← Owned and Operated - A Plumbing, Electrical, and HVAC Business Growth Podcast
Owned and Operated - A Plumbing, Electrical, and HVAC Business Growth Podcast
#195 The From Zero to 10 Million Cold Calling
00:41:01
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- [00:00]
Jack
With all of our interactions with people who are doing acquisitions, there's a lot of people who talk about wanting it, but there's very few people who actually go through with it, especially in the face of rejection. And rejection and rejection.
- [00:12]
Elias Yousef
This is not a pretty business. This is not something that you think you can passively run.
- [00:16]
Jack
To go from zero to even 10 million in one year is pretty outstanding.
- [00:21]
Elias Yousef
If there's one thing that moves the needle for me the most, it's cold calling. I made over 2000 calls. The success is in the work that you're avoiding. You're just chickening out of doing the work.
- [00:36]
Jack
Welcome back to Jackquisitions. Today. We have an awesome operator here. He just bought his own plumbing business out in Denver, Colorado. Elias, what's going on, man?
- [00:49]
Elias Yousef
What's happening? What's happening? Thank you for inviting me, Elias.
- [00:53]
Jack
We have a very interesting way that we connected. You know, you were cold calling, or actually, I think it was emails. You sent out a bunch of emails to prospect businesses you were looking to buy. Me, being the person I am, likes to talk to everybody. And so we got on a phone call and had a few phone calls, actually, about just the space and you and me and how we would all. We could all potentially work together, but. But it didn't end up panning out and you ended up buying a plumbing company in Colorado, Correct?
- [01:27]
Elias Yousef
Well, I come to find out it's more of a water heater company. More than anything. 90% of their revenues are done servicing and installing tankless water heaters. But I'm trying to grow up into a real plumbing company. But, yeah, basically what you said, you hit the nail on the head.
- [01:43]
Jack
We had that conversation, by the way.
- [01:45]
Elias Yousef
Yeah, yeah, we did.
- [01:46]
Jack
Not to cut you off. I just thought we had that conversation before you bought me saying, like, hey, I think this is one of those tier two, like, water heater only, and you're going to run into a scale issue at some point. But super interesting.
- [02:00]
Elias Yousef
Yeah, well, now I'm here, now I got to find a solution, so. But no, I. Yeah, I mean, I. When I first contacted you, I was just cold calling operators throughout the country every single day, from literally Long Island, New York to some place in California. I mean, I was looking all over the nation and I think I tried calling you. My normal default is the call. And if I can't get through, I'll send an email or a text message. My answer is I'll get a yes, I'll get a no, but I'm not going to tolerate no Answer. So until somebody tells me to F off or they tell me a yes, I'll keep harassing them. So yeah, that's how we connected.
- [02:37]
Jack
One of the most common and expensive mistakes that I see in acquisitions in the home service space is not getting serious about accounting. Whether you're buying a business or you're already running one, you need the right financial partner to save you time, money and headaches. That's why we partnered with Apple Tree Business Services. They are a one stop shop that'll help you get through the due diligence process, but then they'll partner with you after to help you out with payroll and bookkeeping and taxes. They know home services. They're fluent in tools like service titan and Housecall Pro. If you're tired of the surprise tax bills or an accountant who ghosts you when you really need them, Apple Tree is the upgrade you deserve. Listeners of the show can get a free tax and financial review. And if you're buying a business, they'll give you 10% off quality of earnings. Just head on over to AppleTree business.com, talk to Patrick, click the link, let them know Jack sends you and they will take care of you. Yeah, one of the reasons I actually fielded your call though was really interesting. You did an amazing job of A, reaching out to me from a personal level, but B, you also had a decent backing in terms of you had gotten in touch with some amazing ex operators who were willing to be a partner in your business. Can you talk about like scrolling back to how that all started from your exiting your previous industry and then going into. I don't want to ruin it for the audience going into where you are now.
- [04:07]
Elias Yousef
Sure. So yeah, this is not my background. I could spell H Vac, I can spell plumbing. I mean, that's about the extent of my knowledge. And I'm only 24, so it's not like I'm, you know, I'm not terribly old or anything like that. I'm still pretty young. Most people look at me like I'm a child. I basically, if I rewind the clock enough. When I was 21 years old, which was only three years ago, I was selling appliances at a, at an appliance store and Phoenix, Arizona and I was bitten by the bug to want to go out and acquire businesses, you know, entrepreneurship through acquisition, you know, and I used to read a ton of Warren Buffett biographies and stuff growing up and so I was always fascinated by the subject. But when I was 21, that's when I finally wanted to pounce on it. So I ended up quitting my job and you know, I had, I owned some real estate at the time, so my natural progression was, oh, I want to upgrade from residential housing to commercial. And well, hey, there's a big senior population in Phoenix, so why don't I do assisted living? So I quit my job and I very quickly realized that my alligator mouth overloaded my hummingbird ass because it took me almost two years to find my first business. And I ended up acquiring an assisted living facility in Phoenix. And again, same thing. I don't know anything about assisted living. It was just a mind numbing process of cold calling hundreds and hundreds and hundreds of people until somebody finally sold me their business. I learned a lot throughout that process. But about, literally, I think four or five months into running that business, I realized I hate healthcare. I don't know, this just doesn't turn my crank. And so it was a completely disappointing buildup of two years. And I also realized that I was really spinning my gears because a lot of people that would want to sell their business, they want to sell the real estate with it. And people were holding on to property values from 2020 and 2021. And Covid decimated that industry. So, you know, just a mortgage on the property was more than most of these businesses were making. So I just felt like I was wasting my time and I was getting really irritated. So naturally I'm start starting to think, what do I want to do in the future? And at the time I was actually at my property and I was calling a. We had like a little orchard, like bunch of trees on the property. And so I had a, a gentleman come over to trim all the trees and I wanted to do the citrus trees. And this is May of last year. And I said, can you do our citrus trees? He said, no, well, you got to do that in January. It's not the time of year. So, you know, they have to call me out here in January. And so naturally I said, can you put me on the schedule? And he said, well, I use a paper calendar for all my bookings and the paper calendar doesn't come out until October, so call me in October to schedule you. And in my mind I was thinking, what the. Is this how the trades are run? I mean, there's just what. And so naturally I started thinking about the trades. And it's May in Phoenix, Arizona. It was hot as hell. So it really didn't take much to figure out. I want to do air conditioning, I want to do H Vac, but I know nothing about it. So, you know, I'm smart enough to at least know that I don't know everything. So the first thing I did is I want to surround myself with people that do know. So again, I just kind of went for the top. And I mean, I reached out to Tommy Mello. I was texting him. He set up a call with, again, I'm a salesman by trade, which, I.
- [07:22]
Jack
Mean, that's a huge first step to just be like, hey, I got a hold of Tommy Mello. He runs a, you know, 400 million dollar garage door business. But I was able to grab his phone number and start texting.
- [07:32]
Elias Yousef
Well, it's online. You just use the databases. You know, there's like us phone.com or instant checkmate.com.
- [07:38]
Jack
There'S a lot of them.
- [07:39]
Elias Yousef
So he ended up sending a call with the CEO of his portfolio company, and they ultimately said no. So I just kind of went down the line, got through to Chad Peterman. He scheduled a zoom call like months out and then missed the call. And I kept trying to chase him down, but ultimately I ended up calling the owner of a company called George Brazil, which is a household name in Phoenix, Arizona. Lo and behold, you know, God love his soul. Jim Probst answered and he invited me to have a tour of his office. And he has like a 40 or 45,000 square foot office in Phoenix. And with, you know, 250 or 260 employees.
- [08:19]
Jack
Employees.
- [08:19]
Elias Yousef
It's a mammoth operation. And, man, I sold my heart out. I sold my heart out. And the whole idea was, you know, I don't know what I'm doing, but I'm young and I have piss and vinegar in my blood, and I want to kind of go out and do this. I just. I just need somebody to show me, show me the way. And he was willing to take me under his wing. And so I'm very grateful to him. He's taught me everything that I know about this business. He's mentored me throughout the process. He also tried to scare the hell out of me to not do this. But he went through a period, which is good. He went through horror.
- [08:51]
Jack
I always said, that's good.
- [08:52]
Elias Yousef
Horror story after horror story. And I'm pretty sure I actually even called you one day and I said, hey, Jack, God, my chairman's been telling.
- [08:59]
Jack
Me, tell me these aren't real.
- [09:01]
Elias Yousef
And I just wanted your confirmation. I was like, is this real or is he bullshitting me? And you said, no, it's real. I mean, I know you've. You've had a tough start in the beginning and, and I talked to a few other people I think. Is it Nathan Lindley? Is he a guy in.
- [09:14]
Jack
Yeah, Nathan's a good guy down in Texas.
- [09:16]
Elias Yousef
Talked to him too. And yeah, I think he told me he week away from bankruptcy once and until you turn everything around. So man, I was scared for a bit, you know, but ultimately I said, hey, whatever, I made my bed, I got a line, I decided to do this. So I'm going to push forward anyway.
- [09:33]
Jack
Super interesting. So that's where I mean, in terms of people who actually want it, there's a lot of people who talk about wanting it, but there's very few people who actually go through with it. And with all of our interactions with people who are doing acquisitions, you know, one of the greatest signs that someone is really going to complete that acquisition is actually their tenacity to be able to do cold calls and talk to people in industry. And so I know with me that that blew me away in the fact that you're able to get a hold of kind of these, these top guys at these top companies and then keep going, right? Just keep pounding pavement until I appreciate that it's a huge indicator that somebody is going to be successful is their ability to just continue especially in the, of rejection. And rejection and rejection because. Because most people in the industry give up. They give up after, you know, three or four times and then they go, ah, this doesn't work. And they go on and they go onto a website like Biz by Sell and try to find something. But truly you get the best deals through that networking. And so how did you find hot water now?
- [10:39]
Elias Yousef
Cold call. He actually didn't answer a cold call so I sent him a cold text message and then he responded. And then we got into a. Yeah. I mean every deal that I've ever had, whether it was the assisted living business I bought, the water heater company I just bought or fall goes to plan. Next week I should be picking up a plumbing, air conditioning and electrical business. That was a cold call. Everything has come off market. And so literally you spend a thousand bucks, you could buy a leads list of like every business you could possibly imagine in a particular industry in your market. And you just go down the list and you just keep calling and calling. Eventually people will tell you to it. They'll give you a no or they'll give you a yes. And so you just have to, you just keep making the calls and they're mind numbing. I mean, don't get me wrong I'm like, they suck. I don't enjoy doing them. But in order to be successful, you got to do. You have to just do what's necessary. You know, I don't get to do what I'm comfortable doing. You just have to, you have to succeed in doing what's necessary. So I have no choice.
- [11:33]
Jack
Well, there's also a really interesting term. What is it? It's market stop. No, not market stop. I forget someone was talking about it at SM Bash. But the point is that we as owners get inundated with so many emails. I received seven yesterday. Hey, do you want to sell your business from some third party that's sole job is to acquire or to. To set appointments for business acquisitions and so to actually stand out and to physically find phone numbers and physically call owners. If I got a voicemail that said, hey, Jack, you know, I'm a local business owner and da, da, da, da. I'm much more inclined to respond to that or at least pay attention to that versus the 10,000 emails I'll get in a year asking to buy my business. Like, I just don't even respond to most of them. And then, not to mention now with AI garbage. Like the AI garbage, they just blast AI. And you're like, I know this is AI. Like, you've not looked at my business. Half of the time it's the wrong person. They're saying, hey, John Wilson. I'm like, I'm not John Wilson, buddy. You got the wrong business.
- [12:38]
Elias Yousef
I've even learned I don't even introduce myself when I make a cold call. People don't even know my name until I'm about halfway through the call. I actually got rejected today. I called a guy in Denver and he said, first of all, I don't even know your name. I mean, who are you? And no, I'm not interested since I'm in business. But you know, you just, it's simple. You just call someone. Hey, Jack. Yeah, yeah, hi. I'm in the plumbing and air business. I was just, you know, curious if you'd entertain an offer on your company. I'm just looking to grow within the market or something and you just come up with something. And if they're. I also realized there's a difference between a suspect and a prospect. So a suspect is somebody that will return your calls. A prospect is somebody that'll actually sell you their business. And so I also realized you could say everything wrong on the phone if somebody's really motivated to get out of the business. You're not going to have. It's like if a girl likes you, it doesn't really matter what you say. The relationship moves forward. Right. It's like. It's kind of like when you're texting, you're trying to get the right words to say or something like that. She's not interested.
- [13:31]
Jack
Yeah.
- [13:31]
Elias Yousef
So it's just a volume game. I mean, you literally have to go through hundreds and hundreds and hundreds of. Of. Of contacts with people, and eventually you'll. You'll figure out, okay, this guy's desperate. And I don't mind maybe going into the story of hot water now, but even then, just to take a step back, I realized I needed a team first because I don't know what I'm doing. If I immediately go to start looking at businesses. I mean, I'm not even. I'm not even gonna know what to say or how to do due diligence or how to run it. I mean, I don't know any of that stuff. So I just. I wanted to get a team in place of strong operators that know what they're doing, and that could really kind of give me the clout and expertise that I need to open up doors. I actually, in hindsight, I don't know if it was necessarily important I did this, but even I wanted to get somebody I didn't have to explain about. So, technically, the CEO of Costco owns 2% of this company, and he's been. He's definitely the biggest hitter I was able to get in contact with. So he ran Costco for 12 years, and he was worth like a third of a billion or something like that. So if you Google him, there's pictures of him with, like, Joe Biden and Obama and all that stuff. So. But the reason for that was like, okay, when I go to do due diligence or acquisitions in the future, I wanted to. When I approach a bank, I'm just not an idiot saying, hey, I'd like a couple million bucks, please. It's. I'm a representative of my team. You know, we have a very deep bench of operators. You know, we're looking to acquire and operate and scale these companies. So. And so it gives me a lot of borrowed credibility, as they say it, I think, in the marketing industry, borrowed credibility. So I needed to ride the coattails of my team, which I've definitely taken advantage of that, and I'm very appreciative of it. But ultimately, I also realized. I don't know if you've ever read the book Good to Great, but it's my favorite business book. And they talk about who's on the bus is infinitely more important than where the bus is going. Again, I'm very glad I took the opportunity to build a team first, because we've been able to morph and pivot because we looked. We even flew out to Iowa to go look at deals. We were going to go to Long island to look at deals. Then ultimately Jim stopped me and said, you can't run these businesses remotely. Do you want to live in Iowa? Hell no, I don't want to live in Iowa, so why the hell are we going out here to look at. So he's taught me a whole ton, and he's definitely set proper expectations. And he reminded me very frequently that this is not a pretty business. This is not something that you think he could passively run or that, you know, it's all the biz by sell listings that say turnkey operation, absentee, owner all. I mean, that's all just owner.
- [15:59]
Jack
Never true.
- [16:00]
Elias Yousef
That's all bs. So, yep, he taught me a lot. But ultimately I realized I wanted to live in Colorado because I was sick of Arizona and I wanted to move out there. So I just. I said, okay, I'm just going to look in Colorado and that's all I'm going to do. And I just need to turn over every rock in Colorado and eventually I'll find a deal. So like I mentioned, I just bought a leads list of every home service business in Colorado and I just started making my way through it. And eventually, after making enough cold calls, actually, this deal that we might be closing next week was actually the very first person to say, yes, this is a deal that's just been taking a long time to work on. But ultimately, I got in contact with the. The seller of Hot Water now and had a conversation with him.
- [16:42]
Jack
So sorry to stop you. Before you go on to that, I think. I think this is a really interesting topic. How many people did you call before? Before you got your first. I'd say viable. Yes, right. Because there's lots of people who are like, yeah, maybe what? You know, if you give me $200 million, I'll sell you anything. But. But realistically, how many calls did you have to make to get to a position where you had a legitimate. Yes.
- [17:09]
Elias Yousef
I mean, I've lost count. I mean, I know. I mean, I made over 2, 000 calls in total over the last.
- [17:15]
Jack
To the Denver market alone.
- [17:16]
Elias Yousef
No, not in the Denver market alone. In the Denver market, I've made several hundred for sure. But I, I don't know the exact details. It was a lot goes a lot.
- [17:24]
Jack
I think that's still, like, even, even ballpark is still really important because if somebody's listening to this and wants to try this strategy, like how many calls after the first 100, I just don't want them to get discouraged. It takes 200 calls, 300 calls to get there before you get a maybe or a kind of a yes. And then you have to work that.
- [17:43]
Elias Yousef
Deal through for every hundred phone calls people actually get through to. Because even most of the calls I make, it's, you're not even getting it through to somebody. But for every hundred conversations, maybe 90 or 95 will say no, 5% might say yes, I'm interested, and maybe only 1 is actually feasible, you know, and then, even then it's a shot in the dark if you're actually going to be able to make a deal. Because there was a deal I was looking at recently in a rural market here in Colorado. The business wasn't even making any money and the guy wanted 2 million bucks for it. I said, how did you substantiate that number? He said, all the assets that, you know, and, you know, it's just. Yeah. And I realized this.
- [18:21]
Jack
Yeah.
- [18:22]
Elias Yousef
So, yeah, it just takes a lot of volume. It takes a lot of volume. And one thing that has made this specific industry more challenging, there is a lot of unprofitable companies. I would say vast majority, probably 80% of all the financials I've seen, these businesses are losing money or breaking even or something, or making such a marginal profit. It's. You're either really successful and you're growing and you're scaling your business or you're just, just one of another million chuck in a truck contractors or something. And almost all of them have the same problems where their payroll is out of whack, their pricing is too low. It's like, it's almost comical. It's a broken record. I keep seeing the same thing over and over and over again. I'm sure you guys.
- [19:06]
Jack
Yeah, it's very commonplace. And, and one, because it's an old fragmented industry in the sense that, you know, 10 years ago the trades had very little help. They had very little focus. There was no CRM systems, there was no, you know, this is all, all the growth that we've seen in some of these big companies like Peterman Brothers. They've only happened in the last 10 years. Hoffman Brothers, last 10 years, John Wilson last 10 years. It's this last 10 year segment that has seen the actual growth and kind of maturity of the industry itself. But, yeah, we see that a lot. Or that it's. It's so small and, and it works for one owner, but there's no systems in place to make it viable under volume. And then they still want a million dollars for it. That's. That's. Generally, though, the number's always one million. It's always seven. Was it six figures? No, seven figures. Always seven figures. No matter how big the business is.
- [20:00]
Elias Yousef
Yeah, absolutely.
- [20:01]
Jack
It's a vanity thing, it feels like.
- [20:02]
Elias Yousef
You know, and basically the narrative that I can actually use this when I prospect, when I'm deep in conversations with people, but it's very accurate. Most business owners in this market are people that are either a master plumber, master H vac tech, master electrician, excellent at the trade. One day their boss pisses them off. They say, you know, f you, I'm not doing this anymore. You know, I'm gonna. I'm gonna be my own boss. I'm gonna go work for myself. They go start up. They buy a white van, they put so and so LLC on it, and they say they're in business. And because they're great at the trades, they're naturally able to start picking up work. But they're not business people. They're terrible at marketing or managing people. They don't know how to, you know, market a business. And hr, legal, they struggle with all that stuff. And so just naturally they start building up a business. But they still have this mindset of just, you know, again, they're. It's like the E Myth talks about it. They're excellent at the actual trade, but they're not good at running a business. And so you see this whole proliferation of these small contractors that are 1, 2, 3 million dollars contractors. A lot of them don't even get to 3 million because.
- [21:07]
Jack
I'll just say sub 3 million. Yeah, because.
- [21:10]
Elias Yousef
And Jim says it great. He says, there's only so much you can blow up the balloon. These people don't realize the idea of scaling and delegating and building systems, because if a business is not dependent on a system, it's dependent on a person. There's only so much you could do. These people are control freaks also. They're involved in every part of the business, and they're not good at everything. So you just. You see a lot of these business and then the same people that are wanting a million bucks for the business, it's the man doing all the work, and maybe his wife does the Bookkeeping and accounting and all that. And they're both want to depart, they want all their money up front and they want to depart and they're the ones that do 80% of the work in the company. It's like what, it doesn't make any sense.
- [21:46]
Jack
So 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 Alan fib.com that's a l a n f I b dot com or click the link below to get connected. And so let's move on to hot water. I mean that's all actually amazing information for everyone listening, but in respect of time, I really want to get to this first deal in hot water now. So you, so you buy hot water now, was it one of these companies or was it, you know, five, $10 million?
- [22:50]
Elias Yousef
No, I mean, I'll be very candid. We were operating and the words of my chairman were opportunistic and we saw an opportunity that we jumped on that. I'll just explain. It also started cold calling. Got through to the owner of this company, asked him if he was interested in selling. He said he was possibly interested. So I end up getting his financials. I have a meeting with him, or I have a meeting with him first, talks a bit about the company, then he sends me his financials. I take one look at it and I'm like, what is this? I mean it's just a million dollar contractor that wasn't really making any. In fact, I'm pretty sure he lost like 100 grand or something on a million bucks. Right. It's just, what is this? So immediately five minutes after looking at the PNLs, I sent him an email and I said I'm sorry but this doesn't really work for us, you know, and we passed on it.
- [23:38]
Jack
Yeah.
- [23:39]
Elias Yousef
Then a few days later he comes back and I get a text message and it says, well, hold on, you know, I think we should still talk or something. So naturally I realized this is somebody that's motivated. So I take maybe A little bit of a deeper look, and I have another conversation with him, and then I call my chairman. I started kind of walking the deal with him. And he told me a story. He told me a story, actually, when we first started working together, of an acquisition he made several years ago. It's not a small company. It was like a 6 or 7 million dollar contractor, but they weren't making any money. The business grew way too quickly and started almost imploding on the seller. And he was just so stressed out. He almost was going to have a croak. He was going to croak. He just wanted to get out. And he was one of Jim's training clients, because Jim runs a company called sbe, which is just kind of a training platform. And so it was one of his contractors. So naturally, he approached Jim and said, I can't do this anymore. And Jim wasn't in a position at that time to want to buy a company, but he saw the opportunity. So he basically proposed an idea to sign a management services agreement to basically allow him to manage the business with the right to buy it in the future. Now, Jim is experienced. He has all of the clout to be able to pull that off. But that was in my mind. And so I just kind of threw a dart in the wall with this one and saw if it stick, it stuck in it. And it actually did. So I started talking to the owner of Hot Water now, and I told him, hey, your business isn't really investable, but I see a big opportunity. I, you know, I know you have a great team, and I know we could grow it. It's just, it needs to be cleaned up a little bit. And so I just kind of pitched him on this idea of, like, well, I don't mind coming in and operating the business with the right to buy it in the future. And the reason I'm saying all this is because he actually gave us access to his QuickBooks account. And I realized there's just spending problems. It wasn't even that the business was necessarily losing all that money. When I see a $5,000 Norwegian Cruise.
- [25:32]
Jack
Line expense and, yeah, Amazon expenses, personal piggy bank.
- [25:36]
Elias Yousef
Yeah, I was like, I don't know if this business is. Is actually losing money. You know, I think it's just fiscally mismanaged and obviously the basic stuff like pricing is too low and all that type of stuff. So to make a long story short, we ended up signing a deal where I am effectively the owner of the business. I have sole control of the bank accounts. I Have complete operational authority here. Technically, I'm not the owner. I have the right to buy the assets anytime during the next three years at a price that's fixed to the outstanding liabilities on the balance sheet. And so if I even pay down the debt in the future, that my kind of price drops. And so since we've been here, we closed February 4th. By the time we finished up the month February 28th, we were in the black because I just went through and cut every expense that was.
- [26:27]
Jack
Yeah, no more personal piggy bank.
- [26:29]
Elias Yousef
Yeah. So once I took away all the credit cards and shredded them and increased pricing and started putting a lot of focus on how do I get the guys to sell more and incentivize them. I started paying commissions. For the first month we were there. I told everybody, I'll pay you your hourly rate or commission, whichever is greater. And lo and behold, almost all of their paychecks have been better with commission. So they're starting to kind of see the. The. They see the light now and help them sell more. And so I'm sure it could have panned out a lot worse. And I'm sure people could have quit on me the first day or something. But at least where we're at, the way the agreement was written is I had no liability other than I could have wasted my time if things didn't work out. But I could have walked away technically. But that's. I think, you know, that's not really my personality. It's like, I just gotta fix this now.
- [27:15]
Jack
But incredibly interesting that that's a really creative way. So we hear a lot about creative financing in these deals like this and reducing risk and reducing liability. And this sounds like a wonderful way to do it. And like you said, there's no financial risk on you personally, which I think is a big point to your first deal is. Right. Most of the time people are signing PGs, their personal guaranteeing, all of their assets. And like you said, you had real estate, so that would have to go up. And so there's a lot of moving parts there. But I think that that's a really interesting way of looking at a deal that might not pencil from a debt to service income ratio standpoint, but from a seller financing. This isn't even seller financing. This is just like seller.
- [28:01]
Elias Yousef
It's.
- [28:02]
Jack
It's really giving and management fees.
- [28:04]
Elias Yousef
Yeah. He.
- [28:06]
Jack
So then how does the seller.
- [28:08]
Elias Yousef
They gave up.
- [28:08]
Jack
Did he have to pay for that?
- [28:10]
Elias Yousef
The seller is.
- [28:11]
Jack
Or you have to pay him for that.
- [28:13]
Elias Yousef
He. Okay. So basically, in an agreement like this the seller becomes an employee of the company and you still want to keep them because they typically hold licenses and all that stuff. But, but at least kind of where I sit is I have kind of the trump card, if you will, in the organization. I could operate it as I please. I have full control over the money. I could allocate it however I want. But again, the general idea is just to get, grow the business as much as I can, get it profitable, get it scalable, and then from there, at some point get a loan and refi, you know, refinance their existing debt.
- [28:43]
Jack
Yeah, that makes sense. So he gets paid a little bit down the line, but with the idea that you come and operate it better. And so he, well, should when I buy it, make it sellable in two years.
- [28:53]
Elias Yousef
In this particular case, when I buy it, he wouldn't actually be walking away with anything other than having his liabilities taken out. And just to give you an idea, so in 2024, the business only did a million bucks in revenue. We're operating at like a million and a half dollar company at the moment. And if all goes to plan, I'm leveraging the exact agreement I just did to do another deal with the exact same structure. And so There is a $2.4 million plumbing, heating and electrical business 15 minutes down the road for me that we're just finished up the contract with. So we'll probably get it signed by this week. Once we close that, we should be sitting around 4 million. No money down, no financial risk. Technically all the risk is still on the seller. But I don't want to come across like I'm swindling these people or anything like that. They're lawyered up, they know exactly what they're getting into. They're just burnt the heck out. They're tired and they want somebody to just kind of help them. And the reality is if you're running a five million dollar operation, making a million bucks a year, you're going to commit a pretty nice paycheck right at closing.
- [29:58]
Jack
Which, I mean, this is all why John and I call the 1 to 3 million dollar range is like owner hell. Because the minute that they start hiring employees and start trying to do marketing and they sign up with all these garbage agencies, they're just throwing their money down the drain in their net. They start to see it shrinking, shrinking, shrinking, shrinking. And then they, they get to a point where they're just going, I'm running on 60k a year salary and like 10k in that swings that could bring me to the point of bankruptcy and lose my house and lose all this stuff.
- [30:28]
Elias Yousef
Yeah.
- [30:29]
Jack
So I like there's, I want to be clear, like there's, there is a very large space for these kind of deals because the benefit is, hey, this has been run so poorly and levered up so, so hard that the, the other outcome for a lot of these owners is bankruptcy and loss. So I mean, somebody coming in with an experienced operator, experienced team with, with a, you know, a turnaround month, three of, of buying or doing a manag manager agreement with this other business, I mean there's, there's a big draw to a lot of people.
- [31:02]
Elias Yousef
I mean, there's, there's benefits for both parties. I mean, if you look at it from their perspective, they're running an unprofitable business that has debt. And like you said, the path is typically bankruptcy at some point. You can't really sell a business like that, especially if it is poorly run to the point where you are the guy wearing all the hats, doing everything. You're not going to really be able to sell that business. It's not, it's not saleable. There's no value to it. Right. People, you know, a business that's independent from the owner and a business that serves the owner as opposed to the owner serving the business, that's one that's attractive and salable. Right. And so they're just kind of stuck with this albatross around their neck where they kind of bankrupt themselves to kind of get out of it. So from their perspective, they have a knight in shining armor coming in to kind of save the day. And from a buyer's perspective, it's very attractive where, yeah, you're maybe picking up an ugly duckling, so to speak, but all you're putting in is sweat equity as opposed to real equity. And so it becomes very attractive monetarily once you get in and you actually operate the business. And so, and to us, obviously, with this next deal, that'll really kind of get us to the critical mass that I think that we need to be able to really start to grow this. So I mean, the moment we ink this will be sitting around 4 million and the goal is to get to $10 million by the end of the year. And that's going to be done through obviously acquisitions. And then I used to say organic growth, but I'm copying my chairman. He taught me he uses growth through execution because that really what it gets down to, I mean, people to be profitable or unprofitable, it's just executing on the Basics, you know, are you, are you pricing appropriately? Are you, when you go to a house, are you going straight over to the water heater and fixing the problem and getting out, or are you slowing down and building a whole ticket and it's just all the basics.
- [32:37]
Jack
So, you know, we talk about that a lot. Known and operated side of the business is what you hit on is, is one of the keys, is there, there's a difference between. You came in with the team, with a very, very experienced individual who understood how to grow an H Vac company. But from the other side of the coin, right, there's so many small contractors that just don't know how to price. They don't know what sales is. They've never gone to a nexstar training or an SB training or a certain path training. And so it's a very, you know, tumultuous first couple years for them as they try to grow, but very cool. I mean, so trying you're going to get. With this second acquisition, you'll reach enough velocity to get through the quote, unquote, owner's help point. You'll be in the 5 million range, which should offset enough money to grow organically if you wanted. But your goal is to hit those phones some more.
- [33:30]
Elias Yousef
Yeah. So the goal is to end the year at a $10 million run rate and then the next year at 27 million. And my chairman asked, why 27? And I said, I want more millions in revenue than years on hold. So that's, that was kind of the, the whole idea behind $27 million. But yeah, I just, this is all.
- [33:46]
Jack
I have some ambition, man.
- [33:48]
Elias Yousef
Thank you.
- [33:48]
Jack
I know that. That's awesome. I mean, we have, we have the same goal. Not 27, but we're 20 million, but we'll do it in seven years is our goal. So, I mean, to go, for anyone listening, to go from zero to, to even 10 million in one year is, is pretty outstanding. So I, I, that's why I had to get you on here. I knew this is, you're an awesome operator and you've been doing a great job so far, so I know everybody had to hear this.
- [34:15]
Elias Yousef
No, I appreciate it. I'm not going to take credit for anything. If I were to take my shirt off and turn around, you'd see a footprint on my back from my chairman's boot just kind of being pressed against this. So I have a lot of pressure on me for my team, but that's what I enjoy. So, you know, again, I don't pretend to know anything I'm very grateful to my team because they've taught me everything. And so, I mean, if I could give one piece of advice to anybody, go and find people. I mean, if you're, if your goal in life is to be the best chef you could ever find, go find a Michelin star chef and go, you know, train and learn from them, right? Just find somebody who's been there and done that and has achieved the things that you want to in a very meaningful way and copy them, learn from them. I mean, they'll mentor you. And you gotta ask. You gotta ask. And so, you know, I just.
- [34:58]
Jack
Step one is to buy a list of all the Michelin star chefs. Step two is then to then just repeatedly call and text them until they either tell you yes or no. Oh, man, that's crazy.
- [35:10]
Elias Yousef
You go out, find people, you know.
- [35:12]
Jack
Is there any point where you are going to remove yourself? Because I think this is a, an important distinction, right, is that there's a lot of people out there doing a similar strategy, but the key difference is that they hire somebody else to do the calling. It's somebody in the Philippines or it's, it's overseas or doesn't work.
- [35:30]
Elias Yousef
Doesn't work. If you want the best results, you.
- [35:32]
Jack
Gotta do it has to be you.
- [35:33]
Elias Yousef
You can't get an Indian telemarketer or someone from the Philippines to do it. You're just, you're successes in the work that you're avoiding and you're just, you're just chickening out of doing the work by trying to outsource it. You're not being smart. You're not. That's. If there's one thing that moves the needle for me the most, it's cold calling. That is the single. Like if there was the highest and best use of my time, if I just locked myself in an office for eight hours and I said nobody's allowed to disturb me and all I'm doing is cold calling. That will be the thing that will move the needle the most in the company because that's how I could pick up another 3 million bucks in revenue with another deal or something like that, you know. So if anything, that's the only thing I should be doing. So I actually want to pull myself out of the operations more than anything now. The only reason I'm involved in the operations now is first of all, obviously being ugly duckling turnarounds. I have to be very, I have to kind of put a lot of attention towards this. But also, I'm just saying I have to Earn my stripes, you know, so I have to kind of go through the phase where I have to cut my teeth or my stripes. I need to learn the business. I need to know what it's like to go out in the field and put out fires and do all that type of stuff because I'll learn throughout the process. And I'll also earn the respect of my team because they know that I'm willing to actually be there with them. Anytime they call me, I'm there for them. But in time I do want to pull myself out of the operations and focus solely on growing the business. You know, how can we find the next deal, where can we get capital, all that type of stuff.
- [37:00]
Jack
Yeah, I do have a, this one's an interesting one for you. Question is, at some point there's going to be diminishing rates of return. Right. So I've seen this with John's business. John bought a bunch of businesses in circa 2020 to 2024 and he's grown this, you know, $30 million monster. A million dollar business now doesn't move the needle for him. A $3 million business really doesn't move the needle for them. Especially when you look at the debt that would require to get. Putting that into a marketing system or something would drive significantly more value. So at what point do you see the acquisition channel that you're working on? Because you probably could get to 27 million doing solely acquisitions. But at some point there's going to have to be some switch to focus on organic.
- [37:46]
Elias Yousef
Yes. This is one of those things where again, if you get the right partners, you'll, it'll morph over time. Right. And so luckily having a blessing of actually I have two partners. One operated a sixty million dollar company and one fifty. When the time is right, they start to kind of start to drop new information. Show me. Okay, now you've got this problem. So I know a lot of this stuff will happen over time and I realized let me create those problems first before worrying about it. So let me get to that size and then figure out how to, how to crack through it. But I ultimately do want to write a check and buy a $10 million operation or a $20 million operation. So I do want to scale that up. And so to me right now I am picking up the low hanging fruit until I build something that is spitting out enough cash and is we've kind of built our well oiled machine where now we could just continue to scale it organically or through executing and then from there. Yeah, I mean There's a million ways to do it. One of the things I've even been thinking about is maybe we grow to a certain scale where we get to 20, 30 million and then break into a new market. And instead of trying to take the $30 million company to a $60 million company, I would argue that that's almost probably harder to go from 30 to 60 than to maybe go up into a new market and take a 5 million dollar contractor and start blowing that up. And also the more you scale, you're actually taking on a bunch more overhead, your margins start to shrink. When you're running a 10 million dollar operation, you could probably maintain a 20, 25 margin. You can't really do that on 50 million. You have so much more overhead, you have so much more expenses as well. And I actually saw an operator recently, they're doing $80 million from eight locations. They have eight different geographical locations at 10 million and they're able to maintain pretty nice margins doing that. So again, I don't know if you agree or disagree with any of that stuff. Bottom lines, I don't really know the answer. I'll figure it out in the future. But you know, just, I don't know it.
- [39:42]
Jack
What will be the, the coolest thing is to go back in two years and listen. When you actually get there, you hit your 27 million, you start trying to go to second, third location, you listen or you say, that was absolutely silly of me to even ever say that. And I'm just going for that 80. And so that's the cool part about doing these things is you actually get to look back at some of the old sayings and ideas that you had at the time and then, you know, rehash them. So very cool. Elias, if people want to get a hold of you or if they want to, you know, follow your journey, how do they, they get a hold of you?
- [40:15]
Elias Yousef
Well, you could either find me on LinkedIn or you can go to our, our parent company's Frost and Flow. So you could look that up. I mean, we're actively buying in the Colorado market, so if anybody happens to want to exit or something like that. But look me up. Elias yousef. I'm on LinkedIn, I respond to all my messages. If you just send me a message or something like that. Happy to, happy to have a conversation.
- [40:34]
Jack
Perfect. That was Elias Yousef and we will link his LinkedIn in the description below. So go ahead and take a, take a look for him there. Leave us a five star review. Wherever you listen, we're trying to grow this jackquisitions thing out, and so we'd love to hear your thoughts. Send us an email@info owned&operated.com if you have any suggestions. And we appreciate you all. Thank you much.