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Centurica Trades Hands — How the Deal Went Down
Nate Ginsburg is an entrepreneur, investor, and CEO of Centurica, a premium provider of buy-side due diligence services for online acquisitions. For the last 10 years, Nate has been an online entrepreneur for brands such as Onset LLC, Onset Interactive, and SellerPlex. He is a Partner at AMZ Pathfinder and Principal at Abound Ventures.
Nate graduated from the University of Wisconsin-Madison with a degree in economics and philosophy. He is passionate about yoga, personal development, travel, health and fitness, mindfulness, and audiobooks.
Here’s a glimpse of what you’ll learn:
- [04:02] Nate Ginsburg talks about exiting his FBA business and building his skills as an entrepreneur
- [09:16] How Nate acquired Centurica over a six-month process
- [16:08] The importance of learning skills to overcome rejection in the entrepreneurial world
- [20:57] Why you need due diligence in valuation before exiting or purchasing a brand
- [27:44] Nate explains the three buckets of due diligence: financial, operational, and commercial
- [34:27] The process and requirements of SBA financing and the loan structure
- [41:32] Nate shares some challenges he is excited to resolve to build a stronger foundation for Centurica
- [50:19] Why a knowledgeable bookkeeper is crucial when exiting your business
In this episode…
If you’re buying a business on or off Amazon, how can you avoid common mistakes and red flags that can delay your deal? According to Nate Ginsburg, a business needs to have solid financial pillars to avoid any pitfalls.
Through the process of due diligence and valuation, an entrepreneur can have confidence when purchasing a business — and that is what Nate brings to the table. With his purchase of Centurica, he is creating value for others and his brand by having conversations and educating others on the buying and exiting process. So, how can you make sure your finances are in place?
In this episode of the Quiet Light Podcast, Joe Valley sits down with Nate Ginsburg, entrepreneur, investor, and CEO of Centurica, to discuss the importance of due diligence when growing and exiting your brand. Nate talks about his approach and journey to purchase Centurica, the deal structure of working with an SBA loan, and red flags a buyer needs to watch out for when purchasing a business. Stay tuned!
Resources Mentioned in this episode
- Nate Ginsburg on LinkedIn
- Nate Ginsburg on Instagram
- Nate Ginsburg on Twitter
- Nate Ginsburg on the Quiet Light Podcast
- Quiet Light
- Quiet Light on YouTube
- Joe Valley
- Mark Daoust
- Chuck Mullins
- Quiet Light Podcast email: [email protected]
- The EXITpreneur’s Playbook: How to Sell Your Online Business for Top Dollar by Reverse Engineering Your Pathway to Success by Joe Valley
- Free Copy of The EXITpreneur’s Playbook
- Chris Yates on LinkedIn
- “How to Find The Right Business and Make Sure It’s a Good Investment” on the Quiet Light Podcast
- Am I Being Too Subtle?: Straight Talk From a Business Rebel by Sam Zell
- Stephen Spears on LinkedIn
- Rhodium Weekend
- “Incredible Exits – Mike Jackness — Selling ColorIt” on the Quiet Light Podcast
- “Incredible Exits Gets a Sequel: More From Mike Jackness” on the Quiet Light Podcast
Sponsor for this episode
This episode is brought to you by Quiet Light, a brokerage firm that wants to help you successfully sell your online business.
There is no wrong reason for selling your business. However, there is a right time and a right way. The team of leading entrepreneurs at Quiet Light wants to help you discover the right time and strategy for selling your business. By providing trustworthy advice, effective strategies, and honest valuations, your Quiet Light advisor isn’t your every-day broker—they’re your partner and friend through every phase of the exit planning process.
If you’re new to the prospect of buying and selling, Quiet Light is here to support you. Their plethora of top-notch resources will provide everything you need to know about when and how to buy or sell an online business. Quiet Light offers high-quality videos, articles, podcasts, and guides to help you make the best decision for your online business.
Not sure what your business is really worth? No worries. Quiet Light offers a free valuation and marketplace-ready assessment on their website. That’s right—this quick, easy, and free valuation has no strings attached. Knowing the true value of your business has never been easier!
What are you waiting for? Quiet Light is offering the best experience, strategies, and advice to make your exit successful. To learn more, go to quietlight.com, email [email protected], or call 800.746.5034 today.
Hi folks. It’s the Quiet Light Podcast where we share relentlessly honest insights, actionable tips, and entrepreneurial stories that will help founders identify and reach their goals.
Joe Valley 0:32
Hey folks, Joe Valley here. Thanks for joining me for another episode of the Quiet Light Podcast today. We’ve got Nate from Centurica, on the podcast, he just fought the company century because the due diligence firm and it’s kind of funny. Chris Yates, the original, well, not the original founder of Centurica of the previous owner of Centurica was Quiet Light’s first guest back in 2007, on the Quiet Light Podcast, and now Nate has worked out a deal with Chris it’s Centurica. To buy the company, they’ve closed the transaction. And we talked about Nate’s journey in terms of being an exitpreneur himself. He sold the business in 2007. Teen and then built another company, a service agency and talked about his approach on how to approach Chris Yates, the owner of Centurica. about working together and broach the subject of maybe someday, one of us will sell to the other and how that led into pay, you know, I might be ready now working out how they came to an agreement on the purchase price. Due Diligence. How Chris I’m sorry, how Nate actually financed the deal. He did it with an SBA loan. We talked about the SBA lender, we talked about the deal structure, we talk about the terms, all of that. And then he gets into some of the key things that a buyer needs to look out for when buying a business sort of red flags that you look at. It’s a great interview. Nate’s a great guy, he’s been around the e-commerce world for a long time. Let’s take a listen to the interview with Nate now from Centurica.com. Here we go. And before we go to Nate, folks, I want you to go to exitpreneur.io/QLPodcast to get your free digital copy of The EXITpreneur’s Playbook if you own an online business, and you don’t know the value of it, come on. Now if you’re listening to me, you know I preached this, get your free copy of the experience playbook. Exitpreneur.io/QLPod. Same for buyers. If you’re out there buying if you’re looking to buy an online business, don’t you want the other opposing team’s playbook? Pick up a copy of the free digital version of The Exitpreneur’s Playbook at exitpreneur.io/QLPod. All right, here we go off to Nate. Hey, Nate, how are you man?
Nate Ginsburg 2:52
I’m doing good. Thanks for having me. Excited to be here.
Joe Valley 2:57
I’m excited you’re here as well. I’m excited to hear all about the purchase of Centurica due diligence everything you’ve done and as I mentioned before we hit record how I how I need to get invited to one of your yoga retreats so that I can rest up and be healthy again. Not that I’m unhealthy now I’m okay but why don’t why don’t you give the folks a little bit of background on yourself so that they know a bit more who Nate Ginsburg is which background is what you’re up to these days?
Nate Ginsburg 3:23
Yeah I would love to and first for if they’re a longtime listeners of the show was interviewed by Mark this was man I think in 2017 So after so I’ll get to it in my story but Wales is built and sold an FBA business that I exited in in 2017 and and yeah, came on the podcast to kind of share about my story then are kind of like that that exit and yeah, I guess you know here we are a couple years later and and yeah so we’ll kind of you know, we’ll pick up the story on where where the last left off so yeah, I got into FBA built and sold my own FBA business exited in 2017 You know, before it was cool and
Joe Valley 4:11
and before the multiples were higher.
Nate Ginsburg 4:13
Yeah, yeah. All that being said I got a you know, I was happy with my outcome. And and yeah, so So my my thing for a lot of years are kind of like a core competence or skill as an entrepreneur that I try to you know, just you know, leverage is really like hiring recruiting in remote teams and so when I sold my FBA business I had a you know, a small but you know, good team that was pretty much running that business for me, supply chain, finance, you know, Amazon account, etc. And when I exited that business, I kept my team and started offering services which turned into Seller Plex, which is my other company and Seller Plex, you know, fast forward has grown a lot since then the team now is around 70 people all over the world, we’ve got like 20 in our supply chain department 30 and Amazon account management, we’ve got a content team, we’ve got a finance team. And, and so with Seller Plex, we about a year ago started to get into some due diligence projects, which kind of started actually, we were doing exit prep, working with some clients, you know, with some clients and their brokers on exit prep. And then, you know, due diligence is a lot of ways just another side of the same sort of coin of exit prep. And so we, you know, modified the reports and work that we were doing on the exit prep side to start doing due diligence projects. And yeah, kind of threw our hat into that ring about a year ago. And, uh, last fall, things started to pick up a bit on the diligence side, you know, yeah, all of a sudden, we were doing, you know, like, a handful of projects, or kind of started working with a few repeat buyer, you know, roll up aggregator type clients. And that got me thinking much more seriously about due diligence as a, you know, as a service in a sector. And, you know, I’ve known of Centurica for many years, a member of rhodium community, and so had known Chris through that. And, and yeah, so, Chris, the, the now former owner, you know, we were friendly online, we’ve never met in person, but you know, had a few calls. And, you know, we’re familiar with each other. And yeah, you know, I was just thinking so, so SellerPlex, would occasionally get leads from that went to Centurica, that’s insurance was that capacity that they came to Seller Plex, and, and just sort of thought that there might be some, you know, some opportunities, you know, with Centurica. And again, kind of knowing my kind of core skill set around, you know, Team scaling teams, scaling deliverables, and, and just, you know, client services. And so I was thinking about this for a long time. And finally, one day, just like, you know, pull the trigger shot, Chris, and email, like, hey, you know, we’re doing more due diligence, you know, if you’re interested, maybe we can chat, see if there’s any ways we can, you know, support collabed and something. And to my, you know, pleasant surprise, Chris shot me back, like, right away here. Sure. Here’s my calendar link, like I booked a call for like, the next day. And, you know, and so begins, you know, the next chapter in the story, and,
Joe Valley 7:43
and now you’re own Centurica, he was probably so excited to get that email. Well, they’ve been, they’ve been so busy the last few years, that, you know, with the growth of the m&a world, I mean, we personally grew 85% 2021. And that means Chris has to grow. And because we refer a lot of a lot of clients over to Centurica, he was, was he, in red, in hindsight now, was he afraid, afraid of email excited that he came down? To talk?
Nate Ginsburg 8:13
No, he was excited. You know, I mean, unbeknownst to me, like, you know, was sort of, you know, thinking hoping or, I don’t know, had a hunch Navy, that there was something going in that direction. You know, for me, this was like, you know, this is like, a big, I mean, was slash is a big deal. For me, I’ve been thinking about this and thought it could be a fit. And, you know, I’m, I’m also not one, I don’t want to get, you know, too far ahead of myself for things and, you know, so So yeah, I was trying to stay focused on where things were at. But, but yeah, it was, you know, was hopeful. And so actually, a couple of weeks ago, met Chris, in person for the first time, there was a rhodium retreat in San Antonio that I kind of went down to hang for a day and hung out with, with Chuck of Quiet Light and more of that community. And, and Chris, and I got to share the story to his rhodium community, and it was, you know, cool, kind of getting to both sides. I mean, you know, we’ve had a lot of communication the last six months, but, you know, long answer to Yes, it turns out, Chris was, you know, excited to get that email and kinda had an idea where it, you know, might be going and, anyway, so on the call, we’re talking, you’re gonna start off pretty. I don’t know, like, not that exciting. Oh, well, maybe if you have capacity or you’re at capacity, you could refer us or if we get things, we don’t have scope. And then it was like, I brought up I was like, well, maybe some point in the future, it could make sense for one of us to buy the other one. And, you know, it’s like, dramatic pause, you know, waiting and then Chris comes back. It was like, Yeah, well, if, if that’s the case, you know, I think it may make more sense for you to buy us. And you know, I’m on the other side it just like, you know, trying to keep my cool. And it was like, oh, like, you know how, how interested in that might you actually be? And so turns out, Chris was interested and, you know, thus kicked off, you know, what ended up being about a six month, you know, process from that initial email to finally, you know, close transaction. And, and yeah, you know you’re now looking at are talking to the proud owner of Central America, which for a lot of reasons, and I’m happy to share I really think is like my dream acquisition. And I’m just so excited to be able to build on this incredible legacy and to be the next steward of this really amazing brand.
Joe Valley 10:55
It is an amazing brand. It is you know, I’ve I’ve known, I think I think it must have been about the same time that Mark had you on the podcast in 2017. When we launched the podcast, and Chris Yates from Centurica was the abs, the very first guest ever to come on acquire a podcast. And we’ve referred so much business out to them over the years or to you now, because it’s the right thing to do buyers that are buying these online businesses have to get an outside opinion and expert opinion, to look at things in my opinion, I think it’s the best thing they can do the best money they can spend. Because, you know, it’s not just a yes or no, it’s often Yes. And here are the weaknesses that you can fix. In this business. Here’s this, the strengths, these look good. And sometimes it’s all about the numbers. But sometimes it’s about links and other things like that, too. So I don’t know of any other due diligence firm that I’ve come across. Since I’ve been doing this. It’s since 2012. So for a decade now that is as thorough, as detailed and as reputable as Centurica. So, congratulations to you. Congratulations to Chris. I can tell right now, one of the reasons why Chris was open to that was because of it was you and your personality, right? You’ve been smiling this whole time. The audience is like, wow, this this like, this is a really likable guy, I want to talk to him. It’s so it’s so critically important to be able to bridge that gap and, and be likable. Because if you go in trying to buy Chris’s business, which was probably your wish the whole time, right. But you just let it flow to see where it went. But were likable and helpful on the way and turns out that that’s what the timing was right, obviously, as well. Why was it so hard for you to send the email to Chris, you wanted to buy his business? Why not? Why not? Just yeah. Yeah, I
Nate Ginsburg 12:55
mean, good question. I guess it’s the, you know, internal resistance narrative. Like, it was I was thinking, I don’t know how long I was thinking about it. And, you know, I guess what it is, and like, I mean, yeah, like, sidenote about me, maybe, you know, or, I mean, many of your listeners, I’m sure don’t know, but like, I’m, you know, I’m like a junkie for, you know, personal growth and really into a lot of like mindfulness and I mean, doing yoga for a long time. And a lot of like, I’ll say spirituality, but I hate that word. Like, not religious, but, you know, just like, trying to be aware of what’s going on. And, and, anyway, and so, so yeah, I think just like being aware, while at the time, it was this, like, you know, I had this you know, there was just like this dream kind of, in the background of, you know, buying Centurica, me becoming the owner. And, and yeah, like, before sending that email, that dream was, you know, like, if it was alive, I mean, so if I send that email, or you know, we have that call, and Chris is like, no, not interested, all of a sudden, you know, maybe that dream is dead. And so, you know, I think they’re, oftentimes we have this like, resistance to doing even we, we know what the next step has to be. But psychologically, we get this resistance, because it’s like, oh, well, what if I take that step, and it doesn’t work out? Well, it’s safer to not take that step. And then, you know, you’ll never know. I mean, you’ll never get that. No. So it’s like, I mean, it’ll never happen either. But, but yeah, I think that’s sort of where some of the resistance of of instead of just like, you know, doing it, and normally, I’m, you know, I’m a person who usually you know, does things and,
Joe Valley 14:38
you know, yeah, I’m on the other side of this thinking, Jesus Christ Nate, you, you built a successful business, you sold it. You’ve traveled the world based upon what I see on Facebook and your posts. And now you’re running another very successful business with SellerPlex. Why are you afraid of rejection? Why are you fraid of reaching out to Chris and he rejected Yeah. Everybody’s gonna have being rejected as is part of the entrepreneurial life, you know, it is what it is. So, anyway, well, I’ll
Nate Ginsburg 15:14
tell you a quick kind of side thing on rejection, an interesting, kind of surprising, you know, teacher in overcoming rejection actually was with the retreat that I hosted at the end, it was the end of March. You know, we had it but like that one of you know, most people I reached out to couldn’t come. So that was dealing with a lot of nose. Anyway, it’s it’s a good skill to have, you know, overcoming those knows and staying positive. But yeah,
Joe Valley 15:43
do you have any kids? No kids not at this point. See, I’ve got I’ve got two boys, they’re 18 and 20. One’s about to graduate graduating high school. In two days, from the time we’re recording this, teaching kids to get used to and expect rejection as they try to reach their goals. It’s hard.
Nate Ginsburg 16:04
It’s hard. But I remember when I was kind of in the midst of just like, you know, getting rejected by most of the people that I invited to come to my retreat. And I mean, fast forward, it came together. Amazing. Not that we need to spend too much time on that. But it did all work out. It was a blast. But I was listening to this book. What book was it the SAM? Sam Zell, I think his story, I forgot what the name of the book is. But he he had a line in there that like that the ability to overcome rejection or just deal with rejection is like one of the most important entrepreneurs skills. And so I kind of had that line in the background as I’m, you know, reaching out to people and inviting people and, you know, most of them for whatever reason, aren’t able to calm and so just had that, like, you know, what I’m, I’m, you know, strengthening the muscle of overcoming rejection, like, this is good, you know, for my, you know, for my career. Yeah. Yeah.
Joe Valley 16:59
Yeah. So, I mean, the people that are in the audience that are acquisition entrepreneurs, meaning they’re going to try to buy an online business, you know, they’re gonna face the same thing. Trying to buy an online business. And in today’s world, there’s multiple offers on most listings, Quiet Light had 3.75 offers on every listing in the last 12 months. And you know, things are things are a little tighter with the threat to implosion, and lending tightened up briefly, people are getting a little scared, but I think it’s going to be temporary. So rejection is something they’ve got to get used to. But once they get over that, where I think, I think, to the point of you and your personality and connecting with Chris and Chris going, Yeah, you know what the time might be right. And you know, I know Nate, I know his reputation. I see what he does online. Seems like a great guy. He’s been a member of rhodium, you’ve got all these things that are working in your favor. And that helps. That helps instill confidence in a cellar in many ways. And oh, my most, the most memorable buyer seller conference call I’ve had in a long time. I was with somebody unfortunately, that didn’t get the deal. But he was most memorable because he was just simply the most likable. He didn’t get the deal, because he had SBA financing, and somebody else had all cash. That wasn’t his fault. But being likable is probably part of the reason why you now own Centurica.
Nate Ginsburg 18:28
I mean, totally like, so Chris, and I’s just communication and relationship, you know, throughout the process was, you know, a critical piece that allowed everything to move forward. And, and I’ll say that, I mean, things move forward a know about as well as either of us, you know, could have hoped and, and yeah, you know, a huge factor in that was because of, you know, the communication between Chris and I, and, and I gotta give Chris, you know, so much credit for making this process just easier for us both and, you know, some things that we did, which Chris suggested was, you know, we got on once, once we kind of got serious about, you know, pursuing this, we were just getting on weekly calls, just to check in, touch base, what’s going on, and sometimes there wasn’t a lot to report on, hey, like, waiting to hear this back from the bank or this or that. And, yeah, other times, we had to, like, you know, bang through our, you know, term sheet for what we needed to include in the APA. And just like, get, you know, we we wanted to and ultimately did really get clear on, you know, pretty much all the important points for Chris and I so that when we gave it to the lawyers, it was just a lot. You know, we were already clear on the things that were important to us. So it was just, you know, finalizing details.
Joe Valley 19:52
Yeah, we do that in the Letterman sense of Quiet Light. Couple of things that we do that you’re talking about is a letter of intent is really Pre loi, it’s all the bullet points that would go into the LOI. And therefore, the LOI is pretty thorough, because the LOI is then all of the points that should go in the APA, the asset purchase agreement, it all flows from one thing to another. And then in due diligence, Nate, we set up most of the time, weekly calls. And it’s like, every Tuesday at 10, we’re all gonna get together the buyer, the seller, the broker, and sometimes like you said, there’s not much to say. But other times, it’s it’s really just continuing that positive communication as we go through this sometimes painful process of due diligence, because it can be pretty thorough. So let’s, let’s you said bank, so let’s talk about how you pulled it off as an acquisition entrepreneur. First, how did you come up with a value for the business? And then I want to talk about the financing that you’re talking about? Yeah.
Nate Ginsburg 20:54
So the Vout. So this was a, I don’t know, if you’d call like an off market deal. You know, I just, you know, the business wasn’t listed. I reached out to Chris Yep. You know, he was interested, I was interested, okay, let’s do this, you know, and, and, and, yeah, so, you know, at a point, so this was right around before the holidays in the end of December, when I was going to Mexico for a few weeks. And, and this was kind of like, right before things kind of got serious, because we were waiting for the 2021 numbers to come in to kind of officially proceed with some of the next steps. And anyway, I remember, you know, we had a call scheduled, like our last call before, you know, I left for a couple of weeks, and we were kind of, you know, taking a little break was around evaluation. And, you know, Chris, I mean, and I wanted to make sure that we were in agreement, or at least, you know, ballpark in terms of what, you know, they were going to be agreeable to and in a couple things, just a kind of side note with this whole process. So, you know, because SellerPlex, had been doing due diligence projects, you know, we were a competitor. And so, because of that the weight, like, you know, Chris would only share X, like there was a tiered access to certain information, you know, they weren’t just going to open the whole kimono at first, you know, until, you know, yeah, there were different stages, that until we knew the deal was gonna get, you know, eventually get done. But yeah, the first, you know, next Domino was alright, like, are we? Do we see eye to eye on the valuation? And so, you know, this was on me, it’s like, alright, well, like, how do I value this? And so, so my thinking, and what we did is, you know, I mean, been around the space and pretty aware of what, you know, standard multiples are for, you know, business type and size, et cetera. And what, so what I had access to when I was looking at, you know, I had their financials. And, you know, the number that was shared with me was on the the p&l was was owners benefit. And so owners benefit, you know, that like, Ste,
Joe Valley 23:00
it’s St. Yeah, we used to call it owner owners benefit, it’s easier to say owners benefit, because people understand what it what it is for its sellers, discretionary earnings.
Nate Ginsburg 23:09
Right. So for those that don’t know, basically, it’s the profit of the business, which includes any compensation for the owners. And so and so, you know, one thing that, well, ultimately, it affected the multiple but and a part of this whole transaction was that, you know, so Brian, who was a co owner in Central America, was also a key part in, you know, Project Manager account manager in the delivery of the service. And so, you know, that was important for a few things in terms of, you know, what multiple, the business, you know, I think, was appropriate, because of, you know, key person risk, or it just not coming with, you know, an operating team
Joe Valley 23:53
did you Did, did Brian transfer with a business or is he out to? So,
Nate Ginsburg 23:59
Brian, I mean, so basically, you know, have transitioned from like, you know, day to day to more, you know, advisory and, you know, supporting a team. So, but, so building Brian out of being the main, you know, part of the deliverable, like, was part of the I mean, is slash was, you know, part of this transaction, right. And so, and so, so, anyway, we had this owner benefit number you know, and aware of what kind of multiple roughly different sized businesses get as well as you know, the important point around you know, Brian being like a key part of the deliverables. And so basically, the way I came to the valuation is I took the owner benefit, subtracted an amount that I felt comfortable that it would cost me to basically, you know, replace Brian Right or replace Brian slash Chris, but you know, to, you know, bring in my own, you know, deliverable which So in Part of why this whole thing made sense is because like, I have a lot of pieces from the Seller Plex due diligence side that I’m able to plug in still things that need to be, you know, filled, but like, you know, I wasn’t like rebuilding this from scratch. I mean, I haven’t needed to and didn’t have to, like, rebuild from scratch, but there were some, you know, key roles that I would need to fill. So, you know, we took the owner benefit deducted a, you know, deducted a, you know, an amount that I felt comfortable that I could, you know, you know, rebuild or replace exactly the operations. And then, you know, tacked on a multiple to that, and I don’t know, if I’m able to say exactly the multiple
Joe Valley 25:48
no need for that. No need for that. It is it did it. Did you first did you when you presented it, Chris, were you nervous, again, for rejection? Did he you know, I mean, well, one, the number,
Nate Ginsburg 26:00
so, so Chris, kind of so he mentioned kind of a ballpark number that they were thinking, you know, at a previous point, and, you know, in my evaluation came in, you know, right around in that in that ballpark that he said, and so, you know, and so really like, so basically, like, they were agreeable, I came up with a number that I mean, I won’t disclose the exact multiple, but I’ll say for a business of you know, that much ultimately, you know, the profit, multiple owner benefit minus, you know, whatever the cost to replace, it was, I mean, if the business came with an operating team, the multiple would have been higher. And so So, you know, and it was, I think it was a very fair, I mean, it was, you know, what, Chris, and Brian said they wanted also, when I did my calculations, it was consistent. I mean, that’s, that’s the
Joe Valley 26:50
definition of fair everybody was happy. Right? It’s, it’s, that’s the definition of fair. So Centurica is let’s just talk about what what Centurica does, because I think everybody that’s listening, whether you’re a buyer or seller needs to know buyer should be looking at the marketplace. Sellers, need to understand that buyers are probably going to hire century due diligence after the fact or at least I hope they are, which is a funny thing, because were representing the sell side. But I’ve I don’t think I’ve ever had a deal fall apart in due diligence. Because of a report from Central Africa. What buyers have determined is that you guys have pointed out some strengths and weaknesses of the business and places where there’s growth opportunities, because of some weaknesses that need to be plugged in fixed. So tell us what Centurica does.
Nate Ginsburg 27:44
Yeah, my pleasure. So Centurica is the, the leading premier by side due diligence service provider, some of this, people might know, but what that means is, is, you know, when people are buying a business. Usually after loi, they will hire a due diligence firm, such as Centurica, to come in and, you know, really check the business to make sure that what they think they’re buying, you know, or what they are buying is what they think they’re buying, which includes basically, there’s like three buckets of due diligence, we can say there’s financial, there’s operational, and there’s commercial. So on the financial side, we’re looking at, you know, verifying the p&l was in Centurica, we actually rebuild the p&l from scratch. You know, when e-commerce is, you know, redoing the cost of goods, which often can be discrepancies, and, you know, discrepancies aren’t always malicious. And often they’re not, it can be a lot of times as, you know, if you’re a seller, you know, a lot of them aren’t, you know, accounting whizzes or background and cost of goods is tricky. And so anyway, so on the financial side, we look at and verify, you know, what the numbers are in the business. operational side is, you know, digging more into, like, the business operations, you know, how’s it run, this also can be things depending on the business model, um, you know, kind of like, we’re, you know, potentially gray practices used that could come up at a later point, and whether that’s, you know, spammy SEO, or, you know, gray hat, you know, giveaways, et cetera. And then you’ve got the commercial side which is more like market analysis as a whole and looking at like, you know, product trends and market trends and you know, total addressable market and market share and, and that’s kind of like, Yeah, more kind of like yeah, like, like higher level like I’m like the like the marketing or market analysis side. And so what may Accenture a different and what I’m really excited to build on is, is really the, the niche expertise and understanding of these online business assets. And so, you know, Centurica comes from a history of and I’m excited to build on, you know, we are online business operators, you know, we’re native to the online business space, you know, the majority of the types of, you know, diligence reports that we do are going to be FBA slash e-commerce, content sites, SaaS businesses, you know, there are some others as well. But you know, these are all ones like, you know, I’ve run you know, I’ve run my own FBA businesses, e-commerce sites, I’ve run my own, you know, content websites, I’ve got, you know, I haven’t run my own software, but like, very familiar with the business model, and have a ton of friends, you know, with this, and so, and so that’s really, I think, what makes insurance a unique is that like, niche expertise, when it comes to these specific business models, and where that really becomes valuable to our clients is, you know, when they’re hiring us to do the diligence, and again, we got to financial, operational, commercial, you know, because we understand the nuances of these models, we’re able to see things, especially on the operational and commercial side, that if you don’t have that, like intimate experience, you’re not going to understand and whether this is some gray hat practices that we just are aware of, because, you know, we’re in the space. And, you know, you’ve seen it, yeah, we’ve seen it and, and you know, that and the thing is, and some other trends that I think are interesting, and where some Centurica is really set up to provide a lot of value is, you know, I know, You’ve I’m sure have been experienced and noticing, you know, this trend of more like traditional finance, you know, low mid market, private equity, there’s all these, yeah, traditional finance and money that’s becoming interested in these online assets. And, you know, a lot of these types of buyers are, you know, look like, they’re very intelligent, they have a lot of money, you know, to spend, but really, what they’re lacking is like, the niche expertise with these businesses. And so, you know, we can look at even like a Thrasio as an example, and some of the challenges that they’re facing now. And, actually, so, Seller Plex was a very, very early vendor with working with Thrasio. And, you know, that story is for another time, but like, you know, we tell these are, they’re very smart, they had a big, you know, big plans, big ambitions, you know, have a ton of capital. But, you know, they didn’t come from, you know, they didn’t have that, like, really intimate understanding of like these businesses. And, you know,
Joe Valley 32:53
for the most part, I think people that unless it’s the second time, they’re jumping into this space, because they sold something like you did, and then you jump back in. A lot of folks are coming from the outside world, so they need your expertise. But one of the most important things, I think that, you know, a third party due diligence firm like yours provides is detached advice and decision making and analysis. You’re not emotionally tied to it, the seller might overlook things. Because they just want to get the deal done. They’ve worked so hard to get it to this point, and they just want to get it done. And you guys bring together, you know, more math and logic to that approach. So good. I just wanted to touch quickly on what Centurica does in case the audience hasn’t heard me talk about it 1000 times over the last five years. Let’s talk about how you pulled this off financially. You said banking and lenders did you end up going with an SBA loan?
Nate Ginsburg 33:49
Yep, as SBA. And, you know, so kicked off the process with Steven spears and e-commerce lending, who, I’m sure is also a friend of the show and inquire
Joe Valley 34:01
he’s a good guy. So he likes with and he likes whiskey, folks, if you all see him down in Florida, that’s his drink of choice.
Nate Ginsburg 34:09
All right. Well, I certainly if I see him would, you know, be happy to buy him a drink for you know, the first step in facilitating the financing part and so and so, yeah, well, it kind of afford that, you know, candidly, the, the valuation that, you know, Chris and I kind of napkin math agreed on. I didn’t have that, you know, available at least like, you know, liquid available for sure. And so, you know, knew I would need to you know, seek outside funding. And, and yeah, you know, I’d been quite familiar with the SBA process. I had friends, many friends that have successfully done SBA deals. And, and yeah, had a relationship with Steven and so that was kind of option one, to explore for financing. And, you know, reach out to Stephen, you know, at a number of conversations. I can’t pentagon, you know, preliminarily approved, which kind of got us into the next step of, of, you know, really trying to get approved and working with Bill on his team who was also great to work with. And so yeah, basically worked with them to get the package together to then for them to go, you know, pitch to, you know, the actual banks.
Joe Valley 35:21
And at what point in the first you had to agree with Chris on the price, and then you had to get personally approved for the SBA loan. But then at a certain level, Chris has got to share his tax returns with Steven to make sure that the business qualifies as well. What stage did you do that?
Nate Ginsburg 35:38
No, I don’t actually remember what was like between Chris and Stephen. But it? I mean, like that all would have been like, without like, there were things that Chris was sharing with, either Stephen are the bank that I wasn’t, you know, involved with at certain, you know, Chris and I both kind of had our like to dues and what we had to communicate on. And so
Joe Valley 36:04
let’s talk about the deal structure, then if you’re comfortable with it, just from an SBA standpoint, I’m going to say that it was probably 10%, down 90% paid over 10 years, they might have given you some working capital and money as well, interest rates, six and a half 7%. How far off Am I close? So
Nate Ginsburg 36:25
so and I’ll kind of preface that there were a couple of interesting things that we had to overcome in terms of getting together the financial package. And so one of them was Centurica grew a lot in the last three years. And, you know, while that’s exciting, that’s also like, potentially risk for the bank. And what I learned is there actually, there’s some different metrics, which I don’t know exactly, but like, between growth rate, and you know, cash flow, and this and like, there’s certain metrics based on the financials of the business that like, you know, can be bottlenecks. And so with with this, there was something that basically, because of the growth rate, and whatever this, you know, formula, SBA was only going to be able to come up with 70% of the business price. So
Joe Valley 37:21
this is something for every buyer to listen to, and every seller as well. Don’t expect, like with Stephen, what we used to get was a yes or a no, oftentimes, right, we’d send in the listing details and say, This is the list price, does it qualify for SBA loans? And it was often simple. No, until we got to know him and started saying, let’s not go with a no, let’s go with a yes, but yes, but you need to come up with 30% down, or yes, we’ve been in situations where it’s qualifies with 50%, down 50% Down is better than 100% down. So we buyers know that it’s not just always a yes or no, you got to be flexible in some cases.
Nate Ginsburg 38:04
Right. And this was somewhere that Chris really, you know, amazingly, kind of jumped in into this process where, you know, we kind of sent it over, and then the initial was like, oh, like, you know, we could have some challenges based on, you know, some of these things they were seeing, and then and then kind of, as this was, like, I wasn’t involved in this discussion, but Chris jumped in with, you know, Steven, or Bill and was like, alright, like, what do we got to do done it? And it turned out that, you know, the, you know, the, like, restriction was that SBA was only going to be able to come in for 70%, which meant that, you know, for me, well, you know, I was, I guess, like, the plan, or what we discussed was coming in for 20%. And then, you know, the way we filled that last 10 was, you know, seller financing. And so that was a little bit of like, Criss jumping in be like, alright, like, what’s the situation? How do we problem solve? And, you know, so that’s, that’s what we did. So yeah, those are the terms it was 20 down. 70 Bank and 10. Seller, excellent.
Joe Valley 39:11
The term of the loan from the bank and the seller note are generally incredibly favorable. I’m sure on the 80% it was probably 10 years, right?
Nate Ginsburg 39:21
Yep. Yeah. 10 years, I think it’s prime plus 275. So
Joe Valley 39:26
it fluctuates a little bit. And what what were the terms of the seller note with Chris, what did the bank require?
Nate Ginsburg 39:31
So this is they had some interesting, I mean, the whole thing was, you know, the bank has a number of requirements for different things. And, and so, so a few on the seller note, I think it needs to match the same terms as the SBA loan and so 10 year same, you know, same rate straight
Joe Valley 39:49
straight, so there was no standby or balloon payment option. A,
Nate Ginsburg 39:54
it is, it is so there was two years, I guess, you know, so there’s
Joe Valley 40:00
Standard to a two year standard buy a two year standby folks means that Chris, the seller of the business has to wait two years before that seller note kicks in. And the reason why the bank does that the SBA does that is to protect their investment. So that Nate, you have as much cash available to learn the business and grow and pay that note back, right. They’re really making sure that they’re protecting their business. So they say to me to your standby, okay, to your standby five year payment and balloon payment at the end,
Nate Ginsburg 40:31
I, I’m not sure it might be 10 year, I don’t know, I’d have to
Joe Valley 40:36
I’ve done it. I’ve done a few of these. So what they probably did is they they do it 10 year amortization, they do your standby. And then they amortize that loan over 10 years. So the payment is lower. But then there’s a balloon payment in five years. And in five years. You would go back to the SBA to get the balance to pay Chris off. Maybe that’s not the case. But it’s often the case of deals that I see with Stephen. Anyway, it’s, it’s an amazing way to buy a business like this. So now that you have that, you know, what your required revenue is and whatnot? What how are you going to change it? You’re not going to fix things that are not broken? I’m sure. But are you going to enhance the service? What are your plans for the business?
Nate Ginsburg 41:26
Ah, thank you. Yeah. And this was like, you know, it’s funny, I kind of, you know, was like, had to sell so many people on, you know, why am I the right fit for this business? And what’s my, you know, conversation with tons of people at the bank, I spoke to, like, you know, probably like four or five different ones on, you know, why am I you know, first you know, Steven and Bill and then the bank and, anyway, so, um, but yeah, I mean, I really believe that, for a combination of reasons, like I’m, you know, really like the right steward to, you know, take some Centurica into this next phase of its of its existence. And, and so, you know, some of the things that I’m really excited to, you know, bring this in Centurica. You know, one is, again, back to saying, My, it’s a core competency around recruiting remote teams, scaling capacity, you know, that has been a constraint for Centurica, over the years, in terms of capacity, and, you know, having to turn down deals or not being able to turn things around as quickly because of capacity. And so that’s one thing I’m excited to resolve. The next is, again, kind of building on my just like strength, as you know, in recruiting and remote teams, you know, excited to so this intercom reports are great, you know, I think it’s the industry standard, you know, tons of repeat buyers, that being said, there’s a lot of opportunity to, you know, go deeper into certain areas, and, you know, and really like, you know, by getting the right, additional, you know, analysts or, you know, whatever type of business expertise on our side, you know, that’s going to allow us to, you know, make the reports even more valuable, and in tailor even more towards whatever our clients need. And so, you know, as I’ve been stepping into some Czerka, you know, I’ve been becoming more aware of, you know, things that, like Centurica could does really, really well, and that I’m happy to, you know, jump into and take over. And so, for example, you know, St George has got a very, you know, specked out kind of core delivery, and that it’s really been, you know, like, that’s kind of been the main the main delivery, there’s, there’s a certain scope for it, and look, people are happy. But But yeah, I think, you know, what I bring in with the team that I’m, you know, bringing in and building is more dynamic towards what our clients need. And so, you know, one example even is actually think we’re talking to someone that Quiet Light about doing some, like quality of earnings, you know, in addition to the standard scope, and this seems to be, you know, a need for, you know, on the bigger deals, especially, you know, there’s a need to do, you know, quality of earnings. And, and that’s something that like, you know, I’ve got a great finance department and finance lead, and, you know, we are excited to be able to expand now in those areas, because of, you know, the the existing team that we have as well as, like, my confidence and ability to just get the right person that we need in order to, you know, solve whatever the challenge is. And so, that that gives us the opportunity to really, you know, expand expand the depth, we’ll go deeper into certain areas of the reports expand into new areas, whether it’s You know, quality of earnings, you know, more like in depth like commercial diligence analysis for, you know, whatever business model as well as you know, like I said with SellerPlex, we have a lot of especially ecommerce, you know, like, we have a big supply chain department and so the depth of analysis that we can provide when it comes to, you know, supply chain, which, you know, these days, obviously, you know, pretty pretty hot topics, you know, this all becomes additional value that we can bring to the reports bring to our clients that yeah, that I’m excited to, you know, excited to, you know, be able to bring and keep, you know, building on the amazing foundations that Centurica has,
Joe Valley 45:44
man, you you stepped into what I think is, you know, the gold standard when it comes to due diligence in the online space, and I have no doubt that you’re going to take it to the next level. It’s a great team, they’re bright, Brian’s been great. Tried to connect with him a couple of years ago, we’re going to have lunch in the areas as he was going up to the mountains, and then I think pandemic hits, so we couldn’t pull it off. And I see Chris occasionally at at rhodium weekend, for folks that are not familiar with rhodium weekend, just go to rhodium weekend.com. It’s an amazing group of entrepreneurs that are not just physical product, e-commerce, or Amazon business owners with a lot of content, a lot of service a lot of sass in that group. And people like Chuck Mullins who’s on the Quiet Light team that’s, you know, been an entrepreneur since he was in college and Chuck’s in his 40s Now, and in college, he made more money as a student than most people making in 10 years. So really, really sharp people over at St. sherek. I mean, that’s at rhodium weekend, and of course, at Central America as well. Alright, so now that you’re a due diligence expert, I knew you were before we celebrate flex, we were starting to get word of what you were doing there. What are sort of the top things that a buyer should keep an eye out? What are the red flags when they’re just looking at listings to start with? Whether it’s a quiet whitelisting Fe International website closers or direct with an entrepreneur that selling directly to to a buyer? What What, what, what are the red flags that you would say you always keep an eye on for this? Yeah, I mean,
Nate Ginsburg 47:24
well, I’d say like, the biggest red flag, I said, you know, which is the easiest, like, you know, yes, no, in terms of making a decision is going to be around the financials. And so, this one is a little bit, you know, in one because I know, like, Quiet Light, for example, you guys work with the sellers to, you know, help them make sure that like, the financials aren’t bogus, at least, but But yeah, but I think like, you know, and it’s, I don’t know, if you if this is that apparent, you know, in the sim, or, you know, in any of the marketing materials, they would see, but just like, if you can detect any intention to, like, intentionally deceive, is, you know, runaway. And, you know, you might not be able to see that beforehand, until you’re, you know, really kind of having conversations, but you know, and look, there’s one thing, where, you know, none of us are perfect, we can really do our best on and a lot of sellers, you know, they they, you know, they try and they do their best on the financials. But for all the reasons they’re not, you know, up to the standard that, you know, really a buyer needs to see and there could be some mistakes and look like that happens that isn’t that isn’t necessarily a red flag where it becomes a red.
Joe Valley 48:44
Let me give you an example of where it happens just so that people get an actual live example. When I sold. Mike Jack, this is business color it we’ve done. He’s been on my podcast we’ve been on he has talked about it dozens of times. Centurica did the due diligence, and prior to kicking off due diligence, he sent it out to Brian, man, this is gonna be a breeze, my books are in perfect shape. Right? It’s the it’s the worst thing to say. Because it turns out that it wasn’t malice. It wasn’t intentional. It wasn’t fraud, it wasn’t anything. It’s just that the person that he hired to, you know, import the p&l and get them all in QuickBooks didn’t properly convert foreign currency. And it was caught by due diligence. And so, you know, it was about a $5,000 difference. The business sold somewhere in the three to four time range. And so it was caught Mike was embarrassed and frustrated. The owner, the buyer guy named Matt was like, dude, everybody makes mistakes. It’s okay. Let’s go with math and logic and 3.53 times that $5,000 In the price could be adjusted simply and mathematically like that. Now, in this case, the best is growing like crazy. And Mike is a very likable guy. He’s very trustworthy and honest, as is the buyer of the business. And when you have that, little mistakes like that they whatever, you know, it’s the business has grown 50% since we went under letter written, I’m not gonna worry about it, and move forward things like that. Well, right, perfect example. And again, with a lot of the discrepancies that will happen in the In the financials, I mean, especially on the e-commerce side, like, you know, cost of goods is it’s tricky, you know, it’s tricky to calculate, you know, our team has like, very intimate experience with cost of goods and supply chain and how all the pieces fit together. So, you know, we can confident like, we were confident that we, you know, we know how to put that together. But yeah, a lot of a lot of accountants and bookkeepers don’t. And so it’s not, you know, again, it’s like, not not malice. But yeah, there’s a lot of moving. I mean, you’ve got, you’ve got duty, you’ve got freight, you’ve got cogs that change from exactly quarter to quarter things of that nature, one of the, you know that that’s something that is hard to discover and find, I mean, I guess, when you’re looking at a p&l, folks, all you’ve got to do is take the cogs by month divided by the revenue by month, and if it’s going up and down, like crazy, they’ve done it on a cash basis, instead of accrual. I was talking to a gentleman from a Vasque group ask a, counting yesterday and talked about cogs in calculating and wanting inbound freight to be on an accrual basis. And it’s a really, really hard thing to do. And so that seems to be on a cash basis in most situations. But you can sort of extrapolate it out and flipped it to accrual. The number one flag for me would be that a seller only provides financials in a PDF. Number one, forget about it, I can’t do anything with that. Number two, don’t give me quarterly don’t give me semi annual or annual numbers. This is the online world things change from month to month, we need to see a monthly view of the p&l is going back as far as possible. And as far as possible, it’s not just because you started using QuickBooks 12 months ago, but the business is five years old. You gotta go back, you gotta go further. To do what, to instill confidence in the buyer. First of all, they’ve got to believe in you and the seller and trust in the numbers that you’re putting together. So I love the fact that you said the numbers first. Because that’s the first thing that people look at, they look at the multiple, which is numbers, right? It’s a multiple of owners benefit or discretionary earnings. And then they’re going to dig into the workload of the business, then we’re gonna look at risk growth, transfer data, the documentation, all those key things that you looked at when you were buying Centurica? What’s the risk? Man, this thing’s grown crazy over the last three years, it’s going to continue by paying for that, but it’s going to go down transferability Brian Denninger writes that he presses last name, key key key, yeah, key player in the business? How do you handle that you work through that the growth trends going up, or going down, obviously, still growing. And you with your experience, and your relationships with lots of different buyers and sellers of aggregators, and private equity firms and companies like Quiet Light, you’re going to be able to grow it, I have no doubt. But all of those things come into play. None of them were red flags, except the financials. That’s really obvious.
Nate Ginsburg 53:33
Yeah, well, well, I think I mean, you know, the finance, you know, you gotta, you know, you need to know that the valid, like, however, the valuation was, you know, however the valuation was, was came to you, you need to, you know, be 100% Confident in those inputs that led to the output of what you’re paying. And so, so, yeah, that’s why I mean, you know, I think the, that’s the well, is a red flag, if it’s not, well, you know, you need them. And, and yeah, and just like, you know, other things is, is, and this is where it gets, you know, a little more like later in the process, but just, you know, being aware of some different tactics that the business, you know, has used or does use. And look, I’m not saying that, that necessarily is a red flag, maybe you’re comfortable with that. And, you know, there’s a lot of tactics that a lot of people use for a lot of businesses that might be gray, but are also fairly common and look like it’s as a due diligence provider, it’s not, it’s not our position to say like, don’t do, you know, this is, you know, bad, you shouldn’t do the deal. were more like, you know, an independent, objective observer and we can just say, like, look, you know, these are some things that we found, you know, here it is And, you know, whatever you want to do with that information you can do it’s like we’re not, you know, our position isn’t to tell them like, yes, do the Deal or No, don’t do the deal. Our job is just to, you know, dig into all the areas that we discuss, you know, and report the findings so that the buyer can make the, you know, an educated decision. Exactly, exactly. It’s
Joe Valley 55:24
funny, we, we do the same thing, they, but we’re on the sell side, we don’t sell anything to anyone, we present facts about the business and let the investor make the decision. And then you and, you know, present facts about the business, in due diligence, and let them you know, decide whether they’ve made a good decision and want to move forward or a bad one, and I’m going to pull the plug, yeah, and
Nate Ginsburg 55:48
somebody else on that have where, you know, I know that like, you know, it’s kind of a well, potentially a fine line or something that was in Centurica, we certainly don’t want to, like, you know, our place in the ecosystem, you know, we have a great relationship with, you know, brokers such as Quiet Light, and, you know, our job, you know, we want to, you know, we, you know, dig into the areas, we’re going to report what we find, but like, we’re not there to, you know, ultimately, we want the deals to get done, just like everyone does, and like, you know, we are not there to make things unnecessarily hard for anyone, it’s like, look, there is a, you know, a standard, you know, scope that, you know, as a buyer you’re gonna want to look into, and then, you know, it’s your decision, it’s like, not our place to come in, and, you know, getting into like, you know, retreating things or this or that. I mean, you know, buyer wants to do that
Joe Valley 56:45
the buyer and the seller should do that, or the advisor in between. Yeah,
Nate Ginsburg 56:48
right. But that is something that I mean, I’m aware of, you know, some Yeah, like, it’s, uh, you know, like some due diligence, you know, providers, it’s easy to sort of cross some lines, potentially, when you’re in that spot. And like, that’s something that, you know, really try to stay as objective, you know, look, I think you’ve found,
Joe Valley 57:10
I think you stay out of it, I think I think what you’re talking about is exactly represent the facts and let them make their decision. Just like I don’t, I don’t ever want to see a CPA, doing due diligence on an e-commerce business that somebody’s buying. It’s a terrible idea. They don’t know anything about online businesses. You know, they’re just maybe going to understand the numbers, but probably not even then I think you guys are so so well suited for this. And I’m excited that you’re at the helm. You know, I think Chris, Chris, and Brian did an amazing job with it did a great job building the brand and reputation of it and it’s great to see it go into the next good hands. To take it to the next level. Chris and Brian took it as far as they wanted to as far as they could. And now you’re excited. Fresh, fresh idea. Fresh blood. Fresh, additional services. I’m real happy for you. I’m real excited about it. We’re running out of time here a little bit nit Nate, how to how do people find you? How do they find Centurica? how to spell it? Where should they go? Yeah, all that stuff.
Nate Ginsburg 58:11
So anyone interested in any of our services, so centurica.com c e n t u r i c a.com. Feel free to you know, if you want to reach out to me, Nate@Centurica, or at Nate Ginsburg, all the social. And yeah, you know, really we want, you know, we slash I, like, I’m a big believer that like, you know, we are here to be of service. You know, creating value for others is how we receive value for ourselves. And so yeah, like, I want to be at the center of your team, you know, first and foremost, we want to be of service, we want to be helpful. And if there’s things that you think we can help with, you know, please reach out, you can contact us, you know, on the website, send me an email. And yeah, now that I’ve taken over the business, I’m just excited to connect even more with everyone you know, in the ecosystem. And so, you know, if that’s you, and you’re interested in connecting, you know, please reach out and excited to, you know, be in this space for, you know, the long term to come and, you know, keep growing alongside awesome other companies such as such as quiet light. So, Joe, thanks for having me on. Super fun to chat. And, you know, just we’ll have to link up in person here. Hopefully sooner rather than later. Yeah,
Joe Valley 59:33
my pleasure. My pleasure. I’m excited for you. Congratulations. It’s great success story. And, and I like it so much, because you’re going to help so many people, right? You’re not just selling more socks, you’re going to be helping entrepreneurs, exit businesses protect their businesses when they’re buying and it’s all about their families as well. So congratulations, Nate, thanks for coming on the podcast. We’ll catch up with you soon. Okay.
Nate Ginsburg 59:56
Thanks for having me. Sounds good.
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