Acquiring Minds Podcast Episode Summary
Title: Hiding in Plain Sight on BizBuySell: $800k SDE for 2x
Host: Will Smith
Guest: Chelsea Wood, Owner of Woodland Face Veneer
Release Date: April 21, 2025
YouTube Link: Acquiring Minds YouTube Channel
Episode Summary Sign-Up: acquiringminds.co
Introduction
In this episode of Acquiring Minds, host Will Smith welcomes Chelsea Wood, an entrepreneurial spirit who successfully transitioned from real estate to acquisition entrepreneurship. Chelsea shares her journey of acquiring and subsequently selling businesses, offering invaluable insights for aspiring business buyers.
Guest Background and Initial Ventures
Chelsea Wood begins by recounting her early entrepreneurial endeavors. From high school summers into college, she engaged in handyman services, demonstrating her innate drive for financial independence.
[04:45] Chelsea Wood: "Even since high school, I always kind of had an entrepreneurial spirit."
Chelsea's partnership with a college roommate led them into real estate, where they amassed a portfolio of 130 rental units by 2022. Despite generating a steady cash flow of approximately $5,000 per month each, rising interest rates and limited growth potential prompted Chelsea to explore business acquisitions.
First Acquisition: Restoration Business
Determined to diversify, Chelsea pivoted to buying businesses, inspired by the Acquiring Minds community. Her first acquisition was a restoration company in Melbourne, Florida, priced attractively at less than 2x Seller’s Discretionary Earnings (SDE).
[23:10] Joe Ziolkowski: "You bought it for less than 2x, which is an incredible multiple."
The restoration business, specializing in water, fire, and mold remediation, presented unique challenges, including managing cash flow delays from insurance reimbursements and handling high referral commissions from plumbers.
Challenges and Lessons Learned
Navigating the restoration industry taught Chelsea critical lessons about cash flow management and operational efficiency. She struggled with hiring an effective operations manager, leading to team conflicts and necessitating a restructuring of the Ocala location.
[28:38] Chelsea Wood: "If you're going to try to do that, vet the person as much as you can, but then also make sure it's a good fit for your team."
The project-based nature of restoration work, coupled with 45-day insurance payouts, strained the business's finances. However, Chelsea leveraged working capital and a line of credit to sustain operations during challenging periods.
Selling the First Business
After six months of ownership, prompted by personal circumstances and the desire to return to Wisconsin, Chelsea decided to sell the restoration business. Utilizing her real estate expertise, she listed the business for $1.2 million and swiftly closed the deal for $1.1 million, securing a substantial seller note.
[43:35] Joe Ziolkowski: "You got lucky with such an exceptional entry multiple."
This sale not only recouped her initial investment but also provided her with valuable experience in structuring and executing business transactions.
Second Acquisition: Wood Veneer Manufacturing
Armed with increased capital from her first sale, Chelsea embarked on her second acquisition: Woodland Face Veneer, a wood product manufacturing company based in Two Rivers, Wisconsin. Listed for approximately 2x SDE, the business had been dormant on BizBuySell until Chelsea's persistence uncovered its potential.
[58:45] Joe Ziolkowski: "It had been sitting on BizBuySell, and you knew that it wasn't competitive. So that was the only offer they were going to be looking at that week."
Woodland Face Veneer boasted consistent revenues of $11–12 million annually with an SDE of around $800,000. Chelsea negotiated a purchase price of $1.4 million, which included $1 million in equipment and $1.6 million in inventory, further enhancing the deal's value.
Deal Structure and Multiples
Chelsea structured the acquisition with a 10% down payment, an 80% SBA loan, and an 80% seller note. This arrangement was facilitated by the seller's strong relationship with a regional bank, ensuring a smooth SBA loan process.
[63:31] Chelsea Wood: "This made the process so much easier on the closing side of things."
The favorable loan terms and the robust multiple underscored the exceptional nature of this deal, positioning Chelsea for immediate equity and future profitability.
Operational Insights and Customer Concentration
Woodland Face Veneer presented a significant customer concentration challenge, with the top four customers accounting for approximately 80% of revenue. Chelsea acknowledged that while this poses a risk, the industry's inherent consolidation limited opportunities to diversify customers.
[66:01] Chelsea Wood: "Every deal has some kind of hair on it, and this was the biggest hurdle to overcome."
To mitigate this, Chelsea focused on maintaining strong relationships with existing customers and optimizing production capacities to meet demand without overextending the business.
Comparative Analysis of Industries
Chelsea contrasted her experiences in real estate, restoration, and manufacturing, highlighting the stability and scalability of manufacturing. Unlike the project-based restoration sector, manufacturing offers more predictable revenue streams, especially when supported by efficient operational systems and experienced teams.
[82:34] Joe Ziolkowski: "Do you think that a restoration business at a larger scale would also be a finely tuned machine humming along?"
Chelsea affirmed that with the right systems and team, businesses in both sectors can achieve operational excellence.
Future Plans and Advice for Acquisition Entrepreneurs
Looking ahead, Chelsea plans to reinvest her earnings to pay down the SBA loan within three years, while maintaining a modest personal income. She emphasizes the importance of understanding industry-specific nuances and leveraging existing operational strengths to maintain business stability.
[77:07] Chelsea Wood: "Try to absorb as much as you can from the owner if they're willing and able. It's a really important thing."
Chelsea advises aspiring buyers to be persistent, explore dormant listings on platforms like BizBuySell, and seek opportunities where outstanding deals may be hiding in plain sight.
Conclusion
Chelsea Wood's journey from real estate to business acquisitions exemplifies the potential of acquisition entrepreneurship. Her strategic acquisitions, especially the remarkable multiple achieved with Woodland Face Veneer, offer a blueprint for success. By leveraging industry knowledge, operational efficiency, and strategic deal structuring, Chelsea has positioned herself for continued growth and profitability.
[97:27] Will Smith: "Subscribe to the Acquiring Minds newsletter for more insights and episode summaries."
Notable Quotes with Timestamps
- Chelsea Wood [04:45]: "Even since high school, I always kind of had an entrepreneurial spirit."
- Joe Ziolkowski [23:10]: "You bought it for less than 2x, which is an incredible multiple."
- Chelsea Wood [28:38]: "If you're going to try to do that, vet the person as much as you can, but then also make sure it's a good fit for your team."
- Joe Ziolkowski [43:35]: "You got lucky with such an exceptional entry multiple."
- Joe Ziolkowski [58:45]: "It had been sitting on BizBuySell, and you knew that it wasn't competitive. So that was the only offer they were going to be looking at that week."
- Chelsea Wood [63:31]: "This made the process so much easier on the closing side of things."
- Chelsea Wood [66:01]: "Every deal has some kind of hair on it, and this was the biggest hurdle to overcome."
- Chelsea Wood [77:07]: "Try to absorb as much as you can from the owner if they're willing and able. It's a really important thing."
Key Takeaways
- Persistence Pays Off: Chelsea found an exceptional deal by scrutinizing older listings on BizBuySell, showcasing the importance of diligence and patience in acquisitions.
- Understand Industry Nuances: Deep knowledge of the industry, including operational challenges and customer dynamics, is crucial for successful business ownership.
- Strategic Deal Structuring: Leveraging strong relationships with lenders and negotiating favorable terms can significantly enhance the profitability of acquisitions.
- Risk Management: Recognizing and mitigating risks, such as customer concentration, ensures long-term business stability.
- Leverage Existing Strengths: Building upon established systems and experienced teams facilitates smoother transitions and operational efficiency.
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