John Corcoran 10:24
helpful to know that that was coming. I’m also fascinated by people that start a business and the noise that they hear from family members. So you had your father who probably was not too thrilled when you said, you’re gonna go start this business. But also, this is 2009. Lehman Brothers has failed. That’s not the only business failing, banks are going out of business, people are out of work, and you’re like, we’re gonna move to a new city, new industry, we’re gonna open a high end wine shop, there must have been other family members and friends who are like, Jessica, what are you thinking?
Jessica Fialkovich 10:55
Yeah, and that was, it was totally, and it was also, the second move across the country I had made for owl within like an 18 month period. So I’d like just moved from Philadelphia to Aspen, for this guy, as my family and friends who are not married yet. He proposed right before we made the second move, which made them a little bit more, you know, more security. But yeah, there was a lot of noise. I think it was helpful to though because like, Look, our job prospects, and Aspen were really poor. And Aspen is one of the most expensive places to live in, in the country. So like, we were like we had to leave, right. So we didn’t get a whole lot of pushback from our friends and family there. And they’re actually super supportive, like after we went through, like, here’s our ideas. And, you know, we still had some side gigs, where we’re kind of making money and the fact that my in laws were putting us up, and we didn’t have a whole lot of overhead, we were 24 I think we got a little bit more support. From that perspective, if we’d been at a different stage in our life, and like where we’re at now, and homes and kids, and I don’t think the same support would have been there. But with the low overhead overhead we had and the lack of prospects, really to restart our careers at that point in Colorado, it it seems like a good move, I think, from everyone’s perspective.
John Corcoran 12:16
Now there are so in addition to the larger economy having challenges, there’s so many challenges related to this particular business, highly regulated industry, you’re moving to a new city, a new community where you don’t know as many people at this point in time, since 2009, a lot of things are shifting towards online and e-commerce. You said that you were inspired to do it by some friends who had a physical wine shop with a physical location. But you describe this, this as it became more of a high end wine sales online. So talk to me a little bit about some of those challenges that you experienced.
Jessica Fialkovich 12:55
Yeah, so our vision at first was just to replicate the retail store that we used to frequent and Aspen. And we got that off the ground fairly quickly, we met a commercial real estate broker at the time, Paige Eber, who’s now one of my closest friends, just randomly through connection and she she got us up and running in a great retail location and introduced us to all kinds of people in the community. So that the the physical location was up and running fairly quickly. We were profitable within months. It also helped out like you hear these stories about why it’s good to start a business in a rich recession or depression. And we are the beneficiaries of that. I mean, our rent was like next to nothing. I mean, months, I think we almost had a full year of free rent, which is like, unheard of these days and paid for TI our vendors were willing to extend us terms as a new business that you normally wouldn’t get, but they weren’t selling anything to anybody. So they’re like, alright, well, at least these guys are willing to buy something from us. So that helped us all overcome some of those challenges. Because we didn’t have we didn’t have a lot of funding. We had our severance packages, you know, some some credit card debt. And that’s pretty much what we launched the business with, I think, maybe 25 grand in total, but I think I bought it but we borrowed another 25 for my father in law. So 50,000 Total to open a full retail storefront. And we were able to stock it fairly quickly on vendor terms with you know, six figures in inventory. So that was the whole vision. But as I mentioned, Naples is a luxury market. So at that time, a lot of the other luxury retailers in Naples and across the country were going under or they weren’t taking what’s called their allocations. So allocation like wine is highly allocated like you have to actually apply an interview to sell for some high end luxury brands. And at that time, all those those retailers that were selling those brands had cashflow issues, so they weren’t taking their allocations. And this luxury wine was was sitting just on the shelves. And there was this key day that I think we were probably open for weeks. And this gentleman, also a really close friend of ours now Steven grant strolls into the store. And he’s super soft spoken. And he pulls me aside. And he was like, you know, you don’t have some, you don’t have great wine here. And I was like, Okay. And I was like, Well, what do you want, you know, listening to your customer. And so he gave me a list of wines. And he’s like, go to your vendors and ask them if you can get these wines for me. And I’ll be back in a week. So I call my vendors and they’re like, sure, like, nobody ever wants these wines. So I buy Steven, the cases that he wants. And what he had set us up to do that I didn’t realize is sometimes to get those highly allocated luxury wines. You have to buy off brands of the same producers that nobody would want to buy. Right. Yeah. So like that? Would
John Corcoran 15:51
it? Was that the list of wines he was giving you? Is it the off brand or the or the
Jessica Fialkovich 15:56
it was the off brand? It was like the you know, this the stepsister like the redheaded stepchild that no one would want of those brands?
John Corcoran 16:03
Why did he come in and do this? What was the motivation?
Jessica Fialkovich 16:05
Steven, just like a great guy. And I think, you know, he really was honestly trying to help us out. Also the store, he had been going to previously no longer had cash flow to get the wines he wanted. So and I know, and it’ll be interesting when he hears this, I know he knew what he was doing and being able to set us up to get these luxury brands. But as soon as we started buying those cases, for him, we were on the approved list for the luxury brands that we could make 1000s and 1000s and 1000s of dollars with and that changed the whole trajectory of the company. Once we started getting that stuff. We took advantage of the online e-commerce marketplace that you mentioned was starting up Gary Vee was really pioneering that from a consumer standpoint. But we really dove into this collector market. So the stuff we were putting online was you know, 500 to $25,000, a bottle not like your regular $50 bottle that you can get it total wine. So that’s what setup that direction. And then we started working with collectors all over the US and Canada, Hong Kong, just because we were able to buy these really specific brands,
John Corcoran 17:18
and talk about some of the challenges of developing this online platform, which is, you know, distinctly separate from the retail platform commit has its own set of challenges.
Jessica Fialkovich 17:27
Oh, god, yes. So regulation is it was the number one challenge. So when you get into wine shipping, especially at that time, because it was still relatively new. So the rail regulators didn’t know how they were going to handle it, especially from retailers, like they had rules for wineries and things like that. But going from a retailer direct to consumer, there’s a ton of different regulation, every state had its own different set of rules. And we there weren’t like now there’s sophisticated software’s that can help you figure all those out. But at that point, we had to do it manually, and figure out what the different rules were. We are super lucky, we have such a loyal customer base that like for example, you can’t ship to Pennsylvania, it’s a control state, we would have people we would ship to across across the border to Ohio and our customers would drive from Pittsburgh to Ohio to pick up our shipments. But crazy stuff like that. And then we were dealing with insurance issues to like I mentioned, some some of our bottles are 1000s and 1000s of dollars. So we this one order where we were shipping. It’s called DRC. It’s one of the most expensive wines in the world. And we were able to get a few cases of their most expensive of their expensive wines. And we’re shipping it to Hong Kong to go on the auction markets there. But we just ship out of DC. And so you know, we call FedEx and I think the package was like our cost was probably total worth like 20k. But like the total retail value is over well over $100,000. Right. So you’re talking to FedEx, and they’re like, are you going to insure this? No, we’re not going to share that. Like, we’ll give you like insurance for $5,000 or whatever. So yeah, crazy solutions, stuff. Like my father in law ended up driving up to DC. And then we’re paranoid. So we did like bubble wrap in the back of the car and like temperature control, because you got to worry about that. Yeah, wine. So yeah, as much as opportunity brought us that that really was why we ended up getting out of the business was was the regulation and all the different rules and childhood headaches that it was a lot of headaches. Yeah. And
John Corcoran 19:37
that’s interesting in itself, how entrepreneurs then go to a next business that doesn’t have the same constraints that the previous one does. But how did you end up selling it within three years of starting it? That’s fairly early days for a lot of businesses to sell? Yeah,
Jessica Fialkovich 19:53
so we, we were done. I mean, we’re done with the regulation. I mean, also like with that expansion we’re working with we’re Getting retail hours still, we have a retail staff. And then we’re working across time zones, really from the East Coast to Asia. And it was just insane and ridiculous. And we were totally burnt out. So I did, what I tell my clients now never to do is I just woke up and one day is like I’m done for putting the business on the market. You know, if you look at mine, and my husband’s disc assessments were both like 98% DS, so we make super fast decisions. So it was literally like, within 24 hours, we had the business on the market. And we were fortunate, like the market had come back, right and why it was doing really well was exploding the economy, it was coming back. And so we were able to sell the business in less than 30 days, we just, I think we hit the right time for it. We also kind of saw the writing of the wall with the competition was going to start to increase again, especially on that online side and, and really wines a product. So if you’re reselling a product, the only real war you can have with your competitors as a price one. So
John Corcoran 21:03
yeah, so what were some of the takeaways from that experience of selling that business don’t sell it. So quickly prepare a little bit more than than 24 hours,
Jessica Fialkovich 21:12
definitely prepare, like, we had an amazing financial transaction. But the stress and anxiety around it was way too much. And honestly, I keep saying like we got really lucky, like the buyer who bought our business was very forgiving. You know, we were not well prepared going into due diligence, I think a more critical buyer would have torn our business apart and really reduce the purchase price. But we also I mean, we did, we did not do things correctly. So I did tie myself to the business after the fact which I wish I would have done for an extended period of time. And, and ultimately, our business failed. So the buyer who bought our business was not the best buyer, not, you know, the most appropriate buyer, I would say for the business. And it immediately cut off the luxury online market that we built, that was really our focus kind of destroyed our reputation in that arena. And the business I think survived for about five and a half, six years, just the retail storefront but that was not the business that we built. Some
John Corcoran 22:18
it’s sad to see your business get dismantled in that way from the buyer. So in retrospect, probably would have sold it someone else not tied yourself up as long, but any other takeaways? Um,
Jessica Fialkovich 22:31
I think those are the beta and prepared in advance, like I mean, and it’s not like we started this business like I was 24. I said, when we started, it’s not like I thought I was gonna sell wine into Canada for the rest of my life like we knew we were going to sell and we knew we were going to sell within a relatively short time period, probably less than five years, right. This was an early life crisis for both of us. This was not our career path. Yeah. So knowing that when we were starting, like we could have set up our exit strategy from day one, right. And we just chose to ignore it because we had all these other urgent things going on in our lives.
John Corcoran 23:06
Yeah. So what inspired you to get into the business of helping other business owners to buy and sell businesses?
Jessica Fialkovich 23:13
Yeah, the first inspiration was, it was actually how we retreated when we decided to sell by advisors. So relatively young company, like you said, we were only about 30 months in when we decided to sell. We’re about 3 million in revenue at the time, which was not huge, but also like Borneo, we know how small of a percentage,
John Corcoran 23:34
just simply that’s like less than 1% of business. I get that. Yeah.
Jessica Fialkovich 23:37
And the conversation I had with advisors that I was introduced to, to our attorney who was a great attorney, but he just wasn’t in m&a. They were all like, You’re too small, no one’s gonna want you who would want this business. It was it was a really poor reception. And what I noticed that the transaction is when we did find somebody who was willing to sell our business is what he told us. And yeah, it wasn’t, it wasn’t willing
John Corcoran 24:04
to cut your hair, I’m willing to sell you this bottle of wine. Geez,
Jessica Fialkovich 24:08
I’m willing to sell your business for a six figure commission, right? He treated us like, you know, we were like, annoying to him, right. And he was able to get the deal done for a great price, which I am grateful for. But I was saying to myself, and we did a road trip for like six months afterwards. And he and I were talking about different businesses to start or go back into wine or whatever. And I was like, Why can’t somebody just deliver investment banking level services and advisory services to small business? Like why is that so hard? Like why does no one want to do that? And that’s really been my inspiration for the last 10 plus years is that’s that’s what I want to do. I want to bring the advisory and the services and the information and education all these large businesses have, but just do it for small business and entrepreneurs and not have that attitude about somebody being too do small like mean like small businesses sell in this country 1000s and 1000s every year. And for advisors to have an attitude about a small deal or not a good deal is just completely ridiculous.
John Corcoran 25:13
So how do you know there’s a natural inclination for a lot of businesses to constantly be chasing something bigger and bigger? So how do you remain committed to that initial vision? And not like, Chase? The bigger and bigger?
Jessica Fialkovich 25:23
Yeah, so I mean, like, Look, our my brokerage firms that my, my husband now runs, like, we do have an m&a department and we run some very large deals. I mean, this year, I think our largest transaction was north of $30 million dollars, right. But we watch our median deal size, because we know that the impact that we’re making and small business is where our passion lies, but also outside of that, I think it’s a good business strategy, right? So you put all your eggs in one basket with a big deal, right? So let’s say that $30 million deal that $30 million deal takes like a year and a half to work, you’ve to pull multiple people on it. And it’s going to die for 1000s of different reasons, right. So from a business strategy perspective, it’s really risky to chase those chases large deals, and really stick your whole year on one or two of those, right when the closing percentages is very low. And most of these deals, whereas in small business, you have you have more of an opportunity to close. But you don’t need to take three or four people and throw them on a deal to work full time for a year and a half. You can work multiple deals at a time and provide the same level of service and you’re more diversified. So that’s really what’s kept us true to that is is that yes, it’s good to have some, you know, big elephants in the room that you’re chasing. But from a safety perspective as a business and where we’re passionate. We’d much rather keep our median deal size, much, much lower.
John Corcoran 26:46
So Transworld. The company actually wasn’t founded by you. So when you founded the wine company, you started something completely from scratch. How did you get involved in Transworld?
Jessica Fialkovich 26:58
Yeah, so Transworld is actually a franchise and my husband and I own probably about 25 or 30 territories of that company. And it’s, it’s actually it’s, it’s one of those companies that’s had probably six or eight different owners. We just did a whole you mentioned the deal board. And we just did a whole history on Transworld. Because it’s been around since the early 1774. Yeah, yeah. So currently, it’s run by Andy Agneta. He’s been the president and owner for 25 years now. And through just random circumstances, we were introduced to Transworld introduced to Andy. And that was kind of what I was looking for when I was talking about those, you know, those services for small businesses and being able to broker and, and provide advisory services for small businesses that are looking to exit. And we really connected on two things. One, we’re both from the same areas of New Jersey. We actually grew up in the same short town in the summers. I think, Andy, also, there’s a story we tell them the deal board, he used to clam for Al’s uncle. So our whole family was in the fish industry. And Andy had started a business reselling clams to one of Al’s uncle’s. So we had a personal connection there. But more importantly, we connected on that passion of serving small business and entrepreneurs. And really, that’s, that’s where it clicked for me. So there was an office available for resale in Denver, Colorado, downtown, back in 2012. And that was the first acquisition
John Corcoran 28:29
we did with them. And so it’s interesting, you still maintain a brick and mortar presence, that seems that seems to be a high priority for you. Even you know, we’re recording this in December of 2022, even after a couple of years of COVID and things kind of becoming, you know, less location dependent. Talk a little bit about, you know, why you’ve taken that approach?
Jessica Fialkovich 28:53
Yeah. So we did, we bought our building back in 2019. So I actually bought our first office back in 2017. So one things have changed a lot. But two, they still haven’t changed that much. So when we’re working with business owners that are looking to exit, specifically small businesses, we have two issues. One, confidentiality is key. So we need to meet in a really neutral location where there’s not going to be any of their customers, or any employees that can overhear conversations, so we don’t want to meet at their locations, or any of these transactional conversations that are going on. The second is that it’s more emotional than you would think. Right? Selling your business. And we went through this too, even with a business that I wasn’t super emotionally tied to. It’s, especially if you’re going through it your first time. It’s really removing a part of yourself a part of your identity. And having that personal emotional connection with our clients is super important to us. It’s super important to them to be able to do stuff face to face. So we’ve maintained physical locations. in all the markets that we operate in,
John Corcoran 30:01
yeah, I’m going to ask a super wonky, nerdy question. But this is inspired by your talk that I saw you gave. Yeah. So without getting too far into the weeds here, so you know, all these businesses are, many of these businesses are based on profit, or EBITDA. And a multiple of that, you had an interesting, innovative idea around starting a separate company, LLC, where you ran a lot of the expenses through because it would help with maximizing the value. I’m probably completely oversimplifying what you explained. Can you explain to your words,
Jessica Fialkovich 30:36
yeah, that I will use the caveat that I’m not an accountant or lawyer. So if you’re listening to this, please run this by your accountant or your lawyer. But we’ve seen a lot of our successful clients use a strategy. So there’s something called add backs to EBITDA or adjusted EBITDA that’s been become very popular in the entrepreneur entrepreneurial communities lately, where it’s basically run all your personal life expenses through the business. And then at the end, when you want to sell it, you just add those back and nobody cares. Well, that’s actually really not true. You can’t really add those back, not most of them. And we’ve seen some crazy add backs. I mean, we’ve seen everything from Lamborghinis to divorce settlements, and business p&l. And so what I’ve seen some of our successful clients do is they have a separate entity, like a holding company, or some other consulting company, that’s just, it’s really their company that they’re doing some personal consulting through, or investments or something like that. And all of those add back or non essential expenses live in that company, not the operating company they’re trying to sell. So then the EBIT is not affected, but they still get the tax write offs. Right.
John Corcoran 31:43
Got it. And so they run it through that, and they take some kind of a charge something for consulting or some some kind of revenues coming into that business to cover those expenses.
Jessica Fialkovich 31:53
Yeah, yeah. And that’s something they’re their accountants help them with.
John Corcoran 31:55
Okay. Now, one of the things we’re running a little short on time, but as of December 2022, the economy has been very shaky over the last six months or so in different industries. Some people are predicting we’re going into a recession, there’s been layoffs, some bigger companies laying people off, what are you seeing right now, across the company that you work with?
Jessica Fialkovich 32:16
Yeah, so the business sale transaction markets still super steady. We actually had a crazy three years like business sales increase in VAT and valuations and multiples increased very rapidly 2020 2021 and early 22. So what we’re seeing is, it’s like a plateau right now, we’re not seeing anything decrease, but we’re seeing it like plateau. And then since we are heavily involved in looking as in small business, financials and helping people prep for sale, and things like that, we’re actually seeing small businesses weathering the storm of everything that’s going on pretty well. We haven’t seen a huge number of drop offs and revenue or profitability. Small business owners have been really good at increasing prices, consummate to what their expenses are. So their profit ratios are, are maintaining, so we’re pretty bullish about small business and the business for sale market in the future to come. It’s also we really benefited from that great resignation, and these layoffs. So I don’t remember, if you remember my talk, John, but 80% of all business buyers are actually individuals coming from corporate jobs and corporate worlds. So there’s this really interesting dynamic with supply and demand is when a lot of people resigned from corporate to do their own thing that the valuations actually go up. That’s what happened the last two years. And now when we’re seeing all these big corporate layoffs, that’s good for small business sales too.
John Corcoran 33:42
Interesting. Interesting. So it’s kind of an inverse correlation effect for you for your as far as your industry goes, yeah,
Jessica Fialkovich 33:50
they’re, they’re the demand right? So if we have more buyers demanding a smaller supply that helps
John Corcoran 33:56
Yeah, I want to ask you about how you’ve managed this blows my mind to the you’re doing kind of a roll up acquiring these different franchise locations. You’ve also you had an assistant business that you ran with your sister, one with your two businesses with your husband’s you have multiple businesses and roll ups? How do you manage all that?
Jessica Fialkovich 34:20
I mean, it’s the standard question like amazing team and amazing help, like we really do. We do have business partners and all of our businesses. So it’s not just my husband and I just running everything ourselves, right? And then we have an incredible leadership team and support team personally, like you know, so we have support at home to for my son and for our personal lives. But there’s there’s no way we wouldn’t be able to do it with out all the people that are around us.
John Corcoran 34:49
Yeah. I want to wrap up Jessica with a question I was asked which I’m a big fan of gratitude, and especially expressing gratitude to those who’ve helped you along the way mentors friends yours contemporaries, who would you want to shout out and thank you.
Jessica Fialkovich 35:03
So I’ve got three mentors that have really helped build my career and make me the entrepreneur I am. One is Andy Cagnetta, the CEO of Transworld, who we talked about earlier. The second is Ray Titus. He’s my partner in Exit Factor. He’s also a co-owner of Transworld Corporate. So he’s really helped develop me as an entrepreneur over the last 10 years. And the last one, my good friend, Heidi Ganahl, she was a founder of Camp Bow Wow. And she’s really taught me how to balance all that because she founded this giant franchise company, but she also has four kids, and has really helped me with that journey, too, of how do you balance, entrepreneurship family and your personal life?
John Corcoran 35:44
I actually have four kids as well. So I’m gonna have to look her up and see what the secret is, because I certainly haven’t figured it out. Jessica, this has been great. Thank you so much. Where can people go to connect with you and learn more about what you do?
Jessica Fialkovich 35:55
Yeah, so exitfactor.com/podcast has all my contact information. And we also have a cool Free Self Assessment for your business as well.
John Corcoran 36:05
And you are also launching in a couple of months, two months or so in January, you have your master program.
Jessica Fialkovich 36:10
Yep. So we have a master program that helps business owners prepare their companies for sale and we do a big kickoff every January as part of strategic planning.
John Corcoran 36:21
Cool, so people love to check that out as well. Thanks, Jessica.
Jessica Fialkovich 36:24
Thank you for listening to the Smart Business Revolution Podcast with John Corcoran. Find out more at smartbusinessrevolution.com. And while you’re there, sign up for our email list and join the revolution. And be listening for the next episode of the Smart Business Revolution Podcast.