00:28:17 · Greg Geronemus, Mikk
Started doing some tests here and there on some marketing marketing ideas that we had, none of which worked. But for the most part, it was really learning. Don't screw things up. Preserve the status quo. And, you know, I I think we... Again, we... I think we would have had a very different mindset if we had paid 10 times and, you know, without sort of the favorable capital structure. I think we would have taken a different posture. And I'm glad that we had the ability to sort of approach it with a degree of calm and thoughtfulness that we that we did. [00:29:00] S0: What was your experience with David with all the employees? Yes. There were only five, six people. But how they wrecked for two 20 year old CEOs taking over the firm running the day to day.
00:29:13 · Greg Geronemus
[00:29:13] S1: I I think they were I think they were absolutely shocked. I know they were absolutely shocked, especially because none of them knew about the deal until two of the six people found out the night before, and they found out the night before. We got to meet them the night before. There was a condition of closing that, you know, we got to meet them. I would advise any any searcher or ETA entrepreneur to push much harder than we did to meet at least some members of the team earlier on. That was a that was a risky game that we were playing. You know, we had we had... We were deep into our spend on legal diligence, our QOV, and, you know, those... If we had gotten a really negative vibe or negative reaction from the two people we met the night before closing, we were probably too pregnant by that point anyway. We probably would have just gone ahead and, you know, delivered the baby, so to speak. But I I it was a risky game, and I would I would recommend that anybody, push much harder. I think that was a bit of our inexperience. And and also the sense that we had that we were sitting on a really well... Like, really attractive deal, and we didn't wanna mess it up. But the team, you know, the... I think they were shocked. They were skeptical as they should have been. Not only were we incredibly young, but we had zero operating experience, zero travel experience. But the benefit of a really small team was that we were able to go to lunch with each of them, sit down with them, allow them... And really talk through. It didn't take us long to work through the whole team. We got through the whole team in less than two weeks. And spending the time approaching them with humility and willingness and an eagerness to learn, I think went a long way.
00:31:27 · Mikk, Greg Geronemus
[00:31:27] S0: Now let's talk a little bit about you going from being this journalist in in the first year and then becoming an operator. And I I I wanna talk about this because we just had this part one episode done with you as well where you said you're, if I remember correctly, one of the most active, like, in a way operationally, a fund backing those independent sponsors. So what it means to you, like, being an operator, one from the lens of your own experience and maybe bringing all this to today, to summer twenty twenty six. [00:32:08] S1: Yeah. Mean, I think I really do continue to believe in sort of go slow before you go fast. And I wouldn't change... I would change a bunch of decisions that we made, and I'll I'll get back to that in a second. But one thing I wouldn't change was this sort of slow, deliberate learning early on, especially because of the magnitude of the key key person risk. The people that we inherited on the team were great, but there was... But they were... It was woefully understaffed. I mean, wildly understaffed. And there was so much still wrapped up in the seller. We we needed to take our time. And, you know, if if we didn't soak up a lot of information, if if he left in a in a hurry, now I think we were confident he wouldn't do that because of the size of the seller note. But if if things went poorly with that transition and there was... It would have been a disaster. And so the the combination of the... This sort [00:33:23] S0: of
00:33:23 · Mikk, Greg Geronemus
[00:33:23] S0: of [00:33:23] S1: profound key person risk and a well structured deal, I think we did absolutely the right thing in year one. Now, I don't think we've invested in a business since that has had the degree of the key person risk that that smarTours had. And I think when, you know, when there's more of an established team, established processes, established systems, you can move a little bit faster. But I think still erring on the side of going slow before you go fast really never hurt anybody. Now sometimes you don't have the luxury of that. You know, you... Sometimes there's... You you inherit a crisis. You know, when you when you buy a business, that's often a tremendous shock to the system. And sometimes people, you know, employees flee or customers leave or... And you don't have the time of just sort of being a journalist and jotting down notes. Thankfully, things were pretty calm, and so we had that luxury. But, you know, that's... From time to time, and and and frankly, you know, more often than I think people appreciate, there's a lot of commotion and and in some cases, chaos caused by the transition from a experienced sort of retiring owner operator to a younger ETA entrepreneur. And you're sort of thrust into, you know, managing through some difficult stuff, you can't just sort of sit back and learn as much as you'd like to. [00:35:15] S0: So this owner stayed for a year, right? [00:35:21] S1: Yeah. A little under a year in the end.
00:35:21 · Greg Geronemus, Mikk
[00:35:21] S1: Yeah. A little under a year in the end. [00:35:23] S0: Yeah. Okay. What happened the day he didn't show up to the office anymore? What what were the things you started changing? You... Now you've been learning and observing all the information about the business, the market, the industry. So what happened next when it comes to maybe you can go more specific. Yeah, sure.
00:35:42 · Greg Geronemus
[00:35:42] S1: I think we knew our goals for year one was soaking up information, year two was, we had two main priorities. One was we realized that the business could no longer exist, let alone scale on paper and pen with a splash of Excel that we needed to grow up a bit. And so we worked on identifying and then implementing a new system, a real sort of ERP, and we did that. And then we started looking at how do we sort of take bets, test, and learn on ways to accelerate growth? Our initial hypothesis, especially as sort of two younger entrepreneurs, was that digital marketing would be the way forward. That paid search, paid social, a more active social media presence broadly, that would just open the floodgates. We'll take the website from a 1996 or 1997 vintage, and we'll bring it into the modern era era. We did all of that. We tested all of that. None of that seemed to really move the needle. Now it's a little bit hard to disaggregate because there were some global events. We were sending people to all over the world. One of our biggest destinations was... Actually, our biggest destination was South Africa. That was about 25% of our revenue, maybe 30% of our EBITDA. And e... Ebola hit around that time, and if you're confused why Ebola would matter for South Africa, you should be confused because Ebola was nowhere near South Africa, thousands of miles away. But try telling that to the relatively poorly informed American traveler. They just saw Ebola Africa and freaked out. And so people started canceling their trips en masse to South Africa, which was which was sort of our first, yeah, our first mini crisis. But we're really, you know, all all sort of all told, year two, the big win was systems. We learned that digital marketing was not going to be the silver bullet. And we had our first experience navigating some challenging geopolitical or public health events. Revenue was basically flat. We were able to improve our cost of goods sold and grow gross profit and grow EBITDA. And then delever dramatically and create a lot of equity value. But we had of had this sort of stubborn top line. And a lot of that persisted into the next year or so. We're still trying to figure out digital marketing not working. We had some other geopolitical and public health issues. Zika popped up in Central America, that was a thorn in our side.