Owned and Operated - A Plumbing, Electrical, and HVAC Business Growth Podcast
Episode #210: "Trying to Buy a Business: Here’s What No One Tells You"
Release Date: June 13, 2025
Hosts: Jack Carr and Chris Barr

Introduction and Episode Context

In Episode #210 of the "Owned and Operated" podcast, hosts Jack Carr and Chris Barr delve deep into the intricate process of acquiring a business, specifically focusing on the often-overlooked challenges and lessons learned during the journey. This episode serves as the second installment in the Chris Barr series, where listeners follow Chris's pursuit to purchase his first business in Florida.

Chris Barr’s Acquisition Journey and Challenges

Chris Barr opens up about his recent experiences in the search for a suitable business to acquire. He candidly shares the frustrations and time sinks that come with evaluating smaller deals that ultimately don't align with his primary acquisition goals.

Chris Barr [01:08]: "It's not going to be perfect. I think any search process, if done right, is going to have a lot of imperfections along the way. So adjusting as you go is the name of the game."

Chris emphasizes the importance of viewing each potential acquisition as a learning opportunity rather than focusing solely on the end goal of purchasing a business.

Jack Carr [01:40]: "The goal is to pick up knowledge and information from each. It's like dating – you're dating these businesses to figure out which ones you like or don't like."

This analogy underscores the iterative nature of the acquisition process, highlighting that each interaction and evaluation sharpens Chris's approach and decision-making skills.

Sourcing Leads and Networking Strategies

A significant portion of the discussion centers around effective strategies for sourcing new leads and building a robust pipeline. Chris outlines his methods, which include:

• Cold Outreach: Utilizing databases like D&B Hoover's to identify and contact potential businesses.

• Networking Events: Attending chamber of commerce events and local networking gatherings to build relationships and uncover hidden opportunities.

• Engaging with Professionals: Meeting with estate attorneys and commercial lenders to expand his network and gain referrals.

Chris Barr [06:28]: "I've been cold outreaching to businesses and a lot of owners really just like and again I try to pose, hey, you know, young ambitious entrepreneur here would love to buy you a cup of coffee..."

Jack challenges Chris to explore additional avenues, such as partnering with private equity groups to access "table scraps" – smaller businesses that private equity firms may overlook.

Jack Carr [07:10]: "If you could get in close with them and say, hey, we're looking for this lead size that's much smaller than yours, we'd be willing to pay you for it."

Chris acknowledges the potential of this approach and expresses enthusiasm about integrating it into his strategy.

Evaluating the Pool Service Business: Pros and Cons

The heart of the episode revolves around Chris's evaluation of a pool servicing business he recently conducted a drive-along with the owner. They dissect the business's operational structure, financial health, and scalability.

Pros:

1. Diverse Revenue Streams: The business offers a threefold range of services – chemical cleaning, equipment installation, and pool remodeling – providing consistency and opportunities for higher-ticket sales.

   Jack Carr [12:16]: "I really love that aspect. It's a highly fragmented market with a lot of scale opportunity in the pool service industry."

2. Targeted Clientele: Serving multi-million-dollar homes ensures a clientele that can afford luxury services and are less sensitive to market downturns.

   Jack Carr [20:57]: "They write the check. It's very low hassle."

3. Scalability: The business model allows for easy expansion by acquiring additional routes and integrating existing staff into the operation.

Cons:

1. Labor Classification Issues: A significant concern is the use of 1099 contractors instead of W2 employees, posing potential risks with IRS compliance.

   Chris Barr [22:16]: "A lot of their employees are 1099, and I feel like that's generally the case for a lot of services and especially home services business."

2. Operational Consistency: Maintaining a branded and consistent customer experience is challenging when relying on subcontracted labor.

   Jack Carr [25:01]: "If they're driving in your trucks and you're putting them on a schedule, they should be W2."

3. Financial Transparency: The business has shown fluctuations in SDE (Seller’s Discretionary Earnings) due to expenses that may not be directly tied to operational costs, raising red flags about financial integrity.

   Jack Carr [32:39]: "If they'll lie to the IRS, they'll lie to you."

Financial Due Diligence and Accounting Practices

The conversation shifts to the critical aspect of financial due diligence. Jack and Chris discuss the implications of accounting practices that inflate SDE through personal expense allocations, which can distort the true financial health of a business.

Chris Barr [29:43]: "If you're expensing new parts for your boat and putting it on the business, if you're expensing home repairs or whatever through the business to avoid paying taxes, well, that's just additional SDE."

Jack emphasizes the importance of verifying all financial claims through meticulous due diligence and highlights the necessity of hiring qualified accountants to scrutinize financial statements.

Jack Carr [36:35]: "What you're buying in a business is you're buying the systems. You could go out and spend a million, pretend this business is a million dollars... you buy the buy side business because it's a business in a box."

Chris agrees, acknowledging the need to verify all financial aspects to ensure the purchase price accurately reflects the business's profitability.

Lessons Learned and Strategic Insights

Throughout the episode, both hosts share invaluable lessons for aspiring business acquirers:

1. Importance of Systems Over Numbers: Emphasizing that acquiring a business is more about the underlying systems and less about the presented financials.

   Jack Carr [38:34]: "You just have to make sure that their revenue is steady with the systems in place that are also healthy."

2. Balancing Risk and Reward: Understanding that no business is perfect and determining the threshold of acceptable "hair" or imperfections that won’t jeopardize the acquisition.

   Jack Carr [43:29]: "Don't buy a deal with hair that's going to sink your ship."

3. Growth Over Quick Fixes: Focusing on long-term growth initiatives rather than hastily addressing short-term financial pressures like paying off SBA loans early.

   Jack Carr [48:38]: "Don't worry about the loan, put the money towards growth initiatives."

Future Plans and Closing Remarks

Looking ahead, Chris Barr outlines his upcoming strategies to enhance his acquisition efforts. He plans to intensify his outreach to private equity firms, increase direct cold calls to legitimate businesses, and continue refreshing his broker network despite a current slowdown in relevant listings.

Chris Barr [51:40]: "Private equity love where I'm going to take that. Again, cold outreach via the DMV to talk to individual business owners..."

The episode concludes with Jack Carr encouraging listeners to engage with the podcast's resources and explore further workshops and groups available on their website.

Jack Carr [53:30]: "Head over to ownedandoperated.com to check out the workshops and the groups there."

Key Takeaways

• Thorough Due Diligence is Crucial: Always verify financial statements and expense claims to ensure the business's true profitability.

• Understand Labor Classification Risks: Properly classifying employees can prevent significant legal and financial repercussions.

• Focus on Systems for Scalability: Acquiring businesses with robust systems in place facilitates smoother transitions and scalable growth.

• Network Strategically: Building and maintaining a strong professional network is essential for uncovering hidden opportunities and securing valuable leads.

• Balance Risk with Growth: Accept that no acquisition is perfect, but ensure that any imperfections do not compromise the business's viability and your financial well-being.

This episode offers a comprehensive look into the nuanced process of business acquisition, providing listeners with actionable insights and real-world experiences to guide their entrepreneurial endeavors.