JD Beck welcome to acquiring minds thanks for having me will JD you left corporate to buy a small Plumbing business in Colorado it's been a roller coaster but wholly worth it you told me in the preall let's get into it start us off with some background on you please JD well I'm from Alabama originally grew up in Birmingham uh went to went to school at the University of Alabama I got a degree in electrical engineering and then I never used it I went in the Army after college I was an engineer officer doesn't mean I was doing engineering um that took me to Missouri for a little bit then uh Fort Carson Colorado had a good four years but didn't really want to do 20 of that so got out and then of all things had a career in commercial elevators which one of your former guests was talking about I think his name was Ben Rizzo um that's right s super interesting podcast to listen to because it was my life for about eight years um that career took me to San Francisco for about two Phoenix for about two as well and then back to Denver um just love this state and came back to Denver um for a company called TK elevators my last stint there did about five years managing their construction operation we did about 30 to $50 million a year in Revenue just just depending on what was going on um about five years in started looking for the next thing as we all do right and um had a couple good job opportunities both inside of TK and with some other companies as well um there was a job offered that I guess was kind of like like the the fulcrum if you will kind like the focus Point um it was to go manage a small business uh for a former boss of mine back in California and great people great company liked everybody there um but I brought it back to my wife my wife was like I really just don't want to leave Colorado and I felt the same and um the idea of buying a business was always out there um I had read the U uh the book by Harvard Business Review buying a small business I'd read that a couple of years prior and seem to always pick it up every few years or two short bugs you read a couple times and I said why not let's go ahead and do it um so at that point my uh my search started in Earnest that was around August of 21 um JD let me hop in here before we get into your search so just curious why did you originally pick up the hbr guide to buying a small business it's not it's not just a book that that that most people pick up and read so there must have been some germ of an idea to buy a business yeah it's it's um it seemed like a really good path to generational wealth for a guy like me I'm not super creative I'm not the guy that's going to have the next great business idea I'm not starting Google or anything super interesting I am uh not interesting at all and and the idea tune out audience to you don't have to listen anymore to this guy um no it's it it struck me as a way to like use the skills that I had learned right so I got an NBA while I was in the Army um I like I spent time in the Army as an officer so like you're managing these groups of people from Day Zero and then my career was the same thing right it was it was shockingly similar to the Army it was um managing groups of men building things you know whether I mean in San Francisco it was focused on bigger projects but then in Phoenix it was 100% like there were four to six Crews of two guys building elevators all over the state right and then Colorado was the same thing right we were 30 to 50 men just depending on how big of a year it was um building elevators and escalators all over the state of Colorado so there's not a lot of excitement in the elevator industry there's you know kind of the same thing in the Army I had a really boring experience in the Army boring I mean like nobody ever shot at me in anger it was very much so like I was an engineer we you know we build infrastructure for the Army right and um uh so the idea of like running a startup or something it crossed my mind but um not something that I mean I'm sure I'd do fine it if I ever wanted to do it but I don't know something about somebody kind of hands you this this business that's already existing and they've done like the really hard work of taking it from zero to one and then I feel like that it's then my job to take it from 1 to 10 or from 10 to 100 you know so I don't know it just it struck me as a way to really use my existing skills to you know lever up effectively and the Levering up piece because a lot of people may have the same resume as you did the same experiences and then skills but there's still an entrepreneurial bent in you that led you to want to buy a business that's still doing anything entrepreneurial is still pretty unusual so so what was it that made you entrepreneurial were you an entrepreneurial kid or is it just the idea you wanted you wanted to build generational wealth which in a W2 wasn't going to get you there my mom 100% my mom um like she owned her own accounting practice for years with you know varying amounts of success uh but she instilled it in me from a very young age that um like she was big on like what's that book called like the e- myth Revisited I think was a really popular book in the 90s um she really instilled that in me that there's a very big difference between working for a company and then working for yourself right like kind of like the way that I kind of leveled it down was that when you work for a company they pay you the least amount of money they possibly can when you work for yourself you pay yourself the most amount of money you possibly can now the difference is the most amount of money you can pay yourself sometimes is you know it might be less than what the man could pay you but um still you know she definitely instill that me from a very young age that like this is the path to really doing something interesting with your career okay so so in some sense maybe it wasn't inevitable but it wasn't a surprise that you ultimately struck out on your own no not a surprise yeah okay you said you listened to Ben Rizzo's interview with great interest that was a very popular episode did you think about buying an elevator business I mean I guess contextualize the elevator business for Searchers out there who may or may not have heard Ben's interview well I mean ever since the day I was a young boy I just dreamt of growing up to become an elevator man I mean it was always a go hey I think it sounds really cool to ownn an elevator business um well uh so did I think about buying an elevator business yes it crossed my mind um they're they're typically very large companies so like the company that Ben found one he was able to get into it with some very creative financing terms um that I don't think are typically available and then and then two I was a bit geographically constrained in my search um very much so a search focus on Front Range of Colorado and there's I mean there's one maybe two elevator companies that would be worth it but like the industry is very much so dominated by four majors and then a couple other companies out of Asa um Mitsubishi and fujitech as well so the it's kind of like the Auto industry and then like so much of my experience on the construction side where really like you're taking a manufactured kit or a product and you're managing the installation of it very different from like the service side that Ben walked in they're almost two separate things so in fact Ben even talks about in his uh podcast that after about a year or two um the guys of the company they wanted to go after more modernization projects that were you know bigger tickets much much larger tickets but they were a lot more risk um that was the world that I dealt with on the construction side where everything had liquidated damages these were million plus sometimes up to 1020 million contracts that's just not something that JD Beck's gonna jump into with a small business loan it's it's just it's such a it would be a very interesting thing to get into if the opportunity were ever presented to me I'd be very interested in doing it but I don't see how one guy except for Ben who was able to stumble upon probably the deal of the century I don't see how one guy just goes out there and chases the company although it's funny you mention that like I did come across a residential elevator company in my search but again I don't know at that point I was ready to do something different too but JD it sounds like there's a there's a a stark difference between the construction guys who are the the majors and the complexity of those projects and the risk of those projects is something that a Searcher probably a lone Searcher is not going to want to tackle um but then there's this service piece and those were where the mom and pops live are are are service strictly service elevator service companies good opportunities and that's pretty fragmented I think as I recall Ben saying that piece is still pretty fragmented so um I think the majors still have a very dominant presence even in the service side and they're always going to have a bit of an advantage as well um uh because they manufactured the equipment right so like you're in the situation where the manufacturer of the equipment is offering to warranty it and then to service it for the life of the equipment and then to modernize it whenever gets tired like that's that's um that's a pretty compelling case to a like a building owner even if the companies are absolute disasters to deal with sometimes and they're disasterous to deal with for a reason it's not because they're bad at what they do it's it's they're very much so is a reason behind why they operate that way um there's space for a mom and pop company for sure and they do very well on the service side and they can play ball in the modernization side as well but if you could find a mom and pop Service Company you would have to focus on like bigger cities so I mean like in my experience there were a few in San Francisco there's a few in Los Angeles I don't know much about the east coast and never did anything out there but Pittsburgh is where Ben was if I remember correctly and like that is that's I mean that's probably prime prime Market or something like this where it's a city that's big enough to have like a a um like a company that's I forget what we used to call them like but like a non- major company right like that would be it would be a very interesting space to work in I think there's actually a lot of private Equity groups that are starting to do rollups of these companies much like you see in like the like the plumbing in HVAC space so it's there that's who bought Ben Ben sold to us to to PE yeah yeah I think it's um it's a great opportunity but man it's it's just a whole another level of cash flow challenges and just like add just add one to two digits to every SBA deal and then I think that's what you're looking at and then you have a unionized Workforce which actually it was a really good I've got great things to say about the union I think they did a pretty good job as as far as unions go it's a pretty good one to deal with at least and like the locals I was working with so okay I don't know man you find uh a small elevator company you want to buy up give me a call I'd be I'd be happy to talk to you about it okay all right you hear that audience call JD on elevator due diligence so let's Return To Your Story JD so you start you you and your wife uh you get this opportunity in California your wife says I don't want to leave Colorado you realize you also don't want to leave Colorado you're G to stay in Colorado so now is the moment to think about a pretty hard pivot in your career to go go off and become an entrepreneur to do this buy business thing start us pick us up from there well yeah so I started the surge where everybody starts it seems like I got on bis byy sell um which it it seems to be the entry point for everybody uh started looking around um yeah right um so my last name is Beck um started looking around found this company they're like oh they they work on farm equipment or whatever um turns out we shared the same last I guess I probably shouldn't say the company name but like we shared the same last name and they worked on equipment way out east in Colorado through that I met a broker kind of got exposed to the whole broker World um and then just started chasing companies right so I remember writing my first Loi and like really getting nervous sign and like send this thing over to the broker to try to buy this business well you know I'm not sure what was going on I don't know maybe I wasn't like the greatest buyer at the time which which probably is true you're a firsttime buyer trying to do the SBA thing so it's it's going to beit of an uphill battle and then this is 2021 so um there seemed to been like a lot of activity at the time I don't know if it's if it's necessarily still at that same level or not I haven't really had to do too much of this since then but there was a lot of competition and I was not expecting that like whenever the broker came back to me and said oh we we I forget exactly what he said but he um said like there were two or three other offers for this one business and I thought there is no way there are three other people that want to buy this company in Fort Morgan that does whatever it does right this there's no way he's got to be pulling my leg trying to get more money out of me well sure enough there there probably were so um so I got out bit on that company or the the the seller did something I'm not 100% sure um so kind of kept on looking and it wound up being the same story a few times where you'd write an offer for a company and for whatever reason they didn't pick you so I don't know what it was um I'm not sure if I was getting out bid if I wasn't a very attractive buyer whatever the case may be but I I probably did two or three Lois and just just couldn't seal the deal um finally did get a company under Loi it was a mechanical construction contractor here in Colorado believe it or not they had actually done some work in some of my elevator projects as well and um uh but it was all seller finance which at the time I thought was great there's no real risk here had got to deal with a bank this sounds awesome well companies that are 100% seller finance there's a reason for it and I I kind of started to figure that out about two three four weeks into due diligence and wound up backing out of the deal about probably about it it took me longer than it should have it took me about 10 12 weeks and I eventually did back out of the deal because I kind of decided that it wasn't worth what they were asking for it's worth about half and then actually I found another broker who offered to do a um a broker statement of value right so not a not a full a full appraisal but um but was willing to actually like sit down and for like $2,000 he wrote up this nice report and about like what he thought the business was worth that that $2,000 was worth more than my NBA I mean that that was I learned so much from that one failed deal like it was phenomenal so I mean yeah fa deal tell us more JD what what do you mean so from this document you had you had a third party appraisal of this business you wanted to buy yes and and and what was so valuable in this document and this is not something I'm I've heard um well I mean so much of like so much of like getting an NBA like you go to these classes right and it's all very abstract you know they textbooks they're accounting textbooks they're Finance textbooks I took some classes on entrepreneurship you learn things it's great you do some case studies it's wonderful but when it's your money it's it's a seller's financials it's their tax returns it's it's real stuff it's numbers in a bank account at this point you know and I don't know if I just paid better attention to it or what it was but like you just start going through and learning all these ins and outs of this business like the real this is almost two years ago now so I'm a little bit fuzzy on the details but like the one thing that still sticks out to me was at the time I came to realize that I would have to put almost the purchase price into this business as just working capital just to keep you know the trains running on time I mean it's a construction business right so you had to buy the equipment and then you had to put it in then you had to wait 45 days to get paid and maybe you didn't get paid maybe you don't that's kind of how construction works and um that realization alone I was like I could take my you know my quarter million dollars of of working capital that I'm gonna have to borrow from somebody I could borrow that and put it in the S&P 500 and probably make 7% you know why would I do that and this business is only going to net like 10% like like you start doing those kinds of calculations like you don't really do those in business school at least I didn't I mean maybe other people do you know um so yeah I would say that broker walked me through all of those thoughts um his name's Jim desay shout out to Jim desay a great guys here in Colorado he did that for me and it was one of the best experiences the be I think it was like $25 $2,000 something like that um best money I've ever spent I mean seriously it was outstanding and and JD and and just to be clear it was out a few this is really I haven't heard this like I said so this is great be clear it was so valuable because it was just in the education of the exercise or or because it prevented you from doing a deal that would have been bad or both um I actually talked to the owner recently so he wound up not selling and the business has gone well I don't think it would have been a super bad deal I think it would have been okay but the education of basically having a professional guide you through diligence if like even a business broker guiding you through due diligence and he was not like the sellers broker right totally independent third party this guy that does this day in day out all the time guided me through due diligence I don't know itan it taught me a whole lot I I was working through working with a lawyer as well um it was kind of like a practice round of due diligence that's the only way to really describe it and um I learned a lot I'd recommend yeah I mean if people have a a deal that dies just going through like the due diligence exercise I mean yeah you're going to lose some money you know I'm the size of your deal you might lose a lot of money but don't lose hope like it's it's actually like the education you're getting from dead deals is shockingly good but the but the $225 200 that you spent with him was was just kind of a obviously that's not a full due diligence no that's not full due diligence that's not quality of earnings all of that which is which is much pricier so it was just kind of a an abbreviated kind of due diligence or or or did you just call it like evaluation you just said here here's the data room here's all the information about this business uh you know give me what you think an evaluation is and then he comes back or with a report that's exactly what he did yes I gave him all the stuff that was provided to me he produced his own independent like opinion of the business value and we went from there okay well don't mean to beat this to death but um as you said it was it was more valuable than your NBA so exploring shockingly valuable yeah I mean it's like the world's greatest case study you know yeah yeah great all right carry on JD so that so you don't do that well yes it's a dead deal so up to this point I was still working full-time for TK elevator um so you're doing you're doing uh you're working full-time how much time are you giving to your search is it it's a part-time search I guess but how how much I'd say it was 20 hours a week you know working a 40 hour week on top of that so I mean I was staying busy I mean um the beauty of my job with TK was that I was able like it was like a outside supervisor type of role right so I'm not going to an office every day I would go into the office to like you know for meetings and stuff like that but like I definitely started an end of my day at the house right so I would I'd be done by like 4:30 or 5 and I'd spend the nextra couple hours every single night working on this and then typically a good bit of work on Saturdays as well um okay uh definitely something I'd recommend right people that just quit their jobs and have no money coming in uh while they're doing the search like that that puts a lot of pressure on you maybe you make a bad decision I mean that's a lot of family to support and stuff like that so at this point this was November of 21 um I still thought this deal was going to go through so I told I told my boss what I was planning to do at this point and then the deal dies you know it's announc here like wow this is a sorry Greg uh can I can I keep working for a little bit longer um and like to that company's great credit to my boss's great credit that they let me keep working and um uh I said listen I'll give you like six or eight weeks notice before I quit you know and so they were super on board with it it worked out very well that's great um so I kept on going had a couple other deals that WR Lois on thought for sure this was going to happen and then it didn't happen so I don't know if I smelled bad or what it was but I I could not get a deal to save my life at that point so coming around February of 22 I just said you know what screw it I'm going to write one Loi a week every business has a value I'm going to put that value on paper and I've gotten really good at writing Lois at this point so I decided I'm gonna ride one Loi a week and um I did that for like four to six weeks you know like you'd find a business the list price would be X I thought it was worth 2third of X so I'd send an offer over and of course it didn't really go through right but I was doing a site visit pretty much every single week I'd get back from the site visit I'd sit down decide what I thought it was Worth right an Loi and see what happened um that got J jie your decision to do this was just to to increase your shots on goal because you know numbers game and eventually you know you're you're you're missing so if you could just increase your volume you know you'll accelerate the time to actually hitting something I assume it's that but at the same time it sounds like you're kind of lowballing so lowballing would reduce your chances that any individual of one of these deals would work out so just what was your what was the logic in being like I'm going to go one a week you know rain or shine well it's definitely trying to get at bats that's I mean that's definitely like like shots on goal you know hockey term baseball term whatever right um yeah definitely definitely trying to get at bats here um just just getting in the Reps I think was part of it more than anything else like you see these businesses you start hearing we all kind know how Brokers are we start hearing like the same stories out of Brokers and stuff like that and um so yeah there was definitely like just you know trying to get at bats here but also too like I mean you say lowballing anybody out there that's like gets like a list of businesses from Brokers they they kind of know some of these things are overvalued you know um I think I saw a statistic once too that said that um like something like half or even more of the businesses that get listed with Brokers never sell um so I'm not sure the exact number but it's somewhere in that range right you so um so yeah I mean the idea of lowballing like in my opinion I was writing offers for what I thought was a fair value of the business you know I mean call it low ball and call it what you will right but I was definitely not walking in and say Hey give it to me for free and give me all the AR and I'll do something with it and good luck no that was not the case these Were Real Deals this was you know 2 to 3x um uh like 2 to 3x SD this was you know this was what I thought was fair you know okay yeah so lowballing I then I would not call it low balling I yeah no this was definitely not Craigslist I've done that to a few businesses but this was not that you know um so that got me into a company uh they were residential electrical contractor here in Northern Colorado great guys run by Two Brothers um I think they recently sold but I still keep their name quiet um great company great guys um great part of town would have been just phenomenal right um uh and we had a handshake deal like I went and met with them at at their warehouse on like a Tuesday night in the dark the whole thing trying to you know keep it quiet from their employees and we had a handshake deal you know it was said hey everything looks good but like they wouldn't sign the LOI and um and like having gotten burned on a lot of these deals think that I had this thing in the bag I'm like well I guess I'm going to keep looking you know and I told the broker hey I'm going to keep looking you know and see what I can find and like the broker was you know trying to get them to sign and they were trying to do something to like move all the assets into a trust I don't know they was doing something weird you know just to for tax purposes not anything unsavory but tax stuff these were two accountants that become electricians you know or I think one was an accounter or something I'm not sure regardless I kept looking um so on aark I said hey look there's this plumbing company up in Estus Park Colorado um sure I'll I'll take the drive up there on a Friday it's it's a beautiful drive but I couldn't imagine this working out it's a good bit smaller than what I'm looking at uh but yeah why not so I drove up there and how far is 's Park from Denver or from wherever from where I was living at the time it was about 90 minutes so little too far away for what I would have liked a little bit too small was mostly Plumbing no HVAC it was definitely you know I mean like everything was close but but not quite there okay you know for what I was looking for and um J before before we get into learn more about this business I just I want to make sure we also hear you talk about franchising which you almost did you got interested in doing a franchise and then decided against it is that I is this the moment to tell us about that sure I can talk about the franchises so um yeah I did yeah around that same time of like January February of 22 um started looking at franchises as well if you're trying to write one Loi a week you can kind of cheat a little bit throw a franchise or two in there you know and um so uh definitely there's something there with franchise I did not wind up doing it um and kind of my ultimate decision was I was going to pay roughly the same amount of money or take on roughly the same amount of debt to have no revenue and that bothered me like I don't have a sales background um I didn't at the time and um the idea of just spending three four $500,000 whatever was going to be to then have this this Manual of operations and no revenue and some support it I don't think it's necessarily wrong but it concerned me a little bit and so I was definitely leaning more towards if I could find a business that I would like to buy I'd rather do that but if I couldn't I wanted to get in the game regardless and it was kind of like the last resort okay and to be clear we're talking about doing denovo or or a new territory or a new location brand new brand new territory franchise I looked at some cleaning franchises which actually were really interesting um they have a very unique model of Master franchising where you kind of like Get like some people in and like you subf franchise a small territory to them you would have owned like all of Denver or something like that and like you would sell some small territory and like these guys would be like their own cleaning business owners and they they'd pick up whatever you could sell in that area uh there was a plumbing and HVAC franchise that I really liked I actually went to their Discovery day um it's the same group that does papalock they have a or they had two years ago um this this this like plumbing and HVAC franchise they were working on I don't know if it's still out there it's it seems to maybe kind of died off but I went to their franchise uh Discovery day down in Louisiana it was great you know great people I think it's a really good idea what they've got worked out um there were a couple other franchises I looked at too um well if you if you were open to franchising although you ultimately decided it was kind of your last resort but if you were open to it then you you certainly would have been open to buying an existing franchise resale so like ETA crossed with franchising did you see any of those businesses existing franchises that were ongoing concerns that you could buy anything that was through Brokers um they were out there they were for sale there was always some kind of distress element to it like it wasn't producing enough revenue or something like that I'm sure if you could like get to the franchise group you could probably find a really good deal with especially if you were not geographically constrained I actually there would probably be a really great deal in that um but that would be the way you'd have to go you'd have to go to the franchise group get in with them convince them that you're a good buyer and then they'd have to find a guy that was trying to sell yep which by the way audience is exactly what Michael Horowitz uh who who did the um the Wing Stop bought a bunch of Wing Stops at a oh interesting at a slug and then proceeded to buy more and and do some denovo development um but that's exactly what did he he basically did a lot of development business development a re Outreach to franchisors and eventually got in with some some Marquee franchisors and they brought him a deal so I digress go ahead JD okay so thank you for the telling us about your thoughts on franchising now back to the plumbing business in estess park so I make the beautiful drive up to estess Park which if you're not familiar with Colorado this is the gateway to Rocky Mountain National Park so pretty much every National Park they always have some town like right outside the gate you go to Bryce or you go to Moab or wherever there's always some little town routs on the gate you know where it has like some reasonable accommodations some restaurants that kind of stuff so that is esta park for Rocky Mountain National Park I drive up the canyon go up there I'm thinking a that's a total waste of time me with the broker we walk in it's you know kind of a kind of a rundown building up in esss park there's like an auto place behind with a bunch of defunct cars there's you know it's it's messy for sure um but I want sounds like a small business yeah it's oh man so I walk in there and like stuff just started clicking in a weirdly good way right so one um the first thing that was very different about it was the owner had told all of his employees this was the plant he had been trying to sell it for three years I don't think he'd been trying very hard because he started in 2019 actually he started with Jim desay is the broker that I mentioned earlier and um uh so he um he had started in 2019 and then Co happened and so I think he just kind of like like thought the world was ending got really worried about covid and and just kind of like circled the wagons right and turns out it wind up being one of his best years like probably most small businesses like q1 that year was terrible and then everything after that was great Home Services Yeah Yeah well yeah maybe not everybody but home services for sure you know yeah and then um uh so all the employees knew about this and in fact several employees had had tried to buy buy the company um tried I I can't tell quite how serious but a few of the employees had tried to buy the company um they were unsuccessful for I think they just honestly I think they just didn't really know how to do it and I think they didn't really try super hard you know um which which like there's no shade on them right um then uh there was real estate that could be a part of the transaction he was very upfront about that and then like the owner uh was a very elderly man he was clearly not super involved he was still involved in the business but he was not like the Lynch pin to the business which something I was really looking for and anybody that's still searching like try to find an owner that's almost bad at what he does like I would not say Gary was bad at what he was doing but like he was not like this guy that was like super involved in the business and like he was gone for large stretches he was a bit older he was in a 70s um he wasn't in the greatest of health and so it was clear that like he was you know going to the doctor throughout the day or or coming in late or whatever the case may be and the business was running well enough without him you know he was like it's still very much so needed an owner but um but it got along fine with without like this this Rockstar a player of an owner you know jie let me let me jump in with that that's a great tip and let me jump in with another um way of uh couching that tip that I've heard go on to the reviews the Google reviews of the business if this we're talking Home Services businesses and search the reviews for the owner's name and if the owner if the yeah if the owner's name comes up it means you know he or she is too much of a technician too in the business too and the business is too reliant you want like you just said you want that that that owner's name to be as referenced as little as possible to to yeah to kind of see to see hard evidence that they're not very in the business uh and that the thing that the business is carrying on without their you know being super super active so great Point continue please um the company was run like it was 1985 that's that's the only way really to describe it right so this is a pen and paper business this is uh fax machines um like the whole idea of like service contracts or membership plans anything like that was non-existent but they had a gun save full of like 300 keys to people's homes in Estus Park which if somebody give you the key to your home I'd say that's even better than a a monthly membership or a filter change plan or something like that you know I love that that is yeah what better than recur recurring Revenue credit card plan well how about the key to their house in in your possession and then and then like you know I go back to like all the employees knew this was going on like there was no surprise whatsoever and I've been on both sides of this like the third business I bought which I guess we'll get to later none of the employees knew and so it was you know it's it's it's a very different it's a different vibe I guess to borrow term right so like we were going through and touring this business at like 2 pm on a Friday this was not some like middle of the night meet the owners and this clandestine meeting like I shook this kid Johnny's hand he's like oh hey man yeah cool if you buy this business that'd be great you know um and J even even though there were employees at the business who who'd taken a run at the business and had wanted to buy it themselves yeah um I think I think I mean so like they would have been full I think if it had gone on longer they probably would have found some way to like seller or Finance the business 100% maybe I don't know I'm not sure if Gary would have done it either um but yeah no they I mean like I think I I'm not convinced how hard they tried to buy it you know um like I know one guy that's still with me he said oh he talked to somebody about it and he like consider it but didn't really pursue it super hard right so I mean that was one um the woman that was the secretary she had tried like like she had actually applied for an SBA loan but um it was through Chase right so either she didn't really know the banks that are really good at this and then like she hasn't got like the greatest credit or something I'm not really sure but um you know like they didn't try serious yeah they weren't super serious about it you know um whereas somebody like me like I i' take the loan to like six lenders to look at it right they went to one they got told no and moved on you know um y so um so that and then like we're like meeting people and talking to them and like so one of the challenges with plumbing businesses is lure right so if you're in my shoes and you're trying to buy a plumbing company I'm not a plumber um so I have to have somebody on staff with um certain license to be able to get license from the state right well that guy was already in place you know like if you start looking at some of these other business says I was have to figure out some super sketchy way to you know get get the license or whatever so um a lot of things just kind of made sense nothing worked perfect you know I mean I would say if you find the perfect deal it's probably not the greatest deal you know and then like one thing that the seller said that like was really um um important to me he said that like well hey if you don't buy it or if it doesn't get sold I'm G to close the doors in a couple months you know so I mean that I that kind of tells me one like you're looking for a motivated seller you're looking for a guy with a reasonable expectation of price and like like you're looking for a business that is not super riing on the owner and that has a whole bunch of repeat customers you know boxes checked all the way around you knowt it was a little bit uh smaller than what I wanted I can tell you about the numbers um please I guess now's a good enough time yes at the time um they were doing about 1.2 million in Revenue so in 21 they did.2 million Revenue um I don't think the seller was super keyed into his financials I don't know um I don't know him that well we don't really talk anymore but um he like so he got a PPP Loan in 21 and um I think he just saw the bank account and the bank account looked good he was ready to retire and that was good enough for financials everything else was for tax purposes you know um so in 21 they did about $75,000 in which which is not a lot right I mean for people that are new to this that's that's super small years prior if you took the trailing threeyear average it was like 135,000 in SD so this is a small pling still very small super small super small and so back to the franchise thing it kind of felt like Middle Ground to me it's kind of where I landed with this one right so franchise you got no Revenue whereas if you go out and you do like the true search fund thing pay you know four or five times e whatever your multiple is that's some multi-million dollar deal this was right in the middle right like we had gone from zero to one we had proven that the company works I had an owner that worked out of the office he was not a field technician it was you know meeting the criteria but barely um but JD so we talk about buying big buying small and I'm sure I want to hear your thoughts on that directly but but just one so buying big buying small one of the big things is you know buying larger is a less fragile business and you know more cash coming off it to reinvest in the business Etc the audience will have heard uh people say that us talk about this many times and buying small therefore more fragile less cash to reinvest and so on but there see I would I would guess there'd be a floor on just how how small you'd go which would mean covering your own living expenses so if if the true SD of this business you estimated at 75,000 and let's say your loan your SBA loan if that's what how you choose to go is going to eat up half of that which is a a rough way to think about it that's 40 Grand you're going to be able to pay yourself without having any left over for working capital incidentals rainy day cushion Etc so so you must have been thinking that you're going to live off savings for a while or what because 40 Grand a ain't enough to live on in Denver and like I said that's not leaving any room for anything else no so I think they just had like a poorly managed 2021 was kind of what I told myself I I thought that hey you know 135 is is the number and um there were also were some other metrics too that I looked at right so like at the time their average ticket which I don't measure average ticket the same way so it might not be comparing Apples to Apples um but it's close right their average ticket was like $300 330 I think it was um which if you know anything about plumy and HVAC companies that's abysmally low and so I didn't know that much about plumy and HVAC companies at the time but I definitely knew hey 330 bucks I can walk in here and raise my prices 10% and we're good there shouldn't be any problems um and then I had like I was living very very very frugally looking back at it so we were living in a 900 foot house my wife and I uh two kids two dogs um wow we were in Denver something we had bought you know a few years ago so it was it we were living very affordably looking back at it and um I I kind of penciled out the numbers and I thought okay I can basically replace the money I've been living on because through elevators I was a very aggressive saver and saved all my bonuses and anything on top of that that I possibly could and um I could basically roughly replace my take-home pay with this business you know because business bit more tax advantage and stuff like that too um so the math mathed and I was ready to go and honestly honestly I'll tell anybody the search and still like half of the battle is just getting in and not screwing up you know like you just that's kind of where I landed on this thing was man I have just got to get in there if I can just get in the game I can do something with this and I wru an Loi um JD but just to before we leave the math the math that mathed um so with the 75 sste you know and okay that was a down year you basically predicted you could raise prices 10% which would all fall to the bottom line although you're going to have jave curve so you're going to have new money that you need to infuse the business with so it's not really going to fall to the bottom line but um you thought that was going to cover your living expenses 75,000 SE minus your loan payment and everything was you were able to to two dogs two kids a wife the number I was working with was 135 SD 75 was their last year I was assuming we had one bad year I was taking the trailing three years average and saying that this would work for me gotcha okay so I'm I'm I'm focused on the s75 I should be focused on the 135 okay um and then and then just a thing about the health of the business or the the quality of the business 135 now looking at the correct number of over 1.2 million is margins of just 10% uh yeah bad 11% yeah you saw that I I guess probably as opportunity not as a reason to walk away you saw that that is that is actually a positive even yes okay 100% yeah 100% yeah I mean I actually almost think it's kind of to its credit right because it means that like it's stayed alive with with like the level of involvement that the owner had so can you tell us what you paid for this 135 roughly s um I paid I paid 800 and that included the real estate so the business itself the business assets uh were 350 and um uh then the real estate was 450 so if the real estate was more than half of the value of the entire package then did you get a 25e amortization on the SBA loan that is an astute observation will yes I did which which actually made this all that much more of an attractive deal to me so my debt service especially at the time like CU rates were so low was trivial I mean it was nothing I think I was paying like three or four grand a month it was it was absurdly low and that factors into your risk assessment of this overall Venture so you're so three or four that's a low low that's a low loan payment you just feel like you can you can absorb it like even if things don't go well that's low enough they're not going to come for your house sort of thing yes yeah well and then you've got real estate to secure the loan I picked up um a bunch of vehicles a bunch of assets I actually felt like whenever I closed the deal that um like my balance sheet actually went up about 100 Grand uh because like there were so many hard Assets in the deal right I mean at the time used vehicles were very expensive and a sense different you know but like I got all these vehicles at the at this super great price I got this real estate at like a pretty a pretty fair price I would say um and then like there were tools there were some other stuff if if you wanted to put like a number on the customer list you could but honestly I felt like the day I closed between like the cash infusion from the bank a line of credit that was available that I didn't draw on and all the hard assets I actually felt like I was more than solvent which is another thing I would recommend right like for your first business it's all about risk I would say it's actually not about buying something that's like super attractive on like the eida side it's about risk right because the last thing you want to do is walk into your first business and then bankrupt yourself six months in which does seem to happen to some people you know and um uh a business like this I mean positive on the balance sheet or at least that's that's how I felt I might have been a little bit off but it's close you know um super low Debt Service 25 year amortization of the loan what's not to like uh the only thing I didn't like was the commute yeah and and it also sounds like so if the business was valued at 350 and you're working off an SD that's 135 so you were paying less than 3x yeah I think it's like 2.5 something like that yeah yeah which which again for these smaller businesses that's what makes them so attractive is that that multiple is your risk it's it's it's a it's a good metric for risk right the higher that multiple gets the more risky this is like I was listening to Nick Patrick's um podcast a few weeks ago and I think he paid something like 1ex I mean it was something super low you know and hey it worked out great for that guy um right find a way to get a low Multiple Man and go from there Nick Patrick to remind the audience is is was a guest probably two or so months ago his episode aired and also in estess park the events business in Estis Park uh and yeah got a great deal and and exited not and I think in 19 months he uh he made almost a million dollars for himself I think was the number super small world he was C customer number four I believe for me well the guy that owned the building he was in but still I like texted him like day one I was like hey we gotta go to back flow oh that's great that's so great uh and and I'll also just point out JD that your seller didn't maybe do the best job of negotiating when he tells you that if you don't buy it he's just going to shut it down so any any dollar he gets from you is is more than he'll otherwise get so that's that's a pretty strong uh negotiating position to start from for you yeah Gary's a good guy no no hard feelings to Gary but yeah he was ready to be done man I I think he was 70 72 something like that he's got this plumbing company he's dealing with up in esta Park he didn't live up there he was living 45 minutes away and driving up there all the time I get it you know yeah yeah yeah I do too and okay and how many employees did it have uh seven was the starting number um yeah Seven original employees okay well have we said everything that you want to say about buying small buying super small in this case JD or was there anything you wanted to add can't recommend it enough everybody should do it and Point again just to just to crystallize getting in the game and basically low risk in the sense that the financial your financial obligations are so much lower it'll probably it'll probably sell for a lower multiple um so kind of financially less risky of course it's also probably a more fragile business so while it has worked out well for you let's you know Le let's let's not assume that every tiny business or business with low SD is is one that you can do great things with sometimes they are going to be bad quality businesses so right very well put will yeah I mean um you are kind of effectively buying yourself a job it's it's definitely not falling the playbook out of like the Harvard Business books or anything else that's out there but that's not to say it's not something that's not worth doing you know um it's I mean it's worked out very well for me but just realize you've got to like show up with your big boy pants on and plan to grow this thing but yeah a lot of these things you know they've been lifestyle businesses for the owners they like the owners have not pushed them super hard and if you walk in with with some grit and some ambition you really might could double or triple these business I mean I think Nick doubled his Revenue right so a very similarly sized business at a very similar area so no reason that you can't do it but do just realize that if it's super owner Reliant or there's you know a myriad of other reasons not to do it um then maybe stay away colorful stories to come JD I hope sure let's share them okay okay all right let's just get into the the a little bit of the the nitty-gritty first postacquisition so you get in there um this ticket price and your your your almost quadrupling of it is a big part of how you added value how you have added value and did so quickly talk to us about that yeah I mean so um the common advice is to not really do anything for the first six months and I followed that 100% um I let the company largely run the way it had been run um uh like previous we just kind of stepped in and didn't want to say much even like kind of quietly went to my office listened to what everybody was doing rode along with a couple of the key technicians um met some customers that kind of thing we had some really good work in the pipeline that Gary had like just handed me again thank you so much Gary um some of this stuff like there was a a very large ticket job that was already bid they had been going back and forth for years well it closed like month three um and we got 50% down and then we were so slow at the time not not slow on work but like just slow to execute that um I got to like keep this 50,000 or it was it was some absurd amount of money I got to just keep in the checking account right so a great working capital infusion in like month three it was awesome um so we just we just kind of went with the way it had been going but there were definitely some things that from from Jump Street I I could see that needed to change one like there was no dispatching or scheduling system whatsoever you know it was all pen and paper fax machines run out of es Park like the way we used to dispatch anybody that's in the industry so I will share this for the benefit of those that are in the industry for how interesting it can be so um I'm a pretty fastidious guy I like things to be organized and scheduled and planned uh that was not what was going on in this company um so the way they used to like schedule things like the girl at the front she'd take your phone call whenever you called in to have your toilet fixed or whatever there was no schedule like there was just like three paper shorters with seven slots one for each day of the week Monday through Sunday out three weeks right and um there wasn't like a a calendar or anything like that she just kind of looked at them and said I think Tuesday looks empty how about we schedule you for Tuesday and so she would write your so she would then write down the the details of your job make you a carbon paper job ticket like literally it was you know like like the old school yellow carbon paper behind it um and it was all est's Park so like there weren't even zip codes or cities in the address it was like 453 Riverside and then she and then and then like the phone numbers were often four-digit phone numbers because like everybody's landline in Estus Park is 970 586 and then your four digits right so wow so this was like this was like I don't know I mean J I think it's old school if you'll go to some place that maybe underpopulated or less populated and you see a seven-digit phone number right like they haven't yet added the area codes this is going back to like that's amazing yeah no email addresses nothing like that you know and then so she would take your carbon paper one she'd stick it in the the uh slot for Tuesday right so then Tuesday rolls around the first guy into the shop grabs all the Tuesday tickets out walks into my office there's a whole bunch of like chip Clips on like the wall right like there's eight chip Clips I still have them and um uh they would just stick them all up there there was no time of day no nothing it was just we're going to get to you when we get to you you know and then there'd be a whole bunch of tickets from the day prior that we just didn't get to or whatever because why who needs to schedule things and um and then like the guys would just come in they grabbed one ticket at a time they grabbed whichever ticket they felt like getting there was no like this ticket's more priority this I there was a little bit of that but not much you know um and then they would hop in their trucks and drive out to the job figure out what they needed to get for the job drive back to the shop where all the inventory was pick up whatever and like They Carried like a pretty minimal amount of like copper fittings and stuff on their trucks but it was it was pretty minimal compared to where we are now you know and they would drive back out do the job drive back to the shop fill out the job ticket um they'd say I spent two hours at this job and then so and so was with me for an hour I used five 3/4 copper 90s and six unions or whatever the an expansion tank or whatever they felt like putting down on there and they'd stick it in the thing Tuesdays and Thursdays the girl up front would take everything out of the the bin and like mail out invoices like we we mailed invoices to people and then the good people of usus Park paid us whenever they felt like it put a check in the mail and N we got paid n we didn't that that was the state of this company wow so it's easy to laugh at but there there's so much meat on the bone here for you to just sink your teeth into so much right so yeah and so like the working capital was a disaster we were um like if you bought a new furnace from us like we were six weeks out we did one furnace a week and that's all we could handle um which I don't know if you know about the business so now actually a few weeks ago we sold a furnace Friday at noon and had it put in Friday before 5 so I mean we're you know we we've just gone so much further and then just you know like the cash conversion cycle off that of like we get paid then we get paid then versus waiting six weeks to do these furnaces and then you'd buy this inventory and it would sit in the back of your shop waiting for the job for six weeks you know and so then you pay for it was just it was a working capital nightmare it was a revenue per technician nightmare but we had the trust of the people of ess's Park we had a great Market to work in and so you got something to start with right um I guess you wanted to hear about like colorful technician stories right so uh uh my favorite my favorite one so I had a uh key technician who whose name will remain nameless uh but um let's let's just say there were some substance abuse problems up in esta Park I don't know what it is about that town but um there's a lot of people who have some substance abuse problems you know and and few of my employees were one of them um and uh one of these guys came in the day after Labor Day and vomited in a customer sink because he was so so still drunk or hung over I don't know um uh and uh calls me to tell me about it like it's no big deal he's like hey J he didn't seem to think it was a big deal right he's like hey JD I I threw up it so and so siek and I'm like go home come and I mean like had people who would who would call in sick for quote unquote food poisoning one day a week you know I mean it was it was just that was the culture up there you know well well that's the question jie so so you have you know we're talking about kind of the the ingredients of the business here the raw ingredients which seem like that you could do a lot with it but what about the people the talent and that what you're the picture you're painting now sounds like maybe not so strong well I guess I'll go back to like one of like the key values of this company is that they were able to run revenue and make money in this market with what they had right so given what you had might not have been the greatest it might not have been like the most professionally run operation it's still made money you know and um there's a lot to improve there to your point a lot of meat on the bone as you say but yeah you know so one of the first challenges I realized was hiring people right there's there's not a whole lot of expert techn misss up in EST Park um not a whole lot of expert um office people in that area as well it's a town we had like I think there's 6,000 homes in the whole thing and half of them are only occupied half of the year you know so it's not a huge Market but um and being a kind of National Park entry town I assume it's also not part of really a larger City I mean it's it's kind of an island so yeah very much 6,000 homes is your whole Market sort of thing but um I came to realize a couple of things that most if not all of my technicians and frankly all the better ones were living down the mountain they were living so about 45 minutes down the canyon is uh there's two towns you can go uh Northeast out of there and you go to Loveland or you can go Southeast and you go to Longmont I don't know if you're you know familiar with Colorado geography here but um so those are real towns and most of my technicians were living in those towns and then commuting up the hill um so that kind of probably three months in I'd throw up like an indeed ad or something like that to see if I could get people interested and you'd get absolutely nobody would apply for these jobs if you listed your address as SS Park I did a little experiment I listed my address as Loveland and I had a flood of applicants I mean like scores dozens tons of them right um I'm like all right so we've we've got to probably move this thing down the hill which means we have to expand so Loveland is 45 minutes down the canyon and there's 60,000 people and each zip code and it's it's it it's a normal suburb right it's it's a normalized town so um after my you know first six months of not really doing much the only thing we really did differently for the first six months um I got a little bit more aggressive bidding jobs you know I think I think in the past they just weren't really like if there was some that asked for a furnace change out or whatever you know uh there was no real huge push to um to go out there and bid the job super quick or get you know proposed I it was there they were bidding jobs I don't want to say they weren't bidding jobs but they weren't bidding jobs with a huge sense of urgency you know and then um uh and then we got very fortunate with that one really big ticket so with that said I mean I was able to take a company that was doing 1.2 million a year we did like a million dollars in Revenue in my first six months so just just showing up and I did raise our hourly rate a little bit um I did increase our markup on parts and material a little bit um and then just being a bit more aggressive going after jobs you know um I started bidding jobs that were down in leveland just just to kind of see what was out there and had some success early on and you know got a couple of jobs in the books you know and it started going great so about six months in I kind of sat down and took an assessment of the business and um looked at things that were holding us back right and so I guess if I had to think about it one was was people if you're going to grow this company you have to have access to Talent two is access to customers you know I mean like the town of essence Park's a great place I love the good people up there but it's only 6,000 homes right yep um and then some like office organization and pricing were the other things that the whole idea of building somebody time material still to this day I mean like there's an art to doing that you you can do it I don't want to talk bad about any company that does that but um I don't personally like that for residential customers I want to give the people a price up front and then kind of like like like the standard industry move of like here's your three options or whatever that always you know said a lot better with me right because the customer is not getting a surprise Bill and then you're not arguing over wow why is this $125 an hour I mean you guys yeah you get those kind of conversations right just just one one price we all agree on it we move forward so with so to be clear to be clear the the two pricing models are flat fee UPF front you you give the the customer three options for a flat fee to get the job done no surprises understood at the outset of the job at the beginning of the job that they agreed to that's what you prefer versus time and materials where they only know what it's going to cost after the job is done when the necessary materials have been added up and the time has been added up and then they see a price and and there's surprise to it and they also see the hourly the hourly number which they might get in their head about right and that's that's option number two and it sounds like that's the kind of the more popular the kind of quote Best practice way to do it in the industry but not what you prefer um I don't know I mean I think that I'm not quite sure what the preferred method is I mean it it um I'd say in the residential world the flat fee seems to be much more popular but there's there's plenty of companies that still do still do time material you know I mean oh that's the old school way to do it okay yeah I would call that I would call that much more of an old school way of doing things and then commercial customers definitely prefer the time material like they want to see a labor and material breakout um but commercial customers also they're just different and like they're not bothered by a billing rate of whatever it needs to be right like um back in elevators we we used to build I think service isn't like $ four $500 an hour range I mean it's you know like like that number is crazy right like Plumbing an HVAC you're going to be 200ish is probably a pretty decent market rate right now depending on where you are but whenever you're flat rating it you know there's a lot more thought that has to go into your pricing and like you have to build out a price book and all this stuff but um I don't know it just sits better to me when you can walk in it it feels much more professional to me when I can walk into a customer's house and say hey we should do X Y and Z to your home you know here's the price for each one of these things now if you really want to go up from there we can add the following or if you want to save a little bit of money we can talk about saving it this way you know yeah I just for a residential customer I think it just makes a lot more sense to give them like you talk about price one time and it's done they sign you go do the work you know it's it's just much better um okay so the things that I saw kind of holding us back right like I said you know it was access to customers it was access to talent and like some some kind of like more of a office efficiency I guess is the way you would put that like just and that's more on like the customer service side of things more anything else so what do we do well I go Lisa space down in lovelin and we kind of slowly start moving our operations there um I get in there's all these groups um on like the there's all these groups like The home service industry where they'll help you with your pricing like like uh uh like nextstar is one of them right they help you with pricing and business opertions and all kind of stuff I signed up with a company called the new flat rate and I mean if you're a uh so if you're a plumbing and HVAC company and you're starting to make this transition they are phenomenal like they're really going to help you out I think they're they're a really great way if you have no background whatsoever and then you are trying to jump feet first into this um it's a little bit weird it's a little bit goofy but like once you kind of learn how it works it works out very well um we did that got the lovelin shop and then I rolled out service Titan as well which is more of a standard dispatching software for the industry so now we've actually got like a way to schedule cruise I did all this training with these guys on these flat rate models we started moving things down to lovelin and what happens everybody quits you know it was it was uh because it was such a change it's a it's a radically different company I mean I can't say I blame any of the guys that did wind up leaving for leaving it's you know everything changed and it was totally different um so that that you you know you were really cautious in your first 6 months you know a devote of no change for 6 months uh and then and then you were eager to make changes and and did so and and so it's it's almost like unfortunately you weren't rewarded for those six months you may as well have just started making changes because the end result was the same now you didn't know that looking forward but looking back it's kind of kind of that way how do you reflect on on no no change no change no change no change lots of change and then losing people would you do it differently no I wouldn't um no I would have taken the six months and the reason is you just don't know what you don't know yeah um I might have even taken a year honestly looking back at I think yeah I think um like there's so many gr that that's probably one of the struggles to buying a smaller business like you're just the systems aren't really there right and I came from a corporate America background where we had these wonderful reports and you could easily see the status of your business and you got you know financial statements by the 15th every month you know that does well that exists in the small business world but like you have to do it you know or somebody like you have to pay for it or something right like these things don't just magically happen and um I think um I probably would have liked to have understood the business from a financial perspective better and maybe focused on like our cash conversion cycle or some other low hanging fruit at first um but at the same time like there were some you know there were some people that were not in good roles for themselves um who needed to leave the business for the business to grow right and so that's part of that everybody quitting so of those Seven original employees only two stuck around and uh did the vomiter stay no no they did not yeah okay um so they uh uh so two stuck around and actually they're two of my best employees to this day they're both still here um one of the guys that left left and then came back once he kind of like we went through like the wandering in the desert of figuring out this new business model uh without him and then once it kind of got squared away like he remained friends with one of the two guys that stuck around and once it got squared away I think he kind of saw how good it can be and he wanted coming back and he's a he's with me now he's a great employee as well I'm sitting here watching him move to the dispatch board right now you know um jie let me indulge me an observation here which I feel like is a pattern that I've now been bringing up on recent episodes because um because I'm seeing it which is kind of what you just described where typically in a blueco collar business local blueco collar business where the new owner you in this case start making changes good changes the word travels in the community of the technicians so in your case it was a former employee so he's pretty close to the business he's got buddies still in the business but but maybe maybe word travels anyway or even outside that little nucleus and you start getting people who want to work for you because uh you're developing reputation among technicians in your local market that the new owner is doing good things this is a healthy growing exciting place to work am I am I overstating it or do you feel like there's some of that phenomenon at play 100% it's true once you start getting a good reputation out there you can start attracting good talent but it also kind of cuts the other way too so if you have the reputation you'll attract the wrong Talent just you know keep that in mind um but like the culture that you have attracts people and if you set the culture for what you want it to be you'll attract the people you want they're out there you know um when we were you know the old Mountain Valley we attracted a few technicians who I'm I'm glad I didn't hire them let's let's just leave it at that all right and JD I don't forgive me if I missed it but your average ticket going from 330 to 1200 did you address that or is basically all the kind of like all these things that we've been talking about all these factors contributed to that yeah um so I guess let's kind of talk about the things I've done since since January of 22 right so I brought in a uh I brought in this technician as a general manager type um who actually went to est's park on a lark as well like he had no intention of taking the job he already had another job lined up he told me and and he came up there and he met me and he kind of realized like what I was about which was you know growing a pretty big company and um I think he saw some potential there and decided you wanted to be a part of company from the ground up he's with me for a year now and he's been a big part of this change right so I um I set the the standard here set the flat rate model the whole thing uh we started bringing in some new technicians and so q1 of 22 was pretty rough right like we were trying to find people we were desperately hiring some people we we made some bad hires um made some great ones too but honestly I feel like you make about one to two bad hires for every one to two good hires right um yeah that's painful that's expensive 50% super painful right like I had this guy who like threatened me physically I think he had some like gang affiliation like you name it man I've seen it dude like I I've run through some guys that just it was bad it was really bad well JD hold on a second here sure I mean you say it with a smile you say it kind of nonchalant but these are the horror stories that really scare people about small business are you are you saying it kind of you know breezily because it's in the past and you know it's it's it's funny to laugh about now I mean or are you just thicker skinned or what because that's that might that one story might scare off a lot of people listening to this yeah it's not for the weak or the faint of heart um so uh yeah you get thick skin that's for sure and like you get really good at like like sussing out the guys that are problems and getting rid of them quickly you know I mean a lot of times like whenever you um like like sitting there in the interview with a technician he's the greatest technician ever you're the greatest boss ever and then you guys start working together and it's a different story you know so I went from that guy that has some like I'm pretty sure some kind of like weak Mexican gang affiliation who like you know told me he was going to be the F out of me like whenever I fired him after he stole I think he stole a grand or two on the company credit card like tried to steal some Vehicles it was you know all the things you would expect right um all the things you would expect this is what you're telling the audience to expect JD uh oh you're going to hire some people right like it's it's got to be uh it's be a thing right just just be prepared for it and uh learn from my mistakes and get rid of them more quickly you know um so your mistake wait hold on a second there your mistake was you you actually didn't take a because I'm getting the impression of a boss you who's can handle it I mean you're you again you seem like you're kind of like not that scared off by these situations but in fact you felt like you were a little sof maybe soft or too patient with with some of these characters and let them stick around too long oh yeah 100% especially then I've gotten better about it like um like that guy stuck around for way too long I mean he was probably with me for two or three months he should have been gone like H maybe a month in frankly but I mean you're so desperate for people because like you decided to like rebuild this company from the ground up the customers haven't gone anywhere they're still there they still want what they want um you've got to find labor to staff it at this point so I mean it's you know that can be a struggle to find but I mean I will say like we had another guy come in who like he interviewed great um he had done well had a good resume total methhead total methhead right like but hey I was able to get rid of him very quickly he only lasted a week at the company whenever we realized like there's some telltale signs of that you know and like whenever I saw those I was like oh yeah buddy you need to go right now you know so I mean you get better at picking this stuff up but I don't know I mean it's it's um it's uh maybe some of your guests have it from Day Zero I did not have what from Day Zero the ability to like find the right people fire the wrong ones guys through you know I listen to some of your guests and they seem to be able to do it much better than me but like it took me you know six 12 months to get to the point where I you know uh would fire the people that need to be fired quickly even to this day like I definitely keep people around way longer than I probably should you know um I don't know I me I've got thoughts on that I actually think it makes a lot of sense to like give people if you've got a talented technician who has done something dumb you know for whatever reason like um there's not much sense in firing Talent if if if the dumb thing I mean drugs are a different story right but like if the guy can't fill out service tickets or you know some kind of administrative thing right like okay you got a talented plumber here who needs some help you would do better to help him write him up try to improve whatever it is you're missing out on because talented plumbers are hard to find they're not everywhere right so yeah I don't know I mean like people say they like fire fast High slow and Fire fast is is the thing I I kind of think the other way I mean it it depends on what it is right like if it's if it's a CSR or somebody in a management role that's a different story but if it's a technician and they're talented they're good at the technician stuff but they struggle maybe on the sales side or whatever it is I would rather develop them at at the risk of maybe they don't ever catch on um versus because because their skill so because their skills are so precious so hard to find yeah I I can teach you how to sell I can teach you stuff like that but um finding a guy with 10 years of Plumbing experience it takes 10 years to find that you know like to get that experience right so yeah let's see if we can't teach him everything else or or find a spot in the organization where he fits better great JD well listen we're we're uh bumping up on time and I want want to have some time for kind of zooming out kind of big picture themes here but there are um just a few more things to the plot namely you did a couple more Acquisitions give give us just a couple minutes on each of those and then tell us what the Enterprise looks like today in terms of numbers yeah sure so we um so part of that move to Loveland I I purchased a uh small oneman Plumbing outfit um in Severance Colorado which which is um a little bit e by 25 a little bit further out on the plan so not not too far it's still very much so Front Range Colorado uh did that to kind of give us um like a jump start right it worked out very well um that was a totally seller finance deal for about $90,000 uh making the last payment on that here June 1st um so a oneman business JD so is that yes what they'd call in techland like an aqua hire I mean what what does mean to buy name and a phone number name and a phone number okay but and the guy comes with you no the guy did not so I it was it was a it was a name and a phone number and a Google business profile um and uh I don't know I mean I probably could have gotten it for a little bit less money I wouldn't call it the greatest deal ever but it but it gave us a a start in that Front Range area right so yeah it was enough lead flow to kind of like jump start the business down there and to this day it's actually probably my better lead Source it's probably number three or four um works out very well you know um uh and then so trucked along through the summer of uh 23 and um uh the like one of the Brokers that I had done work with Ross hes out of Transworld here in Colorado great broker as well um he reached out said hey I've got this i got this plumbing company for sale it it it just has your name on it right I'm like okay sure I'll buy it what's so interesting about this well they won't tell you the company's name do you sign their NDA right so I signed the NDA sure as God's got sandals what's the name of the company JD's plummet and um so I'm like well I guess I have to do this right so we went back and forth on this one for a little bit um uh John Dukes was the owner dude like great guy and like comparing that comany to Mountain Valley very different right so JD's Plumbing like they were already Valley to be clear for the audience Mountain Valley is the name of the first business I'm sure Mountain Valley is the original company I purchased that is the umbrella name now you know check it out here I guess right so there's our there it is yeah there it is for the people on listening I got a company shirt on right so um uh so JD's JD's Plumbing versus Mountain Valley JD's Plumbing just a just a very well-run company I have to give it to John he did a great job with this uh they were doing about a million is in Revenue um and uh and operating with some very healthy margins Ian he was doing almost 30% net it was very healthy business right plumbing companies can run at those kind of margins uh it can be a very very good thing because it's all labor right like it's you know it's it's all labor there's very minimal Parts unless you're doing a whole bunch of water heaters or something so we had a great Plumbing side of the business um the forest air side was good and um wrote an offer we went back and forth on it um and bought him as well uh through an SBA loan um not not quite as juicy of a details the um the multiple is a bit higher you know uh there's no real estate in this one but you know is business number three like one thing I've noticed if you go to buy your second or third business everybody all of a sudden wants to sell to you right so you're aen operator you can show that you've you know been successful with this the bank by the time I had everything to them um kind of where I was like before I bought the business I was like well listen you know hey if the bank will finance it then we'll do it right so by the time I sent everything off to the bank they took all of two hours to come back and say Yes whenever whenever they told yes I was like are you sure are you guys okay with this like uh let's move so they said yes we did the deal you think a large part of that JD was because of their confidence in you as a now proven operator it must be I mean that's the only I can really think about it right so so at that point I had shown a year of operating the business I had shown growing it significantly at least Topline Revenue uh bottom line you know hey there's a cost of growth for sure you know but Topline Revenue had gone up significantly and so showing that to the bank and then and then the deal was a very good deal you know and um yeah it was I mean like so comparing that to the first one and the most recent one so much easier you know I mean I've already got the license in place I've already got proven track record running the business um it was kind of I wouldn't call it a slam dunk there was a little bit of competition on the LOI side but um but it was about as close to a slam dunk as you can get in this world so got that and then um have been consolidating like the back office operations of all these businesses ever since I'd say that's about 90% complete to this day so Mountain Valley by the numbers I guess like where I started and where we are now um started off with a company doing $ 1.2 million in Revenue um I'm I'm very confident we'll do about five and a half this year so that's what like a 5x growth and this is year two uh there's some acquisition Revenue in there so congratulations JD's thank you very much um the JD's acquisition was about a million in Revenue a million three something like that roughly the same size oddly enough but a much better performing company um so there's about a million J so so carve out carve out the JD's acquisition carve out the one man the the the my Google page and phone number AC carve out both Acquisitions yep what did you do with Revenue just at Mountain Valley at your original acquisition all the stuff that you detailed all the things that you did did what to revenue triple 3.7 so from 1.3 to so like the last year of of full financials they have is 1.2 excuse me that was 21's financials in 23 we did 3.7 so that's a yeah yeah almost exactly tripled it the average ticket went from $300 to $1,200 that's a lot of uh driving replacements um that's a big part of that you know uh like trying to replace equipment a little bit more aggressively than we had in the past so something that's 15 years old rather than trying to repair it we'll just recommend a replacement given the technicians the ability to sell stuff so I mean I I I put a tablet in their hands that has a price book and it's they can sell whatever they can sell out of there you know and oddly like part of me thinks like with how much our tickets have gone up customers should be kind of hating us a little bit like we're like we're price gouging or something right that is not the case so like when I bought Mountain Valley it had a 4.4 Google rating I've got a 4.9 Google rating right now so I mean it's it's like like the customers clearly like it that was something I was very concerned about like are the customers going to be happy with all these changes the customers like it man like we've and like there's a speed to execution too that is just dramatically improved and then like the pay I can give the technicians has gone up dramatically as well so I mean like to give you an example so whenever I first bought Mountain Valley we were six weeks out to put in a furnace right which put in a furnace is a half day to a day job um we uh were six weeks out for that and we did about one a week at most and that was a stretch which anybody in the industry is probably laughing or choking or something when I say that right now right so um and then like all the technicians were paid hourly strictly hourly there were no sales incentives nothing like that and were making probably on average about $25 an hour so what would that be maybe a, bucks a week right um fast forward to today like I told you so we are now at the situation where we have like there's there's furnaces on consignment inventory in our shops and so if you sell a furnace anywhere in Colorado we're going to send a guy up to you right away and do it that day right so as a case in point we sold a furnace um this was you know a few weeks ago on a Friday at noon which should be like hey we're checking out and going home and getting ready to vomiting customer sinks on Monday um so we sold this for and this is actually the guy that that left and came back right so he was part of the exus of people he comes back in the spring or the summer of 23 he sells a furnace uh Friday at 11: 12 o'clock something like that um the warehouse stuff wasn't quite set yet it's it's still not a work in progress but hey so I hop in my truck I drive I pick up the furnace I drive up there to meet him this lady she had no heat Friday morning Friday afternoon she's got heat he's now PID a commission standard so he used to do one furnace a week he was the guy like the one furnace a week guy he now did a furnace in an afternoon um it was a six $7,000 furnace something like that right so we now had a $7,000 day versus a $7,000 week at best and um margins were higher on it customer gets it much faster um and then the technician they get paid um a a piece of that and so that guy effectively made in that Friday afternoon he made in that Friday afternoon what he would have made in a week prior so yeah the technicians are making more money the company's making more money the customers seem happier we've got a bigger service area and we've 5x Revenue so I mean I guess I would say all this to say if you're looking at a small company there can be a lot of growth opportunities there well like I said JD congratulations that's phenomenal success yeah that's that's really inspiring um let's turn now to a couple things that you said to me in the preall which I thought were really interesting that are kind of me meta observations about your experience thus far one thing was just about and you I kind think you kind of just touched on it what but um you said to me you know in Home Services you need to get used to charging prices that might make you feel uncomfortable was that what was that what this is that where you worri about consumers feeling like you're gouging them oh yeah oh yeah you just need to get comfortable that these to to make a to have a healthy business you need to charge a certain price which makes you feel uncomfortable say more yeah I mean I came from a commercial construction background and that is a you know that's a low margin Endeavor and a lot of what we tried it's it's it's very much so competitive on price um uh you don't want to compete on price in residential service you want to compete on being the best I mean obviously price is still a thing I wouldn't say totally just abandon the idea of price but like I think I think two or three years ago I would not have been proud about telling you that my average trip to a customer's house was $1,200 and like now I'm like that's great you know and and it's great I mean it would be bad if it was 1,200 bucks and we had a two star rating on Google because everybody hated us and we did a terrible job right but like yeah what I tell my guys is hey I want your average ticket to be 1,200 bucks but I want you to give that customer $2,400 of value right and and like the plumbing is kind of a commodity I don't care what anybody says plumbers will disagree with me all day long they want to fight me over this but like Plumbing is a commodity either it leaks or it doesn't either it's to code or it's not right either it's right or it's wrong what's not a commodity is the way you dress when you walk into a customer's house the way that the phone gets answered by the office the way that you present this price the way that like the customer experience is not the commodity right and so you can I think you can find value for these customers and offering them a world-class customer experience and you can charge accordingly for that um that was something that I very much so had to get used to and even to this day makes me a little bit uncomfortable um just just because I had it you know drilled into my head for an eight-year elevator career that it's all about price it's you know but but like even then like in the elevator World they don't even think that like they'll like they do this stuff with change orders where they try to get the elevator in for as cheap as possible so they get the job and then they're making it up on the back end by charging you for things you thought you bought but you didn't right we don't do that here in my world like we're going to give you one of from Price we're going to talk about price one time it's GNA be a very healthy price where my technicians can make six figures because that's what it takes to live in Colorado so I get happy technicians who show up well-dressed and the customer gets a great experience I mean M I think you've got to get your tickets up you've got to get your Revenue up if you're in the world that I was in but you've got to do that by bringing value to the customer and it's it's not with technicians in t-shirts that look sketchy it's it's with technicians who can look you in the eye and talk to you about this and tell you exactly what's going to happen with an office that's organized and well put together so I don't know it's um it's like going to a good restaurant and that's what I want my company to be like and that's what it that's what I'm hearing ing is that it's also a decision on your part to position yourself in the market as a premium offering not super super expensive but you know at the higher end probably of pricing but also higher end of quality of service I would agree that and that that's a strategic decision I guess there's probably a world where you could you could argue that you want to be lower end and do higher volume and maybe the quality isn't as good like like you know that that that's the Spectrum in all things in all services luxury and high margin and high price versus the other end of the spectrum um and and where you've chosen to play is at one end of that do do you think that Home Services can work at kind of the other end of the spectrum where you charge less but do higher volume and less quality work or it's just that's that's maybe that's where you came from and you don't want to go back there's um so like like as a Home Service Company you compete for two things you compete for customers obviously and you compete for technicians and they're very much so linked right and so if you're going to be a premium offering and you pay technicians better then effectively what you're doing is rather than being cheap for the customer you're kind of being cheap for the technician right so like you're giving the technician more money like you're like you're offering value to that technician and then you're trying to get paid for it by the customer right and so I kind of feel like that that companies in the residential Home Services space I'm sure there's always going to be a demand for the Chuck in a truck as we call them right like yeah like the guy that's you know very cheap by the hour gives you a tail light warranty as we call it right but like maybe he's just known and like he's got a certain set of customers and they're very happy with him I think that Market's very limited I think it's very capped that I think the market for people that like what I tell the guys is be the guy they want to date their daughter right like there's always going to be this really big market for people I think that's where most residential people are like I mean they might complain about price a little bit but then they leave you a five star review and they're happy with the service like I think you're just going to find that's a bigger pull to swim in I found that even in Estus Park I was convinced like that that uh this would not work well in Estus Park and I couldn't have been more wrong I mean yeah we lost customers don't get me wrong plenty of customers we lost customers for about two months and ever since then it like the customers that want that level of value um they keep coming you know actually I'm kind of rambling here like but like the one thing that also sticks out to me I feel like the the volume of complaints has remained the same like like we still get the calls about whatever you know the guy tracked mud in the house or whatever happened I feel like those calls come at the exact same rate now that were four times the price than whenever we were the super cheap offering H so I don't know what to tell you I mean yeah I don't premium service better job in charge for it you know um people will pay for it yeah great and anything more to say J just about the Home Service Home Services business overall and that you might tell Searchers who are contemplating buying a home services business we've touched on it a lot but is there anything that we didn't hit that you would want to communicate there's a lot of people in the industry who have a like a wide variety of backgrounds I do think that you're better served with a bit of a technical background walking into this um so like if you've been um I don't know what's a like an insurance salesman or something like that maybe be careful buying a home services company that uh that requires lure like a plumbing or an electrical company or something like that but if you've got I mean if you're the kind of guy that can work on a car work on his house I think I think you're I don't think that you need to have 20 years of Plumbing experience to pick this stuff up I think that um I think you're like as long as you're mechanically inclined I think it's I think it's a great business to get into and I think that while it's super competitive I think I think there's a lot of depth here for for people that are looking for companies to buy like they're great businesses um a little bit seasonal on the HVAC side but Plumbing's not um there's some risk there that kind of sucks but and JD about the point of it being really competitive you know one of the things that I've heard from my guests who are in Home Services is that it was booming covid and then in the year or so following covid and now it's gotten it's really um What's the phrase that I heard somebody say it's it's a bloodbath that home services are a bloodbath now that demand has gone down a lot and that it's a really competitive space and so home services companies are having a really hard time how do you respond to that I mean I've seen a bit of a tightening but not much like we've been picking up so much market share that like it's not something that we really notic like we had a record month in January by by quite a bit but then we didn't do anything for February and March so I don't know I mean it's um I haven't gotten the blood bath feeling yet and I will say that it is a bit seasonal especially HVAC HVAC is super seasonal and um like what I've found is that there's a there's like a set of customers like they know they're going to need a replacement in the next year and so they'll wait till they know it's slow and they'll get six bids like we did um I bid a job um in Denver for a boiler and the guy like I think he must have gotten six quotes like he kept coming back like we offer a price match guarant I say we don't compete on price I throw a price match guarantee out there just honestly a lot of it is is to get the customer to send us quotes and then we can kind of figure what we can do right but um uh this guy would send me these quotes and they were abysmal like there were some people people that went dumpster diving for sure and got that job you know but um at the same time not six weeks later when it's actually cold if you can get on these jobs very quickly you've got the work and you've got the work at a premium so I I think a lot of it is yeah it's competitive but if you can jump in very quickly and do work you know do quality work quickly and On Demand you'll stay alive great the shifted employ employe mindset to owner mindset this was really interesting what what was that about it's a different world when you work for somebody versus when you work for yourself or like you own a business you know which which I would say those are two different things working for yourself and owning a business that's a different animal I'm I'm trying to own a business right and um uh yeah back back to the elevator world even back to my military time like we were very price sensitive we were you know trying to be the best value for money possible not not the best value possible like like like the cheapest thing we could be you know and um looking back at it like I don't know that I did the company a whole lot of favors by you know trying to be more efficient with customers maybe maybe we should have been out there trying to get change orders harder or something like that looking at as an owner now where you look a lot more to that Revenue side because that's that's cash in your checking account it it shifts your mindset a little bit like you're definitely out there trying to get revenue and trying to get it from every single opportunity that you can I mean because cash is the lifeblood of your business you got to have Revenue you don't have anything and um I don't know that was um and so JD the difference there is that as an employee you were trying to squeeze whatever economic value you could out of every customer engagement whereas as as owner you're really focused on driving sales so yeah so that's where you put your energy rather than trying to squeeze sort of thing is that I would argue it's actually the other way around I was trying so right now I try to get as much value out of every single customer interaction as humanly possible and that and that value needs to be reflected in the amount of Revenue that we get off the job really the amount of gross margin we get off that job right back when I was working for a company my goal was was to be was to not the customer change order frankly like that was very much so the way I thought about it and very much so the way this was drilled into my head and just you know the company I worked for that was the way it was like some things we had to like charge for obviously but the goal was to find a way to not charge the customer extra money because that's how you would lose customers quote unquote it's just such a and then like the way you deal with employees too right so I mean like when you work for a large corporation like it's it's a very different stand standard and what you're looking for like like there was a unionized Workforce which is a whole different animal as well you know and um versus what I look for now in employees and you know moving through employee discipline much faster now versus versus then yeah honestly I have uh much higher expectations of my employees now than I did back in elevators and uh I don't know if that's a good thing or not but I don't know it's um and actually too the other thing that really really has changed so back in elevators we used to get like a little metric of networking capital for every single job right that's just a number on your computer screen when you work in elevators now when it's your company it's a number in a checking account on a very different computer screen but man it's a very different metric and uh I don't know I mean it was um everything is much more real now the now that I own the company and everything I don't know it's it's um you just feel it in a very different way because it's your money on the line it's you know it's it's your bankruptcy or not on the line you know whereas whenever it's a corporation like okay if that check's a week late who really cares you know it's it's like I look back on some of the stuff that we used to do back in elevators I'm like I would never do that now like payment terms or stuff like that and it's just I don't know it's it's uh it's a very different experience and I would cost anybody that's planning to make this move that you know I'm two years into this thing and I already have a very different mindset I can only imagine where it's going to be in 10 years well take us home JD with kind of big picture how do you feel about how it's gone or the the decision that you made here to take your career in this direction obviously it's gone well so uh keeping that in mind it's probably going to be positive but but just how would you put it I only had one moment where I kind of said screw it in in the in the first two years I remember driving home one night it was like seven or 8 o'clock at night because that's that's how this goes sometimes and I call my wife and I'm like babe if you're done with this I'm done with it and uh Mrs Beck to her great credit uh she said no I think you're enjoying it I think you're having fun you had a bad day and um that's the only time I've ever thought about quitting uh it's been the best decision I've ever made um both financially I mean um we've uh it's making good money I'm living a a lifestyle that I'm very happy with I'm I'm not flying around on private jets or anything but uh not yet I guess I don't know but um but you know I mean we've we've got a live in nanny I'm able to afford to homeschool my kids I even have the time to do that which has been just a like the best honestly buying a business was the second best decision I've ever made homeschooling my kids was the best and um uh it's it's it's just been it's been super rewarding and it's been so rewarding in a way that I don't think a corporate job ever will be um it's it's uh it takes a lot out of you I mean I've you know I've made some decisions to sacrifice personal health and things along those lines for the good of the business um what do you mean you're you're not going to the gym as much sort of thing not yeah not as much as I would have liked to I mean I was definitely a three to four workouts a week and three to four times training Brazilian jiu-jitsu a week before I bought this business um once I kind of hit that six-month Mark I I kind of had to make the decision that hey the business needs my time I'll get in Fitness wherever possible and so u i I took about a year year and a it was about a year and two months off from Brazilian jiu-jitsu and got workouts in wherever I could on top of that but I just recently got back into that and even then it's it's it's diminished 100% it's it's it's not as good as it used to be me just just like the time and the mental capacity to get into the gym or get onto the mats to work on stuff is you know it's it's it's challenging and it's one of the things I'm kind of hoping with the like in the next few months I've got a few just Logistics changes and the shop and stuff like that that I'm hoping will free up some more time but yeah I definitely had to make some like some health sacrifices for sure you know yeah but to be clear JD three or four times a week doing uh BJJ to four times a week on top of that in the gym so so six to eight times a week in the gym so that was you were doing a lot um so you cutting is probably cutting down to where most people are are feel like they're doing pretty good yeah yeah I got the military backround we like to work out so you know hey that's that's the way it is right um yeah but but I mean you know I've actually I was getting a little frustrated the other day and I was like cuz I had to put some money back in the business q1 can just be kind of a challenging time and um I had to put some money back in I was I was kind of mad at the cash that I had on hand and I realized dude it took me seven years to only get to two-thirds of the amount of cash I have on hand and I picked that up in six months of like running this business so the financial rewards are there um the the sense of adventure is very much so there as well I this has been I mean like even with all the challenges I list off here and all the ones I didn't even tell you about this has been the most fun I've ever had without a doubt like it's an adventure man it's I mean it's something that how many people do this like it's what like a like a fraction of a percent of the population even consider doing something this and uh it's it is a wildly fun adventure I get to go to est's park I met I'm up there once or twice a week now and it's absolutely beautiful um I get to work I mean granted you know you start off maybe all your employees weren't the greatest um but by the time you're two years into this thing it's um I work with people that I really enjoy working with I get to solve problems that I find very interesting and I'm the money is is very much so happening and I intend for it to only get better well let's leave it there JD a very strong a very strong point to to end on but I'm I'm so pleased to hear such a a ringing endorsement of the path that you chose and of course that it is going so well but not that it's been easy it's not like you you know had I guess some of my guests might you know can go easier it can go harder it doesn't sound like yours was on the easy side of the spectrum at all uh so so this is a great story even despite you really having to slog it out for the first year or two fair fair yes great JD if people have questions for you how do you like them to reach out email LinkedIn Twitter I know you're on Twitter uh let's do X formerly Twitter right um so I am dirty hands Ops which you know terrible handle now but it sounded cool at the time and uh I guess we can put that in the show notes or whatever or you can email me JD Mountain valy plumbing.com but we abbreviate mountains so we'll put that in the the show guess JD thanks for for this tour of the last two or so years of your life congratulations again I think people will be really inspired by your story thank you will I look forward to seeing it appreciate it I hope you enjoyed that interview make sure you subscribe to the acquiring minds Channel below we are now publishing twice a week so tons of new interviews and stories to come stories that will help you along your own path to acquiring a business