00:07:58 · Justin Escajeda
[00:07:58] S1: Well, I guess it I guess it... You know, from what I've seen, you know, and definitely looking at companies on, you know, the under $10,000,000 mark, right? Like, I'm not looking at these mega huge corporations. So it might be different in that respect. But for these companies that are, have only been run by a founder up to this point, Look, man, that's... It is really important, in my opinion, and from what I've seen and from talking to tons and tons and tons of employees, like people don't particularly like change, you know? And here's the thing, when a company is first being sold, that's a big deal and it's a scary deal, not only to the owner, but to all those long term employees, you know? So I always talk to the current employees, maybe whenever the seller allows me to a little bit before closing and be like, listen, I do not wanna change anything. I wanna keep it all the same. And to be perfectly honest with you, I have no idea why people go and buy businesses and and and and chain... And immediately change all this stuff. Like, hey, we're gonna do x, y, and z. It's like, you know... And may... Maybe that's why that's why I don't... I haven't bought as many businesses as some people because, you know, I'm I'm really particular. Like, look. You know, if I if I buy if I buy a car off the lot, you know, a a fully loaded Mercedes Benz, whatever, it's like, I'm not gonna go change it. I'm not I'm not gonna go start taking shit off and and this and that and and changing it. I'm spending all this money because I like the way this thing is, you know? And it's such a... And in my mind, it's just such a simple principle. It's such a simple, you know, method of buying companies. Like, hey, just wait for these great ones to come and the ones you really like that you don't have to change anything, and then you could pay a premium. Then it's okay to, you know, overpay. I mean, I've overpaid. Believe me, I've definitely overpaid. But like, you know, I don't feel bad overpaying for a company that I know I'm gonna hold for the rest of my life and operate the way the founder has done it. And here's the thing too, those founders, those people who started those companies, I mean, it's like, not all of them, but most of them, they love hearing that. They love it, the fact that their name is gonna live on for another generation.
00:10:30 · Justin Escajeda, Mikk
What they built is gonna go on for another generation. That you're trying to learn from them how they did this and how they operate, you know? And then sure, can... Mean, we make tweaks. There's no doubt about it. Like half the time, most of these companies don't have a very good accounting system. They don't know what accrual accounting is. It's like a half cash, half accrual, weird morph, and like you gotta, you know, they don't report everything at times. But for the most part, the processes and the culture and the sales and the margins, we we really try to keep the same. [00:11:07] S0: Out of all those acquisitions you've done, what's maybe some of those, and if if there is any, some of the major changes you have had to do, maybe not like post acquisition immediately, but maybe within the first year. Has there been anything which you would like to bring out?
00:11:07 · Mikk, Justin Escajeda
[00:11:07] S0: Out of all those acquisitions you've done, what's maybe some of those, and if if there is any, some of the major changes you have had to do, maybe not like post acquisition immediately, but maybe within the first year. Has there been anything which you would like to bring out? [00:11:25] S1: Accounting? Mhmm. Accounting accounting is probably the biggest one in almost every single one of them. Yeah. We sweet... We... Like I just described, a lot of them, they don't report everything. You know, it's like cash accounting with some accruals sprinkled in. There's sometimes two sets of books for cash and checks. But we that's one that is one thing that we are very adamant about is totally clear cut accounting. Oh, and you know what? Sometimes a little bit marketing, I'd say on the residential side, you know, marketing is really important in residential construction. So, you know, there's things that we've learned that worked that will add to the marketing, but nothing nothing big. Nothing nothing really big that I could think of. [00:12:21] S0: Give us the overview of the portfolio today, and then let's... I'll I'll I'll then try to understand what what Justin actually looks for when when doing those acquisitions and what has been the thought process of of doing some of those.
00:12:33 · Justin Escajeda
[00:12:33] S1: Great. So we have two commercial masonry companies that do some residential, but it's mostly commercial work all the time. One North, one South Of Pennsylvania, one in Western PA here in Pittsburgh, one in Northern PA. Four roofing companies, and they they all all have specials at different things, you know what I mean? Some repairs, some are commercial, some are residential. One company that we bought, Bronson Roofing, it completely, it only does shingle, like re roofs, and they just do thousands of squares a year, you know, and, you know, that's what they specialize in, that's what they did before. We haven't tried to change them. Their insurance brokerage, a material supply company. We have a general contracting company. We have inks installation. We have a design studio slash luxury remodeler. We actually just bought the company. It's really neat. And we have a property management company. Yeah, well, and like I said, they don't have to be synergistic as a reason for us to be interested in them. I'll say that. You know, it's great if they are, but but a big thing that we make sure of is, are they okay as a stand alone business? You know, that's the most important thing. Because a lot of things can go sideways, you know, after after an acquisition that you don't account for. So that's... But like I said, the synergy definitely helps out, you know. We can definitely help each other out on jobs, share share numbers with each other, you know, to to subcontract one another, you know, save thousands and thousands of dollars on insurance and, you know, favorable pricing on construction materials when we can, you know. So
00:14:48 · Mikk
[00:14:48] S0: Like, not too many people have acquired, like, 10 companies and, like, running a portfolio like this. You have, like, a significant amount of data. Have any of the acquisitions gone wrong?
00:15:00 · Justin Escajeda
[00:15:00] S1: One acquisition I could think of, I paid too much for, all right? And I'll tell you why. I was really looking at the last three years as opposed to... And I was kind of... Want... I'll tell you what. There was a little bit of emotion in it because it was a masonry company, and I really liked it. And it had flashy, like tons of assets. It was nice. It was a cool company, and I wanted it. And the prior three years, I really didn't look in, they were great. They were like 5,000,000 top line, 1,000,000 bottom line. It was... Every year, it was like clockwork. Well, here's the thing. I kind of dismissed the fact that they were working on the same four jobs in those years, right? Now, if I would look past those three years and notice, you know, in the couple years prior to that, well, they were doing like 2,500,000 a year, right? So and sure enough, you know what I mean? Like after those jobs closed out, we're back down to, you know, dollars 2,500,000 a year. Now we pay... Now don't get me wrong. We made it work. The company's still viable. It still makes money, but I definitely think that I overpaid. And there some stuff that went on with the owner post closing that he was a little bit of a slime ball about and some things we had to get over. But you know what? You're gonna have that. You're not gonna have... You can only... You know, you can only... You can't sink to other people's levels. You have to act as honestly as you can and and hope to try to avoid the snakes. But I'm still I'm still happy that we bought that company. You know, I really am.