← Owned and Operated - A Plumbing, Electrical, and HVAC Business Growth Podcast
Owned and Operated - A Plumbing, Electrical, and HVAC Business Growth Podcast
#192 The Ultimate Playbook to Buy & Scale Small Businesses
00:45:32
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- [00:00]
Jack
So why do you think that you are one of the 10% that actually makes it to the acquisition phase?
- [00:07]
Chris Barr
I saw that a lot in the franchising world of like, oh, I'm going to do this franchising. I'm going to get an operator, sit back, do my thing and like, oh boy, it's a reawakening for a lot of operators out there that are then.
- [00:19]
Jack
Slicing lettuce at 5am Every misallocated dollar is worth three to four of yours, whether that's 9,000, 10,000, 20, 30, 50,000. It's like if you're going to lie to the government and risk going to jail in fines, like, you're going to risk lying to higher.
- [00:32]
Chris Barr
Like, very excited to, you know, have you and your audience both be involved in my process, track how it goes and then, you know, celebrate the big win.
- [00:45]
Jack
Guys, welcome to the first episode of jackquisitions. I'm so pumped to have you guys here today. We are sitting down with Chris Barr. One of the segments we're doing here on jackquisitions is we're following a searcher in real time to help them out get closed on their first business. I'm really pumped. He does an amazing job and as you listen through this series, you to watch him get closer and closer until he finally closes on a business. So stay tuned, keep listening and enjoy. Welcome back to Jack Wi. So this is an awesome segment we're bringing to the podcast where we are taking home service acquirers or, or wannabe acquirers and bringing them on this podcast. We're breaking down what they're looking for, who they are, and then we're going to follow along on their journey to their first acquisition. We're really excited. We got an awesome person here, Chris Barr. How's it going, Chris?
- [01:42]
Chris Barr
Doing well, Jack. Appreciate you having me, man.
- [01:45]
Jack
Of course. Appreciate you coming on. This is a super fun segment that we are really excited about because I think it's going to be the neatest thing in the world to start with you today and then look back in a year. You're acquired, you're building and now you're on this different journey and, and then we can follow along and check in with you. But it's really cool to actually see people get to the finish line. So why do you think that you are one of the 10% that actually makes it to the acquisition phase? Why are you special?
- [02:14]
Chris Barr
You know, I don't have a crystal ball or anything. So, you know, this is based on my, my best data on myself. But yeah, just kind of a bit of a background on me. I'm still a relatively, you know, young, ambitious professional, and I've got this really highly diverse background that's super versatile. You know, past experiences have included, you know, United States Marine Corps infantry, been a history major, a substitute teacher, commercial real estate broker, you know, marketing specialist for a fast food franchise. So I've kind of been all over the place, you know, and I've been felt a little consistently held back that I don't really have this niche that I can leverage into, you know, vocational opportunity. I feel like that's what a lot of employers are looking for. So, you know, I stepped back and kind of looked at my general skill set and looked at how best to leverage this versatility, and I realized it was through entrepreneurship. And in seeing that again, you know, said, okay, what's our avenue there? And obviously, business acquisitions are very much a trend on the rise. Very buyer heavy market out there right now.
- [03:25]
Jack
The silver tsunami, as they say. My least favorite term out there at the moment. But it is a great opportunity, you're right. And so what a diverse background, man, that's crazy. And so now you're looking into home services.
- [03:40]
Chris Barr
Yep, correct. So, yeah, looking into home services and, you know, specifically, again, wanted to buy something that was existing. I saw a lot of the, again, for entrepreneurship as a whole, a lot of the risk and the pitfalls come in this kind of takeoff process and getting something off the ground. So why not just kind of sidestep that and buy something that's already been, you know, up and well functioning and yeah, you know, so getting into home services again, I have started to get a little bit more agnostic about exactly what type of service and even kind of getting away from that initial preference of home services. We've got a pretty tight geographic area we're playing in. We are really looking from something from Boca Raton to Vero Beach. So any of those four counties in between there, we started to kind of pick through already what was on the market in home services. So again, trying to cast a little bit of a wider net. You know, again, kind of getting back to that initial question of why, you know, why exactly am I going to be one of these, these 10 guys? It kind of that old officer and gentleman quote, like, I got no place else to go. I, I really feel like, you know, I, I've kind of exhausted the avenues that excite me that are available. And again, there's enough tenacity there where I really do feel like I got what it takes to make this happen.
- [05:03]
Jack
So walk me through that, that process. Right. So I'm always very interested in this, this process of somebody either quits or gets fired from their job and then that's the moment that they're sitting around their dinner table going, what am I going to do next? And then finally it's ding, I'm going to go buy a business. So my, my key moment was my wife and I left into an RV and we wanted to travel the United States. I love that. I mean, I had twins and it didn't work out exactly like that, as nothing ever does. But like that was the moment where I said, wherever we stop next, I'm going to buy because I don't like answering to people. And now I just answer to a giant customer base instead. So what was that moment? What was that turning point for you?
- [05:49]
Chris Barr
Yeah, you know, I was a vice president acquisitions in my previous role for a niche style of real estate deals and yeah, you know, left on pretty amicable terms with them and then just kind of looked at it, you know, of next Movement and said, you know, I've a hop from so many things to so many things, but I've been, been a little man on the totem pole plenty of times, you know, took plenty of orders in, in the military and was like, I would kind of like to be in a position where I'm synthesizing all of these diverse experiences I have into kind of leading the ship and leading a vision. And again, not necessarily one that I have to create from scratch on my own, taking something that's well functioning, already built, building off of that and applying my own kind of personal touch along the way. So it felt like that was really where my skill set would be best utilized. And I said I could not think of any other options that were going to be as well tailored to me as that. So that's really how we landed there. And then, you know, I'm a boomer at heart, man. I don't like tech, you know, I really don't. I can barely operate my iPhone. I know how to get calculator app. So, you know, I got that going for me, which is nice. But you know, I wanted to find something that was pretty impervious to tech. And I don't really see Amazon co opting the H vac space anytime soon. It seemed like home services were pretty tried and true and again, especially the vintage ones have been through 2008, have been through Covid, have continued to thrive. So yeah, and I think that, you know, you asked a question at one point in what I'm looking for is also, you know, what are you specifically trying to avoid? And I think that you know, new sexy, high growth stuff, you know, like give me, give me Steady Eddie. Give me something very unsexy. Give me something that is an industry that's been around and has operated the same with a lot of the same players since time immemorial. So that really kind of shaped that desire for again home services. Now that we're slowly expanding on to service in general. But you know, we're starting with a pretty small purchase price, 500k to 1.5 million. We're pretty well versed in commercial real estate. We've got a decent portfolio there. But this is a new asset class. So figure, you know, invest a, start small.
- [08:05]
Jack
That being the case, so 1.5, 1.6 million in purchase price. I mean if you are going to look at the industry, all the industries as a whole from a service or home service or B2B service, I mean you're looking at, right, give or take for a first purchase. We'll talk about the buyer's trap throughout this, this entire segment. But just from a rule of thumb, what you're going to find out there on the open market is going to be a 2-3x of SDE, right? And so 1.6 is like somewhere around a $500,000 SDE which really means after you take out the owner salary to pay yourself, you take out his car that he was using and all the ad backs used to run. It's really like a 200,000 net business which doesn't leave much room for, you know, the, the tried and true. I'm just going to hire an operator, buy the business, hire an operator, put them in. So what you're going to be the man on the ground doing a lot of the things. Where do you feel that your skill set really plays to? Right? Because in my mind there's, there's the finance guys that come in, they come out here with their MBA, they buy a nice cushy $1 million EBITDA and then they're the, the puzzle makers, right? They're moving around all the finance and they're making it work, which you know in certain businesses that does. Well sure, that then you have, you have the operators like people engineers or they are ex tradesmen and they go out and buy a trade and they can run as a tech, they can also run the business. It's like the typical person that we think of when we Think of owning a business and then there's you know, the marketers, the people within that, that, that they solely drive marketing. They're usually really good with AI automation and they're, they're systemizing the business so that they're getting rid of all the overhead. We see those guys a lot in like house cleaning companies is a big one or window washing is they, they're just really a lead gen and then they sub out all the work. Like where do you think that you fit in? Where, where is Chris the man when it comes to this kind of stuff? All of it.
- [10:18]
Chris Barr
No, I think that's, that's one thing that we've also done to distinguish ourselves as buyers to a lot of the owners we've been speaking with is I, you know, I know that the before J acquisitions the podcast was owned and operated, you know, and I think that is something I really buy into in that sense of I do plan on operating this thing, you know, and that's also kind of shaped the type of home services we're looking at. Staying away from stuff that's really highly technical. Like I'm not an electrician nor am I going to be, you know, but something like pressure washing, painting, landscaping, cleaning, fence building, you know, pool service, these are all things that are, are pretty obtainable. Also having very upfront conversations with owners about overlap period of hey, listen, yeah, you're willing to stay on for X amount of time, complimentary, that's great. But I'd like to keep you on for an extra, you know, six months a year if I can, you know, on a, you know, contract basis because I truly want to understand and learn and be able to wrap my arms around the industry as it operates. And I think that I said a lot of those MBA finance guys, again, no disrespect, but they also couldn't turn a screwdriver to save their lives. That that ate me. Definitely have more kind of hands on experience with again this big diverse background. So I want to put that to use. And so I think again getting something that I can, you know, have the ability to get my mind and arms around in a pretty rapid fashion and then being willing to operate and yeah over time obviously would love to grow. It would luck bringing managers. Not trying to buy myself a job, definitely looking at scaling but I think that that's and I and you would know the buyer trap far, far better than I do. But I feel like that's something that either gets people into hairy situations post close or prevents them from closing is because they hit that realization of if my manager walks on me, what the heck am I going to do? And I don't want to be in a position where that inhibits me. I want to say, all right, manager walked out the door. I'm able to roll my sleeves, handle this, make it happen, obviously backfill them as quickly as I can or if they don't have management in place to be able to own, operate manager myself, grow it, scale it to a point where I can step back, bring in a manager. But again, doing all that per what's healthy for the business, not I want to sit there and collect my mailbox money because that is what sounds cool to me.
- [12:34]
Jack
Probably one of the most important decisions you can make in your ETA journey is which SBA lender. You are going to pick a lender who will be in your corner to get you closed on the deal as well as set you up for future expansion. That is why we partnered with Alan Peterson from First Internet Bank. He and his team take a how can we approach as well as I personally know they specialize in home service acquisitions. Mention the show or my handsome bald head and receive a reduced good faith deposit as well as a detailed deal review and maybe even a buy side pre qualification, no strings attached, head on over to AllenFiB.com that's a L a N F I B dot com or click the link below to get connected. It's, it's interesting because I mean we hear this a lot in the beginning and I, I know it was a thought that I had is the, you know, bringing in an operator at some point in the near future, but I think that when you actually get into your business there's a realization at some point that, that, that that's not a reality. Bringing in an operator isn't a reality until you hit a certain level. Right? Because it's never really with the SBA debt and with the personal guarantee that, that some people take on. I don't know if you are, we'll get there but for myself, right there's no one I can trust that I'm going to put in the business that is going to make sure that I don't lose my real estate from a personal guarantee or personally bankrupt myself even with monthly or weekly check ins on finances. It just doesn't make sense. And so that that number where I thought it was maybe, you know, hey, 4 or 5 million, you have enough, what you do you have enough to bring in a GM, but a P&L owner, essentially a GM that would really own the business. It's much later and it's, it's for H Vac and plumbing in particular. Somewhere around that $10 million mark is where I view it because you can start installing, you know, C suite team like, hey, this is the director of finance, this is the director of operations, this is the CEO and there's enough money that you could still pull a salary from the business while it's big enough to be able to manage an actually top line team.
- [14:43]
Chris Barr
Sure.
- [14:43]
Jack
But beside the point, I mean that, that's less about acquisitions and more about operating.
- [14:48]
Chris Barr
So. And I do want to offer one note because, you know, again, pulling from the super diverse background, one of the things I did before stumbling on this was I was a marketing specialist for Jimmy John's corporate headquarters. And I saw that a lot in the franchising world of like, oh, I'm going to do this franchising, I'm going to get an operator, sit back, do my thing and like, oh boy, it's a reawakening for a lot of operators out there that are then slicing lettuce at 5am so understanding that and accepting that upfront and planning for it has been a huge approach circling back to the acquisitions process, which is kind of where we're at now.
- [15:22]
Jack
There you go, no worries. And so as we're moving into, into this and you're actually going from this idea to reality where, because this is a process. How long have you been doing this for now? How long have you. Since you started the journey, man.
- [15:39]
Chris Barr
I left my previous gig back in November of last year, so spent those last two months of the year just educating myself, reading as much as I could in the process and then really started the process in earnest. January 1st of this year. So we're only about, you know, two and a half months in.
- [15:52]
Jack
Perfect. So we're two and a half months in as you start to generate focus. And what I, it's actually my father in law saying, which is one of those old man sayings that always is like, oh, let me tell you about my life. And it's, you don't know what you want, but you always know what you don't want. So where, where are the guardrails on this? You gave us one guardrail. Hey, I can't go above 1.6 million. I want it, I don't want to do that. I want it to stay there. So we have a price guardrail, you have another guardrail parameter, if you will, that, hey, I need it to be in this tight geolocation but you're open agnostically to the type of service. So what are the other parameters that you're putting on this search to be able to A accurately drive and B, maybe to help some of our listeners who are kind of one step behind you saying, okay, what, what parameters should I be putting on this? Like how, how do I concise this down to a point that's actually manageable because there's so many different types of businesses out there.
- [16:52]
Chris Barr
Sure. No, and I think that that's been the playing with how wide we're casting that has been one of the biggest par. The biggest parameter in flux by far since we started the process. You know, there's a few easy, quick ones like anything that started realistically less than five years ago. I've got a pool business right now that was started just about five years ago and check a lot of the boxes. But that always gives me pause. I really want something around, honest to God, at least 10 years. So having something that's vintage is a, is a guardrail, that is pretty significant kind of understanding kind of basic margins. And that again is not a MBA finance guy. That was something I definitely had to educate myself on. So doing some back research again, as sectors are changing, as industries are changing, I'll kind of do some research into what the, you know, appropriate margins are for that business. And the second that you're looking at, you know, tax return, you're seeing, you know, cogs or certain expenses are kind of way outside those margins, like easy pass, easy to kind of get those out of your court and move on to something else. I would say again, the. And recently, because of my operations approach, things that are overly technical, you know, we were kind of examining general contractor opportunities, stuff like that, and there is still potential for them qualifying, but we're really backing off of those.
- [18:14]
Jack
That's a good question. So I mean that's part of what I'm asking here is like I know for my search one of the big caveats, because my search was a little different than yours. Right. Mine everyone's is. But my parameter was I wanted something that was going to as a, as a child of 08 and who saw my friend's parents in Southern California get absolutely decimated by the recession. I wanted something that was recession proof. So one of my optimizations was saying, hey, no new construction because one of those, you know, debt. So if anyone can see my finger, debt plus a downturn in the economy from a new construction perspective is, is absolutely a failure of your business. Any way you Cook it. Unless you were able to get a really interesting creative finance on that. So. So is there anything like that that you really have kind of hard nose on? And, and some of those might even. Right, some of those might go to hey, I want a luxury item or I want to stay away from luxury items. Or you know, like I find one of the hard parts about the initial search is the net's so wide and then you have to kind of reel it in over time so that you can understand markets better to make good decisions. So are you looking at anything like that or are you still in that phase where you're just still trying to go, hey, I just really need to see some CIMs to understand markets first?
- [19:40]
Chris Barr
Yeah, there was again kind of a process of starting with a really, really tight net and then kind of right around end of February, mid February, realized our net was way, way too tight and running out cims. I'm wondering what to do with my hands. And as an entrepreneur that's a very terrifying place to be. So then rapidly started casting a much, much wider net and are now starting to kind of reel it back into this good sweet spot that we're looking at. You know. And so in that sense it's still probably a little bit of a work in process, work in progress I should say. Sorry about that. The, you know, I would say that recession proof is also again, I want, I want stability.
- [20:23]
Jack
That's the reason that this whole kind.
- [20:26]
Chris Barr
Of thing came about was targeting stability. So recession proof is, is obvious and it's almost like so ingrained into the approach that like I didn't even really think about it as a parameter because something like pressure washing, something like painting, landscaping, these are all things that, you know, the home services just really proved their worth in the COVID environment. All those tended to do pretty well.08 Again also getting a business that has existed pre 2008 and I could see their numbers and I could see how they performed. You know, that stability and recession, you know, proof ability is something that's just kind of been ingrained but kind of, I guess back to the parameters. There's things that again are also ambiguous and kind of come as second nature that you don't even realize that you're. That they're legitimate parameters that you're using to weed out certain options. Like for example, there was a roofing business and over the past three years I saw sales continually decline but SDE was continually going up and I'm like something, something, don't feel right here. And using trends like that, that are weirdly probably freaked me out at the beginning but even after two and a half months and really start to become second nature once you see enough.
- [21:34]
Jack
Yeah, I mean I think that's over time that you get better reading financial statements and you understand more. Um, I, maybe I'm asking this the wrong way. I, I guess so if you were to. In a perfect world, if snap your finger tomorrow and you just have the business of your dreams, what for the listeners out there, what does that look like? Like is that hey, I want a service H vac company that does, you know, that meets my standard or you know, like what is that for?
- [22:05]
Chris Barr
You sure? Yeah. Well, I'm expecting after episode one of this show a pressure washing business in West Palm beach that you know is making 500k in SDE a year is going to call me up and Give me a 2x multiple and you know, we're gonna have a done deal. Yeah, I think that again I have my, my preferences. I, I really do like pressure washing. I think that it's underserved. I think that there's a lot of people. And that's crazy because a lot of people would say it's actually oversaturated. But I would say in legitimate players, especially in my market for people that are doing it, you know, you know, suited uniforms, good looking trucks, not just like an F150 with a pressure washer in the bed for people doing it in an upstanding business to business contact or context. I think that that is a great opportunity specifically with where I'm at. So that, yeah, that is a pretty much a targeted ideal sector. But again, you know, because I'm hunting in four counties within Florida, I can't narrow myself into, into that. You know, there's been things as ragan. I got to be careful.
- [23:15]
Jack
No, but that, that's, that's a good, that's a good starting point. Right. Because like that I think helps out to really look at what you are trying to accomplish. And, and so now let me take this a different way and say okay, pressure washing, just for a great example, why not build or why not go franchise? Because there are some great. I mean admittedly as a, as a show that is focusing on ETA and acquisitions, there are some absolutely wonderful franchises out there. Like Rolling Suds, you know, Shout Out Aaron Harper, he's a great guy, lives here in Nashville and actually had lunch with him a few days ago. Great guy, great business. It's. They, they pressure washed the, the. What is it, New Orleans Superdome before the game. So like they get these really nice contracts and they work on the stadiums and I point being is like there's optionality out there to go the franchise model with this or even so start up because you know, yeah, it's not a purchase but you know one guy in a truck is a pretty low lift to be able to start that business. So why, why, why buy?
- [24:22]
Chris Barr
Yeah, I will, I guess I'll start with why not build first? You know I got out of the Marine Corps at like 28. I graduated school at like 30 and then I was a commercial real estate broker and 100 commission spring of 2020 just Kobe was not a good time to be in that biz. So I re. That was a reason I kind of got out of brokerage. I'm like, you know it can be a great, great business if you have this ramp up cycle but with where I'm at in my life right now, I don't have the years to ramp up. You know and in when building something from scratch there's inevitably going to be that ramp up cycle in a few lean years. You know they say most businesses, you know, lose money before they start making money for the first, you know like three years or something like that. I really just don't have that timeline available to me personally. So that's really the hesitancy against building and there was an opportunity to do that with a local connect not here, who wanted to build something, need some equity, didn't work out, no sweat. But so it's, it's not entirely off the map but there's reasons why building isn't right. And then franchising again. I already dropped the franchising organization I used to work for and Jimmy Johnson was great and no disparaging towards them but you kind of see the, the good, the bad and the ugly in franchising. And I think that moreover than the good, the bad and the ugly and the in the in between and the uncertainty of what makes the good the bad and the ugly from a you know, a franchisee perspective. It was also kind of a post marine tourism in that I've seen what big large organizations and the bureaucracy and the lack of being nimble comes along with that. And again I'm sure there's great franchisors are out there. I'm sure there could potentially be a great fit. I don't claim to not be misguided here but dealing with larger, more chunky organizations where there's a lot of protocols, bureaucracies, etc. Is really something I'm trying to move away from and really kind of just a small shop dynamic. And so that's where buying something really stands out to me.
- [26:30]
Jack
Hey, don't disagree with you whatsoever. I think franchising works for a lot of people. I'm actually in the same boat as I will tell people outright the reason, and I joke about it, but there's two types of owners. So there's owners that want independence from whatever, from having a job, being able to take the days off you want, be able to make your own decisions, all that wonderful stuff. And then there's owners that don't like being told what to do, so they want to run their own business. And I definitely have a large portion of that. Second quality is, is being told what to do. It's not. Not something I personally enjoy and I've never enjoyed it, so I went out and did my own thing. But that's, that's just the personalism that I feel is, is pretty true for, for all the owners I've met. Great, great people though. And, but, but it is interesting from. As you kind of go through this journey, I do want you to keep an eye on that and I want you to keep an eye on that because what I found is the red flags from owners. Right? So as you are positioning yourself to be in a spot where the owners are begging you, saying, hey, Chris, I need to sell it to you, part of that is understanding the personalities of these owners, right? And there is it like, like I said, when, when I sell one day there will be somebody sitting across the table trying to, to work with me. And if they understand that about, you know, entrepreneurs that they kind of, they figure that out really quickly. And we see it a lot with, with new owners is there's a reason that owners don't stay around after they sell their business very long. And it has to do with that dynamic. And it's such an interesting thing that you'll run into, but I'm excited because I'm excited for. To see you actually start dealing with that. So speaking of owners and red flags and how you've started, you've been doing this two and a half months. You've had to have talked to some owners by now.
- [28:27]
Chris Barr
Yeah.
- [28:28]
Jack
Yep.
- [28:28]
Chris Barr
Absolutely. Yeah. I would say probably half a dozen or so, you know, general conference calls, get to know you, you know, owner, buyer, introduction. And then last Friday was on a ride along for a bit and I got to be careful with NDAs, whatnot. Yeah, yeah, of course. But yeah, it was on a Ride along for one of these service businesses and again, getting to sit in the car with the owner and really kind of get to know him and see what he does up close and personal over the course of the day. And yeah, I mean it's a, it's a mix of personalities out there. You know, you get some. And I like. And it's not just specific to small business, but anybody who's like, oh, we're the nicest, we're the best, we're the most like ethical. It's like. But are you like, if you, if you had to say it like, you know, so they, you know, there's some that are just, that are just really, really energetic and don't always want to get kind of at the data or the meat of the matter. And I'm not a data guy either. But at the same time, you know, there's some, you know, some black and whites we need to get on the table and some of them just kind of want to talk about more on the meta level of things. So yeah, very ambiguous.
- [29:34]
Jack
That is true.
- [29:35]
Chris Barr
Yeah. So that's.
- [29:36]
Jack
So do you do that as a, do you view that as a red flag or do you view that as kind of the business culture? How do you, how do you take that?
- [29:41]
Chris Barr
No, you know, we, all of us, we have our little piccadillyos, man. And so it's, it's kind of understanding them and their personality and also like how that shapes the business because obviously it's an extension of them in essence. And so again like, you know, Piccadilly, sometimes they're just picnillias, not good nor bad. Sometimes they can be indicators of other things. So kind of trying to read between lines and read people is, is a, interesting practice. And then on the flip side I had again, I can't share too much, but just had an intro call with an owner because there's CIM didn't include any financials like at all. And I was like, I'm about to be like, no. But then my broker's like, this does happen. They want to just get to know you before, you know, letting you take a look. And I'm like, okay, fair enough. And could not have gone better. I this owner and I absolutely hit it off. He seems just like such an amazing high value guy who just, it was hard. Is truly, truly in the right place. Again I tempted to reveal a lot, you know, and I haven't seen financials and I already want to put an LOI on this thing and I'm like, don't get too out of yourself here.
- [30:47]
Jack
So there's, that's, that's, that's what I'm curious about. So I'm gonna, I'm gonna dig in a little bit here. Yeah, please. So do you view that feeling or the generation of that feeling by an owner as a good thing?
- [31:01]
Chris Barr
You know, it's difficult because again, like, I'm not an NBA. I'll be completely candid in that. You know, viewing the financials, I obviously do it, you know, but it's definitely not my strong suit. It's definitely something I have to like, really get a quiet space, sit down and folks, and like really, really do it because it doesn't come second nature to me. But relationships do.
- [31:22]
Jack
Do you feel that. That yourself and the owners are in a, like a symbiotic or in an adverse relationship throughout the transaction?
- [31:30]
Chris Barr
You know, that's the question. And no. Is it ever. You know, and I think it's a, it's a mix of both, you know, and I think that that's one where I got lucky that, you know, commercial real estate. Commercial real estate brokerage really prepared me for that because we're both working towards the same goal. You know, you have something and you want to sell it and get paid for it. I have something that I want to buy. We, we have. Our, our goals are aligned, so it can be symbiotic. But then there it. There's. You scratch the surface a little bit, you start getting the particulars and our interests aren't always going to align. And so, you know, I wish that I had experience of moving through an LOI with you that I could share of kind of how that process looks like and how symbiosis. And the cool part is that's what we're here for.
- [32:15]
Jack
Right? That's what the point of this is. I'm excited.
- [32:17]
Chris Barr
You know, I'm gonna. I'm with you. I'm say this is how that came to light.
- [32:21]
Jack
Well, the reason I ask, Chris, is because, you know, maybe incorrect. I'm not going to pretend that, that I am, you know, the messiah to acquisitions. But what I will say, what I will say is that naturally, just from a numbers perspective, right, You. We are buying businesses based on a multiple. Sure, right. So 3.3x 4x 2x whatever that may be. 1.2x. But I think it's a very, very important part as we start digging into these processes and going through cims that we realize that we inevitably are in an adverse relationship, in my opinion. Don't get me Wrong. It doesn't mean being mean. It doesn't mean being angry. It's not bad in any sense. But there is a natural dynamic where every dollar that they misrepresent truthfully or untruthfully, is worth $4 to you. It's worth $4 to them too. But every single dollar that they can route through a business incorrectly or, you know, slide under the table is worth about three to four dollars. And so when you're talking about, hey, this is an add back for the cost of my car per year, well, did you use that car for your business? Am I gonna have to replace that car? And we start, ha, like later episodes when we go through these add back discussions and through these CIM discussions and finance discussions, there's, you realize that there, there's a benefit to them being very nice and making you feel like they're trustworthy and stuff. Hey, because what you want a business that's trustworthy, right? That's how they, like you said internally, you want that cohesion inside their business. But as long as that, there's an understanding that at the end of the day, every misallocated dollar is worth three to four of yours, whether that's 9,000, 10,000, 20, 30, 50,000. And when you close on that business and they, their time's up, they're gone. Like, they are gone. And it's you and you with the big load on your back. And for everybody who hasn't heard my story, you know, that that's what happened to me. Like, I overpaid and the owner and I are still friends to this day. But that being said, like, it will. It wasn't great. It wasn't great. And so I just, I'm curious. I want to see, see this interaction go on with other people, not just myself, but that's my soapbox and I'll jump off to continue.
- [34:51]
Chris Barr
And one of the kind of mentors I've had, he's, he's lectured at Harvard on, you know, small business acquisitions. He's an MBA from University of Illinois. I mean, absolute, absolute stud. And he was acquiring, I think, some sort of medical practices, something along the slides.
- [35:10]
Jack
I don't have all details, but I.
- [35:11]
Chris Barr
Know deal number one. There was basically two sets of books. One set of books that they reported the IRS and then the actual set of books. And he bought a ugly, ugly situation. Again, he's a stud. So he was able to kind of, you know, write the ship and everything ended up okay. And, you know, everyone went home happy. But like, yeah, it Was a little ugly there. And so avoiding a scenario like that is of utmost importance. And that was kind of in the. Again, I haven't gotten to deal with it hands on yet, but in my kind of pre research and reading, that was something that was really, really harped on. So you got to go through the tax returns and again, it ended up just happened with the ride along. You're saying, oh, yeah, you know, I expensed. You know, you always see that on the tax returns too. Like, 2022 looked okay, 2023 looked okay. 2024 looks great. Because they decided they wanted to sell and realized they couldn't expense, you know, every little thing through their business. And that's where you're seeing like, oh, I was just expensing stupid stuff just to avoid paying Uncle Sam. Like, all right, that's. Well, that's well and good. But like, show me the receipts. And if you can't, then like, we're going to have to calculate this entirely differently. I'm not going on, like, good word and hopes and dreams here. And that's where again, commercial real estate brokerage was helpful because it helps you not get very personal. It's like, again, I still like you, you still like me. We still have a end state that is very symbiotic. But hey, listen, like you're saying you have this personal car and it's going to be an abac. I'm saying it isn't. And listen, either we come to an agreement or we don't do the deal. And that's just, that doesn't, you know. So I think that being objective about those things is something I've gotten a little bit of practice for, but don't have the experience with it in this context yet. So that'll be, that'll be interesting to happen upon.
- [36:48]
Jack
Yeah. One of the great rule of thumbs that someone gave me really early on because I remember looking at like a $50,000. The broker's like, oh, yeah, it's a slush fund expense through the government, like miscellaneous and some. I was sending it through somebody who, who maybe it was Sam Leslie, I don't know, somebody back in 2022, one of the, the, the Twitter guys, and he's like, jack, trust me, if they will lie to the government, they're going to lie to you. And it makes sense. Like, if you're gonna lie to the government and risk going to jail in fines, like, you're gonna risk lying to the buyer. Like, no chance that you're like, the government sits above the buyer. In this hierarchy. So. No. Very interesting. I'm, I'm. I'm really pumped for this because I'm excited to kind of get this feel again. So how, as we move forward, are we going to get you closed on a deal in one year, guaranteeing it to the listeners right now? Yeah, they want to see Chris win. I want to see Chris win. I want to get through all this, get the juice out, get to see an Alawa, get to see due diligence, like knock through all these walls to close. What are we going to do to get there?
- [37:59]
Chris Barr
No, I so appreciate it. I think it's going to be kind of getting an understanding of what my process looks like and having a kind of a sounding board for that process. Getting advice, input and then accountability, you know, knowing that, you know, we're going to be meeting and then we got, we got an audience you're speaking to, you know, definitely. Not that I wouldn't otherwise, but definitely helps kind of keep me on the ball. And so I think kind of the. Through that feedback, kind of shaping what the daily consistent actions look like. Because obviously we've set aside a year for this. This is a marathon. This is not a sprint. And marathons in this sense have been through a daily consistent action. And so if we're fine tuning and tweaking along the way what those consistent actions look like, then I think that it would be surprising if I would not end up with an acquisition within a year from now.
- [38:53]
Jack
What, what do you think that. Do you have any ideas? So, like, one of the cool things really early on that people should do if they're doing acquisitions is I, I mean, you're. You're on, I'm guessing, Biz by Sell, right? You're on Biz by Sell. You're on all these kind of online marketplaces. You're probably working with brokers, the normal things. But, you know, what was really neat early on is, is there's a lot of people doing some very interesting stuff. And one of those interesting things that I did early on was I paid a VA in the Philippines. I think it was like 48 bucks or like 68 bucks, something ridiculously small. And what they did is they scraped every single H Vac listing on like three different websites from Patrick Lang. He is a business broker that does H Vac only. They scraped his website, they scraped Biz by Sell, and I think they scraped another website and they pulled all those listings into a single folder. They added the ones that had real estate, they took out the other ones and Then they, they, they wrote if it was commercial residential service, whatever. And then on top of that, they went through and then they compared them to each other. So now I got to see. Okay, in this market, it's selling for this. And this market selling for 2.3x. In this size, it's selling for this. But this 6 million dollar one is selling for that. And then that helped me later on when I was talking to brokers, I was like, hey, but like, in this market next to you, like in, in, in Louisville, I'm in Nashville, so it may be for you, it better. Hey, in Orlando, one just sold for 2x. So why, why are you. It's exact same business, same size, same range. Why are you selling for four? Like, what's the juice that makes you so special? Yeah, so that was helpful to have the brokers know that I knew the market and have the business owners know, like, oh, hey, this guy's serious. He's talking to other businesses. So like, what? I'm excited. What are you gonna do?
- [40:44]
Chris Barr
No, that's brilliant, man. Gosh, you gotta.
- [40:49]
Jack
Then there's people like. Then there's people like Rory. Oh, goodness. I interviewed him a few months ago. He bought a nursery out in like, North Carolina. And what he did. Yeah, he just went out and he started like, he just cold knocking on doors. Business owners, like, knocking on doors. Like, that's definitely an option too, especially for an area like yours where you have a small Geo. So I'm like, I'm interested, man. I'm excited. Like this. That's the fun part about this, is getting to build these, these systems.
- [41:16]
Chris Barr
Yeah. And, you know, I know we run a bit short on time, but just to kind of give you some insight. Yeah. Again, I've gone through the broker process and would always still. Well, I. And now I feel kind of like, embarrassed. It's like, I. Former commercial real estate broker, like, I had. I have not done the deep work on the comps that. That you did. That's probably something I should be doing, but, you know, it's something I'm going to definitely look into. But getting away again, I. I felt kind of some dead ends happening in that broker cycle. Again, we'll always have a foot in that pool. But again, I saw that episode with the, the guy from Greenville. I was like, I need to go out there, knock on some doors. I'm like, I'm a commercial real estate broker. I can drive a market. And then got like, weirdly, for the first time ever, like, cold feet of like, I have no idea how much to do in revenue. I have no idea. I'm nothing about this business. I'm not a consumer of them. I like I was like outside the business, like I'm not going to walk in here. But I did subscribe to Dun and Bradstreet. Yeah their database and you know, it was a few grand. But it's been a great resource to kind of filter out businesses and sectors I'm interested in. Put a bunch of search parameters in there, see what it spits me back out. See what they're, you know, their total sales to, you know, how many employees they have is kind of a good, you know, understanding of preliminary what their margins might look like. So I've reached out view that got told that F off a good few times from those cold outreaches and then I've just really been hitting the networking hard, especially in the past like two to three weeks. Been going to chamber of commerce events and networking, you know, power, power dating. Almost like.
- [42:46]
Jack
Yeah, right.
- [42:47]
Chris Barr
Events. And honestly they've been, I've seen because I think we all can agree that everyone's really just trying to find a good off market deal. Yes, by all means, see what's out there on the market view the brokers, everyone's hunting for that really quality smacks you right in the face. This is the deal I got to go for on an off market situation and instead meeting with a lot of these local business owners, going to some networking events, getting my name out of the community. I've had three people in the past week be like, oh, there's this service. Business owner tragically had a heart attack. Why he's been trying to run it. I think it'd be best to sell. So I'm like, wow, there's been so much traction, such a condensed period of time by just kind of getting away from that routine system. Call the brokers, follow up, call out the NDA, get the CIM and just kind of putting your name, face and intention out there to your community has yielded a ton of results. So I'm excited to kind of continue to pursue that and see where that goes.
- [43:40]
Jack
I mean that's definitely the best option. I mean you can make all the quirky tools like I did that you want, but the networking and actually I was thinking like how do you get in? Where's a place like that you could sign up like a pickleball gym or something where it's just all old, old guys who are like I don't work on Tuesdays, I go and play pickleball like that's where you need to network at. Go find somewhere but for a country.
- [44:04]
Chris Barr
Club membership or something.
- [44:05]
Jack
Yeah, exactly.
- [44:06]
Chris Barr
Yeah.
- [44:07]
Jack
So interesting. Well, you know, I appreciate it, Chris, you coming on today and you agreeing to like this entire process because I know it's gonna, it's gonna be uncomfortable at times, right? Yeah. But I think this is going to be really fun to, to watch you next weekend. We'll dig into, you know, a little bit more as we move forward and as you kind of run into situations, we'll start digging into like in depth items. So like what does an LOI look like, why and where and when and how and all kind of the really nitty gritty granular tasks through them. And I think that'll be fun to work with you and see where you're at in the processes and update the audience because that's going to be a fun track.
- [44:50]
Chris Barr
I am your ball of putty right now. So mold me, shape me, poke holes in it, give me homework, whatever you got to do. But yeah, very excited to have you and your audience both be involved in my process, track how it goes and then celebrate the big win. Not if, but when that happens.
- [45:08]
Jack
When. Guaranteed one year. No, absolutely no pressure. No, I appreciate it. Listeners, if you like what you heard today, if you like this segment, leave us a comment. What do you want to see Chris do? Learn, talk about? We're really interested. And leave us five star review wherever you listen to your podcast and we will see you next week.