Key Points From the Interview
t’s said that curiosity kills the cat. But sometimes curiosity pays off. In Michael Loftus’ case, looking for new opportunities, and being willing to learn from his triumphs and mistakes, have been the key to his successful entrepreneurial career.
After graduating with a finance degree, Michael dreaded the prospect of spending his life working in an office. He preferred the outdoors and liked plants, so his dad suggested he go into landscaping. Michael got a job as a landscaper for one of the major players in his area, learning the foundations of the industry.
After a few years, he was itching to go it alone, so he started his own one-person operation, knocking on doors and taking any job he could get. It wasn’t long before he started gaining some traction and began hiring employees. He went from nothing to operating a $1 million per year business in three years.
One day the idea of acquisition occurred to him: he could create faster growth by buying another landscaping business.
Michael dove into that idea headfirst. He knew he wanted a business with recurring revenue, and once he found a suitable operation, he acquired it.
Despite the fear he had when he walked out of the bank after wiring every penny he had saved over the last few years, he reminded himself that he was buying cash flow and the value it would add to his business.
He was quickly hooked on acquisition entrepreneurship.
In the next few years, Michael acquired two more landscaping businesses. His company, Connor's Landscape, now earns $4M a year in revenue.
In this episode of Acquiring Minds, Michael discusses why today he probably wouldn’t start a business in a new industry, despite his success. He talks about the allure of commercial landscaping clients and why it’s so important to build trust with employees. He also shares why he advises not writing off smaller landscaping businesses for acquisition.
✳️ Top takeaways from the episode
✳️ Episode highlights with timestamps
Acquisition Entrepreneur: Michael Loftus
💵 What he acquired: Knowing he didn’t want to get an office job, combined with an interest in plants and the outdoors, Michael Loftus started working as a landscaper after college. He spent a few years learning the business from the ground up before deciding to start his own landscaping business. In a couple of years, Michael built it to $1M/yr in revenue, then decided to acquire other landscaping businesses. He now has three acquisitions under his belt and has grown Connor’s Landscape to around $4M per year in revenue.
💡 Key quote: “Organic [growth] is very difficult. It's going to test you. It's not sexy. It's not perfect. It's arduous. And I don't know that I would do it again if I was going to go into a different industry. I would definitely buy first and then build. I'd buy one big one, and then bolt on from there, to be honest, if I had to do it again.”
Acquisition Tips From the Episode
Top takeaways from this conversation
💰 Be willing to overpay the key person to transition successfully.
When Michael acquired his third landscaping business, there was an account manager with the company who was considering leaving. Michael recognized the key role this manager played and knew he couldn’t afford losing this employee.
So, he overpaid him.
Michael offered him a $6 an hour pay increase, knowing if it didn’t end up working out financially (for Michael, that is), he could figure it out later.
“I can't afford for this manager to leave, at least in the first year or so, so I have given him golden handcuffs,” Michael said.
Fortunately, the strategy worked — and then some. Over time the two also developed a good working relationship and that employee is still working for Connor’s Landscape.
📆 Ask the seller for as long a transition period as you can get.
On listings on BizBuySell, there’s often a training period included where the seller stays on to train the buyer. That training period can be anywhere from a few weeks to a few months. Michael suggests asking for more time on top of that, especially for buyers that are completely new to an industry.
But here’s an important suggestion:
In addition to the extra time the seller agrees to during the transaction period, Michael advises offering to pay the seller as a consultant, which can be anywhere from six months to a year. The benefits you’ll gain from the seller’s experience are going to be invaluable.
To get the most from that experience, Michael recommends doing things the seller’s way, at least in the beginning. After all, if you’re buying the company, there’s something there that you like about it.
“You just jump in, you get on his hip, and you just listen, and you just shut up. That's the best way I can put it: shut up and work hard. And you'll be surprised what you pick up in six months to a year with that guy,” Michael says.
🪙 Appreciate your employees’ financial situations, especially those in low-skill trades.
Many employees in landscaping and other low-skill trades are not financially secure. And many acquisition entrepreneurs don’t realize just how precarious their employees’ financial situations are.
Being even a day late getting employees their paychecks can be “like a death sentence,” Michael says.
“There are certain things you just can't mess with. These guys are on the knife's edge, they have no savings, nothing,” he says. “When you just tell the guys, you look them in the eye, and you say, ‘Hey, your check is coming on Friday,’ I don't care if you have to pawn your car, you better get the money there, because that speaks volumes and then that consistency is going to build up trust.”
Many entrepreneurs looking to acquire a business likely don’t have people in their networks who are so financially precarious and can therefore be naive about this responsibility.
“Understanding that, and they're providing for their families, they have three kids, they have a wife, and you just have to take it seriously,” Michael says. “I don't think it's pressure, I think it's a responsibility, so you have to take it seriously and do what you say you're going to do. Because once you break the trust, it's over. It'll go badly for you.”
Inflection points from the show
[2:40] Starting from the bottom in landscaping.
[5:23] Your reward for being scrappy.
[8:09] Growing landscaping businesses with easy automation and social media wins.
[11:25] Finding the right landscaping business to acquire.
[13:21] The advantage of commercial landscaping over residential.
[14:03] The details of Michael’s three acquisitions and viewing it as buying cash flow.
[16:31] Deciding to acquire out of impatience and curiosity.
[20:17] Figuring out on the fly what changes to make and how soon to make them.
[21:36] Posting that he was looking for a landscaping business leading to his first acquisition.
[26:53] Being interested in the value of the assets for his third acquisition.
[29:08] Growing organically through relationships and basic networking.
[32:58] Organic growth versuscompared to growth through acquisition.
[37:14] Why acquisition entrepreneurs should ask for a longer transition period with sellers.
[40:10] Recognize that your employees are your lifeblood,; and understand the challenges they face.
[45:17] Exit opportunities when acquiring landscaping businesses.
[53:41] The seasonality of landscaping in some geographic areas.