Introduction
In this insightful interview, we explore John’s journey from civil engineer to business owner through buying a service business. John shares his experience of acquiring a residential appliance repair business in South Carolina, offering valuable insights for aspiring entrepreneurs looking to enter the world of business ownership through acquisition rather than starting from scratch.
Founder Success Story QnA
Start us off with your two minutes on your back story and what it was that led you to want to go out and buy a business.
I grew up in South Carolina and after college became a civil engineer and enjoyed that somewhat but kind of became ready for the next thing. I wanted to do something a little more entrepreneurial but frankly just had no ideas, no money, and a family to support, no idea what to do. So my company offered me an opportunity to move up to Virginia in a different role and so that seemed like the best option at the time so we did that. Five years ago and shortly after moving, actually Mill Snell, a guy that’s also active on Twitter, kind of put the bug in my ear about buying a company. And I kid you not, it took me months to figure out what buying a company was, what there was to buy about one, and where the value was in a company. I just was starting from scratch and yeah, I did slowly learn more about that and as I did it just became more and more clear that this is what I wanted to do and so never really had any sort of doubts or back and forth on it. It was just the more I learned, the more I wanted to do it and so it became a matter of getting the family situation and the job situation and the finances right to be able to pursue this.
When Mill Snell first introduced you to the idea of buying a business, did that mean that you never considered starting something from scratch?
I had actually been considering starting from scratch prior to that. That was the only other option that I knew and I knew I didn’t have a great idea. I went round and round and round, spent many a night on the laptop researching various and sundry things that I thought maybe I could do and was just never anywhere close to confident enough, never thought of any sort of idea that could produce revenue quickly enough for it to be a viable option.
You kind of get your ducks in a row, get the family situation to the point where everybody’s on board for this next chapter, you’re still in Virginia at the time but you know you’re going to move to South Carolina, your goal is to move back to South Carolina, so you start searching in South Carolina, is that right?
That’s right, yep. We so tell me about this search. Yes, yes. So we decided, I mean first off the big thing is we knew exactly where we wanted to live. I mean I’m talking within like a 30-35 minute radius, not even like a general area versus or a region or something like that. And that was just really important our family. So we did that. It’s a severely constrained geographically kind of thing. And you know we’re not in an enormous city with where businesses are listed every day. So I started looking in April and basically my criteria evolved pretty quickly but I started with just to give you some some actual numbers here. Yeah, I wanted a floor of about 250,000 in owner’s earnings which I thought would be enough to replace my salary, pay a loan that I was going to need to get, and provide a return that would be commensurate with the risk and allow me to build and grow company reinvest in the company basically. And then a ceiling of something like 1.8 million which is what I thought I could max out with an SBA loan and seller financing and the cash that I had. Turns out that part was a little bit rosy but we didn’t get up near that ceiling so we didn’t have to worry about it. But that is a broad range. So 250 up to 1.8 million in earnings, up to 1.8 million in total cost. So that that you know maybe would have been a half a million in earnings something like that. So with with those financial parameters, I also knew I didn’t want to own a restaurant or healthcare or educational something like that or a retail space that I just didn’t feel gifting in any of those areas. Also no online only kind of stuff. So home services businesses fit the bill but frankly there weren’t enough businesses that go on the market in this tiny little geography that I chose to get too concerned with that. So I looked at anything and everything that met that criteria and it amounted to about I think I actually seriously considered about 15 where I got to the point where I actually modeled them out in a spreadsheet and you know requested more info and that kind of thing.
And there were 15 that it interested you enough that you modeled out in, what time span did you find those 15? Like all at once or I mean how long was your search is another way of asking, and then all of those 15, like how much how far did you go down the path with any of those?
Yeah so let’s say let’s say there were 15 that I looked at between when I started in April until I think I stopped really looking in September when I knew that this deal had a really good shot at getting across the finish line. Of those 15, I think probably eight were after doing the modeling they turned out to be companies that I could see myself buying and running and had you know list price that was something close to reasonable. And then of those I got to I I submitted only one other LOI. I got beat out by a local um strategic on that one. But none of the others even got to the LOI stage.
So what were you going to do John if you if like if this deal hadn’t worked out and you know the deal flow was kind of a trickle and you were just only kind of looking at what was coming up on biz by sell, like what if what if nothing came in six another six months came and went, what was the what was the plan? Were you ever going to reach out to brokers for example or or it was just only a biz by sell strategy, talk me through your thinking there.
Yeah I had been making a point of talking with the brokers as I would see the listings and so I was slowly getting to know some of them. I did actually when I went through a dry period in in the summer I did start pulling PPP data using that to target a couple of industries. My background is in stormwater and sanitary sewer engineering and so I I’ve been watching those contractors for years just and from my perspective it sure didn’t look like they were making a killing and so I I you know looked into those companies and did not quite get to the point of doing proprietary outreach but that would have been that next step and just essentially more networking. And we had really made a plan that this coming summer we were going to move down to South Carolina either way and we would basically figure it out. So it was it was kind of a kind of triage is the right word but I did the really public easy stuff first. I was moving towards more individualized broker and even proprietary outreach to owners and then if we had gotten into the spring that then it would have transitioned to more of looking for some form of temporary job or or finding a role in the industry that I might want to target.
What did you like about this business? Was it I mean other than the financials or was it basically a picture of the financial picture that you liked about it or or were there other things like one of your tweets was kind of your your due diligence on the industry so talk to me more about what you liked about this opportunity.
Yeah the due diligence that’s a that’s a short tweet there. The so the I think the first thing that attracted me was that it meant my financial criteria and so that was all right let’s take a look under the hood here. What I found when I did that was a company where 75 to 80 percent of their revenue comes from contracts. So we have contracts with warranty companies and manufacturers that will they have their customers who call them with a broken washing machine and they call us their contracted service provider to go do the work and we’ve got pre-established rates. They pay for the parts, they’re not you know exorbitantly profitable but they are good steady income. And so I loved the fact that this was not something where I was gonna have to be a marketing genius to make it work. We were gonna we’ve got you know calls coming in every day from these contracts. It is also a size that I felt like I was equipped to handle. We’ve got seven technicians and three office staff plus a part-time office staff and and so we’re not you know that that was just something I felt like I could handle but also not a you know three-person operation where one person leaves and I’m not going to be able to make my payments anymore. So so it was a good spot there. And then it was um as I looked at the appliance repair uh industry and and you know doing my kind of diligence on the industry as a whole, honestly I didn’t do a whole lot of diligence. I I really just looked at the fact that they’ve been steady for a long time. I you know just consider the fact that if it’s a in a downturn it’s probably going to be a lot more reasonable to repair your appliances than to replace them. And that that’s our typically our biggest hurdle when we go and diagnose an issue is whether that individual is going to choose to replace their their machine and we won’t get you know paid for the job or uh do the repair. And so I I felt like a downturn might actually be good for us and and in good times people are always going to have appliances. I don’t see that going anywhere. And and if anything the uh people spending more time at home since code has resulted in more wear and more awareness. You know there’s we’ve had so many calls from people that are just have been dealing with something for a while and are just sick of seeing it every day but that might not have happened if they had been spending a lot more time outside of their home. So all of those things just made the company seem more and more attractive as I kind of learned those in stages. And then getting to know the owners and their philosophy they just ran a company that was all about supporting the employees and being you know they they like to use the term family um and and there’s there was a ton of truth to that. I could see it wasn’t just you know uh something they said and didn’t follow up on that that was a a real thing with them and so that made me feel a lot more comfortable like I’m not just going in with a bunch of mercenaries that are going to quit if they don’t like the new boss kind of thing.
Have you found that to be the case, that there’s a culture there?
I have yeah. It’s been really humbling to walk in and just see what uh the the sellers have built over the years through the just grueling process of of bringing people in and training them and then having them move on to other things and um doing that for years and years. And what you what they’re kind of left with at this point is the people that have stayed that have glued together that um you know we’ve got seven technicians that each get in their own van and they each go to totally different areas of the city every day but they call each other constantly. They’re constantly talking to each other. They’ve got questions technical stuff. They call each other when something happens in their life. They’re they’re just in in such great community that I’m walking in here and it and it is it is truly the opposite of a turnaround it is a please don’t screw this up kind of case which is uh you know like I said humbling just to to be aware that this is something that I’ve I’ve kind of inherited more or less um but but also really exciting that we’ve got such such a great foundation here.
What if this were a 50-person company or or 25-person company like what are your thoughts on now that you’ve been been in it for a minute like what it would feel like to be doing this but for a much larger company? Do you feel like you could do it or like you feel already so overwhelmed even at the size of company that this is that you wouldn’t have wanted to bite off more anyway.
That’s a great question and and a discussion that I have had with myself quite a bit. I did talk to several people about potentially investing and doing more of a traditional search fund kind of route where I would take some equity partners and and be able to buy something that’s larger where you know five ten people quit and you’re still doing just fine um you know and and you’ve got a lot more systems and structure in place in a deal like that. For me it was a matter of frankly what you know we’ve all got a little bit of the imposter syndrome going on I think and so just how far can we can we input you know be an imposter and and live with it and um yeah so I think this is pretty close to my limit. I think if I walked into a 50 or 100 person company the imposter syndrome would be uh crippling. That said you know I I’m not the type of person to back away from a challenge so I don’t I don’t want it to sound like I made that decision out of fear um but the the other aspect to that was just taking on