Latest / Exit Algorithms / He Sold a $20M Company at 50. Here Is What It Took to Get Ready | Bob Campana (#98)
Transcript
- Pete Vera, Exit Algorithms: Welcome to Exit Algorithms, the podcast where we decode what it really takes to unlock growth, streamline operations, and prepare your business for a high-value exit. I'm your host, Pete Vera, and today I'm joined by Bob Campana. He's a serial entrepreneur, CEO of Campana Capital, and author of Don't Look Down. He's built and exited many businesses across restaurants, hot tubs, real estate. It has a reputation for thriving in in tough industries. Bob, excited to have you here. Welcome to the podcast. Bob Campana: Pete, I'm honored that you selected me to be on your show and I am ex so excited to share with you some of my failures and Pete Vera, Exit Algorithms: Yes, sir. Yeah, I can't wait to hear more. How how about we start off? Do you mind sharing for our listeners a bit a bit about your background, how you got involved in business and and maybe some of the yeah, the highs and lows that led you to where you are today? Bob Campana: Well, that takes me way back. I'm currently a senior citizen. I'm seventy-two years old. I've started business career when I was twenty one years old. I got in actually I got into a car wreck and got an insurance of twelve thousand dollars. And my father wanted me to that towards my education. I decided to buy a trip aro a ticket ⁓ on Pan American Airways and travel around world for eight months. That was my college education. ⁓ When I came back and as a seminal moment, I was standing on an overpass on the Bay Shore Freeway outside of the airport in San Francisco and saw the sea of cars with one person in it. And it was just the wealth that America had to offer, the promise that America had to offer. did not want to squander that. And decided I was going to go into business. I had $500. I at point my father thought I was totally Wacko because he was a small business guy. He said, You have no idea what you're doing. And I didn't. I had no idea what I was doing. I had a friend of mine that in the Sierra Nevada Mountains in California during World War Two the local utility was what was called which was a pipe made out of wood, and the wood was clear heart redwood, and they did it to feed ⁓ little power generation sta power generation stations around the Sierras. ⁓ they ⁓ the wood pen stocks because ⁓ during the war effort of World War Two, the the metal was being confiscated by the government to basically make war products airplanes or whatever, ⁓ so they wood. Well in the late seventies, early eighties, they decided to replace those wood pipes ⁓ with steel. made a bid on a pipe. We bought a mile ⁓ well, we bought eighteen hundred feet of it, half a mile, I guess, ⁓ pipe, cut it up, disassembled and refabricated redwood hot tubs. I bought the entire pipeline for seventeen hundred and we sold, I think, two hundred hot tubs at seventeen hundred dollars a piece from that. And that basically got me started my entrepreneurial career. ⁓ And when I was doing the hot tubs, I was basically being called as a subcontractor to swimming pool contractors because the people that were building the pools, they wanted a hot tub now instead of a spa attached to their pool. And that introduced me into the swimming pool industry. The ⁓ state of California decided that you had to have a swimming pool contractor's license to install hot tub because there was a lot of flaky pot smoking hippies putting in hot tubs that weren't doing a good job for people. So got my contractor's license and started to build swimming pools and landscaping. That built a company that at the end had a hundred and seventy employees. We were doing almost twenty million dollars a year and producing about five hundred projects a year in the Central Valley of California. I started to get burned out. I started to realize that life wasn't all about being a swimming pool guy. And I started about thinking about selling my company. About three years I had a self-conversation with myself about ⁓ Because most small business owners, their business is their identity and who they are. And I decided that okay, I'm gonna sell it. That that ki put took me on a journey on how I could maximize the value of my company. ⁓ I would imagine that's what you want to talk about now. Pete Vera, Exit Algorithms: Mm. Yeah, absolutely. Yeah. Well, ⁓ to for completion's sake, you know, h ⁓ what did you what you what was what was between that and, you know, what you're focusing on these days? Bob Campana: Well, after I sold that business, I that was gonna become a C BI. I don't know if you're familiar with that, a certified business intermediary. And I went to schools to see how to maximize I did it on own on how I put my financials together and basically the business was profitable and it w it had some different attributes to it that were ⁓ very favorable for buyers. then I ⁓ Pete Vera, Exit Algorithms: Mm-hmm. Bob Campana: Went bought a plumbing service business. the plumbing service business was ⁓ that I I I'm gonna ⁓ I'm gonna be a broker. I'm gonna try and help sell people. The first guy I go to and start talking to about his business, I go, damn, I'm gonna buy this business. So I try instead of so instead of actually people broker his business, I bought the first business that I was gonna try and help the guy sell. And I the opportunity there. That was an interesting transaction because I said, Look, I'm gonna build this business up. We're gonna do this and that. And I had a young man that was helping me on it. And he retained twenty percent ownership of the business. And we built this business up. And at the end of that story, we made the business so profitable the guy said, Hey, I want to just buy my business back. That's why I sold him the the the the business after I had r changed it. for your listeners ⁓ ⁓ the plumbing service business, well, a lot of people would call up how much you charge per hour, how much you charge per hour, they would decide on that predication back then. Well, we changed it to what's called the flat rate pricing model where, well, my water heater took a dump. Okay, look, we're gonna come out, take your water heater out, put new supply lines on, ⁓ put the old water heater in our truck, haul it away, and install a new water heater, and it's fifteen hundred bucks. Flat rate. That's what it is. That basically translated into from $150 an hour to where the plumber we were able to charge over three hundred dollars an hour for the same service, but it was a flat rate price versus and then what happened was people weren't saying, well, one would be perception, ⁓ you're milking the job out so you can longer, so you get an hourly longer hourly rate, or other kinds of perceptions as to the hourly exchange for money and they're always watching how long is it taking and so forth and what have you. ⁓ When a flat rate price, the customer knew exactly what they're gonna pay. didn't take matter if it took 10 minutes or 10 hours, that was the price. So that simplified a lot of things and it made it better for the customer and made it better for us as consumer, ⁓ as a vendor. But what that required was for us to make a book with around, I think it was 750 individual tasks that a plumber could do from changing an apple saw angle stop to putting a wax ring on a toilet to changing supply lines for a water heater, whatever those might be. Pete Vera, Exit Algorithms: Mm. Bob Campana: Those had to be segmented down, and then we put a value on that, and then there was a code was associated with that, which basically showed the plumber what kind of a commission he would receive by selling that service. And that took a little bit of time to educate the plumbers as to how to operate the system. A lot of them didn't like that. ⁓ had I went through several different employees, actually 80 by the time I got it all finished ⁓ and pulled all together. But then we we put a team together, which is Operating very profitably to this day. And then from there, I translated into the hospitality industry, where my daughter, I had a side business, which was a wedding facility that I basically had built with my pool business. And then I dug into restaurants and and the of ⁓ Pete Vera, Exit Algorithms: Wow. Yeah. Mm-hmm. Bob Campana: what was going on in a restaurant, which I was kind of full of myself at that time thinking, well, I built two successful businesses. Let's do a restaurant business. Well, that was an eye-opener because the construction business is way more forgiving than a steak dinner. you had to basically formulate that experience in such a way. But I love the hospitality industry because ⁓ human connection is there now. And our it's so fleeting ⁓ in our tech and with ⁓ Pete Vera, Exit Algorithms: Yeah. Bob Campana: you know, our phones and social media is like a false community thing in my viewpoint. even though you and I are communicating via technology, the connection ⁓ is that all of us long for and the hospitality industry is able to fulfill that need for me. ⁓ So I a couple of things in the hospitality industry. One is do what's called nonverbal communication. Pete Vera, Exit Algorithms: Mm-hmm. Bob Campana: From my design background from building thousands of pool projects and going into thousands of different homes, I've got a unique perspective on design that I basically am able to employ into my restaurants, which brings people into escapism to a certain degree where they were basically come and enjoy a meal with interconnection with their pre people. I f focus acoustics. We all go into restaurants where you can't hear yourself think. ⁓ I'm into acoustics where that restaurant experience a a a in time when you're away from all of your problems in the world. You enjoy a meal with friends and family, ⁓ and the you walk out the door, lo and behold, all your promises hit you right in the face and you're right back in the real world again. But when you're with me for those hour or two, I I give you this respite from ordinary life and and give you a reward, which is why you're there in the first place to ⁓ a get a break. And that's kind of where I'm focusing my energies right now. Pete Vera, Exit Algorithms: Yeah. Awesome. Wow. lot of different rabbit holes we could go up down. let let's first let's let's focus on your you know first your first business, the hot tub business. ⁓ what what triggered the decision to exit that business? You know, how how is it valued, the the deal structure? Bob Campana: Yeah. Yeah, well ⁓ what what basically happened was you told me you're in the navy. Well one of the one of I'm a pilot. ⁓ fly helicopters. As a matter of fact, I crashed my helicopter last year and almost died in it. ⁓ But ⁓ helicopters, I fly airplanes, and I'm I bought this helicopter and I'm flying it over subdivisions in my area of ⁓ Northern California I'm looking ⁓ at All of these emptied lots behind these new subdivisions, which is my customers. That's where I'm gonna build most of the pools or built in new homes. I had this epiphany or this revelation. I go, you know, the builder controls that piece of dirt before the buyer gets it, but the buyer's buying the dirt because they want to have a pool in the backyard. They're the the the builders are selling pool sized lots and so forth and what have you. ⁓ what I decided to do was to go out and make deals with these builders ⁓ give them a c cut. of the construction in lieu of me being able to build the pool and the backyard while the house was being constructed ⁓ then I could deliver the house they deliver the house with the pool and the yard completely finished versus moving into a house and then going through another construction project for three three or four months for they build their backyard out. That enabled to sell More expensive projects because we were able to put that on a 30-year mortgage versus a 15 year HELOC. people spent more money. Well, I basically accumulated, I think when sold the business, I have like ⁓ 11 12 builders, a stable builders, and they were just calling me. Mary Jones, lot 17, wants a pool. I'd go up over there, we'd put the pool project together. So and then that gave me education and finance because I had to carry that entire project until the escrow close. So I had to have revolving lines of credit, put of that together to make it all work. Well, once that actually happened, I was basically scraping the gravy jobs off of area, the competitors were getting the lower profitable jobs. Well, one of my competitors heard that I might be considering to sell my business. I had just turned 50 years old. I've been doing it for 25 years and I wanted new adventures and new challenges. So I enough to know that I had been using my business in some many regards as a lifestyle business where I would basically expense a lot of things through the business and And I had to basically separate that and basically really start reporting all the income and everything on my tax returns because those would be how the buyer would value the business. And then I'm a very large student of Michael Gerber and the EMyth. for your listeners that aren't familiar with Mr. Gerber, I would highly recommend reading his book, ⁓ E-Myth, and the E-Myth Revisited. And he basically crystallized to me. ⁓ Pete Vera, Exit Algorithms: Mm-hmm. Bob Campana: the value of systemization and documentation of systems. what I did is I put it took me about three years to put together an operations manual so that when the potential buyer came, I could put the book in front of them and say, this is how it works. And was ⁓ all And that a key component to increasing the value of my business ⁓ Pete Vera, Exit Algorithms: Mm. Bob Campana: the it it separated the owner as being the bottleneck of making all these decisions and the buyer was able to buy something that had already had management in place and already had systems in place and already had financial reporting systems in place. And that was a key for the buyer because the buyer could then say, ⁓ I can incorporate that into my business and all of the management and everything is basically running on its own and Bob's out flying around. He must be doing something right. So that was the, I guess, the carrot to maximize the business. But that took several years to ⁓ that, organize it, and basically train and get those leaders and the management team in place. And then the culture that had created with that was like a reciprocal culture of we all respected each other and so forth. So then the announcement that I was no longer going to be the leader of Pete Vera, Exit Algorithms: Mm-hmm. Bob Campana: And a new buyer was going to come in was another transition that had to be navigated in a positive way. So each challenge along the way, I had to educate myself and learn about what the potential buyer, just like when I was going out and selling a swimming pool, what did that owner want? made a transition from a brick and mortar sales process where the shape is this big, it gets so many square feet of concrete, then this and that, to the dream. As to why they were buying it and why they were buying it so they could have the memories for their children canning balling and having the f neighbors over for hot dogs and hamburgers. So as I formulated the sales presentation to sell the dream in relationship to the physical, actual swimming pool, was another way that I was able to differentiate myself from the competition. And differentiation added value and had more profitable business. At the end, business was turning a profit of somewhere around seventeen, eighteen percent net net on a construction company was very favorable. And then that translated into a nice multiple. Pete Vera, Exit Algorithms: Yeah. Yeah, absolutely. Wow. How long? So it it took a number of years. How long would you say it it it's a reasonable timeline to prepare your business to to run without you to have the systems in place to be an asset to transfer over to a new buyer? Bob Campana: Well well if you if a buyer is gonna use an SBA loan to buy your business, they are gonna wanna see three the SBA is gonna wanna see three years of tax returns. So it could take four years because you've got to prepare the business for that first tax return. You have to basically shield out, well, my wife's gas is in this thing. I'm basically comping myself a country club membership or paying fuel for my helicopter to do reconnaissance work or whatever the hell I was ⁓ whipping the government over. And had to basically turn around and clean that all up. So when I clean that all up and then I had to pay more taxes because I was ⁓ structuring my business previously to the co courts say structure your affairs in such a way that you can minimize your taxes. That's what I was doing. But the the taxes ⁓ the predication of the SBA or ⁓ lender is going to look at what are you telling the government? And if you're telling me one thing and the government another one, then you're are you really an honest person? Are you really basically providing me what I'm actually buying? So took a little bit of time to change things around. it took about three years to do that. Well at that same time ⁓ I first started, I didn't have an operations manual, I didn't have procedures in place. I didn't have decision trees in place. ⁓ then I I the bottleneck and I might have been the biggest problem in the business. So I had to basically eliminate my participation in it as much as I possibly could so that when the buyer came along ⁓ They could see I'm buying this, but I'm not gonna be buying a job. I'm buying a business that's gonna produce cash flow for me. And and that takes a little bit of time because most business owners don't really think that way. Pete Vera, Exit Algorithms: Right. Yeah. No, definitely right. and yeah, what do you have any recommendations for business owners trying to ⁓ separate from the the business so they're you know either preparing for an exit or just so that they can work on the business than in it? Bob Campana: Yeah, working on the business rather than in the business is the your first transition. And and and and I've talked to several people on this subject over the years, obviously. And one of the ⁓ key ingredients is most business owners start their business, they have to have wear all the hats. They have to do all the different aspects, they have to learn ⁓ different aspects of business. And they're and Mr. Gerber talks about being a technician. So the plumber can fix the pipes, but can the plumber Manage five plumbers? Usually not. They know their job. So they have to transition to a manager, that management is a different job. It's like a chef that wants to own a restaurant. Well, the chef knows how to cook. He doesn't know how to manage an organization. He doesn't know how to manage the front of the house, the back of the house. He knows how to order the food. He knows how to make a recipe. He knows how to make a meal. But does he really know how to manage the waiters, the waitresses, ⁓ the All of the different aspects, the accounting procedures, and all of that that basically go into operating the company. business owners, as a general rule, have to make several transitions themselves to get to a point to they're working on the business versus in the business. And most business owners in ⁓ in small level, they have to do those tasks because that's where they're making their money. They're making the profit by performing that task. ⁓ Well, They have to be able to structure their business in such a way where there's enough profit to where they can step away and they can hire people to do those tasks. And that would be the first learning a small business owner. Once they get that going, then they're going to learn ⁓ to create a culture of inclusivity ⁓ everybody is rowing in the same direction so your business has doesn't have internal conflict. and and that's another learning. ⁓ curve that you have to learn about. And then once you do that, then the next step is to get out of managing the business altogether, have a general manager in place, and then you're overseeing that and you're blazing the trail to possibly a secondary location or more free time for yourself, which is why you actually started the business in the first place. that is another challenge to maintain profitability. while that entire system is being transformed and pivoted this way and that way. And then you're learning all the time about how to basically maximize that. you have the human element of all those different employees and personalities that you're trying to cultivate into a positive mental attitude and a a positive culture. And ⁓ there's I'm ⁓ I in a position to where I knew people that could help me with that. So I used a lot of books and learning and video aud Well, back in my day it was like a cassette tape inside my car what I drove from sales appointment to sales appointment. it i it was just a constant learning and I think that any ⁓ small business that's on a journey understands that constant learning is gonna be a requirement if you're gonna progress. Pete Vera, Exit Algorithms: Yeah. Amazing, Bob. Yeah. The last several minutes, that that's the playbook right there to have a successful exit. I appreciate you sharing. yeah, let's let's transfer over. ⁓ let's talk a little bit more about your book. Don't look down. What are some of the themes in that and maybe some some takeaway for for business owners? Bob Campana: So, like I referenced already, I'm seventy-two years old and you start thinking about your own more mortality at that point. ⁓ I've got eight grandchildren. And you get to this point, you realize, you know, three, four, five after you pass, nobody's even gonna mention your name anymore. You're who were you? You we have such a short time on the planet. So I decided I to document what I had done and what my journey was for my grandchildren primarily. so I went out and I found a ⁓ Ghostwriter to help me with this book. that ghostwriter happened to be a editor from Inc. magazine and entrepreneur magazine that I ordered, that I hired. And it took about a year ⁓ like weekly conversations to basically recap my life, you know, like what I had done and so forth and what have you. And I finished the the we finished the manuscript, I figured I'm gonna buy like ten copies. You know, my mom would buy five and I'd have a few left over for other people and ⁓ That would be pretty much it, but it would be documented. And the c this editor goes, Dude, you should submit this to a publisher because that is a great story. I go, Well, I'm not really interested in that. He goes, Let me do it. So I go, Okay, so he submits it to Greenlee Publishing and a few other publishers, and a week later they called back and they go, We want to publish your book. I was blown away because most places ⁓ You look for years for a publisher to publish a book and in one frickin' week, you know, I'm going, This is crazy. Well, that was crazy. And it was more crazier when we talked to them, they said, We love your book, but we want you to rewrite it. I go, What? the book was a memoir, and they wanted to make it more of an entrepreneurial lesson journey. So we did is we rewrote the book, and then each phase along my life, we basically take Pete Vera, Exit Algorithms: Mm. Bob Campana: This happened. I went on this trip. I did this. I did that. And here's the things I took out of that and what I learned. And then I put like bullet point to the end of the bo each chapter to say, this is what happened in my life, but this is what I learned out of it. And then we rewrote the whole book in that way. it it everybody that well, everybody tells me because they're talking to me about it. We love that. We love that story. You know, it was like great. But it took the journey of an entrepreneur and all the challenges and the failures. ⁓ that go along with a a journey when you decide to be your own boss and you decide to make your way and there's no shortage of mistakes that I made along the way. And then I share the ⁓ successes as well. You know, so i i it was an interesting exercise to write the book at the beginning of it. And anybody that reads it, hopefully they they can take some nuggets out of it that'll help them in their entrepreneurial journey. Pete Vera, Exit Algorithms: Yeah, definitely. Yeah, what you had to pick maybe two or three takeaways from from your book, entrepreneurial takeaways business owners can implement, what what would it be? Bob Campana: Well, I would I would start with ⁓ systemization of your process. I think that you're gonna ever get freedom, you have to systematize the process in such a way that you're able to formulate predictable outcome and that predictable outcome will come through a system is gonna deliver that outcome. ⁓ If Decision comes through the owner of the business, they're never gonna progress because everything's gonna be bottlenecked to them. the then the next thing is that success is not your teacher. Failure your teacher. When you you remember what went wrong, and then you have to find a solution so that that failure doesn't continue to replicate itself. So not getting at failure. But assessing it looking at it as a learning tool and finding that silver lining, which there always is one, that would be another one that I would suggest to do. ⁓ then the last one is the educational component. most people that go into business don't have accounting degrees. They don't understand bookkeeping. ⁓ They their trade. So like if I'm a carp plumber, I totally understand my task as a technician and I have a very high degree of confidence that I'm able to do that world. But if I want to send someone else out to do that plumbing job and I want to manage that person, we referenced it a little earlier. That's a different job. So I have to educate myself on how to be effective in that job. And comes to communication and how are able to own your communication skills. You had mentioned me before we went on the Podcast a year in the military. The military is so focused on concise communication. They want that communication to be concise so that there's no ambiguity in what is being asked of that soldier or whatever is going where or whatever. So in business and your communication skills, that you're able to translate what you're thinking about is something that's like a never-ending journey. And Pete Vera, Exit Algorithms: Mm-hmm. Bob Campana: I I would say that those three different things, if you were to focus on each one of them, they're gonna reveal where your holes and your bucket are really quickly. Pete Vera, Exit Algorithms: Yeah. ⁓ great, great advice. yeah, Bob, so you've been in business long enough. You've seen several waves of disruption in your business career. I'm curious, how do you compare some of some previous disruptions you've seen with how AI is impact affecting the industries you're in? Bob Campana: ⁓ yeah. You know, AI is so fascinating to me because ability to have a conversation with literally the entire compendium of world knowledge at your fingertips. And being able so I've been studying AI for a couple of years now and the prompting thing ⁓ and to basically maximize the way that you interact with AI it is just amazing. And the ability to compile reports or research and all of this just an amazing revelation. ⁓ We don't know where this journey is going to take us. We have no idea of where AI is going to end up. But right now for ⁓ small owners not to be dabbling in it and learning about it and help having their organizations utilize that you're gonna be left in the dust if you don't understand ⁓ application of AI and business the if not anything else, how you communicate with your customers, how you're able to utilize A AI ⁓ crystallize your thinking, how you're able to use AI from a standpoint of doing research on other can my business, how it can analyze your reports, it can turn around and show you from acting as a professional certified public accountant and reviewing my records. what would be a place that you would want to change or should I focus in on on my profit and loss statement? It can basically act as a consultant, as a coach, and all different types of things that were never available to me or anybody three years ago. ⁓ and now it's just like blowing up in our faces. ⁓ educating yourself on the use of AI and how those tools can be maximized ⁓ just ⁓ having some kind of like a superficial for entertainment purposes is a mistake. You you I would almost think ⁓ I'm considering some kind of an AI coach to help me really maximize my interaction AI. Pete Vera, Exit Algorithms: Yeah. love your perspective. Total totally agree. man, Bob, we're we're coming up here on time. I and touched on this a lot earlier, but I'd love it if you could summarize and if you had to pick one practical tip would move the needle the most for business owners wanting to prepare for a successful exit, what would it be? Bob Campana: Well, it's gonna be the financials. ⁓ you're gonna you're gonna have to focus on your profit and loss statement and your balance sheet, and you're gonna have to focus on how you can maximize your profitability because your profitability, your bottom line is what the multiple is going to be that you're going to get for that business. If you can structure your business in such a way that it has a recurring revenue model. So let's use an example of a plumber. And the plumber can put like a annual service where they come out once a year and they look at your plumbing and they make sure everything's good to go and they check your or if they have a combination business where they're plumbing and air conditioning, where they can have like a subscription type of thing, ⁓ and give someone a recurring revenue model. That going to be something that all potential buyers are going to look at because it's a guaranteed revenue source, which isn't speculative. ⁓ And with a history ⁓ many years with this recurring revenue model and building on the revenue model. So I have fifteen subscribers this month, twenty five the next month, and you can show a growth curve where it continues to grow, you're gonna maximize your return on that because that's gonna be a very profitable way to ⁓ structure business going forward. And w ⁓ especially if you can do it where you have an automatic deduction off of their credit card at the same time, that's even better yet. Pete Vera, Exit Algorithms: Love it. Wow, you give some great advice, sir. Thank thank you so much for coming on today, Bob. Where's the best place listeners can find you and learn more about your work, your book? Bob Campana: Well, I have a YouTube channel. It's called Get Back to Work, G-E-T Back, B A C K, the number two work with an exclamation point on the end of it. Yeah, you can look me up on Instagram, Bob Campana, and you see this current project that I'm working on, which is a multimillion dollar restaurant complex, which is going to be utilizing all types of nonverbal communication. and the aesthetical design aspects in the restaurant industry. So join me there and Pete, hopefully you are continuing to bring great information to your followers as well. Pete Vera, Exit Algorithms: Yes, sir. Thank you so much for coming on today, Bob. Love this conversation. Bob Campana: Thanks, Pete. You have a great day and have a happy Fourth of July as well for our country. Then thank you for your service to our country as well. I greatly appreciate it. Pete Vera, Exit Algorithms: Thank sir.