BANKRUPT - The BOMBS that almost took us out! | S1E9

[00:00:13] Speaker A: A lot of great episodes so far, and I think we've had a really strong mix of some successes and some lessons learned and some things like that, but not sure that we really discussed any failures or even scary moments. And we like to laugh a lot about social media, how everyone posts their wins and their specialists and their vacations, and that's just not the way it works. It doesn't work in life at all. It doesn't work in relationships, and it sure as hell doesn't work that way in business. So I thought it'd be cool if we could share some of our, I don't know, our near misses, and some of them aren't even near. We get hit, but we just are able to survive. They're not the bomb, as we talk about missing the bomb. So I thought it would be cool to talk about some of those today and let our viewers that are new to biz know that it is far from perfect and it is ugly along the way. And you come with some scars on the other side, and as long as you survive them and learn from them, then you get the opportunity to continue to pursue whatever it is that you want to pursue. [00:01:11] Speaker B: Yes, I think we will expose all of our near hits and immediate direct hits. But I will say, I think that times have changed where people are being more transparent, business owners and founders in their losses and their failures and what's going on. I'm seeing that more and more of people opening up and saying, hey, it doesn't look what you're watching on social media. That is not what our business looks like. There are so many things going on behind the scenes and opening that curtain up to what's going on behind the scenes and showing the good and bad. I definitely think there is a change. Again, we go back to your father. Like, your father was never going to show that side of things, right? It was head down, put a strong Persona on, and just keep going. And we're not going to show anything else social media, but even one step. [00:02:07] Speaker A: Further, that vulnerability would be equated with weakness. Even one step. Right. It would be like anything that would have a vulnerable look to it would be weak. And gosh knows, you could never be weak. So why would you ever want to be vulnerable out in public or in the open, right? [00:02:22] Speaker B: But I really think that generation believed that it's like, let's just do what we have to do. I'm a man. I do this, I provide, and my feelings don't matter. [00:02:32] Speaker A: Right? There's no crying in baseball. [00:02:34] Speaker B: But truly, I feel like that's how that generation was just built. And now people are different. I think it's because people are more accepting of you can be so many things and be a very strong male, and that can come with a lot of masculine traits, a lot of femininity, all inter and same with female. It's very fluid how these things work together. So, anyway, that was just my while people don't talk about it, I do feel like there's been a trend upwards of more business owners talking more about the failures. But those are not the people that are continually in the spotlight. It's the people that are successful that are in the spotlight, and then they're talking about their failures. But there's a lot of people that never succeeded at all, and those are the ones you'll never going to hear from. [00:03:20] Speaker A: Yeah, unfortunately, because there's so many great lessons to be learned. And hopefully for us, the rest of us in the world, the ones that do fail, they'll give it another shot. They'll get it right. There's a great saying in the venture capital world is that you're not getting any money from us until you've lost all of someone else's money, where it would suggest that that failure is supported, even celebrated in spots. But hopefully, a lot of those folks that don't get it right the first time, wipe themselves off, get a second shot, get the funding or whatever they need to try it again, and then take all those learnings and get back in the game as quick as humanly possible. [00:03:53] Speaker B: This is a little different than what you were talking to, and I don't know if I completely believe it, but I saw a quote the other day that somebody said, all the most successful business owners in the world are failed employees. [00:04:07] Speaker A: That's true. [00:04:07] Speaker B: Which is interesting. [00:04:08] Speaker A: I know a lot of them. True or not, I certainly know a lot of them. I know we talked about in one of our episodes how you got the push out of. [00:04:16] Speaker B: I was a failed employee. [00:04:17] Speaker A: Yeah, you were a failed employee. And I've had buddies along the way that were failed employees and got that push. One in particular I can think of in the finance side of the business got that push right as Schwab, Charles Schwab was bringing out their Internet component, and they started to have these individual advisors because of the Internet, they could connect into the mothership on their own platform. And so many businesses like that were just born immediately and constantly for that period of time. So, yeah, I know a lot of people have gotten that nudge along the way. Our budy from made plus, who's making the shoes, was with one of the large local manufacturers of shoes and decided to break out on his own and was somewhat frustrated about what he couldn't do and wanted to do what he wanted to do. And the only way to do it was to start his own shop, make his own shoes. And he is. [00:05:11] Speaker B: Yeah, absolutely. So when you're talking about near misses, things that potentially could have taken your business down and out very early on, what would be the one that jumps out in your mind immediately? [00:05:29] Speaker A: I have three, but they're very different. [00:05:31] Speaker B: Let's start. [00:05:32] Speaker A: Okay, but I will. I'll start with one, but I'm going to pick one. And I think the one I'm going to pick is because it might not occur to anybody, because it was an acquisition. And we made the acquisition with the intention of growing, and in the process, almost missed on the diligence to the point that it took out the mothership. And this was an acquisition that we made back in 2011, and it was of a packaging division that was underneath of a larger company. And I'm saying it that way because it made the diligence around the financials a little tougher to pull out. It was very mixed and very grouped together, and I made some assumptions very incorrectly. So when I looked at the numbers, right, I looked at their sales, which were comparable to ours, the same, maybe just a hair less. But for all tense and purposes, we were going to double the size of our business with the acquisition. So when it came time to look at the expenses and understand the financials and do the diligence, I just assumed that if we were using three trucks, just pick a number. Right. Or something that you'd have to bring on to service the business. That since we were doing $7 million or eight, I think it was eight at that time, and they were doing $8 million, let's call it that, we would just need to double our trucks. Simple, right? But I was wrong. And what I missed was their business didn't run anything like ours. It was very transactional. They were pushing out orders of $300 at a time when we were pushing orders of $1,300 at a time. So for them to deliver, it took four times the effort for them to deliver one order, as it did us. [00:07:10] Speaker B: And I remember from a price you're talking. [00:07:15] Speaker A: I'm just saying, if you think about the number of transactions, it took four times the transactions to do the same dollar that we were doing, right. When I was figuring it would took, we were taking the same number of transactions. [00:07:27] Speaker B: Were they also doing this is just because we've never actually talked about this. Well, we've talked about it, but, yeah. Were they doing a lot of partial deliveries, which anybody that knows, like, in the freight world, you're trying to do full truckloads all the time. [00:07:42] Speaker A: No, not that, but they were servicing a much smaller customer base. So one thing that they were super proud of was their service of the UPS store. So think about when you go into UPS store, there's boxes in tape and so on and so forth. And if you look at the number of different types of products they use, there's probably 15 or 16 of them. But it's one little bundle of this and one little bundle of that. So the intensity or the transactional intensity to service that business was exponentially higher. So when an Arnold's truck pulled up with what our typical transaction looked like, it had $1,300 of product. When this company's truck pulled up with one order's worth of product, it was $300 worth of product. [00:08:28] Speaker B: And they had a bunch of, if I'm understanding correctly, a lot more skus of products. [00:08:35] Speaker A: They were working with no comparable skus, but they were of just lesser value. Yeah, of lesser value and maybe selling more in depth. So a typical order, like if you were selling something to a UPS store, and I'm remembering starting to take these orders. We closed this acquisition on October 1 of 2011. And then that night, literally that night, I signed the paperwork and we took over the business that night. And I just remember we kept as many people on as we could. We kept on two inside salespeople that stayed in Virginia, and they were entering their orders and doing what they did in a typical day. But those delivery tickets were printing in our building. And I remember the printer turning on, and I didn't think it was ever going to turn off the amount of paper that came out order after order after order. And you would think, well, thank God. That's amazing. It sounds like you got it right. Except for when I'd pick up the order, there would be 14 or 15 line items on it. It would be $309. So think about all the intensity to go pick that order and put it on the truck and the space it took and so on and so forth. And I just remember thinking, this is back to a near miss. I remember we were there all night. I think that first week, I worked 720 hours days. I showered in the sink and I slept on the couch, and I would just wake up, shoot some bizine in my eyes, drink a five hour energy, and go back to the floor and try to figure out what was going on. And I just thought, oh, man, Mick, you've done it this time. I'm on the hook. I own the business. There's nothing I can do. I can't walk away with it, from it. I've acquired the asset, and all of the assumptions that I made on the cost to serve are way under. They're way, way under. We was supposed to take six trucks immediately took seven. We needed an additional truck to keep up to the service levels. The space that we thought we would just add a little bit more space, or we would just turn our inventory faster. We had a whole building behind us, an unanticipated rent that we had to pick up because we started bringing their inventory up from Virginia, and it never stopped. It was just truckload after truckload after truckload. And I had signed on the line to buy all of their inventory at cost, and I had to buy it. So I had to buy it. I had the business. I had just lumped out a million to or something. And whatever the down payment was, the seller took back some of the financing. So I was on the hook with a note to him, the bank where I took the down payment from. And I just remember I thought, oh, man, you have done it this time. And I wasn't sure that we were going to be able to outrun this one, because my biggest fear was that we would let the customers down and they would leave, and I'd be sitting there with all of these costs, and I'd be sitting there with all of these commitments that I had made through the acquisition, and I had lost the asset called customer, which is really what I bought. I bought a customer list, and I just remember thinking, oh, my gosh. We ultimately got it together, and we split into two shifts. But I remember that day. There weren't enough four trucks. Everything that was supposed to be on the ground was in the air. We couldn't get to the inventory. It was in the wrong spot. It was in the wrong building. We loaded every cubic inch of every truck we had, and we still had 16 orders that didn't get on, and they were from northern Virginia. So someone was going to be coming back, and we were going to be missing those deliveries. I would say if there's one thing that allowed us to survive in that moment, it's that the business that we bought wasn't run very tight. I won't say, well, but it wasn't run very tight. So I had this expectation when you buy something from us, if it's in by 03:00 it delivers the next day if it's in stock, right? So I was sweating every single ticket that came in before three, and again, we were looking at a pile of tickets that you could barely jump over. And I'm sweating it where I'm like, oh, this is the end. These customers, they have to leave us because we did not deliver the next day. Fortunately, the company that we bought had lesser expectations, and their customers did, too. So when we delivered the second day, right as we're walking around the clock, literally working 24 hours, and I'm working 22 of those 24, sleeping two or whatever I can do. And there are probably some days where I work 48 straight hours, we were able to keep up, and I don't know that they were any the wiser in retrospect, but I was really sweating the fact that we're trying to make our brown boxes look different through service and logistics and right thing, right place, right time, and we're completely letting it down. So in the absence of that, it's just a brown box. And you can get just a brown box in a lot of other places. So that's one that I remember. And the other thing too is I remember when we were a lot smaller. If we had a tough week, I could personally get on a fork know? And John Calvert, one of our longest tenured employees, we'd meet at our distribution center. We'd both jump on a truck. Three, 4 hours, the place was back in order. We had everything set up and back in shape, and we opened Monday clean. And I remember standing there at 315 in the morning on, I don't know, April 2 of 2011, and thinking, those days are over. Like, I will personally never be able to just jump on the fork truck and grab John, and in eight man hours, four times four or four plus four, never be able to just fix this and go into Monday like, okay, we're good to go. Those days were over. And that hit me hard. Such that twelve years later, I'm still talking about it. Those are some of the moments that I remember along the way. And I thought, man, we're going to get taken out because I've signed on for all of these commitments, and we're going to lose all the customers in the process, and I'm not going to have any way to fund all of this debt that I just signed on for. [00:14:20] Speaker B: I don't want to be the interviewer, but because I know a lot of people are going to have these questions, two questions, and then we can move on to the next topic. [00:14:32] Speaker A: But you get to share. [00:14:34] Speaker B: Yeah, then I'll share. But there's a couple of points that I know people are going to be interested. I'm interested in one being how did you ultimately. I actually want to start with the other one first. Want it to be in sequential order. Number one. What did you miss on that? Due diligence. How could you have done that better and understood what you were buying? [00:14:56] Speaker A: Yeah, I think so. In 2011, I was 39 years old, right? I think something like that. And I was very optimistic. I never considered failure. I never did. [00:15:16] Speaker B: So optimistic or naive. They're very close cousins, but they're not the same. [00:15:22] Speaker A: No. [00:15:23] Speaker B: Naively optimistic. [00:15:24] Speaker A: Yeah, I guess so. And I will say in fairness, because I had very trusted know, gosh, going back then, so Ellen and know and Tod Furman, who's one of our trusted advisors, he went through the numbers with me and we did the very best we could in the diligence, but because of the way their business. So we bought the packaging division of a coffee and office products company. So everything was being delivered on the same trucks. And the truck pulled up and they had some coffee for you, and they had some pens and pencils and they had a roll of bubble wrap. And it was hard to tell, like in those city deliveries in Washington DC, for example, it was hard to tell how much of that truck was dedicated to packaging and how much was dedicated to servicing the other things that they were delivering. So it was very difficult to pull out the operating costs and understand what they were. So when I made some of the assumptions, I was only able to look at revenue. Like the only number I knew accurately was that their revenue and our revenue were pretty comparable. So then I just assumed that it would take the same amount of resources to service that business as it did our business. And what I missed on was how different the transactional intensity was. It was way more transactionally intense than our business. And gosh, I don't know what I would have done differently. I would say, if there was enough synergies and the things that I was optimistic would work out and thought the numbers proved out. Although I had many, many moments of doubt, certainly in those 1st, 30 days, 60 days, as we are just swimming in this business and drowning, quite frankly. I mean, nose just above. I don't know, in retrospect, because you know me well, I mean, I beat myself up when I got something wrong. It was all right, dumb dumb, how do we not do this? This was excruciating. How do we not do this again in the same situation? I would dig in deeper. I would slow the process down. I would say emotionally, I always wanted to. That was an acquisition that got us into the northern Virginia market, which I called on as a salesperson, and quite frankly, got my ass kicked down there. There were some businesses that were strong. They had been there forever, and I just couldn't break in. And I'm not sure if maybe emotionally that was my opportunity to break in. But I would say I would do what I do now. I would slow it down a lot more. I would be a little less eager and a little more careful. I mean, not lazy, not procrastination or anything that looked like that, but I would certainly go, hold on a minute. I've seen this movie before. A lot of their operating assets are intertwined. When we go to pick off what we think is one third of it and allegedly looks like our business. Is that the truth? That's what I would do differently, is I would spend more time trying to disassemble those three business units between their coffee, their office products, and their packaging to say, all right, so what does it really, of all these operations that we see, how much does it truly cost to serve? The truth was, it costs very little to serve the coffee and the pens and pencils. It costs a lot more to serve a bundle of bubble wrap and everything that looked like it in the packaging world, because it's all air, right? It's baked stuff with relatively low value. So I would take the time. Yeah, I would unbundle that a lot more aggressively, and then I would be more conservative, and then I would round down versus rounding up. As I was, I was moving a little too quickly and rounding up on synergies and so on and so forth. I would reset both of those, for sure. [00:19:04] Speaker B: It's interesting because your whole business model is, to everybody should be, but you talk about it a lot, is you want less input and more output. How do you get more efficient? And that's the opposite of what you acquired? [00:19:20] Speaker A: Oh, yeah. [00:19:21] Speaker B: Literally the opposite. [00:19:23] Speaker A: And the other thing was, our ERP system was outgunned the day we closed on that. And so, I mean, we were completely under gunned. From a software perspective, the system that we had in place at that time was never built. So then we're also responding to put more people in place that are managing the system. And we broke it that day. And that was something that I never even considered. Like, I didn't stop to go, okay, so now we have all this extra a. I didn't know the transactional intensity, so therefore, at no point did I stop and think, well, what does this mean for our ERP system? The people that are using it, when the stack of tickets comes back and has to be invoiced, how long does that take? What does that look like? How do I get all of this other output? And the only answer was with more input, like you just said, right? All I could do was add heads and man hours and all of that stuff. So we broke our ERP system, which had me replacing it ultimately in October of 13 after another one year search. [00:20:23] Speaker B: Event, which we talked about in another episode. Sometimes that's an amazing thing when somebody, in this instance, being a company. But as I talk about a customer, like breaking our system or we cannot keep up with them, it's not what you were looking for, but sometimes, silver lining. It's like, this is great because it forces you to upgrade, enhance, get better, or make this thing broader so you can handle more customer, more customer needs. So silver lining. [00:20:53] Speaker A: Yeah. I mean, just too, right? We're talking about near misses. But in that moment, I thought that I had exposed us to extinction. I thought I had taken the company out. I really did. Across my mind, I was just being realistic with myself and thinking, all right, and Mick, how bad did you do it this time? And I thought I had exposed us to extinction in that moment. And that's a great motivator. You get your shit together in a big hurry when you're looking around at all the people that you've now put in jeopardy, when you were supposed to grow and be better on the other side, and now you've put every single person and your legacy, I mean, care, don't care. All of your family's hard work, you've now put that in jeopardy through some suspect choices or decision making in the process. [00:21:35] Speaker B: It's frustrating, which really, I mean, frustrating, I don't think frustrating is not the word I would use. [00:21:43] Speaker A: Yeah, it's every emotion, terrifying. [00:21:45] Speaker B: Well, it's impossible to understand. So as we're talking about the pressure of running a business, I mean, that is a perfect example of when you're like, holy shit, I just made a decision. Ultimately, you call the shots, right? So there's a lot of input, but it all lands on you. You're the one who makes that executive decision, and you're putting everyone else's livelihood at stake, at risk. And no one can understand that until you're in that position. And it's a hell of a position to be in. So those are the moments where you earn your keep, but it's part of it. It's what you sign up for, but it is something that you cannot describe, and you only can experience it. [00:22:34] Speaker A: And who would think too, right? Just the idea of the risk of growth if you don't stop and think about it for a second. I had all the greatest intentions of the world. Make an acquisition, grow the business. There was a lot of employees that we were picking up in the process that were great. They were really strong, and I was excited to have them and welcome them to our team. So the idea of growth ever being a negative thing or an acquisition ever being a negative thing, if you're new or a young business owner or a young person, even like I was at that particular point, it might not even occur to you that there's to be like, well, what could possibly be the problem? We're going, right. Everybody says that's a good thing. Well, there are a lot of risks and threats in that process, of course. [00:23:13] Speaker B: And you've got to be smart about how quickly you grow. Even though I will say, honestly, I've never thought about, I've always been like, let's grow as fast as we can. [00:23:22] Speaker A: Yeah. The answer is yes. Now, what would you say? Until we have an order, we don't have a problem? [00:23:26] Speaker B: I mean, everyone's philosophy is like, yeah, exactly. Everyone's philosophy is like, oh, you got to nice and steady a smart strategic growth. I've been like, balls to the walls. Let's go all the time. I still think like that, and that is how my mind works, and I think it's how it will forever work. It's just let me go and let's figure out how to support it as we're growing at crazy light year speeds. [00:23:50] Speaker A: What's funny? Just because, and I have an idea what we're going to talk about next. And just the idea that by trying to go on offense, we were put on incredible defense in the process. Right. I mean, our intention was to grow and be on offense, but, man, we got pushed into a defensive mode in a very big hurry, which is, I think a lot of people think about, when you talk about near misses, you think about something really bad that happened that really makes sense. It was foreseeable or. Yeah, that's always been a problem. I'm not sure that anyone would have thought what could possibly go wrong. You're growing the business that equals good. So that's an interesting takeaway. Know, talk about not knowing what you don't know, that was definitely a big moment for Mick Arnold. [00:24:36] Speaker B: Like that last question I have as you were talking about this, because the numbers were the numbers, how they achieved those numbers was what we didn't understand, what the operations were. Were you able to be, while you were doing your due diligence over here, were you able to be boots on the ground in their business, seeing how their ERP system works, seeing how their delivery tickets and how their trucks are loaded? And was that something you were able to see a little bit, like in person, or were you just listening to the feedback that you were getting from them? [00:25:13] Speaker A: No, some. And let me explain what that means. So they operated their business in a very unique way. The main building was in Springfield, Virginia. They had a warehouse in Richmond. So they were bringing the packaging product up every night, overnight, landing it into this small building, because the cost per square foot in Springfield was so high that they only had so much space. So they'd bring up these two straight trucks of packaging, which were the orders for the day. They would break them down, put them into all these other vehicles, where some of them were twelve and 14 foot vans, like you'd see in a city that are low step, like if you want to run a U Haul truck. Right. It would be. It'd have a low back, have a roll up door. Small, so inefficient. Twelve and 14. But they were making a delivery to a lawyer's office of coffee and pens and pencils, and then running next door to the UPS store and dropping off six bundles of boxes and a bundle of bubble wrap or something like that. So I did get to watch it, but there wasn't that much to see. And I think there was also. You've reminded me of some arrogance on my behalf, too, in that business. That particular chunk of business had changed hands a few times down there, and that piece of business broke everybody that touched it. So it drove one company out of business, it got sold off to another company, and the bank made them sell it to somebody else. So it was tainted along the way. And I think this is all occurring to me real time as we talk about this. I'm not sure if the fixer in me was attracted to that or, of course, nobody else would get it right, but we can. And we certainly operated differently. And I would like to think a little bit better. But there also is probably some arrogance laced in there, if I'm being honest about it or thinking about it retrospectively. [00:27:00] Speaker B: But here you are. [00:27:01] Speaker A: Yeah. [00:27:02] Speaker B: Sitting to talk about it. [00:27:03] Speaker A: Yeah. Scars, bruises, lessons learned. Little jaded. Yeah. So over to you. Boy, that was quite a ride. I think I might be sweating. I just wear black today, so I couldn't pin it out. [00:27:15] Speaker B: No. As much as I know, I still always learn little tidbits myself because we don't just sit around talking, getting into the weeds of every experience. So it's really cool for me to hear it in different versions, too. Just as much as somebody that's just hearing it for the first time. [00:27:33] Speaker A: Yeah. Like twelve years ago. Right. I mean, that's something until you sit. [00:27:36] Speaker B: Down and I'm sure you pull different things that you're like, oh, yeah, I didn't think about it that way. But now that you ask me, well. [00:27:42] Speaker A: The arrogance thing just occurred to me in real time. I probably conveniently tucked that away so I wouldn't have to take any more ownership. [00:27:51] Speaker B: I was going to say a smart ass comment, but I'm good. [00:27:55] Speaker A: Should I earned it? Go ahead. [00:27:59] Speaker B: All right, so that's your biggest one. [00:28:08] Speaker A: Boy. That's right. [00:28:10] Speaker B: First that comes to mind. [00:28:11] Speaker A: That's right up there. Yeah. There's a couple of others I'll get into. And if we have to split this into two episodes, it might be that's. [00:28:19] Speaker B: How many failures we've had, folks. [00:28:20] Speaker A: Great. Yeah, I've got some good ones. I've got some really good ones somehow still here, but got some good ones. How about you? Certainly the challenges are different. [00:28:35] Speaker B: It's funny. Well, I probably have. I don't know if. Well, probably less, just by virtue of running the business for a lot less time exposure. You guys have been around for a lot longer, but it doesn't make them any less terrifying. Memorable. [00:28:58] Speaker A: Traumatic, yes, traumatic. [00:29:00] Speaker B: And something we were talking about before we came in here into the studio was that I've had so many very recently, relatively speaking, because I've only had the business for less than seven years. I started in 2016, September, and I almost have blacked them out. It's like I blacked out on some of the terrifying almost misses failures. And I think that has been part of how you keep going when you're running a business, because you've got to think about it, you've got to get better, but then you've got to move on. And I think part of that mechanism as a human, of protecting yourself and being able to do that is you almost block some of that out. So when I'm thinking back, there's not a ton that comes to mind. I mean, obviously, if I really sit down and get introspective I can figure them out, but it's not something I'm thinking about often, especially the little granular details of them. So when we were talking about doing this topic, it's like, I've got to think about this because I have totally blocked so many of those out consciously, I don't know consciously, unconsciously, but that's what I've done as maybe just as I called it, a mechanism to be able to just keep going, keep grinding and stay motivated. [00:30:20] Speaker A: Yeah. It's a survival tool or tactic. Right. I mean, as an animal, you're definitely going to also, too, anything that would bring that back up, that would rob you of energy that you need today would be counterproductive. I mean, certainly, you know the lessons. I mean, they're in there. They may not be front and center, but when confronted with those situations, again, you know exactly what they look like and it's in there. And that may call it up to top of mind and be like, oh, yeah, I know what this looks like. I have seen this formation and I know I'm not running right on this one. [00:30:53] Speaker B: Yes. And I know I've taken so many lessons away from them, from which I carry and think about all the time, but the experience itself, I try to forget, or I have allowed myself to sort of black that out. But I will say my most recent one I've had of quite a few. But the one that was most terrifying was wire, the wire fraud, which now I don't even remember. I guess it was 2020. It had to have been 2020. [00:31:28] Speaker A: It was because it was just when. [00:31:30] Speaker B: Lockdown, we were in lockdown. It was just when that pandemic had started and cyber fraud was up. I think in talking to my insurance company, it was like 300%. I think they told me at that particular time, because people were just susceptible, people were at home. There was so much hacking going on. It had to be the beginning of 2020, I think. So here's what happened. We had a vendor and on one side, a customer on the other, and we were buying, I don't remember the particular construction material, but we were buying material from this vendor and we had sent payment to that vendor. And they contacted us via email and kept asking, kept asking for the payment. And my sister, who was at that time had paid them. She said, what are you talking about? We've paid you. And this kept going on for like a week or two. And she would pick up the phone and talk to them. They're like, we haven't received it. What's going on. Is something going on with the mail? We're like, okay, maybe something's funny with the mail. Something's up. You'll get the payment. They don't. So we put a stop check on it, and I believe and resend fast forward. We figure out they are not receiving any of the payments that we thought they had. And then it becomes an even bigger issue, obviously, because they don't get the payment. And this was when, I don't know. Usually we have 30, net, 45, maybe even 60 different terms. But this was a particular situation where we owed x amount deposit up front, which is really unusual. But we did. Before they released the material. [00:33:24] Speaker A: I think it was, if I remember correctly, because we were in the weeds together. It was a prepay, and you had to wire it. You had to send it. Ach. Which is how it got. [00:33:34] Speaker B: Yeah, we did. You're right. But I think that it was after we tried to send initial payments. See, here's where the blackout comes in. But it was deposited sometime before they released the initial shipment. So our customer was on the other end. Where's the material? It was a job that was very urgent. I think we got a PO last minute. They needed material on site. It was like, boom, boom, boom. And you've got to get it to us and do, like our customers. Get it to us as fast as you can, please. You're right. In an effort to get them the material as quickly as possible, we were going to do a wire, because a wire isn't immediate. So. That's right. We go in, and I believe at that time, I don't think I had a. Yeah, I didn't. I was thinking if we did it via token, like the wire token or going into the bank. [00:34:32] Speaker A: No, I think this was just a plain old wire where. [00:34:35] Speaker B: Well, I know we have. [00:34:36] Speaker A: Where somebody gave you an account number. [00:34:38] Speaker B: No, they did. But I'm just saying, the way that we did it, whether it was just, like, through our token wire, we went into the bank, but it was going into the bank and wired the money. That's right. And then they said they didn't have the money that was wired. Okay, so here. That's the story. Wire the money, said they didn't have it. Customer needs material. They're not getting their material. Everybody's pissed. Come to find out, how many dollars was this? I believe it was. I mean, it was between 100 and $150,000. [00:35:10] Speaker A: I want to say it was 115, 120. [00:35:11] Speaker B: It was between 100 and 150. And real money for a small business. Real money for any business, you could balk at that. And certainly now we would be okay. It wouldn't take us out. But a couple of years ago, small business, I mean, it's doing real damage for sure. And then not to mention what you're going to have to go through with your customer over here. I mean, just a lost customer and everything else that's going to ensue from there. So when we were digging a little deeper, we got on the phone with a vendor and they said, listen, we don't have the money. You keep telling us you wired it, we don't have it. We found out when we were looking through the email exchanges, some hacker scammer came in and they into the vendor's system and acted like they were from that company. But here's the thing that's so scary. They got into an email exchange that we were actually having with the vendor, swooped into that exchange, acted like they were them, and the name was exactly the same, except one letter was off. [00:36:27] Speaker A: Yes, I remember. [00:36:28] Speaker B: And it was a long email, so you really had to look at it. Even after the fact, I still had to scroll over it and really look at it to identify the letter that was missing. And it was not just these generic responses. I mean, they had our real invoice or their real invoice. Everything was real. They used the same language, they articulated the same that our vendor did. They knew a little bit about the actual job, the project. This was somebody who got in who knew the project, knew the players, had actual paperwork. So the most believable thing you could ever imagine. And they were giving us banking information that essentially wired the money to them, the fraudster, to the bad guys. To the bad guys. So we figured this out, and it was, I believe, seven days after the fact. So immediately I contact M and T, my bank, and say, listen, we wired x amount of money, and I just hear a silence on the phone. [00:37:36] Speaker A: They said, how long ago? And that's what brought the silence. [00:37:39] Speaker B: Well, they said, how long ago? And I said, well, it was six, seven. It was going on a week. First of all, the chance of getting a wire back is virtually impossible. Like, you don't get it. When you extend past one day, you definitely don't get it. So seven is laughable. Like, really, this is sorry you lost your money. But of course, they didn't say that after the fact. We talked about it, and I had learned all these things, was like, okay, got it. They put their head investigator on the case from the bank immediately. [00:38:19] Speaker A: Which bank? [00:38:20] Speaker B: So M and T bank my bank is M and T Bank for sure. [00:38:24] Speaker A: Should definitely be screaming that. [00:38:25] Speaker B: I thought I just did. [00:38:26] Speaker A: No. [00:38:26] Speaker B: Oh, it was in my head. [00:38:27] Speaker A: First m t mention of all day. [00:38:29] Speaker B: Oh, I'll say m t. Hell, yeah. But that was in my head, so I thought I'd said it. A lot of things are in my head. [00:38:35] Speaker A: I gotta help you break through the trauma right now. Yeah, you're failing this one. You definitely tucked this one away. [00:38:41] Speaker B: Yeah. This is almost embarrassing that I can't speak about the details. [00:38:44] Speaker A: I remember walking into our living room, and you were on the couch. [00:38:47] Speaker B: This is that part of the story. I remember that part. Had investigators on it. So the money had been wired into, which I've learned has more criminal activity. Probably a better word. I'm not sure if that's what kind. I don't know if there's a particular, but than any other bank in the US. So it wasn't shocking to m t bank. That's where the money had been wired. Well, these people were clearly amateurs, because when the money got wired, they went to Wells Fargo and they tried to pull the entire deposit out at once. So it got flagged. And the money did not leave the bank because it was flagged. Well, then instead of. If they would have come back and just tried to take a chunk of that out and just kept doing that consecutively, they would have gotten the money. They went back and did the same thing and tried to pull all of it out. So it got flagged twice, which means seven days later, or six days later, whenever that was, it had not left the bank yet. So one day I wake up and I am just, yeah, you had seen me the day it happened. You came into our apartment. I didn't even know what to do. A mess. And woke up one morning, I hadn't slept those few days, and I see this credit in our bank account, and sometimes I talked to my sister, and I was like, do you see what I'm saying? It looks like the money is back. And she's like, no, it's a credit. This happens all the time when it could be just the fact that they're going through an investigation and it's pending, and it doesn't actually really post. I don't know how that works. But in my house, like, yeah, that's probably what it is. [00:40:41] Speaker A: Because you were prepared for it to be gone, right? I mean, that was 100% the likely outcome. [00:40:45] Speaker B: Yeah, very likely outcome. It was. I don't know, whatever. Hour. Abnormal hour. And I'm texting my banking agent and he raised back, he's like, no, that shouldn't be there unless you have the money back. He's like, let me figure this out. Let me figure out what's going on. And he called me back. He's like, yes. He's like, the investigator tracked it down. We got your money back, and then told the story that I just told you about how clearly they were amateurs. And we got the money back. But that day, I called the bank, and I said, set me up with. Okay, so I called the bank, I said, set me up with every. The person you know that can set us up with every security measure there is. There's multiple password authentication, but, like, so much more than you get an email every time there's anything you can think. [00:41:37] Speaker A: Of, there's positive pay for people that are putting checks out. That's something that we've indoctrinated through the pandemic as a protection. [00:41:45] Speaker B: Yeah. Now, anything over xml, they text us to make sure that was a transaction by us. Anything you can do. We didn't have the security measures in place we needed. I'm not saying we wouldn't have been duped. I really believe. I'm not sure we would have ever picked up on it, but we would have. Once we went to wire like that, actual sitting there putting the wire through at the bank, we would have been stopped somewhere from a to b. So that was the silver lining of it, is that we got all that in place and then worked with insurance to make sure we had all the cyber insurance now, which is just ever evolving. And now there's always more and more cyber insurance, blah. It's just going up, but have to have it, because when that happened, I contacted the insurance company to say, hey, when I thought all the money was less, like, what can you do here for us? Are we going to be able to get some of this money back? Can you help? And it was almost like, well, you have some security, you have some coverage, but not the particular coverage you need. And it's like, well, what the hell am I paying for this over here? Yeah, well, it covers a portion of security fraud. And it was that lack of understanding, and you just believe, okay, I've got cybersecurity coverage. I'm good. No. And it was almost like, we can't help you, which really made me angry, but I did have to look at myself. Did you read the fine lines of which I actually bought there? Probably didn't. [00:43:18] Speaker A: Sure. [00:43:18] Speaker B: So in the end, all we did was heighten our security measures. But it was a terrifying experience for that period of time. And I won't forget. Well, I would say I won't forget it, but I forgot all of it, clearly. [00:43:33] Speaker A: Well, I do remember one thing, so takeaway, because we talk about this on a fair occasion, is war room. Because I remember when I walked in and you had all of the color was out of your face and I said, what is going on? And we talked about it. And my first thought was, who do we know? I mean, in general, our first thought is, okay, this is not our expertise. Who do I know that's way smarter than me about this? And we called, I think we called our attorney, an accountant, and said, here's the situation. And they both had gloomy outlooks. Right. There wasn't just like the call to the insurance company. Yeah, it's not looking so good for you. Like the bank. Yeah, not looking so good for you. And these guys were great. I mean, they were certainly on our team, but they were also being very realistic with their experience and saying, by the way, it had happened a lot. They were having clients that were getting hit in the same way. More money, less money, same way, a little bit different way. But it was absolutely rampant at that time. And just this whole idea of people dropping in in front of emails. I had a very close friend whose assistant was walking down the hall with a check and said, I'm getting ready to drop that check for you, as you instructed in the mail. And he said, what are you talking about? And sure enough, somebody had dropped into an email and it was impersonating him. And there was this trusted assistant just trying to do the right thing, running down the hall with a check to send it to the bad guys and flagged it and caught it. And it was a good outcome. But it was that close. It was that close where somebody thought where they were certain that they were talking back and forth. [00:45:07] Speaker B: It is crazy. But as you alluded to the war room and this right after that, not right after, but a couple of months after, when I'm thinking about the experience, we went out to dinner and we brought the MNT team out with us. I owe you times 1000, like, get whatever you want on the menu and drinks because you got my $150,000 back. But it's just how critical that war room is. And it's in those moments, they're there all the time. But it's in those moments of absolute desperation and the hardest challenges when you're really struggling that you realize how important your war room is. And we should realize that all the time, but it's just human nature. You don't until you're in the depths of a problem. So right after that happened, I was so just happy that you had introduced me to even the idea of a war room, and I had built one, and I had put time and effort into nourishing those war room relationships. For anybody that hasn't listened to some of our former episodes where we talk about war room, it's just a group of people that are all experts in their respective fields that you're not an expert in. And they've got your blind spots and they've got you covered. And if you've got a question about anything, that they are your expert, and you go to them and you just lean on those group of people and you keep them very close. And that's what a war room is. And in that moment, I was like, I am so glad I have spent years building this team because I believe M and t probably would have gone to bat for anybody. But did they go to bat for me a little bit faster because I had really put so much time into that and energy into that relationship, maybe. I mean, again, when you go back to, you're working with human beings that have emotions. If I have somebody that's been amazing to me that I've got a good relationship with, is it my human nature to probably act a little bit faster and harder on their behalf? Yeah, it just is. [00:47:11] Speaker A: Yeah, of course. Look, they're just making choices with their time, right? They have the same time resources we have, and they get to pick where they spend it. And with that relationship, they spend it on you. And I think back to the war room thing, as you're building that war room, just talking about two the biggies are, we mentioned lawyer and accountant. And it's a new business. It's hard because you're pension pennies, right? You're watching every single dollar. And when you look at a rate for what a great attorney cost or a rate of a great accountant, and it might be painful to see whatever those hundreds and hundreds of dollars are, to think, gosh, I just can't do that, man. It's in those moments when you need that counsel. And by counsel, I mean anybody that would act like a counselor to you, whether that be a lawyer or whatever. And some you pay for by the hour, like accountants and attorneys. Others you pay for differently, whether it's your insurance guy, your bonding agent, right? You talk about Reggie a lot, who's been such a value? [00:48:09] Speaker B: Do I just got off the phone with this, right? [00:48:11] Speaker A: Yeah. Really? For another war room type event? Because you thought, who do I know that knows this better than me? Reggie. [00:48:17] Speaker B: Yeah. And I think actually this would be, let's. Let's go into a little bit more of this war room and end on the war room, and then we can get into our other near misses on a whole other episode because we've got so much to talk about. But on the war room as a segue. Speaking about Reggie, my bonding agent, who now I'm doing insurance with his company, too, but now we're going through another. I don't know if this one's a near miss, but a new experience that's really challenging. I have never, luckily, just flat out not been paid. I haven't had that. Have we waited longer than we've liked? Of course, this is where we are not getting paid. We've been told by the CFO of the company that they're struggling financially. Everybody else we talk to is also not getting paid by them. So this is. I know we're at risk. Clearly, I didn't know this before we got into business with them. And so we've got, I think it's $180,000 that we just don't have. And our customers, they're big manufacturers. They're like, where the hell is my money? And I'm like, where the hell is my money? We delivered this product. It's been installed. It's really black and white. And I'm looking at the aging report. I'm like, holy shit. So if you're not familiar, you only have so many days where you can lean a job, which means stop the job if you haven't been paid. So you've got to make moves within a certain period of time. Luckily, the job is bonded, so we can go after the surety, the bond to get our money. But it's not that easy. You have to get claims attorneys involved. So now we're like, okay, we haven't been paid. This customer is no longer even responding. I mean, I'm like, I'm going to have my guys just show up at your door. I'm everything to get our money. But we're getting no response. We're getting nowhere. So of course, I call Reggie and he goes out of his particular role and more and helps me contact their, sets it all up. I'm in contact now with their claims attorney, who won't answer me either, who they were supposed to have a meeting with this customer and get back to me on Friday. Like, what is the deal when are we getting our money? No response. Call their mobile today. Mobile, mailbox full. Call their office today. Office, mailbox full. I'm four emails deep not getting response. Call Reggie, what are you going to do? Oh, we're going to get your money. I heard that conversation and just send me the emails and we're going to do this. And it's just like a ride or die. And I think as we talk about when you're looking for your war room, really important for people to think about it is about you want to bring people in that are the best at what they do. Of course, they're experts. They know their field. That's a given. I mean, I don't think really, but you have to get people that align with your attitude and your mentality and your personality. One of the reasons Reggie and I jive so much. We're on the phone for 1 minute. What do you need? He picked up the phone. He didn't even say hi. He said what's wrong? Because I don't call him unless something's wrong because he knows me. I don't ask for anything unless it's a big deal. What's wrong? Tell him let's go. Let's get out of it. And he's got this total edge and he will tell you like it is. He will get vulgar, whatever he has to do. But that's me too, right? I will get in there and I will mix it up and I'll rumble with you if we have to. But I love that edge about him. Let's just do this. So having the right people with the right mentality, you've got to line because that's just as important as how much they know. [00:52:14] Speaker A: Yeah. If not, you're going to be frustrated, right? Because you are in this moment and you've called on like we have a great labor attorney. In the same vein, where you get into a situation, whether someone leaves and you have a non compete or something like want it when it's time to fire one over the bow, which is what you're talking about with Reggie, you're to that point in this situation where you need to pick someone to fire one over the bow. And I've had situations like that know when they're right in lockstep with you, you don't have to suggest firing one over the bow. They can hear the urgency in your voice and know exactly where you are without any more conversation. And they're already packing the cannons. They are ahead of you in packing the cannons and they've already got the fuse lit by the time you get to them. And that's where you show up the same and ready to put the same type of energy into the relationship. [00:53:03] Speaker B: Yeah. [00:53:04] Speaker A: Otherwise it's just technical expertise. That's great. And it's mandatory. [00:53:07] Speaker B: A lot of people have that. [00:53:08] Speaker A: Sure they do. Absolutely. [00:53:09] Speaker B: I mean, it's like a lot of people have the same skill set. There's so much more to it than just your skill set. I don't think as a business owner I am smarter in one particular field than anyone else. But I do know that I will scrap and I won't stop. But it's all those intangibles that help me with the business and maybe have an edge or an advantage. So there's so much more to it. And I think reggie's closing words were, I got you, I'll be that asshole. And hung up. [00:53:42] Speaker A: Right. [00:53:43] Speaker B: And it's just like, thank you. And you're right. If you don't feel like people are meeting you with that same energy, what you are feeling and need is not as important. You want people to meet you. And if he came to me with the same thing, I would show up with that same energy. So it's everyone there on your same level showing up, meeting expectations. Standard. [00:54:06] Speaker A: Well, like when he came to you and said, well, now, in addition to bonding, we're also into insurance. You're like, hell, yeah. You know what that meant? Or what they were doing, but because he said it and they were going to start doing it, your immediate answer was, I'm in. [00:54:17] Speaker B: Yeah. [00:54:17] Speaker A: Now what's the question again? I'm in because I want to all. [00:54:21] Speaker B: Day because it's the people and I know they're going to go to bat with me. I'm not going to be in a situation where there's wire fraud and I've got the insurance company basically raising their hands like they can't help shrugging their shoulders, even. [00:54:32] Speaker A: It was like a phone shrug, I. [00:54:33] Speaker B: Would say it's like wiping their hands. And maybe they couldn't. Maybe they really couldn't legally, and we weren't covered, but they didn't even show up to explore. What, am I yelling? I feel like I'm yelling right now. [00:54:47] Speaker A: No, you are. You are very passionate about what you're saying. And Tommy can always moderate. You can modulate her screaming. Right, Tommy? [00:54:53] Speaker B: I was like, I'm screaming right now. [00:54:54] Speaker A: He's over there looking at the bars, jumping off the machines. He hasn't stopped touching your volume button. I can see him out of the corner of my eye turning you down every time you rear back for comedy. [00:55:04] Speaker B: He'S like, oh, hell, this is going to be loud. I think we can just close saying, if you surround yourself with people that show up with the same energy and intensity. That's a great word. If you're all riding on that same wave, you can do whatever you want. But you've got to be so particular about plucking those people out and then making sure that you just give everything to that relationship, nourish it, grow it, build it, and create that bond. And then you got it. [00:55:35] Speaker A: So we started on near misses, which was great. And then having to be able to lean back on your trusted partners when you get yourself into that pickle. I use a very kind term, pickle. Into that pickle. [00:55:48] Speaker B: What a nerd. [00:55:49] Speaker A: Who the hell ever says that? [00:55:50] Speaker B: Jesus. [00:55:50] Speaker A: That's what happens when your dad's 50 years older. You have words like pickle, pickle. You remember in that pickle way back then, remember we were back in the Ford. [00:55:59] Speaker B: But I think the greatest thing that you can take away as the near misses both of ours could have taken us out is we're on the other end talking about all the amazing things we got out of it. And that's just life. If you're not uncomfortable and you're not taking risks, it's cliche, but truly, it's the only way you get better. And it's because you have to, like, you are absolutely forced to get better. And until that happens, as a human being, we're pretty okay as humans with being content and comfortable. Who wouldn't? That's humans. [00:56:38] Speaker A: Absolutely. [00:56:38] Speaker B: So until you are forced out of that little comfort zone, like, holy shit, this is uncomfortable. I've got to fix this. Then you do. And I think that is the reason that we do what we do, and you're going to go through these ebbs and flows. But when you're down here, when you're here here, you're down here. Nobody can see my hand if you're just listening. But if you're just part of the. [00:57:03] Speaker A: Course, then you have, wow, you are a beauty today. I mean, this is going to be. I can't wait to listen to this back. This is going to be amazing. Tommy, you have your work cut out for you, making this thing. [00:57:13] Speaker B: If you've got a dip, just burned your mic. [00:57:15] Speaker A: You hope you can fire. [00:57:17] Speaker B: All right, we're going to end it now. [00:57:20] Speaker A: Well, look, I'll tell you next episode, we've got more. We are such f ups that we have many, many more to discuss. I'm going to tell you about family members suing family members. And I'm going to tell you about going toe to toe with the Teamsters union, which was pretty scary day when I was. I wasn't sure. [00:57:39] Speaker B: Yeah, it was a cliffhanger for and what we'll have to do. When you're talking about the Teamsters and the union, we have to bring the conversation that we had with our good buddy Colin after some shots this weekend, that commentary into the conversation, because it was a hysterical commentary. [00:57:57] Speaker A: We'll try to represent it as best we can. Or maybe we just have to bring the Jameson in for that particular. [00:58:01] Speaker B: Maybe we'll have to bring Colin in. [00:58:02] Speaker A: You know what? [00:58:03] Speaker B: That could be even better. Yeah. [00:58:04] Speaker A: Good God. Talk to me. You really have your workout out for you, Tommy. We bring Colin in. Yeah. All right. Well, fun as always, man. That was a rocket 55 minutes today, man. I know how to wind you up. All right. [00:58:16] Speaker B: Sorry about that, guys. [00:58:17] Speaker A: I'm going to have to get some rest between here and next episode, so I'm back on point. [00:58:21] Speaker B: Cheers. [00:58:22] Speaker A: Cheers. Cheers. Well done. [00:58:23] Speaker B: Got me. [00:58:24] Speaker A: Thank you, as always. All right, stat of pickles until we come back.