Buyers and Builders
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.
00:30:32 · Nathan Lindley
[00:30:32] S1: Yeah. So we we have... Last year, we had an an average transaction or an average call value of $1,477. That was for every call that we ran. Every time we knocked on the door, we averaged $1,477. Now, of course, there's a bunch of those calls where you you walk away with nothing, and then there's, you know, a handful of calls where you make $40.00, right? And but the the blended average across all of those was $1,477 for the year and so, so now, I can overlay that on their call volume and I can say, okay, if you ran 2,000 calls last year and you and you generated a million dollars in revenue, then, you're averaging $500 but I know based off of our performance metrics that we would have done $2,954,000 off of that off of that call volume. And so I have I've distilled it and distilled it and distilled down to just like what what am I actually acquiring here? And why would it be better for me to buy this business than to put money into Google? And and that's ultimately what I've distilled it down to is is that I am buying the opportunity to come into this customer's home and look for problems that I can then provide solutions for. And so that's the distillation of my M and A strategy. But that, you know, that took an iterative process. You know, every time you you do a deal and some aspects of it works really well and some aspects of it didn't work as well. And like, you know, one one thing for us now is if the owner has a very strong customer facing role, that's a that's a a a big issue for us. Not that we won't still do the deal but it's going to be a we know that there's gonna be a high customer attrition due to that fact. Because all the customers are are accustomed to to engaging with the business owner. And and when he steps away, there's gonna, that's gonna be felt. And so, not that we won't still do the deal but that is a strong consideration for us. Versus if the if the owners maybe involved in the like in the in the office and and managing things but he's not on the phone talking with the homeowner on a regular basis. That's a that's a totally different level. If he steps away, the the homeowner might not even ever know. Mhmm. And so that's a that's a big consideration for us.
00:32:51 · Mikk
[00:32:51] S0: You mentioned putting money into Google. How does your funnel work if you if you can share? And who does the calls? Is it technician? Is it people in the office? How are people incentivized? And maybe you can share more about your incentive structure because it's Yeah. It's... It seems to be working so well.