This week features John Wilson, owner of the Owned and Operated Podcast and a specialist in plumbing and HVAC acquisitions. He talks about a $4.5M HVAC business boasting 33% margins, questioning the sustainability of these figures as it scales. They dive into the importance of focusing on core services over multi-trade diversification for better margins. John also sheds light on the Northeast market dynamics, including the influence of union presence on pricing and strategy, and the complexities of navigating service work versus new construction.
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Active Account Definition
Active account definitions vary, impacting customer base assessment.
Clarify the time frame used for "active" accounts (e.g., last 36 months for plumbing).
volunteer_activism ADVICE
Reactivating Customers
Leverage technology to reactivate inactive customers.
A larger customer list can become a substantial new lead source.
volunteer_activism ADVICE
Multi-Trade Challenges
Avoid being multi-trade at smaller revenue levels (e.g. $4 million).
Focus on one trade to improve margins and overall business health.
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How Acquisition Entrepreneurs Outsmart the Startup Game
Walker Deibel
In 'Buy Then Build,' Walker Deibel provides a comprehensive guide for acquisition entrepreneurs. The book explains how to skip the startup phase and generate profitable revenue immediately by buying an existing company. It covers topics such as finding great brokers, generating 'deal flow,' uncovering opportunities and risks, navigating the acquisition process, and transitioning into the role of a CEO. Deibel argues that buying a business is often more lucrative than starting one from scratch, especially with the current market trends and the retirement of baby boomers who own many small businesses.
In this episode, we reviewed a $4.5M plumbing and HVAC business with a strong focus on repair and replacement services in the Northeast US. With 1.4M EBITDA and 2,500 active accounts, it has a balanced revenue stream, recurring income, and no exposure to new construction. The big question is whether the impressive 33% margins are sustainable as the business scales.
Thanks to this week's sponsor:
Acquisition Lab and their team have been longtime supporters of the pod.
Acquisition Lab exists to help people buy a business and navigate all the complexities of the process, as well as provide a trusted framework, tools, and resources to support you from search to close.
If you are serious about buying a business, check out acquisitionlab.com or email the Lab's director Chelsea Wood, chelsea@buythenbuild.com and mention us ;)
Business At A Glance Revenue: $4.5M (2023) EBITDA: $1.4M Customer Base: 2,500 active accounts Location: Northeast US Revenue Mix: 60% plumbing, 40% HVAC Team: 23 employees Focus: Repair & replacement only What We Thought Customer Base Questions John raised concerns about the definition of "active" accounts. If the 2,500 accounts are truly recent, it's impressive. Otherwise, it could indicate a weaker client base than advertised.
Multi-Trade Challenges At $4M, managing both plumbing and HVAC might hurt focus. John thinks focusing on one service would improve margins.
Northeast Market Strength The business benefits from higher ticket prices in the region due to hydronic heating systems, but unionization could pose a challenge depending on location.
Acquisitions Anonymous - #1 for business buying, selling and operating 