In the latest episode of Diners & Deals, host Seth sits down with the dynamic Matt Matros—a serial entrepreneur turned independent sponsor with a story that’s as inspiring as it is insightful.
Matt’s entrepreneurial journey began with Protein Bar & Kitchen, a fast-casual dining concept he scaled into a national brand. But he didn’t stop there. After two successful exits—Limitless Coffee (acquired by Dr. Pepper) and a video shopping startup (acquired by QVC)—Matt pivoted to the world of dealmaking, helping founders and operators in the lower market overcome challenges, scale businesses, and achieve their goals.
In this episode, Matt shares the hard-earned lessons that shaped his career, including:
🎯 The realities of sitting in the CEO seat: Matt pulls back the curtain on the pressures of leadership and the importance of emotional resilience.
💡 Financial discipline as a superpower: From budgeting to long-term growth strategies, learn why sound financial practices are non-negotiable.
🤝 True partnership in action: Matt’s approach to supporting founders and aligning with investors showcases the art of dealmaking with integrity.
🔥 Navigating exits and scaling with purpose: Gain insights into how Matt successfully grew and transitioned businesses while maintaining a clear vision.
This episode is packed with actionable advice, candid reflections, and a peek into the mindset of a leader who’s been through it all. Whether you’re an entrepreneur, investor, or dealmaker, Matt’s story will leave you inspired and better equipped to tackle your own journey.
🎧 Don’t miss this insightful conversation! Listen to the full episode on Spotify now.
Episode Transcript
Seth Deutsch
What’s up, dude? All right, this is pretty cool. This is, it is pretty cool. And you were just saying, like, this is like a real setup.
Matt Matros
This is a real setup. I don’t know. Thank you to your sponsors.
I mean, this is legit.
Seth Deutsch
Yeah, thank you, C-Suite Financial Partners.
Matt Matros
We appreciate it. I knew it was either them or like Warner Brothers Discovery or something because it was such a legit media setup.
Seth Deutsch
Yeah, yeah, listen, we try to be somewhat legitimate. Welcome to the Diners and Deals podcast.
Matt Matros
I know. I wish we were at a diner. It’s my fault.
Seth Deutsch
No, it’s my fault. It’s my fault actually, because you know, when I had conceived of this, my favorite, one of my favorite TV shows is Comedians in Cars getting coffee, Jerry Seinfeld. And I love that it is like friends sitting down and talking kind of like inside
Seth Deutsch
baseball, right. And talking at a diner. And I do, I do so many meetings and meet my friends at mostly S&G. Everyone knows if you’re gonna meet me in Chicago, it’s at S&G at 3000 North Lincoln Avenue. And we tried recording some there and we just couldn’t get the sound right.
Seth Deutsch
And so it’s like, it’s just, it’s, but there are donuts back there from Do Right, which I still think are the best donuts. And I challenge anyone listening to this, if you have, you know, better donuts out there in the country, please comment, please let us know. But I stand by do right as the top.
Matt Matros
Do you write lettuce? Right. Isn’t RJ, RJ Melman behind?
Seth Deutsch
I don’t know. I don’t know. So they do. You would know. You would know. And I thought that they would. I wouldn’t know. Perhaps. Yeah. But we met, man, we were just saying we got it’s been longer than we think. You were just saying six or seven years and then you’re like, oh my gosh, COVID. Right, which just skews the timeline. It’s like we’re living in the multiverse, right, a bit.
Seth Deutsch
But it has just been wonderful. You’ve been, you’re just so generous with your time. You’re always so positive. You’ve got great energy. I’m an admirer of you. So that’s my mom, my wife, and now you.
Matt Matros
Okay, so I got three. Maybe one of the kids, don’t know.
Seth Deutsch
He’s too young to understand. But thanks for being here, and thanks for doing this, and thanks for sharing. You know, you share so much on LinkedIn, and which I also am mesmerized by, that I wish I could be so vulnerable and open
Seth Deutsch
on that type of platform. But I just really appreciate you being here.
Matt Matros
Well, the fact that you invited me, and I was looking at your roster of folks that are also doing this, I was like, I can’t compete with these guys. It’s my own little imposter syndrome already. It’s already starting.
Seth Deutsch
It’s starting, it’s starting.
Matt Matros
Can we get the couch, the therapy couch out?
Seth Deutsch
I can do that, we’ll do that next time. Okay. We’ll do that next time.
Matt Matros
Maybe in the next episode, it’ll be sponsored by like Headspace or Calm or something.
Seth Deutsch
Sure, we’ll call them. We’ll call, if you’re listening, Headspace or Calm. We are open to that. What I want to start with is what you’re doing now, and then we’re going to back up, and then we’re going to progress and talk about now again. So, edge acquisitions.
Seth Deutsch
Tell me, tell us about what you’re doing now.
Matt Matros
Yeah, so essentially I’m a co-pilot. I like to help entrepreneurs, searchers, or other executives who wanna buy businesses or own businesses for the first time, get the deal closed. So I’ve had 15 years as an entrepreneur in the number one seat, it’s hard, it’s challenging being in the number one.
Matt Matros
So now I’m bringing those skills and learnings to folks who wanna be in the number one seat themselves. So essentially what I do is I find companies that I like for whatever reason, whether I like the space or the industry or the market they’re in,
Matt Matros
or the geography or some amalgamation of all that, get the sellers to want to sell to me, get the sellers to tell me what’s truly important to them, I’ll find that for them, and then I find operators who will run the business. Sort of like a business matchmaker,
Matt Matros
I guess in industry parlance, it’s truly an independent sponsor. I never really thought about that because these deals that I deal with are very small, sort of in the, kind of like the sub-10 million dollars of total enterprise value.
Seth Deutsch
Huge value to be created at that end of the market.
Matt Matros
And that’s where I sort of feel like is because a lot of the work that needs to get done with these companies is hairy or dirty. It’s less around technical in terms of the specific trade that they’re in, and it’s also not even as black and white as just digitizing the business.
Matt Matros
There’s usually some other stuff involved. And I’m really kind of good at that muck, just because I’ve been a small business owner for so long. I sort of know what documents you need to worry about, what Department of Revenue requirements you need to adhere to and what are the things that need to get cleaned up.
Matt Matros
So maybe that’s my particular area of genius, is dealing in that mucky, hairy space,
Seth Deutsch
but we’ll see if I’m able to create that. I think you’re a genius in a number of areas, but I think the willingness to do that and to really find the operators who want to partner with you and get their hands, go down all the way in the muck,
Seth Deutsch
and the founders, whether they’re staying on or not, that are really up for the scaling journey, for the coaching, for the growth. It’s one thing for them to say it as you are starting to get to know them, as it becomes real.
Seth Deutsch
Well, I’m six months in, so we’ll see. But you’ve been doing a lot in those six months, but there’s something that you’ve said before we back off and talk about how you got here, which is something about that number one seat. It’s a tough seat. It can be a lonely seat. You wanna talk a little bit more about your feelings
Seth Deutsch
about what it takes to be in that seat?
Matt Matros
Yeah, I mean, heavy is the head that wears the crown or the island is lonely or insert cliche here as it relates to being an operator slash entrepreneur or an owner. A couple of stories I like to tell is whenever I’m talking to a founder or an entrepreneur
Matt Matros
and they seem to be excited about the advice I’m giving them I always remind them I’m just one guy with an opinion and they can have Bill Gates or Elon Musk or Mark Zuckerberg or whomever the titan of their industry is on their board but they’ve never started a blank before, whatever their business is, they’ve just never done it.
Matt Matros
So I bring all this up to say that at the end of the day the founder, the owner, the entrepreneur needs to be true to themselves and true to what they think the right answer is, ultimately, because they have to sleep with that decision. But with that comes a lot of pressure.
Matt Matros
And the best way to summarize it is most folks are used to signing the back of the check. Very few people are comfortable signing the front. And once you have responsibility, either for vendors or customers or employees or all three, then it gets real.
Matt Matros
And this is even before you take on investors, which is sort of the fourth stakeholder. So it’s a hard set of responsibilities that owners take on that I think a lot of people underweight or underestimate how hard they really are. In 2005, when I was graduating business school,
Matt Matros
and people were doing things that were, quote, entrepreneurial, those were like the losers. Those were the people at Michigan Business School who couldn’t get an interview with Kraft or Goldman Sachs or McKinsey. And even when I left Kraft in 2009 to start my first
Matt Matros
business, which was a smoothie shop that turned into a chain of restaurants, people were like, what are you doing? And that was 2009. It wasn’t only until 2012, 2013, when people started hearing about this Mark Zuckerberg guy,
Matt Matros
when people started hearing about this Elon Musk guy, when Jeff Bezos started to become sort of a persona to himself, that entrepreneurship sort of became cool and revered. So now, unfortunately, people think it’s easy. Or they think that because in many industries
Matt Matros
the barriers to entry are so low, they think that anyone can do it. And that’s just unfortunately, it’s not true. So part of what I try to do, either with founders, entrepreneurs, or even just my own content on LinkedIn,
Matt Matros
is just tell people, expose the truth to an extent and then let people make the decisions for themselves.
Seth Deutsch
You also mentioned Michigan and I did make sure to wear Ohio State shirt for you. I even brought on my Ohio State shoes. The shoes are pretty classy.
Matt Matros
God, I hate Ohio State.
Seth Deutsch
I know you do and listen, I did not start as an Ohio State fan, this is my wife’s doing. I think you know this.
Matt Matros
Yeah, you went to Rice, which is a very good school and all my Ohio State friend fans. Hardly any of them actually went to school there, which should tell you something.
Seth Deutsch
Well, you know what happened in my circumstance, they did not recruit me for good reason. They did not recruit me. But I had I had some anger about that. I was holding a little bit of a grudge. And so I would root against them. And my wife, who is a super fan and an alum, basically, I think about three years into our relationship, told me I had a choice, which was either start rooting for the Buckeyes or find someone else to marry. Wow. So I think I it was a hard, you know, like it took me a while because, you know, like it’s hard to do this if you’re not genuinely into it.
Seth Deutsch
Have you genuinely gotten into it though? I’ve gotten there. I mean, this has been now, I think, 21 years.
Matt Matros
Oh, Jesus. And it’s been a good couple decades for her. Yeah, yeah, yeah. It’s not a bad place to be passionate for her.
Seth Deutsch
No, no, but it took a while for me to get there, but yeah, I think I made the right decision.
Matt Matros
Yeah, imagine if she was a huge Cubs fan for the hundred years before they won in 2016. I mean, Ohio State at least wins.
Seth Deutsch
That’s right, that’s right. So we’re gonna get off of Michigan because we could go there, we could go to USC, we could go a whole bunch of other places. We have duked it out a little occasionally over social media on this.
Seth Deutsch
But I think when we met, you were still at the helm of Protein Bar when we met. Now, what I want to do is back all the way up to growing up. How did you grow up? Where did you grow up?
Seth Deutsch
What were your influences? At what point in time did you know in your heart that you were an entrepreneur? When did that happen?
Matt Matros
My dad was a small business owner. He was one of those that worked seven days. He had dry cleaners and he owned some property. I grew up in a small town outside of Los Angeles. And the two sort of seminal things in my life that sort of shaped who I am now
Matt Matros
were my dad died when I was 11. He dropped dead of a heart attack, middle of the night. And I grew up heavy, I was the fat kid. And it didn’t help that my name was Matt, which rhymes with fat, so you get all the cruel jokes from kids who can be quite creative.
Matt Matros
So those were the two sort of seminal things that happened to me, as you and I have talked about trauma. That’s where it started. You know, I was an 11 year old who had trauma. I’m very lucky though, because statistically speaking, most men who grow up without male role models,
Matt Matros
like a large number of these men end up either incarcerated or dead from drug overdose or other reasons. So I got pretty fortunate that I didn’t go down that negative path.
Seth Deutsch
You and I are both very lucky and fortunate. You and I both had early childhood trauma and we are so blessed, however it is that we got here to be doing what we’re doing and be sitting here together today.
Matt Matros
Just to even be sitting here, exactly. Yeah, so we’re totally different, maybe a different story for a different podcast, but that’s sort of the undercurrent of everything that I did. So because of that, I sort of grew up a little early.
Matt Matros
I became the man of the house at age 11, which I didn’t literally become the man of the house, but sort of elevated myself metaphorically into that role. So as a result of that, just always was outkicking my coverage from a goal-setting perspective. So immediately set the goal to go to USC, which I did.
Matt Matros
Then I set the goal to be a sports agent, which at 18 I became, then set the goal to go to business school, which I got into at Michigan, and then so on and so on and so on. So the funniest part about it is I was always the youngest guy in the room until the last few years.
Seth Deutsch
I was like, look, look.
9
I’m like.
Seth Deutsch
It flipped on us, didn’t it?
Matt Matros
Overnight, I feel like. It was overnight. I was always that young, overachiever kid in a room with adults, and now I’m the adult, as you just described as well. So that’s sort of the backstory, was from LA,
Matt Matros
went to USC, ended up becoming a sports agent for baseball players, which was a dream job for many. Did that for four years, worked closely with pro baseball players, and then left to go to business school. Moved to Chicago to work for Kraft Foods
Matt Matros
and traditional brand management, May of 2005, and then left Kraft to start my first business, which is Protein Bar, which was when we first met.
Seth Deutsch
Remind me when you started Protein Bar, what year?
Matt Matros
May of 09.
Seth Deutsch
Okay, so you were at Kraft for four years.
5
Mm-hmm.
Seth Deutsch
So you went down the big company route, and I’m sure you learned a lot, and I’m sure that was internally for you in different ways challenging. I remember when I went from entrepreneurship to Eaton Corporation and I was in the identity management software space and I met my spouse and I moved back to the Midwest and I went to business school and I’m like, I don’t know if I can do what
Seth Deutsch
I was doing anymore. I got to pivot. And I decided I was going to go into industrial manufacturing and moved to Kalamazoo and was operating a truck parts remanufacturing business coming from entrepreneurship. And it was, and I learned so much. And there’s so much from that Eden experience that I have taken with me.
Seth Deutsch
And it was eating me up at the same time. How was craft for you?
Matt Matros
You’re 100% right, at least as it related to me. Learned a ton for three and a half years. Some of the best leaders or bosses, it’s weird to say boss, because I haven’t had a boss in a while, but that I’ve ever learned from,
Matt Matros
happened from Kraft Foods. They teach you how to be a general manager, and that’s why I took the job there. And then when I left and started at Protein Bar, most folks thought, they’re like, oh, did you learn all this in business school?
Matt Matros
I’m like, no, I actually learned it, learned it at Kraft Foods, being a professional, sort of where I learned how to be an entrepreneur, a business owner, a general manager. So I think fondly back to those three and a half years at Kraft, because I did learn a ton.
Matt Matros
I was just young. I was 25 through 29, and then started my first business as a 30-year-old, and oftentimes I think, well, especially now that I’m 45, the pros and the cons of starting a business that young, the pro is that you have naivete,
Matt Matros
right? The con is that you have naivete, right? But I miss that naivete that a young person had to go face first, head first, with reckless abandon into starting a business. And now that I’m a little older, I sort of miss
Matt Matros
that I had that. Because now you need to be more thoughtful. Now the flip side to that is I sort of wished that I had my wisdom and maturity and leadership that I’ve learned now over the last 15 years that I could have applied when I was a young entrepreneur,
Matt Matros
especially because Protein Bar grew so fast. So that’s kind of the pro and the con of having it happen early versus late. But I guess that’s sort of why we’re all on these journeys, right? And why journeys have many chapters and many pages
Matt Matros
that you go from one to the next. And I remember when I got fired from Protein Bar by the private equity firm, like I was sad. And I was sad because I wasn’t Mark Zuckerberg, or I wasn’t Elon Musk, or I wasn’t Jeff Bezos, these founders who had started their business
Matt Matros
but then continued to lead it through a transcendental period for those businesses. And then I just realized I’m not those guys. But it was hard to compare myself to those folks. Or any leader who starts a business and then takes it through to many hundreds of millions
Matt Matros
of size or revenue or employees or whatever it is you happen to use as your benchmark.
5
But here I am.
Matt Matros
And I learned a ton from it. Yes, here you are.
Seth Deutsch
And do you compare yourself anymore? Or are you in a different place now?
Matt Matros
I do, it sucks. Comparisons to Thief of Joy, everyone says. I don’t even know who’s most quoted for that, whether it’s Kermit the Frog or Notorious B.I.G. or Redgear Chipling. Someone the other day said it was Theodore Roosevelt
Matt Matros
that came up with that line, Comparisons to Thief of Joy. I do. Someone will look it up for you.
Seth Deutsch
Someone will, yeah, someone’s Googling it now.
Matt Matros
But I do, and it’s unfortunate
Seth Deutsch
Do you know how great you are we talked about this when you first came in here right you don’t it’s okay and and And we know where it stems from right and that All I have ever wanted for you is for that heart to be open Right for you to love yourself and to take the love Are you able to do that more now?
Matt Matros
I’m getting there. It’s taken, gosh, years of therapy. Where this sort of all bubbles from recently is, you know, I’ve had three businesses that I’ve started. One was a restaurant, or a smoothie shop turned into a restaurant chain.
Matt Matros
I sold to private equity. I had a beverage, sold to Dr. Pepper, and a video shopping startup that I exited to QVC, which on the surface looked like tremendous successes because they were things I started from nothing and exited to the marquee acquirer in each of those three.
Seth Deutsch
And anyone looking from the outside, repeat that again. Just say it again, what you did. You started a smoothie bar that became protein bar that was sold to private equity. Correct, yeah. You started a coffee brand that you sold to Dr. Pepper.
Seth Deutsch
Correct. You started an online shopping platform that you sold to QVC from the outside. Yeah. Right. The perception, right, is this guy has it all. This guy is amazing. Right? All of these things that how sometimes we feel about ourselves, people would have no idea how we feel about ourselves and how we perceive ourselves. But these are things you started and sold
Seth Deutsch
and so you were saying.
Matt Matros
Just on the surface, it looks tremendous. And I’ve had a hard time of connecting them to either wins or success, versus in my own mind thinking of them as losses. For me, protein bar, I sold at the peak, yay me, but I rolled a bunch of equity
Matt Matros
and then the business sort of went a little bit sideways. It’s just now getting its mojo back. Thank God. I’m in a great, great leadership team there now. But it didn’t achieve what I thought that it could or would. Dr. Pepper, I sold Limitless to Kirk Dr. Pepper right before COVID.
Matt Matros
Imagined when I sold the business to them, it was nationwide at CVS and Walmart and COVID hit right? So no one’s predicted that and now the business isn’t sold in those places. And then with QVC, I had a video shopping startup, exited it, went to go build video shopping startups for them, and they’re tremendously successful.
Matt Matros
But QVC as a whole just is in a very not good place. It’s cord-cutting. So yeah, again, for me, I just think of them as not successes. And perhaps this is because, and forgive me if we’re taking this turn.
Matt Matros
We can go wherever.
Seth Deutsch
I could, I thought in my mind about 15 or 20 different places this could go. And the things you’re sharing are gonna have a big impact on a lot of people. So just keep going. And I guess if not, you should edit out
Matt Matros
and just pretend this never even happened. I’ll reimburse you for the cost of the rent room. Perhaps the reason why I view them as failures is, and this is what sucks about America, specifically in the West, is the fiscal scorecard, so the monetary return compared to other people who started those things. And granted, don’t get me wrong, I’m very lucky.
Matt Matros
I’m a millionaire, which is, God, that was so weird to say. I’m very arrogant sounding. But sort of when I compare myself to other folks in my peer set that had other exits. Now the bad news is, is I’m comparing myself to other people who had very large, substantial,
Matt Matros
once in a lifetime type exits and not remembering, and maybe this is why this is a good session, because I’m not remembering the 99.9% of people that actually ended up with nothing or ended up in bad situations.
Matt Matros
So, but that’s the unfortunate part, perhaps, about this comparison syndrome is it tends to be, at least for me and most folks that I talk to, purely based on money and what the financial return was for those outcomes. And don’t get me wrong, mine were good, but they certainly weren’t what I compare myself to, which is my own fault.
Matt Matros
It’s my own problem. Yeah, let’s definitely delete this part.
Seth Deutsch
No, I don’t know if we’re going to delete it. We’ll see. It’s because, listen, here’s something I think that’s very interesting as you continue to go down this next chapter. I’m going to back up and talk about some things within within there before we get to edge but one of the things you said I think is Really really important and it’s part of what is making you successful is going to continue
Seth Deutsch
Your success and what you are going to achieve in the next 15 years. I Think is going to be beautiful. I think you’re actually going to enjoy it. I think you’re going to be present in it. I think you’re going to have a very different emotional reaction to your success. Part of because you’re going to be helping so many people. You’re not going to be concentrated on one thing and you’re going to be using all
Seth Deutsch
of the wisdom and all of the battle scars, right? And all of the emotional intelligence and business intelligence that you have accumulated over these decades to help other founders realize their vision and help other entrepreneurs and operators realize their vision. And they could not do that without you.
Seth Deutsch
And you could not be in a place to do that had you not been through what you’ve gone through. But the important thing is, and I talk to sellers about this all the time and all of the platforms that I’m a part of, and I talk about the seller hangover. And it’s a combination of really three or four things.
Seth Deutsch
When you’re selling your business, whatever has taken you to that point to do that, whatever you were thinking you were going to achieve with your partners on the other side of it, a few things happen. Number one, while you’re transacting the business,
Seth Deutsch
you’re distracted. So there’s a little, I think of it as a J curve, right? Any other J curve. So you’re a little distracted, so the business is gonna be down a little bit. You complete the transaction, guess what?
Seth Deutsch
You would like to go party a bit. And you deserve, right, to go party a bit. The third aspect of the seller hangover is that when you come back and you now have partners, you have sold majority control or whatever it is, you are now figuring out because for the most part maybe other than your partner or your spouse, you really haven’t had a boss in so
Seth Deutsch
long and you went into this wanting a partner or perhaps wanting a boss or whatever that is and then you show up and you have almost forgotten how to be a leader. You are without your bearings. thing that shows up is a massive dose of regret and sadness because you have sold your baby. And what I tell founders who I’m going through this process with every time is I tell them about all of these things.
Seth Deutsch
And I bet you do too. And there’s no, it’s one of these things that you have to go through the experience and go through the chasm Because they’re not believing you or there can’t feel it or they can’t sense it and all of these things in Every situation I’ve done over 70 acquisitions in my career all of these things show up on The other side that feeling that you’ve had, you’ve experienced, this is visceral for you, this is real, you’ve sold your baby, sold three of your children, right? And so
Seth Deutsch
what I would tell you, just so that you don’t feel so alone or so unique in this way, is that feeling is normal. And you can relate to the people and you can help prepare them for this and you can help pull them out. They’re all gonna go through this. The question is how quickly can we get them to recover and reshape the mentality and remind them
Seth Deutsch
of why we formed this union to help them scale and realize their vision. I mean, you could’ve nailed.
Matt Matros
For those that can’t see this because we’re on an audio podcast, I was taking the notes as Seth was talking because I’ve talked to so many founders or sellers that have come into this place, and we’ve all sort of had an amalgamation of reasons,
Matt Matros
and you sort of encapsulated all four of those things in a very eloquent, templated sort of way. So just to review, I wrote these down. The seller handbook consists of four things, and I’ve lived all four of these. First one is distracted while selling the biz.
Matt Matros
So perfect example of that with Protein Bar. I had a nine-month diligence process with El Caterton, the most premier private equity firm and consumer in the world. And I didn’t innovate for nine months. And Protein Bar, for those that don’t know, it’s a healthy food, fast, casual restaurant, sort of in the vein of a Sweetgreen. And for nine months, I didn’t innovate. And then the deal closes and I look up, and Sweetgreen has expanded,
Matt Matros
and Panera Bread has Keen Maw on their menu, and there was all these things that I was distracted because of the selling. And I talk about that a lot, because that sort of put the business back
Seth Deutsch
maybe 10 years. And then you feel behind, and you might be behind.
Matt Matros
Yeah, and we very much were behind. I guess we’re just now getting mojo. Number two, the party a bit, was what I just wrote down. That’s exactly what happened. So I had money for the first time in my life.
Matt Matros
I had this girlfriend who was not a right fit for me and was taking my victory lap, you know? And probably as a result of that, made some decisions that were sort of poor for the business, which in hindsight, perhaps I would have done differently. And let’s pause there.
Seth Deutsch
And it’s really, and it’s not to go not go celebrate, but at that point in time, and I talk to founders about this all the time, it’s like, what do we need most? We need performance and we need recovery because we know it’s been down and we need you present for everyone else. Right.
Seth Deutsch
That has also felt the lack of your presence for so long. And for most of them, this is brand new news. You’ve been living with this news. You forget that this is new news. Life-changing news, transformative news. Everyone’s going to be questioning why, and the whiffoms, what’s in it for me, what does
Seth Deutsch
it mean for me, all these things. And they need you fully present, emotionally present, leading them through the chasm. But so many founders right at that moment, and I get it, want to take the victory lap and it shows up in the culture for quarters.
Matt Matros
Spot on. The funny thing is, it’s so interesting with protein bars, we had about 600 or so employees when the transaction happened. Again, protein bar chain of restaurants at the time we had, gosh, 15 units open,
Matt Matros
maybe 16 units open. So think of protein bar as a size of like a Starbucks or a Chipotle or a Sweetgreen. So most of the employees were store level folks. But even at my corporate headquarters, which we had a team of maybe 15 or 20,
Matt Matros
their lives didn’t change. I mean, several folks got paid out on the deal because I gave equity to some folks.
Matt Matros
But like in general, the deal closes and they’re like, okay, well now, like what’s in it for me? Or okay, what do we do now? But I got lost in that, or sorry, lost, not the right word. I wasn’t present to the fact that that was gonna be the prevailing mentality.
Matt Matros
That was also your first sale. Yeah. So you, and I don’t know,
Seth Deutsch
the private equity sponsor or partners or whatever, they may not have also prepared, it’s their job to prepare you, because they’ve done this, how many times have they bought a business? Hundreds of times. And what I also find quite often is that
Seth Deutsch
they are not showing up in the right way as well, especially with someone that’s going through this for the first time.
Yeah, I mean the short answer is yes, right?
Matt Matros
To everything you just said, I don’t blame Al Catterton for what happened. They made six investments in QSR, Fast Casuals, right around the same time. We were their biggest. It was a $25 million investment,
Matt Matros
and it was out of a growth fund. Catterton’s mostly known for being a massive buyout fund. You know, it took Birkenstock Public and a number of others. But they started dabbling into this growth space, and we were their first investment and their second fund.
Matt Matros
And I bring all this up to say that most of those six deals either went sideways or went south. And perhaps it was just they didn’t prepare us, perhaps they dabbled in a space that was unfamiliar for them, getting a little bit more downstream
Matt Matros
than what they’re used to doing. The joke amongst all the founders of the other five concepts were that, you know, I got fired first, but everyone eventually got matrosed, as we all called it. Every single one of us.
Seth Deutsch
That’s funny, I’ve got a friend who was on this podcast recently, and when we played pickleball, it’s called Santiago-ing. It’s when you hit the ball before it bounces on the second shot. Anyway, so now we know what being Matros is
Seth Deutsch
and we know what being Santiago is.
Matt Matros
Thanks for trying to call you out. I enjoyed the Chris podcast you did with him, by the way.
Great, great.
Seth Deutsch
But there are lessons here. Let’s think about some of the lessons and keep going through that list, right? But there are also lessons for what founders, if they are gonna be taking on private equity, should be asking, right?
Seth Deutsch
Should be asking of the fund, should be asking for like, what is the preparedness plan? What is the 90-day plan, what is the communication plan, what is the cultural plan? By the way, is this your first time investing in the lower middle market or is this like your first time investing in the lower middle market?
Seth Deutsch
How do you bring resources the way that you are now? You’re going into the lower, lower middle market and the amount of human capital that must show up and the way it must show up in those deals versus taking something that’s a mature company and taking it public, very different skill sets that you need to show up when you are selecting
Seth Deutsch
your partner, hopefully they’re gonna be founders that are listening to this that are gonna be selecting you as their partner, right, but lots of lessons in this when you’re looking at capital selectivity.
Matt Matros
Yeah, I mean, you said it best because all capital is green. Everybody has capital and all the groups, whether it’s an individual, whether it’s a family office or whether it’s a private equity firm, has the same amount of money, right, at least as it relates to your transaction. So that’s never really the problem or the issue. It’s really more what are you going to do after the fact?
Matt Matros
I think a good way to illustrate a difference that I just sort of discovered or learned on my own is that because someone said to me recently, they’re like, well, Matt, well, you sold a company on October 1st, well, October 2nd, the job was still the same. Like, it’s not like something changed overnight.
Matt Matros
And the best way I can illustrate it is founders or entrepreneurs have a vision and professional investors have an underwriting plan. And the two things are the same. But a vision starts with looking at the end and working backwards to get there, an underwriting plan is sort of, I guess what you would call kind of like bottoms
Matt Matros
up or or an underwriting plan doesn’t really allow for much variability or or margin for error, at least in the instance of Catterton’s. I remember sitting with Catterton in Broomfield, Colorado as we were sitting at a fucking Starbucks going through the underwriting plan that they had built for Protein Bar.
Matt Matros
And I remember thinking to myself, they’re pricing this to perfection, like holy crap. But of course, I’m not gonna say anything
Seth Deutsch
because of the valuation. You’re not gonna push back, you’re not gonna know. And I don’t know if you’ve been operating with debt before or not, maybe, maybe not. Maybe a line of credit, something of that nature. Well, now you’ve got institutional debt, right?
Seth Deutsch
You’ve got covenants, which you may not have operated under before. By the way, they have investors that they have to report to, and they are competing for scarce capital within their fund, right? Just because they’ve committed capital to you, well, you are a part of a batch of, let’s say, six companies that are all being funded, right? And they have to report to their LPs every quarter, and they are measured and they have promised some type of cash on cash return and those LPs, right, could be a pension fund, whatever, they are putting downward pressure
Seth Deutsch
right on them. And so you don’t know this really until like your second or third institutional deal, right, on how to really work with them because you just kind of look at that plan, you’re like, I want to do the deal, sure, I’m going to hit that. Of course I’m going to hit that plan. I always hit my goals. What’s going to go wrong? Of course we’re going to do that. But you really, unless
Seth Deutsch
you’ve really, and you’re very good at, you know, we’ve become very good at this as VO guys at projecting ourselves into the seller, but the seller projecting themselves into the investor and really absorbing, right, fully, neurologically, the underwriting plan
Matt Matros
typically does not happen. It’s funny just this week I was in Canada where I’m under a well I’m under a low I to buy a B to B to C beauty business and I actually told the seller I didn’t want to do the deal because I thought he and his wife and his co-founder were the best people to own the business. Largely because, again, very small, low, not even middle market, low market. I don’t know. Private equity doesn’t have a word for what I do. It’s because everyone
Matt Matros
always says lower middle market, but I’m like, well, you’re lower, lower. We call it lower, lower.
Seth Deutsch
Yeah. Matt was on it. Matt Sussman from Cold War Capital was on before you. You know, I think, listen, the group that plays here the most at scale is Shore Capital.
Matt Matros
Okay. Yeah, Justin.
Seth Deutsch
Yeah. They are the group that play, right, that scale plays here very well. And if you then think about like their in-house bench, they’ve got like 180 people on their in-house bench that they bring because they understand the quantum and type of human capital that you have to bring to these businesses to really build them. Cold Boar also plays in that space institutionally.
Seth Deutsch
You are playing in that space, let’s just call it as an independent sponsor. The work that has to be done is very different than when you’re buying a mature company.
Matt Matros
It most certainly is. Going back to the that seller thing though, just to put a bow on it. You’re totally right about the seller. Yeah, they’re just the seller and the buyer have to be simpatico, which is obvious, right? but for those folks that are listening, they didn’t see Seth sort of made a visceral motion to his his core because you’re in you’re ingesting each other almost you’re got that sounded weird But you’re you’re to become one or you know the seller and the buyer really need to be in line not just oh yes
Matt Matros
That’s where we want to go, but here’s how we want to get there, but then moreover when it doesn’t go well correct What’s gonna?
Seth Deutsch
And what are the choices we’re gonna have to make because before if things didn’t go well The Christmas presents aren’t going to be as lush. The vacation’s not going to be as long. Right? These are the implications, let’s say. Right? The implications with investors and debt, whether that’s SBA and seller financing and you putting in some of your own capital or an LP or move up the stack all the way to institutional, the implications are much different.
Seth Deutsch
And I try to do my best to help sellers as best as we can to help them understand this, but they’ve never been through it before. And all I’m saying is, I am watching you like literally process things as we’re sitting here. It’s really interesting because you know all of this. You don’t realize how much you know,
Seth Deutsch
and the value of that knowledge and wisdom that you’re bringing into this next chapter. The folks that partner with you that you have forgotten.
Matt Matros
I appreciate that. I was going to ask you a question though.
Okay.
Matt Matros
Is it best then, because again, a lot of my insecurities around this has to do with the fact that I rolled 40% of what I’d owned. And in a bizarre twist, I actually didn’t want to roll, sorry, I wanted to roll more. It was Mark Cuban who was one of our investors who said, no, no, no, Matt, your operating agreement says you need to roll as much as we do.
Matt Matros
So I ended up having to take more cash out, which ended up being a godsend in hindsight. But do you think this is different if you sell the whole thing?
Seth Deutsch
Yes, it is, because you’re no longer part of it. It’s different. It’s like a difference, these selling anglesmay change a little bit.
Seth Deutsch
These things are different. When you sell the whole thing now, you might have regret afterward. You might have loss of identity afterward. You might go on this whole other existential journey if you have not become emotionally ready
Seth Deutsch
to sell your business. Part of that also depends on where the seller is in their life horizon. But I also caution people about buying businesses with retiring founders unless they know that business inside and out as if it is a part of their DNA.
Matt Matros
Like as the seller.
Yes.
Seth Deutsch
But yes, these things are different. When you’re selling your business outright and you are no longer going to be a part of it, many of these things don’t show up because you’re not showing up day one after the transaction closes. You are gone. So there’s a different type of preparedness for that emotionally as the seller, but for
Seth Deutsch
the buyer, there’s an entirely different set of diligence and considerations and risk management that has to go into buying a business with a retiring founder. And I will remind all buyers, no matter the situation, you are always at a significant disadvantage
Seth Deutsch
because you have no way of knowing the truth.
Matt Matros
And it’s so funny because most buyers, at least again, what did you say that you and Matt call it, the Lolo? The Lolo. The Lolo market. Most buyers in the Lolo market are dudes like me or search funders.
Matt Matros
They all think that, and maybe this is their naivete, they all think that they know more than the seller.
Seth Deutsch
That hubris is dangerous.
Matt Matros
It’s sad, almost. I was looking at a floor cleaning business in Iowa, beautiful company, $2 million of top line. Single guy owned the business for 15 years, maybe longer than that, paying himself three quarters of a million bucks a year.
Matt Matros
It was a great living. The business essentially was just doing the floor waxing every single night at Hy-Vee’s in Iowa, which is a grocery store. And I was looking at it. One trade, one thing.
Seth Deutsch
One thing. One thing, grocery stores. Maybe one grocery store, Hy-Vee, right? One thing again and again and again and I can only imagine, you said 15 years, what went into perfecting, right?
Seth Deutsch
How much wax are they using? How are they managing their chemical supply chain? How are they managing their formulation? How are they managing their labor? Because this is done typically late at night. As well, all of these, all the labor dynamics,
Seth Deutsch
everything else, keep going.
Matt Matros
I was gonna say that this, the acquirer, the searcher that I was looking at this with, sort of had the gall on the call with the seller to probe him on his cost of wax. And I pulled this kid aside afterwards, sorry I called him a kid, he’s in his 30s,
Matt Matros
but I pulled this guy aside afterwards and I was like, I was like, you know, Jason, what are you gonna tell this guy who’s been doing this for 20 years about how he’s gonna buy his wax? Sure, you can maybe help him something
Matt Matros
on the commercial side or maybe growth related that he hasn’t thought of, but what do you know about it? I’m not sure how we got on this topic. And is that even really the lever? And is that even the lever, exactly.
Seth Deutsch
It’s two million of revenue with 750,000 of net income.
Matt Matros
Yeah, and maybe it’s 759 because you have a better wax guy, you know, or your cousin has a candle factory somewhere. Like it’s, gosh, how did we get on this?
Seth Deutsch
I don’t know. It’s okay. But we’re talking about seller hubris.
Matt Matros
Seller or buyer hubris.
Sorry, buyer hubris. Yeah.
Matt Matros
Now, when you advise, because you advise a lot of private equity firms.
Seth Deutsch
So yeah, a few here and there.
A few here and there.
Seth Deutsch
I’m being honest. This is not about me, you can ask me a question, but we’re gonna get back to you, but go ahead.
Matt Matros
What I was gonna say is, is the first thing that you’re looking at value, is the first thing you’re looking at the future, is the first thing you’re looking at is why is this guy selling, or gal selling?
Seth Deutsch
There’s a book behind you, okay? And I’ll tell you the first thing that I look at, and I never look at a business with a retiring founder, ever. So that, for me, that is the thing. That’s crazy, because I like that.
Matt Matros
Everyone’s different.
Seth Deutsch
I’m just talking about, and it’s part of because of where I play in the market. We’re gonna get off of me for a second. There is a page in that book that I love. And Steve Carroll, who is on this podcast, and I were talking about it,
Seth Deutsch
and that book is Big Panda Tiny Dragon. It is a picture book of Buddhism 101. And they’re having a little chat, and they’re like, what is it about? Is it about the journey or the destination? I think Big Panda poses this to Little Dragon.
Seth Deutsch
Could be the other way. To which Little Dragon responds, it’s about the people.
And so for me, to answer your question,
Seth Deutsch
what is the first thing that shows up? Whether I’m just deal advising or I’m going to be involved in it, it’s we are going to be married and this is like old school marriage that does not end in divorce, right? Or that cannot be annulled. This isn’t going to be, it’s going to be eventually, whatever the hold period is, but we are together and do we want to be together?
Seth Deutsch
Do I care about these people? Do they care about me? Do they care about our investors? Do they care about their culture? Do they care about their people? Do they care about their customers?
Seth Deutsch
Are these people that I want to be around? Are these people I want to hang out with? Are these people that I want to be in service to? And when you’re bringing in institutional investors, you were mentioning someone like Great Range Capital the other day who I am so fond of and I love that team.
Seth Deutsch
I think about one of their LPs. I won’t say who it is, but let’s just say that it is a pension that is investing on behalf of teachers and firefighters. That is who we are producing, not just for the seller of the family, but to bring the business to the table, and the partners at Great Range and their principals who are incredible people. But the majority of the capital that we are deploying and have to pay back is to pay for the pensions of firefighters and teachers.
Seth Deutsch
That is who we that is that is part. There’s a big part of who we have a duty to. Right. And like to what extent do they embody really the understanding of the duty of taking on outside capital and being a steward of that and being a steward. So anyway, for me, the first thing that shows up is the people. Now there are a thousand other things like to like the business. Do I like the end market? Do I like the commercial model? Do I like the operating model? You know,
Seth Deutsch
what’s the talent plan? What’s the value creation plan? There are all these other things, but for me, it always has and always will start with people. And in my own company and Samson, you know, my logo is a dog. My company is named after my first dog, who was a King Charles Cavalier Spaniel. He was a comfort Spaniel, an entity, a being on this planet that is here to help others.
Seth Deutsch
And on his logo are the cross donkey jawbones. Why donkey jawbones? Well, because in the Old Testament, Samson slayed the Philistines with the jawbone of an ass. On my logo, there are crossed donkey jawbones because what I say to all my partners, I don’t have clients, I have partners.
Seth Deutsch
We are going to war together. Right. We are picking up arms together to do great things.
Right.
Seth Deutsch
And so for me, it’s, do I want to be in the trenches with these folks. Long-winded answer to that is the thing. The number one thing.
Well, how do you decide?
Matt Matros
So if nine out of 10 elements are great, but the 10th element is the people, that’s… That’s no-go for me. Have you ever had a situation where you’ve overlooked that? Or you did this and… In the past, sure.
Matt Matros
Yeah.
Seth Deutsch
So, you know, this is what comes from, for me, 20 now, I’m a bit older than you, 25 years of doing this. There were times when I sacrificed these things. Now, for me, the other thing that’s important for me, this is just for me personally, this is not for everyone. There are two things that have to show up. I used to tell myself that I did not have to be, but I am not that way.
Seth Deutsch
So two things have to show up for me. Number one, do I love the people? Number two, do I love the business? And if I don’t, it doesn’t mean that it’s not like, now that’s if I’m going to be involved. It’s very different than if I’m just like advising someone on, they’ve called me in as an expert witness on looking at a deal. But for me to be involved,
Seth Deutsch
those things have to show up if I’m going to be a board member, if I’m going to be an investor. And when I sacrificed those things, when I put those things aside, when I told myself a lie that I could be like most other people, then I was not living then you’re surviving. Mm-hmm So I make the way I make choices. I’m not I am NOT Saying do what I do what I am saying is be yourself And it’ll fit it’ll come to you it’ll find you find it you’ll find it, you know, yeah
Matt Matros
Yeah so
Seth Deutsch
Yeah. So let’s let’s talk about. Could go ahead.
No, no. You want to go back to you?
You want to go back to you?
You want to go number three?
Matt Matros
Well, because we did want to distracted was one and then party a bit. And that presence of just to kind of put a bow in this whole thing. It’s a seller hangover. Yeah, let’s do it.
Seth Deutsch
You like that. You’re going to use that. I like it because it’s it’s templated.
Matt Matros
It makes sense. Yeah, it covers all the bases, at least for me, I’m sure there are other sellers out there that may say, oh, you’re missing this or missing that, but to me it’s all encompassing.
Seth Deutsch
I’ve got another rating scale I’ll tell you about not on this podcast that I think you’ll like, keep going.
Matt Matros
The last two were having had a boss, and now you have one, and then the last one was the dose of regret, which is gonna happen regardless.
Seth Deutsch
That’s right, and that boss thing could be partner. Yeah. Right. But it’s, it’s in some shape, form or fashion, depending on how you’re capitalizing a deal. Like we talked about your janitorial deal, right? You all are partners, let’s say. Right. But listen, if you’re taking on bank financing, you go, you bust some covenants,the bank might buy the business.
Seth Deutsch
You probably not going to be working for the bank, but if you take on, if you do a majority recap or whatever, and you sign then an employment agreement, whatever it is, you’re gonna have a partner or a boss probably for the first time in a long time, or maybe the first time ever.
Seth Deutsch
Ever, yeah, and it’s a wake-up call,
Matt Matros
because at least with me and Protein Bar, I went to not reporting to anyone, doing whatever I wanted, for right or wrong. Now granted, I had investors, so I had that, I definitely believe, I didn’t call it fiduciary responsibility then, I called it,
Matt Matros
holy shit, I took other people’s money, and I need to make sure I don’t F it up. Which I guess they would define as fiduciary responsibility. It wasn’t until, though, I had someone I felt like I was reporting to, other than the customer. You’re always reporting to the customer,
Matt Matros
but now I’m reporting to this other thing that had their underwriting
Seth Deutsch
plan. You just said something really important there. You said you felt like you were reporting to someone. That’s not a partnership. That’s fair, yeah. These are the things you want to – when you enter into these things as the seller, this is something the seller needs to test. Is this a boss? Is this a partner? And then you as the buyer need to, depending on the role that you’re taking, really need
Seth Deutsch
to make sure that you’re showing up in the right now. Now listen, a delegation of authority from accountability and responsibility, at some point, the buck stops somewhere, but that’s not the feeling you want, because what you don’t want to do is turn a founder into an employee, or the feeling of an employee. You have just fractured something in them that cannot be undone.
Matt Matros
You think you can accomplish that in a majority buyout, even if they’re rolling?
Sure.
Seth Deutsch
It’s a feeling. It’s how you show up. Anyway, there’s more. No, yeah, I’m thinking about this. But you don’t know that as a buyer. You can sense it.
Matt Matros
You can sense it, but you can control how you show up. This is what’s important. And perhaps, you know, I talk a lot about Catterton and perhaps a lot of it was just my own immaturity. I was 33 or 34 when I sold, and I wish that I was 44. We can’t go back, we can only go forward.
Matt Matros
We can’t go back, we can only go forward.
Seth Deutsch
I’m gonna remind you, right, I’m watching you process, and it’s a beautiful thing. Everything you now get to bring to the table. And again, I hope that your future partners are listening because there’s such a depth to you of caring and creativity and experience.
Seth Deutsch
And you and I also carry all types of battle scars. And it’s how we now are able to manifest all of that to help others achieve great things. I want you to remember who you are, if nothing else from our interaction. I had to imagine you bring up the helping
Matt Matros
of the others thing, and maybe that’s where it’s always been different. Being an entrepreneur is selfish. It’s selfish on a few vectors, right? The family vector, you know, I feel bad for friends who start businesses with kids and families,
Matt Matros
like, thank God I didn’t. It’s selfish from a mindshare perspective. You’re out to dinner with someone and you’re not listening to what they’re saying. You’re thinking about payroll or whatever it is. It’s selfish from interests, so you lose friendships,
Matt Matros
you lose activities or things that you’re into, so it’s a very selfish thing. But when you use that word help just now, at least as it relates to us, that’s a big shift. That’s what you’re doing. That’s what I’m, yeah, and now I never had thought about it
Matt Matros
as now I’m in the service of helping others.
Seth Deutsch
Yes, you are. And if I were to go speak to your partners, I know they feel that way about you.
I watch what you do on LinkedIn. You don’t know the impact you’re having.
Seth Deutsch
I know it. Others know it. You’re having a massive impact. Whether you know it or not. Yeah, I guess pretty special. Thank you. I guess it’s it’s been neat that when
Matt Matros
people reach out because I know it takes courage to reach out to someone that’s a stranger. But people will reach out and send me notes. I’m sure they do that. That resonated a lot, whether it’s about sobriety or getting fired by private equity or getting money for the first time or mental health or whatever the challenges happens to be. But I don’t want to be the woe is me guy.
Matt Matros
You’re not, no, no, you’re not coming across as the woe.
Seth Deutsch
You are not at all. I think that, you know, as you embark, you’re already, you’ve already invested a number of businesses, you’re doing this, as you do this at scale, people that are gonna listen to this,
Seth Deutsch
again, it’s something that trauma survivors, just so that, you know, those listening, if you know a trauma survivor, if you are a trauma survivor, I am a trauma survivor, you are a trauma survivor, our conception of ourselves is much different than everyone else’s conception of us. And so the way you are showing up here, the knowledge that you are imparting, it is gold. This is what your partners want from you.
Seth Deutsch
This is what your LPs want from you. It’s all these lessons learned, and it’s the wisdom of now how you apply them, right? You don’t, there’s, maybe Oprah or Jeff Bezos have the time machine. Maybe they’ve got it, all right?
Seth Deutsch
We don’t have access to it, right? And now you’ve got it, we have an opportunity, and I think we have a duty. It’s why I’m doing this. I feel I have a duty to share and to bring on guests who want to share their experiences with, in a vulnerable way, in a natural way, as sitting here as friends. Like, we barely even know this stuff is here. We’re just chit-chatting, right? But you’re gonna have such a big impact.
Seth Deutsch
And for you, the beauty of it for you is now it’s not just on one company, it’s on many. And all of those customers and all of those employees and many of the people that work in the businesses that you’re touching tend to be the sole owner, the sole breadwinners, right, for their families
Seth Deutsch
and the impact it’s having on their families. And so you now have a chance. The work you’re doing has this multiplying effect, right, that is fantastic because now as an investor and as an operating partner with what you’re doing, you get to have an impact across multiple businesses and bring all of this wisdom to bear. And if I were a seller in the lower, lower market,
Seth Deutsch
I would want to partner with you.
Thank you.
Matt Matros
It has been neat. Seeing Alejandro’s the owner of a cleaning company that I backed earlier this year. And with my capital, he was able to, or we were able to go buy two other companies with a third one on the way.
Matt Matros
And it’s been neat. I’ve been sort of proud of him as he’s matured and as I’ve seen his growth as a leader and some of the positive changes he’s made. He’s certainly stretched from working in the business to working on the business in a way that’s kind of neat.
Matt Matros
It’s only been a few months.
Seth Deutsch
If he didn’t have you, he wouldn’t be able to do this.
Thanks for that point.
Seth Deutsch
It’s true. I do want to talk about one thing and then we’re gonna end with whatever you want to end with.
Matt Matros
And God, I could be here all day.
Seth Deutsch
Well, you’ll come back.
Matt Matros
Like Lionel Richie all night long.
Seth Deutsch
Maybe. We’ll do it, but we’ll maybe get another sponsor and have a couch and all that stuff. Let’s talk about the roles that CFOs or controllers or office CFO, whatever it is, but that financial acumen has had in your ability to build and scale businesses. And as you then look at the lower, lower middle market and look at professionalizing these businesses, scaling these businesses, executing buy and builds, usually when you start with one of these platforms or companies, and then again, you might be
Seth Deutsch
taking on debt or some of these other things, typically the people, if there is a finance function at all, if it’s not just an outsourced bookkeeper. But this is an area that typically needs significant investment and scaling up. Can you talk about your experiences with building that function?
Matt Matros
As someone, I’m a consumer guy, so everyone thinks of me as like the touchy-feely storyteller, pretty picture guy, which is by and large true, which is why I like consumer. But the topic of financial discipline comes up in this Lolo field a lot because I love it
Matt Matros
when I’m talking to a seller and I’ll talk about either systems or processes or reporting and they’ll immediately say, oh, my accountant. And I’ll always say, an accountant, you only need once a year. That’s to file your annual returns.
Matt Matros
Like, an accountant is not necessarily financial controls. And that usually transitions to the topic of information. So a lot of sellers oftentimes think that financial controls are, oh, just because I have an investor now, I got to do these things. Or, oh, of course, my investor wants me to get, you know, regular books. And I tell every seller, it’s for you.
Matt Matros
It’s not mostly for me. It’s just so you can make better decisions about your business and you need that information. It’s right now you’re going into battle blind unless you have the information as to what problem you’re fixing. Now sure you may have anecdotes and you may feel it and anyone who works or owns a small business sort of knows their blind spots or vulnerabilities, but perhaps they sort of put off financial controls either because they’re scared
Matt Matros
they don’t know how to fix that truth or because they truly are just focusing on sales and growth which I don’t begrudge any owner for going through that but the topic of financial controls comes up for me most specifically because that’s the first big easy thing that you can do on the low low to stretch someone
Matt Matros
for that low middle or low low market to lower middle. And a lot of the stuff that I like to play in is when a company kind of doesn’t have it. Or I’ll look at deals and everyone will ask me, like, did you do quality of earnings? I’m like, for me, quality of earnings,
Matt Matros
they said they did this much in sales and I looked at the bank account and they had that much cash deposits. It’s like cash proof in many of these versions.
Yeah, that’s where I like to play.
Matt Matros
But there’s a disconnect beyond that and that’s mostly just because you can’t really do quality of earnings necessarily. I kind of went all over the board with that answer, but it’s more important than I ever would have thought, especially as someone who is pretty picture,
Matt Matros
and colors, and logos, and fonts, and taglines, because it’s information, and it’s not controls for the sake of controls, it’s controls for the sake of information, and that information for the sake of better decisions.
Seth Deutsch
That’s right, and as you scale these businesses, many of them require quite a bit of working capital. And go ahead, I see you smiling. Well, I’m smiling because that’s actually
Matt Matros
a really good point, right? A lot of entrepreneurs don’t sort of, and I still kind of struggle with it as I look at a popcorn factory versus a feed mill versus a lash extension company versus a cleaning company. Like, this concept of working capital
Matt Matros
is not necessarily what an owner would define it. They would say, oh, it’s just the money that I have to pay the bills.
But they’re improving that makeup
Matt Matros
is what puts dollars profit in their pocket. And oftentimes, I don’t think owners realize they have control over that. They think it’s sort of just, oh, this is just the way the business is run. But that doesn’t need to be true.
Matt Matros
And also how to define working capital can be different for different folks.
Seth Deutsch
Yes, and there’s the textbook definition, right, from an accounting perspective, but that doesn’t necessarily capture it. Either depending on the dynamics of the business and the cash flow cycles of the business. And listen, I’ve acquired businesses,
Seth Deutsch
which I really like acquiring, that are negative working capital businesses. Those are really cool, but still, if you’re gonna scale them, that curve can change. Right, that curve can change for a period of time.
Matt Matros
As a business owner, I always thought working capital was just my payment terms.
Right.
Matt Matros
Like, oh yeah, I pay my vendors on net 30, yeah, sure, I could ask them for net 45, now all of a sudden I have better networking capital. And yes, from an accounting machinations perspective, that certainly is true, but it’s more than that. And maybe it’s probably just because
Matt Matros
the actual definition of networking capital is AR minus AP or some combination of that.
And you just assume that just to play with my payment terms,
Matt Matros
but it’s more than that
Seth Deutsch
It’s much more than that like especially like in construction or things of this nature right especially if you’re having to let’s say Front see you win a big job, and you know you’re gonna have milestone Payments and that the job you’ve just won is like three times the size of any other job You know outstrips the size of the company before and you’ve been you know and now you’re gonna have to front all this labor and all these materials and all these things, right, to then pull through the revenue,
Seth Deutsch
let’s say six months from now. And so different businesses have different dynamics.
Matt Matros
Commercial cleaning, it’s a big deal because if you want to grow, you need to add more customers, but those customers pay you usually a net 30 to net 60. And I’ve got to get the labor, and I’ve got to pay them on day five.
Seth Deutsch
I got to get the trucks and I got to pay them. Because in those businesses you’re paying weekly. And so growth comes with the need for additional working capital. Now, you can equitize that, you can borrow it, all these other things. And then the other tricky thing that comes typically with growing those types of businesses is, especially with net new customers, is are they going to pay? It’s a whole other…
Matt Matros
God, that’s so true too.
Especially in B2B, different…
Seth Deutsch
And everyone says, oh, I have a contract.
Matt Matros
I’m like, that doesn’t mean shit. Like, first of all, contracts are only as good as someone’s willingness to enforce it. Right? Number one. And number two, you may perform the services and contract it not. You still have to go get that money from that person. And then number three, you may be owed a lot of money
Matt Matros
by someone, but if they go out, or if they go bust, or if they go AWOL, you’re not getting that money. That’s right. Gosh, yeah, I’m thinking of a seller right now who was, she’s a wonderful business owner.
Matt Matros
She has a plastic injection molding company, and Harley Davidson owes her a half a million dollars, and that’s like her pain. Her pain is not having this half a million bucks to go buy other, or sorry, to go buy products for other projects.
Matt Matros
I’m like, there you go, you don’t need to raise a half a million bucks, you just need to get your guys to pay you.
Seth Deutsch
You need to go get paid.
Yeah, God, it’s so hard.
Seth Deutsch
You need to go get paid, right?
Matt Matros
It’s hard because they have no real leverage other than if their product is sticky to that customer or not, does the customer need that product?
Seth Deutsch
We could go, I wanna know so much more about this. We can take it offline. We’re gonna go have a bite to eat when this is done here and we’re gonna talk about some of your deals. Listen, I think this is a great, this is a great pausing point.
Seth Deutsch
There’s so much more that we could talk about and I hope you come back and I hope we do this again and pick up the conversation maybe six months from now. Let’s talk about some deals that have gone well and some deals that have gone sideways and some things you’re looking at and we can
Seth Deutsch
chit chat again. But before we end, is there anything that’s just, we’ve sat, you’ve poured your heart out, we’ve talked about a lot of stuff. Is there anything that you want to share with the audience, whether it’s 30 year old you that you’re speaking to that’s about to leave Kraft or Mondelēz or whomever it is and go start their business,
Seth Deutsch
or if you have in mind a seller that’s thinking about doing a transaction and bringing on a partner, an investment partner, a business partner for the first time, is there anything you’re feeling right now that is topical, that’s weighing on you or that’s present with you
Seth Deutsch
that you want to give any kind of final thought?
Matt Matros
Yeah, I think the thing that’s come up a lot, as you were talking about the seller and the relationship between the seller and the buyer, the thing that was going through my head was time. Just take time to get to know them. I think a lot of my challenges
Matt Matros
or a lot of my subtotes as I view them was when I rushed to make a decision because I always prided myself on being decisive. You can still be decisive, but take time and be thoughtful to get to the bottom of that answer. And maybe that’s an area of maturity that happens over time
Matt Matros
is that you tend to understand that you need a little bit more time to make a purchase decision. You need a little bit more time to make a hiring decision. You need a little bit more time to make a decision within the business, but that’s not necessarily a bad thing.
Matt Matros
I had always prided myself on speed of execution. But if I go from making a decision from one day to two days, I’ve just increased my decision-making time by 100%, right? So it doesn’t have to go from one day to 100 days to make a decision, it’s just taking a little bit after time, and I’m starting to do that a little bit more,
Matt Matros
just being more thoughtful.
Seth Deutsch
I’m glad you are, and I’m glad, it’s a great point you bring up. I talk about this a lot, we teach this a lot in M&A class. But, you know, because you, it was interesting. You talked about speed to make a decision with, let’s say, buying a business versus like hiring or firing an employee. Very different implications, right? Very different implications. It is really important, especially, listen, it doesn’t matter if the founder is staying with the
Seth Deutsch
business or the founder is not. If the founder is not staying with the business, then you not only need to spend time with the founder, you need to spend time with the people that are actually running the business. You need to go see, you need to be present. If they won’t actually let you into the operation,
Seth Deutsch
especially with a retiring founder, walk away, number one. Right, number two, one of the things we talk about is never luring someone into the boat. This is not fishing, this is not selling. As much as you have great salesmanship and we all, right, there is this natural tendency to woo,
Seth Deutsch
there is a competitive nature in us as well that likes to win.
Seth Deutsch
This is just as important, and you talk about this a lot on LinkedIn, is picking your spouse. The seller, though, even more so for them versus the professional investor, this is the only time, unless they buy the, unless it doesn’t work, and they buy the business back and then go sell it again, which happens. But realistically, this is the only time they’re going to do this.
Seth Deutsch
And so you need to spend as much time as possible so that you will come to this place, into this union together and willingly without pulling each other in. They have to want to walk that aisle or walk those steps with you. Yeah. If you find yourself pulling, let go of the rod. And you’ll know when you’re doing it. You have to challenge, you have to check yourself. Yeah.
Matt Matros
It’s, but that’s the hard part though, is that it’s because it’s offset by the competitiveness, this livestock feed deal, I really love it, I wanna get it.
Seth Deutsch
Don’t fall in love with a deal, never, never, never, never, never, never, and spend as much time as you have to. I was just with someone this week with one of the platforms that I have the pleasure of working with and this is a conversation that’s, it’s a relationship that’s been going on for 10 years
Seth Deutsch
and it’s a conversation that’s been going on for two. And you know, it might go on for another five or ten or one year or six months don’t know doesn’t matter how how what matters is ultimately these people who are going to make life-altering decisions determine whether or not they want to be together and when and how it makes sense that’s what matters.
And it’s hard to reverse. So you gotta do it right
Matt Matros
Super, super fucking hard. You asked if we could cuss.
Seth Deutsch
Yes, we can cuss super hard. All right, man, listen, it’s been too long since we’ve seen each other. I’m so glad that you’ve done this. Thank you so much for coming on the Diners and Deals podcast.
Seth Deutsch
I’m glad we did this in person too. This definitely has to be in person.
Matt Matros
This one, this podcast, this is an in-person thing.
Seth Deutsch
Let’s maybe do it again. For sure, I appreciate you. All right, brother. All right, brother. Thank you.