Small SDE, Big Upside: Buying a Business with 5 Employees
Oct 21, 2024
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Christiana Laugen, a former tech professional, shares her daring leap into entrepreneurship by acquiring a 40-year-old pool maintenance business. She delves into her motivations for leaving the corporate world, emphasizing her desire to 'eat what she kills.' Christiana discusses the rapid changes she made, including restructuring her team and enhancing operational efficiency through technology. She also highlights the unique challenges of commercial versus residential services and the exciting potential for growth in what many consider 'boring businesses.'
Christiana Laugen transitioned from tech to acquiring an established pool cleaning business to have a more hands-on impact and embrace new challenges.
Her acquisition strategy focuses on leveraging the potential of 'boring businesses' with stable customer bases for profitable growth opportunities.
Maintaining a mentor-like relationship with the previous owner has been vital in navigating transitions and ensuring business continuity during operational changes.
Deep dives
Embracing Change in Career Path
A career transition from the tech sector to owning a home services business is explored. The guest, Christiana Laugen, left a successful role at a publicly traded tech company, driven by a desire for a more hands-on impact in her work. She found her opportunity in acquiring a small pool cleaning business, emphasizing her readiness to embrace this unglamorous venture. Despite initial concerns about how her career shift would be perceived, Christiana expressed confidence in her decision, believing that her past experiences would contribute to the business's future success.
Acquisition of a Boring Business
Christiana acquired a small pool cleaning company operating with just five employees, generating $300,000 in Seller's Discretionary Earnings (SDE). The acquisition was made under the notion of purchasing a 'boring business,' a concept that emphasizes the potential profitability and growth of businesses that may not seem exciting. She chose to purchase an established business rather than a startup, believing that existing stability and a loyal customer base would offer a solid foundation for growth. This reflects a strategic approach to entrepreneurship where underappreciated businesses are seen as opportunities for development.
Challenges and Opportunities in Small Business Growth
Christiana aims to implement significant operational changes within the pool cleaning business to drive efficiency and growth. She identified opportunities for improvement in hiring practices, technology adoption, and marketing, seeking to transform the company into a more systematic operation. Addressing these issues quickly, however, has presented challenges for both employees and Christiana, necessitating a careful balance between immediate changes and employee adaptation. She recognizes that while fast improvements are essential, they also require sensitivity to the existing team's dynamics.
The Role of Seller Relationships in Transition
The relationship with the previous owner has been crucial for Christiana during the transition period. The former owner, who retains a 5% stake, has provided valuable mentorship and support, positively impacting the business's continuity. Christiana's decision to maintain this partnership allows for collaborative growth while enabling her to assert control over the new direction of the business. Their rapport has helped navigate operational challenges, demonstrating the value of strong relationships in business ownership transitions.
Long-Term Vision and Growth Potential
Christiana views her journey as a long-term project, highlighting the importance of patience and sustained effort in small business ownership. While specific growth metrics remain flexible, her focus is on building a profitable and scalable operation through strategic improvements. She aims to raise the business's profile and market presence, seeking opportunities beyond merely maintaining its current operations. Christiana's commitment to a clear long-term vision assures that her goals are rooted in both personal fulfillment and professional success.
