Host: You read that right. $3 million of EBITDA and today's guest Austin Smoke found the roofing business right on biz Buy Sell. So this story might raise your expectations in terms of what to look for. And not only because of the size of business Austin was able to find, but also because of how he approached management of the acquisition. During the transaction process, he sourced and recruited an operator. So so from day one, Austin had someone to keep the trains running on time as he focused on the transition and professionalization. Now this may sound like easy street. Buy a small business, cash flowing millions and hire someone to run it. But Austin emphasizes more than once that it has been anything but easy. Finding a good business to buy takes time and luck. Getting a deal done is difficult, landing a transition difficult. Austin worked 17 hour days during the first few months after close. Now make sure you pay attention to the last bit of the conversation where we discuss how to decide what type of business buyer to be. Austin knew that he wasn't going to be an in the weeds owner operator of a roofing business. He's a former banking guy. But maybe you're not. Maybe the actual financial transaction of buying a business seems like the least pleasant part of the puzzle to you and you're eager to just get into a business and run the cruise. As Austin says, it's important to understand what you want before you decide on the style of search you'll pursue. That and so much more to learn from this remarkable story of buying a roofing business with Austin Smoke. And by the way, we had some technical issues, so please excuse how the sound quality changes about 10 minutes in. Welcome to Acquiring Minds, a podcast about buying businesses. My name is Will Smith. Acquiring an existing business is an awesome opportunity for many entrepreneurs and on this podcast I talk to the people who do it. Listeners of Acquiring Minds know that for almost any business you acquire, its success comes down to the people and how you develop and manage them as their new leader. Thing is, in addition to management there is also a lot of process and bureaucratic work when it comes to your new employees. Payroll, compliance, HR technology, hiring, to name but a few. These processes are crucial to get right, but at the same time distract from where you want to be putting your energy in leadership. So Aspen HR is an HR firm and PEO that takes this work off your plate and handles it with the care it demands. Aspen is owned and run by Mark Sinatra, himself a successful former searcher, so Aspen's own leadership understands the HR challenges that searchers have post acquisition. The firm is Offering Acquiring Minds listeners a complimentary pre acquisition HR and PEO review for your target business. Check out aspenhr.com or contact Mark directly@markspenhr.com Austin Smoke welcome to Acquiring Minds. Happy to be here.

[3:27] Guest: Thanks for having me on.

Host: Austin, you are the new owner of a roofing business in Central Florida, a sizable roofing business doing about $3 million in EBITDA. And this acquisition represents something of a dream come true for you. Going all the way back to high school, you'd develop the notion that buying a business was better than starting one from scratch because you had started one, a landscaping business and it was really hard. So can we start back then? Austin? Tell me about that experience and what it taught you.

Guest: Definitely. So I always had the entrepreneurial spirit. So started a multitude of companies, small scale when I was younger, I'm starting my teens, picked up a few books in college, starting out with the Harvard Business Review as well as Reginald F. Lewis, his book. They kind of taught me about, you know, lower mid market private equity and how to get in the gate. So actually one of my first sellers meeting when I was 19, there were some Jew shops that were in New York City. I was an owner who had three for sale. I had no idea how to structure a deal, had no debt or equity relationships, just generally wanted to do this. So you know, it's 19, fast forward eight years and now we're here.

Host: All right, well let's, let's go through that history a little in a little bit more detail. So at 19 years old you have your first seller meeting. Why? And you're, you're in college I assume at the moment. Give me 30 seconds on that.

Guest: Yeah, sure. I'll give you a larger scope background. So originally from Atlanta, went to school in New York, went to St. John's University, graduated with a BA in economics there. The reason I had the sellers meeting is I had picked up the Harvard Business Review book How to Buy a small Business, which is fantastic for anyone looking to get into the space, especially self funded. That was one of many, I would say. So that year I probably went on 10 seller meetings, started to learn about the scope of, you know, how to raise financing from banks and things of that nature. When you're 19 with no proven track record, it's really tough. So fast forward from there. After graduating from undergrad, I started my career in investment banking at Goldman Sachs. I was there from 2018 to 2021 working in real estate investment banking. I left Goldman in 21 to pursue self funded search which I Launched formally in October of 21, ended up acquiring my first businesses at the top of 22 which were food and beverage franchises, a small network here in Florida, went back out to the market looking for a larger deal to do. And that's when I, that's what brings us to the 3 million EBITDA roofing company, which I closed on roughly seven months ago.

[6:15] Host: Okay. And the many deals that you'd looked at when you were young and inexperienced, without a track record, you kind of continued with the idea that you would eventually do that, but you took this, you know, side route at getting some, some years of experience at Goldman sort of thing. What was your, what was your thought process after you had all those seller meetings, but nothing came to fruition?

Guest: Yeah, definitely. I mean if you want to work in private equity or lower middle market private equity, going through investment banking is the primary route, um, secondary, you can do management consulting. But you know, understanding that, that's why I took the investment banking route for a few years prior to going out myself and acquiring a company.

Host: So the, so the goal, the, the dream remained the North Star throughout all of that, that experience, you were really going, you were going to Goldman to get some experience to then go out, buy, do a search. I mean it was really kind of years in the making your search.

Guest: I wouldn't say it was that crystal clear, you know, but it was always in the back of my mind to do this.

Host: Okay. And you, when you told me about your experience at Goldman on our pre call, it kind of struck me what, what you said you really took away from those years. Can you, can you share that with us now?

Guest: Sure. It was how to work in a, in a fast paced culture, how to be productive. You know, what work ethic actually looks like when you're spending, you know, anywhere from 12 to 16 hours on the desk daily. And you have to focus on the intricacies of everything. You know, if you're looking at a model for eight hours, you know, or multitude of models for eight hours, everything has to be right. So it just taught me how to work. You know, I always had a strong work ethic, but you know, from a culture standpoint, Goldman was a fantastic resource for me just on how to be a professional and how to work so

Host: it's not just working hard, which you already knew how to do, but working hard for extremely long periods of time while the stakes remain high throughout and the quality of work really can't dip.

Guest: Agree. That's a great way to put it.

Host: Yeah. Okay. All right. So you get out of Goldman, you start your self funded search in earnest. But you have these, these franchise opportunities come your way. Take pick up the story from there, please. Sure.

Guest: They were really a godsend. So a friend of the family was looking to close out his father's estate and they were looking to sell these last few franchises out of their portfolio. It's looking to move quickly. I bought those at less than 1x EBITDA. It's a few franchises in the food of ever space down in Florida. They helped fund essentially my search period.

[9:06] Host: Okay, and can you tell us any more about those businesses? You said there are a few franchises. How many, what they are? Just give us a picture.

Guest: Sure, sure. So they're all located in Florida underneath the Focus Brands which are Auntie Anne's own A Subway as well. Focus Brands has a lot of brands. So Cinnabon, et cetera. So those were acquired in February of 22.

Host: So these two franchises, they were, you got them for 1x less than 1x EBITDA and together they helped fund your search. Were they. Where were you when this happened? Were you still up in New York? Because you said they're in Florida. Are you having to go down to where they are? What is the operational management of these look like?

Guest: Sure, sure. So I actually worked in investment banking in Dallas and then moved to Chicago from Dallas. So when I purchased these, I was still in Chicago and I did the search full time from Chicago. So a manager was in place. He had been there for eight years of the franchises. He handles day to day operations for me. I don't do anything pretty intensive within that business. So they're pretty much passive assets for me.

Host: Now let's just understand that a little bit better because while you ultimately bought a $3 million roofing business, some people will really be intrigued by just the acquisition of these two businesses which are, as you just said, passive. A word that I try to avoid. But if that's what they are, that's what they are. In your case, can you give me a sense of how much the SD of each of them is? Just so we have a sense of size support you if you kind of just wanted to stop there, definitely altogether.

Guest: The SD I would call roughly 150,000. I actually wanted to scale the franchise portfolio to 10 units. But you know, with working with franchisors there's a lot of red tape. So you know, I was able to get really good deals under contract within, you know, the brands that I own. But the actual franchisor was a mediating factor. In between that. So I was able to get them financed and get them under contract. It was just the franchisor said, hey, we want to see, you know, multitude of years of experience underneath your, underneath your belt prior to you, you know, taking down 10 units in a market. So.

Host: Oh, fascinating. Well, we did. I didn't actually get that from our pre. Call us. And so you, you. Because one of the things when I've had acquisition entrepreneurs on who have acquired into franchises is, you know, getting inside a big franchise can be difficult because typically franchisees are selling to each other. But here you got these two through this kind of unusual back door, if you will, and that, that gave you the toehold and you, you tried to take advantage of that. You, you went into the franchise network trying to acquire more and you had 10. A deal to do, 10 units. And so the, and the franchisor said no because you didn't have the experience. That must have been, that must have been frustrating. I mean, you, you, you.

[12:08] Guest: Yeah, it really was. So I, I think I had a really good deal under contract. It was eight units, roughly 700,000 or so in EBITDA. Purchase price was I think 1.75. So it was a fantastic deal. They had management in place. You know, it's kind of a plug and play situation. But franchisor ultimately just said no. You know, and I won't speak negative to negatively towards those brands, but, you know, some are better than others. It's more so all about relationships. And it takes time build that relationship base.

Host: Well, that's a really good reminder because the people that I have featured, the guests that I have had on who have bought into franchise, the franchise systems, you know, it's, it's gone their way, which is why they're, why they're guests on the pod. But that we always acknowledge that there is this big risk in terms of your, your, you know, you've got the risk of yourself, you've got the risk of the business. And then in a franchising situation, you've got the risk of the franchisor and you're at its whim. And that introduces a whole other element of risk that independent businesses don't have. And again, my guests who have been on, they haven't really. That hasn't been a problem for them. But so you're, it was, but it really was a problem for you. This is a good example of how a franchisor, you know, really represents risk because they just said no to what you wanted to do. So. All right. But meanwhile, you still got these two businesses and they're throwing off $150,000 a year, which is a full salary and they're basically passive. That alone is, is pretty amazing. And, and I recall from the pre call you saying like if you weren't convinced that buying a business was the way to go with your life before you, you, you sure were. Then is that, does that capture it?

Guest: That's right. Yeah, definitely.

Host: Cool. Okay, so you're up in Chicago, you've got 150,000 coming in and you want to go and find more businesses. So tell us about your search from there. Sure.

Guest: So while I was in corporate, I was actually looking passively for a year. So I built out a Rolodex of brokers, lenders, equity investors, my CPA legal team, et cetera. So all that was built out prior to launching the search formally. Funny enough, I found the business on Bizycel, you know, so and it's a pretty sizable business. So I would always say, you know, I know there's a lot of chatter about how you know good or bad biz Bicelle is, but it can still be a pretty good resource so you can find some gems. But everything I did was brokered, you know, I was on axial things of that nature and really got on the local markets that I was trying to attack, got on their local broker list which is pretty much the most feasible way to get good deals.

[15:00] Host: August Felker is a two time successful searcher. First with a traditional search fund. The second time around he did a self funded search. Today August runs Oberle Risk Strategies, an insurance firm with a dedicated practice group for searchers and acquisition entrepreneurs like you. If you've got a business under loi, Oberle will provide complimentary due diligence on that business's insurance and benefits program. A great no risk way to get to know August and team. They love helping searchers. They've worked with hundreds. Oberly is a specialty insurance brokerage for searchers by a former searcher. Check out oberly-risk.com o b e r l e-risk.com, link in the show notes. So you're in Chicago, you've got the two franchises. Give us a picture of what that search looked like.

Guest: That's right. So the larger search was already there. You know, the franchises came within the first four to five months of me launching my search. So throughout that period I'd been bidding on deals on a monthly basis. So at that point when I closed on the franchises, we were probably five months in full Time I got the deal that I actually closed on in late 22 under contract in May of that year. So we closed on it in November. So it was a seven month process for diligence and paperwork. It was very arduous. So that's the scope of it.

Host: Okay. And you, I, as I recall you had been looking in particular geographies. Like you had geographies you liked. What were those and why was it basically just kind of their strong economies, high growth. What were the geographies and why?

Guest: It was more so where I felt comfortable moving. So Georgia, Florida, Texas, Chicago and Southern California.

Host: Cool. Okay. All right. And, and so your searches in, in these geographies is you're, you're open to biz by sell as everybody should be and you're doing axial and you're, and you're also reaching out directly to brokers in these, in these geographies and cultivating broker deal flow from in all those places.

Guest: That's right. And you're going to get the best deal flow from the local brokers. They know, you know, smaller business owners who looking to sell, they're serious about it. They're, you know, a lot of people focus on proprietary data, deal flow or you know, data. I always thought that it was, it's already being done by the broker. That's their job essentially. They're, they're doing outbound daily and they've been doing it for years. So they're going to find the deal, they're going to list it. You know, you're, you're wasting a good chunk of time, you know, doing proprietary.

Host: Yep, yep, I, I hear that. Okay, Austin, so tell us about the roofing business that you find.

Guest: It came from biz by sell, local broker in Florida. It was marketed at, you know, two and a quarter in ebitda, fair purchase price. It's in Central Florida, about an hour north of Orlando. Strictly residential roofing. Does about 8 million on top line and 3 million in EBITDA. Mom and pop shop, you know, founder, centric, husband and wife worked within the business full time, you know, 60 to 70 hours a week. I took it over in November as I referenced previously.

[18:21] Host: So it was 2.25x is what it was being sold for. 2.25.

Guest: No, no, that's, that's what it was market. The EBITDA was marketed as, which was 21 EBITDA. 2022 EBITDA is what reached 3 million.

Host: So it grew, whatever that is, $750,000 over. So that's like 30% growth. Over the course of the year that you're, you know, while this seven month negotiation is going on. And what was the, the multiple when

Guest: it was first marketed? It was three and a half eggs at closing. It was, you know, was it two and a half, 2.75 somewhere around there?

Host: That's pretty remarkable that you're so, so as the revenue as the EBITDA is growing over the course of the seven months that you're negotiating this, they're not trying to push you for a higher valuation. So. So, because basically the multiple just comes down if you get more EBITDA for the same price.

Guest: No, I think they've been burned by some other buyers previously and they were, you know, exhausted with the process. So going back to the negotiating table wasn't what they were looking for. They were looking for someone who was going to come aboard and actually care for their company, which is something I've, you know, really done since acquisition and something I exuded throughout that, you know, deal searching process.

Host: Yeah, well, understanding that, hearing that, that they were a little bit fatigued from talking to buyers and the disappointments that come from trying to transact it still strikes me as a, you know, a low multiple for a business doing that much ebitda. At least what we often hear is that, you know, certainly a business doing $2 million in EBITDA or above, often a million dollars in EBITDA or above can attract the attention of bigger players. Not a self funded searcher, but like private equity or a smaller, smaller private equity shop or a traditional search funder. So were you, do you think that those were some of the folks they had talked to previously, people like that? And why, why weren't you having to compete with private equity to buy a business doing $2 million in EBITDA? I mean that's, that's big for a self funded searcher.

Guest: So from my understanding, most of the buyers that they were looking at were more so search fund oriented. So you know, your mid-30s to 40s guys who were looking to purchase a company and operate it themselves, from my understanding of what they told me is who they were dealing with. Mostly they didn't speak with many private equity firms that were strategics within the market per se. I don't know why it just didn't happen that way.

[21:02] Host: Okay, well, Austin, people are going to hear this and be like. And probably my headline will be something to the effect of how does a self funded searcher buy a $2 million, sorry, 2.25 million. And then ultimately when you closed $3 million EBITDA business, which, by the way, was on biz by sell. I mean, this wasn't even found via proprietary. And. And I get. I'm starting to feel like it just. It was just chance. It was literally just sitting out there for anybody to find.

Guest: You have to get lucky. You know, everybody wants to put strategy behind things. You know, it's. For me, it was God and luck. You know, um, same thing with the franchises as well. You know, it's. You have to put the effort in. You have to put the reps in, but it's a. It's a numbers game at the end of the day, you know, finding a really good asset and finding a good, you know, seller group. So it's. It's purely numbers and. And luck as well.

Host: And. And I didn't ask what was your criteria? I mean, were. I assume you weren't. I mean, your. Your bar wasn't that high that you were only looking for 2 million and above. I assume you were probably willing to buy something much smaller.

Guest: No, I did buy much smaller, you know, starting off. So right when I went back out to the market, I would say a million in operating profit within those geographic areas that I referenced previously and something I felt that I could take over a management role in.

Host: And what do you mean by that? Why do you emphasize I felt that

Guest: I could take over something? I mean, you have to fit, you know, the role. Um, I think some businesses are better for certain people, some aren't, you know, so you have to find something that's gonna fit you culturally that you're gonna step into the seat and be able to thrive with.

Host: And. And why did. Why did this particular business have that business buyer fit?

Guest: It was very lean. That's one thing. There weren't. There weren't a ton of dependencies and things of that nature and processes in place that were gonna be too arduous for me to take over. From an ownership standpoint, I would say those are the primary and key things.

Host: You know, it's. That's funny, Austin, because that's a little. That's a little counterintuitive to me. What I'm hearing is no management layer. Lots of mess, just a, you know, just mom and pop mess. And while that probably, you know, that's great opportunity for you to go in and professionalize, it's also, like, that much more intimidating because it's that. It's that much more for you to go in and figure out. But it sounds like you. You actually, that was. That was a plus. Not a, not a negative.

Guest: Yeah, sure. Definitely. What I, what I meant by that, it was a very simplistic business model. So I, I actually hired a GM to handle day to day operations for me. I knew kind of an operating capacity was going to be tough if I wanted to do everything by myself. But the business model itself was very simple. So it was delegating a few tasks for, you know, gna that I was gonna hire. So it wasn't, it wasn't that, hey, Austin's gonna be able to do everything that, you know, the husband and wife do that have been running the business fantastically for a decade plus. It's, these processes are very simple and you can hire people to do these relatively quickly.

[24:17] Host: Okay, okay, that's a great clarification. And so hiring the gm, that, let's, let's get into that a little bit because that's also another topic that is of great interest to anybody exploring this path. What was your playbook there? You wanted to hire a GM from day one or operate yourself for a while and figure it out and then hire a GM or what from.

Guest: From day one? I always wanted to hire an operator. You know, I was a banking guy. I didn't want to step into the seat of roofing owner and have to do everything from day one and have to depend on my expertise to lead that company. You know, there's a lot of risks within that. So prior to acquisition, you know, I was looking at potential GM candidates for roughly three months. I found this one through a family office who was looking to be my sole equity investor. At one point they actually left the deal 2 1/2 weeks before closing. So that's another sticky story we can get into.

Host: Oh, but they did give you your gm.

Guest: They, they ran the search for me, so they put it out on their HR platforms. So source candidates.

Host: Well, before we can hear about how, how that fell apart or the, their funding of your as it. As your loan investor, sole investor fell apart. But I just want to understand a little bit more about this GM process so. Because I had another guest on recently who bought a towing business in North Carolina and he also, as he's doing his deal, is recruiting an operator to put in from day one. And I was kind of staggered by this because it's, you know, the conventional wisdom, at least down here, maybe private equity people would say something else. But down here, you know, in the really kind of acquisition, entrepreneurship land, self funded land, it's don't think that you can hire an operator from day one and kind of passive, you know, passively.

Guest: That's very true. I totally agree with that. You can't be passive. You can't, you can't just put the guy there and expect him to do everything for you. So I was in the business 17 hours a day the first three months. So developing the transition plans, giving them daily tasks of what needs to be done, delegating what his tasks were going to be. So I was present within the business daily as the owner. But when it comes to operations kind of post that transition period, they're a lot more seamless. It's scheduling, planning, having a focal point that you know, your employee base can go to, to ask questions and.

Host: Right, that's, that's a great, also great clarification.

Guest: So you know, as you look to scale, you can't scale without infrastructure. I've always had it in my mind that hey, I need to be able to do that fast, but I need to be able to repeat this elsewhere with other companies. So that was more so the idea.

Host: So when you say you want to repeat this elsewhere for other companies, I'm getting a little bit ahead here. But you have a vision of doing this repeatedly over the course of your career.

[27:09] Guest: Agreed, agreed. So with growbacks capital, I'm looking to scale within this market via roll up. Generally, you know, anywhere between 7 to 10 million in EBITDA is what I've kind of put the idea as. And then from there more of an independent sponsor model within lower middle market private equity in general.

Host: Okay, so you had said that the husband and wife were running this business. So it was basically you were going to have to replace two full time people.

Guest: Right.

Host: Okay. And did you anticipate that that would be your gm, that the two of you, you and your GM that we're already talking about, or does it map, does the husband and wife map to

Guest: that or is it so I'll break down responsibility. So the wife was cfo, lead administrative personnel. She did, she wore four hats. The husband wore four to five hats as well. He was, you know, scheduling, purchasing, management of the crews, pretty much anything outside the office and the wife handled pretty much anything inside the office. So when I was taking over the business, it was, there was a lot of G and A, you know, that was going to come into play. So I hired additional administrative staff, the GM you got myself to account for, as well as additional support staff within our warehouse. Oh, and I forgot the previous owner did sales as well. So you had to hire another sales guy.

Host: So what do you anticipate you Just touched on it eventually going independent sponsor, but just your kind of more immediate next 12 months, next 24 months. Your, your plan for growing this business or potentially, you know, organically or inorganically? What, what is your, what's your plan here?

Guest: Yeah, hyper focused on scaling through acquisition. So theoretically the goal is to four entities within the roofing space around that 7 to 10 million EBITDA threshold, all within the residential roofing sector within Florida.

Host: So you're looking to do three or four more acquisitions to get you to seven to ten.

Guest: Two to three more acquisitions for a culmination of three to four companies.

Host: Okay, that gets you to seven to ten and ebitda.

Guest: That's right.

Host: Okay. Okay. And then envisioning exiting or holding on to it, or you just have so much optionality at that point. You'll just do whatever makes sense.

Guest: We'll see, we'll see at that point. I gotta get there, you know, it's, it's an arduous sash just to do one. So we'll see, we'll see when I get, you know, when that happens.

Host: Okay. Okay. Well, let's talk about, I want to hear some. We're a little, we're a little compressed on time today, but I want to hear about the roofing business because it is an industry that a lot of searchers look at. You'll see a lot of roofing businesses on biz by sell.

Guest: At least I have.

Host: But before we do that, I've heard you say the word arduous more than once now. So it was an arduous acquisition and it's been arduous since you got there. 17 hour days. Let's just quickly. I know we were stepping back a little bit, but the actual transaction, is there anything you want to highlight there that as to why it took seven months, why it was arduous? Is there anything that we can learn from your experience of the transaction?

[30:22] Guest: Yeah, of course, you know, me being a first time buyer, everything wasn't, you know, 1, 2, 3 for me it was learning through the fog. You know, I had a good diligence firm in place for, you know, financial. I had a good lawyer to do legal diligence and prepare docs. Licensing is another thing that you have to work through in the state. So that takes time. Also rupture my key lease. Throughout that process, it was raising cash capital, you know, for the first time was also a large task. I mean it's a multitude of things that go into the process of doing a deal, you know, and then actually getting a Closing day. So it's really tough to get to closing date, especially on your first one.

Host: So it wasn't necessarily that anything went terribly wrong. It's just there's so many moving pieces to this and kind of that's correcting it all up.

Guest: You know, it, it takes time. Unless you're, you know, private equity firm with dry powder, you know, or somebody who has the cash to do the. It takes time.

Host: Yeah. And then the 17 hour days. So since you've gotten into the business, even though you hire, you had this GM to, to come and actually handle the operations, to be the one in the business and you're basically working on the business. Sounds like from day one, it's still you're doing so 17 hours every day. So give us a picture of what your life looks like. Why are you working so hard? Somebody completely naive from the outside would say, what do you mean, man? You hired a gm, what are you doing all day? Disabuse everybody of that notion. What does your day look like?

Guest: Sure. So in the roofing industry, they start really early. So 6am is when the warehouse opens. Roofs come in to get the materials, or our warehouse guys are structuring the materials to take stuff out. Days are long as well. You know, it's till sundown, so that could be, you know, seven, eight o' clock at night. The first, you know, two to three months it was transitioning of accounts. I think I had like 50 new, you know, meeting suppliers, building those relationships. A multitude of things that you're learning just from a process standpoint and also delegating those processes like this is going to be your new responsibility. I also implemented a software, you know, and that took time as well. So everything prior to becoming aboard was carbon copy on paper, in a word doc or somewhere in Excel, or you know, just on the physical sheet of paper. So I implemented processes around, you know, how we're going to order materials, you know, how we bid through technology, how we receive payment through technology, all of those things. You know, I implemented a software for that, which was a tough task as well. Like that takes time and just learning the industry, you know, setting up new accounts, managing employee relationships. It's a lot. It takes, takes a lot. You know, it's not, it's not just cut and dry. So it was, it was a multitude of those things. And also just trying to show good faith to the employee base that, hey, I'm here, you know, just be around, you know, it's not just gonna be here and not be here typically. So

[33:30] Host: it sounds like you were confident in getting in there and making changes pretty early on because, you know, it's only been a few months. Yeah. So what, what was your philosophy on that?

Guest: I felt it out, you know, so originally I wasn't going to implement the software until, you know, after six months. But, you know, the employee base is very lean and you know, you kind of rub shoulders with everybody and see, like, hey, it's going to be okay for you. And like, some employees are like, hey, I already use this in other companies, so I know how to use it. Or, you know, you have something to shy away from it. But it's, it's, it's more so filling out the employee base to see if they're okay with it. Transition that quickly.

Host: I like that. I often ask about the change management, you know, how, when and how much change that the acquisition entrepreneur feels comfortable doing. And there shouldn't be a hard and fast answer to that. It's really depends very much on the organization. So the answer is feel it out with is what you did and, and if there's re. Recept. Receptivity to it, go for it.

Guest: I guess that's right.

Host: Austin, anything you want. Any more you want to say about your particular experience buying the business before we just talk about the roofing biz?

Guest: I would say I bought from a great ownership group. They were fantastic to work throughout the transition period. You know, bought in a great market. You know, it isn't an exact science, you know, when it comes to these things. It's what are you going to feel comfortable with, you know, day one, how are you going to manage those expectations and what's your, you know, buffer in between that?

Host: Okay, actually, I, I was going to circle back on this and, and forgot to. What happened with this? The family office that was going to be your sole investor. And how did you then find capital to do the deal when they backed out?

Guest: Yeah, so I used an equity syndicate to help raise capital and they had about 70% of the capital for me or make the introductions to people who had the capital. So I had two different avenues. I was at a small LP base. You were going to write 25 to $50,000 checks. And I had the family office route who are going to take a larger chunk of equity but be the sole. So with that, I had. Funny, I was about to let all my smaller LPs know that, okay, I'm going with this family office and they're going to be the sole provider of the equity. And literally that day they called me and said, hey, we can't do it. So I was playing both sides. You know, the smaller LP base and the family office route. You know, with the smaller LPs, I was able to get 70% of the check that was needed. And then from personal relationships, you know, I was able to foster, I got the other 30%.

[36:24] Host: And is there a. It sounds like you would have preferred the family office. And is that just because the logistics are easier when you have a sole investor versus multiple? Well, to help educate people on the pros and cons there.

Guest: I think there are pros and cons. It depends on the family office that you're working with. Some of them have, you know, great back office support from hr, you know, payroll, things of that nature that can be extremely beneficial for you to lean on. It just depends on which family office and how aggressive they're going to be with, you know, writing checks for you as well. I think the better route happened, the smaller LP base, you know, I have a myriad of LPs and they're all, you know, unique in their own right. They're CEOs, operators, investors. They, I can lean on them for a lot of expertise or help if I need it. So there's pros and cons to both sides. It's just kind of depends on what you can get.

Host: All right, to, to close us out here, Austin, tell us about the, the roofing business. You said this is a residential business. Your, your, yours is residentially focused, but so there's residential, there's commercial. That much I know. But take it, take it from there. Kind of give us the, the 30, 000 foot view of the roofing business, please.

Guest: Sure, sure. So I'll give you the scope of my business. I wouldn't say I'm an expert within the roofing industry by any regard, but we have a small residential roofing company that does repairs and replacements for homeowners within Florida. Within that you have a multitude of types of roof companies in the residential space, primarily sales driven. And so about all their work. You have what I call your more organic companies that are more market driven and they have W2 employees that actually service their clients, which is more so what we are. And that's kind of primarily what's driven within my market for residential roofers. And you have your commercial guys who handle commercial properties from a service standpoint, so repairs and replacements on those and then your new construction roofing companies as well, which is a low margin business in my opinion.

Host: Okay, so, so of those kind of four within residential you have, you know, your own, your own cruise, which is what your situation is, your own W2 crews. And then you also have within residential kind of sales organizations that sub out the jobs and then you have commercial roofers and then you have roofers focused on new construction. What are, do you feel like where you play is of those four buckets, is that, is it kind of one of the more attractive, would you say or what are the pros and cons of your mod and where you play?

[39:05] Guest: It's a higher margin business. In the residential side, especially on the repair business, I would say, you know, there's give and take. On the commercial side you have a repeated customer base. On the residential side it's typically, you know, one offs unless it's repairs. So but if you're doing a repair, they don't want you coming back next week to do the same repair. So there's really no recurring revenue base. You know, it's, it's all purely driven off a brand and word of mouth, I would say within my market. So there's pros and cons to each scenario. Residential is definitely a lot more high margin, but commercial can be, you know, may have a sticky, stickier revenue base.

Host: Okay. Okay. Well, to the point about your, where you play be in residential not being recurring. What I have also heard about the roofing business is in places like Colorado where there's hail damage all the time, is that it's this cutthroat, very aggressive kind of hard selling business and really competitive. The roofing guys are really competitive amongst each other. Is that. But it's also, but it's also very seasonal in, in Colorado because of the hail. I assume it's probably seasonal everywhere. It's like when there's some sort of weather that causes roof damage. That's when roofing companies get busy. Get busy. But anyway, just to the point about how competitive the industry is, what does that look like for, for a roofing business in central Florida? Yeah, definitely.

Guest: I would say it's all weather dependent. You know, Florida, the state for tropical storms. So it makes it a fantastic market for roofing. The roofing industry in general. Colorado is another one of those markets where it's, there's a lot of storm related work. So I would say when it comes to the competitive nature of it, of course any business is competitive. But the way to distinguish yourself, you know. Well, let me backtrack actually. So the market is very fragmented. So within each county there are, you know, two to three roofers that kind of own that county. Within Florida, there aren't any large companies that own the state when it comes to roofing. So there's, there's competition definitely, but there's brand awareness within your market and that's what you want to hone in on.

Host: And so how does your brand stand up in your market?

Guest: It's fantastic. I mean the previous owners, they, you know, they built a fantastic brand and company, something we're just trying to steward and continue to guide forward and, and

Host: do you for landing jobs. So you have this, this brand equity. So hopefully people just know the name and seek you out and do direct searches. Hopefully people are just googling that and calling you. But I imagine just roofing, roofing company near me is also, you know, you're kind of just trying to generate online leads who be from people who don't yet know the brand. How much of your, of your lead generation looks like that? Like give us a little sense of how you keep the phones ringing.

[42:03] Guest: Yeah, definitely. It's so prior to me taking over, there was no marketing presence. There was no, there was no SEO span, no Google Ad spend. No, none of that.

Host: You're kidding. So it was just the strength of the brand that was making the phone ring?

Guest: Correct.

Host: That's awesome. Wow.

Guest: So after I took over, you know, implemented those marketing strategies around SEO and Google Ads, Facebook ads, LSA ads, you know, guaranteed ads, those things and also more like next door things of that nature. So multitude of platforms online that I went to, you know, to market. But that's not, that's not what drives the, my consumer base. It's, it's brand new. It's the, the authentic authenticity of and workmanship of what the company has done for the last 20 years.

Host: Okay, well, but certainly I imagine adding all of these marketing channels in has, has moved the needle. Have, have you felt a revenue move north significantly because, because of it or is it not even really noticeable?

Guest: You do see some uptick, but that's not against, that's not where I, our customer base is. It's not where the multitude of it's coming from.

Host: Okay, so, so you would caution somebody who's looking at a home services business to buy that has not been savvy about online marketing. You would caution that buyer. Just because the business you're looking at hasn't been doing digital marketing, don't think that you can start doing digital marketing and all of a sudden blow up like transform the business for the better. It's not necessarily going to,

Guest: I don't know, you know, it depends on how how much you're going to spend on marketing as well? You know, I'm still conservative, you know, I still have to keep, you know, fine tune approach when it comes to profitability and you know, where our expenses are actually going. So I mean I definitely increased our marketing budget, you know, drastically, but it's not, it's, it's not a significant portion of revenue.

Host: Okay, Austin, I want to ask a few more questions to, a couple more questions to close out here. You've seen kind of search and buying businesses from a, a bunch of different angles. You have these relatively small but passive franchise businesses. Then you buy, you do a self funded search and you buy this for self funded searchers. For my audience, a quite large business, $3 million in, in, in EBITDA. And now, you know, you're using your, you've got a rollup vision. So you're also thinking about things from a rollup perspective. And then in the, in the slightly more distant future, independent sponsorship, what would you tell people from all that kind of like swirl of ways to approach buying a business to take away from how you know, what you think the opportunity, the best opportunity is.

Guest: And, and I think it depends on your personality and what you want to get out of the experience. You know, some people really want to be operators. You know, some people more so want passive assets. It's, it's a give and take. I think both are great. It just depends on what you want from your experience. I think there are certain routes that are different, you know, traditional search versus self funded search versus you know, independent sponsor model. Those are different vehicles, you know, but when it comes to small scale business, you know, things that are sub 5 million in enterprise value, it's, it should be more. So how do you see yourself fitting within that organization and how involved do you want to be things of that nature? You really need to dig, you know, inside to understand that from, you know, your operating capacity.

[45:48] Host: And what is Austin optimizing for? Like when you considered the range of options, what did you decide you wanted to optimize for in your own life and professional path?

Guest: For me it was always passive. I'm not as we alluded to when we first started the interview, I saw how tough building businesses from scratch were. So I have a great deal of respect for founders and sellers of these businesses. So when it comes to the operating capacity of businesses, it's, it's, it's, it's a great task. I learned a skill set around, you know, deal structuring and things of that nature from you know my experience and help me. And I. That's what I feel I'm good at. So it's. Again, it's. It's. I would say you can pull it from there.

Host: Okay. But at the same time, you are spending 17 hours of business a day in the business and doing a lot in the business. You're not operating, you're not managing the crews and managing the people, but you are doing things to gain operational leverage. So it's not like you're arm's length here at all.

Guest: That's right. That's very true. That's because I want to make sure we're successful. And I wouldn't, I couldn't, you know, I couldn't let the company just go abyss without me giving all my effort towards, you know, the entity.

Host: How. How much longer do you think you'll be working? 17 hour days. I mean, I just really want to.

Guest: That. That stopped after, I would say the first three months.

Host: Oh, great. Okay. And so how much are you working now?

Guest: Anywhere from 20 to 40 hours a week, depends on the day. Oh.

Host: Oh, well, that sounds. That sounds a lot better. All of a sudden, your life seems easy, Austin. Bursts of energy followed by not easy, but. Okay. All right, well, we can. We can call it there, Austin. I know you got a hard stop in two minutes, so tell people who want to reach out to you what the best way to do so would be.

Guest: Sure. Feel free to find me on LinkedIn or you can go to my business website and shoot me an email there directly.

Host: Yeah. What's your business?

Guest: URL.

Host: Grove Oaks Capital.com Grove Oaks Capital.com Austin Smoke. Thank you very much for the. For the time, sir. Very interesting story. Yeah. That people are going to be so eager to. To understand how they can buy business with $3 million of EBITDA. So congratulations on that. And we'll have to have you back and see how things are going in a year or so.

[48:18] Guest: Thank you so much for having me.

Host: All right, Austin, thanks.