The Small Business Black Holes with Alan Pentz

When Risk Pays Off: Inside Group Captives and LP Investing with Sam Bacon of Green Circle Demolition

Feb 20, 2024

Sam Bacon, President of Green Circle Demolition, discusses the benefits of group captives, LP investing in real estate, and managing inconsistent revenue streams. They delve into the challenges of owning scrap yards and the risks and benefits of joining insurance group captives. They also touch on environmental concerns, investment strategies, liquidity management, and the impact of macroeconomic factors on the construction industry.

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INSIGHT

Demolition Business Exit Challenges

Demolition companies are difficult to exit due to their non-recurring revenue models and fluctuating contracts.
Private equity firms find them less attractive due to large receivable balances and costly growth.

ANECDOTE

Green Circle Demolition's Start

Green Circle Demolition started with interior demolition and asbestos abatement.
They expanded to other environmental remediation services due to the broad contractor umbrella.

INSIGHT

Risks in Demolition and Abatement

The demolition and abatement industry carries long-tail risks, especially regarding worker's compensation and mesothelioma.
While perceived risk is high, actual physical risk can be mitigated with proper safety measures.

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In this episode of the Small Business Mentor podcast, Alan Pentz is joined by Sam Bacon, President of Green Circle Demolition. Join them as they explore entrepreneurship in the construction industry, digging into the pros and cons of joining group captives, what limited partner investing is really like, and how to manage inconsistent and unsteady revenue streams and contracts.

Having learned the business from a former demolition owner, he expanded Green Circle’s verticals within the core demolition service offerings. Green Circle is now a premier demolition and environmental contractor committed to maximizing client value by providing professional, affordable solutions to specific customer needs. Sam is also a Board Member of the National Demolition Association, representing over 1,000 U.S. and Canadian companies offering demolition and related services and products.

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Quotes:

"Essentially, [ a captive is] a nice way for you, as a business owner, to put away a few hundred thousand to a few million dollars a year that has the potential to come back to you half a decade later. And it's something you're paying for anyway, so you're deducting it 100% on the front end, and then you're bringing it back at capital gains rates 5 to 7 years later when those policy periods are closed".
"I don't want to be able to go out and buy a car or buy I. I want it gone. I want it away from my greedy hands that might spend it on something”.
"It is very cowboy, man, 100%. I mean, it's just you’ve got to buckle up because you don't know what you're getting. There's nothing consistent".

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