It’s Getting Real…

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I know, I know, we said “quarterly updates”…please forgive us. The good news is that we’ve got plenty of updates and learnings to share! (And if you’re new to this newsletter, welcome! You can read our past posts here).


  • We’ve been busy getting into the swing of things and honing the “middle of the funnel”
  • We’ve learned some lessons delivering two of the three LOIs we’ve written this year
  • We’ve got our first deal under LOI! Email us if you want to learn more. Would also love any feedback you have on this teaser we put together for banks
  • We’ve been roadtripping and crashing industry events as we build our name in the space


Since our last note to you, we’ve been working to hone our funnel, aiming to boost conversion in the middle of the pipeline.

[J: Exclusive footage of O’s every-morning conversation in the mirror:]

harder better faster stronger

So today we’d like to talk about:

  • Why IOIs are important to us
  • What we learned from our first two LOI issuances
  • Where the learning has gotten us to today — on the cusp of not one, not two, but three platforms under LOI. One of them is currently under LOI now!

But before we get there…how has our search been going?

The search in numbers (since launch of the fund):

  • Emails sent (1st in campaign): 1,882 (a 32% reply rate)
  • Calls/meetings with CEOs: 72
  • Calls/meetings with stakeholders: 29
  • NDAs signed: 24
  • IOIs issued: 6
  • LOIs issued: 3

Our email campaign



  • We’ve probably found most of the management companies in our initial core geographies — FL, NC/SC. One benefit of our focused strategy is that we have the time to “frack the list” and get more responses from folks we’ve emailed before. This will include things like “we’re in town — let’s meet!” emails (we’ve had good response to this so far) and creating industry-specific blog content that we can deliver via drip campaigns
  • The 32% reply rate has gone up or down, depending on the month (for example, the summer months had a slightly lower response rate). Maybe it’s seasonal?
  • 600 email replies converted to ~40 NDAs sent (of which 24 signed), illustrating how many owners either have subscale businesses, operate in non-core geographies or aren’t looking to sell (yet)

The importance of IOIs

We’ve found that there are two different schools of thought on including formal IOIs in a process. If they are just like LOIs in that they are both non-binding documents that discuss valuation, why not just encourage the seller to sign an LOI and get the benefit of exclusivity?

We get that. But we’ve found there is a lot of information that comes from getting a seller’s reaction to an offer early — particularly if there is more than one owner. And we see a few other perks:

  • Allows us to frame the IOI as a “discussion starter.” We try to get a number in front of a seller as soon as we can, usually after two calls. No one usually feels they know a person after 60 minutes of conversation, let alone feels comfortable enough to seriously contemplate selling their life’s work. So, as a “discussion starter,” the IOI opens the conversation in a more approachable way. Owners also appreciate that we aren’t immediately asking for exclusivity after two “dates” 😉
  • Our IOIs are written without the legalese, which allows the owner to see — in plain English — what we’re offering. When owners receive LOIs, with all of their bells and whistles, they understandably feel the need to get lawyers to review it. This not only drags out the response time, but can result in owners turning defensive as their lawyers work to justify their hourly rate
  • It’s an opportunity to educate on the process. We try to clearly outline next steps in our IOIs. For owners, this is usually the first time they have seriously entertained a sale and don’t have an idea what happens each step of the way

Project Honeybaked and the one-size-does-not-fit-all pitch

“This is a story, all about how
Our deal got twist-turned upside down
And I’d like to take a minute, just sit right there
I’ll tell you how we missed out on Honeybaked by a hair
(…well, not quite)

On the cover of it, Project Honeybaked was everything we were looking for: a $1M platform in the Carolinas. Retiring owner looking to move on to greener pastures. The only hitch was that this was a brokered process — which is a rarity — so we didn’t have full access to speak with the owner as much as we’d like.

We went on the charm offensive — got to know him and his wife, sent a gift to commemorate their upcoming wedding anniversary, read his wife’s book, and delivered a hand-written note along with our LOI. By the end of it, we’d made it among the 3 “finalist” buyers and the owner’s wife admitted that she really liked us and wanted to work with us.

… but ultimately, it didn’t work out. The owner chose an out-of-town strategic buyer. And not even because of price (trust us, we confirmed that we were price competitive!)

It turns out that the owner wanted to work with someone he felt was “experienced” and wanted his management team to run the office after he left. Understanding this, we can see how our pitch (“we want to take the business over and run it ourselves! We’d love you to teach us”) didn’t necessarily resonate.

The worst part is that we think we could have been an ideal solution for him — we just needed to tweak our story to align with what he wanted. The broker told us that our pitch would resonate, and we ran with it. We could have benefitted from asking more deeply about the owner’s wants/desires so that we could…repeat them back to him. Truth is, we would have been delighted to have his management team run the office, particularly given our goal to grow to a $20M EBITDA business in the next decade.

The experience angle is a bit tougher. We think we have the career experience and management training to lead an organization–and after a year of speaking with over 100 owners around the nation, even some pretty deep industry knowledge. So maybe we should’ve found more opportunities to brag a little (something we usually avoid). Either way, we feel like we re-learned our Sales 101 lesson the hard way: you can’t make the right pitch until you’ve asked the right questions!

Project Dolphin and the “joys” of negotiating with partners

In our EtA class, we were warned about the perils of dealing with two owners. And in this industry — where “right brained” customer service / people management has to be married with “left brained” finance and accounting know-how — you often find partnerships of owners who spike in either direction. Project Dolphin was one of these situations, with one owner a former accountant, and another a property manager.

Dolphin is a Florida-based management company that we’ve been working with since the launch of our search. After months of back-and-forth negotiating with the Accountant partner (cinematic foreshadowing), we finally had an LOI to sign. We get the “yes” from the Accountant…but get a “no” from the Manager partner hours later. We do not have a deal.

To try and keep the deal alive, we offered to go meet in person for one last attempt. They invite us down, which we take to mean that a deal could be done. Buckle Up! Off we fly (back) to Florida.

Let’s paint a picture of the evening: the swankiest Ruth’s Chris on this side of the Mississippi, the din of evening chatter, tables intentionally placed in the corners of the restaurant’s many private rooms to bring a clandestine aesthetic to each party’s dining experience.

Jalen, Orlando, and Dolphin’s two partners sit and dine, joking and laughing the entire evening. Steak and wine aplenty. Once the dessert plates are set, business discussions begin. The Accountant begins by acknowledging how great our relationship has been over the past six months, while the Manager sits in silence. The Manager looks alarmed, almost unprepared. And when she begins to speak…it’s clear that it’s a “no.” Again.


No negotiation. No terms to discuss. Just…no. We were perplexed: if the answer was no, why did the Manager accept our offer to fly down and iron something out? The Manager departs as dinner has wrapped, leaving us and the Accountant at the table, a bit stunned. Interestingly, it turns out this was a surprise to the Accountant as well!

Suffice it to say that we learned a lot through that experience. In particular:

  • Build a direct dialogue with both partners. After dinner, it became clear that the Accountant had been urging the Manager along…possibly too much so
  • Use conversation materials — like an IOI — to gauge each owner’s reactions early on. One may balk at the structure while another balks at the ownership terms. In this instance, the Manager wanted equity and to work in the business much longer, which we weren’t initially aware of
  • Some people’s preferences don’t come to light until they have to sign on the dotted line

The bright side is that after all our time together, both owners have said they’d like to work with us, just a little farther down the line. And thanks to our focused and long-term strategy, we’ll still be buyers in a year or two! Who’s to say if we will get to buy their business, but as our “first” in many ways (first LOI negotiation, first on-site visit, etc.), we have learned a lot from this deal and will remember it fondly…ish.

Where we are today

Fortunately, these experiences (and many more) have helped us get better in shaping the middle of our funnel. We’re developing a better sense of identifying if a seller is truly ready and how to structure our offers to meet their needs. We’ll write more on what goes into our IOI and LOI in a future note (if we can actually stick to quarterly!)

And, we’re happy to report, we’ve signed our first deal under LOI! It’s a Chicago-based management company. And we also think we may have 1-2 additional platform-sized deals under LOI by year end. Things are getting real!

Hit us up if you want to dig into this further!

Other Ellery updates

We’ve been trying to keep busy! Over the past 6 months, we:

  • Took our show on the road to a few states across the country: Florida (2x), Georgia, DMV-area (DC, Maryland, Virginia), and Illinois!
  • While we didn’t win Honeybaked, we left a strong impression with the broker, and have been invited to other processes
  • We attended two conferences managed by our industry’s association, CAI, including one we “crashed” (because we aren’t yet CEOs, we didn’t qualify to attend…but we DID qualify to hang out in the hotel lobby! That lobby turned out to be our highest-density owner conversation source by far.)

As always, for the two of you who made it this far in the email (hi moms!), thanks for being a part of our journey!