Beyond Consulting

5: From Consulting to Search Fund CEO


In this episode of Beyond Consulting, sponsored by ECA Partners, we speak with husband and wife team, Nicholas Contag and Katherine Hill Contag, each a serial entrepreneur and who, together, co-founded Klaro CFO. Nic and Kat join us to discuss what it takes to succeed in consulting, search funded ventures and corporate strategy teams.


The Beyond Consulting Podcast is hosted each week by Ken Kanara.



Ken Kanara: Hello, and welcome to Beyond Consulting, brought to you by ECA Partners, the only podcast dedicated to helping our listeners navigate the wide variety of options they have after a career in consulting. I’m Ken Kanara, host of Beyond Consulting and CEO of ECA Partners, specialized project staffing and executive search firm focused on former management consultants and private equity. Each week I host guests that have spent time in consulting and made some  pivot or career change. The goal is to help our audience understand all the options that they have, and ideally, learn from our guests, both in terms of what they did right and things they wish they would have done differently.

Today is our first episode with not one, but two guests. We have Nic and Kat Contag in the studio today. They’re both serial entrepreneurs and I’m going to actually have them introduce themselves, because they’ve done cooler things than I have.


Nicholas Contag: Thanks Ken, thanks for having us. We’re super excited to be here. Kat and I just pointed at each other, so I guess that means the rule is that I introduce myself first, so here it goes. To start, I am originally from Ecuador. That’s where I was born and raised. I’ve been in the States now for about 20 years. We moved when I was in high school, so I’ve been in the States for college and grad school and everything ever since high school.

Professionally, I’ve done a lot of different things. After college I was fortunate enough to work on Wall Street for a couple of years. I picked a great time to be there–it was 2008 through 2010 and as I say that I realize how long ago that was, but that was the financial crisis at that time. I was really lucky to keep my head down and keep working. I was at Goldman Sachs at the time, and basically completed the two year program there and went off to Business School. That’s where actually, I met my wife Kat, who’s sitting right here next to me.

After Business School, I worked as a consultant for a couple of years. I was with McKinsey out of the Miami office. I worked on a bunch of different kinds of projects, but primarily in health care and construction. After two years there, I paid off my student loans and decided that it was time to be an entrepreneur. That’s something I always wanted to do, ever since I got to the States. I always felt like coming from Ecuador, the States had all this amazing availability of resources, capital, investors, other forms of support and an enormous market, regardless of almost any industry you wanted to go into. I thought, “Yeah, it’s time to be an entrepreneur.” I decided on a search fund, so I ended up actually buying…for those who are not familiar with a search fund, potentially, I raised a small fund with the sole purpose of buying a single business. We bought a business based in Tampa, FL that did, of all things, acoustical ceilings. I ran that for about five years as a CEO. I exited the business in 2020 and that year became a father of our first, our son Leo. That’s where I’ll conclude my intro by saying that. I’ve talked a little about the professional side, on the personal side, again I’m a dad, father of Leo and one black lab named Oscar, and I’m super excited to talk about everything that can come after consulting and anything you want to dish our way, Ken.


Ken Kanara: Yes, and as is true in most things in life, we saved the best for last–Kat.


Katherine Hill Contag: I am Catherine Contag, sometimes I go by Catherine Hill, which is my maiden name. I’m originally from Palo Alto, CA. I grew up in Silicon Valley. I am also a serial entrepreneur. I grew up knowing that was exactly what I wanted to do in life and I started by selling plums in front of our house, and then I graduated to a lemonade stand. My parents are both business school people, so they actually taught me how to keep a profit and loss statement for my lemonade stand. Clearly, I was an early nerd, but I went to school out in California as well and I started working for Walmart.com. My idea was that I wanted to go work for a large company and really understand the building blocks of that business so that, hopefully, one day I could run my own business.

I started off in their finance division and then moved to Bentonville, AR, which was a whole other podcast in and of itself, but that’s where I became an internal consultant, if you will. I worked in their corporate strategy division preparing different presentations and deliverables for the CFO of Walmart. That was an incredible experience. I still have really good friends from that to this day, but actually, being an internal consultant solidified that I wanted to be an operator. I loved providing advice and giving that guidance, but I was this 24-year-old who wanted to make the decisions and was very adamant about that, so I then went on to business school. Again, the best part of business school was meeting Nic, cheesy but it’s true. From there, I had a brief stint, and internship, in investment banking at JP Morgan, in their tech media telecom group. I knew I wanted to go in a tech direction and I thought, “Oh, I have a finance and strategy background, investment banking will be great,” and then the first morning I work until 5:00 AM and got all these kudos from everyone on the team, and I was like, “I don’t think that’s what we should be championing.” It was not a good fit for me, but I then went to a startup called Bauble Bar in New York, where I managed their wholesale and retail partnerships. I joined them when they were about 20 people and really saw what it took to start a company and how messy it is, quite honestly, but how it’s a ton of fun. I just loved it, and ever since then I caught the entrepreneurial bug. I went on to create a consumer product that I sold through the Container Store and Amazon…we’re nearing the end of my bio I promise, but then, once I sold through that inventory, Nic and I paused. We had to make a decision: do we want to go out and get funding for this business, or do we wanted to double down with the search fund? I decided to go join Nic…


Nic Contag: I basically pleaded for Kat’s help…


Katherine Hill Contag: …but I went and joined Nic to really help with…the company was based in Tampa, FL and was doing a lot of work within that region, but we had big plans to grow outside of the region and grow across the state. That’s what I joined to help do, from a marketing and sales perspective. It was an experiment in the sense of we were like, “Should we work together? Is this a good idea?,” and we had been business advisors for a while to one another on our businesses, and we just said, “We’re falling over each other trying to give each other advice, let’s just take the plunge and work together.” It turned out to be a really wonderful experience and we are now running our own business together to this day.


Ken Kanara: That’s awesome. For our listeners, they failed to mention they’re basically an entrepreneurial power couple. They both went to Harvard Business School, so they’re quite intelligent, as they are stunning. We all first met in Miami of all places, I think because we were living there? We met you guys when I think, Kat, when you had just successfully launched your first company. Remind me, it was Color Clutch, right?


Katherine Hill Contag: Color Clutch, yes. It was a patented product, totally random, but a patented product to store nail polish in a very compact way.


Ken Kanara: That’s right, I remember. I remember because we bought one as well, direct-to consumer. That is really cool. It’s really great to have you guys on the show. I’m really excited for two reasons. One, because you’re the first couple that we’ve had on the show , and two, you’re also the first couple that I’ve known that can actually work together, which is crazy. Maybe it’s just because Kat’s the real boss and Nic’s very submissive, but that’s a whole other podcast.

Let’s back it up….entrepreneurs, search fund in business, but today, I want to hear about what you guys are doing right now with Klaro, because I think this is really interesting.


Katherine Hill Contag: I think that a little bit of a back story is important. We sold our portion of the business in 2020. Our son was three months old, it was the middle of COVID…it was just a crazy time. We decided that we needed to go live closer to family for a variety of reasons and so we moved to Minneapolis, MN, which is where Nick’s parents and sister live now. We moved, COVID was raging, there were not vaccines yet and so we were all quarantined. We were staying at home, we didn’t feel comfortable with the daycare option, so we were co-parenting, full time. We decided, “Let’s pause and take a year off. We are very stressed out. Let’s pause and figure out what’s next. We know we want to start another company. We love working together, but let’s take a breath.” It sounds wonderful and beautiful to be able to take care of our son and have that. It is a privilege, I acknowledge that, but it’s hard.


Nicholas Contag: It’s not an easy decision because we’re so used to, especially coming from these career tracks that Kat and I had early on, we’re so used to always having our foot on the gas and never taking a break. Yeah, you might take a vacation, maybe, but even that has become really rare. COVID really forced us to take the time and find a way to get comfortable with it.


Katherine Hill Contag: All of that is to say, we had some time to pause and to think about, “Okay, what do we want to do next? What’s needed out there, based on our experience? Like any good entrepreneur, we tried a few different ideas, but the one that we came back to was in the financial strategy space. In the businesses that we’ve run previously, I have corporate finance background and Nic has private equity investment banking background, we were both spending a lot of our time managing the financial business and specifically, the strategic financials. So, not just the accounting and bookkeeping, but, “What is the five year plan? What’s our cash flow looking like?  When are we going to bring investors on?” All of those are really important questions that you need to think about as a business owner. Yet, it was hard to find someone who we could even talk to about this and get advice from. Also, there were recurring processes that we were doing monthly to manage that side of the business, but it was very hard to find someone that we could hire to bring on for an affordable price. We kept coming back to the idea and that’s where we landed with Klaro CFO. Our website is klarorocfo.com, that’s with a “K,” so it’s K-L-A-R-Ocfo.com. It’s a spin on the Spanish word claro, for clarity.


Ken Kanara: Oh, okay. I was always wondering this. Okay. That’s very helpful.


Katherine Hill Contag: It’s a spin on that sense of clarity, and what we do right now is we work with pre-revenue companies, we work small and medium businesses, all the way up to about 30 million in revenue, but we help them with those strategic financial pieces of the business. The term fractional CFO is used a lot, so we’re basically a fractional CFO for a variety of projects.


Ken Kanara:  That’s really interesting. You said it’s primarily smaller businesses…did use discover, this, call it, “space in the market” when you were running Hanlon? Is that right?


Nicholas Contag: Yes, that’s exactly right, because as Kat mentioned, we found that running a small business, a small/medium business, however you characterize it…Hanlon, just for reference, at the time that we bought it and throughout the time that we ran it, we had about 50 employees and in between about five and ten million in revenue. Even at that size, it was very difficult to hire someone to come in and provide those CFO services. As we took the year off during COVID to reflect on what would be helpful, we thought, “Man, we really would have used these services when we were operators in this business and maybe there are people out there that feel the same way.” It turns out, there’s actually a big, pent up demand for it, and that’s what we’re finding. Now the challenge for us has gone from getting our initial clients that we help with the services that Kat described, things like valuations and projections for their financials, and even things like sale side negotiations, to how we can take that model and scale it. We have a lot of ideas about how we want to do that, but that’s really where our attention is focused now.


Ken Kanara: That’s great. We definitely see a lot of this. We work with a lot of lower-middle market clients and usually, the first thing after acquisition is, “Oh shoot, we need to figure something out with finance,” or, “Oh gee whiz, there is no finance function.” It’s someone sitting in a room, in the middle of nowhere, taking the controller/CFO/accountant, an all-in-one thing who is just, I’d say, taking a swing at the books, versus strategically. What are some of the big use cases that you’re seeing with your clients?


Nicholas Contag: We’ve seen a few different flavors of services, if you will, I always think of any business that we’ve been in almost as an ice cream parlor, maybe because I just really like ice cream.


Ken Kanara: Yeah, you haven’t graduated to lemonade yet, Nic.


Nicholas Contag: I haven’t yet.


Katherine Hill Contag: That’s right!


Nicholas Contag: I haven’t gone back. The first thing that a lot of business owners are interested in is the valuation side of the business, especially when you’re not in the range of a private equity firm that may be looking to buy you out, there aren’t that many buyers for your firm. Maybe your plan is to sell it to an employee or to leave it to a family member at some indefinite point in the future, but the opportunities tend to be few and far between. The valuation side is important to people because they want to figure out, “Hey, where do I fall in this spectrum? What is my business potentially worth today? If I do want to exit and have a sale (to something like a private equity firm or a larger competitor, perhaps like a publicly traded competitor), how do I get there? Where am I today and what does the path look like to get there?” That is one of the big areas that we help companies with. To your point about the finances, a lot of times we’re talking about the accounting, like the QuickBooks file or whatever accounting software they use being in a little bit of a disarray at times. We run into that a lot so we’ll help them get a clean view of their business and put together a valuation that’s intuitive to them so they can understand and they can see what the assumptions are that are built into it about things like revenue growth and expenses and ultimately, the profitability of the business.

The other major area that we’ve seen interest in is in basically preparing for an investment or for a sale. Often that will come after the valuation stage, but a company may say, “Hey look, I’m really looking to erase some debt because I just need the money to buy some equipment or to hire a bunch of people and start a new service,” whatever the case is, or, “I’m looking for an equity investor,” or potentially, “I’m looking to sell the entire business.” We’ll jump in on that side of it as well because that’s a process that we went through at many points in our careers, but we got first-hand experience doing that through the search fund, where we went through the process of speaking with a business owner, buying their business and then, on the other side of it, exiting our stake of the business, which is essentially your sale of the business.

Those are the two areas that we primarily see, and then the third flavor if you will, that tends to be, at this point, much more ad hoc. We have found situations where people may need valuation because they’re looking to issue some shares, some equity to key employees, and they don’t know where to start with that, so we can advise them on that part of it. Or, they may have some work that still relies on the financial forecast, but it might be specific to something like their pricing strategy. They could say, “Hey, I don’t know if I’m pricing my products…my services (whatever they are) the right way. How do I think about that and tie that back to the financial projection that we made? How would that projection and the valuation for my business change if we price things differently? How do I test this and how do I actually do this?” That’s just one example of  the ad hoc stuff that we do, basically those are the three flavors of services that we offer.


Ken Kanara: That’s really great. For now, is it primarily services led? Is there a technology component? How are you thinking about now and the future of the business?


Katherine Hill Contag: I think it’s important to mention that we started in October 2021. Right now, it’s April 2022, so we’ve been around for about six months. I love that we act like, “Okay, we’ve got well-oiled machine because we’re entrepreneurs, but every day we’re learning more about what our clients need. All of that is to say, we have gotten some really positive feedback that folks want to work with us on a more regular basis and we are looking at migrating something to a SaaS platform where they can have a dashboard that they can log into and keep their pulse on those important KPIs for the business, and then deep dive with us on specific  negotiation strategy or whatever might come up in their business at the time. The short answer is yes, we would like to get some tech involved with it and we’re navigating that right now.


Ken Kanara: That’s awesome, and for what it’s worth, from what I’ve seen work the best, at least in lower-middle market, is services-led and then developing the technology around that because a lot of the companies, I’m guessing, that you’re dealing with it’s not just like, “rinse and repeat” or boilerplate, right? It’s all very different situations.


Nicholas Contag: The challenge for us right now is trying to find the activities within the different needs that companies have that potentially are boilerplate, that you can scale with some  type of software. Then you can provide more custom services and, frankly, better customized services to them because you have things like their financial forecast, not just historicals in QuickBooks. You have access to their forecast and at a very granular level on a cloud-based platform and you can perform your analysis and give your recommendations based on that information. That would be the goal for us in the long term, at least for now.


Ken Kanara: That’s awesome. I think you guys are hitting on a real pain point from what we’ve seen, as well. The real question that people are wondering is, Kat, how do you work with him? What’s your secret?


Katherine Hill Contag: Nic’s laughing because…it’s funny, almost every on every  discovery calls right every time we meet a potential new client they’re like, “Wait, you guys work together? How does that work?”


Nicholas Contag: It’s actually a red flag…


Katherine Hill Contag: …but also, I think they’re coming from the standpoint of, “I don’t know that I could work with my spouse…” The simple answer is that when I grew up my parents worked together. I saw that dynamic and it was very normal. It worked out well. They had complementary skill sets and I think this is the same with Nic and I. There are certain things that I like to focus on–the sales and marketing, that’s my lane that I run in, and Nic has a lot of other strengths. For this specific business he focuses on those valuations and building the deliverables for the clients. It was a little bit of a different mix at Hanlon, but similar. I think that allows us to work together easily because it’s nice. I 110% trust everything that Nic is working on and I know he’ll do it better than I would, so it’s great to work with someone like that.


Nicholas Contag: From my side I feel exactly the same way. It’s really cool to feel that you’re working with someone that you obviously trust 100% in every single regard: professionally, personally, however you want to think about it, and you feel like they will do it, as Kat said, frankly better than you would. That’s a cool feeling to have, especially when you’re an entrepreneur and you’re trying to hold yourself to really high standard. You’re trying to do everything to the best of your ability, a lot of times. That’s part of what makes it so fun. We obviously love each other, we have a great home, and working together just felt like an extension of that. It came naturally, really. It wasn’t ever something that we really sat down to weigh the pros and cons and talk about really deliberately. We just started doing it and then realized that it seemed really natural to us, so we figured, “Let’s keep doing it.”


Ken Kanara: Joking aside, I think like part of the reason it can be an issue is mainly because, if we think about, okay, if we are working at separate jobs, hearing that advice from someone without all the context is like, “Are you serious?” Which is, admittedly I hope my wife doesn’t listen to this podcast, but sometimes she’ll give unsolicited advice and I kind of roll my eyes and I’m like “Okay, whatever,” but again, you guys are in the trenches together. I think that is a big part of it, and that started at Hanlon, right? Talk to us, Nic, about how that whole search fund process happened, from the beginning, and then how you two started working together.


Nicholas Contag: It was really high level, as I mentioned earlier. Since my family moved to the States I always felt that I wanted to be an entrepreneur. I felt like if there’s a place on planet Earth where you can be your own boss and you have a shot at it–it’s not a guarantee ,but at least you have a very good shot at doing it and being successful at it, it’s in the States. I always aspired to that and for me, I stumbled on search funds. I learned about them in grad school and I remember the day that I learned what they were I was, really, just shocked. It seemed ridiculous to me that you could be this 20-to-30 year old that goes and raises millions of dollars without ever having run a business before, buying a business after looking for one, then buying it and then taking over the business, leading it and hopefully growing the business, and then potentially, selling that business. I couldn’t imagine a bigger challenge. For me, when I learned about it, I felt like someone had painted Mount Everest in front of me and I just thought, “Man, I really want to go climb that. That seems like a lot of fun and a perfect way to use a lot of the things that I’m interested in. I was down for it. During Business School, I was, frankly, I felt a little scared to even try it. I felt worried to try it out of the gates because I had my student loans and I felt like, “Man, if this if this doesn’t work out, at least financially, then I could be in pretty bad shape five or ten years from now. Those, at least, were the thoughts that were running through my mind. I thought, “I want to take a little bit of a safer route at first, do a couple of years of consulting because it was a typical rational that you hear from people, “Oh, keep your doors and you don’t become a specialist in anything. Remain a generalist, also the pay is not that bad and you can potentially pay off your student loans,” all that stuff. Great. I had that detour between business school and starting the search fund to work in consulting for a bit, but I’d say that consulting really cemented that choice to become a search fund entrepreneur, or even just broadly an entrepreneur. One of the things that I observed while working as a consultant is that it seemed like from day one you were consistently praised for being really smart. You were told that, which is a weird thing. Especially when I was the parent of a toddler. It still strikes me as a little bit odd today then there was so much emphasis on that one dimension of a person. People would even start to talk about it during informal team time together, like trying to give examples of things that they’d accomplished in their life that demonstrated and proved that they were really, really smart and worthy of being there and worthy of the things that they were being told by recruiters and by other people in charge of people development at the firm. I couldn’t help but think, “Man, if you think you’re that smart, then maybe you can go try to actually apply this stuff, the recommendations that you’re giving businesses and put them into practice.” Wouldn’t that be a test? Wouldn’t that be a test of the conviction that you have behind your recommendations and the rigor that you’ve put into it.

I always had that feeling and that was a big  part of what drove me to make the decision to leave consulting and become an entrepreneur. The decision specifically to raise a search fund was what really felt like, at the time, a lack of creativity in that, I would look at Kat and I thought, “Man, she is the kind of person that could come up with an idea from thin air,” it felt like. I felt like I could just bang my head against the wall for hours and I couldn’t come up with a service or a product that I felt like anyone would want to pay for. The search fund was a way to get around that problem because you’re buying a business that already exists, that it’s proven that there’s a demand for that service or product. You’re bypassing that whole stage of, “Hey, is this idea even good or not?”

I have different thoughts today about the implications of bypassing that stage and what it’s like to live through that startup phase, but at the time, that was really my thinking.  Those things, to summarize it, one, the general idea of everything involved in the search fund was amazing to me. My professional experiences right out of business school really cemented that belief in that, “Hey, this is really something that I want to do. Finally, I think, just as importantly, not having a business in mind that I would start from scratch, all of those things came together and really made the search fund an obvious option for me.


Ken Kanara: Two observations: one is, McKinsey’s vetting processes clearly work because I didn’t get past the first round, so they must be doing something smart to make sure that they indeed find smart people. Two, it’s funny…I’ve never thought about the search fund path that way. Yes, it is an entrepreneurial path and it is a risky path and it is something that can, obviously, put you in the deep end, but like you said, there is a playbook or a path where, Kat could start a business literally, probably, on this podcast. She might have started a company. That is a perfect way to describe her, by the way. That’s pretty awesome.

You start the search fund, you were in Miami at the time, you start looking for businesses, and then what?


Nicholas Contag: That’s when the fun really begins, because you basically quit your job one day. What we did was, we looked at each other and we both quit our jobs around the same time, and we said, “Okay , we’ve got six months of runway, roughly.” Runway means that after these six months we’re out of money. We’re going to start going hungry. It’s that simple. In six months’ time, we either have made our ideas start to take off and it looks like we can make a living off of them, or we’ve got to, at the latest, at that point, go back and maybe go begging for our old jobs or something like that, but that’s what the options are.

You leave your job and now you’re in this free moment of “now what do I do?” My first step was to start finding businesses because I figured even before raising money or finding investors, I want to feel comfortable that there are businesses around the place that we wanted to live at the time, which was Miami, or Florida more broadly. I wanted to feel like I could point to actual companies that would potentially sell to me under the right circumstances. That I could see myself, as crazy as it seemed, running one day.

I set out down that path and that was a lot of, at the beginning, networking with anybody–heads of boutique M&A firms, law firms and consultancies and accounting firms–everyone in Miami that I felt would, potentially, be able to connect me to small and medium business owners because of the work that they did on a day-to-day basis. It was a lot of cold emails, a lot of really bizarre meetings at the beginning. I’d be walking up and down Brickell, the main drag in Miami, like 90 degrees with 100% humidity in a wool suit like a total idiot, sweating. I would go into these buildings and meet with these people and they would usually bring a small army of people with them. I thought it was because it was A) their security detail, or B) this guy is either really crazy, right, referring to me, or maybe there’s something interesting here that other people may want to listen to and then participate in. I tend to think they thought I was crazy and this was a security detail that were coming in with them, but I would pitch to them what I was trying to do– buy a business. They would provide some leads and I could learn about some businesses that way. I also went out to start recruiting people to help me: students from local community colleges and universities, both in Miami and in the outskirts of Miami, to help me search for companies doing the unglamorous work of going online and going into Google or using databases that we had access to through university networks, that kind of thing, to learn about businesses and start assembling a huge database.  We were amassing a huge database of companies and all the details that we could learn about those companies, so we could start to reach out to them via e-mail, letters, in-person–whatever worked, to basically gauge whether they would be up for sale or not.

After that point, I was probably about two, almost three months into that when I really started talking with perspective investors or partners because then I thought “Okay, I can go into these conversations and I already can point to some businesses.” In my mind I felt like we could potentially buy a business tomorrow if one of these owners decided to sell. That’s not how it actually happened, but I wanted to have that level of comfort so I felt like I had a little bit more than smoke and mirrors behind me.


Ken Kanara: One of the things I’ve always admired about you and Kat, and I’ve told this to you before, is you guys just have this unique ability to pull up and shoot. You just talked about generating these meetings with these random people when things weren’t perfect and you’re sweating in your wool suit. It’s interesting because you glazed over it like it was a small point, like not that big of a deal, but it’s something that people I see struggle with all the time because they wanted to get it perfect. Has that always come naturally to you or has Kat helped you with that? I’ve noticed that it seems like second nature to Kat.


Nicholas Contag: Actually Kat is way cooler than I am, but yeah it’s actually a really good point. The tendency to want to do things perfectly right at the first try is definitely something that I struggled with and I think I definitely still struggle with today. The only difference with ten years ago is that I think I’m much more aware of it and I’ve definitely done things, for instance,  therapy, to talk about it and let someone help me be, at least, aware when I’m doing that. The short of it is that, yes, I think that many people with a consulting background or similar jobs tend to have that inclination to try to be perfect, but if you’re going to be an entrepreneur you have to get comfortable breaking stuff. You’ve got to be comfortable with things not being perfect and you fix it along the way because there’s a tradeoff between getting your business going and starting to generate some revenue and showing yourself that it’s a viable business and designing  the perfect product that’s going to blow customers socks off the first minute that they see it. You do need something that’s viable but it doesn’t, by any means, have to be perfect. That’s just the name of the game when you’re an entrepreneur. So totally, yes, and I talk to Kat about that still all of the time right. Am I overthinking something? Am I going too far in the weeds or have we answered the mail with what we have so far and is it is it time to move on?

Broadly speaking if you’re thinking about becoming an entrepreneur and you do observe that in yourself, any partner or advisors that you surround yourself with, it would be helpful to you if you found someone that you think can help pull you out of that rut potentially. Then, as you were saying, you can just pull up and shoot and then have a good sense of humor about it. You try something, it goes horribly wrong–that’s okay. That doesn’t say anything…


Katherine Hill Contag:  It makes for a good story.


Ken Kanara: Your book, when you guys retire, is going to be awesome. I think the title is like, How Not to Plan a Career.


Nicholas Contag: Yes, exactly! Don’t plan it. Yes, we agree with that.


Ken Kanara: That is awesome. Cool. So you’re attending a lot of meetings, you’re looking for businesses…was Hanlon the first big transaction that came across the board?  Talking to me about the transaction process.


Nicholas Contag: There were a few different businesses that came close. In broad breaststrokes,  we–being that that team of students from community colleges and universities and recent grads that were working with me, there were about ten to fifteen of those students over the course of a year. From the time that I partnered with my sponsors and basically received a wire transfer from them to conduct a search, to the time that we closed on a business it was about a year door-to-door. Over the course of that year there were about ten or fifteen people working with me to look at the business as we looked at about 2000 companies. That means we researched those, found  a lot of information about them so that we could reach out to them. We obviously reached out to every single one of them, but of those, it’s a very narrow funnel of those.

I only sent out, I think, somewhere between ten and twenty, what  a lot of people call “indications of interest.” Think of it as a one page piece of paper that goes to a business owner and says, “Hey, I’m interested in buying your company?” You only get there if you’ve had some dialogue with them and you can actually talk about terms under which you would buy the business. It’s not a formal offer, it’s just outlining the terms under which a formal offer would be extended and, hopefully it’s your chance to get in writing whether you’re in the ballpark with them about general terms, prices, etc., or not. Out of those 20, I only ended up giving out one letter of intent, which was for Hanlon, which was the business that we bought.

Of those 2000, roughly like twenty of them came to that point where I knew enough about the business that I was extending terms and was really thinking about myself as the new owner or part-owner of the business. Hanlon definitely wasn’t the only one, but it was one of, I think, very, very few out of what felt like a massive funnel.


Ken Kanara: Then, the transaction process, that was a new experience as well.


Nicholas Contag: That was. Yes, that was, but I think you’d be amazed at what you can do with adrenaline because as a consultant sometimes you work on a due diligence project, right? Those are always…I think due diligence is synonymous with nightmare. You don’t get amped on a due diligence project unless you’re a total masochist. The truth is, this was very different because here the due diligence is for you, right? You’re doing due diligence on the stuff that you think is potentially an issue when you start leading that business. You start getting really practical, really quickly about what stuff really matters here and what’s just analysis paralysis, nice-to-have scenarios. You really narrow in on the stuff that you feel could almost literally kill you on day one. There’s a lot of just thinking that goes into place and it’s very practical thinking. You want to stay away, in my opinion, from any academic notions of due diligence that you think you may have or templates of due diligence or checklists. You want to make it from scratch so you make sure you’re nailing down the things that are really going to matter on day one.


Ken Kanara: That makes a ton of sense, because we’ve all done those due diligence projects where you’re exploring hypothesis eight, nine and ten, in reality, they don’t actually matter. You’re really focused on the stuff that actually matters. Are those 50 people going to walk out when you walk in, right?


Nicholas Contag: Yes, that’s one of the biggest fears, totally. Is everyone just going to quit or are the books all fudged? Is everything just made-up in this business? All that stuff. Are the customers real? Are they fake? Why are they buying from this company? I think when you’re doing diligence oftentimes it’s easy to think of the more nefarious situations but are there lies going on or are these legitimately, “Hey, we’ve established these customers over a long time and they really love our service…” and things that you feel are more transferable to you as the new owner. You have to be really practical about all that and then how you’re going to gauge that. How are you actually going to get data to the best of your ability to glean that? That’s really tricky.


Ken Kanara:  That’s awesome. Walk me through day one. You walk in as CEO, what the heck is that like?


Nicholas Contag: You want to get the most luxurious car that you can get. And you drive it right through the front door.


Ken Kanara:  Two parking spots, right?


Nicholas Contag:  Obviously, and if they’re not already there for you, you make them. You crash the other cars out of the way. Once you throw your keys at someone and say, “Please take this…” No, you definitely don’t do that. I think it’s a weird experience for everyone involved. It’s weird for you, it’s weird for the owners who sold the business and definitely for all of the people working at the company who are receiving this news. More often than not, I think they have no idea. Maybe they have some suspicions that the company was being sold, but they didn’t know for sure. So you’re walking into the company to announce big news for the first time because the change in ownership potentially comes with a lot of changes and people are generally, really understandably, worried about change. I was really excited to just get in there. I remember I got there about 15 minutes early. I was parked outside of the office across the street like a psycho and then I thought, “I’m just going to go in. It doesn’t matter that it’s fifteen minutes early, I’m just going to go introduce myself.” I walked in and I went into the previous owner’s office and said, “Hey, if you’re ready to do this, let’s do this.” Then he just called his home office team into his office, there were about fifteen people in that room. The previous owner spoke first and he conveyed that he’d sold the business and gave some rationale for why and what had prompted it, and so on and so forth. Then I just introduced myself as briefly as I could because I figured this is their chance to ask questions. Everyone’s going to have a million things, potentially, that they want to ask, so I wanted to give the time to them. And they did. You get all kinds of questions. You get questions ranging from, “Are you going to move the office tomorrow?” Which, why would you? The answer is probably no, I’m going to leave it right where it is…to really specific questions about certain customers and things that you have no idea about, and you just hear people out, in my opinion, you just hear them out. You’re just trying to convey that, for the foreseeable future, you don’t want to make any huge changes, you’re just trying to learn the business. You’re not an expert in the business–they’re the experts in the business. You’re really just trying to learn about them and learn about the company.


Ken Kanara: That brings up something, which is true that I know about both of you because I’ve known you, but I think that you both have this unique ability to be very relatable. Yes, you went to fancy business schools. Yes, you worked at McKinsey. Yes, you’re successful entrepreneurs, but at the same time, I mean, you joked about the fact you’re going to take up two spots. I think that’s a commentary, because I don’t think everyone would have taken that approach. I think your ability to build connections with people is truly a big ingredient in your success.

If you think about the three or four things as it relates to the investment thesis for Hanlon and then where does Kat come into the picture? Could you talk me through the story of your ownership and eventual exit?


Nicholas Contag: Yes. The idea was, I think, really similar. It wasn’t anything earth shattering when you think about it in the context of most search funds out there today. The landscape with search funds has changed a lot in the last ten, twenty years with regard to the kinds of industries that people look for…that searchers look for. Maybe ten, twenty years ago, you saw many more searchers that were exclusively partnering with the same group of search fund investors and looking at very select industries. One of them, for instance, software as a service, for very good reasons, and companies that had very specific profiles–recurring revenue, which obviously you tend to get with a software business that has growing revenues that were rapidly growing at  double digits for the last maybe two or three years, that sustainable, even op margins. All these things that made for the perfect business, if you will, and very hard to find, especially to find and to buy at a reasonable price.

Now I think you see a lot of searchers that are self-funded and they are buying businesses that are much more service-based. They could be in construction. They could be in related services. There’s the Rick and Royce Buying a Small Business book that was published a few years back. For example, the example they give is the port-a-potty business and they say you could be the port-a-potty (say that 10 times fast), port-a-potty king or queen of whatever city. We’re talking about businesses…these kinds of businesses are not super high-tech, they’ve been around for a long time, but they can be, as they put it in the book, enduringly profitable. With these kinds of businesses, the thesis is generally, “it’s a locally run business, I think that as the potential owner/ operator of the business, I can come in and I can put processes in place so that we can just service a bigger, broader area and potentially, we can transform the business so that we can go from, say, cleaning port-a-potties or putting up acoustical ceilings, or whatever the case is, to providing a completely unrelated service that we discover just by virtue of being in that business. I think, a lot of times, that’s far-fetched. It’s hard to make an investment thesis out of that without having a really specific view up front of what exactly it’s going to be, because if you knew you were going to make some revolutionary industry-changing product or service, then presumably you would start a business, right? You would do a startup route and do that. With a search fund, you’re really just trying to expand the existing operations and formalize things so that you can do that.

That was the story with Hanlon. The business had done really, really well in the years leading up to our purchase of it, but as you mentioned earlier, it was missing a lot of things that it needed to get to that next level. The books and records were maintained by a single person. It was overwhelming for that person. It was literally just an overwhelming amount of paper and paper records…going through and those were being used to actually make payments. Money was coming in and out of the company on the basis of these paper records that were not kept in the most organized way possible. There was no clear path for advancement for people. We operated in an industry, in a part of the country, that frankly, there was endemic racism and sexism and bigotry of other sorts that made it difficult for black people, Latinos, women, gay minorities and  others to advance within the company because not only did they not have a clear process for advancement, but those characteristics about them were also viewed as a hindrance. It was this mentality of “less than.” So coming into the business, I think one of the biggest challenges was how do we change the culture so that we make it transparent so that people know what it takes to move up within the company. In other words, “I do X tasks, I know how to perform certain kinds of projects, I get promoted, I earn more,” but also to create an environment where people from different backgrounds could move up as well and they weren’t being ganged up on or held back in any way by others in the company. That was the biggest challenge when it comes to transforming the business and setting it up for growth.

That’s what we did over those five years that we ran it. Kat, as she’s mentioned, was involved in about the last two and a half years-ish of the five years that I was with Hanlon. We did a lot to  put in place things like performance evaluations for our field team, show them a career path, put in place training programs for them so that they could get formal, on-the-job training instead of just showing up to a project site, a job site, which is scary the first time you get to one: you’re wearing a hard hat, there’s all sorts of things that you could trip on or fall into and teaching them formally how do you do this job in a safe environment so that when you get out there to the field you feel like you know what you’re doing. We began offering things that the company didn’t offer before like benefits, health insurance and 401K plans. That didn’t exist. We put all of that stuff in place because we felt like it was the right thing to do. Then, on the other side of that, also building a sales machinery. When we bought the business, the only way you could figure out what the pipeline looked like for backlog was you’d have to go talk to the person doing the estimating and just ask him, “Hey what do you think is out there?” They would look at a big stack of paper on their desk that was, and I kid you not, like three feet high and they said, “Well it’s all in here.” So…if I wanted to know what we’ve bid out there and what we could potentially win and what the rest of the year could look like revenue-wise, I have to look through this stack of paper? “You got it. You got it, Ace.” That’s what you’ve got to do. We had to transform that. We had to put a CRM in place. That was one of the main things that Kat was involved in. We had to put in place this technology they would allow us to forecast our business and to plan ahead, and then use that to figure out, “When do we need to hire? Where are we going to hire from?” and so on and so forth.

It was a lot about taking the business from a much more mom and popsy operation that operated locally to turning it into something that was capable of taking on work throughout the entire state and doing it reliably and without too many local fires going on because things were just happening consistently throughout.


Ken Kanara: What was the most interesting thing you learned about yourself and about each other during this whole process.


Nicholas Contag:  I love that question. I think that we learned…I could speak for myself. I definitely learned that I’m very mission driven and I think the same is true for Kat. In any business that we go into, we want to do it because it’s fun and because we believe it’s the right thing to do. The service or the product that we’re offering does some good for humanity. You might say, “Well, outsource CFO services, what does that do?” But at first blush, it sounds like something almost out of the Dilbert comic book, but the truth is that a lot of small businesses out there–and this became very evident to us during the pandemic–they just need this help. How on earth are you going to grow your company if you don’t know what revenue is going to be and if you don’t have an idea what it’s going to be in the next year or how much cash do you think is going to be in the bank by the end of the year and how much you could pay yourself and pay your employees in bonuses. It’s very, very difficult to do that. With Klaro, we rally around this idea that we’re serving early entrepreneurs and small and medium business owners and we just get really jazzed up about that.

With Hanlon, it was a very similar thing. Construction is a tough industry, a super litigious industry. It’s very risky and the margins tend to be very thin. There’s a lot of cash you’ve got to outlay and there’s a lot of risk that you incur because you just might not get paid. All that kind of stuff happens. To get through all of that on a daily basis, for us it was about the mission. It was about creating opportunities for all of these people that can come join the company at various levels. On their first day they’re sweeping floors on construction sites, but they’re hungry, they’re looking to move up and we want to create an opportunity for them. We want them to know that they can come to Hanlon and we don’t care who your mom or your dad are, where you went to school–if you went to school…you can advance if you work really hard and we will be transparent on our side about what that is.

I definitely learned that and that’s the biggest reason why I love working with Kat because, and she’s nodding as I say this, but I know she feels the same way. That’s what just makes it fun and we can laugh about the hard times when they come by because in the end we just think, “Well, we’re still moving towards that end that we find fulfilling, so anything that happens in the between is not that big of a deal.


Katherine Hill Contag: Yes, I would echo what Nic said. I think that agreement on the mission and what drives us, no matter what business we’re working in, I think that has to be a real common piece for us in order for us to work successfully together. And we’ve had that in both this business and the last business.


Ken Kanara: That’s awesome. At the end of the day, I call it, “You gotta give a shit,” right? People ask us specifically as it relates to sales, “What would you recommend for a sales person?” You have to care. There are a lot of tactical things I could tell you, but that’s kind of…


Katherine Hill Contag: Yes, it comes down to that.


Nicholas Contag: Yes, it’s not a means to an end. It’s got to be much more than that.


Ken Kanara:  Just to wrap things up here, two things. One, we ask all guests this, and Kat, I’m interested to get your take on this too. I know you didn’t do consulting in the traditional consulting firm route, but I know you did strategy and finance and that sort of thing. I’m interested to hear your advice, but what advice do you have for consultants who are considering, let’s call it the “entrepreneurial/search fund/jack of all trades/CFO startup path. What advice do you have in general?


Katherine Hill Contag: Yes. I think my over-arching advice would be to dabble before you jump. If there’s a way, even through consulting projects, if you’re still at a McKinsey or a similar place, can you…I know there’s not a whole lot of free time, but are there ways that you maybe can…I don’t know if it’s going for coffee with someone that’s on the client side and learning about what they’re working on or what their needs might be. I know from when I was at Walmart and in the internal consulting role, I would meet with buyers all the time and I would try to learn about what they did just to see, “Is this is this of interest to me? Is this something that I want to do?” Then if you can’t, I know everyone is strapped for time these days, and I know you’re going to ask us for book suggestions, but I love biographies because I feel like that’s a really great way to learn what someone else’s life has been like and the adversities that they’ve faced and how they’ve worked through those, but then also what they’ve been working on. I like business biographies, so a lot of times they’re running businesses or doing this and that and you can learn from that what life is like a little bit on other side. I feel like that’s a way to live vicariously through other people, and lately I’ve really been enjoying podcasts for the same reason. I listen to How I Built This, for entrepreneurs and you can hear the story and live vicariously.


Nicholas Contag: Or Beyond Consulting


Katherine Hill Contag: Beyond Consulting is a great one. I highly recommend it.


Ken Kanara: I love that we’re self-plugging. This is great. Cool, what about you Nic?


Nicholas Contag: General advice…I agree with what Kat’s saying about trying different things out…


Ken Kanara: That’s how you stay married, by the way.


Nicholas Contag: Yes, exactly. I agree. To your point earlier about not making things perfect and being willing to just try things…if you’re trying to bake a cake and it comes out totally busted, by that same line of reasoning, don’t wait too long to take the plunge. If you think you might wanted to be an entrepreneur, you know. You know, right? A lot of people, I think, justify staying in jobs that they don’t necessarily like and I say that understanding full well that many people that are consultants love it. Great. All the more power to you. There are many people who do it that really, really hate it and they’re getting up every day wondering, “Hey, how long…how much longer do I need to do this for? Is it when I pay off those loans? Is it when I have X amount saved in the bank? Is it like when I get promoted it to a certain role? What is it? If you’re asking yourself those questions, you don’t want to be doing that. That’s the answer. Don’t wait too long to try it. Bet on yourself and I think you’d be surprised by what you can do, but you have to try. You have to have the discipline to say, “Hey, this is my last day. I’m out. I’m going to give myself X amount of time,” and be generous. We mentioned when we started we had six months. I guess that was a function of what we had to live on.


Ken Kanara: You backed into that number…


Nicholas Contag: …but it was the most that we could do, but be generous with that and give yourself that space. As you’re trying it out, as you’re an entrepreneur and you’re not working with all the resources of a big firm behind you and stuff goes wrong and you really mess things up and you feel like an idiot from time to time, or all the time, that’s okay. Give yourself the grace to just say, “Don’t laugh at it and at least I can learn from whatever this experience was and tomorrow will be a new day and tomorrow I can hopefully do a little bit better.” That would be my advice.


Katherine Hill Contag: I would add on, too, because I always had that hang up of, “When should I start? When should I make the plunge?” The sooner you can make it, the better, because your cost of living is probably just going to keep increasing, right? Because you get accustomed to…you either have kids or you get accustomed to the bigger house…if you can take the plunge and do it before that stuff starts adding up, it’s going to be easier.


Ken Kanara: That’s true. The golden handcuffs become increasingly more of a complex lock to pick as you get older. Last question…we’re always trying to expand our Beyond Consulting library so we’re always interested in people’s book recommendations. Kat you mentioned that you like biographies, what do you recommend?


Katherine Hill Contag: The one that comes to mind, which I know that Nic has read this too, it’s actually not a business biography but it’s by Martin Short. It’s called I Must Say but it is hilarious because it’s Martin Short. I love it because it talks about his career and you think of Martin Short and he’s awesome and he’s hilarious and he’s had a super successful career, but it hasn’t always been that way for him. I just love the story because it talks about his adversities on SNL and how it didn’t come easily to him and all these things that I didn’t really know about him and I just have such a greater appreciation for him. It also helps me look at things that I’m dealing with and trying to work through, so I just I love it because I also read a lot of business books so it’s nice that this is not a business book.


Ken Kanara: That’s awesome. I struggle with Imposter Syndrome myself, so I’m definitely going to read that because I always feel like I’m totally faking it.


Nicholas Contag: Yes, but that’s also, I think, really, really normal, especially when you’re trying different things all the time because, to some degree, you are faking it. You’re trying to build some legitimacy.

I think on the book front…this is another part of the interview where it becomes blatantly clear who the brains is here. Kat reads a lot more than I do. I’m not sure I can read. No, I have many books by my night table that are unfinished. I think of my recommendations this way, there’s the ones that you really want to read and then the ones that you pick up when you really need to fall asleep and stop looking at your phone, but those could still be edifying. I’m making my way through Thinking Fast and Slow, the Daniel Kahneman behavioral economics book. A really interesting book, it will put me to sleep in about ten minutes so I’ve got just a handful of pages to get through that at any given time. Still really good, and just broadly to the whole, just understanding how your brain works and as an entrepreneur, just this notion that a lot of the things that most people would be hyper-analytical about, you may have to get comfortable not being super analytical about, just for the purposes of moving your business forward and making a decision and testing it and then course correcting as needed. That’s one application there. Otherwise I’m really into prose in Spanish, so I’ll spare you all of those guys. Those are when I don’t want to go straight to sleep.


Ken Kanara: I do like Thinking Fast and Slow, but I am reading it really slow. I only started it two years ago and I think I’m 80 pages in but I’ll get it done.


Nicholas Contag: Exactly. Eventually. Yes, exactly.


Ken Kanara: It should be called Thinking Fast and Reading Slow. Awesome. Well, guys, thanks so much for joining us today. Tell us… if we want to learn more about Klaro or get into contact with you guys, no pun intended, how would we do that?


Katherine Hill Contag: I think the best way is to go to our website, which again is klarocfo.com and actually, on our website we have our linkedin’s and our e-mail addresses, so we love when people reach out to us so don’t be shy.


Ken Kanara: Awesome. Well, alright. Good stuff. Thanks so much for joining us, Nic and Kat, today. For those of you listening for the first time, be sure to subscribe so that you’re notified of new podcasts when they are released. We do an interview each week, so stay tuned until next week and if you wanted to catch past episodes check out ww.beyondconsulting.info and if you want to get in touch with us directly, it’s eca-partners.com. Until next week, thank you so much and thanks for listening.



Connect with Nicolas Contag and Katharine Hill Contag on LinkedIn and visit klarocfo.com for more information.



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