Podcast Summary: Acquiring Minds – "Comfortable Concentration for a $800k SDE Business"

Host: Will Smith
Guest: Phil Kohler, owner of Roman Enterprises
Date: January 15, 2026
Episode Duration: Approx. 84 minutes

Episode Overview

This episode features Phil Kohler, who recounts his journey from corporate supply chain management to acquiring Roman Enterprises, an automotive paint distribution business in New Jersey. Host Will Smith and Phil explore how Phil became comfortable buying a business with only one employee, high supplier and customer concentration, and the risks and opportunities therein. The conversation is deeply practical, offering insights into acquisition strategy, risk management, deal structure, operations, and life after the close—from someone who bought and now runs an $800k SDE (Seller’s Discretionary Earnings) business.

Table of Contents

• Phil’s Background & Path to Entrepreneurship
• Discovering Acquisition Entrepreneurship
• Refining Search Criteria
• Finding Roman Enterprises
• Analyzing the Risks
• Deal Structure & Risk Mitigation
• Transition & Post-Acquisition Life
• Operating & Growing a Distribution Business
• Reflections & Advice for Searchers
• Motivation & Perspective
• Memorable Quotes & Moments
• Timestamps for Key Segments

Phil’s Background & Path to Entrepreneurship

Phil shares his professional background, starting from managing inventory at a small steel company in North Jersey, then working at food giant Mondelez, and later building wealth via real estate ([04:12]-[08:36]).

• Enjoyed the hands-on, broad exposure in small business settings.
• Learned from a mentor, a CEO with investment banking background:
  “He knew nothing about steel... I learned a lot from him then and I continue to today.” — Phil ([05:59])
• Realized after joining Mondelez that he missed the small business feel and control over multiple business functions.

Discovering Acquisition Entrepreneurship

Phil’s journey into acquisition started after investing in real estate and exploring the potential of greater cash flow through buying businesses ([08:38]-[13:01]):

• Inspired by Rich Dad, Poor Dad, focusing on buying assets for cash flow rather than just pursuing a higher salary:
  “The idea of buying assets that produce cash flow... was really mind blowing to me.” ([08:38])
• First learned about business acquisition from a friend exploring Biz Buy Sell.
• Compared real estate cash flows to the much larger SDE available in small businesses.
• Parlays experience evaluating real estate deals into analyzing business acquisitions.

Refining Search Criteria

Phil ties his search for a suitable business closely to his skills, geography, and risk comfort ([18:00]-[22:52]):

• Geographically bound to 45 minutes from home in North Central Jersey.
• Seeking SDE of ~$400k to replace his salary and benefits; avoided competing with private equity for larger deals.
• Business “buyer fit” — sought a business suited to his supply-chain background.
• Open to many industries but sought alignment with his skill set.

Finding Roman Enterprises

Phil finds Roman Enterprises, a paint distributor with only one employee and a small set of customers and suppliers, and talks through his due diligence process ([22:52]-[31:48]):

• Business listed at $3M ($2.5M purchase price plus $500k inventory), SDE of $800k.
• Customer concentration: 7 customers account for nearly all sales.
• Supplier concentration: primarily sourced from a single German paint manufacturer, via a local importer.
• Single employee, whose role is warehouse manager and clerical worker.
• Phil conducts distribution-specific due diligence (inventory turns, AR cycles, etc.), consulting his mentor to assess viability.

Analyzing the Risks

Will and Phil dig into the unusual risk profile presented by Roman Enterprises ([33:04]-[40:53]):

• “It’s kind of a no man’s land, higher SDE... but none of the infrastructure that a larger SDE business does. Just the opposite—a one employee business.” — Will Smith ([21:51])
• Risks: customer and supplier concentration, solo employee, limited internal infrastructure.
• Comfort factors:
  • Long-standing, “sticky” relationships (20+ years) with both supplier and customers.
  • Mission-critical nature of product to customers.
  • Owner could step in operationally as needed.
  • Reasonable valuation (just over 3x SDE), justified by the perceived risks.

On Risk vs. Opportunity

“There’s a lot to love about Roman Enterprises... there was lots to love about Roman Enterprises... there was also the $800,000 of SDE, a reasonable valuation, sticky relationships, and business buyer fitness. Running this business well is all about supply chain and inventory management, and Phil had deep experience doing just that.” — Host, [00:00]

Deal Structure & Risk Mitigation

Phil sought to structure the deal to insulate himself from the downsides ([42:24]-[44:40]):

• Negotiated for a 28% ($690k) seller note—on the larger side to keep seller engaged and to buffer against risk.
• Attempted (unsuccessfully) to make the seller note forgivable if revenue dropped post-close.
• Standard SBA loan, with Phil’s own 10% cash in.
• Considered seller equity but current rules would have required additional guarantees.

On Deal Comfort

“I wanted a comfortable DSCR... the target number I had was around 2.2x, so I wanted the SDE to be twice the size of my total debt.” — Phil ([36:05])

Transition & Post-Acquisition Life

Phil describes transition and day-to-day running of a one-employee business ([46:59]-[53:44]):

• Post-close, spent time establishing relationships with key supplier (including a visit to Germany) and securing continuity agreements for supply chain stability.
• Runs a “hands-on” operation, on-site daily even though prior owner was frequently remote.
• Built rapport with the sole employee, recognizes the risk of both “human simplicity” and fragility.
• Leaned on his systems/ERP experience, improved business processes, and started eliminating manual work where possible.

Memorable Quote

“I think I can make this guy like me... I’m not being phony around him, but I’m being genuine. And I think he appreciates that... maybe he appreciates having somebody there now, every day so he can talk to, whereas the previous, the seller was there maybe once a month.” — Phil ([49:54])

Operating & Growing a Distribution Business

Phil dives into the mechanics and challenges of optimizing and growing a small distribution company ([54:02]-[64:47]):

Operational Improvements

• Initial focus on supply chain/inventory optimization:
  “I could right-size this inventory a little bit better. The old owner wasn’t looking at sales history… probably not the most effective use of your cash.” — Phil ([54:02])
• With thinner cash flow (post-Leverage), had to be more systematic.

Growth Strategies

• Growth levers:
  • Upsell existing customers,
  • Add new distribution points (“jobbers” who serve other body shops),
  • Expand product range.
• Limitations: Growth in existing territory largely tied to performance of independent jobber/distributors, whose “routes” Phil may eventually acquire.
• Sticky relationships create growth friction—loyalty of existing body shop customers to their own suppliers is a significant barrier to switching.
• Phil even tries door-to-door sales himself in areas without assigned jobbers.

On Door-to-Door Sales

“It sounds really scary... but I would say on the door to door side, it ended up being easier than I thought because I walk into this body shop, I’d say 7, 8, 9 times out of 10 I’m talking to the owner. So I’m directly, you know, talking with the decision maker.” — Phil ([62:19])

Reflections & Advice for Searchers

In the final third, Phil reflects on his journey, motivations, and offers practical advice to would-be buyers ([65:50]-[76:32]):

• “I love going in every day... It’s been pretty much exactly what I thought... managing a small business.” — Phil ([65:56])
• Recognizes the shift from passive (real estate) to active (business) ownership.
• Stresses importance of knowing your risk:
  “Those first few weeks, yeah, it was a little stressful. Now I have some cash reserves, so I feel more comfortable and the trajectory is going up.” ([70:05])
• For acquisition entrepreneurs:
  • Distribution businesses can be attractive—but often have lower margins and require reaching a critical mass of volume to cover costs ([72:19]).
  • Inventory turns are a key KPI; gross margins in distribution are usually thin (~20%), so bottom-line margin and scale matter.
  • Supplier and customer concentration is common and must be managed, not always avoided.

Motivation & Perspective

Phil attributes resilience and perspective to his family history. A moving story about his grandfather, a Holocaust survivor, reminds him to put business risks in context ([76:39]-[78:50]):

“I think about the things he went through that were really hard and it really makes everything else seem not so hard, right?... Customer concentration, who cares, right? Vendor concentration... compared to what he went through, it’s nothing.” — Phil ([77:23])

Memorable Quotes & Moments

• On finding Roman’s SDE:
  “I remember that moment, you know, where time almost stops and you’re like, what, what did you say?” — Phil ([11:44])

• On assessment of acquisition risk:
  “There was a strong stickiness element... their body shops were used to this particular brand of paint and they liked it.” — Phil ([37:35])

• On seller notes and risk:
  “We tried to structure the seller note so that if the business didn’t hit certain metrics, then part of the seller note would slowly disappear... but the seller did not like that idea.” — Phil ([43:33])

• On inventory-management opportunity:
  “I could probably bring this down half. And, you know, if you start optimizing in different areas, you could really lower the amount of inventory you have, which is all cash that just becomes, drops to your bottom line.” — Phil ([55:27]-[56:32])

• On the entrepreneurial experience:
  “This is not real estate. It’s not passive. It is very much active, and you can’t just set it and forget it... But this is, I think, ultimately what I wanted.” — Phil ([68:21])

Timestamps for Important Segments

| Topic | Timestamp | |---------------------------------------------|---------------| | Phil’s small-biz background | 04:12–08:36 | | Real estate to Biz Buy Sell | 08:36–13:01 | | First attempts at acquisition | 13:01–15:46 | | Search criteria & philosophy | 18:00–22:52 | | Intro to Roman Enterprises | 22:52–26:25 | | Distribution business diligence | 25:20–31:17 | | Supplier & customer concentration | 33:04–40:53 | | Deal structure & seller note | 42:24–44:40 | | Transition to ownership | 46:59–53:44 | | Operations & inventory optimization | 54:02–56:32 | | Growing the business (distribution levers) | 56:54–61:10 | | Direct sales experience | 62:19–64:47 | | Reflections on entrepreneurship | 65:56–68:21 | | On risk, debt, and cash flow modeling | 70:05–71:19 | | Advice on buying into distribution | 72:19–74:43 | | Perspective/Motivation from family history | 76:39–78:50 |

Final Thoughts

Phil’s journey demonstrates that buying a business with high concentration and minimal staff is not for everyone, but with the right background, risk discipline, and operational focus, it can be a path to autonomy and wealth creation. His story emphasizes the need for fit between buyer and business, careful due diligence (especially in distribution), structuring for downside protection, and, above all, a willingness to actively run and improve the business you buy.

For more episodes and summaries: acquiringminds.co