Why Buy a Small Manufacturing Business

any acquisition entrepreneurs find they have transferable skills from their past careers. It can be a natural transition for many business owners. But few make it look as easy as John Hubbard.

When retiring from his 13-year military career, including seven years in Special Operations, some army buddies suggested John go to grad school to then buy a business. After a brief detour — a stint as a police officer — John followed their advice. He went to grad school at night and by day, gained real, hands-on small-business experience.

John conducted a “micro search,” cold calling small businesses that were approximately the size he was planning to acquire later, for his search. He contacted several businesses and convinced one owner to hire him to run their operations so he could learn the job from the inside.

John Hubbard, owner of Express Custom Trailers — John Hubbard, Express Custom Trailers

After just one month, he knew that his military career provided him with more than enough experience to run a small business.

Starting his search in August 2020 — while he was finishing his MBA — John found Express Trailers (which he later changed to Express Custom Trailers). It was based in Tampa Bay. He quickly closed the deal in February 2021.

The previous owners had been extremely hands-off, and John retained the existing managers who had been actually running the business. It allowed him to work on growing the company and improving revenue.

Within the first month, he discovered half of the business was losing money, so he “fired” those customers right away. This allowed him to focus on commercial customers who wanted custom trailers — the trailers with a higher price point. He also renamed the company: Express Custom Trailers. Revenue has been steadily growing ever since.

In this episode of Acquiring Minds, John discusses why he avoided a traditional search fund, why so many investors took an interest in him, and why it was important that he get hands-on experience running a business before acquiring one. Finally, John shares how being unafraid to ask “dumb questions” has given him the opportunity to learn about the business even faster.

Check out:

✳️ John Hubbard

✳️ Top takeaways from the episode

✳️ Episode highlights with timestamps

✳️ Links & mentions

Acquisition Entrepreneur: John Hubbard

‍💵 What he acquired: After retiring from the military, some army buddies suggested John get into the acquisition space. Initially, he thought it would bore him. After a brief stint in law enforcement, John came around to the idea. But first, he started grad school because he wanted to be sure he possessed the skills to run a business. So he found a job at an exterior home remodeling company. Within 30 days, he knew his time in Special Operations had given him many of the skills he needed for his new life as a civilian entrepreneur. John started his own search for a business in August 2020 and quickly found Tampa Bay-based Express Custom Trailers. The transaction closed in February 2021.

💡 Key quote: “For the military guys listening, the first time you go to staff as a junior officer and senior enlisted guy, all these things you thought were super complicated — fancy military stuff — you quickly see behind the curtain and you're like, okay, this is pretty simple. What we're doing at all levels here is the same way with the business. I felt like, within probably a month, I said, Okay. Payroll, workers comp claims, finding new warehouse space, negotiating leases, hiring, firing — this is all just platoon-level military operations you would carry out if you were a platoon sergeant — let alone a small business owner.”

‍👋 Where to find him: LinkedIn

Acquisition Tips From the Episode

‍Top takeaways from this conversation

‍🕶️ Choosing the flexibility of a self-funded search.

‍Army veterans are not rare in the acquisition entrepreneur space. Many of them choose to go the traditional search fund route, but John knew it was a hard pass for him. He had two main reasons why he chose to go the self-funded path.

The primary driver of his acquisition plans was his desire for autonomy. Far more than an economic decision, this was a lifestyle decision for John.

“I would have chosen this even if I made half the money I would have made at a JP Morgan, Goldman Sachs, or something post-MBA,” John says.

It was important for him to retain control over the business so he could have the lifestyle he wants.

“The freedom to be the boss at work was more important to me, which I knew I wouldn't get as a 15% owner of my company, if I went traditional,” he says referring to his business search.

His second reason, which he was not going to compromise on, was the very specific geographic area he wanted to stay in. John knew traditional search fund investors would be unlikely to invest in him if they knew he was only looking at businesses within a 10-mile radius.

🛡️ Leading by pulling back rather than by pushing forward.

‍John didn’t know anything about the custom trailer industry when he took over the business, and he wasn’t going to pretend otherwise. He retained the existing management, a few guys who had been running the company. He told them they were going to continue running it.

“It was a lot of easy wins up front, because I just said, what do you guys need? What have you always wanted to do? How much money do you need to do these things? Tell me, what are your plans, and they came up with 95% of the stuff we've done,” John says.

John looked at it as if he was assuming command of a battalion of rock stars that, up until that point, were held back by their leadership.

“It's easy to be a standout commander when all you do is say, ‘OK, you tell me what you need, I'll give it to you. And I'll protect you from everybody outside the company. You look down, I'll look outside, and you guys rock-and-roll,” John says.

“I told them, ‘I want to pull you guys back instead of pushing you forward every day. So I'll let you guys know when you need to rein it in.’ And so far, they haven't crossed any boundaries.”

🔧 Many small manufacturing businesses are actually fabrication businesses and shouldn’t be overlooked.

‍Many searchers steer clear of manufacturing businesses, and John was initially in that camp as well. However, when the deal for Custom Trailers came to him, he liked it enough that he decided to acquire it anyway. After running a manufacturing business for more than a year, John says there are some misconceptions that potential owners have about that type of business.

Companies listed as manufacturing businesses that are below $1M in EBITDA more than likely are actually fabrication businesses, John says.

The reason searchers aren’t interested in manufacturing companies, according to John, is that they imagine enormous pieces of equipment that cost hundreds of thousands of dollars and the capital expenditure (capex) required to acquire and maintain that equipment.

“When we manufacture trailers, our most expensive piece of equipment is probably $4k,” John says. “[It’s] our bandsaw to cut steel, it's handheld welders, handheld saws, it's an assembly line, if you will, but guys working with a tool in their hand. So it's manufacturing, but really it’s like mass fabrication.”

He says he saw a lot of companies during his search that were listed as manufacturing businesses, but in reality, were made up of 10 people using handheld equipment.

“I definitely wouldn't shy away from it. I would look into the company, especially if it's at that price range, it's not going to be some giant, manufacturing behemoth,” John says.