Edgar Galindo: Two Landscaping Acquisitions, One Cross-Collateralized Collapse

Hey, everybody. Welcome to another episode of Still Searching. Today, I am speaking with Edgar. Edgar bought a landscaping company and things did not go as planned. So he and I have that in common. But he's here. We're going to talk about his experience and see what we can learn from that. So Edgar, thanks for joining me today. Yeah, no, thank you for having me. I'm excited to share and hopefully some people can pick up some lessons. Yeah, likewise. What I like about this is that, you know, the vast majority of people who have a business failure, they either don't want to talk about it or they're not able to talk about it for legal reasons. And so anytime I come across somebody like yourself who's like, not only is willing to talk about it, but is able to talk about it, I'd love to have these stories on there because it's always good to put a face to a name. Yeah, no, I totally get it. And, you know, ever since I kind of came out and then shared my story, I can't tell you, I've had countless calls with people who went through similar situations. They maybe can't talk about it publicly or they just needed somebody to listen.

It's crazy. Yeah, I think it's not very, it's not human nature to want to share these things. But it's a lot more common than people think. Yeah, that's exactly right. And I'm not sure how it felt for you, but I know like when I was coming out of it, it felt like, you know, it's very, for me, I was very ashamed and I was very, it very much feels like you're the only one that's just happened to. And, you know, I knew like conceptually that wasn't true, but it definitely feels isolating. And then when I started talking about it, like you said, people just come out of the woodwork, start DMing you. Yeah, that happened to me. Yeah, that happened to me. And you get on these calls and they end up being like part therapy. And then exchanging, exchanging stories and like things that work and things that didn't and super beneficial. And my thought was like, man, if we could just get some of the, some of this information out there so that other people can hopefully learn from our mistakes ahead of time, that'd be great. Yeah. And honestly, not just the mistakes, right? I think there's sort of somewhat of

a misconception around entrepreneurship through acquisition that it's like, hey, you buy a business. It's existing. It's easy. It's, you just don't rock the boat and keep doing things and it'll be fine. And it's, I mean, I haven't met a single person who bought a business who was like, oh yeah, this was super easy. Even, even, even the successes are hard. So there's that too. Yeah, I was talking just the other day with Scott Crosby. He's in St. Louis bought a company and he was talking about how he, he didn't take a paycheck for 18 months and just getting kicked in the teeth and he had experience in the industry. And then he was like, I, I actually, I met him for lunch here in San Diego a week ago and he's like, man, two months ago, I took my first paycheck for 2,500 bucks and it felt so good. And that's real life. That's, that's how it feels. Yeah, it is. It is. So let's bust right into your story, man. Edgar, I intentionally, we didn't have a conversation ahead of time to some,

for me to understand this story, because I want to learn about it just like everybody else. So tell us a little bit about your background and kind of how you stumbled into this whole strange business acquisition space. Yeah. Let's see. I, I'll take you all the way back, but I'll try to be brief here. I actually grew up in the, in the trades, if you will. My dad is always working in construction. He, he owned a roofing company. So I would go spend my summers with him and, you know, working with the crews and then learning, learning about that sort of type of environment. He was a subcontractor for, for a large metal roofing company. And so we would just, you know, go out there in the sun and then really learned the meaning of hard work and taking, we're taking a meeting, man. This is like, I was like 16, 17. And then my mom owned a commercial cleaning business. She would, she had a full-time job, but in the evenings after, after work, she would go and clean banks and I would help her do that. So we would go and clean 10, 11 banks a night with some help,

obviously. And, you know, kind of got to see that side, that side as well. So both entrepreneurial, I always had that in me. I wound up studying math. I thought I wanted to be an engineer. I thought maybe I wanted to be a teacher and wound up in construction initially as a field engineer for a industrial construction company. So I always cut my teeth in construction. I spent five years working for that business. It was actually a family-owned business at the time. They were, they were very large. I must have been, I don't know, close to 80, 100 million revenue and they were all over the country. But I got to progress there from field engineer, planner scheduler, estimator and wound up being a project manager. And so that was kind of seeing like what can a really successful family-owned business look like, right? And I got to a ton of my construction, moved all the way, kind of progressed through all the different parts of it. And ultimately decided, hey, I want to go to business school.

So this was in New Orleans, great place. Ended up moving to Austin to go to business school back in 2018. Graduated in 2020, kind of COVID. I went into consulting and just be clear, this University of Texas at Austin, right? Yes, sir. Yeah. God, Austin, McCombs School of Business. And when did you consulting after I spent two years working at Deloitte consulting that all kind of different projects for tech companies, construction companies. So I got to work with the C suite of different construction companies, a very large one. Some of the largest was in the country and got to see what kind of issues they were dealing with. So at this point, as you can tell, I've had small family-owned businesses, my parents into trades. I worked with larger sort of mid-sized construction companies. And now I'm getting to work with some of the largest in the country. So construction is kind of where, you know, my passion lab. I like how tangible it is. And I like consulting. Yeah, it's a pretty broad level of experience

there. Because like you said, I mean, you grew up in it. You kind of rose through the ranks of a medium-large-sized firm. And then you go and you see the C suite side of it. You know, while you're at Deloitte, like, you know, obviously, it takes time to learn this kind of stuff, but it's kind of baked in for you. You'd seen this industry from definitely different perspectives. No, for sure. Yeah. And I really enjoyed it. I like how tangible it is, right? Like you can go outside. I mean, especially here in Austin, we're growing so much. You go outside, there's cranes all over the skyline. You see buildings go up. And yeah, I just like how tangible it is. I think one of the things I missed when I was in consulting was, you know, you work three, four months on a project and you hand over a PDF. It just wasn't as tangible. But anyway, yeah, exactly. I love my time at consulting. I worked with really smart people, solved really cool problems, but you work a lot. And my wife and I were ready to start a family. As I mentioned to you, we have a two-year-old

now. I wanted to start a family and I just wasn't going to be able to do what I wanted working that much. And a dear friend who actually bought a business himself out in Nashville, he kind of introduced me to the idea, I think very common entry point for so many people. He was like, you should read this book. Buy Then Build. I read it. Of course. Yeah, the ETA Acquisition Bible, I think. So I read it. I loved it and I was like, yes, this is what I want to do. So that was my intro. And then him and I started searching together. Things kind of didn't work out. We were doing a part-time search and part-time searches are very hard. So I ended up looking for a job going to something that would give me a little more flexibility. So I ended up going to work at Google for I was there for about six weeks and before they laid me off, which sounds terrible, but I did nothing bad to say about them. It was

learned a ton even in six weeks. I had a great signing bonus. They gave me a great severance package and they vested some of my equity in an unaccelerated basis. And ultimately, I felt like that was a universe saying, hey, you wanted time and you wanted capital to look for business. Here you go. That is so random. It's like get hired at Google, which is like an end goal for a lot of people. They basically sign you up. You get your bonus, you get started and then six weeks later, like just kidding. Sorry. Here's the severance package. That's right. Exactly. And so, yeah, I had essentially translated to roughly like 10 months of runway to find a business. And that's how I got into landscaping. I was introduced to another searcher who had already found a landscaping business under LOI and he was looking for an operating partner. Initially, I was just going to run the business and get earned some

equity, but I ended up going in on the deal and wound up with 25% of the business for a design build firm in Austin. Yeah. Okay. So, correct me if I'm wrong, it sounds like you were searching exclusively in Texas because Austin is home and you're not trying to move away. That was big constraint, absolutely. And you ended up acquiring a design build firm with a partner and for those of you who are unfamiliar with the space, a lot of times people say landscaping, you think like cutting lawns and stuff, but in reality, it is a massive industry where we have like residential construction, residential maintenance, commercial construction, commercial maintenance and everything in between. Irrigation, turf, tree trimming, like there's a whole lot that goes into it. Yeah. I mean, green roofs now, everything, irrigation. Yeah, there's so many different. There are businesses that are just artificial turf install businesses.

There are just patio businesses and design build, like you said, it can encompass a lot of it. It's outdoor living. Like if you go look outside your house, there are some design build outdoor landscaping companies that do all of it. Yeah. Yeah. You could do almost anything you want. I think people build like, you know, big stone walls, like outdoor features, like big fire pits and stuff. Yeah, all of that. Yeah. Exactly. So and the other thing people don't realize is that each one of those aspects of landscaping, completely different business model, like design build for residential, you're looking at like 50% plus gross margins. It's all project based. It's a lot of work. You're on or you're off, but then commercial maintenance work, I mean, you're looking at five to 10% margins. It's you're competing and you're barely making any money. Yeah. No, absolutely. And then, and then even within those segments, right, you can get into like, you know, landscape design build just like

generally, or you can like for me, for us, we were in the, in the high end. So our average project was call it 80 to $120,000 project. Like that's a, you know, the home value for in a lot of places. And this is just what's being spent on, on the outdoor part. So yeah, very broad, very broad business is this landscaping. It's not a, it's not just, you know, mowing and then blowing is some say. All right. So let's keep moving. You work with a partner. You end up acquiring this business. You own 25%. The other partner owns the rest, right? Yeah. All right. And so what was the agreement? Like you're the operator. They're like the silent partner. Like, what was, what was the trade off here? Yeah, that's pretty much it. I was going to be the operator. I could earn up to another 25% so that we both wound up 50/50. He's a great guy. We're good friends. He is, he was sort of the real, the CFO, if you will, where I was really focused

on the operations day to day. And yeah, that was the kind of the agreement we were also, we wanted to do sort of this mini rollup here in Texas. So we were kind of like, we knew that was our end goal. We didn't, we didn't really have a strict game plan of like at this time here and there, but essentially after six months of running Austin, things were looking good. We're growing. We came across this opportunity for another, another similar landscape design build company in Dallas, North Dallas. And I think this is like, I'll take a pause here because this is one of the first lessons I think, right, by clear lessons I have for searchers is that when you're looking for a business, when you're searching, it can feel, you kind of develop this scarcity mindset of, man, there's not that many deals out. Like the deal flow is slow. All of these CIMs I'm getting or, you

know, their sub par, you're 10 months in, you haven't taken a paycheck, you're worried and there's all this, this scarcity mindset, like there's nothing out there. That changes when you buy a business. I think when you buy your first business, you can go to somebody else. First of all, you can take, depending on how this first one goes, you can take more risk, right? You may have not ever thought about buying a business that's netting, I don't know, 150K a year. That's too risky. But when you already have a solid platform of foundation, you can look at smaller deals because they're just going to add on to where you already have, right? You can maybe use the same management. I mean, it's kind of similar to the private equity playbook here. You build the platform and then you start doing add ons, but you can go further down, obviously more risky, but you have more opportunities there. You can go to competitors and suggest a merger, suggest a joint venture and you're taking seriously because hey, you have something. You can go to another business and say, "Hey,

I want to buy you. I already own this. I do this." And I think you get taken more seriously than when you're just searching and you're like, "Hey, I've never done landscaping, but you have a great business in the books and I am interested." They might just blow you off. And that's that first lesson, right? You have this scarcity mindset and when you buy the first business, you have to work to get over that. I think in hindsight, we would have benefited from waiting a little bit and saying, "Hey, Austin's going well. We're six months in. We're still having done a full year. There's still more to learn. Let's maybe hold off on this deal." And it was a great fit. The business was good financially. They actually did maintenance, which is something that we wanted to start in Austin. We didn't do any maintenance here. Our clients were like, "You just installed this great landscape. I wish you could maintain it." But a very different skill set. The guys doing construction and store work are very different

from the guys doing mowing and blowing. So it's really two businesses. And this is common in landscaping. I think further north from for both of us, there's landscaping, lawn care, and then snow services. And it's the same business doing both, but they're completely different businesses, like different equipment, different weather, like complete. But that's just the nature of trying to get through the seasonality. Well, the economics are different. So it almost requires it in a way. And you're right. A lot of these companies, they're small businesses. They're mom and pop-owned. And so the only way you're ever going to make some money is if you focus in on one thing and really go in on that. I'm focusing just on the maintenance piece or I'm focusing just on the construction piece and actually get pretty good at it. So I see what you mean. Exactly. Yeah. And we weren't going to start maintenance. In Austin, it's like starting a new business. And that's the reason for us acquiring was to not do this.

But there's this opportunity in Dallas. They have a maintenance arm. We can learn from them how they do it. We can pick up best practices and slowly start doing this in Austin. They did a lot more outdoor living, like patio installs and outdoor kitchens. And we didn't really do a lot of that here. So we said, Hey, we can take this here. But they didn't do a lot of, they did some, they did, they did landscaping, but it wasn't to the extent that we did here, which is, was kind of the second lesson, I guess, there's this vocabulary that is different across regions. They described themselves, the Dallas business described itself as a high end landscaping business. And in hindsight, I don't know that they were high end compared to the high end work we were doing in Austin, right? Like the biggest project we did here was over a million dollars for landscaping. Our average was 80 to 120 ish. We did very large projects, 350,000 landscapes on

six, $7 million homes. Their definition of high end was like, Oh, we did, you know, we're doing this $30,000, $40,000 patio. And we had a $30,000 minimum here. Like that was barely above what we would have taken. So I think when you're looking at businesses, there's words that you kind of just let go over your head like high end. Oh, we do high end, but you should use numbers, not like words when you can say this is for real. Yeah, exactly. Like what does high end mean to you? Because it's very different in Austin and, you know, and like some definitely some parts of Dallas super wealthy compared to, you know, the suburbs. It's just a whole different ballgame. So you touched a little bit there on like having that scarcity mindset. And I think I understand what you mean. And it sounds like the first business was doing great. Like you said, six months and things are going well. You know, the, you know, the post closed transition was going fine. It was what you thought it was your deal. You did your diligence and you're like, Hey, this is what we think we're

getting ourselves into and kind of checked all the boxes. And that's great. Obviously the biggest risk. But then you find this other company in Dallas and you're thinking, and I don't correct me if I'm wrong, but you're looking at it and you're like scarcity mindset. Wow, I've got this opportunity. And if I don't take advantage of it now, it's not going to be here later, right? You're thinking that, which is what kind of pushed you to move faster than you would have otherwise moved. Yeah, exactly. I think, I think that mindset was like, Hey, you, like, you know that this doesn't come around very often. Right. And it maybe doesn't when you don't already have something, right? But yeah, no, that's exactly it. I think that's hindsight's obviously 2020. I think we could have taken a little bit more time before we, we pulled the trigger on, on, on something like that. Could not agree more. I completely relate to that. So you end up deciding to move forward this, this company in Dallas, and you acquire that business as well. What happens then? Yeah. So that, at this point, my business partner is, Hey, I'm going to, you know, move to Dallas

and I'm going to be the day to day on that one. And, and he does. So he moves to Dallas. He starts running this business. I think things are going well initially. We're, we're making investments. We're, a lot of the changes we've made in Austin, we're working out for us. So we're trying to bring some of those changes there. I think that the first, one of the things we did there was that transit, I had this construction experience, right? So I'm kind of familiar with maybe not landscaping, but I already knew what a change order was. I already knew sort of what progress billing, how that worked there. He didn't have as much construction experience. We wanted to keep the seller on longer. And this was right around the time when the SBA allowed a roll over equity. So that was the plan. Like, Hey, you're going to keep some percentage and, and, you know, we're going to, we're going to help you grow this business. The, the story for him was, at least as I recall it was, Hey, I've grown this business as much as I can. I, you know,

I need someone with more energy who has more know how on these things. And you guys are both MBAs or whatever that's worth. You, you, you can help me. Because of the financing, it ended up like not working out to where we just did the roll over equity, but we kept them around with, with a potential vesting schedule, essentially was the plan. And he really knew his stuff, man. He, he, like, he, he done great. He grew this business. He, he, he started just mowing and, and he grew it into something like truly special. But like a few months in, one of the sales guys kind of came up to us and said, Hey, you know, who's going to pay me this commission data mode? And it was significant. It was, I think close to like 100 K. And so we're like, well, this is, this doesn't like, we don't know you this commission. This is for past projects. So we bring it up to the, to the seller and, and he does, he disagrees essentially. He's like,

I don't owe commission on this. I'm not going to pay commission on this. We, this is for a sale that occurred before you bought the company. Yeah. For sales that had already happened in the past, not to mention that in the, the work in progress, which is a messy thing in construction deals. When you, the closing date is going to be at some point and there's work that has already started that maybe they collected a deposit on that haven't done any of the work. So that deposit needs to go to the buyer because they're going to have to do the work. On the other hand, there might be work that they've been, that they just finished, but they're waiting on the final invoice and you close in between that final invoice should go to the buyer, to the seller because they, they already did all that work, right? So it's kind of arbitrary because you're literally going to projects and you're like, ah, that's about 80% done, but like it's somewhat arbitrary. So he essentially asked, I think it was like 5% of that work in progress amount that we were supposed to get as a commission.

And I don't think we were very clear on whether commission for who or for what. So when the gentleman came and asked, Hey, who's going to pay me this commission out of mode? We were like, Hey, we, we already paid commission. We already bought the, everything that was from last year, that should have been accounted for. But like I said, the seller didn't believe that he had earned commission. And I say didn't believe because there was some structure, right? The project had to meet a certain profitability threshold and, and that the seller argued that didn't happen. We looked into it and we felt very confident that, that he had earned at least some portion of that commission, if not most of it. And we lost a lot of faith in the seller at that point, not only because we felt misled, but we also, the sales guy was really important. He was driving a lot of the, the growth of the business. And so you want to make sure that he gets taken care of for the work he did,

like the discrepancies between you as the buyer and the seller, it's not, it's not the sales guy's fault. He's just doing his job. So you're like, exactly. What do I do? Yeah, totally. So, so we ended up deciding and it was just based on one principle. It was like, Hey, we no longer trust the seller. We lost trust. And so we let him go. We felt that it was for cause. He felt that it wasn't. And so he ended up suing us. I think it was like two or three, I don't know, maybe a couple of weeks after we let him go, we got served. So at this, at this point, we're still processing. What are we going to do? Because it's not only the money that was owed. I'll round to a hundred K to keep it simple here. Significant is close. Yeah. We paid. So let me take a step back here. So this hundred K was not in the books. We had a quality of earnings. And this is like important for listeners to hear is it was not logged as an

accrued liability or a short term liability or wages owed. It was just not in the books. Completely under the table. Yeah, completely. Like the seller was like, Hey, I don't owe this commission. Why would it be logged anywhere? Right? I don't believe that I owe this commission. We, again, we go back and look and we felt that he did. Long story short is we have to make this sales guy a whole. And we overpaid for the business because that hundred K came straight out the bottom line. It's straight out of SDE, right? Like that. So the multiple that we paid, which was like 3.6. Now it's not just the hundred K that we have to pay back. It's the 360 that we overpaid for the business because we diluted off a number that was inflated by that amount. So that's a lot of money. That's 460. We're like, Hey, what are we going to do? Are we going to try to get this out of the seller note? We had like only 40 K and escrow. So you're working with your

attorney as well thinking, all right, how do we fight back against this lawsuit that's now coming after us? How do we, you know, what did we do in our purchase agreement where there's like a representation, a warranty, a seller's note where we can kind of claw back some of that money. And then while doing all that fancy stuff, how do we actually keep this business running? Right. Exactly. Exactly. Right. We're still, we just got it. And now there's this weird thing where the guys there love the seller. They, again, he built great relationships. So then I would say, wait a minute, our new bosses are getting sued by our old boss. Like it's kind of weird. Yeah. So yeah, that's kind of the gist of it. We end up at this point, we hadn't really decided what we were going to do. Were we going to sue? We were still thinking through that. So we get sued. So then we're like, okay, well now it makes sense to counter sue. The good thing is we, we had an arbitration clause. So we got to go into arbitration. I think it was the seller who actually suggested, hey, arbitration is expensive. It's like 100 K thing. Why don't we try mediation? So we went into mediation and his ask was essentially

pay me the year salary that I was going to make and, and this bonus and all of the seller note, which was like 680 K and I want to be released from my non-compete. So you can imagine my, yeah. I want all the money and I want the freedom to be able to compete with you on day one. Yeah. I was like, exactly. I was like, wait a minute, you want us to fund your next business to like compete with us? We just can't do it. Right. So I think by the end of mediation, his final ask was like, no money just released me from the non-compete, which kind of brings up the third lesson for searchers. It's, I felt that we were a little misled in terms of like, what are you going to do now? Once you leave this, once you're done and, you know, it was like, I'm done. Like, I want to retire. I want to buy a ranch. I want to try whatever it was. It was not, I want to start

a landscaping business. So when he's like asking to be released from the non-compete, it's like, wait, why? We thought you were done with this. So yeah, long story short, that's kind of kicks off this whole long, very expensive process of going through this arbitration. I mean, like over $100,000 in lawyer fees. And I think that's another point to bring to searchers is that being made whole is expensive. There's actually like, there's like this area, there's this gap where it's like, hey, let's use a small example, right? Somebody takes $8,000 from you, literally grabs it out of your cash register, you can sue them to get it back, and it's going to cost you 10 grand. Like, it just doesn't make it exactly. So there's this amount. And for us, obviously, 460, whatever the total was, it did make sense. Like, that's a big amount of money. We're just

trying to figure out, does it come out of the seller note? How do we, how does that work? So yeah, we essentially spent a ton of money on lawyers. We did splurge on a really good law firm, and I don't regret that. I think it felt really good to have very good representation. But that really hurt our cash flow. I mean, we, our sales are going down. The gentleman was really the face of the business. We knew that going in, that's why we wanted to roll over equity. That's why we wanted to, given the potential to invest over time. And yeah, business started to hurt. We're going through all these things. The growth is slowing. We have to pay the sales guy. He worked with us. There was some payment plan. And now we're paying the lawyers. So cash flow gets tight. We decide that, hey, you know, we're going to have to make some, some changes here. So we, one of the changes we made was we had a landscape designer who was paid hourly, a totally fair

hourly rate, but ended up was only working part-time initially, I think, before we bought the business. But over time progressed to working quite a few hours a week, over 40 hours a week, close to 40 or slightly over and translated to, with overtime, it translated to like, I don't know, the very above market salary. So we're like, hey, this doesn't make sense. Let's figure out a way to compensate you more in line with the market rates, which we know because we have landscape designers in Austin. And we'll set up a commission structure so that you can make what you made last year, if you sell what you sold last year, but at least this way we were protected. I really like pay for performance. I think if you structure it well, it can work really well. So that's kind of what we were trying to do. Anyone who's actually owned a business like that, they understand the importance of aligning incentives. Like, I want you to sell more and I'll absolutely give

you a piece of that. Yeah, absolutely. No commission commissions, like go to town, like sell. Yeah, exactly. And that was definitely me and then my business partner's mentality. So we, yeah, long story short, she decides to move on to leave. Things are still tight. During this time, my business partner got married. He just had his first child as well. And then things are obviously changing for him as well drastically, as you know, when you have your first kid. And so we ended up deciding, hey, we need to hire, things are plateauing here. They're starting to go downhill. We need to hire a new CEO, someone that will help us turn things around. We found a great guy. He was an XPE landscaping guy, been all over the place, worked BrightView, like just really new stuff. But he was looking to settle down and he lived in DFW. So it was a good fit.

He came in and I think this is where we made another mistake. We maybe should have involved the people that are making that decision of like, hey, even if we knew who we wanted, I think there was a little resentment of like, well, you didn't interview me for the job. Right. And then we were looking for something very specific. I don't know that anybody there had it, but we could have either, hey, given them the opportunity to interview or at least had them help us interview the CEO, the guy that was going to run it just for like a culture and fit perspective. But we didn't do that. We kind of surprised me like, hey, here's your new boss. And so that I think kind of, I don't know, created some tension. And ultimately we ended up, though the designer left, we ended up, although this is costing us money, we were like, hey, we have to make some changes. We have to make some cuts. And Austin, we used a great bookkeeping service. I didn't have an in-house bookkeeper over there. We had an

office general manager and we said, hey, you know what, we're going to have to let the bookkeeper go. So we ended up letting the bookkeeper go. The CEO eventually goes on our computer to get some files and sees that there's like a text message thread between him and the sales guy and the designer that had left. And they had started their own business already. They had already started their own business. They had registered. They were screenshotting themselves leads that were coming into us so that they could take care of them. And that was rough because you're like, you started questioning, am I the bad guy? What's going on? Why are we... So as you can imagine, there, the business, we're in a lawsuit with the seller. We've lost a bunch of our employees because of this thing. We actually sued them. And now the people is what you buy a business for.

We have like two guys left from that original acquisition. We're bleeding cash. Things aren't turning around. We're talking about, hey, let's bring in like 200, 250K into this business, invest, put more money into it and turn it around. And the CEO who we hired, he's very honest. He's like, hey, I like my job. I want to keep it, but I'm going to be honest. This is not a 250 turn around. It's a lot more money. And then once you start penciling it out, the math doesn't lie. And we said, hey, this is not going to work. So we decide to close the business. The second sort of... To be clear, you decided to close the Dallas one that you acquired. Austin was still going, right? Yeah. Austin is still going. Austin is doing well. It's the first year I think we ended up growing. I closed it 20%. Things were looking good. Our bottom line is not great, but that's just because the growth is expensive. New trucks, new equipment, new crews. And our second year, we're like, hey, we're going to focus on cost cutting. Now that we've achieved growth, let's cut some of the cost.

And we started doing that. So it was working. Some of that investment, the first year, is the cost cutting. We bought new skid steers because we were spending so much money on maintaining the old ones that we're like, hey, this is a payment on a new one. So we start cutting costs. That's looking well, but the issue here was that the businesses were cross-collateralized. So Austin was a guarantor of the Dallas business. And so Austin having to take on that debt was not really going to be feasible. We end up... Yeah, I think it's an emotional thing. I really loved all my employees here. They're great, but you take a step back and you're like, let's look at the model, put numbers in. And would we have ever closed on this deal with twice the debt? And they're just like, no, it really just makes no sense to keep this going. So we ended up deciding to close Austin

down as well. We wound down back in March and finished all the projects we could. And yeah, we're still in the process of filing for bankruptcy. And that will trickle down to both me and my business partner. We will eventually both also have to file, which is the last... I think the note I'd leave that story on is nobody plans for this worst case scenario. Nobody wants it to happen, but it's something that you should really, really think about. I live in Texas. I'm grateful for that. I'm happy that we have great homestead protections. I don't know that I would have gone into this if we didn't have those protections, but I was aware of them. I knew that the worst case scenario, this is what's going to happen. And then for me and then my wife and my family, it was like, we do not... I don't want to lose my home. And that's protected, right? We don't have

rental income. I don't drive a fancy car. We don't have a Rolex. So I knew that the biggest asset I had was my home and I don't want to lose it. And I knew that worst case scenario, I was protected from that. So that's the last sort of lesson. Just don't hope for it. Don't want it obviously, but you should have some idea of what's the worst case scenario before you make some decision, because it's not as easy as the online gurus say. It's hard. It's not passive money. You're not just going to be collecting. You're going to be working a lot. I have a lot of searcher friends who bought businesses and I'm telling you, they all work super hard. Yeah. And the risk is real. I mean, I'm looking at your story. It sounds like the Austin business that you bought was a great company. Everything you thought it would be, it worked out really well. You modeled it right. You stepped in. You're working. You're rolling over sleeves. You're getting to work. Things are working. It's growing.

And what ultimately sank you was that poison pill, that company you acquire in Dallas, that ultimately did not work out. And it's like, you can look back now and say, hey, hindsight, 2020, I should have seen this. I should have seen that. But the truth is, like you said, in the moment, sometimes you can't see some things coming. You had a good relationship with the seller in Dallas when this started. A good guy had built a company, but you're right. When things go south, lawsuits add up. They get expensive. These bills come out of nowhere. They get expensive. It is a people thing. These businesses are people things. And so alliances get cut right down the middle. And ultimately, you have to make some really tough calls. And it's like, if that one in Dallas goes down, well, now you sign for the debt. So how are you going to pay that off? And it sinks the one in Austin. And yeah, wow. And then that's, that's a really good point. Yeah, there's, it's people, right? There's this huge people component. I think I go back and like, if you looked at the models of the businesses, they both pencil out, like, I mean, not just,

I'm not, it's not me telling you this, like the SBA back there, right? We were able to get funding, like the math was there, the debt coverage ratio was there. It made sense on paper. And yeah, things go go wrong with the things that you can't model, right? And yeah, that's, that's, that's, that's the risk. Yeah, it's really tough too. Because like you said, you have, you have all these employees and not just in Dallas, but obviously in Austin. And it's like, it's not their fault. Like you tried something and it didn't work. And now everybody's out of a job. And, you know, I've spoken to 150 plus people who have had an experience just like yours and just like mine. And you're right. Like I talk to people all the time who are going through this. And then number one thing is like, there's this fear, there's this dark tunnel of fear, like, what happens next? And I tell them the same thing you just said, which is, you need to reach out to a bankruptcy attorney in your state because every state is different. If you don't know what the, if you don't know where this is headed, like that, that fear of the unknown is really going to drag on you. I'm glad you had a chance to do that, you know, before

you ever got into this. Yeah, no, for sure. It's, um, yeah, it should be part of your diligence. Like just, just know it's not all rosy and it's not going to be, look, it's, it's not necessarily your fault, right? I think, uh, I was speaking to a group recently and one of the, the guest asked like, Hey, you seem like kind of chipper. Like you're not like super, like you're going through it right now. And then, you know, you're sharing your story, like, how do you do this? And one, I have a great wife who's a great partner, which I think that's incredible doing this on your own and then not having like the full backing of, of your significant other is, is tough business ownership is you need all the support you can get. The other thing is, uh, I just learned to disassociate, like what happens to, like that's business, you know, and I'm not trying to say political here, but like there are president file bankruptcy, like countless times. So it's not like, uh, it's just part of business. You filing bankruptcy doesn't make you a bad person. You

filing bankruptcy doesn't make you a bad business owner. Sometimes it's circumstances that you've stumbled into. Uh, and, and on the other hand, you buying a business and selling it for 20x, you know, 10 years later, or even sooner, it actually doesn't necessarily make you a great business owner. It could have been a little bit of luck. And as long as you keep that mentality of like, Hey, I'll do my best. I work hard. I'm a good person. Uh, and actually act on it. Then, then you're not ashamed to sort of share your story. And I'm not saying there's not shame initially. It's just you're, you learn like, Hey, you know what, the best I can do is help other people and, and let them know. Um, because like I said, I've had countless calls and I'm sure you have now since that, uh, since the, the Acquiring Minds episode came out and people are going through it. I mean, from like forged invoices to, uh, sellers knowing of, uh, big clients leaving, uh,

yeah, people just decide, people rolled over equity just deciding they don't care anymore. And they're like, I don't know. I'm not going to do it. And then I'm having the license that you need to keep this business. Uh, I've heard, yeah, crazy, crazy stories. Uh, and then like you said, some people can share and just don't want to others can't share because of the same legal sort of, uh, blocks, right? Yeah. And that's why, uh, you know, you're kind of for sure that you're coming out of this with just a whole ton of hard earned wisdom, knowing how things can work, how they can't work, things to walk out or work out for. And even though there's all these like, uh, potential red, red flags and minds out there that can, that can be very dangerous. You also found that like, Hey, with this acquisition of this company in Austin, things really can work out. And so you've seen, you've seen kind of both sides of this. Yeah. Yeah. All right. With those lessons learned, uh, well first, uh, what type of specific advice would you have for other people who are kind of looking into this space? You know, maybe

other than, uh, this and the stuff you've already mentioned and be, are you thinking about doing something like this again, whether, you know, bootstrapping something your own or maybe buying a company in the future? Like what's, what's the plans for Edgar? Yeah. So, uh, let's see a couple of the lessons learned here. Um, I actually, let me look at these up. One is, uh, I think that maybe this was a red flag. Maybe it wasn't actually things very common. Uh, I, I, we didn't talk to employees. The seller was adamant that he didn't want people talking to employees because, you know, deals walk through all the time and now that could cause some issues, but, um, yeah, from my perspective now in hindsight is, and something for people to chew on is you're walking out with a check. I'm walking out with a personal guarantee. Like I need to talk to people like you, you're going to get a couple million dollars here than like you need to take some risk. Like it's the risk is that I have to talk to some of your employees, especially the key

ones that are selling a majority of your revenue to make sure that they don't feel that their own commission or that they don't feel they've been mistreated. Um, that's kind of the, the, the first thing, right? And then on, uh, and maybe your lawyer should have caught this maybe, maybe not, but that, that work in progress, that commission, Hey, I want 5% commission on this. It's like, when it's something like that that relates to money, I think the agreement should make it very clear. Like how much and who's going to get that? Like, is that your money or are you going to use that as a bonus for employees? Like, are you, where, where is that? Um, where is that actually going to go? And when I, and I don't know the full, how this works here, but the escrow amount, we have $40,000 in escrow for the Dallas business. I think in hindsight, it's like laughable, like $40,000. Yeah, like, what are you going to do with that? Like, and yeah, and it's just like, so I don't know that obviously a seller note is a, is a great defense mechanism, but you should

know that to make a claim on the seller note, you're going to be talking to a judge and talking to a judge is expensive because you're going to have a lawyer and, uh, and so that gets expensive. Escrow, I think is a little more accessible, but, uh, for, like, you know, how do you make that, that bigger? Uh, the structure, if you don't have to cross collateralize, maybe you don't. For us, the bank wanted it to sort of mitigate the, the risk. Uh, a line on vocabulary. I don't think this had a huge impact, but what does high end mean where you're at versus what, and it obviously it's not just high end, right? It's whatever other descriptive word is used in that industry. Uh, and then the last one I've already talked about is the pace. Uh, the pace is the scarcity mindset, the pace of how many businesses you buy, how quickly, like the first one is hard. The second one is a little easier. I imagine, I don't know, the third one is even easier and so on and so on. So don't get,

don't get stuck in that thought of like, I gotta jump on this. Like, hey, get this first one lined up, secured, working correctly, and then you can, you know, start thinking about other things. You will get more opportunities. Uh, and they're not as scarce as that first one. Um, I imagine you think about that one a lot where you're like, you know, Austin was great. Austin was growing. Austin was working. What if we had just focused on Austin for 36 months? Yeah, you know, I do. I think about that. But then I also think about like, man, what if, what if it, I worked out, what if that commission had been, that was never an issue. And all of a sudden we went from a $5 million a year company to a $11 million a year company combined and another year, like they're both cash flowing and none of the sales dropped the next year. We can, you know, there's the other side too. So yeah, hindsight is 2020 and, uh, it could have gone either way, I guess. I try not to beat myself up too much about that. Um, yeah, you stepped, you stepped in, you stepped in the arena. You made

some tough calls and sometimes they worked for you and sometimes they didn't. And then you learned from it and you keep going. So like, yeah, yeah, so much respect. Thank you. Thank you. I appreciate it. Again, I've gone through the ringer. So I'm, I think my own therapy is sharing so that others don't make some of them the same mistakes or learn the, and then you ask, well, what am I up to now? I, am I going to buy another business, do what I consider it? I think, so if I go back to why I even got into this, it was for financial stability and for, uh, more time with my family. I didn't get either of those. And I think that's something that people have to be honest with when they're buying a business. You're going to work a lot, a lot. It feels different. It does feel different. I was working, call it 70 hours in consulting. If you were to ask my wife what changed, she would be like, he was working 70 hours in landscaping. It felt different in the sense that you have

this sense of ownership. You decide, Hey, today I'm going to go here. Tomorrow I'm going to go here. I'm going, so it doesn't necessarily always feel like work, but to the people around you, it still is work. Uh, so I'm still seeking those two things, right? I want something that'll give me financial security, uh, and I want time. And now I want more time because I have this beautiful little girl and that's kind of all I want to do is just spend more and more time. So if a business presented it, well, once I file for bankruptcy, I'll never be able to get a federal loan again. So that, that, that's, there'll have to be some kind of financing agreement, which, or investment, which I think I could probably pull together if something presented itself. Uh, but I learned a ton in landscaping. And so what I'm doing as I'm actually, the one thing I said I would never do was like, I'm not going to do a startup. Doing a startup is crazy. Why wouldn't I just buy an existing business? Uh, but that's actually exactly what I'm doing. So I'm working with my dad on,

on, on the family business. And then I'm creating a landscape management software. I got two into design build landscaping to not do something with it. I've learned that where the gaps are, I learned where the opportunities are. And now I'm trying to operationalize it and, uh, and make something of it. Obviously startups are hard and it's very opposite of why people buy businesses. But I think my circumstances changed, right? I now have way more deep knowledge into this one industry that I think software under serves to, I, uh, I have a, I have a daughter now, like I, I want more time. So I think, you know, I just answered your questions. I'm not sure I would do it again, uh, unless it was going to give me those, those things that I'm looking for. But I'm hoping to get that from, from what I'm building now. Amazing. Well, I think, uh, I think I can speak for everybody who's, who's listening in Washington and say,

Hey, we wish you and your family all the success going forward. Um, I know, uh, you guys have been put through the ringer, uh, going through the, uh, the dissolution of the business and your own personal bankruptcy, which is most likely coming up on the horizon too, but wish you all the best and all the success. If there are other, um, other people out there who are like, you know, maybe they're, uh, business owners right now who are going through the struggle and they want to reach out to you or, or other people who are kind of considering the acquisition space and they kind of want to be able to, uh, get your thoughts on it. What's the best way for them to reach out and, uh, talk to you? Yeah, for sure. I think, uh, LinkedIn is great. It's Edgar Galindo, just my name. Uh, and then I'll just put my email out there is edgar@ledge.build, L-E-D-G-E dot build. Okay. Yeah, reach out. Happy to, happy to chat. Uh, I, I've had countless people looking into landscaping businesses reach out. So if you're looking into landscaping, you just bought a landscaping company. I can help you avoid some of the, the tripping hazards that,

uh, that I stumbled with. Amazing. Well, thanks again, Edgar. I can't tell you how much I appreciate you, uh, being able to come forward and talk about your experience, uh, especially for all the other people who are trying to, you know, figure out that question for themselves. So thanks again, and wish you and your family all the best going forward. Sounds good. Thank you for the time.