Podcast Summary: Acquiring Minds – Episode: How to Move the Needle in a $600k SDE Trades Business
Podcast Information:
- Title: Acquiring Minds
- Host: Will Smith
- Episode: How to Move the Needle in a $600k SDE Trades Business
- Release Date: February 3, 2025
- YouTube: Acquiring Minds
- Episode Summary Subscription: acquiringminds.co
Introduction
In this episode of Acquiring Minds, host Will Smith delves into the intricacies of purchasing and revitalizing a trades-based business through an insightful interview with Kirk Olson, the owner of Mike’s Fencing in Indiana. The discussion explores Kirk’s journey from real estate to acquisition entrepreneurship, the challenges he faced in acquiring a struggling fencing business, and the strategic measures he implemented to turn the business around.
Kirk Olson’s Journey: From Real Estate to Entrepreneurship
Background and Real Estate Success
Kirk Olson shares his foundational years, highlighting his education in computer engineering and military service, which set the stage for his entry into real estate. Starting with a single duplex in Kansas, Kirk methodically expanded his portfolio, ultimately managing over 110 rental units generating approximately $100,000 in annual cash flow. This financial stability provided him the leverage to explore acquisition entrepreneurship.
Kirk Olson [01:36]: "I've always been a pretty normal person...I did an internship for GE Healthcare but found myself yearning for ownership and financial freedom."
Transitioning from Real Estate to Buying a Business
Despite his success in real estate, Kirk sought further growth and fulfillment, leading him to consider purchasing a business. Initially targeting businesses that could synergize with his real estate operations, he encountered repeated setbacks with the owners of a fencing business who were rigid and difficult to negotiate with.
Acquisition of Mike’s Fencing: Persistence Pays Off
Initial Attempts and Setbacks
Kirk recounts his first attempt to acquire Mike’s Fencing through his real estate partner, John Murphy. The deal initially fell apart due to the sellers' insistence on unfavorable collateralization terms, mirroring previous failed attempts with other buyers.
Will Smith [00:00]: "John bought a painting business in Michigan, but before he did, he got very close on a fencing business...When the deal collapsed at the 11th hour, he was devastated."
Securing the Deal
Undeterred by the initial failures, Kirk maintained contact with the sellers and seized the opportunity when another buyer also backed out. This persistence led to Kirk successfully closing the deal, becoming the fifth buyer to take on the business.
John Murphy [21:32]: "Without any of that, I want to be sitting here at Mike's Fencing."
Kirk Olson [22:25]: "Always stay top of mind to them in case something falls through."
Understanding Mike’s Fencing: Business Overview
Business Description and Financials
Mike’s Fencing operates as a fencing contractor with a balanced mix of residential and commercial projects. Established in 1983 and operated by the current owners since 2001, the business boasts substantial brand recognition in Northern Indiana. Financially, the company averages around $2 million in annual revenue with an SDE (Seller's Discretionary Earnings) of approximately $600,000, translating to gross margins of 25-30%.
Kirk Olson [28:25]: "I was redoing the math...we have a 60% gross margin, about 10% above what other companies are getting."
Employee Retention and Corporate Culture
Upon acquisition, Kirk retained nine employees, with only one installer departing shortly after closing. He emphasizes the importance of fostering a positive work environment, moving away from the previous owners' hostile culture by implementing regular meetings and offering incentives to boost morale and retention.
Kirk Olson [91:11]: "We need to get to that point where it could run itself with defined procedures and strong team dynamics."
Facing and Overcoming Business Challenges
Sales Decline Post-Acquisition
Six weeks into ownership, Kirk noticed a troubling decline in sales, dropping from six weeks of bookings to just two weeks. This unexpected downturn caused significant anxiety, threatening the sustainability of the business.
Kirk Olson [64:06]: "I was freaking out, like, man, if we're doing this terrible now, we're not going to have income to make it through winter."
Market Dynamics Post-COVID
Kirk identifies a shift in the market dynamics post-COVID, where the initial surge in demand for fencing services began to stabilize, leading to more price-conscious consumers who began seeking lower-cost alternatives.
Kirk Olson [69:15]: "People are now shopping around more. Folks that could still afford us...a little too high, so they're going with lower-priced options."
Strategic Interventions for Business Turnaround
Rebuilding Job Costing
To address inefficiencies, Kirk initiated a comprehensive overhaul of job costing, a critical component in project-based businesses. By developing detailed spreadsheets, he gained better visibility into material costs, labor efficiency, and overall profit margins. This meticulous approach allowed for more accurate bidding and improved financial control.
Kirk Olson [74:10]: "I spent most of it sitting here in my closet and looking at spreadsheets...now estimating is more rigorous."
Implementing a CRM System
Recognizing the need for streamlined operations, Kirk introduced Job Nimbus, a CRM tailored for fencing and roofing companies. This tool centralized lead tracking, improved communication, and enhanced visibility into the sales pipeline, significantly reducing the time spent managing estimates and follow-ups.
Kirk Olson [84:29]: "I have a nice dashboard which a fair amount of CRMs do...I can look at that and see we've got 10 appointments made."
Enhancing Digital Marketing
Kirk revamped the company's digital presence by optimizing Google My Business listings and initiating Google Ads campaigns. These efforts increased lead generation, resulting in a steady influx of new projects and better utilization of the sales funnel.
Kirk Olson [80:21]: "We started pumping a little bit of money into Google Ads...now we're booked into February."
Improving Operations and Culture
Beyond financial and marketing strategies, Kirk focused on enhancing the corporate culture. Initiatives included regular team meetings, incentive programs like raffles for sports events, and fostering an environment of mutual respect and support. These changes not only improved employee satisfaction but also attracted higher-quality talent.
Kirk Olson [95:07]: "I want to help folks and provide as much as I can to them because I’m fortunate for everything that I’ve done and got."
Results and Business Turnaround
Recovery and Growth
By mid-year, Kirk's strategic interventions began to bear fruit. The implementation of job costing, CRM systems, and targeted digital marketing led to a resurgence in sales. Mike’s Fencing witnessed a turnaround from a precarious position to being fully booked months in advance, with additional leads for larger, multi-week projects.
Kirk Olson [81:51]: "We’re still booked into February...we got two and a half crews going and everything’s running smoothly."
Operational Efficiency and Increased Margins
The refined job costing and improved estimating processes not only stabilized the business but also enhanced profit margins. Better financial oversight enabled Kirk to make informed decisions, ensuring sustainable growth and operational efficiency.
Kirk Olson [79:37]: "I wouldn't say that yet, but I think it gives the estimators and myself better visibility into whether a job is worth it or not."
Key Lessons and Takeaways
Persistence in Deal-Making
Kirk’s experience underscores the importance of persistence in acquisition entrepreneurship. Maintaining relationships and following up with sellers, even after multiple failed attempts, can eventually lead to successful acquisitions.
John Murphy [21:32]: "Never assume that the deal you're working on is a slam dunk."
Implementing Systems and Technology
Adopting technological tools like CRMs and detailed job costing spreadsheets can significantly enhance operational efficiency, provide better financial oversight, and facilitate growth.
Kirk Olson [84:33]: "Job Nimbus gives me a nice dashboard where I can see all my appointments and follow-ups without bugging the team every other day."
Focusing on Corporate Culture
Building a positive and supportive work environment not only improves employee retention but also attracts high-quality talent, fostering long-term business success.
Kirk Olson [95:07]: "If you screw up, I'll be angry, but I'm not going to tear you up in front of everyone."
Understanding Cash Flow vs. Profit
Kirk highlights the critical distinction between accounting profit and actual cash flow, emphasizing the need for meticulous cash flow management to ensure business sustainability.
Kirk Olson [100:06]: "QuickBooks may say we've profited, but if your AR is high, you don't have that money in the bank yet."
Conclusion and Future Plans
Kirk Olson’s acquisition and turnaround of Mike’s Fencing serve as a compelling case study in acquisition entrepreneurship. By leveraging his real estate success, implementing strategic operational changes, and fostering a positive corporate culture, Kirk not only stabilized the business but also set the stage for future growth. Looking ahead, Kirk plans to focus more on commercial projects and explore opportunities to expand into additional locations, continuing his journey of building and scaling successful businesses.
Kirk Olson [87:38]: "My focus is to be more competitive on jobs that we bid with our general contractors...opening a new location is a long-term play."
Notable Quotes
- Will Smith [00:25]: "When buying a business, he set his heart on it, fantasized about running it."
- Kirk Olson [21:32]: "Without any of that, I want to be sitting here at Mike's Fencing."
- John Murphy [21:55]: "Never take for granted that the deal you're working on is a slam dunk."
- Kirk Olson [95:07]: "I want to help folks and provide as much as I can to them because I’m fortunate for everything that I’ve done and got."
- John Murphy [73:45]: "Putting in tech, turning on digital marketing, putting in tech...it's saving you an hour."
- Kirk Olson [100:06]: "QuickBooks may say we've profited, but if your AR is high, you don't have that money in the bank yet."
Additional Resources Mentioned
- Upcoming Webinars:
- SBA Lending Office Hours: Hosted by Heather Anderson on February 6th.
- Legal Office Hours: Focused on financing debt with attorneys Bill Barlo and James David Williams on February 13th.
- Self-Funded Search Conference: SM Bash: April 2-4 in Dallas. SM Bash
- System 6: Outsourced finance team for SMBs. system6.com
- Aspen HR: Human Resources support for acquisition entrepreneurs. aspenhr.com
- Oberle Risk Strategies: Insurance brokerage for searchers by Mark Sinatra. oberly-risk.com
Contact Information:
- Kirk Olson: k olson o l s o nikekesfencing.com
This episode provides invaluable insights into the challenges and triumphs of acquisition entrepreneurship, particularly in the trades sector. Kirk Olson’s candid recounting of his experiences offers aspiring entrepreneurs practical strategies and inspirational lessons on building and sustaining successful businesses.