Royce Yudkoff:

Welcome to Think Big, Buy Small, a podcast from Harvard Business School about entrepreneurship through acquisition. We’re your hosts, Royce Yudkoff…

Rick Ruback:

…and Rick Ruback.

Royce Yudkoff:

Rick and I are here today with Paige Sopcic. Paige is a former searcher who used an incubator as her foundation for launching her search, and Rick and I are going to ask her lots of questions about that sourcing and search path. She bought a fascinating company, which she grew explosively and has sold, and so we're going to hear a lot about that business and that journey from Paige.

Rick Ruback:

Paige, it's great to have you on. We were so lucky to have you in class for a full year, and you've been back so many times to share your wisdom with our class. This is just a wonderful extension of that.

Paige Sopcic:

First, I'm happy to be here. I'm a fan of the pod, so thank you for having me on.

Rick Ruback:

I know you were born at a very early age, but where did you grow up?

Paige Sopcic:

I grew up in northern Illinois, which I would describe as a suburb of a suburb of Chicago. It was a big day when the first McDonald's came to our town, which I remember as a child.

Rick Ruback:

So, kind of a rural upbringing?

Paige Sopcic:

Incredibly rural.

Royce Yudkoff:

Your parents weren't farmers, or were they, Paige?

Paige Sopcic:

No, they weren't but both grandparents’ sides were farmers. But no, blue collar. My dad worked in HVAC. If only I had known then that I should have started rolling those up in high school, I maybe would have. And then my mom was the first of her five siblings to go to college but, you know, not necessarily people focused on their careers, necessarily.

Rick Ruback:

Yeah.

Royce Yudkoff:

And what sort of led you out of the community, and where did you go to college?

Paige Sopcic:

So, I went to the University of Illinois in Champaign-Urbana, so I traded more corn for more corn, and I studied chemical engineering.

Rick Ruback:

So, you went to school for real stuff. You got all those equations and periodic tables and all those things.

Paige Sopcic:

Yes, all those things. I was good at math. I liked science. It felt like the right path for me then. And I liked the idea of being an engineer, working with my hands. You know, I didn't know a lot of engineers, so it felt like a really ambitious career path at the time.

Rick Ruback:

And were you intimidated by the fact that many engineers are men or was that just one more challenge?

Paige Sopcic:

It felt unique to be in the room as a female. I'll say, chemical engineering was a little bit more weighted female to male than perhaps mechanical or aerospace was, but no, I think it added to the challenge.

Rick Ruback:

That's great. So, you're an engineer, and then did you get an engineering job?

Paige Sopcic:

I did. So, right out of college, I went to work for General Electric, which went through multiple name changes but was essentially GE Energy. I remember distinctly at the time thinking, you know, "I'm going to go solve the problem of my generation, which is energy”, and how motivating that felt. And then, on the reverse, how quickly that faded away into, "Well, you're just working on a part in a system and you're a cog of…” – you know, at the time, I think GE had 300,000 employees. So, while I was in energy, which is the industry I really was excited about, thought was so important…

Rick Ruback:

And working as a chemical engineer.

Paige Sopcic:

Yeah, working as an engineer, had a hard hat, had steel-toed shoes, working, you know, on equipment that went into power plants so, you know, big, fun kind of equipment and projects.

Rick Ruback:

So, you're living what you thought was your dream.

Paige Sopcic:

I was living what I thought was my dream, at the time. It was amazing. For the first few years, I was a spoiled engineer. GE had phenomenal investments in their young engineering team. I got to do four rotations in four different business units, but pretty quickly was looking ahead and being asked the question, "Where do you see yourself in five years in this company?" And I remember looking around saying, "There is no job here that I see myself doing in five years…"

Rick Ruback:

Because you looked at your bosses and you didn't like their jobs.

Paige Sopcic:

Right. It looked a lot like middle management in a cubicle farm, unless you were at the very, very top. And the middle management did not look really exciting to me, at the time. By the end, I was doing a little bit more of project management but, yeah, for the most part, you know, we were a really, really small part at the very bottom of the food chain.

Rick Ruback:

All right. So, you do that for how many years?

Paige Sopcic:

I was at GE for about six years.

Rick Ruback:

Okay, and then you stumble into our class a year after going to the Harvard Business School, so you decide you want to leave engineering for business, I guess?

Paige Sopcic:

Yeah, I felt like I was getting too niche in what I was doing in engineering, and I wanted to be a lot more broad. And when I was looking around at the time, I had two options: it was Harvard Business School or I had a job offer from SpaceX, and it was going to go even deeper into the engineering abyss, and so, you know, ultimately went with Harvard Business School.

Rick Ruback:

Both career paths would've been sort of interesting, right? This one probably worked out a little bit better, financially. We'll get to all of that. So, you stumble into our class and you fall in love with the idea of small business?

Paige Sopcic:

So, it was even before your classrooms. In our first year, Jim Sharp was a guest in one of the classes, and it was the first and maybe only light bulb moment I had in my career, where he was describing having been an engineer, I think at GE as well, and buying a business. And he put to words all of the thoughts I’d had on what I was looking for that I just wasn't able to answer myself. And so, it was a light bulb moment on, you know, "This is what I want to do." And I looked like him in a lot of ways, from a career background, and so it felt like, "This is what I wanted, this idea of reward linked to effort." – so, then I took all of your classes the next year.

Royce Yudkoff:

So, there are numerous ways to finance a search. Tell us how you thought about your choices, and I think our audience would be helped along by understanding what an accelerator is and then why you chose them.

Paige Sopcic:

So, I started my search with Broadtree Partners, which was an accelerator, and ultimately, at the time, it felt like there were three options. It was self-funded, traditionally-funded, or accelerators. This is 2018, when I'm graduating, and I would say accelerators were relatively new in the search world. I eliminated self-funded pretty quickly, because I was coming out, you know, of business school with a significant amount of student debt. I didn't have a husband that I could, you know, live with, I didn't have family that I wanted to live with, so self-funded just did not seem achievable to me at the time. It was really a decision between traditional-funded and the accelerator. And for me, my background in engineering, I felt intimidated by the idea of doing a QofE for the first time, doing the deal process, what that looked like with lawyers, with accountants, with bankers, with investors – it was all going to be a first for me. I felt the accelerator de-risked some of that, that I was a little nervous about. So, I joined Broadtree and really liked the idea of having a cohort, being plugged into an engine of search that was already running.

Rick Ruback:

And how many people were in the cohort?

Paige Sopcic:

It was myself and five others who effectively started Day One together. We all learned a version of search and really how we were going to execute it in this vehicle. So, they had a CRM. They had a process to approach, you know, drip marketing. They had a process to find owners. They had templates for LOIs, the LBO. They had lawyers. They had firms that they used for QofE. There was a bit more of a structure that I really appreciated, as someone who had not seen a deal or really, you know, evaluated a business before on my own.

Rick Ruback:

And like funded search, did they pay you?

Paige Sopcic:

They paid us, yes. So, we had a salary that I would say was competitive.

Rick Ruback:

And health insurance and all that other stuff?

Paige Sopcic:

We had health insurance. And then, of course, they covered broken deal fees, they covered travel expenses, all of the expenses I was accruing during the search.

Rick Ruback:

So, that sounds wonderful. It sounds like you have a job and the job is just to search and they're going to take care of you in the same way an employer takes care of you. There's a benefits package, a system, you're fitting in.

Paige Sopcic:

Yes.

Royce Yudkoff:

Also, sort of psychologically, it sounds like it feels different from being a solitary searcher. You have a cohort you can sort of look to for reaffirmation or a sense of how you're moving, and then you have experienced people who are readily available and motivated to answer your questions.

Paige Sopcic:

Yeah, I would say there was definitely more of a camaraderie with my cohort, and there was a lot of momentum. I think having people doing it alongside you, that you were talking to every day, all day, on "Hey, what deals are you looking at? What lessons learned do you have?" We were doing that live, so we were having internal investment committees on deals we were looking at. If we had a deal bust from another cohort member, we would do the post-mortem on what went wrong. Could we have done this differently? And all of that was being shared, I’d say, really candidly across the team. And then I had a similar cohort of people from Broadtree that were also then CEOs at the same time as me, going through really similar challenges.

Rick Ruback:

Yeah, that sounds really helpful. And do they do all that for free?

Paige Sopcic:

They do not do it for free, no. So, they have common equity in your deal. So, instead of the terms that you would typically see in a traditional funded, you give up some of your equity as a searcher to the accelerator.

Rick Ruback:

At the time the search begins, you have a contract which says, "Instead of getting twenty or thirty, I'm going to get something less and I'm going to do it through you."

Paige Sopcic:

Yes, exactly.

Rick Ruback:

What happens if you find an opportunity that you really like but they don't because it doesn't fit their style? That must happen in the fullness of time. It didn't happen to you.

Paige Sopcic:

So, it didn't happen to me and luckily, when I was there, it was still a little bit of the Wild West. There was a certain amount of social capital you could expend on deals that maybe didn't fit the typical search fund mold. I would say, Broadtree, what they were looking for is what any search funder is looking for: recurring revenue. I will say, usually you would talk to a few investors and you would get investors’ pulse on that specific deal or that specific industry. And if there was appetite from the investor base, Broadtree was very supportive of people going after those deals. If you talked to a few investors and there was no appetite, that was a clear signal that this is probably not the right company or the right industry.

Rick Ruback:

Okay. So, you've sort of hinted at a difference here, which is that while you are searching under their tutelage, they're not raising capital for you.

Paige Sopcic:

Correct. It's a little different. They don't have a fund, necessarily, that they're sitting on – or they didn't at the time. They had LPs. When you had a deal, you pitch that deal to each of the LPs. And some said “yes”, some said “no”. For my company, I'd say about 50% of the equity was raised in that LP cohort and 50% was raised from external investors.

Rick Ruback:

So, you still have to go through the work.

Paige Sopcic:

Absolutely.

Royce Yudkoff:

It sounds like you have a head start on the fundraising because there are a set of LPs who became LPs, limited partners in Broadtree, expecting to see a flow of searcher deals, so they're kind of predisposed to buy.

Paige Sopcic:

Yes. They're predisposed and they know the terms. So, this is not their first deal. They understand Broadtree. And they've met you, probably at that point, a handful of times, well before an LOI.

Royce Yudkoff:

Okay. So, that's a big plus versus cold-calling on investors. And also, you know, if you get half of your funding raised from these investors, it makes it a lot easier to get other investors who will see the train filling up. There's some value in that aspect of the incubator, I'm inferring.

Paige Sopcic:

Yes.

Rick Ruback:

And what you give up, it's interesting – if you kind of drew a line, you'd have the incubator on one side. Then you'd have funded search, then you'd have unfunded search and, as you go down the line, what happens is you get more carry as an unfunded searcher, less carry as a funded searcher, less carry as an incubated searcher, and then much less carry if you're hired as the CEO. So, it's kind of a linear thing, I think.

Royce Yudkoff:

Yeah, and what's going on in return for that is sort of more and more support and structure and some removal of risks along the way, as you trade away a bit of carry.

Rick Ruback:

So, in 2025, you're seven years older than the Paige of 2018, and more experienced. Would you tell Paige of 2018 this was a good idea?

Paige Sopcic:

It's obviously a tricky thing because, looking back, it feels like a long time ago now, and I know a lot more now and I have a different skillset than I did then.

Rick Ruback:

Right.

Paige Sopcic:

So, if I was giving advice to a searcher who was really hesitant, and this would be the phrase I'd be listening for: "Right out of HBS, I don't think I'm ready to do a search. I'm going to do two years of consulting first." Or "Right out of HBS, I'm going to do two years of X, Y, Z and then I'm going to do a search." Usually, that's coming from somebody who doesn't feel like they have the skill set, and they do – it's just a perception. I think that person, which sounds a lot like me in 2018, it's better to do any path of search you can right away than to wait a few years doing something that isn't search and go back into it. I think there is so much momentum coming out of business school. Like, ride that wave. Don't wait a few years. So, I think for people who looked like me and have that risk or that fear, any version that gets you into searches is the right decision. That’s my take. I would say, for my own self, it felt like if I didn't do the accelerator, I think I would have done a few years somewhere else and then I maybe wouldn't have had the same energy or momentum to do a search at all.

Rick Ruback:

I think you said almost the exact same thing at the time, because I remember thinking, "Wow, this accelerator thing’s a little unusual." And I remember chatting and you said the same thing: "I can't afford to do it on my own. I don't really want to do a funded search. This really gives me that boost that I think I need." So, I think you've been consistent all the way through.

Royce Yudkoff:

How did you find your business? And tell us about your business.

Paige Sopcic:

So, it was a proprietary search. And I was doing a mix of geographic searches and industry-based searches. And so CanSource, which is the company I ended up closing on, it's based in Colorado and it was at the perfect crosshairs of a geography I was specifically interested in, and then, on one of these industry lists I was pursuing. So, found CanSource and ultimately closed on CanSource in December of 2019.

Rick Ruback:

That's a year and a half of searching?

Paige Sopcic:

Year and a half, yup.

Rick Ruback:

From start to close, which is really quick, because oftentimes people find it in a year, but then they go on a, you know, “forty years in the desert” to get the closing. So, that was really quick to get it all done. Well done. So, the accelerator accelerated.

Paige Sopcic:

The accelerator accelerated for me.

Rick Ruback:

What was your status at the time? You didn't have a family yet, but you had a partner by then?

Paige Sopcic:

Yes, I had a partner who I was living with in Savannah, Georgia and he was very aware I was looking really all across the nation and that, for me, you know, closing a deal meant almost certainly that we'd be moving to a new city.

Rick Ruback:

And he was okay with that?

Paige Sopcic:

He was, I think, willing to make the sacrifice for me to pursue this path, yes. He was really supportive of me. He didn't think it was crazy. You know, he believed in me, which was really helpful. He did not put a lot of constraints on where we could or couldn't move.

Royce Yudkoff:

That's great. So, tell us a little bit more about what the business does and also what you liked about it, when you started to learn about CanSource.

Paige Sopcic:

The name really gives it away. We sell cans to beverage producers across really North America. We work with about nine hundred brands and sell them, you know, decorated cans. So, we don't touch the liquid. Our finished goods are pallets of empty cans that are going to breweries or, you know, filling facilities across the US. What did I like about it? So, one, it had a lot of the financial metrics we were looking for. So, it was around $2 million in EBITDA with phenomenal growth over the past few years, and it had owners who wanted to sell, which at the time felt easier said than done. What really stood out was it was a growing market. Cans had a lot of tailwinds, for kind of obvious reasons, which were people were moving away from glass and plastic. Cans and aluminum – infinitely recyclable, convenient, you can take them everywhere. A great statistic we loved at the time, and still do, is for new beverage creation, seventy plus percent of new beverage starts in a can. So, there was phenomenal market tailwinds just on aluminum as a substrate, but it was also – you know, this is 2019 – we were starting to see new categories. Historically, the business had done a lot in beer. We are starting to see White Claw and Truly take off in this new seltzer category. Canned wine was just starting to become something you'd see on shelves, and you were starting to see a few examples of things like canned kombucha and coffee. So, for us it was a growing market that we had a lot of reasons to believe were going to continue growing. And then I’d say for me, personally, as just a fit, you know, my background was in engineering. I didn't have any experience in healthcare. I had no experience in SaaS companies. This felt like a company where an engineer who was good at supply chain and good at solving supply chain problems would have a natural fit.

Royce Yudkoff:

So, even though you had never been in the can business, there was kind of a big-picture assessment, "I could do what that CEO does. I could fill that job."

Paige Sopcic:

Yes. There is an assessment that I could fill that job, I think a belief in the market, and then, maybe, you know, underlining that was I was the target consumer for a lot of these new brands, so I understood the market and I was actively seeing this evolution on the shelves that made me believe in something maybe a little bit earlier than other people were.

Rick Ruback:

So, the customers are micro-breweries. I take it big breweries do their own can labeling and printing?

Paige Sopcic:

Yes. Big breweries go direct to our supplier. You know, this went against some traditional search scorecards, but we had basically one supplier. And that is because can manufacturing is almost a duopoly in North America. And so we had one supplier we buy our cans from and, if you're big enough, you're going directly to that supplier as well.

Royce Yudkoff:

So, you would buy the cans, you would put the label on, then you would pack them in pallets and send them on to the filler, whoever was going to fill them.

Paige Sopcic:

Yes, exactly. I would describe it as light assembly. We'd buy the label, we'd buy the can, we'd put the two together, and we'd send it to our customer. That has evolved a lot in the last, you know, five plus years, but that was our core and really only product offering when I came into the company.

Rick Ruback:

And so geography must be a huge barrier to entry here because empty cans must not weigh very much but they must take up a lot of space.

Paige Sopcic:

Yes. So, freight becomes a point of differentiation for our industry. When we bought the company, it was headquartered in Colorado, and it had a facility in Sonoma, California, one in Pennsylvania, and one in North Carolina. All facilities did almost exactly the same thing. They sleeved cans and they sent those pallets to customers in the geography that was nearby.

Rick Ruback:

Interesting.

Royce Yudkoff:

Paige, if you feel comfortable sharing this, what kind of multiple did you pay for this lovely $2 million EBITDA business?

Paige Sopcic:

So, it was closer to six and a half. When we bought the company, I think, from a top line point of view, it was growing 30% over the prior year. So, it was a high-growth company.

Royce Yudkoff:

So, this is a really interesting point, which is that many searchers buy small companies at value pricing. The companies are growing slowly, they have a long history of profitability, and they're buying them for four or five times EBITDA. You bought a company with a 30% annual growth rate, and you had to pay something for that.

Paige Sopcic:

Yes. It felt like a very fair multiple at the time when we came in.

Rick Ruback:

And are there recurring customers, in the sense that once a customer gets adapted to your can…?

Paige Sopcic:

That was one of the things that was really attractive. So, it's a consumable product. If you're buying beverage, you got to keep buying cans because that's how you're making money. So, we had a lot of, you know, reoccurring revenue, where customers would come back and order again and again and again throughout a year. You know, one customer might order once every month, another might order once a quarter. It looked different but, you know, at the time, a lot of revenue was coming from recurring customers. And on top of that, a lot of those customers were growing year over year. So, someone who maybe bought a million cans in 2020 came back and bought more the next year because their brand was growing, they were distributing in more states or more locations.

Royce Yudkoff:

So, Paige, if I were looking at this business, I agree with you – I'd be very attracted by the rate of growth, which seems to be supported by some industry trends that you've spoken about. I would be very attracted by the re-occurrence of these customers. I would have a question in my mind about how easy it is for customers to switch to another company that labels their cans. Tell Rick and me a little bit about that. Is it really easy for them to switch or there's some things that tend to make them sticky?

Paige Sopcic:

There's probably three things that make it sticky. One is we have their artwork. So, when we're printing the labels, you know, we use a specific label manufacturer. That color looks a certain way, that label looks a certain way. So, there is some, I’d say, stickiness to working with the same person who's been printing it over and over again. The other is the can itself. So, we work with one can manufacturer. All of our cans come from that manufacturer. Your product, whether it's a beer, a cider, coffee, it can actually interact with that can or your filling line can work with specific cans, specific dimensions. So, there is almost a product specification that works really well with working with one supplier, like us. And then the final is service. At the end of the day, a lot of the can industry can feel like a commodity so where we have to differentiate is service. That is things like logistical support; it's account management team, who's helping you when you have problems; it's kind of answering that SOS call and bending over backwards to help, you know, small entrepreneurial startup customers like ours in ways that big, more established brands simply can't.

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Rick Ruback:

Royce, Paige purchased what I guess we'd call light manufacturing. And so many of our students shy away from anything to do with manufacturing and focus almost exclusively on service businesses. Part of that's a little bit our fault, right? We’re looking for businesses which have low CapEx, high conversion from EBITDA to cash flow, and service businesses do that pretty well. You know, there might be trucks and tools, but basically what you earn becomes cash.

Royce Yudkoff:

Exactly, it's capital expenditure-light in those business services. The impression I got, Rick, is that there was some CapEx in this business. There are clearly machines, but it wasn't a hugely capital-intensive business. It's not like an auto manufacturing plant or something like that. They're basically wrapping cans and the cost of these machines compared to their EBITDA is not that huge.

Rick Ruback:

The thing I think is so intriguing about light manufacturing businesses is that they have so much operating leverage. It's just inherent in the business. And in Paige's experience, I think she had to make some CapEx to expand capacity, but mostly she was running at or near or maybe even above 100% capacity, as reasonably measured, right? So, the kinds of concerns with light manufacturing just didn't show up in her experience. I think what worries people is, “We have two factories and we scaled up and now demand is down and we're really stuck. How do we keep these plants running at the size we have?” I think that's the challenge.

Royce Yudkoff:

Yeah, that's the other piece that searchers worry over and why we also push people towards service businesses, is that most businesses that manufacture things, they get orders for some thing and, you know, when times are bad, a lot of those things stop being asked for. This business is not quite like that because it's consumer consumables. It's beer, it's soda, and so there's a regularity to it that's better than most manufacturing companies.

Rick Ruback:

What I think is true is they're inherently riskier than a similarly sized service business because of the potential for operating leverage and the need to run it at a relatively high capacity to have good profit margins. I mean, we always think about profit margin and operating leverage as, “Oh, if you can just increase sales, you're going to have a much bigger percent of that incremental dollar fall to the bottom line than your first few dollars.” That's the nice part. But the reverse is obviously true, that when you start losing orders it hurts a lot more than if you didn't have operating leverage. And the other thing I think about is that if so many of your costs are inherently fixed – fixed labor, fixed plant, fixed utilities – maybe your inputs have some variability but you have a complex supply chain to manage, then the business is just inherently riskier and you have to be able to run it at some reasonably high utilization rate to make things work. It's just a difference in risk between light manufacturing and service that I think is so different.

Royce Yudkoff:

Let’s return to our conversation.

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Rick Ruback:

So, you buy this in December of 2019, and life seems good. And then the spring happens. Well, is it Spring 2020, right? As I recall, something interesting happens then.

Paige Sopcic:

COVID! Yes, COVID happened, and it's so interesting looking back. Looking back, it was phenomenal for our business and our industry but incredibly stressful. A lot of the ethos you hear in search is, you know, “Buy the business, learn, ask questions, don't change anything for the first a hundred days.”

Rick Ruback:

Where would they get that advice? I wonder – but keep on going.

Paige Sopcic:

That was my plan coming in. And then, within three months, it was lockdown, sending all of our employees that we could home, and dealing with the general fear of our team and our, you know, our local communities. But if you picture a brewery, who used to sell 50% of their volume in packaging, like cans or glass, and 50% in a tap room, in draft or kegs, that half went to zero and a hundred percent of their product had to go into packaging. So, overnight we saw our demand, truly, it was a spike. And it stayed at elevated levels throughout COVID.

Rick Ruback:

I can't speak for other people, but I suspect there was a little bit more drinking during COVID as well.

Paige Sopcic:

A captive audience at home.

Rick Ruback:

A captive audience at home.

Paige Sopcic:

A lot of reason to want to have one extra drink in the evening. And it wasn't just alcohol. I mean, this was true across non-alcoholic categories like the Coke and Pepsis of the world. Everything that was sold at a grocery store was selling more than it ever had before. We really, really benefited from some of the trends, even though it felt very stressful from a supply chain side.

Rick Ruback:

Right. So, demand almost doubles. But you have a physical plant, right?

Paige Sopcic:

Yeah, so luckily we had some extra room, and this was something we had diligenced, which was, "Okay, you have how many plants, how much growth can we continue to see with the same footprint?" And at the time we bought the company, there was only really one shift at all of the facilities. Every now and then, in the summer, they would bring on a second shift of temporary workers but, you know, this was, again, in February / March, so we were at one shift. So, all of my time in the first few months was “focus on production” and “focus on supply chain”. How do we get more out of the existing people and equipment that we have today? So, that was adding people running second shifts. It was, I'd say, somewhat sophisticated modeling of our can supply on, “How much inventory are we bringing in each month?” And then, that means, “How much can we ship to our customers? And which customers?” And so, you know, our backlog went from maybe four-week lead times to sixteen-week lead times, and that was with us adding shifts at every single facility and, you know, trying to take an engineering lens and look at every hour of production. How can we do more? It was phenomenal for the top line and bottom line but, you know, it was a lot of stress on the organization and production teammates who, unlike the rest of the back office, they had to show up every single day during COVID.

Rick Ruback:

Now, I must say, the finance professor in me heard this description and I said, "Operating leverage, operating leverage, operating leverage. Margins are going to go through the roof." Did they?

Paige Sopcic:

They went through the roof.

Rick Ruback:

Wow.

Paige Sopcic:

Again, it was a beautiful thing for a first-time CEO to not have that be the worry. Sales were coming in. The stress in the organization really was the plant, the production, the supply chain. There was a cost in the medium term, coming out of COVID, which is that our company and our sales organization, we didn't have to do lead gen in the way that we do today. We got really good at answering the phone and delivering for customers, but we were taking orders. We were not building a pipeline. We were not building relationships. Looking back, I don't know how we would do it differently because our head was underwater just trying to get out of sixteen-week lead times. How do we motivate people to work on Saturdays and Sundays? All of our time was going there, and so when we came out of COVID, you know, there was a cost to things that we didn't invest in.

Rick Ruback:

But still, it must have been so joyful to be underwater and working so hard but making lots of money. We hear lots of stories about people whose businesses hit bumps in the road and they're working twenty-four-seven and they're underwater, but they're financially underwater as well. You were financially in a hot air balloon above the ocean, even though it felt like you were drinking out of a fire hose.

Paige Sopcic:

Yes, as a first time CEO, you know, it helped build some confidence. I didn't have to worry about breaking covenants. I wasn't having LPs call me when we sent out our quarterly letters because the numbers looked absolutely phenomenal. I wasn't checking the bank account to make sure we could make payroll. And, you know, we had the cash to make some investments in teammates, in hiring for new positions, and adding a new CRM tool.

Rick Ruback:

In some businesses that accelerated and grew substantially with COVID, they had a sad bump downwards after people went back to work and life returned to whatever is the new normal. Did that happen in your business or did cans stay?

Paige Sopcic:

We definitely had a COVID bump. We hit the peak and we came down the other side. The good news is where we landed on the other side of COVID was still meaningfully higher than where we came in. What we've done out of COVID, you know, we look a lot different now than we did then. So, part of it was, during COVID, the suppliers – including our can manufacturer – you know, they were really only supplying to people that they had contracts with, that looked like us. So, coming out of COVID, the manufacturers ramped up their capacity, and all of a sudden, they had more capacity and people weren't buying as much. One of the things that allowed us to do is add a new product to our menu. So, instead of just labeled cans, we started selling printed cans, so think of your typical Coca-Cola can. We started being a third-party distributor with Ball, our manufacturer, to go after some of these larger customers. As we saw sales go the other direction, we asked ourselves, "What else can we do?" And the main answer was adding this new product offering to our mix.

Royce Yudkoff:

You know, Rick, I think a lot of people we meet who work inside of some large company and think about entrepreneurship spend a lot of time worrying about, "If I go out and start or buy my own company, here's a long list of bad things that can happen to me." But the reality is good things can happen too. You're sort of putting yourself in a position where opportunities roll by and so it's a matter of seizing those as they come along.

Rick Ruback:

Right. My guess is there was not a lot of expectation around grocery stores taking off like rocket ships and every bar closing down. That wasn't something that, as we were sitting around in February of 2020, we thought was a very strong likelihood.

Paige Sopcic:

Right. We did not diligence what would happen in a pandemic. We did diligence what had happened in 2008 to the beer industry in an economic downturn, and we had felt good about that. And similarly, we didn't diligence, you know, what I'm living today in the world of tariffs. We got some things right, but there was a host of positive catalysts that we hadn't even considered.

Rick Ruback:

Life is full of surprises.

Royce Yudkoff:

And I would say, being a growth-oriented investor, you also diligenced that you had a tailwind in this industry, that you had a shifting to cans, and you had new categories opening up, and that would be very forgiving for you.

Paige Sopcic:

I think a phrase you guys would say in class is, “Even a chicken can fly with enough tailwinds.” That is something thought of a lot when we bought this company.

Rick Ruback:

That's a good line. I don't think we've ever said it, but I like the idea.

Royce Yudkoff:

It has your signature on it, Rick.

Rick Ruback:

It does have that foolishness to it. So, I want to ask two questions. First is, the LPs that were gleefully opening their quarterly reports during COVID, and those joyful calls you were getting from their grandchildren, thanking you for paying for their college educations, did they get grumpy when things started going down, post-COVID? Or were they just magnanimous and, "Ah, what goes up, goes down!"?

Paige Sopcic:

Broadtree was an ally during all of this to, you know, communicate exactly what we were going through. They wouldn't always just have to hear it from me. They were also hearing, "Here's the story from Broadtree." I didn't get those phone calls, I didn't get those emails. I would say for me, personally, I look back and wish myself and the board had sat down and said, "Should we start a sales process a little sooner than planned?" And so I think some of the LPs had that same feeling as I did and I wish we had taken that a little bit more seriously during the peak. I think it's a hard time to time a sell, but we should have at least been having those conversations.

Royce Yudkoff:

That's a nice introduction to the fact that you did sell the business, and maybe, share with us what led you to the thoughts, "Let's put it up for sale now," what the sale process was like, and what your ongoing role is.

Paige Sopcic:

So, we sold the business in August of '23 to a company called TricorBraun, which on paper is exactly what we would have been looking for. So, it's a global packaging distribution company, who had also purchased two can companies about a year or two before they acquired us. This was a proprietary deal for them. So, we had built a relationship with the buyer when they bought one of these other can manufacturers. I’d say, we'd had the door open for a sale and for us, it felt like the right time because there was a lot of consolidation happening in our network. So, it felt a little bit like being at a dance and you didn't want to be the person who was left without a partner. More than anything, as we saw scale had value here, it made sense to us that being a part of a much bigger packaging company was going to help us grow into the future. It was a relationship, but a proprietary deal. We did not go through a process. And part of it, I think, was the shock of coming out of COVID. Having been at a high, coming down to a low, I think, we were looking forward and saying, "We can now more reliably predict what the next three to five years look like, and being with a much bigger company is going to be better for our customers, better for our employees."

Rick Ruback:

So, when you said a proprietary process, what I take that to mean is that the eventual buyer called you and said, "Would you like to sell?"

Paige Sopcic:

Yeah, they called me, and it was from a relationship I had with the can manufacturer they had purchased before us. So, I had a good relationship with that owner. I knew when they were getting acquired and we had been talking to them as well.

Royce Yudkoff:

This is so interesting because you bought this company in a proprietary search and they bought you in a proprietary search. No auctions involved, no brokers involved.

Paige Sopcic:

Right, which I think there are some pros and some cons to that, looking that. They were so great on paper and they've continued to be great on the other side of the deal that it made sense. We had a lot of conviction that they could get this deal across the finish line. We had a lot of conviction that they made sense and that they would pay a good price based on what they knew about the market, the other came supply companies they'd already purchased. It felt very, very much like the right partner. And then, to your question, I'm still here today, so now, I'm operating CanSource inside TricorBraun and, you know, we're still trying to grow the company.

Rick Ruback:

So, in this case, you had a buyer and a seller who both knew a lot about the business. You both had been through the COVID ups and downs. You both knew the business as well as any humans could know. Was it an easy price conversation or was it an acrimonious price conversation? Because you might have different views about the future as well.

Paige Sopcic:

It was, I would say, a relatively straightforward price conversation, for that reason. I think we had an understanding of what the market was. I think we had aligned on what the next few years of growth could look like. It was a straightforward price conversation with a little bit of more nuance when it related to things like the earnout.

Rick Ruback:

Mm-hmm. And then, the impetus to sell. So, you got the call but you didn't hang up. Why didn't you hang up?

Paige Sopcic:

Part of this goes back to like our product transformation. So, we went from only doing sleeved or labeled cans into this third-party distribution. We were going after much larger customers, and we were a much more sophisticated company. So, when we acquired the company, there was no contractual revenue. By the time we sold the company, we were executing multi-year contracts with our customers for their supply for the years to come. We were going after bigger customers, and to win in that market, you need supply power. You need to be able to negotiate with our can manufacturer for price, for service. So, having a bigger company supporting us, it made sense that we'd be more successful in the long run. Plus, again, there was consolidation. So, we had seen other competitors who looked like us, the same size as us, get acquired. And it did feel like if we didn't say “yes” at this time, there might not be a partner for us in a year from now.

Rick Ruback:

It's like musical chairs, huh?

Paige Sopcic:

Yes, it felt like that in the moment.

Rick Ruback:

And what percentage of your personal wealth was tied up in your ownership of the business?

Paige Sopcic:

I mean, nearly a hundred percent. Maybe the reality is, you know, approximately eight-five, maybe. Maybe more.

Royce Yudkoff:

And did that play a role in your being interested in selling down your ownership of the company?

Paige Sopcic:

Absolutely. You know, I was not diversified. I wanted to have an exit. I wanted to go full circle with search. I always thought of this as a repeat game, so to me, it was really important to be able to say, "I searched, I bought a company, I sold a company and set myself up to do it again." And part of that is the timeline, and getting there sooner allows you to start the next one sooner as well. And a part of it was also, I think, going through the chaos, with the highs and the lows of COVID, it was exhausting. And so it felt like, “Yeah, this is the right time to have a bigger partner, to survive as a company, and grow as a company.” – and for me personally, take some chips off the table.

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Rick Ruback:

Royce, one of the things about the sale process that I found so interesting was it was a direct process, in the sense that the buyer was a consolidator in the industry and reached out directly to Paige, and they were both expert in the industry and so the price negotiation was just so much simpler because both had a shared knowledge of the space.

Royce Yudkoff:

I agree with that, Rick. And as you and I have spoken about, when searchers source deals, there are two paths. There's, of course, working through brokers and there's direct sourcing. And the conventional wisdom on direct sourcing is you pick out an industry, you learn a bunch about it, and then you work your way through that industry. And I think those searchers, what they're trying to achieve is some fraction of what that industry buyer achieved, which is they approach a seller, they're credible, they're sort of more quickly knowledgeable about the company, they can get to a price better. I think that's what they're trying to do when they choose the proprietary searching industry focus. And they might burn through several industries before they find a company to buy, but I think that’s their North Star. They're trying to achieve what that buyer did with Paige.

Rick Ruback:

That's right. The other thing is that if you imagine at the moment of Paige's decision to sell, the company has passed its peak, at least the COVID peak. It had fallen back down to a higher normal, but normal, and was exploring new product lines and a different structure. I imagine if a private equity firm was buying that business, it would struggle with the due diligence. It would say, “Hey, how come 2022 was such a great year and 2023 was just okay?”, right? And then they'll say “COVID”, and then the people doing QofE will say, “Well, how do we know what 2025 is going to be? We can't tell that.” And so suddenly the business has become much riskier, even though the company benefited enormously from the shift to cans and all the COVID disruption. It created volatility and that volatility will hurt the pricing of the firm because private equity won't come in when it's that volatile.

Royce Yudkoff:

I completely agree with you. I think Paige was too hard on herself in wishing that they had sold earlier during the peak of COVID because I think buyers would have heavily discounted the COVID period revenues and profits, for all the reasons you said. And, in fact, I think the high uncertainty of where those sales would trough to would have actually hurt them in some way. I think waiting until that's over and normalizes, in some sense, and reveals how much of a secular shift had moved to cans, now that people had gotten used to drinking out of a can. I actually think they timed that sale intelligently.

Rick Ruback:

Yeah, I know, but it is so tempting to just always beat yourself out for missing the best outcome. But you just can't tell that at the time, right? You always sell too early or too late. You just don't know at the time which it is. But, but what is really interesting is by selling to somebody with deep knowledge of the industry, they avoided some of that.

Royce Yudkoff:

Yes.

Rick Ruback:

Royce, we talked many times about when to sell. And we talked with Paige about how her ownership becomes a disproportionately large percent of the entrepreneur's family wealth. That was clearly the case here. But you have a rule.

Royce Yudkoff:

I do have a rule, Rick, and I think I've persuaded you of that rule, which means it's passed one of my acid tests of, “Does this actually hold up?”

Rick Ruback:

I love that rule. I think about it all the time.

Royce Yudkoff:

And the rule is this, when you have a big financial asset, which normally you love because it's performed so well for you, you should ask yourself, “If I had this amount of wealth in cash, would I take the amount of wealth I have and buy this business anew? Would I actually want to hold that much of it?” And almost always you will find that you would say, “No, I love this asset but I'd rather own a quarter of it or 15% of it or 40% of it, but not the amount it's grown to.” And I think it's very clarifying when you look at an asset you hold that way, it's a signal that you shouldn't be doing this.

Rick Ruback:

Right.

Royce Yudkoff:

She also saw the industry around her consolidating and probably assessed correctly that her business didn't have the capital to buy out other competitors, but that being stuck alone at the party as the industry consolidates was probably not a good idea. And that was an additional consideration, I think, and a wise one.

Rick Ruback:

I think that's right. But so many people postpone the sale. And I think that's really scary because they always postpone it for when times are going to be better. So, if they were thinking about selling in 2018 or 2019, they've been waiting for post-COVID. And then after COVID, they were waiting for the inflation to settle down. And now we're going to be waiting for the tariffs to settle down. And, you know, sometimes you just got to stop waiting.

Royce Yudkoff:

Yes, and to remember there are many reasons to do ETA. One of them is wealth building, and the problem you're trying to solve is to not ever not have money. And it's not to be the richest person on the planet but, I think, in terms of sell and hold decisions, you need to reflect a little more on what you're really trying to solve for.

Rick Ruback:

I absolutely agree. It's like, “What are you trying to solve for?”, as you say. Am I trying to secure a world where I don't have to worry about educating my children; I don't have to worry about where I'm going to live; I don't have to worry about how I'm going to fund my retirement; I don't have to worry about healthcare; I get to lead a high-quality life with enough resources. You know, maybe that's the goal.

Royce Yudkoff:

And now let’s go back to our conversation.

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Royce Yudkoff:

Paige, just in the few minutes we have left, could you reflect for us for a minute or two on how you kind of evaluate the experience of being an entrepreneur–CEO versus being part of a much larger enterprise?

Paige Sopcic:

I would say, there's so many pros and so few cons. I think your classroom was pivotal for me understanding the good and the bad about what search was. So, I had done a lot of research, talked to a lot of people, I knew what I was getting myself into. I didn't have a blindfold on about the challenges. So, to me, the pros in what I experienced, I mean, first, yes, wealth creation. It absolutely was a job that had upside versus just a salary. So, I was really attracted to that and that was what I experienced. But, you know, on the more personal note, it was challenging in a way that I'd never experienced in my corporate life. It was much more diverse in what I was doing day-to-day. So, instead of being an engineer in one very specific track in GE, I was seeing everything across the company: sales, marketing, supply chain, production, you know, finding new leases, hiring, firing. Every aspect of the company, ultimately, you know, I was involved in at some point, which was part of the challenge but also part of my, you know, personal growth. The satisfaction from the job too is miles beyond anything I experienced in my corporate life. So, when we have a win, whether that's a new customer or we have a teammate celebrate an anniversary who's been at the company, you know, ten years, I feel much more pride in those things than I did before. The biggest con is it's a lot of responsibility. You are absolutely stuck for a longer period of time than you are in a corporate job, where you're interchangeable for them and they're interchangeable for you. It's not like that in a search, and that comes at a benefit and at a cost.

Rick Ruback:

And how about managing the exact same assets for a boss now? Does that make life easier or harder?

Paige Sopcic:

I'm very, very lucky. I mean, part of the reason we like TricorBraun is like they have a phenomenal culture. The biggest advantage to me is they know our industry really well. My boss knows packaging ten times more than I do. I've enjoyed it and, for the most part, we just continue to run as is, and we get the support from them when we need it. But in the long run, I still always want to do something more entrepreneurial.

Rick Ruback:

Paige, we have a tradition of ending our podcast by asking our guests whether they have any questions for us. So, what do you think? Do you have any questions?

Paige Sopcic:

Of course. Maybe it's a two-part. Who's your dream podcast guest?

Rick Ruback:

Well, you are, you are!

Paige Sopcic:

No, come on…dream podcast guest, that you'd have to really work to get them on, and/or is there a podcast you guys would love to be the guests on?

Rick Ruback:

Well, we've been lucky enough to be guests on a few podcasts as part of our outreach effort, and that's been fun.

Royce Yudkoff:

Paige's excellent question – who would I like to have on more in our podcast – and it would be searchers whose searches didn't work out, because there's some percentage of that, and not surprisingly, it's a little harder to get them on the air in front of thousands of people and talk about this. But I'd be kind of interested in increasing the number of those that we have on our podcast to fully round out this picture. Rick, I think that's something we ought to redouble our efforts on.

Rick Ruback:

Yeah, that would be a good idea. I would also think a psychologist would be a really interesting guest. I think somebody who could talk a little bit about the psychology of search and the ups and downs and the stress, because we hear so much of that, which is so different from what I expect. We hear combat veterans saying, "Searching is really stressful," and I say, you know, "There are no bullets. How could this be really stressful?" And so people find joy and interest and stress and challenge in all kinds of interesting places, and I'm increasingly fascinated by the people and it would be nice to have an expert on who knew something about people.

Paige Sopcic:

I love that idea. I think one of the protagonists in class had recommended getting a therapist early on in their search. It was not advice I took until after we sold the company and it's advice I wish I had taken maybe a bit sooner, for this exact purpose.

Rick Ruback:

Well, you know, there's a great comedian who once said, you know, now that he became successful, he started going to therapy and the therapist told him to “find himself”, and he said, "Why? Now that I'm successful, I should take on a partner?" Who was that? That was not Lenny Bruce. It was Jackie Mason! Jackie Mason.

Royce Yudkoff:

Paige, thank you so much. This has been wonderful, spending the time with you, and congratulations on your achievements. We look forward to following your career.

Rick Ruback:

This has been such a fabulous conversation and covered so much ground. We really appreciate it.

Paige Sopcic:

Thank you both. I wouldn't have been here without you. That is the straightforward answer, so thank you. I’m happy I made the leap but I'm happy I had you guys pushing me throughout HBS.

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Rick Ruback:

Royce, what a fabulous journey Paige is on. I can't help but reflect that she got her dream job out of college, working as an engineer at GE. And she sounded like she loved working for the firm. But in the end, I think it was intriguing that she looked at the career path and she liked the job better than her career path. That's what I took away from that.

Royce Yudkoff:

Yeah, both you and I think a very good way of looking at where your future ought to be is looking at your boss and asking the question, “Would I like that job? Do I want to be her or him?” And Paige did that and the answer was “not so much”. And I don't know if you heard this too, but part of it seemed to tie to this issue of control over your professional destiny. You know, she described her bosses as being part of a cubicle farm, in an office, and that's not how I'd ever like to be described.

Rick Ruback:

I also think that in some sense she wanted a bit more freedom. You know, the sales team sold a particular piece of machinery and her job was to deliver that piece of machinery with those specs. And that was not as exciting as being involved in the entire journey of understanding customer need, understanding pricing, opportunities, and that sort of thing, right?

Royce Yudkoff:

I agree with you. And I think one of the things you and I see a bunch is that you change over time, as you have a job. And often you start out and you're learning a ton and you're practicing this craft that intrigued you, and so it's great. But then as you get more experienced and older, you just want more control over your destiny, and often that takes a long, long time in big institutions.

Rick Ruback:

And I think what you're interested in changes. I thought it was intriguing that when we asked her why she left engineering, she said she wanted to be broader. But she doesn't mean broader in product space. She means broader in managerial…what's the right word? Scope.

Royce Yudkoff:

Yeah, that every day a whole set of different skills are being called for. And you and I often say this to students about ETA, which is that, you know, you can be agnostic about the particular product or service. What should be fascinating you is the managerial challenge. You know, that on any particular day you're selling, you're doing a bit of finance, you're doing a bit of human relations, a bit of engineering. I mean, it's a very well-rounded career.

Rick Ruback:

Yeah.

Royce Yudkoff:

I would like to say one other thing before we leave this issue of being in a big company versus ETA, which is, you know, we countless times are doing therapy for students who are fearful about the risk of leaving a big established company and going off to buy a small company. But if there ever was a paradigm example of why that notion of risk is elusive, it's working for GE. She couldn't have known this at the time but within a few years that company would literally explode and shed tens of thousands of workers…

Rick Ruback:

Right.

Royce Yudkoff:

…whereas she was infinitely more secure in a business she due diligenced and correctly bought.

Rick Ruback:

Right, right. Royce, what a great conversation that was with Paige.

Royce Yudkoff:

I thought we learned so much about her journey acquiring and then growing this canning enterprise.

Rick Ruback:

Yeah, it's really interesting. Who would have predicted that it would take off much like it did? But it really benefited from the environment and it was great to see she was able to capitalize on it. It is a hard thing to see an opportunity and jump into it, and she did it.

Royce Yudkoff:

Credit to her. In our next episode, we're hosting a very different type of guest, A.J. Wasserstein, who teaches entrepreneurship through acquisition at Yale Business School and previously was his own form of acquisition entrepreneur, rolling up record storage companies with great success. A.J. and you and I, Rick, are going to be talking about revenue quality, why that matters, and how to measure it in an acquisition.

Rick Ruback:

Yeah, that's great. I'm looking forward to that. He's put a lot of thought into how to categorize revenue quality and I think we'll all learn a lot.

Royce Yudkoff:

Rick, we end each season with a very special episode where we ask our listeners to e-mail us and offer questions they have after listening to our episodes or after their experiences in search. We pull out the questions and you and I discuss them.

Rick Ruback:

You know how much fun that can be.

Royce Yudkoff:

It’s a favorite of ours and a favorite of a lot of our listeners. So, listeners, shoot us an e-mail at rickandroyce at hbs dot edu and we’ll put them in the bunch we go through and answer them in our final episode of Season Three. We’re looking forward to it. You’ve been listening to Think Big, Buy Small. We’re your hosts, Royce Yudkoff…

Rick Ruback:

…and Rick Ruback.

Royce Yudkoff:

Katie Zandbergen produced today’s episode. 

Rick Ruback:

Craig McDonald is our audio engineer. If you have any questions, comments, thoughts, feel free to just e-mail us, rickandroyce, all one word, at hbs dot edu.

Royce Yudkoff:

We’ll be back next week with another episode of Think Big, Buy Small.