hours in the day. There's only so many years in a lifetime. Do they really want to do that? It's kind of like a house.
You go get an inspection and you're like, you're buying a house. And they're like, the roof needs to be fixed. And you could say, well, I'll fix it. Or you're fix it. Which is better for you? I don't know.
It doesn't matter to me.
So what's happened is I give owners a list of the stuff that they can do, and they may do one, they may do two, but they never do them all because it's too much. We learn the hard way. There are people in our industry who try a lot of funny stuff, and that's unfortunate.
So I think it goes back to working with good people, good partners, because it's the funny stuff that really kind of muddies the water here. What the term they use is retrading. They say, oh, we're actually going to pay you X. And then, like, really close to the end, they're like, surprise.
There's a curveball a lot of sellers didn't see coming where I add value. And I try to tell people Is, hey, who is the one that you're talking to? We can look them up and ask around if they're good guys or bad.
We can say, hey, expect a retrade here. Here's what's going to happen. Be prepared to answer it the right way. We run into a lot of. Every single one of the businesses that we bought has gone.
Almost every single one has gone through failed processes. It's just the market's littered with them because. And that's okay.
If it doesn't feel right, if there's funny stuff, if there's anything that's off pudding, then don't do the deal. And it's really 90% of the time something like that has happened to most of the people we talk to, unfortunately.
Freddy D:
So what's an ideal client for you guys?
Jon McLaughlin:
I spend a lot of time going to places that are overlooked. Right now we're spending a lot of time in the Midwest. We're spending a lot of time in tier 2, tier 3 cities which have great companies.
We love companies that have happy customers that have been around for at least 10 years, maybe 30 years. Founder owned, founder led. Everybody knows them in that space that they're in. They have hundreds if not thousands of customers.
And usually the owners, they all have ideas of where to take the business. But it needs some more like elbow grease and some calories to go take it there.
So I spent a lot of time with owners downloading from them what that is because I'm not going to tell someone who's been in the business 30 years what the right move is. They already know. The whole team knows, all the employees know what needs to be done. It just needs some of that tlc.
So that's our ideal client is a business that's doing, it's tech enabled in some way, doing between, call it 3 million and 20 million of revenue. Right. It's on the, on that side.
And they think they can get to fifty or a hundred or there's a big impact in their space and they want to work with someone who they can trust and at least we'll give them a fair deal or just give them free advice because I'm not going to get stupider from talking to someone. I'm always learning something about the market.
Freddy D:
Always be learning.
Jon McLaughlin:
Yeah, there's that part. And then something that we can hold for the long term and take care of the people. It really comes down to the people. Right.
And these are small things.
Freddy D:
Create super fans is having the team.
Jon McLaughlin:
So that's what we take care of. We take care of the people and we give everybody a shot and we really want to level everybody up.
So that's what we see ourselves, is leading from behind. We just did an off site and it was like I put the org chart and the CEO for a typical org chart on the top.
I put the CEO and the CTO on the bottom to help everyone understand we're not at the top. You guys are running the company. We're at the bottom.
Freddy D:
Right. Because a good leader focuses on empowering their team and making their team be successful.
And by having their team be successful, they automatically become successful versus the leader that tries to direct and tell and demand and everything else. Those companies are always struggling and always got issues and always got turnover and everything else.
But the leader that really empowers their team, there's energy in that company.
Jon McLaughlin:
That's right. Yeah. Because there's too much on the plate to do for one person. And unstucking yourself. Right.
Is really about taking yourself out of the whole process and just asking people how you can unblock them, empower them, give them the flexibility to do cool stuff, which is resources. Right. And unconstraining them. So that's been fun working with this smaller team now and really giving them the freedom to do cool things.
And I've been surprised at every corner by the way of what that model can yield in terms of results because they are kicking the butt of like bigger, more established companies that have all these like great looking executives with great resumes. It's all sort of potentially talk. Right. And I've been, we've been blown away, honestly.
So it's been a really good experience to really lean in hard on that. And it's been fun for me too because how do you develop culture in a small company? It's really through the people. Right.
And that's something, that's why that's.
Freddy D:
You got to create, like I say, you got to start creating super fans internally.
Because if you get super fans internally, they're going to create the external super fans with all stakeholders because you get your suppliers, your distributors, your banker, complimentary business. But it all starts internally. And if it's crap internally, it's going to be crap externally.
Jon McLaughlin:
That's right. Fix yourself first before you try to fix everybody else. Right.
Freddy D:
All right, John, great conversation. How can people find you?
Jon McLaughlin:
People can find us@ww.amberline.com they can find me, John McLaughlin on LinkedIn and they can visit our companies too, TDX, which is the aviation maintenance one, if they're interested in some of the work that we're doing on the ops side.
Freddy D:
Great conversation.
Jon McLaughlin:
I'm a believer in the mission of creating superfans. Business is a good place to self actualize in terms of making things happen. So thanks for having me on the show.
Freddy D:
Well, we'd love to have you on the show down the road again.
