Jamie Simpson – How he purchased 6 acquisitions using cash within a business

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Julie Wilkinson  00:03

Hi, I’m Judy Wilkinson, and I’m a chartered management accountant. And I’m excited to be launching the build and exit podcast. This podcast is for business owners and entrepreneurs who are looking to expand their business portfolio by acquisition or at some point in the future, when to exit their business. We’re going to bring real life stories and experiences of people who have grown by acquisition, who have exited their businesses, and other areas of business such as funding and cash flows. So there’ll be lots of opportunity to learn different areas of business and how you can in the end, transition your business from a lifestyle to an asset to look forward to seeing you soon. Hi, and welcome to the building exit Podcast. I’m Judy Wilkinson and I’m the owner and founder of Wilkinson accounting solutions. We’re an accounting and consultancy firm that specialises in mergers and acquisitions, we act as acquisition CFOs that help people buy businesses. And we also help on Exit Planning. The reason I started the podcast was because I wanted to give general tips and guidance to entrepreneurs and business owners who are looking to sell their business or looking to grow by acquisition. And I’m really excited today to have Jamie Simpson with us. Welcome, Jamie.

 

Jamie Simpson  01:10

Thank you very much appreciate you having me.

 

Julie Wilkinson  01:12

So just a bit of background of why we’ve brought Jamie on to the show. So Jamie well had lots of different jobs back in the day, but is I suppose his entrepreneurial journey started when he was a taxi driver and he ended up expanding that into becoming a company and managed to systemize it and went travelling. So that was back in 2011. And then whilst reading his business started business consulting, because he because he had systemized and travelled obviously have a business I was like, Oh my God, I want a piece of that. And then what’s really exciting was in 2020, he actually completed his, I suppose, his first m&a journey. So he bought six hairdressers, which is what we’re going to focus on today. And since then, has obviously been consulting and doing lots of acquisitions. So I think it’s really interesting, you’re going to be able to give some great guidance, I think for our listeners today, Jamie, so I’ll hand over to you to you know, expand a bit about yourself.

 

Jamie Simpson  02:07

Perfect. Thanks, Julie. Yeah, so I’m Jay Simpson. I’m based in the south east of England. I’m a non exec and business consultant for small businesses, SMEs. I currently got a portfolio of free companies and heteroatoms with two others. So we’d like to think that’d be closer to seven or eight by the end of this year.

 

Julie Wilkinson  02:26

Oh, brilliant. So lots of people got ambitions for that. So yeah, I mean, there’s quite a few things I think we could delve into today, because there’s the systemization of how you’ve got the business to run without you. But I did want to focus on the six hair salons. So did you acquire all six in one go?

 

Jamie Simpson  02:44

Yeah, in about four months.

 

Julie Wilkinson  02:47

So they wasn’t, it was money. So they wasn’t in a group themselves. They were all individuals, were they.

 

Jamie Simpson  02:54

So you had to two salons were owned by two different sellers. So that’s four and then two independents to get it up to the six.

 

Julie Wilkinson  03:05

And why did you choose to do so many? What made you go down the route? Did you had intentions of doing it? Or did it just kind of land in front of you?

 

Jamie Simpson  03:13

Opportunity. I literally saw an opportunity with lockdown. People were looking to, I think locked down made a lot of people realise that they probably didn’t enjoy what they were doing. And a lot of people were enjoying time at home, probably because the weather was nice at the time. And so they were looking to get out of their business. So I utilise the bounce back loans in order to fund the initial consideration in order to get the transactions over line. Once I’ve done a couple I realised there was more of an appetite out there for that kind of transaction for people to exit the business. So I just put my, my foot on the pedal and I did six in about four months.

 

Julie Wilkinson  03:50

So Blimey. So what made you go into that it? Was it because you just saw a gap in that market is that what made you go into the hair salon specifically?

 

Jamie Simpson  04:01

Yet? I’d like to take credit and say I was sat there one day, and I thought this was an amazing opportunity. I think I saw someone else do it. I think I saw someone else buy a hair salon using a bounce back loan. And I took inspiration from that. When I did a little bit of research on the industry. I’m not the biggest expert on hair salons, as you can probably tell by my hairstyle. So what I did is I found an industry expert while I was working on the transactions. And then once the transactions were over line, I put an industry expert in this empty to run the businesses for me.

 

Julie Wilkinson  04:32

I mean, because you use the bounce back lottery was that quite easy to get the funds? There wasn’t really any Was there no real due diligence on that funding at that time?

 

Jamie Simpson  04:39

Well, no, because I didn’t use the bounce back loans, or the everyone took out a bounce back loan at the time because the whole purpose of the bounce back loan was to give you security with the uncertainty in the future. So the majority of these owners had the bounce back loan that they’d already taken out. So there was no due diligence in place because the drawdown facility was already there in place. So I said to them, Why don’t We use those funds to give you your initial consideration. And then when the business transfers over to myself, but liability transfers, as well for a limited company, so

 

Julie Wilkinson  05:08

basically use the cash from the loan to fund the upfront payment on the acquisition. Yeah, exactly. Okay. Yeah.

 

Jamie Simpson  05:18

Because the loan was already taking out prior to myself coming on board. There was no due diligence for the financial aspect from March. No,

 

Julie Wilkinson  05:24

because the money was already in the business. Yeah. Which is actually quite clever. I mean, people. I mean, that’s a standard. I mean, the fact that you’re that money came from their loan. Lots of people do acquisitions using the cash in the business. I mean, that just happen to appear from the loan. I suppose.

 

Jamie Simpson  05:38

There’s not much cash in the bank for hair salons because they are more lifestyle business. Yeah.

 

Julie Wilkinson  05:41

Well, that’s a whole nother that’s a whole nother podcast. So if I won’t be on that, so you bought the six. So what did you find was a good point about the acquisition? What did it so did you find after you bought it as an example, the fact that you use the money from the business to buy it? Did you ever find that problem afterwards? Was there any cashflow problems?

 

Jamie Simpson  06:05

So I’d say my experience of the salons was about 80%, negative 20% Positive, because I’d systemized my own business so well. And it was a well oiled machine. I inherited six businesses that weren’t well oiled machines, and I could only be in one place at a time, hair salons as well, quite high maintenance industry. And they’re very customers are very loyal to staff. So staff have kind of got a lot of power over the owners and the management. So yeah, it was a complete learning curve for me. In regards to the finance, I’ve never had any issues post transaction, simply because it was a bounce back loan. So it was repaid over 10 years with a small amount of interest. So from a cash flow perspective, it wasn’t too bad to service. But once you combine that with a deferred consideration element as well, it did, sometimes it got a bit tricky. And because I was quite new to the business acquisition world, I didn’t protect myself in certain areas. So one, Salem, for example, opened up a home salon, which was nine miles radius away, hence why they gave an eight mile non compete. And they took all the clients with them. But because I had deferred, defer consideration in place, I could kind of control that situation as well.

 

Julie Wilkinson  07:20

Yeah. When I did my acquisition, we put a clause in our Well, I did an asset sale, not a share sale, but we put a clause in our asset agreement that says they couldn’t transact for three years after the after the deal close. So yeah, that’s interesting. Okay, so So

 

Jamie Simpson  07:37

I use something completely different now. So instead of using a non compete, because what you’ll find as a judge will usually side with in favour of the person that’s looking to earn a living, and they will overrule your non compete. So what I like to use now as a compete, and so you’re, you’re more than entitled to take customers, you’re more than entitled to take the work away. But you have to give us 80% of the revenue for each customer for five years. And if they decline that, then you say, why are you going to take the customers? And if they don’t decline that, and they end up taking your customers? It’s more of a a corporation transaction that they’ve agreed to, rather than a human HR contracts that the judge can overrule. So it’s quite clearly in black and white, and it seemed more in your favour.

 

Julie Wilkinson  08:23

That’s interesting. Yeah, that’s a clever one. So did you know when you bought the hair salons that they wasn’t ran very well? Do you have any idea or were you not really sure? Did you not know?

 

Jamie Simpson  08:37

I tend to find the more though, they went out the way to tell me how well they were run. I kind of guessed they weren’t run that well. Because the if it’s if a business is run, well, they could just show you up to date numbers, upstate financials, upstate staff, organisation charts, if you’re not receiving them upfront, and that’s a huge red flag. So I kind of knew that they were not running at optimum. But I’ve in hindsight, I would say they were borderline distressed, right? Well,

 

Julie Wilkinson  09:06

not necessarily just financially, you may actually just maybe operationally.

 

Jamie Simpson  09:10

Yeah, I’ll give you one example. So you got a manager of a salon, our biggest sell on turnover half a million a year. She was the main stylist in the business who brought in the most revenue to the business. She was working on the Monday when the salon was shut doing admin, instead of bringing in the revenue with her being the highest charging stylist, So little things like that. And because she was contracted in, I couldn’t change that. So due diligence is great, but you have to know what you’re looking for. And that only comes with experience. Or you can pay for the privilege of someone doing the due diligence for you like yourselves from a financial element to protect yourself moving forward.

 

Julie Wilkinson  09:51

Yeah, because there are I mean, the fact is, I don’t believe there’s really any SME business that’s perfect. I mean, we see about 100 balance sheets a month and none of them ever reconcile and genuinely 95% of SMEs are owner operated. So no deals would ever go through if you want everything to be 100%. But I do think you can you can plan better than some people do. So like, for instance, in that scenario, when we do our operational due diligence, one of the key things we try to look out for people is like, what’s the risk? So in that scenario, as an example, if you needed if, if you know, you’d bring an HR person on board, that you’d look at the risk, and you start building the budgets in to make sure the cash flow was built to say, well, how quick am I going to be able to grow the growth strategies if I can’t bring an extra person to work on the Monday as an example, and you might be able to bring another person in to cover that Monday, but then that’s an extra costs and things like that. So I don’t think you can ever get away from it. Because at the end of day, the business is around how they are. And if you want to take the opportunity, sometimes you just got to go for it. But you can have contingencies built in in terms of numbers, because I just think the main thing is the cash flow. At the end of the day, the business has cash, you can grow it, if it hasn’t got any cash, you can’t really grow it. So as long as you’ve got money, you can you’ve got opportunity. It’s the way I see anyway, yeah, let’s not

 

Jamie Simpson  11:02

forget, I had zero downside here, I was using the bounce back loans as the initial consideration or deferred element moving forwards. So I kind of not overlooked due diligence, but there was zero downside for me. So I was happy to take the risk. Get in there, find out what the situation was once I was in there and rectify it. And ultimately, I was able to do that for all six packaged them up and sell them. So yeah, it was good learning curve, one that I got paid for rather than painful.

 

Julie Wilkinson  11:28

Yeah. So how long did you have before before he sold them?

 

Jamie Simpson  11:33

Six months.

 

Julie Wilkinson  11:34

All right. So you literally did buy? You didn’t you did sort of buy, consolidate, build and then exit?

 

Jamie Simpson  11:43

Yes, rolls them up, increase the profits, put in a marketing strategy, put them under one umbrella, gave them all a lick of paint, and then sold them off to one buyer.

 

Julie Wilkinson  11:54

Yeah. So and well, I suppose the hard work was worth it. Then in the end, it wasn’t.

 

Jamie Simpson  12:00

Yeah, yeah. I quickly realised I didn’t like the industry. And it wasn’t for me. So I thought I need an exit strategy. What’s the quickest way to do that? So yeah, it was all about just making the numbers more attractive, tidying up the books, putting in a few systems and processes of which show KPIs of which I could show a potential buyer, and then offloading them for a nice profit.

 

Julie Wilkinson  12:22

Yeah. And then, and it’s good. And so then after that, so once you sold that you still had this tax because you still got the taxi business now. Is that still a big company of yours? You know, the one you Bill?

 

Jamie Simpson  12:33

No, I, I exited that to to the guy that was operating it for me.

 

Julie Wilkinson  12:37

Okay, so after the hairdresser’s there, where did you go from there did you do start doing more acquisitions quite quickly.

 

Jamie Simpson  12:46

I took a year off do a bit of consulting, because I’ve had a couple of babies in quick succession. So I really wanted to just be around and enjoy that experience, because I didn’t need to work. But I was working on a few deals in the background, but definitely not being a motivated buyer had to be the perfect deal. And since then, yeah, I just did quite a bit of consulting. And I’ve just taken equity in free companies to help them grow.

 

Julie Wilkinson  13:10

Okay. And is that kind of what you use for especially eyes endow that is it work, like taking equity to help other acquisition or other business owners or acquisitions, rather than just doing your own full acquisitions.

 

Jamie Simpson  13:20

I do a bit of both. But because I do that, and it pays a really good wage if you like. And I’ve got interesting free business. And there’s free different lots of problems solve every day to keep me busy, I really, really enjoy that. I like helping other people as well get a kick from that. But it means I’m not desperate to just go by any old business. So it works quite well. So as I say, I’m at Hass terms for two other companies at the minute, which are a lot larger than I’ve previously done. But I can take my time with those, I could do due diligence on those, I can stress test those. And I’m not motivated to push it through my end simply so I get some income coming in. So I’m enjoying the process, and I’m very picky.

 

Julie Wilkinson  13:57

Yeah, that’s good. Yeah. So what I think would be interesting, remember, if we take it all the way back to when you were a taxi driver, I mean, how did you transition from sort of being I mean, I don’t know that your full background history, but you know, it’s quite inspiring for people to see that you were textile and built that into a company that was your first company. So how did you make that transition?

 

Jamie Simpson  14:21

Well, I didn’t want a job. And I had zero qualifications or skill sets or anything like that. So I become a taxi driver, because then I could work my own hours and work for myself. A lot of business owners were not very good at working for ourselves, you see. So I had a vehicle which at the back folded down with a ramps, you could transport wheelchair users and people used to take the mick out of that. And I thought this is a great opportunity because no one else is doing this. So I started targeting local care homes and local council saying I offer this service and the demand was overwhelming. So I got three or four other drivers in some regular contract subs out of the Regular contracts to my regular drivers at the set times each week, make sure they are in touch with each other, put in a noncompete. So I didn’t need to worry. And then I went to travel to Australia, Africa, Southeast Asia, quite a bit of Europe, over three, four or five year period, while the business was earning me a very, very good income.

 

Julie Wilkinson  15:20

And how long do you think it took you to sort of bring in those drivers and sort of systemize it to allow you to travel?

 

Jamie Simpson  15:29

Well, I watched a film called The Thomas Crown Affair with Pierce Brosnan. And I thought, I want to be a businessman. So I thought, I’ll own my own taxi, I charge a premium for doing this work I’m doing it’s only me a good living. And then I watched that film. And I thought, Now I want to be a businessman. So I started reading a few books on business, and you need to own a business that earns money while you’re not working, if you want real wealth. So I thought, how can I put that model together. And then I had a few contracts on at the same time on the same day, so obviously, I can’t do both jobs. So I subcontracted out one job. And then I had other jobs come in, and I thought that the margin I was making on these jobs, I’m better off just outsourcing it anyway, and not working. And over a period of about a year or so had all these jobs that are delegated to different drivers, putting the systems and processes to make sure they were arriving on time customers were happy payroll was being made, etc. And that freed me up to go go and travel.

 

Julie Wilkinson  16:24

And did you find in that boat, because sometimes we see if people want to make that transition, sort of bring other people in, sometimes their profits drop, because obviously a lot of business owners are taking a certain amount of money and they need a certain amount of money from the business did you ever find when you were in that growth that it had to drop a little bit to then improve the future?

 

Jamie Simpson  16:41

I found so when I was travelling, I never had more money. And that’s why I started consulting, because people were seeing that I was doing better than ever while I was in different countries. But when I wasn’t involved in the business and systemize the business, the business really took off to be honest with you.

 

Julie Wilkinson  17:00

All right. And do you think and so was you involved in any of like decisions in the business? Did you have like an MD or anything that ran it for a year or who sort of made the business decisions?

 

Jamie Simpson  17:11

I did, but they were quite. I made the final decisions. But I also empowered the staff to make key decisions as well. So for example, I taught them how to price I taught them about availability. So don’t have two jobs too close to each other. If you get stuck in traffic, then you might not make the job, try and manoeuvre the job to a half an hour gap in between. So I just educated my staff over a certain period, enabled them to make key decisions. And then maybe I’ll check in once a week and say, what were the problems this week? What can we learn from them? And how can we change that moving forwards? And I’d also do that with the clients as well, and see what problems they were having, if any, and tweak that accordingly. And over three to six months, you can really iron out all the problems.

 

Julie Wilkinson  17:53

Yeah, yeah. Oh, it’s really good. So do you

 

Jamie Simpson  17:58

want businesses now?

 

Julie Wilkinson  17:59

Yeah. Now that you go into bigger businesses, do you find that run a bit better than some of like the hairdressers scenario? Is that one of your Is that something you look for when you’re buying now like they want to be more, I suppose independently ran?

 

Jamie Simpson  18:13

Or do you know what they because they were turned around. So I quite enjoy turnarounds. They are hard work. But they can be quite lucrative. So a good example of just yesterday, I had a guy contact me, he’s got a fire security and alarm business. It’s got 400,000 pounds worth of debt, 15,000 pound a month worth of debt repayment, and the turnovers only like 700,000 complete mess, absolute basket case of a business. But because I’ve got the skill sets and the contacts now I know I can turn that around, take a percentage in the company in a monthly management fee, and help him grow the company. So it is of interest to me, as long as I’ve got someone else that there is an operator. Whereas before I was the main person, although I put in an MD, I got all the headaches. But if you can solve people’s problems, and they’re willing to stay on, I do enjoy that. And they can be quite lucrative. But at the same time yesterday, I signed headstones for a free million turnover industrial Door Company. And that’s got key members of staff. It’s got Operations Director, Sales Director, etc. So you are paying a premium to have that staff organisation in place, and for the business to run better without you. And by implementing the same distressed techniques. They actually help us accelerate the profit of these healthy companies as well. So they do overlap but every day is different.

 

Julie Wilkinson  19:33

Yeah. So And do you find that is one of the criteria do you put a finance department in some of these companies?

 

Jamie Simpson  19:42

Yeah, it really depends on the business. I use an accountant for a lot of the work. But sometimes if there is a bit of a niche industry or a specialist transaction, I will bring in external help. But a lot of these companies already do have their own, not finance team but admins. Finance admin, if you like, and what she put in the KPIs and a reporting mechanism, you kind of could tailor those accordingly to fit into how we like to see our dashboards for the business.

 

Julie Wilkinson  20:12

Yeah. Okay. So what’s your future date? I mean, are you working? Do you work in specific industries now? Or Yeah? Are you open to any industry,

 

Jamie Simpson  20:23

I’m open to any industry, but I’m really enjoying working with traitements home business owners, because they’re very specialist in what they do. So we’ve got a share and an air conditioning company, we’ve got sharing a reactive maintenance company, they’re very skilled on the tools. But because they’ve been honing those skills for the last 10, five years, whatever they’ve been doing, they’ve not had the time to learn the business skills. So they don’t understand the benefits of monthly management accounts, cash flow forecasts, how to actually price for margin instead of going from their gut feeling. So there’s a lot of quick wins there that you can implement, while working with them at an early stage, that adds a lot of value to their business, which builds trust. And then you can work together to grow the business long term. So I’m really enjoying that side of things at the minute.

 

Julie Wilkinson  21:08

So if someone so we’re coming towards the end of the podcast now, I mean, so if anyone’s looking on might need your support, what what’s what sort of thing would you help with and where can they find you?

 

Jamie Simpson  21:20

Yeah, so I do business turnarounds. Turnover has to be a minimum 500,000 1 million ideally, but I quite enjoy them. If we can save a business and then not just save it or take it up a few levels. I’ve really enjoyed that. And also by H HVAC and electrical companies with 1 million plus turnover. You find me on LinkedIn, and very active on LinkedIn, Jamie Simpson, Grove specialist. And my website is Jamie simpson.co, CEO. And that’s where you can find me guys.

 

Julie Wilkinson  21:50

Well, thanks so much, Jamie. And thanks to our listeners. I hope you enjoyed the board and exit podcast. We’ve got loads more shows coming up soon. And if you liked our channel, hit the Subscribe on YouTube or leave us an apple rating and review. And I hope to see you again soon. So once again, thank you so much for taking the time to listen to our podcast. I hope you found it useful. If you think there’s anyone else in your network that might benefit from our podcast and please share it with them, either just click the link and send it to them or send it in a Facebook group or other social media channel. Don’t forget to subscribe. So other podcasts come to you directly as of when we launch them. So I’m really looking forward to seeing you next time. We’ve got some really exciting things coming up. And we’ll see you again soon.