Zahoor Kareem is the Co-founder of K&L Capital, a private investment firm that acquires and grows small to midsized non-tech businesses. With a background spanning logistics, franchising, and business services, Zahoor focuses on building sustainable companies that thrive beyond their original owners. Over the years, he has led multiple successful acquisitions and divestitures, bringing operational excellence and long-term value to each venture. Zahoor is passionate about empowering teams, creating enduring businesses, and giving back through thoughtful entrepreneurship.
Here’s a glimpse of what you’ll learn:
- [1:53] Zahoor Kareem shares his first entrepreneurial experience recycling juice cups for profit
- [6:33] How Zahoor paid for college by launching creative campus businesses
- [9:47] Viewing capital accumulation as a strategic and purpose-driven game
- [19:39] Lessons Zahoor learned from acquiring and operating a FedEx delivery business
- [29:30] How Zahoor transitioned into the water and fire mitigation industry with franchise acquisitions
- [37:11] Building businesses that prioritize hope, resilience, and employee well-being
In this episode…
What does it really take to thrive in the high-stakes world of business acquisitions and franchise operations? Many entrepreneurs jump in, only to face unexpected pitfalls, rising costs, or the harsh reality of customer concentration. So, how can you build businesses that not only survive but scale successfully across industries?
According to Zahoor Kareem, a seasoned entrepreneur and acquisitions expert, success comes from focusing on businesses with clear, simple operating models and opportunities for improvement. He highlights the importance of balancing hands-on involvement in the early stages with long-term systems that allow the business to thrive without the owner. This approach reduces dependency risks and builds sustainable growth. Zahoor also emphasizes learning from past mistakes, quickly identifying deals worth pursuing, and maintaining a deep commitment to taking care of the people inside the business.
In this episode of the Rising Entrepreneurs Podcast, host John Corcoran sits down with Zahoor Kareem, Co-founder of K&L Capital, to discuss what it takes to succeed in franchises and acquisitions. They explore Zahoor’s approach to evaluating deals, building resilient teams, and overcoming hidden challenges. Zahoor also shares insights on transitioning into new industries and creating businesses centered on long-term value.
Resources mentioned in this episode:
- EO San Francisco
- EO Accelerator
- Entrepreneurs’ Organization (EO)
- John Corcoran on LinkedIn
- Rise25
- Zahoor Kareem on LinkedIn
- Greyhound
- Berkshire Hathaway
- FedEx Ground
- Servpro
- Blackstone
Quotable Moments
- “Capital accumulation is a game, right? I think ultimately for me it’s like, how do you acquire?”
- “I can start something from scratch, but I don’t want to, nor do I like to.”
- “You attract bees with honey, and that line has stuck with me ever since then.”
- “If I get hit by a bus today, the business still continues without relying on me.”
- “We’re actually in the business of taking care of our people, so they take care of customers.”
Action Steps
- Prioritize businesses with simple, understandable models: Focusing on straightforward operations reduces complexity and improves your ability to identify improvement areas.
- Build systems that operate without you: Creating self-sufficient businesses ensures long-term sustainability and reduces risk tied to the owner.
- Learn from past acquisition mistakes: Reflecting on what went wrong sharpens future deal evaluations and strengthens overall investment strategies.
- Focus on employee well-being and support: Investing in your people drives customer satisfaction, operational success, and long-term business resilience.
- Stay open to new industries and opportunities: Expanding beyond familiar sectors fosters innovation and diversifies your portfolio for greater stability.
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Episode Transcript:
Intro: 00:03
Welcome to the Rising Entrepreneurs Podcast, where we feature top founders and entrepreneurs and their journey. Now let’s get started with the show.
John Corcoran: 00:12
Alright. Welcome everyone. John Corcoran, here I am, the co-host of the show. And you know, if you check out the archives, we’ve got lots of great episodes with smart CEOs, founders and entrepreneurs from all kinds of companies. And I’m also the Co-founder of the company Rise25, where we help connect B2B business owners to their ideal prospects with done-for-you podcast and content marketing.
And you can go to our website at rise25.com and learn about what we do. And this episode is brought to you by EO San Francisco. EO San Francisco is the Bay area chapter of Entrepreneurs’ Organization, which is a global peer to peer network of 20,000 influential business owners across 200 chapters, 60 plus countries. And if you are the founder, co founder, owner or controlling shareholder of a company generating over $1 million a year in revenue, and you want to connect with other like minded successful entrepreneurs, EO is for you. And the EO San Francisco chapter has about 130 members across all kinds of different industries.
You can learn more about us at eonetwork.org/SanFrancisco. All right. My guest here today is Zahoor Kareem. He is a relatively newer member of the San Francisco chapter. He’s a seasoned entrepreneur with a track record of acquiring different businesses across a number of different industries, which is kind of fascinating because he’s looked at very various different industries.
And so we’re going to learn about the world of M&A and acquiring different businesses who are such a pleasure to have you here today. And I always like to start by hearing about what people were like as a kid. And you had a bunch of different ideas, but let tell me about this one, where you were interning in a hospital and you saw a business opportunity, saw these nurses that were making money by basically recycling their juice cups for a nickel. And you saw an arbitrage opportunity, I love it.
Zahoor Kareem: 01:53
I did well, thanks for having me. And that’s correct. I was volunteering in the summer at a hospital in Calgary, where I was for middle school and high school, and I noticed all the nurses collecting in garbage bags, like the leftover juice cups right there, like the tiny little juice cups with the little aluminum foil on top. And so I had a curiosity. I asked the head nurse.
I said, why are you collecting these? I was like, oh, because we just at the end of the week, we we take them to the recycling center and we get a bunch of money and then we use it for, for fun stuff for, for, you know, for the, for the unit. And so my parents at the time ran a wholesale bakery. And, you know, they had a supplier. And I picked up the cup and I looked on the back of it and I was curious.
And so I asked the distributor, I said, do you guys carry this cup? And he happened to say that they did. And I said, all right. He said, how much is it? And I don’t remember the exact number, but it was something less than $0.05 at the time.
And he said, but you have to buy them in like boxes of 2000. And I said, sure, like I’d like to buy it, a bunch of them. And thankfully he didn’t ask why.
John Corcoran: 02:56
And this is just buying them. Like the raw material.
Zahoor Kareem: 02:59
Like the raw material.
John Corcoran: 03:00
The raw uncut. Yeah.
Zahoor Kareem: 03:01
I don’t even know this was such a thing. Like, you could literally buy the cup. Yeah. And you know, in my adult self and being more environmentally friendly probably wasn’t the best thing to do. But I, you know, so I ended up ordering, I don’t know, thousands of these cups.
And rather than just taking them to the recycling center and wondering them wondering why these were like unused, I would basically every day dump them into our bathtub at the time and add a bunch of Kool-Aid powder to it, because it made like a color, and I would rinse them out and dry them and put them in a garbage bag. And then every week I would take them to the recycling center. And that was kind of my summer project of, you know, earning, I don’t know, a penny or two per cup.
John Corcoran: 03:40
You saw an opportunity. Yeah. So you want to make sure that those recycling snoops didn’t rat you out. Those guys. Yeah.
Zahoor Kareem: 03:48
And I and it’s funny, I, it’s funny you asked about the story I love that recycling business in in Calgary. Right. Because it was one of those where they just had a warehouse and they just collected a bunch of stuff and they paid you pennies on it, and then they sold it to a larger company. Right. And it was a really hard business to actually acquire.
No one wants to sell them. But it was an interesting thing as a, as a, you know, as a summer project. Well, it gets back.
John Corcoran: 04:13
To kind of your thesis behind your investment now is, is simple concepts. And that’s kind of like a simple concept, right. You know buying.
Zahoor Kareem: 04:22
Simple to me. Yeah.
John Corcoran: 04:23
Yeah. Right, right. Exactly. So so we could talk about that as it gets to your present day and the types of companies that you acquire. But you also had an idea to start a company that was like webvan for those that don’t remember Webvan explain what Webvan was, because it’s an interesting idea from the early dotcom days.
Zahoor Kareem: 04:43
Yeah, that might be a little too much credit for me, but yeah, Webvan from in the early.com days, probably the late 90s in essence started, you know, your What is it? Instacart was like the precursor Instacart, right?
John Corcoran: 04:57
Yeah.
Zahoor Kareem: 04:58
You could order groceries. And their model, which was flawed, is they started to build warehouses and host all this inventory everywhere. And my idea before.
John Corcoran: 05:08
Super capital intensive.
Zahoor Kareem: 05:10
Right. My idea before all this started was, well, what if you’re busy and this is really pre-internet, and you could just call a phone number and tell us what you wanted for your grocery orders, and we would go do it for you, and we’d charge you 5 to 10 bucks. Again, another kind of high school project. And it didn’t get off the ground, but I literally printed flyers, went to the grocery store and put them up on a bunch of different cars and tried to see if it would work. And interestingly, it didn’t work, for better or for worse.
Otherwise, I don’t know how I would have. I would have then had to figure out how to actually solve the problem of I have your order now. Now I have to go to the store and find a way to pay for it.
John Corcoran: 05:45
Yeah.
Zahoor Kareem: 05:46
And collect money and then make $5. But.
John Corcoran: 05:48
But you weren’t wrong that one day someone would be interested in this. busy people would want someone to deliver the groceries for them.
Zahoor Kareem: 05:56
Yeah. And, you know, it’s interesting. One of my tenets is I can start something from scratch, but I don’t want to, nor do I like to. Right. And and I and I’ve made that mistake a couple of times.
But typically my my, my, you know, my SOP is find something that works and either clone it or make it better. Right. I don’t have any, I don’t I don’t think I have any bright ideas, I just, I like I, I ran businesses in college and I learned from what other people were doing, and I put him out of business by doing it better, faster, cheaper than how they were doing it.
John Corcoran: 06:29
What other ones? So you had some other businesses during college?
Zahoor Kareem: 06:33
Yes, I paid for, paid my paid my way through college by I think it was I noticed at the beginning of the year that someone was selling t shirts and I went to McGill, which is in Montreal, and it’s probably a top 20 school.
John Corcoran: 06:45
Very well.
Zahoor Kareem: 06:46
Respected.
John Corcoran: 06:46
School. Yeah.
Zahoor Kareem: 06:47
And someone was selling in September a t shirt with Harvard’s logo on it and underneath it, it said, America’s McGill. And I.
John Corcoran: 06:57
Love.
Zahoor Kareem: 06:57
The t shirt. Right. And so I’m like, oh, that’s interesting. And I made a couple of phone calls. My parents had a friend of a friend that owned a screen printing company, and so I got him a logo and I printed, Lord knows how many hundreds, maybe thousands of shirts.
And I knew where all the new kids were going to be on campus because I was, you know, part of the welcoming group. So I just set up a little table and we just sold these off for, at that time, like $20 a shirt was a big deal 20 years ago. Yeah. And it was just at the beginning of the year, I noticed that somebody else was, you know, recording cassette tapes of a music class. Right.
So you could actually almost like study notes. And so.
John Corcoran: 07:38
Yeah.
Zahoor Kareem: 07:38
I figured this out, and I went to talk to the professor before the class even started and said, hey, can I have the recording in advance? Like, can I have your master? Because this is what I’m going to do. I’m going to go to the library and I’m going to make copies so that not everybody has to go to the library to make their own copies. And he said, sure, here you go.
And I made a bunch of these tapes and sold them off at, you know, five bucks at a time. But the biggest business in college was I was going to Toronto with a friend who that friend is now turned into my wife, actually, of 25 years. And she’s like, oh, I’m going to take this bus. But it’s not Greyhound. And it’s like $50 to go from Montreal to Toronto, which is probably a four hour, 4 or 5 hour drive.
And I happen to sit at the front and I just peppered the operator with questions on the four hour drive, and they answered all of the questions I asked. So the next year I’m like, I think I can do this as well. And so I ended up printing up a bunch of flyers, putting them up all around campus, charged $5 less. And partly it was hard work, partly was luck because when their buses showed up, I sold out. They had some bad luck, but when their buses showed up, they were school buses and mine showed up and they were full coaches.
So after the first event, I basically they stopped providing the work and every holiday 2 or 3 times a year, I would rent 2 to 3 Greyhound buses and I would sell them out.
John Corcoran: 09:04
These were students that needed to like, get home to Montreal.
Zahoor Kareem: 09:07
Yeah, they would go to Toronto. And you know, if you took Greyhound or the train, it was 100 bucks and I was charging $55.
John Corcoran: 09:14
Yeah.
Zahoor Kareem: 09:15
And people knew that it was bus. And I’m like, it’s not my bus. But that like to this day, like people still remember that bus service. And so that was another one of those like saw someone else do it. Thought I’d give it a shot and, you know, made it happen.
John Corcoran: 09:28
So you mentioned that your parents had a bakery. So I guess you maybe observed entrepreneurship up close. But what drove this? You know what, drew? You know, if you look introspectively, what drove you to start these different businesses?
Was it you just wanted to get money in your pocket? Was it curiosity? What was it?
Zahoor Kareem: 09:47
I think it was this note. It was a game, I think, more than anything else. Capital accumulation is a game, right? I think ultimately for me it’s like, how do you acquire how do you keep acquiring capital? Not for my own good, but ultimately at the end of the day, it’s to give it away, right?
Like it’s to help make the world a better place. I’m going to quote Michael Jackson. And so it was just an interesting model, right. Like even my passion for the equity markets, like I read everything I could find on like, Buffett and Munger and Berkshire Hathaway and in high school when I came across them. Right.
And so but my uncle was an entrepreneur, ran the largest budget rent a car franchise. My parents are professionals. Dad’s a mechanical engineer. We moved to Canada. They started becoming entrepreneurs.
Right. And so they ran businesses, but they were just happy running their business. It was just a job. It wasn’t. It wasn’t a business how I think of a business in terms of it making money for you.
They were working in the business, right? Not on the business.
John Corcoran: 10:46
And did that example inspire you to not want to work in businesses?
Zahoor Kareem: 10:52
Yeah, I mean, I didn’t want to own a small business, right? Coming out of like, working in the corporate world and having a steady check, like, I didn’t want to just I didn’t want something to be dependent on me. Like all of our acquisitions, I’m really involved with the first year. But if I get hit by a bus today, like, the business still continues, right? Yeah, they might have an issue when it comes time to like closing the books at the end of the month and, you know, looking at some financial oversight.
But the businesses don’t rely on me. Like, I like my flexibility and my freedom. Yeah. And my time with my kids and my family. And so I, I don’t like to be, you know, my business partner is on the other side, right?
He loves like, knowing every single thing going on in the business. And I love him for it. I’m on a need to know and I don’t need to know everything. So.
John Corcoran: 11:35
Yeah. Yeah. So you after college, just you ended up moving to the Bay area a couple of years after college, I believe it was with the with the goal of having the business you have today. But you you found that you. It didn’t exactly work out that way.
So how’d you how’d you end up coming to the Bay area? And how did that work out?
Zahoor Kareem: 11:56
So right out, right after college, I. I wanted to acquire a business, a business. And I was looking at a bunch of different businesses, and I was young and immature and didn’t know what I knew now. And I passed on a couple of businesses, which would have been great. But at the time I thought they were too expensive.
Like I thought the multiple of EBITDA or cash flows was really high. And I’m glad it worked out that I didn’t buy anything because a year and a half later, I had a couple of mentors that said, you know, tech’s really big, like this is now 2000. Like, why don’t you start a tech company? I’m like, I don’t know how to start things. I just know how to join things and hopefully make them better.
And so I came to the Bay area to a job fair on like 24 hours notice. Really landed, landed at, you know, midnight San Jose went to a Kinko’s because those existed. Printed my resume. Because that’s still what you did back then.
John Corcoran: 12:51
What do you remember what year this was?
Zahoor Kareem: 12:53
This would have been in January or February of 2000.
John Corcoran: 12:57
Wow. Okay. Oh, this is actually March right before the peak, which was March of 2000. Oh, right.
Zahoor Kareem: 13:03
Again. No, no, I moved your right around the time the Nasdaq crashed in March of 2020.
John Corcoran: 13:07
March of 2020. Yeah. That’s right.
Zahoor Kareem: 13:09
Yeah. And so I came in January.
John Corcoran: 13:10
20th 2000 2000.
[Continue to Page 2]
Zahoor Kareem: 13:12
Oh 2000. Sorry. Yes. Not not Covid. Yeah.
And I looked at, you know, the job fair listings and there was 50 companies that were there. And I said, I want to meet these four companies. And I picked out companies either because they’d either just raised capital or the executive team was attractive. And I met those four companies. I got invited back a week later for interviews with all those four companies, and I think I got two job offers out of those four that I really wanted to meet with.
And I picked the company that I liked the senior executive at and they raised a bunch of money. And the long story short of it is that CEO, that whose company I joined because of him ended up being on the board of the second company I was at turned in from being a boss to a mentor to a very dear friend like dear friend, as in, he came to see my daughter when she was born in the hospital. Dear friend. Wow. And so.
Yeah. So I joined a a software company that was, you know, initially was doing things in the world, you know, recording like presume. Right. They were recording streaming audio then they were doing some content management stuff. And so yeah, so I was on the marketing side and business development side there for three years.
John Corcoran: 14:30
Yeah. So you worked in a variety of different roles ops, finance, business development. It sounds like you hopped around kind of different, different companies during this period of time, about 15 years. And you would you describe this time as, you know, just kind of like learning the ropes or learning the tech world?
Zahoor Kareem: 14:47
Yeah, I think it was I was on this path, right, of continuing either learning, learning new things. Step one moving up the ladder. Right. It was all back then. It was like, how do I get to the next level?
Right. How do you get the next title? And yeah, you know, and how do you get the next raise. Right. Because it’s expensive to live in the Bay area and, you know, your first job, you’re making ends meet.
And so yeah. So the second company I joined was in the e-commerce space, had some fantastic growth. I mean, I think the seven year period I was there, it grew from 10 million to 200 million. Wow. And I got to take on lots of different roles there and fixing divisions, launching divisions, small M&A, large M&A, watching it go public.
You know, which was a great, great education right. It was it was like an MBA on the job. Right. So yeah. And figuring things out along the way, which was, you know, which.
I’m super grateful for that experience and for people pushing me to learn more and, you know, and even stretch outside of my comfort level. Right. Because they trusted that I could figure it out.
John Corcoran: 15:55
You’ve since now you have a company where you’ve done acquisitions outside of the tech world. What during that experience, that 15 years of working inside the tech world know you to an interest to not pursue that, but rather to acquire companies that are non tech types of companies?
Zahoor Kareem: 16:15
I think the premise when I started this was how do you generate double digit returns for investors paid out on a regular basis? Because in the tech world, if you start, if you’re in the venture world, you’re raising a bunch of capital for an idea. And 5 to 10 years later, you go public and there’s a return. If you’re in the typical private equity world. You know, the Blackstone’s KKR of the world.
You acquire a company, you do a bunch of restructuring, you sell off pieces, you add a bunch of debt. And seven years later, something happens in you return capital. And I wasn’t I didn’t come out of the banking world. Right. So I wasn’t going to go raise $100 million fund.
That wasn’t necessarily an option. But the idea of telling people that, hey, this is going to generate returns for you on day one, right? You’re believing in me, but your capital is actually going to generate a return on a quarterly basis was an attractive premise, right? So and the fact that you were going to be able to generate 15 to 20% returns on your money, I thought was an interesting idea that people would gravitate towards and would want to participate in.
John Corcoran: 17:23
Yeah. And you actually had a dinner party. So around the time you were going to leave, the last company you worked for, and you decided that you’re going to do something else, you went to this dinner party and you had people you basically saying, yeah, we knew that you’ve always wanted to go acquire something or you tell the story, but you were you were asking. They were asking about what you were going to do next. And you basically revealed this is all the kind of the master plan.
They all knew that that’s what the master plan was.
Zahoor Kareem: 17:53
They did. I had looked at different companies to acquire and shared it, and looked at it with a couple of really, really close friends. And so I was having this dinner probably, probably in early 2015 at the time. And they had asked exactly. They’d asked that same question, what company do I want to look for another company to join?
What do I want to do? And I said, you know, I’m actually going to look at acquiring a company and raising some capital. And they obviously who knew me very well and had heard me talk about this for a long time, it said what you’ve always been talking about. And in essence, at that dinner, you know, the 3 or 4 people committed to participating and being the equity if I found the right deal. And so that kind of kicked off the races of identifying a company to potentially acquire.
And got introduced to a company that was doing last mile delivery services for Fedex ground. Knew nothing about the space.
John Corcoran: 18:53
Know anything about that? Yeah.
Zahoor Kareem: 18:54
Didn’t even know it existed. And I think every company I’ve acquired since with a partner, I never knew those businesses existed until they were brought in front of me and so quickly ramped up and got my got my arms around it, understood that it kind of met the criteria I was looking for. Right. It had. It was consistent operating history.
Easy to understand. Some form of management in place, minimal capital expenditures. I was wrong, by the way, in three out of those four things. But the premise, and I think I’ve been wrong in every deal that we’ve done, like what I thought was what I thought I knew is not what I knew after we acquired the companies.
John Corcoran: 19:31
So for let’s dwell on that first acquisition. So what were some of the bigger areas? You were wrong. Like what needed to be fixed that you didn’t think needed to be fixed.
Zahoor Kareem: 19:39
So the idea that there’s minimal capital expenditures. We acquired this company and Fedex ground, which in essence was the only was the only client. In essence, it was a master contract with Fedex ground.
John Corcoran: 19:51
Now that’s a challenge, right?
Zahoor Kareem: 19:52
A month after we acquire, you know, this company that was delivering in, I don’t know, ten zip codes, a new rule came down and a new type of agreement came down where they forced us to repaint the entire fleet. Now, you know, that’s like a $50,000 expense the first month after you take over an operation. Didn’t realize that.
John Corcoran: 20:13
And there’s nothing you could do because that’s your only customer. You had to comply.
Zahoor Kareem: 20:17
No, I thought yeah. I also learned very quickly that they yielded a big bat. And, you know, I wrestled a bunch of feathers, and I shouldn’t have. So one of my investors to this day, and who’s a dear friend, you know, said something to me which has stuck since that day. And he said, you attract bees with honey.
And that that line has stuck with me because I was I was the bull in the China shop because I was like, I’m your biggest provider in San Francisco. I don’t have to do like, I’m going to follow the letter of the law of the contract. And they weren’t accustomed to anybody pushing back. And so as soon as someone’s pushing back, they reminded me very quickly that they were the big dog on campus and they controlled everything, right. So we were doing an acquisition.
They they railroaded it. We had to restructure it. And then I learned that we’ve got to play nice all the time. And so.
John Corcoran: 21:13
Yeah. Yeah. Because that’s that’s a lot of client concentration. If you have only one customer.
Zahoor Kareem: 21:18
Correct. And there’s no option right. Your trucks are branded Fedex ground. You can’t deliver for Safeway at nighttime.
John Corcoran: 21:24
Yeah yeah. So that’s a bit scary.
Zahoor Kareem: 21:28
That that scare factor is one of the reasons we divested as well of the business seven years later. Yeah. You know, at a healthy return. Right? But we had a couple of tough years where, you know, you’re it’s staffing related, right?
And that truck needs to get out. And if it doesn’t get out, your client is kicking and screaming, asking you how you’re going to get it out the door.
John Corcoran: 21:49
Staffing related. Like you didn’t have a driver.
Zahoor Kareem: 21:52
Right? So if a driver doesn’t show up.
John Corcoran: 21:53
Yeah.
Zahoor Kareem: 21:54
That truck is going to be reloaded with another 200 packages tomorrow. So you have to move those packages today somehow or the other. And so we had to, you know, very quickly learn the additional expense of having spare drivers and having your managers be able to drive. And, you know, and while it’s a consistent space, having one client who dictates your rates and your cost structure is not the business I wanted to be in longer term. Right.
So we learned it took us a while to figure that out, but we still made four more acquisitions in that space before figuring it out.
John Corcoran: 22:28
Before you divest it. And then you also launched and and then you closed and Amazon delivery service was this before Amazon started building their own delivery service? Because there was a long period of time where Amazon used a combination of, I think UPS and and US Postal Service before they built their own.
Zahoor Kareem: 22:46
Correct. So this is when they built their own, they called it their delivery service provider platform. And one of my old managers had left and was working for one such company and called, I think we should do this like you should do this. So, you know, made a few phone calls. We got an introduction and instead of buying a fleet, we wanted to test it out for a year.
And we rented vehicles. We rented a fleet of, I don’t know, 20 vehicles, which was super expensive for a year to test it out. And it was an interesting experiment which reminded me not to start something from scratch. Right. Like you, you know, again, there was a staffing issue.
There was a fleet issue. Amazon, you know, much to their their claim for success is that they’re super hyper focused and micromanage every aspect of it. And so ultimately, it wasn’t really a separate business. Like they would control everything you do. At what time did you show up?
Did everything get delivered? What equipment do you use? What time of year people coming back, right. Are they in uniform? Are they not?
Right.
John Corcoran: 23:48
And so compared to Fedex, it was a lot more micromanagement.
Zahoor Kareem: 23:53
Absolutely. And so a year later, they tried to actually offer us a larger contract to which we said no to and said we’re just going to cut our losses and move on, is.
John Corcoran: 24:04
That they didn’t want to be in this space.
Zahoor Kareem: 24:07
No. And so, you know, it was a, you know, call it a not including my time. It was a six figure loss, right. So, you know, and we continued to kind of not just manage the Fedex business because it had continuously, you know, the package world in e-commerce was continuing to grow at 7 to 10% a year. And so, you know, we were We you know, we were lucky in terms of that.
We, we we we looked ahead a little bit, right. And saw that Fedex was going to start to cram margins down. But they also wanted to build more concentration in terms of the zip codes that you delivered in and partially hard work partially. Good luck. We restructured the zip codes that we had going into Covid to focus on residential only, and got out of the business zip code core.
John Corcoran: 24:57
Interesting. Yeah.
Zahoor Kareem: 24:58
Which which again, worked like we didn’t have to lay anybody off. Our volumes went up 50%. We were sending volume to other companies that had nothing to do during Covid because they were delivering to the financial district, and there was no one in the financial district at the time. And so.
John Corcoran: 25:15
That’s fascinating. There’s I interviewed other companies like this that in other spaces that unintentionally, you know, ended up being well positioned for the Covid downturn, not even realizing that that would be a thing, because there’s other companies that would think like, oh, we just want to focus on urban core, and they don’t realize how much risk they put that in, you know, going into a thing like a pandemic.
Zahoor Kareem: 25:38
Yeah. And we knew that delivering that businesses was also a pain point in the logistics side. Right. Because you’re delivering to a business that you’re trying to find parking, you’re delivering large volumes of product to one individual, which means the profit margin is a lot less. You’ve got massive.
We are spending $10,000 a month on parking tickets, right in San Francisco. And so kind of that shift of going from 11 zip codes all over the place to like, you know, I think it was four zip codes in core residential areas in San Francisco was, you know, good stroke of planning. And then we got lucky with Covid. Yeah. I don’t think you could say that very often, but.
John Corcoran: 26:21
Yeah, when that but when Covid started to happen, was there a moment, was there a period of time, a couple of weeks where you were, you know, petrified, where you felt like it was all going to unwind or. No.
Zahoor Kareem: 26:34
I was on the other side of the world traveling with my family for a year when Covid hit. And so we never, on the business side of it, ever had to shut down because it was deemed to be an essential service. So it was just status quo for us. It was more, you know, make sure everybody’s masked, right? You’re not really engaging with a customer because you’re doing a delivery to the door.
The rules became really easy, right? It’s like, hey, you don’t need a signature for anything, right? Like, yeah, you’re just delivering the package, right? I mean, if it’s alcohol, you still need a signature. But outside of that, it was still like, drop something off and keep going.
And so we actually saw a very big increase in volumes, about 50% within our delivery areas. And because they were deliveries to the home packages were smaller, which means we didn’t have to add more people. Right. Our vehicles just got more efficient. And so we got really lucky that there were no business.
The business continued just as if it was normal.
John Corcoran: 27:41
Yeah. Wow. So at some point you decide that you’re going to divest of this, sell off this business, and you decide to move into a new industry. How did you evaluate what industry you would go into next?
Zahoor Kareem: 27:54
So, you know, the idea was that we would always do another acquisition. But I did four in a span of call it 15 months, and then didn’t do another one for seven years or for five roughly. What are we in 25? Yeah, roughly five years. I didn’t do another one.
And then in the process of looking at other businesses, it was, you know, my my now business partner who was initially just a passive investor on the logistics side. And I started working together. I couldn’t tell you how that happened. He was curious about what I was doing and the returns and I shared because I have no secrets. And and somewhere along the line, we started working together, and I think he came across the business and said, do you know anything about this?
And he’s got a real estate background. And he was kind of intrigued by this. And he said, do you know anything about the water and fire mitigation? I said, no, but let’s look at it. And we had initially looked at this, our first acquisition, and it was already under contract.
So we forgot about it. And then I think it was two months later, the broker called back and said, hey, it fell out of contract for, you know, the the buyer couldn’t get the right financing. Are you guys still interested? And so we said, sure, let’s, you know, let’s dig in and you know, and and put in an offer. And so we started looking at it and again, it kind of met the criteria.
Right. Which in hindsight were all wrong. Consistent operating history, easy to understand, minimal CapEx, some form of management in place and three out of the four after we got into it were all wrong.
John Corcoran: 29:27
And what were the biggest ones that were off?
Zahoor Kareem: 29:30
So one was consistent operating history, right? If you as a customer have a water loss because a pipe broke in your house, you’re likely hopefully never calling me back, right? It happens once to you. It’s not like you’re your water pipe and your fridge is going to break every three months.
John Corcoran: 29:46
Yeah.
Zahoor Kareem: 29:47
So that’s one. Right. You basically have a customer once that was first learning. The second one was Servpro, which was the franchisor had been acquired by Blackstone a year or two before we got into the business. And they wanted to add more franchisees.
And so they were selling off more territories. And we quickly realized after the fact that we had acquired Palo Alto, Redwood City, Atherton, but they were doing a ton of revenue outside of those zip codes. But now all of a sudden, someone else had that zip code. And so that was another key learning. And then the third one was is that the seller who was exiting stage left really managed a lot of the day to day operations, and there were no redundancies with their core people.
And so it took us about a year and a half to build some redundancies as the business got larger. And then, you know, there was not a lot of CapEx. But the first two about the consistent operating history was the key. You know, the big moment going, no, there isn’t like if you move into the commercial side, there is a little bit more consistency, right? If you have a property manager that has a thousand units, they’re calling you every month because something’s wrong somewhere every month, right.
John Corcoran: 31:05
So but you you were in residential only.
Zahoor Kareem: 31:07
At the time.
Zahoor Kareem: 31:08
They were in residential only. And if I look at it now, five years later, four acquisitions later, we’re just starting to identify a commercial sales rep and start to recruit for one to try to build a book of commercial business. Probably do about 20% commercial today. And, you know, with some large corporate clients. But again, it’s not super consistent.
John Corcoran: 31:31
Yeah. So you so you figured these pieces out along the way. And did you stay with the franchise model with acquiring franchises.
Zahoor Kareem: 31:40
Correct. So the we did we did so we so we acquired, you know, under the Servpro umbrella, which is a franchisor. You know, we acquired two territories from an existing operator. A year later we acquired another territory. And then I think about six months after that, we acquired two more territories from, you know, from another operator that were still under the umbrella.
So it was great. We could just consolidate them.
John Corcoran: 32:05
So it’s kind of easier, a little more cookie cutter type of approach that way. Correct.
Zahoor Kareem: 32:10
Okay. Correct. They just get.
Zahoor Kareem: 32:11
Turned in under the same parent company umbrella and you know, just, you know, it’s one payroll system. Right. Yeah.
John Corcoran: 32:20
And how is that working? In some ways, there could be similarities to the Fedex world, where someone else, some other company kind of controls your butt and they change the rules of the road. There’s not much you can do about it. How has that been being underneath, you know, a larger company where they they dictate a lot of the rules for you.
Zahoor Kareem: 32:38
You know, it’s it’s great.
Zahoor Kareem: 32:41
Because they’re a typical franchisor, right? And in the regular franchisor franchisee model, you know, in the Fedex world was very different. I wouldn’t call it acts like a franchise model, but it’s not right. They consider you a third party service provider. And so they’re always threatening your contract.
John Corcoran: 33:07
It’s a very.
Zahoor Kareem: 33:08
Very mature franchisor model.
John Corcoran: 33:10
They have a.
Zahoor Kareem: 33:11
Technology platform that they’re constantly updating and improving. You know, you know, they they hold an annual conference where they bring everybody together to do continuing education. Yeah. It’s great. It’s a ton of it’s a ton of support.
And the phone rings because you are a Servpro operator, right? So people know on the residential side that they’re one of the two major players in the residential side, and now they’re growing in the commercial side. And so, yeah, it’s been a great it’s been a great place to be because again, it’s an essential service. Right. So even during Covid, we actually closed on the acquisition in the middle of Covid.
And it didn’t skip a beat like, you know, it just it continued because the type of work changed a little bit. But we still kept everybody, you know, we didn’t have any layoffs and kept everybody occupied.
John Corcoran: 34:03
Right, right. Now we talked about this before the interview, but you kind of in some ways like there are these categories, categories, categories in the acquisitions world, private equity. There’s a search fund, but you’re you’re kind of neither of those. Do you do you find it’s hard to explain to people what you are or to define who you are, or you know what your company is?
Zahoor Kareem: 34:29
Yeah, I think.
Zahoor Kareem: 34:30
It depends who I meet. Right. If I’m just meeting somebody on the street and say, what do I do? I may just simplify and say I manage X, Y and Z company.
John Corcoran: 34:37
Yeah.
Zahoor Kareem: 34:38
If I’m having a longer conversation, I will keep it simple and say, I manage a private equity fund and we acquire small to mid-size companies. If I meet somebody who’s super well versed, I’ll tell them we run a search fund. And so I think it just depends on the audience. Right. But to simplify it, we acquire non-tech, you know, non-tech operating companies.
And typically where a seller is exiting doesn’t have family and or kids who want to take over. And they want to, you know, they want to exit stage left. Yeah. Right. Yeah.
John Corcoran: 35:12
And and now you’re looking even in other areas as well. So now you’ve been looking into the education space and the health care space. Correct. I guess I’m just so curious about, like, how you can manage this, to move from one industry to another industry, to another industry without the background and experience in these areas.
Zahoor Kareem: 35:32
Yeah. And I think, you know, I don’t I don’t think I’m, I don’t think I’m special in any shape or form. Right. I think it’s just my brain. My brain is wired to be able to understand lots of things very quickly.
And apologies for the cuckoo clock that’s going to ring 11 times, I think. And I think I say no very quickly to a deal. Right. Usually within the first five minutes I will say yes or no. If I say yes, then we’ll dig deeper.
And usually it’s what’s in my circle of competence. What can I understand and grasp really quickly? And one of my favorite business people or companies I should say, is Berkshire Hathaway, right? So operated by Warren Buffett, Charlie Munger, who’s now since passed. And they’ve got 50, 60 companies in their portfolio.
Right. Granted, they’re much larger, but that’s kind of been the model, right? Like they he gets a phone call and someone says, I have this company to sell. And they say yes or no. And then they dig a little deeper.
And so when we’re looking at kind of the next acquisition to get, it’s always been business services education and healthcare. And we you know, we’ve identified, you know, a company in the healthcare space. And I won’t share the name. But the premise is that, you know, that they provide, you know, assisted daily living support in the home, right to to, you know, to individuals. And so it kind of checks off the criteria of consistent operating history.
Easy to understand, minimal capital expenditures, right.
John Corcoran: 37:08
Whether those come to fruition or not. Right. Correct.
Zahoor Kareem: 37:11
But but but but the other tying thing is that if I look at the water and fire mitigation business and this home health business, they’re actually in the business of giving people hope. It sounds a little cheesy to say, but like when our when when our phone rings, when you’re sitting in a puddle of water or you’ve had a fire or you’ve got mold, right? Like you coming.
John Corcoran: 37:34
Up, you’re coming.
Zahoor Kareem: 37:34
To help. Coming to help. Right. And so ultimately, you know, and I remind this to our teams often, right. Like, not that we’re we’re in the helping people business.
But I take it a step further. Right to this is a long answer to your question of like, what are we in the you know, what are we in the business of. Right? Like, we’re actually in the business of taking care of our people, right? And if we can take care of our people by making sure that they have a roof over their head and food on the table, and they can build their families and be successful, they’ll take care of their customers, right?
John Corcoran: 38:11
Yeah. Yeah.
Zahoor Kareem: 38:11
For sure. To me, to me for all of our companies over time. Success is when your employees kids go to college and the kids go, hey Mom and Dad, how did you pay for college? They say, well, I worked for a company that took care of me. Yeah, right.
And and so not directly the question you asked, but I think getting a handle, I can understand lots of different companies pretty quickly. If the company is public, I probably know about it. I spend a lot of time making investments in the equity markets as well, and in a wide variety of companies. And. If I understand them very quickly, I don’t know how or why, but it makes sense in my brain, right?
John Corcoran: 38:50
Yeah.
Zahoor Kareem: 38:50
Yeah, yeah for sure. And you know, and and also there’s the understanding over time that, you know, people are really the key to any business. Right. And so that’s super important.
John Corcoran: 39:00
Yeah. So this has been great. Where can people go to learn more about you. Is there is there anywhere they can go. Because I know this is like kind of your question.
Zahoor Kareem: 39:09
Yeah. Yeah. One of the things that I will, I will commit to doing is we need to have, you know, you know, we need to actually set up a website sooner rather than later for K&L Capital or our holding companies. I need to update my LinkedIn profile with a little bit more detail, because it doesn’t have a lot on it. I’ve tended to hide in the shadows.
Our operating companies do really good work. Our people do really good work. And you know, I help to navigate and provide, you know, high fives in the background. And I am not have not typically been a very public person. And so but we.
John Corcoran: 39:43
I appreciate you coming out and sharing your story here today because I’m sure it’ll inspire someone. And you’ve learned a lot, and I appreciate you sharing some of that wisdom.
Zahoor Kareem: 39:52
Thank you. I appreciate the time, John.
John Corcoran: 39:54
Thank you so much.
Zahoor Kareem: 39:54
All right. Chat soon.
Outro: 39:56
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