Ep 490 Exit Story: How a Middleman Built and Sold a $19M Distribution Business
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Hi there, and welcome back to another edition of Built to Sell Radio, the podcast designed to help you punch above your weight.

in a negotiation to sell your company. I'm the executive producer, Colin Morgan, and this week you're going to meet Sean McAuliffe, a former house painter who built a $19 million distribution company supplying replacement car keys to locksmiths across the country. He never thought anyone would want to buy his business until a private equity firm offered him millions. Here's Sean to tell you how it all went down.

Sean McAuliffe, welcome to Build to Sell Radio. Thanks, Sean. I'm really excited to be here. I've been a longtime listener and excited I got the opportunity to actually be on the show.

The long-time listener, first time caller. Well, we're grateful for your long-term listenership. And I'd love to get into the business that you started and ultimately sold. I understand it was in the key fob world. Explain this. How did you get started? Yeah. I mean, I certainly didn't plan to end up in this industry. It just kind of happened. So, you know, honestly, I never finished college. And I was working as a painter for a while. And I enjoyed that.

But I wanted to get into a more office job. And I was always kind of a do-it-yourself, do-it-yourselfer in terms of like fixing things on my car, doing car audio work, you know.

modifying my cars. And back then, there was the penny saver still. And I found an ad in the penny saver for a wholesale distributor of car stereo equipment. So they would supply the car stereo install shops and they were looking for a salesperson. So I applied for the job. And there's only one other salesperson there. It was a very small mom and pop distributor. And I hit it off with the guy and he hired me.

And so I did that and learned all about phone sales. I had no experience in this guy. I still keep in touch with him. He's probably the best phone salesperson I've ever met and really taught me so much. And I'm not a natural salesperson. But anyway, I did that for four years. I was there for two years, moved to another distributor, another mom and pop, same industry, just kind of down the road two years later.

And, you know, I've been doing these cold calls and B2B sales and developing relationships. And there was this one account that I've been talking to for many years. Right. And we sold everything from car alarms to window tint to butt connectors and cable ties that cost less than a penny. Right. And these guys, they were big. They were bigger as a dealer than us as a distributor.

But I would call them every quarter or whatever it was and have a good half hour conversation. And they would barely buy anything from me. So finally, one day I'm like, I'm talking with my contact and I'm just like, dude, we talk all the time. We have great conversations. You don't buy anything from me. Like, what can I sell you?

He's like, I don't know. He's like, we buy these keys from this company and we don't really like them. So if you give me the keys, like I buy them from you. And, you know, along this four years, I kind of got into sourcing and getting creative sourcing product in China. Alibaba at the time was still like kind of a secret. So, you know, I hang up with them whenever I go home that night and I look on Alibaba for keys. You know, he told me the specific key is Ford key. Cause when you, uh,

You saw the remote start back in the day, you would hide a key in a special little module. So I saw the keys for maybe it was like three, I want to say it was like 343 actually on Alibaba. I think he mentioned that he bought them for around like seven or 750. Then I searched around the internet, I saw them on eBay for like 1450. So then I did some back of the napkin math, what's going to cost a ship, what's going to cost to get it in, how much is a mailer,

And I said, okay, there's a few bucks of margin here. So at the time I was broke. I think I had like a five something credit score, 500 something credit score. I had negative money. I had a credit card with like a $300 limit or something like that. But I bought like $100 worth of these keys with a credit card from Alibaba. Okay. You lost me a little bit because I think of a key fob as

as this like highly proprietary thing. I remember my wife had a Volvo years ago and we lost this key fob.

And I'm like, well, we got to go to the dealership. And it was like, I'm going back maybe a decade. I think it was like 300 bucks to replace this key. I'm like, are you kidding me? $300? So fill the gap for me there. You're talking about $3, $5, $7. I'm going to Volvo and they're charging me $300. There is some big difference here. And there's a couple of things. There's like your basic car key, like your transponder key. It still has a little computer chip in it.

So that from the dealer might be $50 or $100, but you can get them in China for $5. Then there's your key fob that kind of looks like this. This might be $100 from the dealer for the part and $200 for the install. Some dealers, it might be $300 for the part and $200 for the install. It really depends. Whereas we might sell this retail price.

GM, for instance, might sell their OEM version for $100 and we might sell it direct to consumer for $60. There's bigger spreads there as well. Okay. So this is an important part of the story as well, because you're saying install. So you're getting effectively a blank key from China and then the dealer has to

configure it to work with your car so that you can't just buy a key to open any car on any lot or any driveway. You've got to have it configured officially by a dealer who uses the VIN number, presumably. A dealer or a locksmith. And this plays into something I'm sure we'll talk about where they plug into the car, you know, they cut the key. If it's a basic key, they'll cut the key, obviously. And then they plug into the car and basically tell the car, accept this new key.

okay okay so you're noticing this arbitrage of like what they're selling for in china versus what the your distributor or your these car dealers are buying them for and you set up shop maybe take take me through the next yeah so i just i i ordered a hundred dollars worth or something like that of this this one key uh so maybe it was like 25 units um i made some ebay listing i actually just made ebay listings first i didn't even call the customer

This is so old school. I love it. I made eBay listings. You know, I had a little box. We had like a basement apartment and I had, it was like a bottom floor of a split. And there was a fireplace with a, you know, I guess a little mantle. And I just put the box on there and I had my computer next to it.

And I started selling this key, right? And I would make maybe five bucks. I think shipping at the time was $1.68 from US. - Who's buying keys on eBay? - So consumers were buying keys, but then also what I noticed is, you know, back then eBay would give you all the contact information of the buyer. Now they kind of obfuscated a lot, but I noticed that a lot of locksmiths started buying from me. I see so-and-so's lock shop or so-and-so's lock and key.

And that's when kind of a light bulb went off for me. And I thought, you know, I already had this B2B sales experience, you know, selling a very kind of similar demographic and product. I think there's a business here on the wholesale side. Now, I only have one SKU. So not yet. But, you know, over time, I started selling these keys. And then I added another one and I added another model and another model. And locksmiths kept buying from me and consumers.

And then I started, again, eBay would give you the phone number. So I started calling directly these locksmiths saying, hey, my name is Sean. You bought this from me on eBay. If you buy it from me direct, I'll give you a better price. And I did that for a couple of years. Then I got on Amazon and things were on the marketplace side really taking off. I was probably doing a million dollars in sales within...

a couple of years right wow um and these are items that cost like 10 15 20 so there's a lot of units right so i would come home from work when i was still working and i was doing this at the end i'd come home from work ship you know the beginning ship five orders 10 orders 20 orders 50 orders 100 orders and just go drop them off at the post office and they let me like drop it off on the back stoop after hours

And what are you clearing on a million bucks? Like if you're selling them through eBay and Amazon, like what would you clear at the end of the day on a million bucks? You're making good money. I mean, 150, 200, 200K. Wow. You know, again, like when you're doing it out of a small office and you don't have a lot of employees and overhead, the margin is really good. You know, as you get bigger, you get more overhead. Yeah.

I got to ask, like, okay, you're a painter. You're living in a basement apartment. Like, what's it like to all of a sudden stumble on effectively a million-dollar opportunity? Like, you're clearing $150,000, $200,000 on selling these key fobs. Like, what's that like to be – I mean, you must have felt like you just hit the lottery. It was – no, actually, for me, like, I felt like –

I've had a lot of things happen early in life. So to me, I always felt like the hammer was going to drop at some point and this was all going to go away. The old Andy Crow, only the paranoid survived. That kind of thing was going to happen and I was going to lose it all.

So I'll make hay while the sun shines, but don't expect it to kind of keep going. And, you know, that continued until I sold the business. That's crazy. So how big did you get this thing? In 2019, I sold the business in December of 2019. I started it in about, you know, I think I actually made the LLC in 2011. And when I sold, I want to say we were doing about $19 million in revenue.

We did some big contracts. I had like 20 some odd employees. I had a 12,000 square foot warehouse. I had bought a business on the West Coast along the way, like a complimentary business. So it was it was a journey.

And are you still able to kind of maintain those margins back from the old eBay days? Like on the 19 million, would you be clearing 15%? Possibly, you know, especially now with everything that's going on and there's a lot more competition in this space. I was really the only, you know, one thing that set apart my business. When I really, you know, one thing we didn't really get into is I really started focusing on the wholesale side, the B2B side after a while.

And that's really what took off and was doing the lion's share of my sales. And the marketplace was more just like an add-on after a while. And I was what kind of separated my company from the competitors in the space at the time was that we focused on making like a high quality aftermarket where a lot of my competitors were buying used original remotes and refurbishing them and then reselling them.

And now a lot of other, you know, there's been a lot of, there's a lot of competition now. So the margins are slimmer. You know, you've got to do more with less essentially. Okay. So you're at 19 million in revenue, you're south of 15%. I think at that point I was still at around 15% EBITDA margins when I went back and looked at it. Amazing. Amazing.

Yeah. And okay. So, but when you say the wholesale side of the business, you're talking about locksmith. Yeah. Supplying locksmith. So what, so selling keys to these guys ended up turning into, okay, we got to sell stock key machines. We got to stock lock picks. We got to stock tools, accessories, everything that a locksmith needs. We focus on the automotive locksmith so that they can run their day to day. So, you know, by the time I sold, I think I had like $4 million in inventory and

in the warehouse that, you know, was there stressing me out constantly.

I bet. Yeah. And, you know, nowadays, a lot of cars come with like a Tesla, for example, will have the app on a phone and you can use your phone to get into the car and drive it. So what was going on in 2019 as it relates to the phone? And did you see that the market for fobs potentially going away?

But kind of going back to what I said, I thought that a hammer was going to drop at some point all the time. But at one point, I had a revelation. I was sitting in my office and I was talking with I hired one of my best friend essentially to come help me at some point. And he became my operations manager.

We were talking about this one product that we would sell hundreds of thousands of. It was this little Ford remote and it fit all the Fords from 1998 to 2008 or something. So we would sell thousands of thousands of these every month. And surely, we're going to run out of people to sell these to. And we're talking and then we're like, I hadn't really thought too strategically about the business. I'd kind of just been living in it.

And then like, let's see how many vehicles there are on the road that use these are all so we did the math, you know, okay, this many vehicles on the road across all these years, assume someone loses a remote every couple years. And then the potential market size for just our remote was millions of units. So that's when a light bulb went off for me like, well, there's actually a lot more to this than I expected.

But I didn't think this was a real business. I kind of just thought I found like a cheat code for a little bit that was going to work. But why do these locksmiths need you? Why wouldn't they just go like you're getting you're not manufacturing these things. You're you're buying them from China, presumably. Yeah. At one point, we kind of partnered with some factories in China to manufacture. So you do that. But also, there's there's a lot like what people don't realize about buying something from China is you can buy things.

you know, 20 products that all look exactly the same on the outside, but are very different quality on the inside. Right. So what we did is we standardized that process where we make sure you're getting a quality, consistent product, FCC registered. If you have an issue, you deal with us. You don't deal with China, which, you know, that's a nightmare. Right. So and we're stocking it all. There's thousands of SKUs. If you want to have a good assortment, it's thousands of SKUs and it's more SKUs every year.

So this inventory, you mentioned $4 million of inventory. Is this sucking up all your cash? You're clearing even 10% on $19 million, a couple million bucks. So on paper, you're clearing a couple million bucks. I'm assuming though-

your business is pretty thirsty for cash. You're having to buy this inventory. You're not putting $2 million in your jeans every day. Yeah. And that was something that I learned the hard way. But I was able to cash flow in addition to, but certainly one thing that constrained our growth was my unwillingness to spend enough on inventory. But yeah, I think one thing I tell business owners, especially when you have

an inventory based business like I have is like you get your tax bill and it says, oh, you made $2 million last year because, you know, your profit was $2 million. But, oh, I had to buy another million dollars worth of inventory and then I pay tax on all this other stuff and

you go wait a sec i didn't make two million dollars last year you know it's it's sitting on my shelves um so that was definitely a part of it thankfully like i i was you know the profit was good enough i was still able to put money in the pocket buy my first house have a kid um

But that is definitely something that very easily could happen where you find yourself out of cash because you either put it all in inventory, had too much inventory, bought inventory that you can't sell fast enough. And did you ever consider...

streamlining your inventory SKUs so that you had the Ford F-150 and the Chevy, whatever. And no, we weren't going to stock all these obscure SKUs, but you could turn inventory, use cash more efficiently. Did you start to do some of those things? Yeah. I mean, especially when you have a distribution business, you're there to kind of have the odd stuff. Right? Right.

Right. So you kind of have to do it. But certainly we tried to get smarter about how much we stock of certain items. Right. And how much margin we make if it's something that we're not going to sell a lot of and we have to do a big M.O.Q. and we're going to sit on it for a long time. And we'll use minimum order quantity. Right.

we're going to sell it for a higher price, right? Versus something that we sell truckloads of and we know we're always going to sell through it. We could sell that at a bit of a lower price because we're not sitting on the inventory. It's turning quickly. So we did kind of get strategic with pricing and quantities and things like that. But as a distributor, you don't need to have everything, but you need to have most of it. Otherwise, you're going to lose the order to your competitors.

Yeah, that's a really good point. I know nothing about distribution businesses, clearly. I've made that obvious. But it sounds, as you replay it to me, I understand what you're saying. If the value proposition is, look, come to me, I'll have what you need. Yes, you could go to China, go through all the rigmarole yourself. But the reason you come to me is I'm going to make it easy. So-

The moment you get rid of that value proposition. Exactly. There's nothing left. Got it. Okay. So you're a couple, so you're 19 million in revenue, 10 to 15% EBITDA margins, and

4 million of inventory. What made you decide to sell? I was not in the mindset of selling. In fact, I had bought a company that did commercial hardware because I was supplying locksmiths with all their automotive needs. And I thought, well, maybe I'll get into the commercial hardware side of it so I can have everything. Sorry, commercial hardware? Door knobs, door closers. Other stuff you could sell the locksmiths? Yeah, the more like residential and commercial like hardware type stuff, right? And what did you pay for that business?

In terms of multiple... It was less than a million. I want to say it was like a... It was a smaller business. I want to say it was like a 2 or 3X that I bought that for. Two to three times EBITDA? Yeah. Yeah. Got it. Okay. So you bought them for two to three times EBITDA. And... Okay. And I moved out to Portland, Oregon for six months with my family. None of my kids were in school yet. So we moved out there to get it while my operations manager ran this in New York to get it up and running, hire new people and

And then I came back and then I was at an industry trade show, you know, where it's all locksmith distributors or locksmith tool manufacturers and then locksmiths are the folks walking around.

And someone approached me. I'm sitting there talking to a customer, doing my spiel, being the nice guy selling machines and all this stuff. And I see this guy in the corner of my eye looking at me, waiting for me to free up. So I finish doing whatever I'm doing with this potential customer. And I go over and I say, hey, introduce myself.

And turns out he's from the private equity company that had invested in one of my main competitors. This was like a competitor that I basically put a target on their back. Like I want to go after their customer base. And he said, you know, just basically introduced himself, you know, I think kind of mentioned that they were interested in acquiring me and,

And all this. And at that time, I was starting to really get stressed out. Like I was having health issues. I thought I was having heart problems. You know, all the inventory, all the employees.

You know, the decisions that, you know, especially in the beginning, I was working like eight, 16 hours a day just in front of the computer, right? I had not taken enough vacations. I'm a painter from Long Island. What do you offer me? Yeah, exactly. Like, I've just been riding this wave trying not to get, you know, sucked in essentially and drown. And then, yeah, the talks just happened from there. Okay. What was it like? So that moment, like,

that you realize the guy from the private equity group is not a potential locksmith. He's actually someone who's interested in buying your business. Just describe that moment. Like, were you able to keep a straight face? Did you like light up or like, did you say, oh, please tell me more? Like, did you keep a straight face? What was it like? Yeah, it was, you know, when you're at a trade show, there's so much going on and you're just in this mode where you're just like moving, you know?

So I can't say I thought about it a ton at the moment. I was like, "Oh, okay, this is cool. It's interesting." I hadn't thought about selling my business. The thought had never really crossed my mind. I never wondered how much my business was worth. I didn't know if it was worth anything. You know what I mean? I just hadn't really been thinking in that mindset. And obviously, trade show ends and I have time to think about it on the flight home.

And yeah, I'm like, Oh, it's kind of, you know, that would be, that would be nice. Like I've got this, like it felt like sometimes an ax hanging over my head with this, you know, inventory could all go away, you know, a lawsuit or this, who knows. Right. I built all this and, and while I've made some decent money, I put some decent money away. It's not as much as I have on the shelf and inventory. Right. So then I'm like, Oh, this is, yeah. Okay. This,

This sounds like a good thing. Like, we'll keep talking about it. And then, you know, they were very good. They were the methodology that they used to probably approach business owners like me. And I'm still in touch with these guys. I like these guys a lot, but there are sharp guys that know how to negotiate and how to get a good deal.

So what happens next? So you're flying home. You think, maybe this makes sense. Where does it go? Yeah, what happens next is what I think they call strategic pacing, where they start. We have a conversation. I send over some basic numbers. I obfuscate anything customer related and all this. And I make them sign all types of NDAs. I was very...

I held my vendors, especially as like the secret sauce. So not going to get on any vendor names, no one that worked in my own company pretty much knew our vendors. It was really just me. - Interesting. - Our vendors for our core products that we imported. So, you know, gave them the basic information. Okay, they take it, you know, they take their time. And then say, you know, ask some more questions. They come out, we have a meeting in person.

At this same time, I'm still running my business with my hair on fire. So I'm not thinking that much about it, although I am thinking about it. And then I think it was probably about nine months between the first conversation and closing with a lot of kind of pauses and breaks in the first six months. And then it's starting to ramp in month seven and then month eight, nine, absolute crazy going through due diligence and all that.

At what point did the Spectre evaluation come up? How did they approach that? Yeah, they were very cagey on that. And what they did is a good technique of putting a range out there that they put out. And then they did not really want to do an EBITDA multiple. They just wanted to settle on a price.

for whatever reason. And again, now hindsight being 2020, I would have done things very differently. But then at some point we landed on a price and some other... Did they ask you what you wanted for it? Or were they the first to come up with a number? I put a range out there based on some research that I had done. And was that a range of multiples? Yeah, I guess it was a price. I guess I kind of looked at what multiples... Again, I didn't know a lot about how this worked back then.

But I found your show, I found other articles, and I started listening, you know, in whatever time I had. That's the thing is I didn't dedicate enough time to this. And I was like, oh, maybe I can get, you know, six times that six times, you know, this profit. It's good money, right? But I was like, that's not too good money. Like, I'm like, that's probably not realistic because the number was just insane. You know what I mean?

So they never would have imagined that I would have gotten or had. And, you know, they came in a number lower than that, you know, much lower. And we had to negotiate a little bit, not hard enough. Where were they? You were hoping for six times. Would you remember roughly where they came in? They were below that. I don't know if I could say exactly how much, but, you know, they were below that. They were in the range of five.

I would say the lower range of where you would probably find a distribution business in my scale, which is four to six times. Four to six times. In that range. Yeah. Yeah. Because you don't have proprietary technology. You're reselling effectively. At the time, I didn't realize that I did have a platform. Tell me more about that. I didn't understand the true value of my business at the time.

And now with hindsight, I do understand the real value of my business. What do you mean? So I had built a platform in one, like we had probably the best website in the industry, you know, if not tied for the best. And two, we had a product line in our brand Keyless to Go that was going to empower a lot of things in the future and had already started to do so.

Because I had taken some steps to kind of professionalize the brand and no one else in the industry had done that. This is a brand that you were selling not to locksmiths, but to consumers? Both, to locksmiths and consumers. And they did basically what the difference is when you sell a Kiosk Entry remote, anything that emits a radio signal, you have to FCC register it.

And we spent hundreds of thousands of dollars doing that to all of our products. No one else in the industry had done that. They're effectively selling non-FCC registered products. And why does that matter? One is, right? You know, basically I was planning on big growth at this point because I had done that math of like, oh, there's X and millions of vehicles. That's as many millions of remotes. The issue is when you

start doing big things, you get big targets on your back. And if you don't have your T's crossed and your I's dotted, then you have risk. Whereas if you're just a small, relatively small distributor, selling unregistered FCs, who knows? No one's going to report you. But I had big goals at this point, and I wanted to be able to unlock bigger doors.

Okay. And so you said earlier, I just missed it, that it was actually illegal or in order to sell these, you had to have this FCC. So you were out there building this effectively a bit of a moat around your business, which you've now come to understand maybe warranted a higher valuation. But at the time, you didn't appreciate that and just thought, well, we're just a distributor company.

four to six times is a reasonable number. They're on the low end, I'm on the high end. Surprise, surprise. And you kind of worked out a deal somewhere in the middle. Exactly. Got it. Okay. That's really helpful. And as I understand it, having that proprietary platform with a moat would have driven up the multiple. Any sense of what that multiple could have been? It's hard to say, but I would say I think I could have gotten...

Again, this is hindsight, right? Maybe double what I ended up getting in terms of actual final payout. Or not sold at all and just made a lot more money as my own business funding independently, right? Yeah. Okay. So they're in the sort of four to six times multiple range, the buyer. How are they intending to treat the inventory? As part of that. So roll that. Got it.

Okay. Because some owners, I think in some industries, it changes a little bit. And if you've got a huge amount of inventory, I think, well, I'm going to get paid a multiple of even a plus value of my inventory. But I think in most cases, the inventory is considered, you're buying the business and the inventory comes with it. And what we had to really negotiate on in regards to that was our working capital adjustment, which- Explain that.

I'm not really, it was hard for me to even understand, but it's essentially like, you know, we're having to buy inventory to support the business and we're a growing business. So we're going to have to buy more inventory tomorrow than we bought yesterday. Right. And there's a space between when an offer is kind of accepted and when a business closes. And in that period of time, I might spend an extra $200,000 on inventory that's needed to keep the business growing and

But based on the purchase price, I'm not going to get that $200,000 back. Or I paid for inventory that's going to be theirs and I'm not going to own it.

you know because there's that three months lead time from china or whatever it is so it kind of accounts for that difference um i'm really bad at understanding because i can barely wrap my mind around this as well i i hired someone to help me through this process but um but that was something that we had to negotiate on because i'm like guys i'm not then i'm just not gonna order any more inventory right and you're gonna buy a business that doesn't have the inventory to support it so then you're a throttled business as a result yeah yeah yeah

But this is, okay, so these private equity deals, at least what I've seen is usually a kind of a hybrid where they give you some cash, but they also ask you to roll some equity. Was that the structure? How did they kind of structure it? Yeah, exactly. So the deal was for a certain number in total and a certain portion that I rolled back in, probably about 30%, something like that, or 30, 40% I rolled back into the business.

Okay. Okay. Got it. And I know we have to be a little careful around valuation because it wasn't made public, but I'm assuming the overall value was kind of low eight figures, if I'm doing my math. Yeah. Yeah. Overall value was low eight figures. Yep. Got it. Which you were able to get a big chunk up front and then roll equity. Yeah, exactly. More money than I thought I'd ever have, certainly. Yeah.

Yeah, I bet. I think a lot of people want a clean exit and they want all cash and they don't want to roll equity. What was your reaction to their suggestion that you roll some equity? Well, part of the deal is they wanted me in the business, right? What basically their company that they had initially invested in is their platform company.

was kind of a full line distributor. So they really focused a lot on the commercial and residential side. And then they were one of the original leaders in the automotive side, but then had kind of fallen off

And I had really picked up on the automotive side and become one of the leaders. So they wanted to buy me to bring me in and help them with that and kind of get the added benefit. We could sell their hardware, they could sell our automotive. And therefore, it's like a one plus one equals three scenario. And how'd you feel about that? I was good with it. I...

I've looked at it as an opportunity, one, to learn. I wasn't going to be the CEO. There was a CEO in place that I was going to report to, and I really liked him. And I felt like I had more to do in this industry, but this would allow me to take some chips off the table.

you know, get de-stressed a little bit, hopefully at some point, you know, set, you know, put my family in a place where, you know, they'll have more than I ever had and, you know, never necessarily have to worry as long as I don't make any mistakes. Right. So I thought, you know, it was that was still a great experience. And and that was always part of the deal is, hey, you're going to become part of this bigger company.

And my job, my title became like chief strategy officer automotive. Right. So I continue to run my side of the business. And then I also drove the automotive strategy for the entire business, the platform and myself. And what happened? So so this was 2019, December 2019. So shortly thereafter, I think COVID happened. Was that February? Maybe was that February of 2020? Yeah.

Something like that. So my team was all very digital anyway. So we were able to kind of, except for the warehouse, all the office, front office was able to work from home kind of on the drop of a hat. We went through the whole process.

process of kind of working together with this other new kind of side of the business and how do we integrate our inventory and what do we take from one that's good and use it the other and what do we discard from one that's bad and how do we do this one plus one equals three. Six months in, I basically realized, oh, I'm actually doing my job again instead of just dealing with merger type stuff that you don't even realize when it's taking all your time.

So we're going through COVID. That's super stressful. We're merging. Then I start like noticing like just weird things happening towards the end of the year. Like, you know, getting asked for certain reports and just certain things happening. And at one point I just reach out.

I think I was the CFO and I was like, this is kind of a mean thing to do because I know she knows what's going on. I said, are we selling the company? I wanted to give her a yes or no answer. She didn't tell me the truth. She couldn't, but then I finally came to, and I like her very much. I don't hold it against her. But it turns out within a year, we were selling the whole company to another private equity company who is merging us with another group of competitors.

who was kind of doing a similar roll-up, but strictly in the automotive space. So by December of 2020, that deal closed. And now we merged with another company. Okay. And so were you paid out for your equity, the 30% that you rolled at that point? Yes, I was paid out. I made some extra. It was good. I was not paid out as much as I would have liked based on the original predictions, just because it wasn't enough time.

but it was still a good return in the short amount of time that it was on my equity. Had you taken 100% of cash on your original deal, it was even a little bit better than that? Yes. Wow. Okay. This is a windfill. Not only do you get your cake and eat it too, you get 100% out within a year. Yeah. I ended up rolling more

Not as much, but rolling some more into now the new, the second company. Okay. So tell me more about that. Why did you decide to do that? I still felt that there was upside in this industry. I felt, you know, I still felt like, you know, it's only been a year. I had not achieved the things I was looking to achieve yet. I still felt like there was a lot of upside and, you know, they wanted me to be part of it, you know,

So I rolled a smaller chunk over. Certainly, I have less. I'm a smaller piece of a bigger thing now. But yeah, I did roll some more over. And then it turns out after kind of as so we spend a year merging with this one company, this new company that we merged with called Automotive Keys Group, which is what I'm part of now.

They were really focused on really just the automotive side. So they actually now split us apart and sold off the original platform company that we had merged with and kept us. So all the work we had just done, we undid. And now we're part of this other thing. This must have been kind of frustrating. At some point, you didn't sign up for that. Yeah, I think I would say...

I would say, especially in the beginning, the new relationship did not feel very one plus one equals three. And there was a lot of frustration. After six months, I ended up leaving. I had no plans on leaving originally when I did the deal. I don't know if I necessarily could have killed the deal. They ultimately wanted my side of the company, so maybe I could have.

But, you know, ultimately after six months, I was like, you know, I don't need to be here. I'm not enjoying it. It's stressing me out. And I don't see it changing anytime soon. To be clear, this is six months into the second new owners. The first one lasted a year. The second one, six months. And the first one was very additive. I learned a lot. I felt like we were kind of taking the best of either side and working them in.

Whereas the new one, the new company, which I'm at now, and we're much, much better, it didn't feel that way at the time. Okay. So just to square that for me, you left and now you're back. So explain that. Yeah. So I left. I was having my third kid. I was not enjoying myself. My wife was pregnant with our third kid. We had just made it through COVID.

you know yeah not taking enough vacations not taking enough time off you know working from home two kids already my wife was having her third and i wasn't enjoying my work and i didn't need to be there right i had enough money that i could coast right um at least for a while uh so probably one of the hardest decisions i ever made was you know my my daughter was due in september

This is probably I started feeling this way in March, like, oh, God, this is I'm not enjoying this. I bought, you know, I bought a vacation property that I wanted to spend the summer at and I didn't want to have to work. So I had that coming up. And and then we were going to have our first board meeting that I was going to go to. And I was like, I don't want them to kind of announce me at this board meeting somehow. And then I just like leave a month later for whatever reason. I just didn't didn't like the idea of that.

And I had a couple of conversations with the CEO at the time. We didn't really see eye to eye on a couple of things. And I just made the hardest decision to leave the company that I had spent so much time and energy building. And then... Yeah, go ahead. Sorry. Yeah, I was just going to say. And so how did you end up back there again? Yeah, so...

I spent about a year not really working much, driving some race cars. It's something I always wanted to do. So I got into that. Then I had started trying to figure out what to do. I was looking at franchises. I was getting a bug to really start working again. I was looking at businesses for sale, seeing if I could find something, but I couldn't really find anything geographically in my area. And then I've always been digital marketing, e-commerce. That's been just my thing for whatever reason.

So I was like, "I'll start a digital marketing agency." So I started working on that in 2023. I started getting clients and building things up. At the same time, I started a small eCommerce project with a buddy of mine. And we went out to SEMA Apex, a big automotive parts show in Vegas every year. And I ran into a bunch of the team from Automotive Peace Group.

And I think the executive director of the board, who's now the CEO, I think he reached out to me or maybe the CEO at the time reached out to me after the fact. I think the CEO actually was like, hey, let's have a drink together. So we met up while I was in Vegas and we talked about the possibility of me coming back. And then within a month, I was back. That's...

Wow. But now as an employee, not a sort of shareholder in the same significant way as you were before. Yes. I still own a piece of the company. It's still a significant dollar amount for any company.

normal human being but it's a small percentage of of a much larger business now because they and you do you have the rights to sell that if you wanted to sean or do you don't do you have to hold it i don't think so i don't think i do honestly it's not something i've thought about but it's you know it's private equity i think generally speaking i'd probably have to sell it back to the private equity company at some sort of par value which wouldn't really make sense to do got it got it okay

What a journey. What a journey. I appreciate you sharing the story. I think it's amazing how the company grew so quickly in such a short amount of time. Are you up for a quick lightning round of questions before I let you go? Yes.

Some classics. If you're a long-time listener, you know I like to ask sort of the same questions. I haven't prepared myself, so I don't remember what the questions are. Well, that's okay. That's okay. Slimy trick that an acquirer tried to play on you. It doesn't have to be slimy, but something that in retrospect you realized was kind of a negotiation ploy that you probably, if you had to do over, you'd like to know about.

Yeah, certainly. I wouldn't and definitely wouldn't say slimy. I just say great. You know, the guys that I dealt with at the first private equity company, very sharp guys. I still I'm still in touch with them. Great negotiators. And I think the strategic pacing aspect of it was really something that, you know, they let you sit and stew. Right. And that makes you kind of.

I don't know. It makes you just not make the best decision. So and from what I understand, that is a tactic that's frequently used, especially when you're dealing with like a small business owner versus like another bigger corporation. Right. So that's something to be aware of.

For folks that may not know that term strategic pacing, just, you know, don't intentionally delaying response to emails or, you know, things to make the other side think that maybe you're not interested. It's kind of like a dating tactic. How many hours or days do I have to wait? Yeah, got it. Okay. Biggest mistake that you personally made during the process of selling your company?

It's hard to narrow it down. I feel like it made a lot, but probably not planning ahead well enough for the tax implications of what it means. Because when you sell your company for a big number, if you don't plan accordingly, and no matter what, but especially if you don't plan accordingly, you're going to have to write a check for a big number to the government. And that is not a fun day. So I think going back in time, I would have engaged with...

CPA or CFO more diligently throughout the process and planned ahead. And maybe would have strategically paced it out myself so I can get things in place where I could save on some of that tax bill. Super helpful. Lowest emotional point you experienced during the process of selling?

I mean, I would say it was when I had to leave when I left the company. You know, that's for the second time. That was really the hardest thing I ever did. We had an amazing crew of people. We had built like an amazing team here, really family atmosphere. We had people in the warehouse that had been working for me for many years. And you don't typically get that in warehouses. You get a lot of turnover. We didn't have that. So having to look these people in the eye and tell them, you know, I'm leaving and it's not something I wanted to do.

was probably the hardest thing and I stressed over it. I mean, for months I stressed out about it and then especially the day after, the day up and all that was really, really hard. - Highest emotional point? - Through selling? - Yeah. - You know, I think for me as someone who always felt, you know, I didn't have much growing up and you went through a lot of tough times and uncertainty and you know, didn't, my future wasn't looking very bright for a while.

You know, having that cushion now where my kids will never have the same struggles that I had. You know, they'll have their own struggles and money doesn't solve everything, but it creates a lot of opportunities and removes a lot of potential stressors in your life. So just seeing that number in the bank account where, you know, my kids are set as long as I don't do anything stupid, that's probably the highest. Do you remember where you were when you refreshed your bank account to see the number? Yeah, I was sitting...

I was at home. It took a little bit to come in. I think I remember correctly, it took longer than expected to come in because I was sitting in my office and it wasn't coming there. And I kept refreshing. So then it's like it's nighttime. Like, let me get home. So I go home and then got it. And, you know, when I showed it to my wife, too, we were both just like it didn't feel real. What was her reaction?

Like, was she there in the early days when you were a painter in Long Island? Yeah, actually, we've been together since we were 19. Okay, so what was her reaction? I think both of us, it was disbelief because, like, it just didn't feel real. Honestly, like, you thought, like, it would be, like, an earth-shattering moment, but it wasn't because it just didn't feel real. It's not like someone, like, puts a pile of cash in your room that you can now go just, like, spend or something, right? It's just a number in a bank account. Yeah.

But yes, disbelief, definitely disbelief. And what do we even do now? That's such a cool experience. You were already generous saying you're a listener of the show. That's great. Were there other resources that you could point our listeners to that were helpful kind of getting you ready to sell? Were there other resources?

Things that you could share with our listeners. I think one of the biggest thing is find good representation as you go through this process. That's one of the biggest, really vet your representation, really find it.

do the research. I mean, the hard thing is, you know, you're out there running your business and your hair's on fire running your business every day. But this is, you know, a decision that can, you know, the right way can mean millions of dollars in difference, right? Do you want to give anyone a plug? I don't think there's necessarily a plug on this, unfortunately, but I would just say take the time. It's worth it. You will probably only do this once.

Even though you might think you'll do it again, you will probably only do it once. So spend the time and do it right. There is one book that I would love to plug because it just helped me as a business owner as I was going through this process and I was merging with another company. And I wanted to figure out how to be the best version of myself when I was doing this, which is a book by Jocko Willink called Leadership Strategy and Tactics, a Field Manual.

Just gives you a great way to kind of work with people, which you could bring any way in your business, whether it's through negotiation or just getting people together. Just a book that I love. I've read multiple times. That's awesome. I haven't read that. I've read Extreme Ownership by Jocko, but I haven't read that one. So I'll put that one as well. I love this one because it gives you specific examples of like how you can handle certain situations.

That's really cool. Okay. We'll get that in the show notes as well. Last question. What did you buy yourself? Give me a trophy that you rewarded yourself with for all this hard work. Race cars. Race cars. I always wanted to drive race cars. That's what motivated me to...

to start a business i wanted to figure out a way to get enough money where i could go drive race cars so i bought some race cars i bought um first i started with just an mx5 race car just to warm up and then i bought a porsche race car and did some doing racing around the country and doing some more this year so it's awesome porsche what what model uh cayman gt4 club sport okay that sounds fancy i don't know anything about it's a purpose-built race car from porsche it's you know

So like, it doesn't get much, it doesn't get much better than that. And, you know, asking for any better is just being, you know, wishful. Yeah. Yeah. Awesome. Okay. Well, that sounds like a great trophy to reward yourself and kind of something you can touch and feel and remind yourself of the success, which is amazing. And now folks want to reach out to you. You're back.

at the company that you originally are the brand, Keyless2Go. So tell people where they can find that company if they want to learn more about. Yeah, the big thing that I'm focused on right now at the business is our Keyless2Go line. So we make aftermarket replacement remotes for keys and remotes and for all cars, essentially. And we have locksmiths in every town in America, essentially, that can cut and program these things. So

If people go to keyless2go.com, they can find a key that works for their vehicle and they can, you know, prepay for cutting and programming at a certified locksmith that we vetted and we do business with that is local to them. And they can even, you know, just like SafeLight, these locksmiths can come to your home and do it versus you having to, you know, go to the dealer, drop off your car. That's awesome. So that's what I'm working on right now in this business and trying to grow.

And that's keyless2go.com. Exactly. Okay, great. We'll put that in the show notes along with your contact information, Sean. This was amazing. Thanks for doing it. Thanks, Sean. I really appreciate the time. I had a blast. And there you have it for today's episode between John and Sean. For show notes, including links to everything referenced in today's podcast with Sean, be sure to visit his episode page over there.

at BuiltToSell.com. Also, if you enjoyed this episode, a quick reminder to hit that subscribe button wherever you're listening to today's show. And if you want to help support this podcast, I'd highly encourage you to leave a rating and review. Ratings and reviews truly help our show grow and get in front of more business owners.

just like you. Special thanks to Dennis Labataglia for handling today's audio engineering. And thank you to our community of certified value builders who help us bring our message to you. Our advisors are experts in helping you build the value of your company. To get in touch with an advisor or learn how to become one yourself, head over to valuebuilder.com. I'm Colin Morgan, and I look forward to talking to you again next week.