Meet Bryan Beer
The entrepreneur who bought, and later sold Hot Tubs Canada Inc!
The Come Up highlights successful business owners’ & operators ‘come-up’ stories in an easy-to-read, written interview format. All content is transcribed from live interviews.
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For this issue: Bryan Beer—a business broker and advisor who entered the industry after selling his exiting his own business in 2023!
Before Canadian Hot Tubs Inc.
To rewind and go way back — I used to work as a management consultant. One of those jobs where you fly to work on Sunday night and fly home on Friday night.
I can’t lie, that kind of job is fun for a while. With the way those consulting projects work, you live project to project, and you can sometimes get three to four weeks off at a time.
But the guys who were the managers — the ones who had been doing it for 20 years — they were all divorced.
They’d get back from a day of work on whatever project they were on, go down to the bar in their hotel, get drunk, go to bed at eleven and do the whole thing the next day. From a lifestyle perspective, it wasn’t the best career path for me.
So again, it was fun for a while, but wasn’t really for me — and as it turns out, I actually got laid off. I was living with my then-girlfriend, now wife. So I was on UIC, I was unemployed. My wife is an occupational therapist, and she was working at St. Mike's Hospital in Toronto.
We kind of got wind where things were going in the private sector. So, she started as a contractor, working with people who were in motor vehicle accidents.
While she was doing it, I really had nothing else to do but go to a cafe, sit, drink coffee, and think about what to do. Eventually, I convinced her that we could do what she was doing better than the place where she worked, even though we only had three months industry experience between the two of us. I found a six month contract at another consulting firm, so that gave us an income to bridge the gap before we started our company.
Once we did — it took off very quickly.
It's funny to think about it now. For the first two years, we didn't even have a computer. We had a phone, a fax machine, and our photocopier was a roll of nickels.
We’d go to the corner store for all our photocopying.
We had a really good run for ten years. The business was successful, we were growing, and we were profitable, but things changed quickly, and four months later, we were out of business.
Not because of a lack of clients, strangely enough, but because of government legislation changes that ruined our business model.
After that, I made a really bad investment in the candle industry.
I met a guy, through a mutual friend who was an inventor. He had some IP in the candle industry. So our plan was to get a patent in place and license this IP.
All of a sudden — without literally any experience in the candle industry — I’m down at the National Candle Association convention in Orlando in 2004, selling this product.
It was crazy. People were lining up, stealing our samples. People had video cameras, filming what we were doing. Remember: this was before camera phones, so videoing stuff was a big deal.
It was just insane. So, I call my wife, and I’m like hey, we better start figuring out the best Porsche dealer to buy from. laughs
Around that time though everybody just started to get killed by Chinese imports. American candle producers experienced a huge downturn.
Everybody liked our idea and our products — we had meetings with all the big players in the candle industry — but it was just the wrong timing. So it just never happened.
The push for globalization and moving manufacturing overseas got really serious during that time, so the macro trends badly affected us again — the lesson there being it’s all about the wave theory…you've got to catch the right wave at the right time for everything to go right, and in our situation, that just wasn’t the case.
First attempts at buying a business…
With the first business we bought together, my wife had a job at the time — which is a tip for any budding entrepreneur. Having some kind of steady salary is key, or at least certainly helpful, when you’re starting out.
It helps not only from a cash flow perspective, but also, it is something banks look at if you’re looking to borrow money and take on debt. They’re more likely to lend because they know you don’t need to pull money out of the company right away and you have some stability to make longer term decisions.
But either way, I had been out on my own for twelve or 13 years at that point, and I remember thinking that I was unemployable.
I'm an electrical engineer by trade, so I was way out of date, largely because I wasn’t working in that field, and I hadn’t kept up with the tech. But also, I didn’t think anyone was gonna hire me cause they’d feel like, given my history, I was just looking for a job until I could find another business.
At least that's how it felt.
Then another thing came along. A friend of mine from McGill who had a lot of experience in merchant banking started a capital pool company, which is a TSX thing. I came on and we had big plans to do something.
Instead of doing a normal reverse takeover, which you normally do with cash flow companies, we were going to buy a company and operate it.
So anyway, we entered into a purchase agreement for a company called Afton Foods, which was in Toronto. They were in bankruptcy protection, but they still were turning out about a million a year in EBITDA.
They had two brands which you may or may not remember: One was 241 Pizza and the other one was Robin's Donuts, which was obviously getting absolutely beat up by Tim Hortons, but they still had something like 125 stores throughout Nova Scotia and Ontario.
Anyway, we entered into a purchase agreement, conditional on financing, but we just couldn't get the financing done. It was only for $12 Million, too.
Normally, $12 million would be a slam dunk. Still, somehow we just couldn't get it done. But we were kind of the de facto CEO's of Robin's Donuts and 241 Pizza for, like, six months.
It left me with a kind of a bad taste in my mouth about Bay Street and investment banking and stuff like that.
Then came the hot tubs…
With every cloud, there's a silver lining, right?
I'd been lucky again as things weren't working out with that deal, and I was constantly online looking at websites for businesses for sale.
Really, you can look for years before you find something that's of interest to you geographically. I found this business, and the first thing that piqued my interest was it was in my area code.
What I liked about it was that the hot tub business had been around since the mid seventies. And this is in 2008, mind you. The original owner had done really well with it, but he was kind of neglecting it, and it was heading downhill.
But I liked the product. It was just so well differentiated, so unique.
This was a manufacturer, so not only was it a very niche product, but it had 350 million potential customers across North America, because they lend themselves to being shipped. And I used to tell people: whether you lived in Mississauga, Ontario, or Madison, Wisconsin, it literally didn't matter to us. There's a little more paperwork and some extra cost to get it across the border, but really it was all the same to us.
So we closed the deal on July 15, 2008, and of course, October 2008 the world came to an end with the housing and financial crisis.
It was impeccable timing once again, but somehow we kept going!
At the end of the day, I knew where we needed to go — digital marketing, social media, all of those things. But I'm not that guy. I don't have Facebook, even…
So I knew where we had to go. I just didn't know how to get there, and didn't have a lot of extra cash to do it.
On deal hunting vs. buying a solid business…
I never really put that much thought into it.
As an owner-operator, looking for a deal when there’s a finite amount of money involved — getting something in your price range, finding something locally, finding something that you can run that doesn't require a lot of specialized knowledge — it’s hard to accomplish. Because hey, I went into the hot tub business with no experience. I was selling these hot tubs when I'd never even been in one.
With some businesses — plumbing, heating, electrical, for instance — it's hard to buy them unless you have that knowledge. But with this business, I felt it was simple enough that even if I didn't have any industry experience, I could figure it out.
It was neglected. It was run down. It went from the original owner to his stepson but the stepson figured out quickly that he wasn't cut out to be an entrepreneur, so I bought it off him.
It was beaten down, and obviously, if it's beaten down, it keeps the price down. When you don’t have very deep pockets, that’s the only kind of deal you’re looking for.
How intentional was working towards an exit?
Well, I'll rewind it a little…
When Covid hit, we shut down for two months. End of March to the end of May.
At the time, I literally just sat there and thought, well, this is the end of the line. The world's going to be in a recession. Who's going to buy a hot tub?
I thought we would have to sell our house to pay off our loans and suppliers. But my wife — who's never taken an economics class in her life, mind you — figured that people will probably keep buying tubs because they're not traveling.
I flat out disagreed. I was like, I've studied economics and it doesn't work that way.
Naturally — she nailed it. She predicted the whole staycation and home improvement phenomenon that we saw from 2020-2022.
When I say we shut down, I meant fully shut down. Like, I didn't look at the email or anything for two months. When I finally did it was just like hundreds of emails and voicemails.
Turns out it was a lot of fun for that year or two, because there was so much demand and so little supply. Everyday was just improvisation and juggling a hundred balls. The business was doing really well.
So anyway, I was sitting in the TIFF Bell LightBox Theatre on King Street West,with my two kids, watching Glass Onion — that movie with Daniel Craig. And I don't know what it was, but I just thought, it's time to sell.
This was in November 2022. Our year-end was coming up, so we'd have fresh financials. I was turning 60 on my next birthday. And more than anything, the older you get, the more risk averse you get, right?
You can fail when you're 40 and still have time to recover. When you're 60, you just run out of time.
I also started to worry that if something were to happen to me, the business would be in trouble, and that trouble would translate back to my family.
In the past, you can ignore those thoughts — or you can write off the idea that something won’t happen to you, but of course, that's just not realistic.
So that really got to me. I wanted to take some money off the table because a large chunk of our net worth was tied up in that little business. So, yeah, I can literally remember to that point where something went off in my head.
The process of selling his business…
I started by convincing my wife.
After that, I started looking around and I talked to some business brokers, and that's how I got connected to TransWorld Business Advisors.
From day one — they were on it.
They saw the value in the company, so it was an easy decision to go with TransWorld.
We took it to market and one of the buyers who came in very quickly was actually kind of aligned with one of our customers.
So it all worked out. They came in hot and ended up buying the business.
It's one of multiple businesses for them. They've got deeper pockets, lots of resources, whereas for the most part, it was just me in charge. And oddly enough, I initially told myself I wouldn't sell it for x, but I'd sell it for y.
We valued it exactly in between, and that's what it sold for.
Trends that make good and bad businesses…
At Transworld Ontario our bread and butter are businesses that sell for $300K to $3M but we handle much larger deals as well. We like manufacturing, distribution, contractors but we are completely industry agnostic.
Buyers generally look for like three good years of consistent or growing financials. And it’s not that you can't sell a business when it's declining, but you’ll have fewer buyers interested and unless somebody can see some untapped potential or something, you probably won’t get an amazing offer.
The other thing is that I see — and keep in mind, I lived this — don't leave it too long.
Anybody who's a boomer or boomer adjacent needs to start thinking about selling within the next year or two. Whether it's another Covid or a health event, things can change very quickly so it’s good to quit while you’re ahead.
There are so many people I talk to who are in their 70s, who run a CNC shop or distribution business or something, that five years ago was doing a million in sales. Then, all of the sudden, Covid happened, and now they’re 75, and just getting by. You can leave it too long.
Another thing is: selling a business isn't a DIY project. Yeah, you could be a great plumbing contractor, but selling a business requires a different set of skills.
It's also time consuming as hell, and emotional, because you've tied up so much in that business. If you have a business broker there, you can kind of get some clinical detachment and make better decisions than if you're all alone.
Think of it this way: lawyers get lawyers and doctors get doctors, right? You need some objectivity.
Why he went the ETA route
(entrepreneurship thru acquisition)...
Well, I think when it comes to businesses out there — like startups — where you've got to come up with a really good idea to be successful, I was just never that creative. ETA just appealed to me more.
I think people are also conditioned with the idea that being a founder is sexy. People want to be the next Steve Jobs and all that.
But there's $2 trillion worth of businesses in Canada — Boomer owned businesses — that are going to need to change hands in the next ten years. Only about 20% of those have some sort of family succession plan, so that leaves $1.6 trillion worth of businesses that need to be taken over.
It's just so vital for the economy that those businesses continue. Not only that, but when a new buyer buys them, they bring in new money, new energy, new ideas. They improve those businesses.
Advice for those considering ETA…
First off, understand that it's a long process.
To find a business that fits your budget, that fits your geography, that fits your skill set — it usually takes years.
Yes, technically there are a lot of low hanging fruits — like pizza places — but the upside on businesses like that is almost non-existent.
What I saw in hot tubs was the opposite. I saw that we weren't limited to Kitchener-Waterloo. We had literally all of North America to tap into.
So yeah, to see something that really jazzes you, it's a long process, and then even if you do find something, it's very competitive to get.
A couple of my colleagues sold a business in North York a month or so ago — a nice business that sold for like $2.4 million.
But to get there, they had almost 300 NDAs signed by potential buyers.
Even if you like the business and you have the money, the probability of closing it is still fairly small.
What he would’ve done differently…
If you take over a business, and you have the money and the resources — make changes fast. Don't drag it out over too many years.
Another thing: A lot of people who want to buy businesses have never really thought through how they're going to finance it. I talked to a guy just a couple days ago, and he was like, I want to buy a business in this space, but I want no money down and 100% vendor take back.
I had to stop him and say, sorry but it doesn't work like that. Maybe on YouTube videos or maybe in some deals in the US, but not here.
So yeah, figure out how you're going to finance before you get too far. Because like I mentioned with the Robin’s Donuts thing — all the pieces were in play, but that stopped us dead in our tracks.
Downsides of ETA…
I don't hear this as much as I did a long time ago: most people, including your friends and your family, don't understand entrepreneurship.
They say things like, oh, man, it must be nice to be your own boss. You get to take as many vacations as you want and have as much time off as you want.
They couldn't be more wrong, but they don't understand that. People who want to buy a business need to know what they're getting into. It's lonely.
“Everybody wants to go to heaven, but nobody wants to die.” Living out your dream comes with certain consequences. You can feel like you are trapped. You have a good chunk of your net worth tied up in a very illiquid asset and unlike people who work a 9-5, you can’t just quit and find a new job.
It's definitely not all wine and roses.
Last min advice…
Make your business plan, have all your financial models, your projections, your pro formas, crunch every number down to the nth degree — and then when everything's done, cut the expected revenue in half and double the expected costs.
If you're still showing a profit, you're probably okay.
Things never turn out as rosy as they do when you're writing a business plan, so leave lots of room for error.
That’s it for issue this issue!
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If you, or someone you know would like to be featured, or just want to connect, feel free to message me on LinkedIn, or, if you’re building a business of your own and need some support, we should chat!
Interview by: Alex Tribe
Edited by: Angus Merry