Buyers and Builders
00:23:13 · Nathan Lindley
[00:23:13] S1: So this was where things really started getting interesting. I, you know, I had I had four or five technicians who just couldn't even cover their own payroll. And then all of a sudden, I get this one guy who's on commission and he is out earning everybody else collectively. And at first, we... It just started out with a couple of really good days. I was like, wow, those are some good days. But then it turned into a couple of good weeks, and I started to realize that this was just kind of a new normal. And I I remember sitting down doing the math and figuring out that I could completely float the entire company off of this one guy's revenue and realizing that if this was as good as it got, I could at least not go bankrupt. As long as this guy worked for me long enough to pay off my SBA loan, I could at least get out of this empty handed, you know, but not bankrupt, which was... That was actually a huge improvement. And and what it showed me was the importance of alignment of incentives because this guy won when I won and I won when he won and and and we both lost together. And so our bad days were bad together, and our good days were good together. And so so that was such a huge change versus my hourly techs who they were gonna make their paycheck kinda regardless of what happened today. As long as they kept their butt in that truck for a full eight hours, they were gonna get their their paycheck for the day. And so they were ultimately indifferent to the outcome of of their appointments. And so that was just a massive shift and it and it showed very clearly in the performance. And so so that was that was kind of the the the inflection point for us where it went from staring bankruptcy in the face to all of a oh, I think I could see a road map for how we could start making money. The other thing that it did too is it caused our payroll to fluctuate with our revenue. And that was always the thing that was so frustrating before is we'd have a $20,000 payroll and we bring in $10,000 that week. Then we have a $20,000 payroll and we bring in $40,000 that week. And so there's just no correlation to anything. And so by putting everyone on on commission, we're able to kinda actually chart our expenses to our revenue, and that was just an absolute game changer.
00:25:25 · Nathan Lindley, Mikk
So ultimately, what we've done is we've played everyone in the entire company with, like, one or two very specific exceptions. Everyone in our entire company now is on is on commission. And so if our CSRs, they get paid for every call that they make, for every appointment that they book. There's there's, you know, like, this whole pay structure built around their their performance. And so that's become, you know, a a key tenant to our to our... How we operate our company. [00:25:52] S0: And then what's next, doc? You started you you started seeing this this model works, and now sometime later, you acquired company number three and four and five, and let's get into... Yes.
00:26:09 · Nathan Lindley
[00:26:09] S1: We took a solid year to just watch it work and just make sure that we weren't dying. Because it got... It has been so bad for so long that the last thing we wanted to do is go in deeper and and the problem wasn't actually fixed. Right? So so what we did is we we started just kind of building Austin back up because we lost all of our technicians, and we kinda... The one guy. So we just kinda started building Austin back up slowly, hiring one or two guys at a time, build Dallas back up slowly, and and putting everyone on performance. And then you're you're having to kinda fix all these little problems that are coming up too. Right? Like, you're you're just kind of fine tuning all the little bits of the process. And so after a a year, year and a half, we're like, okay. Things generally seem to be working. Let's keep going. Let's do the next deal. And so there had been this deal that had come up, like, a year previous, and we'd actually been... We've been looking at it before the wheels had fallen off, and the deal had fallen apart. And so we went back... That that guy actually reached back out to me and said, hey. His business partner had passed away and he owned another company. He couldn't run both companies. Like, kinda need to get out of this. So we were able to get that deal on really good terms. And so that became deal number three where we... That was another Dallas deal. So now we had two deals in Dallas and one in Austin. And and that was when things kinda started accelerating a little bit. So that was deal number three. And the deal number four... It's funny. Actually, both of these deals number three and four were both deals that we had looked at previously, and then they had kinda fallen out. And then they ended up coming back to us, like, a year to two years later saying, hey. We we kinda need to sell. Deal number four was a similar situation where the owner had passed away and was the widow who was trying to kinda keep things going and she was really struggling, so she needed to to be out of it. And so that was another Dallas deal. And so... And and actually, all of these deals were through BizBuySell by the way. Like, all of all of the deals that we had done up to that point were just brokered through BizBuySell, very, you know, retail, you know, nothing nothing proprietary at all. And then How
00:28:29 · Mikk, Nathan Lindley
[00:28:29] S0: was your... I will interrupt here. How was your due diligence? How has it changed? Let's not talk about the last maybe three acquisitions, but [00:28:39] S1: Yeah. Yeah. [00:28:39] S0: Acquisition one, two, three, four, because the first one gave a gave a huge, huge lesson for you.
00:28:46 · Nathan Lindley
[00:28:46] S1: Yeah. So due diligence was a little bit of an evolution as we're just trying to refine our thesis of what it is we're actually buying. Because there's obviously... There's the opportunity cost. If I can go buy a company or I could advertise or, you know, do do all these other uses for your capital. And so I was always having to defend the acquisition strategy in my mind and instead of just going out and and spending $30.00 on Google and so, there's there's kind of rationale that evolved in my mind. Initially, it was just, well, these guys are, you know, doing 2,000,000 a year in revenue. So, if we buy it, we'll also do 2,000,000 a year in revenue. As the idea has evolved, what it has turned into and what I've really refined the the core value driver to is what I term buying at bats. And and the the... It's kinda like, I don't know if you ever read the book or seen the movie Moneyball, but it's a really similar thought process to to that. And that we we have KPIs that we know. And I I refer to them as our batting average. And so we know that if we go out and run 10 calls in a day, we'll sell something on on five or six of those calls. And those five or six calls will have an average transaction value of about $3,000 And so so those are those are the performance metrics that I know that we can control for. So then what I'm buying when I'm when I'm going out and acquiring another company is I'm I'm buying the opportunity to get my foot in that door. And so, like, we're a baseball team. I know that we'll hit half of the pitches that are that are swung at us or that are thrown at us.
00:30:29 · Mikk
[00:30:29] S0: Is it really that high, the conversion? Yeah.