Introduction
This Q&A with Nick Munsee reveals exactly how he acquired a specialized traffic engineering consultancy. Discover the sub-3x multiple deal structure, how he mitigated keyman risk without equity grants, and why 47% margins make buying a consulting firm in a niche market worth the recruitment challenges.
Founder Success Story QnA
How did you personally discover acquisition while running your property management business?
Yeah so I uh I still own this business by the way a property management business out in Northern California I started that in 2010 and uh quickly it was 2012 ran into an opportunity I had a mentor that told me that the fastest way to grow was through acquisition and so in 2012 I had an opportunity to acquire a company and uh went through I mean these are small Acquisitions but Bank financing super nervous about making the loan payment um but uh we closed that first acquisition found that immediately boosted cash flow and made the payment in more and it was super excited loved the process of analyzing the business getting to know the quirks within it and how those would fit into our our operation.
Why did you decide to come back to Utah after running your California property management business?
Came back to Utah really just to be around family um my my family is uh has been small business owners all the way back I’ve worked within a small business all growing up and uh one of the reasons was to come and try to be around my my my family and raised my kids around them my uh father passed away just this last year so it was awesome to be able to have the opportunity to spend time around him you know during his final years but came back with the intent of uh buying buying more businesses just love love the process of like I say analyzing inquiring and and figuring out how to make a business more efficient.
Why was your search for a business described as being “closer to retirement than you ever want to be again”?
It was uh you know it I think it’s a problem with small business owners but we wrap so much of our self-worth in our businesses and the success and the ego that’s easy to be gained from being the boss and calling the shots and all that kind of stuff and I realized as I kind of unwound myself from the day-to-day operations of my business and California and eventually I didn’t have a lot to do on a daily basis that uh I think I was very much wrapped up in that and kind of came away from it not knowing what to do I don’t sit still and just hang out very well as it is anyway and so started the search process looking at different businesses I really didn’t have a direction.
How did you find Hails Engineering, the traffic consulting firm you acquired?
Yes that’s a great story so I was at the um independent sponsor conference McGuire Woods in Dallas this was I think it was September 2023 uh was sitting uh at a table for lunch sitting across from a guy was telling him I’m looking for you know real estate construction related businesses in the Mountain West Region and he he told me oh interesting I just looked at one uh this morning that didn’t have a location listed on it and it’s actually in Salt Lake City so he sent me the link to that I inquired about it pretty quickly got uh a meeting signed an NDA got a meeting set up with the seller I think by the time that happened it was November of 23.
What makes traffic engineering a unique niche within civil engineering?
It’s so the firm is a civil engineering firm but that’s a very small piece of the civil engineering world so when there are new we work both with public and private sectors on the uh public side we’re working with municipalities Departments of Transportation in kind of reviewing some of the work of other Consultants as well as performing some of our own studies and when I say studies that’s a lot of what we do it’s uh it’s basically analyzing traffic data and making suggestions based on that traffic data on how to improve the flow of traffic or the functionality of traffic in transportation where a lot of uh civil engineering firms they’re doing a lot of design where they’re actually designing the roadway and we we don’t do any of that kind of stuff so it’s a very specific and specific niche and small corner of the civil engineering space.
How did you structure the deal to acquire Hails Engineering?
We yeah we made an offer of uh it was I guess I can’t disclose that either but I’ll tell you the multiple the multiple was a just under a sub three multiple 3x multiple and as far as the breakdown in the capital stack uh we got uh we got an SBA loan for I think it was about 65% of it and then we had seller financing which actually was made up of two seller notes but the seller notes equaled I think it was about uh 20% of the purchase price and then we came up with the capital for the other 15%.
How did you mitigate the key risk of the seller being the only operational expert?
Yep very important factor because if if that problem’s not solved we don’t do this deal like 100% And so one of the very like the first I mean the first meeting before we even had an LOI signed with the seller which is kind of the conversation we’re having with every seller of a business that we’re looking at because we’re still looking at other businesses is is there an individual within the organization that can replace the work that you do and fill your role and so we had that conversation early with the seller of this business and he he said yes there is there’s a super sharp guy who’s been with me for eight years and I’ve kind of been grooming him to become a manager and take over the operations of this business.
How does the profit interest structure incentivize your new operations leader?
Let’s say that we’re valuing the business at $5 million and we give him a 10% stake in that if if that was a stock award he would immediately have a $500,000 taxable gain that he would have to pay the tax bill but we didn’t give him $500,000 in cash to pay the taxes which is kind of a non-starter from the beginning so with this profits interest structure we grant it today the value of the hurdle is five million and today that stock is worth zero if we grow this business and we sell it for uh we sell it for $20 million 5 years from now then his 10% stake of that he now gets the difference between that $5 million hurdle and that $20 million exit so the gain there is 15 million he gets 10% of the 15 million.
Why is growing this consulting firm more about recruitment than sales?
The business does so little sales in marketing like they don’t do any like none and they have more work than they can handle and which part of another huge thing I’m a believer in is like understanding the reputation in the industry of the business that you’re buying and this one had a very strong reputation in the state of Utah some of their surrounding states for being the very best at what they do so that was a huge asset that we were purchasing. I think there’s some opportunity there for doing a little bit more sales and marketing to grow the business because we have more work than we can handle and what I realized the bigger challenge was going to be recruiting.
Will the exceptionally high 47% margins decrease as you grow the business?
I’ve kind of projected I think if if it meant steady top-line revenue growth that I would be comfortable with that that margin dropping down to 30 25% I think we can over the next and a lot of that is investment in uh systems software but also in in people doing marketing I think is a big uh a big kpi essentially in this business is billability or utilization rate so total number of hours engineer is producing how many of them are billable. The seller I think he was working 50 60 hours for the last 20 years because he was lead project engineer as well as office manager HR manager all that kind of stuff and so I think to be able to fully utilize the skills and the technical skills of our engineers we’re going to have to bring in administrative staff to support.
Nick Munsee Business Stats
Nick acquired Hails Engineering in 2023, leveraging its established reputation in Utah’s traffic consulting niche. Here are key metrics showing how buying a consulting firm with embedded operational risks can yield strong returns when structured correctly.
- Revenue: Lower to mid-seven figures annually
- EBITDA Margin: 47% pre-acquisition
- Employees: Approximately 10 people
| Business Metric | Value |
|---|---|
| Acquisition Year | 2023 |
| Deal Multiple | Sub-3x |
| SBA Loan Portion | 65% |
| Seller Financing | 20% (two notes) |
| Owner Equity | 15% |
Nick Munsee Method
Nick’s approach to buying a consulting firm focuses on mitigating operational risks through strategic team transitions. His method ensures continuity while scaling the niche business.
- Narrowed search to B2B service businesses in real estate/construction sectors after initial broad search failed
- Made operational transition a contingency before signing LOI with seller
- Required seller to identify internal successor during due diligence phase
- Structured profit interest grants to retain key talent without immediate tax burden
- Used existing team relationships to enter new Denver market organically
Nick Munsee Tools
Nick relies on relationship-driven tools to scale his niche consulting acquisition rather than traditional sales software. His team leverages existing industry credibility while building new capabilities.
- Industry trade shows (in-person relationship building in new markets like Denver)
- Referral networks from existing engineers to find specialized talent
- Structured profit interest agreements for talent retention (using legal/CPA expertise)
- SBA loan frameworks adapted for consulting business cash flow patterns
Key Notes
Key insights from Nick’s experience with buying a consulting firm reveal why niche service businesses can deliver exceptional returns despite apparent operational fragility. These principles apply to any expertise-dependent acquisition.
- Niche consulting firms thrive on reputation, not sales efforts – Hails had more work than capacity
- Key risk isn’t lack of clients but losing institutional knowledge when seller departs
- Profit interest structures solve retention problems better than equity grants
- “Roll-up” strategies fail in hyper-specialized markets with limited competitors
- Margin compression is acceptable when funding recruitment for sustainable growth
Get Started in Just 5 Steps
Follow Nick’s blueprint for buying a consulting firm successfully. These steps navigate the unique challenges of service business acquisitions while preserving value.
- Narrow your search to specific service sectors where you have domain knowledge
- Require seller to identify operational successor before signing LOI
- Negotiate multi-year seller consulting agreement for relationship transition
- Implement profit interest structure for key talent retention
- Grow through recruitment in adjacent markets rather than aggressive sales
Conclusion
Nick’s success with buying a consulting firm proves specialized service businesses can deliver extraordinary margins when you solve the knowledge-transfer puzzle. By focusing on niche markets with strong reputations, using creative retention structures, and growing through talent acquisition rather than sales, entrepreneurs overcome keyman risk while scaling sustainable value. The real opportunity lies not in replicating existing models, but in finding underserved niches where “unpleasant” expertise commands premium valuations.