How Nathan Lindley's HVAC Roll-Up Nearly Failed: The Day Everyone Quit

All right, welcome back to another episode of Still Searching. Today, my guest is Nathan Lindley. He's the CEO of Lindley Home Services, who is running a roll-up of HVAC companies, largely across the southern United States. Wonderful to have you here, Nathan. You're going to bring a touch on a lot of things that a lot of people have questions about, you know, buying a business, running an HVAC company, which is always like super popular, much less rolling them up across the southern United States, which is one of the hottest places in the country right now to be operating a business. So thanks for being here. Nathan Lindley Yeah, thanks, man. This is a blast. It's super fun to get to connect with you face-to-face. Guest Yeah. So for those who don't know, like, we, you know, we talk a lot on LinkedIn. We, you know, we chat back and forth. But this is actually the first time we've spoken live. Nathan Lindley Love it. It's such a cool time to be alive. So you have such a niche subject, our ETA, right? And you connect with the 300 other people in the whole world, really, like, you know,

have that same interest or passion. So it's awesome. I love it. Guest Yeah, that's exactly right. Now it's like, you spend a little bit of time on LinkedIn and you can start connecting with, you know, home services, CEOs, business buyers, all kinds of professional service providers from lawyers to accountants and CPAs to investors. And it's just amazing the reach we have now, which wasn't true even five years ago. Nathan Lindley Yeah, it's awesome. I love it. Guest Yeah. Nathan Lindley People talk a lot about how, like, the whole business buying space has exploded over the last few years. And part of that is just because of well-known influencers in the space. But the other part of that is, like, the tools are now readily available. There didn't used to be an ecosystem for buying a business. Guest No, no, no, absolutely. 100%. Nathan Lindley Yeah. It's, you know, 20 years ago, I don't know how you would even approach this. Guest Yeah. I mean, you have to, I mean, Walker knows, Walker-Dival, you know, going through buy-and-build, like he started this back in, like, 2009, really, for business companies.

And then, you know, we all know that search funds kind of started back in the 80s at Stanford, and then they moved to Harvard in the 90s and early 2000s. But it wasn't until the mid-2010s, up to 2020, where just normal people started realizing, oh, I could go buy a business. So, Nathan Lindley Yeah. Guest Wonderful to have you here. And that's a great place to get started, because how did you get in this phase? What kind of, you know, clips for you was like, hey, I'm going to go buy a company? Nathan Lindley Yeah. So, I co-founded a book publishing company with my dad back in 2004, when I was just getting out of high school and kind of going through college. I always knew I wanted to be an entrepreneur. And I was going to, like, I was living in Portland, Oregon at the time. It was going to Portland Community College, and they didn't really have like an entrepreneurial path in college at that point. That kind of came probably five, ten years later. And so, I dropped out of school and founded this book publishing company with my dad. And this was a whole long story on itself. We ended up running out for 15 years and never really scaled the way that we had hoped it would. But when we were doing that,

I spent a lot of time working in our print shop, because we kind of had our own, our own particular facility. So, I listened to a ton of books. And so, one of the series of books I listened to was The Rich Dad, Poor Dad series. And in one of those, our young obviously talks a lot about real estate investing, but he also kind of just drops this little, like almost a little aside that you can also buy businesses. And that caught me off guard, because we were at like year six or seven in our book publishing business, you know, bootstrapped the whole thing. It took, I'm not joking, it took probably 10 years to break 300,000 in revenue. And so, it was just such a slow burn, you know. And so, the thought that you could buy revenue and on day one, your phone is ringing, you know, just really stuck with me. And I had to experience such profound pain, just trying to get that flywheel turning, you know. So, when we eventually shut down our book publishing company, like, that was like, priority number one was, you know, like, I have to try this is one of the things like, you know, once that idea gets in

your head, you just, you have to know what's down that path, you know. But man, what a great foundation though, because that's one of the issues that a lot of first time buyers run into now is that they've never had that experience of like the slow grind or operating a small business in any shape or fashion. And so, like, you spend almost 10 years running this publishing business, and you know, fighting the headwinds, fighting the struggle, learning how like it's done organically, to where when the time came, you're like, oh man, I could buy revenue, I could buy customers. That's like a jet fuel on it. No, exactly. I mean, there is such a rat's nest of issues involved in bootstrapping something and getting it off the ground, like looking for product market fit. And I mean, like, there are, there are 100 issues that you just bypass when you're getting, when you're doing the ETA approach, like, you know, you have product market fit, you know, hopefully you have a team. I mean, there's, there's a lot of ifs in there. But you know, there's, you're starting like at year 10 versus bootstrapping, you know, so it's, it happens to me, for sure.

Yeah, yeah, definitely. And then you get the leverage of being able to not just acquire revenue and customers, but doing it in a, in a way that's, that makes a lot of financial sense, you know, as opposed to like, you're basically just buying back all that bootstrap time. Absolutely. 100%. Yeah. Okay. So like, it's funny you say that how like one little thing kind of tipped you off. And I was the same way. I was wrapping up my MBA program at NYU, and Stern is a finance school. It's not known for, you know, buying businesses or anything like that. And so I was wrapping up my last class, entrepreneurial finance, and there was one little chapter, like chapter three or four, that talked about small business multiples. And it was like, kind of like how this happens on like the, on a very micro scale. Oh, yeah. And I was like, Oh my God, if there's multiples, then you can buy them. People are buying these. That was like, that was like, that was like, just like you, that was like my, my runway, my lift off. And I was like, Oh my God, and you just start going down, you know, you red pill and you start going down the rabbit hole, right? Isn't it weird? You'll just get that one little like little bread crumb. And it's just like, it sticks in your brain. Like,

I have to know more about this. Yeah. Okay. So you got the bread crumb, you close the publishing shop. How do you move forward? Yeah. So in 2018, we just decided to shut it down. It was, it would move just exhausted at that point. And so my wife and I, when we first got married, we had bought a foreplex. The very first thing we did as a married couple was we bought this four unit rental property up in Portland. That was in 2018 and the housing market just exploded from there. So we had a lot of equity in it. So we shut down a book publishing company and we had all this equity. And I also really wanted to get out of Oregon super bad. I just, I'd never enjoyed living there. And so, and so I also knew I wanted to, to try this ETA thing. And so if we were ever going to move, it needed to be right then because I'm about to like put roots down again, and then it's going to be like game over forever getting out of the Northwest. And so I wrote down a list of all of the businesses

that I could think of where my, my, my, the thing that I had learned in the book publishing thing was no matter how great my book was, nobody had to have it. It was always a discretionary purchase. And I was very, very acutely aware of that over time. And so I wanted, I, I wanted to be the guy where if I had just lost my job, and this bill came in the mail, I would call my dad and I would borrow the money to make this payment, right? Because I, I noticed that no matter how broke I was, I found the money for certain things, right? You're never going to go without food. You're never going to go without show. I mean, well, you might have to move it with your parents at some point, I guess, but you know, you, there's certain priorities. And so, so I wrote down a list of all those things. There's like roofing and fencing and plumbing, you know, and all this kind of stuff. And this was in 2018. This was pre COVID. And my dad had a really wide network of friends and happened to have a friend in the HVAC space down in, in central Texas. And so I called this guy up

and I said, Hey, I'm thinking about getting into HVAC. I don't know anything about HVAC. If I gave you a piece of whatever I buy, would you consult for me and show me how to, how to run this thing? And he said, Yeah, absolutely. So my wife and I, we sold our rental property. Yeah. Looking back on everything that I did, like, it was, it was a good plan. It just didn't go well. The execution wall was lacking significantly. So, you know, so we sold our property, we moved down to Dallas. And then the deal that I had my eye on ended up falling through, which in retrospect shouldn't have been a surprise because deals fall through all the time. But long story short, it ended up coming back around. It was just like a nine month delay. Thankfully, our publishing company did have a little bit of residual revenue coming in off of this or able to live off of that. That was kind of our bridge to get us through that nine month gap. So we ended up closing on our first acquisition in February of 2020. I was watching the news of the cruise ship that had the COVID

outbreak in Japan. I was watching that story while I was waiting to sign the contract for the, for the deal. I mean, a crazy year of time to be doing this, right? And so we got into, I was looking at a new state in the new industry and during COVID. So there's no baseline for, you got no, no point of comparison or anything at all. So when, you know, it's the middle of February in Dallas and the phone's not ringing. Is that normal? Was that not normal? You know, finally in March, April phones are ringing a little bit. Is this, is this good? Is this not good? And what I didn't realize at the time was that the guy I brought in as my, as my technical partner is like, you know, who's supposed to kind of be my operating partner. I did not do a good enough job in vetting him to make sure that he really knew how to run the business side of things. What it turned out is that he was a very good technical guy. He could solve a lot of technical issues, he could repair an air conditioner very

well, but he was not very good at running an air condition company. And, and... Totally different skill sets. Totally different skill set. And, and I, I should have known better. I should have done a deeper dive, like on his books, just to make sure that he is who I am believing him to be. He was never dishonest or anything. I just didn't do a good enough job of making sure that this was going to be the right fit. And he's still a care holder with me today. And a wonderful guy, but just didn't know the things that I was, I was going to come to him to get this knowledge. And so all the KPS, like how many calls a day should you be able to book? How many calls a day should each technician be expected to run? What should be the average transaction value for each call that you run? None of those things could give me any sort of framework for it. They had no, no concept for what gross profit should be, or what my overhead should be at a, at a certain size. And so, and so because I'm in a new industry, in a new city, you know, and there's COVID going on, there's, there's no way to establish like a benchmark, because there's, you know, there's zero history and whatever history

I was able to get from the previous owner was not during COVID, you know, and also his record sucked to begin with. So there's, you know, only so much we could get out of it anyway. So yeah, so sorry if this is long winded, but this is perfect. What was the size of the business? Okay, so that was, they've been doing it between 850 and a million a year. And I paid 850,000 for it on an SBA 7A loan. So my payment, even to this day, is about a nine brand per month. So you probably, I mean, obviously at that size, there's not really even a, but you probably paid about what, two and a half to three times SDE? Yeah, it was about three times. Yeah, I'd say, yeah, right in there. So it was not, not back from the multiple perspective, but what I didn't realize is that the revenue composition was very heavily geared towards a small set of general contractors. And I lost all those relationships right out the gate. So I, I kept my revenue in half like so fast. And this kind of speaks to my not knowing what I didn't

know, you know, zero awareness that that would be an issue. And again, speaking to you, probably the lack of quality in my choice of partner, he didn't make me aware that that would probably be something that I would look at. Yeah, but these are the, these are the normal problems, you know, first time buyers are into it. Like it's like, until you're an owner, especially if an acquired business, you don't think about the, you don't think about all the different ways that that business is operated until you got there. Like you don't think about how, you know, the relationships with those general contractors, how that feeds directly into revenue. Absolutely. And how that relationship goes with the seller. Yeah, 100%. Yeah, absolutely agree. And, and then two, you know, I think there's, there's kind of this dichotomy of on the one hand, if you're getting into a new industry through ETA, you, I highly recommend that you find an expert in whom you can rely. Yeah. Conversely, there are a lot of people that I, that you think are an expert who actually aren't you're only as good as you think they are. You know what I mean? So it's just, there's like, even like the guy who

does my taxes, I still, like, I, I trust him to a point, but then I still by myself kind of like, have to go, okay, well, explain this a little bit more thoroughly to you, because I feel like you, you know, skirted around, you know, so there's this icon. You know, they say the, they say the, the definition of an expert is someone who's read one chapter ahead of you. Totally. Totally. You have to be smarter than your audience. Exactly. So when I'm talking to people about you getting into ETA, there's that, I don't even really know what to tell me, because on the one hand, you do really want someone that you can trust. On the other hand, you need to make sure that you can actually trust them because it's going to matter a lot. It's survivable, but it will be massively more painful for you if that expert isn't as good as you hoped he was. Well, that's the same thing. You know, I tell people when, you know, they're searching and they're looking for professional service providers, like CPAs, quality burnings, or lawyers, because there's a ton out there. And, you know, they could be good at one thing, they could not be as good at other things. But you put a lot of faith and trust into these people, because, you know, most

of us cannot do a very thorough quality burning at a CPA level. Most of us have never been to law school, and much less have done small business transactions. So as the owner, you have to be able to take on the risk of knowing that, hey, I have to trust professionals to do their job, but at the same time, it's 100% your responsibility. So when you're, when you're a legal team is like, hey, this is what we think, this is our course of action, you have to be able to trust them at the same time, be critical and understand, hey, are we moving somewhere that makes sense? Or do I not listen to this? I'm paying for advice. That's all it is. Yeah. Yeah. That's a really good point. I think a really important point too. And you, you can't, it can't be abdication. But you said it, you said perfectly, like, at the end, it is your responsibility to make that decision. And it's not your attorney, it is not your CPA, it is your responsibility. And one thing I think, I think a lot of people def, I don't know, I guess abdicate the underwriting, the due diligence, like, well,

the bank's not going to let me do a bad loan. Oh, they will. They absolutely will. They will 100% let me do a bad loan. And they'll let you sign a PG for it. Yeah, absolutely. Yeah. I think a lot of people think like, well, if the bank thinks that this is a good deal, that must be a good deal. Absolutely not true. You know, and so yeah, at the end of the day, like you said, you're getting their advice, but then it is your decision. And you have to own that, you have to understand it. If you don't understand it, you don't do it. Yeah, it's, it's delegation, not abdication. Yes. You know, and that's actually one of the, you know, the strengths of being like an entrepreneur or a business owner is that you have to get really good at surrounding yourself with people who are 10 times smarter than you at whatever they do. But at the same time, you have to be able to run the race with them. Yes. Alongside of understanding where you're headed, because you're the decision maker. No, 100%. And so like, if I can go on with the story, because the, the, the next thing that happens ties it exactly into this. So because I have no background in this, I'm trusting everybody around me to tell me how we're supposed to run this business, right? And so I've got these HVAC

texts who are telling me, oh, you need to do X, Y, or Z, or you should price this service this way. And what I didn't realize was that these guys knew nothing about business. They, all they knew was how the last owner had run it. By the way, I've got some of these deals for like a fraction of what they could have been worth because the last guy did such a bad job of running it. And so I'm getting advice that's extremely ill-informed. And so, so we did our first acquisition in February of 2020, we did our second one in November of 2020, because it hadn't all really hit the fan yet. Yeah, I thought people weren't better than they really were. And so I brought my dad on as a coal investor, he cashed in his entire retirement into my deal. So then we think it was a lot of pain. It was that much worse. It's not just me going down is, you know, me taking my family down with me, right? And so, so in February or November 2020, we closed in our second deal and we just started hemorrhaging money because we had scaled so all of our problems had scaled. And so in 21, we lost like 250 or

$300,000 or something insane like that and burned through, you know, all of our working capital. I called up a friend of mine in Oregon to invest. He had been wanting to invest with me and said, "Hey, now would be a really good time." He invested his wife's inheritance from her grandfather, $100,000. And so when I burned through all $100,000 of that, again, listening to my technicians telling me how this company was supposed to run. And so going back to the whole like, ultimately, it's your responsibility. So I'm listening to these guys and telling me like, "Oh, yeah. I mean, this is just how it goes in March. You should expect to lose in stupid amounts of money in the early spring." Easy to say when it's not your money. Yeah, exactly, right? And I always had this gut check going on. It was like, this doesn't make sense. But you can't tell me that the big players are doing things this way. And finally, it was March, I think it was like March 1st of '22. I was like out of money. I had like literally like

$2,000 in the checking account and I just made payroll. And I walked into our office down in Austin. I said, "Guys, I just made my last paycheck, my last payroll." And so one thing I'd been wanting to do for a long time is I wanted to switch everybody over to a straight commission pay structure. Because what there was going on was there was no correlation between my payroll and my revenue. None at all. So I have a $30,000 payroll and like $5,000 of revenue for that week. And then I have $30,000 payroll and $75,000 revenue for that week. And it's like, you're just hoping every week that something good happened. But the incentives aren't lined up. No, exactly. They're all on hourly or salary. And so I floated the idea a few times of going to a commission structure and they were like, "No, you'd never get anyone to work for you like that." And so it wasn't until I literally was out of money that I said, "The only way I can pay you from today on is if you sell something." I had literally been incapable of paying you.

And that day everybody quit. And so I had two businesses, one in Dallas, one in Austin. That's about a 220 mile drive between my two locations. And I was the only employee. Yeah. And I'm not an HVAC tech. And so thankfully I had just extended an offer to a guy who had actually in our interviews, I would actually really like to be on commission because I came from a place where I was a commission and I made really good money that way. If you're okay with that, I'd like to commission. Honestly, I hired him as soon as those words came out of his mouth, I hired him. And so he happened to start like two or three days later. So I was very short window of time where I had no employees. But I still had nobody in Dallas. I just now I have that one guy in Austin. So that was the point where

things started to turn around for me though. And that was the reason because of that is because I finally stopped listening to everybody else because there's this deep seated insecurity that I don't know what I'm doing and you do. You've been doing this for 15, 20 years and I'm new at this. But deep down in your core, you know, it just doesn't make sense. You know? And so finally it took me getting the spine to call and say the emperor doesn't have any clothes and start making the decision that I have to make even though it's going to be extremely unpopular with people who I did, I used to respect, but they're the ones who are driving this thing off a cliff. And so finally I'm realizing if nobody grabs a steering wheel and yanks this thing away from the cliff, we're going over like right now. I love how you said that too. And honestly, I love that that experience happened for you because I fell into the same trap. You know, after I bought my business, I had a couple people who have been there. I mean, I had a lot of employees have been there for well over a decade. A couple who had been there for a while as foreman and knew a lot about the industry. And I really relied on

them for that kind of expertise. And but on the business side, I kept coming back to them, man, we are not doing well. We're, you know, 5% net profit is not where I want to be. And, you know, like you, I'm like, all right, I just want to keep this thing going, listening to it. And then finally towards the end, you know, I had this thought where I'm like, if I want to be successful, I need to cut the 40% of my own, my unprofitable clients. And I probably need to skim back at my payroll quite a bit. And, and I look back, I'm like, at the time, I did not have the courage to make that kind of surgical cut, you know, and I look now I'm like, man, I wish I had done that. And I'm so like, I'm, I love that you actually had that happen to you because you need that. You know, it didn't work out for me. But for you, like it got to the point where I'm like, hey, it is you, it is all you trust yourself to make it happen. Because at this point, like you said, I don't even have my payroll. So how am I actually going to make this work? Right. Yeah, exactly. Yeah. And at some point, physics forces you to make the decision that you did have the courage to make early on, you know, and so what I was really encouraged everyone

who's thinking about this is make that decision much sooner, you know, and you'll save yourself just and uncalculable amount of pain. And a big part of that is just the growth, because like you said, you bought the first business in February of 20. And then it wasn't until like March of 2022 where you finally got the point where I'm like, this is not working. I have to make a complete change. And it was forced upon you. But still, it's not like for those two years, you weren't thinking, man, how can I make this better? Like you're trying things, things are trying to get moving. Yeah. But it takes, you know, it's a learning experience. 100%. Absolutely. Yeah. Yeah. I mean, we tried quotas and, and, you know, all this kind of stuff. Do nothing else work. Yeah. So yeah. Yeah. So it really, that was the turning point. It was, it was the worst day of my life. I mean, still to this day, it was nothing has been as painful as that moment. Like I was sitting on this couch. I literally pulled a blanket over my head and hid under a blanket for like 10 minutes. It was just like,

it was just unbearable stress. But it was also the day that things started to turn around for us. So. Wow. All right. So you got your first, it's you and one salesman. He's all commissioned. Yeah. That's the, we know this is the lowest point. Tell us how you're climbing. Okay. Okay. So this speaks to alignment of incentives. You, your team has to be pulling on the same rope in the same direction. Right. Like, like this is, this is a cardinal rule. Please do not do anything in business without everyone wanting the exact same outcome. And everybody wins and loses by the exact same metrics. Right. So this guy goes out and starts selling three to $5,000 a day every single day consistently. Wow. Whereas my whole company combined wasn't doing, I had like four or five texts out in the field not doing what this one guy was doing. Yeah. And so he just opened my eyes, number one, to the power of incentive and motivation. Cause if your, your compensation is tied to the

outcome and they were all for the most part pretty ethical sales. Like every now and then I was like, okay, did that guy really need that? By the way, I did in a fire in the sky. So don't, don't get me wrong. There's a lot more to the story, but, but he was motivated to, to help these customers in a way where, where my other guys, they're like, well, you know, it'll keep blowing. If the phone rings, I'll call them back if I'm not on lunch. Yeah. Exactly. It wasn't this, this aggressive go out and, and make it rain. And so, um, yeah. So this guy was out producing everybody else combined on the very first day. And like, I did the math after like a week or two, I did the math. Like, I could float the entire company. If I was lean, I could float the whole, the whole company off of this one guy. He was actually doing the work. So like everybody quit. So who's actually doing the work? Yes, exactly. So, so, um, so the other thing that, that it opened my eyes to was, there's a huge difference in quality of employee who applies for a straight commission position. This guy, this, this type of employee is extremely confident in his own ability to produce his paycheck.

And he's not reliant on an hourly pay rate. He's going to go out there and he's going to make his own rain. And so, uh, so we switched to a straight commission model from that point on. And now my, that, that guy wouldn't even hack it today by the quality of my current team. Like he would be the low man on the totable. That's how far we've come. So we were averaging, you know, two to $500 a day of protection that we were dying. And now we're averaging, you know, I mean, my guys, so 802 a million a year in revenues, kind of our expectation protect. So, yeah. Wow. That's incredible. Total nine days. So, so your first guy, I mean, it opens your eyes to commission. It opens your eyes to like aligning those incentives. And now, you know, you've taken that and really ran with it because now you've got a fantastic sales team. Yes. But in the early days, okay, you're selling, but you've got, you've got a location in Dallas, you've got location in Austin. So who's doing the work? Him and me. And those were some lonely days,

man, driving around DFW and an HVAC fan. When I thought I was going to be the private equity, you know, guy, you know, sitting behind the glass and, you know, writing, writing LOIs to shops and, you know, like you, your, your idea of what your world's going to look like and then what it becomes, you know, it was, it was night and day. At this level, you have to be ready. You have to be ready to be the owner operator, roll up your sleeves and be like, Hey, I need to be able to do this. Absolutely. Because what happens, you know, like even if you had a team, what happens if like, you know, your top guy or gal calls in that day or, or like you said, your team quits, like, what are you going to do? Are you just going to fold up and be done or are you going to move forward and make it happen? Right? Yeah. If you're going to go buy a landscaping business, I mean, yeah, I, I, I hope to sweet baby Jesus that you don't end up behind a lawnmower at some point, but I will also put all of my money on you probably will. Absolutely. There's going to be one day where you're sitting on it. It's going to happen. Yeah, exactly. Exactly. Right. Right. Okay. So you're,

you're growing, you've got, you're, you're basically doing all the work in Dallas. Your other salesman is making the sales for both locations largely and doing most of the install work in Austin. Yeah. Yeah. So we were setting our installs. We were setting our installs. Okay. Oh, okay. That makes sense. Yeah. Yeah. Yeah. So, yeah. So once we kind of started to figure some of that stuff out and we started to, to see what our KPIs, what the, what the range of our KPIs could be, it completely changed the math for us in terms of like, what one tech could produce. So we're thinking like, okay, if we can do a quarter of a million of revenue per tech per year, then, you know, you're going to start building out your financial models and you might be able to send a pay off your SBA loan that way. But when you start talking about like a million of revenue per tech, the metrics change dramatically. So that was about the time that things started to get good for us because now we could look at, we could, our lens changed when we were looking at our target

companies because now we had our own in-house KPIs and they were typically a lot better than the, than the out-of-the-box KPIs of our target companies. And so that's where a lot of my posts on LinkedIn lately have been talking about. Today, I'm not buying SDE or EBITDA. I'm buying traffic. The way I phrase it is I'm buying at bats. So if you were the coach of the baseball team and you knew that your batting, your whole team's batting average was say, you know, 0.3 or whatever, then you could do the math. You could say, okay, if I have this many at bats and my batting average is X and, and for every time we hit the ball, we tend to run 1.5 bases, then you can, all you got to do is know how many at bats can you get and you can extrapolate from there what your outcome is going to be. Because you've got your, that makes total sense because you're not based on the EBITDA, the SDE of the acquisition company, because you've already got your own sales team. You're running your own profitability models. So you're not, you're not even concerned with how they used to make

money. You're concerned with what's the quality of the customer list I can acquire. 100%, 100%. Now, this is only true once you have your own playbook and your own KPIs. Like this does not apply when you're, when you're getting started. When you're getting started, your number one and only mission in this world besides not dying is to develop your KPIs and get them as good as you possibly can. That is the only thing that matters. Once you have those, then you could switch your, your thought process from buying EBITDA to buying opportunity. And so you think about the, the EBITDA is the end result of a huge long chain of decisions that were made. So number one, you have the number of opportunities that came in your door, right? Number of, in my case, number of times the phone rang. And then, and so then you have calls booked, the revenue sold, the gross profit that you had, and then how you spent that money on your overhead. So there's, there's this big long chain of decisions

that the other guy is making, the guy you're buying, he's making all the decisions and he's ending up with a number. Well, that number is the end result of like 20 different things that you have the power to change. You can change any one of those things. You can, you know, have a higher booking rate so that a higher percentage of the calls that come in turn into actual book appointments. You can adjust your pricing to give yourself a better gross margin. You can, you know, do sales training to improve the number of those calls that actually turn into a sale. Or you can hire guys who are better, better at selling. And then how, and then how, pricing strategy, what's that? And pricing strategy too. Exactly. A lot of people in home services, they, they look at and like, well, I'm just going to add, you know, 15% on to whatever my cost is. And that's my price. And that's insane. Okay, so here's a perfect example. Capacitors, they're like, if you go on Google, you can find a capacitor right now for, you know, $15 or, or you get the really high end ones are like, you know, 70, 80 bucks. We sell them for $450. That sounds usurance. And you'll,

if you go on like the next door app or Facebook, you'll hear people complaining all day long about how they got charged $450 for this capacitor. And they went on Google and found it for this much, right? Well, if you break down your cost per call, if you, if you divide your overhead by the number of calls per month that we run, we're pushing $400 in overhead cost per call after run. So if I sell like a faster for $450 and actually I can't break it even. That's what people don't realize. I mean, yeah, you can buy parts, but at this, you're not buying the overhead, you're not buying the skill to install, you're not buying any of this stuff. You're right. When you hire someone, you're not hiring them for parts, you're hiring them for a solution to a problem. Yes, yes, exactly. Exactly. So, so these target companies that you're out there buying, they never get that math right, never ever did they get that math, right? It's funny you say that. I was, you know, I was actually talking to my brother like a week ago, he owns his own home in North Carolina and he was talking about how like he wanted to put in like a flat portion of his driveway, you know, to be able to park his boat on. And he's pretty, he's

pretty handy. He can do stuff himself, but he had a contractor quoted for like $1,800, they're like grade it and put in the concrete and he's like, I can do that. And so he gets out there and he spends a couple of weeks grading this thing if he didn't expect the roots and the rocks and all this kind of stuff, but gets my other brother out there, they're working on it and they make progress, they get all set up, but then he ends up hiring someone to actually do the concrete portion and end up being just as expensive as if he just hired the first guy on day one to do it in just a few hours, you know, totally perfect example. Yeah. Yeah. Yeah. So, so once you know your KPIs and you're out there shopping for your third or your fourth deal, you are your number one, that guy's mispriced everything, you can just about, you know, guarantee it. And then the other thing too is, is starting to achieve things like economies of scale, like I have my dispatchers in place now, I don't need, you know, Betty, the lady who's been his CSR for the last 25 years, which, you know, sound heartless to say, but I'm just talking about the economics of the deal. If you want to keep Betty, you're welcome to keep Betty. But, you know, so there becomes all these layers of overhead

that you can start cutting out like insurance policies and duplicate cell phone plans and, you know, all that kind of stuff. So you start, that's when, that's when things start to get a little bit exciting because number one, you've got your own KPIs that you can then overlay on his call volume. And then there's all of these strata, all these line items and his P and O that you can start cutting out. So yeah. Okay, so now you're, so things are really starting to click, you're building out your sales team, you've figured out your KPIs. And so at this point, you've got the two businesses, one in Austin, one in Dallas, and to be clear, you're rolling up. So it's the same brand, everything on all the acquisitions. So when you buy a business, you're replacing the brand, it's all the same thing and just moving forward. So after you have these first two and things start rebounding and start building out your actual core competencies, what's the next acquisition? Yeah. Okay. So the Dallas deal was $850,000. The first deal I would do was $850,000 on an SBA note. The second deal was $285,000 all cash. And that was because the guy was basically breaking

even on like $3 million of revenue. We ended up cutting out a bunch of that revenue because it was really just new construction and quickly figured out that we were not set up for that. So we ended up only keeping about a million and a half of that revenue. And so we paid $285,000 for that one. I brought it to my dad to be an investor on that deal. So we just cashed that one out. Deal number three wasn't again up in Dallas. This one, it kind of became a flagship brand, it's called Dunright. And they were doing about a million and a half of revenue. We paid $350,000 cash, I'm sorry, not cash, $250,000 for that one, $150,000 of cash and a $200,000 seller's note on a three year term at 8%. And so we just took some profit from the company for that down payment movement investor for that one. And that one's gonna be paid off this year, which will be really fun. Nice. Yeah. And so, and then deal number four, oh, by the way, so I think all of these deals

fell apart and then came back together and then fell apart and they came back together. So yeah. So if you're out shopping and then deal falls apart, don't despair, just be around when that guy's ready to come back on the table. As long as you know your number, as long as you know your price, you're not over committing. Yep. That's why I tell people, I still have business owners from my first search, like call me up and ask if I'm still buying or if I know someone else who's interested in buying because they're still trying to sell. Yeah. They come back around. Yeah. Because they never got that $8 price tag that they thought their business was worth. Yeah. Exactly. Exactly. Totally. And so all of these deals were in and out a couple of times. So deal number three was $350,000 with a $150,000 seller's note and $200,000, sorry, $150,000 cash, $200,000 seller's note. Deal number four was, I talked to this guy and his wife like three years earlier, they ended up pulling out of the deal and he passed away. And so I ended up buying the deal from his widow,

but they ran their company in a really unique way where they had 100% subcontractors that had no assets in the company at all other than the database and the phone number. And so, because there was a lot of-- You really are just buying the customer. That's actually a really good alignment for what you're doing now. It couldn't be better, right? Exactly. The only thing that I want, right? And so that when we ended up structuring it as a percentage of revenue 100% because there was no way to predict what was going to happen once we closed on that deal. And so it would be impossible to assign a value to it. And so we set it up in our CRM. We took all of our customers and we tagged them with the name of their company. So any sales that we made, we could pull a search based on that tag and we can give her a percentage of revenue. So for the first year, it was 15%. And then for the following five years, it's 10% of revenue. So for me personally, I try and keep my debt service to about 10% of revenue. That's just kind of where I feel comfortable. That way,

if I have a 20% net margin, I've got 100% or 200% net coverage. I actually love the structure of that deal because like you said, when you're buying just the lead generation, it's really hard to put a value on that because it's not like you're buying revenue or anything. But at the same time, for someone to feel confident enough to be able to go forward with that kind of deal, they have to believe that you can execute. And so at this point, you've already got three total acquisitions that you've got those KPIs in. You've got a great sales team. And so after the initial conversation, three years ago, you've come back around, now we're talking again. There's an opportunity here for the seller to look at you and say, "Hey, I see your team. I see how you're operating. I believe that you can make my customers more valuable than I could do on my own especially." That's something that makes sense. I'm like, "All right, yeah, 15% of the revenue for year one and then 10% for the next five years, that's ideal." Yeah, exactly. 100%. And that's where, as you get experience, you get KPIs,

you can start leveraging those things in some really cool ways. And like I said, you get trust with yourself, credibility, which is really important when you're trying to get a deal on. Absolutely. And this is one of the things I tell first-time buyers, I'm like, "Look, there's a ton of people out there kicking tires." Absolutely. And deals fall apart all the time. But your position changes dramatically the moment you close a deal because then everyone else looks up and they're like, "Oh, a buyer. Oh, this one actually closed a transaction." Now you have credibility, exactly. Yes. And when I tell a broker or a seller that we've done six deals, there's a whole list of concerns that are just taken off the table right there. They no longer ask for your personal financial statement. They no longer ask for your capital and they know that you can close. And so they just put your name on the top of their list and then you let them know, "Hey, this is what I'm looking for. Just make me your first call." And it happens. Absolutely happens. Yes, exactly. And then again, going back to the more you do this

and the better you define it, get your KPIs, you get very specific on what your strike zone is. I can tell you exactly what I'm looking for and versus like, "I'm looking at a little bit of everything." Then you don't really have a lot of conviction on the deal that like, "This is a hell yes. I would rather die than let this deal slip through my fingers." But also, I know what my price is and I have conviction on that price. I'm not going to go over that for anything. So then deal number four then was a... Which one was deal number four? So number four was the revenue one you just mentioned. Yes, right. I'm sure that was deal number four. So then deal number five was a deal that we found in on Biz by Cell. But honestly, I think I found all of my deals through Biz by Cell. So everyone dogs on Biz by Cell, but it's been like my only lead gen source. But this is exactly it though. Like, again, when I talk to first time buyers, I'm like, "Look, the name of the game, since you've never been in the seat, is risk mitigation."

That's the name of the game. You want to find the best possible business you can. It's probably not going to be on Biz by Cell. You could, but it's probably not. The issue is, is that when you have businesses on Biz by Cell, they're all inherently flawed in pretty major ways across the board. And when you're a first time buyer and you're especially going to sign a personal guarantee, that's not the playground you want to be in. But when you already have a stable business, then like I said, if you know exactly what you're looking for, now I can buy a mom and pop shops. And when I know I'm looking for this type of customer list in this kind of area, and I know I can easily integrate them into what I'm already doing, because I don't need all that other stuff. They didn't take time building. I don't need any of that anyway. So it's a completely different game. Right. Right. No, 100%. Absolutely agree with that. It is just funny though, because I was talking about someone else in a day. I was trying to name out all my deals versus like, I think all of them were from Biz by Cell or like, yeah, pretty much, pretty much all of the things. So yeah. So number five then was a deal that the

seller was actually going through bankruptcy. And they had had some health issues. And so because of the bankruptcy, it made the just buying them out really complicated, particularly at any price that could be underwritten with a loan, they wanted like a quarter million or something like that. But it was, it was like, you know, negative SDE. And so no bank would be able to loan on it. So what happened was we let it go through bankruptcy, and then we bought the phone number and the, and the database for $37,000 on cash. Again, exactly what you're looking for. Yes. I don't need the assets. I don't need any of that stuff. Just let me buy your customer list. Yeah. Yeah, exactly. And then deal number six, which we closed. So five and six, we both closed in August of 24. Deal number six was $700,000 on an SBA note. The SBA has launched their expansion loan program now, which is really cool. So if you have experience in an industry, if you have an operating company in an industry, as long as the NAICS code, the NAICS code is the

same, you can, you can get an expansion loan worth 0% down. And 100% LTV in a lot of cases. Yeah, right. Yeah. And I think it varies by bank, like, you know, their, their appetite to do that deal. But we did ours through Live Oak. And so it was a $700,000 acquisition. And that one has been an absolute grand slam for us. So our payment on that side, 10 grand a month. And was this one still in the Dallas area? Yes. So this is in South Fort Worth, a town called Benbrook. And so man, you're building an empire in DFW. Yeah, we're trying. Yeah, I think we're up to, so it's funny. You know, he's talked about, you know, having been at that point where, you know, we had one tech in Austin. Now we're up to seven techs in Dallas and two in Austin. And we're working on closing a deal. And I have the APA signed for another deal in Austin. That should put us up to six or seven techs. So, yeah, yeah. So it was, it's a tall, you've been busy. And this is all

happened since that initial turnaround point of March, 2022. So, you know, barely three years in of just like the actual expansion portion of the business. But at the same time, it would, we would be remiss in saying that those first two years from 20 to 22, that laid the foundation for everything else. Like, it really did. I mean, you learn the most when, when she is hitting the pan. 100%. And there are, there are mistakes that I am just straight up not willing to make anymore. Like someone came to me and said, Hey, you know, I'd like to, you know, run this location all, all salary tax. I tell them where to go. There's absolutely zero chance in this world that they're, that there are certain things that are so straight off the table for me. You know, because I paid the price to learn those lessons. You know, that's, that's exactly it. And, and honestly, that's exactly why I do what I do now, because now that I've been through it, I'm like, wow, there are a lot of red flags, a lot of things that I just fundamentally will never do again. Yes, yes, absolutely. Makes you better for it though, because you don't know if you're not

sitting in the seat, you have no idea. I tell people, it's like, it's like joining the military, like I can, I can give you a uniform and I can tell you what boot camps like, I can tell you what my time on deployment was like. But if you've never done it, then it doesn't make sense to you. It does not compute. You do not understand. The same thing is true for business ownership. Yes, completely. Yeah, yeah. So, wow, okay. So now at this point, you've, you've completed six acquisitions total, including the first. Yes, six deals total. Wow. Largely in the DFW area, you've got a few in Austin. And so you're kind of moving across Texas there. Yeah. Okay, so did you, did you really expect like from the beginning, like, Hey, I want to make this an expansion company, I want to make this like a roll up or like, it's not a whole code because you're putting everything under the same one. But did you ever think like, I'm going to be a roll up guy, like from the beginning, or was this kind of, it's so funny, man. I mean, like, I feel like the ecosystem has evolved so much since I started, because I didn't know the term roll up. But what

happened was I was on biz by cell and I'm looking at, I'm trying to kind of like understand the pattern to all these businesses. And, and I would notice these huge discrepancies in the multiple. And I'm like, could you buy like two or three of these, like, you know, two X, three X multiple companies and sell them for a five X. Is that a thing? Is that a viable strategy? So I started like looking around and finding out that prep, you know, like our publicly held companies will actually do that. Oh, no way. So that's actually a thing. Like three years later, I find out there's this thing called a roll up. And like, I'm already into, I've already bought like two companies at this point. And finally, I'm not, this is actually a known strategy. You know, I didn't, you know, I'd never heard of, you know, Pitchbook or any of these like, you know, kind of private equity VC, you know, information sources. You know, so I found out kind of after I was already doing it. I mean, you're, I mean, you're exactly right. You realize like, Hey, could I do this? And then you got to get tipped off to like the idea of what a roll up is. And, and roll ups are

a long history, especially in PE. And they're one of the best ways to rapidly create value from a lot of smaller, many times distressed businesses, because you're not just combining revenue and profits, but you're systematizing all those KPIs. And, and then you're also getting to, you're also benefit from multiple expansion. Because if I take five companies doing a million dollars, and then I combine them all into one company doing five million, and then I cut out the, the, you know, the cost, the overhead waste, like you described. And at the same time, put systems throughout the whole thing. I theoretically moved revenue from five to seven. And now I'm playing in like the four to six multiple, as opposed to the one to three. You literally just printed money. You printed money. Yeah. You packaged up an asset, an actual sellable asset for a larger acquire. That's what you've done. And that sounds easy and it makes sense, but it is incredibly difficult. It's not as easy as just saying, Hey, I love to talk a little bit about this,

about this now, because you've done six acquisitions, you're doing a roll up. So you are systematizing, you're putting everything under one brand. Talk about some of the big key issues, because we'll, we'll hear about how, you know, simple M&A largely does not work. You know, there's all kinds of issues, you know, financial outcomes aren't what you thought they were. You know, there's culture integrations, all kinds of stuff. You know, talk about some of the big things, you know, just from rolling up these companies that you've discovered, and maybe some lessons learned as well as some positives that you weren't expecting. Yeah. Okay. So number one thing is employee turnover. I have had employees quit just because the company changed hands. I've had employees quit. I was actually doing a consulting for a friend of mine who owns an HVAC business. And I just came in as a consultant and I got quit. Like he just sensed that there was just something happening and he's like, yeah, I'm going to bounce. I mean, just because you showed up in the room one day. And so I saw there was a broker that I follow on

LinkedIn talking about how everyone's nervous about key employees quitting. They don't really care who's in charge as long as they get the paycheck. I'm trying to get it like I could not disagree more strongly. And so which then goes back to like making sure that you've got really, really good key people on your team. So I would say to that is by far my number one thing is that you're likely going to lose everyone. So when we did the Austin business and I didn't have my own convictions established yet, I was able to keep a lot of those guys for a little over a year. But once I changed everything over to a commission only structure, they all left. And so I would say to you that employee turnover is going to be a big issue on the transaction no matter what. It's going to be a doubly big issue if you have a lot of conviction about the process that you

want to run because it's going to likely be different. So you think about the guy who's been working for the seller for 20 years is doing so because he knows exactly what's expected of him, exactly what he's going to be rewarded for and exactly what he can expect in return from the company. So there's this whole set of expectations that has been very firmly established and it works for that guy. Now you're going to go in and start monkeying with that and say I expect more out of you, but I'm also going to pay you more. Well, I don't want you to pay me more. I want you to expect less out of me. I want to be able to get on and watch Jeopardy with my wife and not have to think hard about this job. But you're coming in, you're wanting to make more money than the last guy did. So you want a little bit more drive, but that guy doesn't have more drive to give. And so that's, I think, a huge factor. It requires nerves of steel because one of the biggest fears that first time buyers have is everyone quit on day one. And that's largely

unrealistic, but you have to expect that employees will quit and especially key employees will quit. You have to believe that's going to happen. But the silver lining there that you don't realize until you've been in the seat is this allows you to build culture, your culture. Because when you buy, you're buying the culture of the sell and it is so hard to change that. Yes, completely. No, on the money 100%. Yes, absolutely. Yeah. And so that's, it's almost kind of a necessary evil in a way because like you're saying, you have to be able to build your company and you can have a very difficult time doing that with the last guy's team. You know, one thing, I wish I could have told that to myself three years ago. I mean, all the Cardinal said, I was like, I raised payroll, I was like, no, don't quit. I held on to people who are like overhead that weren't useful. And just to find out that they were stealing from the company, like all kinds of issues. I'm just

like, if I just had the luck that you did where I could just have like, because I didn't have the, I didn't have the courage at the time. But if I just had the opportunity, like you were, I'm like, man, what would happen if we just let go of everybody and just started from scratch and like, all right, I'm going to build this from the ground up with a customer base. Yes. Yes. No, absolutely. And I would really strongly encourage anyone watching this to build your own company, build the company that you want to run, that you can be proud of, that runs the way that makes sense to you. I would listen to the experts, the guys who have been doing this for 20 years, but do not just like take it at face value. Like you need to question everything that comes out of their mouth, because you bought that company for a reason. And there's probably some performance issues in that company. I think particularly the older the seller is, the, the, I don't think a reflection of age, I think it's the reflection of contentment and maybe a lack of desire to keep

improving it. Like if that last guy was making 300K a year, I didn't have a lot of motivation to do that. You know, and so, so you're going to be inheriting a lot of suboptimal performance. And so you need to be questioning why things are being done the way they're being done, because there's unlikely, very likely room for improvement. Absolutely. Oh, wow. That's a huge nugget, like right off the top. And I tell people now, I'm like, you know, who are looking to buy, I'm like, like everyone's so focused on the financials. And for me, the financials are just par for the course. Like they have to be there for you to have a deal. And if they're not, you don't have a deal. But that's just, that's the, that's the appetizer. That's the order. I'm like, the real deal is the culture of the business. Like you have to be able to either acquire a business where you feel like you could fit into the culture that's already there, or you're willing to wipe the slate clean and start from scratch. Right. And I would, I would keep that option very high on your list that, that the odds of you wiping the slate clean are pretty dang high. Yeah. Okay. Great. All right. So that, that's a great first one. Let's

keep going. What else you got? Oh, man. I know. I'm putting it on the spot. That's a hard one, dude. I feel like, I feel like that's kind of the, the main one is just building, building your own company and realizing how much of what you just bought is likely going to disappear. Totally. Yeah. Well, let's talk about that. So like you, you found yourself at a point where you owned basically a brand and a customer list in Dallas and Austin, no employees, just you, and you're finally like, all right, I'm going to do this myself. So from there, you start off with that first hire, and then you started building this company into what it is today. So how did you, how did you, you have to put these systems in place? You have to figure out what your KBI's are. How did you do that? Like, like, was that like experience you had from your time, you know, running the publishing company? Or like, what kind of resource are you an EOS, traction kind of guy? Like, how do, what makes you think, Hey, this is the systems I have to have in place. This is how I figure out my KPIs. Like, what would you tell business owners who are basically winging it? Because like, let's be clear, 95% of them are straight up winging it.

So here's actually, this is, you're making an interesting point. Because I think one of the things that helped me identify my KPIs was that dark night, the soul moment that I went through, where I actually had to jump in a van and start running the calls, I realized how fast you have to run when you're running six or seven calls a day. You guys be flying through those calls. And that was when I started realizing that you need to slow down in order to make more money per call. So that's one of our, one of our KPIs, our not really a KBI, but like an operating guideline for me is that our technicians only run three calls per day. And that was because I actually got out in the field and realizing that if you're running more calls than that, you don't have the time to do your job well, and you're missing opportunities. So your average training, our revenue dips when our guys start running too many calls, because they don't have the time to, to provide you quality experience. And so I think getting in the field, if you don't

know that industry already, getting in the field and learning that industry from like the, from the ground up, like you have to understand every single step in this process. You have to know it really well. That was one thing, a huge mistake that I made. I'm just now really just not thinking about this was I was very resistant to wanting to go out in the field because I didn't want my name to be known by the customers. I didn't want anyone to be able to call me on my cell phone. And yeah, you want to be the bad guy in the office behind the desk. No, totally, totally. And my thought was, well, I'll hire a guy who's been in tech for 10 years because he's going to know everything anyway. So I'm just going to hire that expertise and I will have to know it. It was a massive mistake. And things didn't start improving until I started knowing every single element to this. So knowing what it's actually like to be out in the field running calls helped me to, to figure out that too many calls is not a good thing. Like other shops out there that we buy, they run six or seven calls per day. And that's when the first things I do is I cut that down to three calls per day, which sounds counterproductive, but it's not because

then we're able to convert at a far, far, far higher level on each of those calls. So I know I'm trying to double my headcount in half the number of calls to protect. So yeah, because if you're getting higher conversions, then you can more than make up to the higher headcount. And then not only that, if you're getting all those calls, you can prebook weeks in advance and now you've stabilized your, your revenue and your funnel coming in. And so you're not like, you know, feast or famine every week. Bingo. Bingo. Exactly. And so, so not again, this speaks to the application thing. I'm just, I'm going to hire an expert who knows this part and then I'm not going to have to know it. I think you have to know everything. You know, you, and that's, I think, been a, been a big, a huge key for us. Yeah. Like you were saying before, it's like, you don't want to find yourself in a place where you're the one pushing the lawnmower, but you have to know how to push it. And then enough to where like, you know what it takes to be the guy pushing the lawnmower, you know how to hire for that, you know how to optimize for that.

And you have to be willing to roll with your sleeves and do it if you need to, but you don't want to get to that point. So here's the other thing. Here's an interesting thing. As a, as a business owner, like you're trying to build this machine, right? Like, like all, you got all these parts and all these cogs, but nobody, nobody thinks that way. Yeah. The guy pushing your lawnmower is not thinking about this thing like a machine. He's thinking about his lawnmower, about making sure that that line stays straight in the grass, right? There's actually something really beneficial to you going out and pushing the lawnmower for a week because you start to see how this ties into office communications or rock planning or things like that. You, once you get a good grasp on that role, you can then figure out how it needs to tie into these other processes. So I see this all the time where there will be like, you know, a process glitch where, you know, say like,

communications not being handed off from the technician to the office in a particular area. And what I'm shocked by is how many people just put up with that problem. Yeah. You know, they're just like, oh yeah, so and so forgot to tell me to order that part. And now it's been three weeks and the customer's calling angry because they still don't have that apart. And I forgot, I didn't order it because the guy forgot to tell me to order it. Yeah. And that's just, that's just a two state of them. But once you, once you know that that's going on, you can build processes to, to prevent that, but you can't build a process for a problem that you don't know about. And the best way to learn about a problem is to get into that position and really know it well and understand how it interacts with everything around. Man, that's exactly right. And, you know, conceptually, a lot of us think about a business as a machine that prints money. Like we're like, that's what we think about because when it comes time to, if you're going to build an asset, like, you know, like how it's described in the email, if you're going to build something that is actually a machine that prints money without your direct involvement, then you have to think about it from a, you know, fundamental, you know, puzzle pieces perspective. But we all think about that. We all know that.

But then to actually get in there and like, all right, I'm buying a, I'm buying a baker. I better figure out like, how many cupcakes can I make? Is it makes more sense to make cupcakes as opposed to buncakes or cookies or anything else? And if I do, how many of these are profitable? How many of them are not? How many of them go stale? How many of them are sold? I'm not the guy figuring out the details. Then no one else is going to take the time to figure that out. It's my machine. Dude, honestly, that's a super good example because let's say for, let's take that as a literal example. Like, let's say you're going to go buy a bakery and you hire a baker. That baker will only do exactly what you tell them to do. They'll bake as many muffins and as many cupcakes as you tell them to do and not ask a single question. So then it falls on you to ask the question, is this the appropriate amount of cupcakes to be baking on a Tuesday? Yeah, I mean, I know that sounds stupid. And so you have to get in there and start analyzing traffic flows, analyzing the amount of work that goes into make product A versus product B and figure out if that's profitable, if it's appropriately priced. That's one of the things that I'm always amazed by as you get in

there because this particular repair is a ton of work. It takes our guys basically the whole day and we're only charging $1,000 for it. Yeah, I know the part only costs 70 bucks, but it is a huge amount of it. But until you get in and you know it at that level, you're screwing up. I promise you, you're screwing up. And you can't trust your employee to tell you when there's a problem. No. Of course not. Yeah. Of course not. And honestly, until you have that kind of insight, you don't fully appreciate the machine that is McDonald's. Like you don't fully appreciate what they've built there because they can literally take any idiot off the street and have them producing millions of dollars of hamburgers because you don't have to do anything. Everything, everything is pre-done for you. It makes McDonald's that much more impressive and beautiful. Amazing. Yeah. And that's why that's exactly why restaurants get such a bad rap because it's so hard to run a restaurant. Like if you over serve, like, I mean, you go to Chipotle, right? That's

what I love. Chipotle. And I love when they double up my chicken without me asking. But as the owner, as the owner, I'm like, oh my God, my concert through the roof. And I would have no idea because I'm not, how do you measure that? Do I weigh how much chicken I've made? So I know how many grams were sold, how many going because they have KPIs for that, like six ounces is this much. That's why the spoon's this big because otherwise your costs are insane. And although it's so much more meticulous in food service, it still holds true across all the industries. You have to know. You have to know. You know, the thing about this, you know, Chipotle, you're talking an extra $1.20 of chicken. In HVAC, you're talking a $300 motor that's, you know, rolling around the back of the van because, you know, it got, it got the wrong one got ordered and then it never got returned. So that's literally just, you know, getting destroyed in the back of the van somewhere. Or I'm in landscaping and we did a lot of, we did a lot of residential projects, like they were total like $60,000, $70,000 project,

you know. And so if we're going to go in there, we're going to build to scale exactly what the customer wants. They're going to have, you know, they're going to make their own decisions on stone and tiling and turfing and all this stuff. So that when I go to buy from my supply shop, I can only buy this particular stone in, you know, like this, this size of a pallet. So now I've got extra pallet, like what do I do with that? I can't resell it. It's stuck in like, it's piling up in the back of my facility. These are costs, unliquidated inventory. Yes. Yes. Am I tracking that? Totally. Oh my gosh, dude. So this was one thing that we did a couple years ago. So we actually shut down our offices and for a very similar reason. What would happen is we would go to pick up equipment for a job. We would either order the wrong equipment or maybe too much of something and rather than taking it back to the supply house to get our money back, they just could dump it in our, in our shop. And so I drive down to Austin for a trip and be looking around in there and see like there,

you know, be as part of sitting on a shelf with a customer's name on it. I come back a year later in that exact part of seeing the exact same spot. Yeah. And it was a $2,000 part. Yeah. And now we can't return it now, you know, as I've been here. And you can't return it now. And you just hope that it's a part that isn't obsolete at this point because a lot of like, a lot of like the overall mechanics and stuff, like that stuff stays good for a few years, but if it's something technical, like God forbid, it's like, you know, like a technical interface or something computerized or like, you know, because smart homes got so popular over the last few years, if it's, if it's an interface on that, it's gone. Like I can't even sell that anymore. It's like no one wants that. Absolutely. Well, the other thing too is let's say just by sheer luck, you do happen to find another home that needs that exact part. You have to remember that you have that part. So they have an inventory tracking and things like that. It was such a mess. So we ended up just completely shutting down the whole thing so that if you do end up with a part in the back of your truck, you're highly motivated to get it out of the back of your truck because it's taking up space.

And that's a very precious commodity in the back of these guys trucks. So I got rid of the whole thing. So to motivate them to take it back to the supply house and get their, get my money back. That's huge. I mean, just, just making sure that, you know, the money you spent on gas and toned, just to have them return that equipment wasn't worth it. Oh, yeah. Oh, 100%. 100%. Yeah. Yeah. Completely anecdotally, I was looking at a machine shop to acquire once. And they specialized, they specialized in like lawn mowers and like commercial equipment. And it would have made, made a lot of sense, you know, theoretically to attach that to a landscaping business because we do a lot of stuff like that. And so I was looking at it and I didn't acquire. And the thing that turned my stomach the most, because I would open up, I went into the back and these guys had been here for a long time, had a great customer list, but they had, I mean, I don't know, but 100,000 SKUs, like I'm talking nuts and bolts and all, like, like you, like an incredible amount of inventory. And it was decently organized, decently organized. But I just looked at, I mean,

my first thought was, I'm going to have to get like, 10 interns for a month to just sit here and count everything. Because if I run this, because they were running by the seat of the pants, like they didn't have the inventory tracking. And like inventory tracking alone on a machine shop or repair shop or like the thing about like a, you know, auto repair facility, I'm like, right, that is a headache. I don't want, I don't want that. I don't want to have to know like all these costs are. And so I'm like, nah, that's not a good fit for me. No, dude, but by the time you were done counting the inventory, it would already be inaccurate because we would have gone to the hell over here and pulled some sparks off the shelf, right? Yeah. And like we said, like, it's not like I'm going to shut down operations to count all the inventory. And at the same time, like the employees who were running it, there's only a handful, but they've been running it for like 20, 20, 25 years. I'm not going to convince them to start using a computer system. I'm going to let those guys go and bring somebody else in. I need you to scan this QR code every time you take a net out of this box. It's never going to happen. Yeah, absolutely. Absolutely not.

Are there, do you ever find any businesses that you would, you would be tempted to buy just because it sounds so fun? Yes. Okay. In fact, I immediately think of the very first message. Again, when I first started searching, I was looking in defense tech. I've got a big background in Air Force, especially like R&D type stuff. Yeah. All the secret squirrel building our next great aircraft type thing. And then after that, I went into big techs, a lot of software development. Okay. And so I'm thinking like defense tech software, I'm open to manufacturing like, it's not that I'm a manufacturing guy, but I've kind of done some of that in Air Force. And so I was kind of looking around and the very, one of the first businesses I looked at was the 80 propeller shop. And I can say this now because they've since sold to somebody else, but I was looking at them and they're in San Diego and they had a propeller shop and they made specialized propellers for airplanes and for test airplanes. So they were really popular with like, there's this whole community of like small aircraft that do like stunt piloting and stuff.

And they built, they make them for that. They make it for test aircraft. And they had already received interest from aircraft DoD out of LA because LA is LA in the area around it, ton of aircraft testing over there. And so they'd already gotten experience from like R&D and DARPA and say, Hey, can you make these very specific propellers for like unmanned vehicles and all sorts of stuff. And which is right up my alley. I'm like, Oh man, I could do that. The owner was like, I am not sitting in a meeting with DoD or any of this stuff. I'm not going through a contract. And I get it. It is a nightmare, but that was like right up my nightmare alley. I'm like, so I'm thinking all this stuff through. And the man, he was a stunt pilot himself. And that's how he got into this doing it. He fabbed all this stuff himself. And in the lobby, he had a P51 Spitfire that he had rebuilt from scratch. Gorgeous jet. Oh my goodness. Just a beautiful jet. And I remember thinking, this is so cool. And I'm like, man, I would have to get my

private pilot's license. I would have to be like in this. I'm like, I'm not going to be a test flight guy. But like, I saw myself, you know, running this business and like doing deals with secret squirrel Air Force R&D and like, just having a great time. And it did not work for a lot of reasons. None of which have anything to do with the fact that my wife would never let me fly. But I remember thinking about that. I'm like, wow, what, what a great story. What a great, what a great lined up story for me. But it would have been a lot of fun. Again, not a good fit. He did end up selling to somebody who I think was a good fit. So very happy for them. But yeah, of course. I mean, and you know how it is, like when you start buying, even if you're like, like yourself, like you're just an HVAC, you can't help but walk into literally every single business you walk into. And you start thinking, man, what is it? What does their capital stack look like? What does their revenue look like? Like, man, are they making money off of this or that? What's the profits? Are they a high, high volume producer? Like if I walk into Walmart, I know that like everything here is just, it's about volume and cheap and sales and inventory tracking like we

just talked about, like they're down to the penny. They're super meticulous. Or is this a, is this Rolex where they could care less whether you buy or not, everything is super high priced. And it's a completely different business model. And so you just get addicted to it. Oh, totally, totally. Dude, there's one percentile right now on a, some newsletter that I get. It's like, it's helicopter maintenance or something like that. Yeah. That just sounds so awesome. I can see so fast that someone would die. Oh yeah. Like we just said, you have to be able to, and I think everyone can get there. Yeah. To be in a position to where you have to learn every individual piece of the business. And if it is something, and I talked to, I talked to a lot of first time searchers about this. I'm like, look guys, if you're coming from finance or PE or, or quite literally anything, and you've never ran a team before, like you need to be clear that like there's a lot that goes into this. You're buying in an industry that you don't know. So I'm a big fan of internships. I'm like, if you're willing to sign a personal guarantee on several

million dollars of debt, then you should be okay with taking a couple of weeks and like walking alongside a business owner and figuring out like what the day to day is like. I'm passionate. Huge. Yes. Yes. You have to do that. You have to understand that like, you're going to have a massive amount of learning that comes from operating the business from just from the business side, marketing, sales, all that kind of stuff that you've never done before. Yeah. Not to mention the technical details. You have to be able to get to where you can wrap your head around every single aspect of the HVAC business. And then it's just that scales at an incredible rate when you're talking about like, oh, I'm going to buy an aircraft manufacturer. Right. Oh my gosh. And you're not, you're not an engineer, like you don't need to be, but you should probably start learning and that's just going to be a higher learning curve for you. You know, you're going to manufacture satellites next, like what are you prepared to learn? And so like the learning never ends. Oh, 100%. Which honestly is part of what's so fun about it, but it's also definitely one of the biggest challenges. I mean, to that point, like, I remember text just straight up lying to me about

certain jobs because they didn't want to have to do the work. They didn't want to have to be the one to go up on that roof. And they're like, Oh, no, it's okay. I can't do that because the weather is not right or something like that. Or like some sort of city code or apartment said that I can't go up there without XYZ safety equipment, blah, blah, blah. Sounds very, sounds very technical. It sounds very correct. And I don't want to be like, I'm too stupid to know any different. So yeah, absolutely. And so you got to learn. There's just no way around it. You have to learn. And you're probably the same way. I bet every phone call you get is some guy with the finance background who's wanting to get into ETA, right? 30 to 35%. Yeah, right. But what is true is that, you know, regardless of whether it's them or someone else, 80% have never been in a very autonomous supervisor position. This is one of the reasons why I'm so bullish on veterans, because by the time you're 28 years old, and you've been like a staff sergeant or a company great officer, you've led a team, you've been in charge of that team, you've been in charge of that team and their equipment and

their resources and largely their families. Like you've understood, like at least what it means to like lead something of actual tangible value and have to make decisions and then have to back those decisions up to your superiors and then make decisions that your superiors didn't like because you knew it was better for your team. Like you've got so much more experience there that I would rather have you than someone who's been like a director of marketing at JP Morgan because you've never actually led a team. Right. And if the project completely flopped, it was no skin off your nose, right? Of course. Yeah, it's not off you. I mean, yeah, that's the thing that I keep coming back to. I'm like, man, I always encourage, if you're a veteran and you're interested in this space, absolutely take the time to see if this is the right fit for you. Yeah. And not just the, not just the model of acquisition, but what industry might fit for you. A lot of veterans come from small towns and small communities. What a great fit because it's really hard to get a PE associates from New York City to want to buy like an HVAC company in, you know, the middle of nowhere Texas. Yeah. Exactly. Yeah. No,

I could not be more man. I think that's brilliant. Yeah. So those are the things that I see. I see a lot of people who they see it online and they think that it sounds like a really good opportunity economically, but they're unwilling to buy a snow removal company from Minneapolis because it's cold. And I get it. I'm not moving to Minneapolis. It's cold. But you need, that's what we're talking about here. That's what we're talking about. And on top of all those other barriers, it's learning the details. Yeah. Yeah. Totally. And I'm assuming you would agree with this too. But if you're going to do this, I would not even consider moonlighting it. Like this is no, right? No, I had a great conversation a week or so ago with Kira Hamilton. You see her all over LinkedIn. She, she bought a laundromat in San Francisco. Yeah. And she loves, she's a great resource because she talks about it. She actually bought and then sold the laundromat. And now she's an SBA broker. So, and she's been a real estate investor. So she's worn a lot of hats in this

phase. And so she's got a great perspective. But she really talks about how like a lot of people have this idea of buying like, I'll buy like a side business, an asset business. I'm not going to maintain my W2 job. I'll hire a manager. They'll run it for me. And she, and we know that that's total BS. Right. But she does a great job of debunking this because, you know, she bought a laundromat, a small one in San Francisco and she had employees, she had management. And she was still there all the time folding laundry, cleaning the shop, making sales. Like it's, it's just a really good job of helping you understand that like, there is no side business. There is no passive income. The only, the only passive income that comes from business ownership is when you built it to a place where you're no longer the CEO and now you're the chairman and you're hiring the CEO. Yes. And that CEO then has a management team. Like you're that far removed. And then let's be clear, even though you're physically removed, you're not, you still own mind share because you own the company. But you don't stop thinking about it. Like, dude, they have, they have board meetings, like for a

reason because they're checking up on the CEO. I remember watching this, watching, I was listening to this podcast, my first million, I love it. They're great. But they had a, they had a tech founder on there. And he was, he was talking about this exact thing. Like he got to the point where he was out of his business and it was like $35 million, something, something wild, right? He's doing a great job, but he'd already hired professional management. He was out of it. And they asked him, you know, it's still growing. Why'd you sell it? And he was like, 'cause just because I wasn't in it, I was still thinking about it all the time. Right. And if that just runs so true, I'm like, yeah, they're like, you're thinking about it. You're the one with, you're the one with the, oh, I don't know. Until you, like I said, until you sat in the seat, you just don't know, you don't understand. Dude, 100%. No. So I, I, I took my, my business for a test drive on the, on the market last year. It was kind of just like floating it out there to see if anyone would be interested in buying it. And it was interesting to see kind of what came back in terms of like the feedback.

You know, there, there was some interest, but everyone wanted to know like, how long it was going to stay. Like, well, what do you need? I'm selling the business. Like, well, then, like, basically they wanted me to stay and run. Like, well, if I'm going to sell the business, I want to sell it and walk away. So obviously the, the workaround for that then is to have, you know, in place management, which we're, we're not there yet, but it's kind of one of my goals. I want, by the end of this year, I'd like to have a CEO. But it is kind of funny how, like, I think there's this thought that you can like buy it and you can flip it, or you can buy it, but you can put management in and absentee own it. And, or I can buy it and convince the seller to be the new general manager. Right. Exactly. You're doing a great job, Mason. I'd like to buy you out and then let you keep running it for me. Exactly. Exactly. So I'm going to give you a, a, a bunch of money so you don't have to work, but then I'm going to expect you to keep working. And by the way, all the fruits of your labor, I get to keep. So it's like, not a super compelling proposition.

And so I think that's the next net that I'm trying to figure out on a crack is, is, you know, what exactly does the end game look like? Because it sounds like there's going to be a little bit of a setting up the scenario to be able to sell, which is going to involve having a manager in place. And then the thought would, you know, come up, which is like, okay, if I haven't, you know, management in place, then maybe I don't need to sell. But then like you're talking about, doesn't mean you're not still thinking about, doesn't mean you're not still involved. You know, the chairman is still extremely involved in, you know, every company. This is, this is exactly, you know, where I'd like, where I was hoping this conversation would head to, because, you know, you're doing a roll up. But as you know, you're not actually getting a liquidity event until you actually sell. I mean, you're getting a salary. That's great. And your business is valuable on paper, but that's your paper. And if, you know, COVID 2.0 hits tomorrow, then, you know, I have full confidence that you could ride that tide. But the next time I hear somebody

who's ever owned a business, say they're looking for a recession for these, makes my head want to explode because you have no idea what's going to happen. You can't really care for those like, you know, black swan events. So, you know, we know that like, as you move forward, you know, building out your management team, it is not only going to make your business more sellable, but it's going to increase the value of your business. It's going to provide you with more autonomy. And the beautiful thing is that when you do work yourself into that chairman seat, you know, you keep building on the business from the chairman level, it at least gives you options. Like you could be in a place where you're like, Hey, I don't need to sell. I'm actually pretty okay with this. My management team is running it. Let's keep expanding. I'll be like the business development side, or maybe you find a way to partner, but again, no liquidity event. Maybe you find a way to where you've built something and, you know, to where you can partner with a PE group. And, you know, instead of buying you out completely, you keep on a minority stake. So you get some of the earnouts on the outside there, you know, from an, you know, as an investor, but not from an active position, maybe as a board member or something. There's options,

but 99% of business owners will never ever have the opportunity for those options because they've never done the work to begin with that you're doing right now. Yeah, totally. No, that sounds true. Yeah, I think that's one thing too that I don't know exactly what the point of saying this is, but I think there is a, an underappreciated difference between EBITDA and cash flow. And, you know, like I think we've got, we're pushing a million of EBITDA this year, but our cash flow is a very small fraction of that. And then that gets divided across all my shareholders. So I was thinking like, if I got to a million EBITDA, I could just be like, be rolling. I mean, they need things, but rolling, you know, like, it's, well, I mean, you're exactly right. I mean, and it really comes down to deciding like, what's your end game. So before this has been amazing, filled with gold nuggets, amazing things, not just for first time buyers, but for business owners now to be like, man, that, that's incredible. So thinking forward, you know, what, what does the end game

look for you? And not, not necessarily with the business, but like, because I mean, you could, you could, you could hold this business for a long time. You could sell it next year. There's options. But, you know, like, if you fast forward 30 years, what is, you know, 65 year old you look like, you know, what does that dream look like? Yeah. So I thought a lot about this. And I think for me, what this really boils down to is me becoming the person that I want to be. And, you know, I got this kind of like avatar in my head of, you know, 65 year old me and he's fit, he's got a great marriage and his kids, you know, are calling him, you know, every day. And, and then like on a professional level, like, I'm still failing in a lot of areas, you know, like in terms of leadership, I want to get good at those. You know, I don't want to take an exit before I've gotten everything out of this personally that, that I want to get, you know. And so, like, I got, I got pretty decent with the book publishing thing. I got to where I didn't have to print the

books myself. I didn't have to make the books myself. I had like, I was the manager and had like one layer under me. Now what I'm working on is building managers, you know, so get like multiple layers of management. And that's, it's kind of a limited skill set to train a manager to manage the technicians or the installers, you know. And so, so that for me, I think is, is really my biggest goal non non-monetarily is just making sure that I become the person that I am trying to be. Man, I love it. I love it. It just reminds me of this Jim Rohn quote, where he was talking about how like, when he first met the millionaire who changed his life, Mr. Shope, and he says, I want you to set the goal to make a million dollars to be a millionaire within the next five years. Not for the money, but for the person that you would have to become to earn the money. Right. And you kind of, you really touch on like, one of the reasons that one of the things that really drives people like us is that you have this idea of like, I want to be able to become the best possible

version of myself. Yeah. And I want to squeeze everything I can out of this opportunity. And then when I'm done, I'll know when I'm done, I'll move on to the next opportunity. Yeah, no, 100%. 100%. Yeah. And I feel like, you know, I feel like you, you see that happening every day as you do this journey, you know, you become more detail oriented, you become more thorough, you become a little bit stronger socially, like, you know, not, not just listening to every employee's opinion and just doing whatever they tell me to do, but really, you know, express some conviction and confidence in this is the path that we're going down. I love your vision. If you want to go pursue that on your own, you know, bless you, go do it. You know, but those are all the things that I, you know, I have developed myself over the last, you know, three years. And I'm curious to see what else comes up. So amazing. Well, Nathan, I'm going to, I'm going to leave it at that. This has been phenomenal. Thank you so much for, you know, telling us about your journey, a lot of the wins and especially some of the big losses along the way. And kind of like how you're building going

forward. This has been just a completely invaluable. If people want to reach out to you, because I know you're active on LinkedIn, is that the best place to find you? Absolutely. Yeah. Yeah. All right. Great. Well, in that case, I'll link your profile in the show notes. And thank you so much for being here. I've really, really enjoyed this conversation. Been a blast, Jed. Thanks, buddy.