Key Points From the Interview
ecause blue-collar businesses so dominate the world of self-funded search, I'm always interested to hear stories where the target business was white collar.
Today's guest Nick Munsee acquired the epitome of such a business: a consulting firm.
Traffic engineering and transportation consulting, to be specific.
A narrow niche, but because of that, there aren't many providers of such services, and Nick's acquired business enjoys quite healthy margins of 47%.
But this is a case of a seller who was doing too much.
So those margins will almost certainly come down under Nick's ownership. But he paid a low multiple, so even with narrower margins in the future, his effective multiple will still be very solid for a business with earnings like this.
But to that point of the seller doing too much, he also had the local relationships, he had the technical expertise.
The business really orbited around him as principal, so we spend a lot of time on how Nick de-risked that dynamic.
Listen for how Nick incentivized a replacement leader for the seller, which was a contingency of his acquisition. Nick insisted that there be someone else who could run the business.
The model seems to be going well. Nick is working strictly on, not in, the business, and not on a full-time basis.
So to me this seems like an appealing business to own. And when I think of the myriad types of consulting work that are performed across the economy, I'm frankly surprised we don't see searchers acquire more such businesses.
See if you agree.
Here's Nick Munsee, co-owner of Hales Engineering.
