Acquiring Minds: The Path to Becoming a Better Operator & Strategist

Podcast Information:

• Title: Acquiring Minds
• Host: Will Smith
• Episode: The Path to Becoming a Better Operator & Strategist
• Release Date: January 2, 2025
• Description: In this episode, Will Smith engages with Tim Leahy, an acquisition entrepreneur who successfully bought and scaled a home technology company from a modest $230,000 SDE to doubling its revenue. Tim shares his journey, challenges, and strategic insights into acquisition entrepreneurship.

Introduction

Will Smith opens the episode by highlighting the popularity of varying acquisition stories—ranging from large-scale buys to smaller ventures that eventually grow significantly. He introduces Tim Leahy, who acquired a home technology company with an SDE of approximately $230,000 four years prior, and has since doubled its revenue with ambitions to reach $10 million by 2027.

Notable Quote:

Will Smith [00:00]: "Stories about buying small, especially if buying small led to something bigger, get a lot of listens."

Tim Leahy’s Background

Tim Leahy provides an overview of his professional journey, which includes a successful career in finance and an MBA from Kellogg. He recounts his experience during the housing boom and the subsequent financial collapse, drawing parallels to the book "The Big Short." Despite a promising trajectory, Tim felt an intrinsic desire to pursue entrepreneurship, inspired by his family's entrepreneurial roots.

Notable Quotes:

Tim Leahy [03:03]: "I had this interest of doing something more with my life and my professional career."

Tim Leahy [07:00]: "The one thing I thought was unique to me is I always followed that ambition or that thought through sales."

The Decision to Acquire a Business

Tim describes the pivotal moment that led him to pursue acquisition entrepreneurship. Inspired by a former student, Doug Cook, who successfully bought a window business, Tim reached out for mentorship six years later. This initiative resulted in a profound mentorship relationship that guided him through the acquisition process.

Notable Quotes:

Tim Leahy [08:32]: "He was just like, can I, you know, saw your class six years ago, Would you be willing to talk to me?"

Tim Leahy [08:56]: "He's a very important mentor in my life at this point."

Search Process and Parameters

Tim elaborates on his search criteria, emphasizing geographical proximity (within two hours of North Chicago) and a minimum SDE threshold to ensure manageability and reduce personal risk. Initially industry-agnostic, Tim's broad criteria prolonged his search. With the assistance of Sun Acquisitions, a middle-market M&A firm, he refined his focus, eventually homing in on the home technology sector.

Notable Quotes:

Tim Leahy [15:05]: "The parameters was I wasn't ready to really move..."

Tim Leahy [17:57]: "Sun Acquisitions... helped push me and keep going."

Choosing the Home Technology Industry

After numerous exploratory efforts, Tim was mentored by Larry Sanderman from Sun Acquisitions to narrow his focus. Recognizing the increasing need for integrated home technology solutions, especially as remote work surged during the pandemic, Tim identified an opportunity in the AV (Audio-Video) industry, which was evolving beyond simple consumer products to more sophisticated, long-term solutions.

Notable Quotes:

Tim Leahy [27:27]: "People are going to be spending a ton of time at home... There's going to be a need here."

Tim Leahy [31:17]: "Homes need an infrastructure to support today's technology needs and the technologies 10, 20 years from now."

Acquisition of Home Run Technology

In February 2021, Tim acquired Home Run Technology, a 15-year-old business with stable revenue and strong referral relationships. The purchase was facilitated through an SBA loan, with terms that mitigated personal financial risk. Despite a clean acquisition, Tim encountered unforeseen challenges, particularly in managing working capital and understanding the intricacies of a project-based business.

Notable Quotes:

Tim Leahy [54:39]: "At year one alone I put probably equal to what our working capital line in additionally..."

Tim Leahy [56:26]: "We were growing, but we were writing jobs at a revenue at a margin that was sub what we needed."

Challenges Faced Post-Acquisition

Tim candidly discusses the difficulties encountered during the first year post-acquisition. Managing cash flow became a significant hurdle as the company faced high demand but lacked the necessary financial mechanisms to support rapid growth. Additionally, cultural dynamics within the small team posed unexpected challenges, leading to employee turnover and operational inefficiencies.

Notable Quotes:

Tim Leahy [59:14]: "That was a really, really tough moment to be like, I don't know what's going on here."

Tim Leahy [63:02]: "You have this weird relationship between... dusty, not rusty."

Strategies for Overcoming Challenges

To navigate these obstacles, Tim implemented strategic changes focused on long-term operational improvements rather than short-term fixes. Adopting frameworks like EOS (Entrepreneurial Operating System) and building a robust leadership team were pivotal. These efforts not only stabilized the company but also laid the foundation for sustained growth, enabling Tim to double the business's revenue.

Notable Quotes:

Tim Leahy [76:47]: "When you make those small changes that have the trajectory of being long-term impacts..."

Tim Leahy [79:22]: "We adapted our design philosophy... listen for what they need."

Current Position and Future Goals

Today, Home Run Technology stands as a reputable entity in the home technology sector, with a strong leadership team and a clear strategic vision aimed at reaching $10 million in revenue by 2027. Tim emphasizes the value of hands-on experience gained from buying small, which has honed his operational and strategic capabilities, preparing him for future acquisitions.

Notable Quotes:

Tim Leahy [80:36]: "We doubled the business in revenue... solidified the team."

Tim Leahy [81:02]: "I wouldn't buy small again. But I am super grateful for the past four years of my life..."

Reflections and Lessons Learned

Reflecting on his journey, Tim shares profound insights into the realities of acquisition entrepreneurship. He underscores the importance of being mentally and emotionally prepared for the inherent challenges, emphasizing that buying small does not equate to an easier path. The experiences, though fraught with difficulties, were instrumental in his personal and professional growth.

Notable Quotes:

Tim Leahy [81:15]: "If I didn't go through all those things, we wouldn't be where we are today..."

Tim Leahy [82:48]: "Buying small doesn't mean it's easier at all."

Conclusion

The episode concludes with Will Smith commending Tim for his resilience and strategic acumen in scaling a small acquisition into a thriving business. Tim's journey serves as a testament to the transformative power of acquisition entrepreneurship, highlighting both its challenges and rewards. Listeners are encouraged to reach out to Tim for further insights and connections within the acquisition community.

Notable Quotes:

Will Smith [84:03]: "Look forward to hearing you watch your journey as you get to 10 million."

Tim Leahy [83:38]: "Please do. It's Tim Leahy... happy to talk to anyone about it."

Key Takeaways:

• Start Small but Think Big: Tim's experience demonstrates that acquiring a smaller business can provide deep operational insights and manageable risk, paving the way for substantial growth.
• Prepare for Challenges: Cash flow management, cultural integration, and operational inefficiencies are common hurdles that require strategic planning and adaptability.
• Leverage Mentorship and Frameworks: Guidance from experienced mentors and the implementation of structured operating systems like EOS can significantly enhance business stability and growth.
• Embrace the Learning Curve: The hands-on experience gained from navigating the complexities of a small acquisition can be invaluable for future entrepreneurial endeavors.

For more insights and detailed episode summaries, listeners can subscribe at Acquiring Minds or watch on YouTube.