00:39:43 · Kenn Ricci
[00:39:43] S1: David, this was the most amazing thing I've ever seen in my life. People thought it was such a great bargain that they would send me a check I think the buy in at that time was like $800,000 People would send a check for $800,000 and say, send me the paperwork, I want to fly tomorrow. In other words, they loved it so much. They knew they couldn't fly till I had the money. They'd send me the checks and they'd go, send me the paperwork, we'll get to that stuff later. Just let me fly. Yeah. So a 100,000,000 in the first three months, 400,000,000 in the next year. And now all of a sudden I've got a tiger by the tail and no clue, right? Because a business that grows that fast is immensely complicated, particularly for cashflow. And I think at that time, didn't really realize that, you know, in capital intensive industries, particularly aviation, the balance sheet is the whole game. It's not the income statement, it's the balance sheet. You know, forget income, forget EBITDA, it's free cash flow. And how strong is your balance sheet? That's what drives that business. I didn't know that in 1998. I hadn't figured that all out yet. I'm in my early 40s when this is happening. And so then I bring in an equity partner. So now I have some equity partners around the table. 2,000, we have the .com bomb. So I've been through four recessions. That was number three. So now the business is struggling a little bit, cashflow struggling, not volume struggling. And we decide, you know, when a business is in trouble, there's two things you can really do. Well, three things, I guess you could close it down. Two is that you can sell it for a song or three, strategically change direction. So you go to the bankers because your problem is always the credit markets. It's always who's out there for you. And you say, I have a new strategy. I'm going to merge with this company. Here's the projections. And you buy yourself time to see if you can put these companies together. Acquisitions, mergers are incredibly difficult. I hate them. I don't do them very often. I think they're immensely culturally, they're damaging.
00:41:36 · David Senra, Kenn Ricci
[00:41:36] S0: Why do you hate mergers? [00:41:38] S1: I hate them for me because for me, I think they're a sign of weakness because you can't build your business on your own. You can't, whatever this company is offering you in terms of, let's say it's market share. Let's say they have a part of the market and you have a part of the market and you say, gosh, we'll capture the market. Well, do you really need to spend 12, 10 times cashflow to gab the market? Would you invest that money yourself and get grab the market share? Or do you not have a good enough product to do it? So I think we don't analyze enough what it costs for whatever your logic is for bringing that in. Give me the logic for why you're doing that. And I would tell you 90% of the time, you could probably do this yourself without the acquisition. Now, once you do the acquisition culturally, if you have a business built on culture, which is essential for me, it's essential for us, it's impossible. You can integrate a culture if 10% of the workforce is being added. Adding 30%, 40%, culturally impossible. And then you're going to destroy your culture. So you probably had, you probably overpaid. I don't know if your business, if the business of me reasoning is sound, and you really put your culture at risk. So that's why I don't like them. [00:42:49] S0: Okay. Yeah. So, but you were, this was I'm in trouble. [00:42:52] S1: I'm in trouble financially. [00:42:53] S0: So you have to.
00:42:53 · David Senra, Kenn Ricci
[00:42:53] S0: So you have to. [00:42:54] S1: Yeah, I haven't figured this out yet. You're asking me, this was, this is twenty six years ago. I have knowledge that's accumulated since then. So we merged with a company that's also in trouble called Travel Air. It's a division of Raytheon. And we do the, we slap it together fiftyfifty. Are they in [00:43:09] S0: the same business? What are [00:43:10] S1: they doing? Yes, they have a company called Travel Air that has a brand new product line, but also fractional ownership. And Raytheon owned Beechjet at the time, Beechcraft, Beech Aircraft. And they had merged it with Hawker Beechcraft. It became Hawker Beechcraft. And so they were trying to see, they had Travel Air as a distribution channel for their aircraft. So it's not making money. It's losing $30,000,000 a year. They slap it together with Flight Options, which was marginally breaking even. We were making money, but not free cash flow. So we put these to the company, consolidate, get rid of the back office. Raytheon wants to focus on missiles and submarines. And in the concept of putting these two together fiftyfifty, we come up with shareholders roulette, are you familiar with that term? [00:43:55] S0: Yeah, where you have to- [00:43:56] S1: You have to make an offer Either to you buy [00:43:57] S0: or sell it.
00:43:57 · David Senra, Kenn Ricci
[00:43:57] S0: or sell it. [00:43:58] S1: At the same price. Yes. So I had eighteen months to underwrite the transaction. I go to Warburg Pincus. Need an investment partner to do this. They see the model. They value the business at $360,000,000. I go running up to Lexington, Massachusetts to go into Raytheon to tell them I'm here with your $180,000,000 This company was a piece of shit. And now I'm here, I figure, where are you putting the Kenn Ricci statue that I found, like I found all this money for you? And they looked at me and they thought I was stealing the business and they bought me out. Oh. And I'm gone. 2002, I've lost my throne. It was the worst day of my life. I had, I was passionate. I love this business. My friends were in the business. Hold on, [00:44:39] S0: we gotta pause here because it's How very much of the $180 goes to you personally? [00:44:44] S1: You hit the nail on the head. You a knack for asking the exact right question. I own 16% of the company. Okay. Fast forward today, the punchline is going to be, I bought this company back and now I have a controlling interest. So who thought the worst day of my life?
00:44:44 · Kenn Ricci, David Senra
[00:44:44] S1: You hit the nail on the head. You a knack for asking the exact right question. I own 16% of the company. Okay. Fast forward today, the punchline is going to be, I bought this company back and now I have a controlling interest. So who thought the worst day of my life? [00:44:57] S0: But still, like you thought, let's go back to like you were... You learned how to be a pilot when you were in college. You grew up, you know, middle class in Ohio. Yep. And you have millions of dollars. And you just said it's the worst day of your life. This is really, really important because the whole point of this show is like I usually talk to people that do things for a very long time. And there's like this new industrial, like entrepreneur ecosystem, and it's driven by investors. And they tell, they give the worst advice to founders ever. They're like, start a scale sell. Yeah. It's like, I've talked to all these investors, or excuse me, these entrepreneurs are sold. Yeah. They all talk about like this. No, no, no. If you sold something you loved, they're like, Yeah, but your Travis from Uber was in that chair. And he made billions of dollars and lost Uber. Ask him how he felt when he had 4 or $5,000,000,000 dropped in his head. He didn't give a shit. [00:45:42] S1: Didn't give a shit about it. Absolutely didn't give a shit about it. Start scale, get a new investor. [00:45:47] S0: It's crazy. So, okay. So worst day of your life, let's take me to that. You were like, I thought I was gonna have this company. They bought you out.
00:45:47 · David Senra, Kenn Ricci
[00:45:47] S0: It's crazy. So, okay. So worst day of your life, let's take me to that. You were like, I thought I was gonna have this company. They bought you out. [00:45:54] S1: First of all, no one was gonna be more passionate about building that business than me. I don't care who Raytheon put in there. It was never gonna, you know, these businesses are small margins. They're highly technical. It's a, there's not an MBA program at Harvard on how to run private aviation. At least there wasn't at that time. It's become a lot more popular now. [00:46:12] S0: You're in your forties at this point? [00:46:13] S1: Yeah, 42. Married with children? Yes, at the time. [00:46:17] S0: How many kids? [00:46:17] S1: Two children at the time. [00:46:18] S0: Okay, yeah. So you got a couple of tens of million dollars, whatever the number What's your thought process? Well, first