Key Points From the Interview
ou hear a lot about HVAC businesses in acquisition entrepreneurship, and we’ve finally got a guest who saw the appeal and shares his acquisition story.
In November 2021, army veteran Nathan Lenahan acquired Bart’s, an HVAC business in Fort Worth, Texas, with his two business partners.
Despite buying small (the acquisition was for $400,000), Nathan expects to reach $2.72m in revenue in 2022 — impressive for their first year as new owners.
Often the advice is that you should acquire the biggest business you can and max out an SBA loan, but Nathan’s story suggests that might not always be possible. Though he originally wanted to buy a multi-million dollar business, “the market kind of kicked our ass,” he admits.
Ultimately he and his partners are happy with the trajectory and plan to acquire additional businesses to create a platform to make home ownership easier.
In this episode, Nathan talks about why he was drawn to acquiring an HVAC business, the benefits of “buying small”, and how it’s not necessary to know an industry inside-out before acquiring a new business.
✳️ Top takeaways from the episode
✳️ Episode highlights with timestamps
Acquisition Entrepreneur: Nathan Lenahan
💵 What he acquired: After moonlighting at Lockheed Martin, Nathan Lenahan started a property management company and sold it 18 months later. In November 2021, he and his partners acquired Bart’s HVAC for $400k.
💡 Key quote: “This is a people business all day long. And nobody cares how much you know until they know how much you care. And you show you care by being with the team — by listening to them, by paying them what they're worth, and by giving them opportunities to be proud of the work they do. If you can do those things, the technical knowledge will absolutely come.”
Acquisition Tips From the Episode
Top takeaways from this conversation
🌡️ Why acquiring HVAC businesses is a good bet
HVAC is critical in the modern world, and can be life-and-death during a Texan summer (Bart’s is in Fort Worth). People aren’t willing to go without it and know they have to pay for it, but Nathan loves making the whole process easier for them.
Compared with the many things that can go wrong in other skilled trade businesses like electrical or plumbing, HVAC is relatively less complex. Usually, 10-12 of the same issues crop up. From the standpoints of inventory and supply chain, management is a lot easier.
HVAC also has the highest recurring revenue percentage when compared with the other businesses in the trades. Bart’s had around 70 annual service contracts when Nathan and his partners acquired it, each netting between $150 and $250 per year.
Memberships like this — based on necessary products or services — create lasting value all round. In Nathan’s view, it’s not about the sale, but about making things easier for people.
🌱 The benefits of “buying small” — bigger isn’t always better
The original owner of Bart’s optimized the business for revenue and tax purposes. He didn’t optimize for selling the business, which meant that Nathan and his partners got a good deal and probably paid a lower multiple than they would have otherwise.
With an SBA loan and a $100k working capital line of credit, Nathan acquired Bart’s for just $400k.
The acquisition goes against the argument of buying as big as possible, but Bart’s growth is very encouraging. Nathan expects to reach $2.72m for 2022, almost 3x revenue from time of purchase. They’ve put in an additional $70k each, but Nathan is confident it’s all going to pay dividends in the long run. And apart from a few technical hiccups, the transition has been seamless.
💡 You don’t need to know HVAC to acquire an HVAC company
While he loved home services and all things real estate, Nathan didn't have direct HVAC experience before acquiring Bart's.
The key to success for an acquirer like Nathan is having someone within the business who does know HVAC. If it's existing management, make sure you have an airtight plan to retain them post-acquisition.
That, and build trust with employees.
“This is a people business all day long. And nobody cares how much you know until they know how much you care. And you show you care by being with the team — by listening to them, by paying them what they're worth, and by giving them opportunities to be proud of the work they do. If you can do those things, the technical knowledge will absolutely come.”
Ask lots of questions, listen, and be prepared to roll your sleeves up and pitch in. That’s where you start.
Inflection points from the show
[2:05] Nathan’s background and journey to acquiring Bart’s.
[4:44] Nathan discusses growing and selling his property management company and moving on to WeWork in its heyday.
[7:21] Why HVAC as a business appealed to Nathan.
[9:27] Revenue percentages for one-off repairs vs. subscriptions for Bart’s.
[11:10] How Nathan narrowed his search to HVAC specifically vs. plumbing, electrical, etc.
[12:24] Nathan explains why he didn’t return to property management and instead acquired an HVAC business.
[16:52] Bart’s business is discussed in more detail including growth plans, revenue, and employees.
[20:16] So far, Nathan and his partners have not discovered any skeletons after the acquisition. But that doesn’t mean taking over as new owners is completely without growing pains.
[23:18] What’s working well within the business and the factors that will help with anticipated growth.
[29:38] Advice for a prospective HVAC buyer without industry experience.
[33:10] The perks of buying small and the financial details of the deal for Bart’s.
[37:08] A good reputation spreads like wildfire.
[38:08] Nathan discusses his plans for future acquisitions and how data collection fits in.