In this episode of the M&A Launchpad Podcast, hosts Casey Minshew and Feras Moussa interview JD Beck, a successful entrepreneur in the plumbing and HVAC industry. JD, a graduate from the University of Alabama with an electrical engineering degree, went straight to the army after college. After the army, JD spent time in the corporate world before discovering the world of business acquisitions. In 2022, JD stumbled upon Mountain Valley, a local plumbing and HVAC business, which he then acquired for an incredible price. JD continues to lead and operate Mountain Valley, while simultaneously acquiring other businesses in the space.
JD discusses the challenges he faced during his transition, including the acquisition of Mountain Valley Plumbing, operational changes, and the importance of building a high-performance team. J.D also emphasizes the significance of effective pricing strategies and the role of business brokers in finding opportunities. He discusses the challenges of his first deal compared to subsequent ones, the strategies he employed to evaluate businesses, and the significance of networking through platforms like Twitter. JD also reflects on personal growth and leadership changes within his company, outlining his future goals for expansion and profitability.
In this podcast episode, we discuss:
- HVAC & Plumbing Industry
- Improving Operations in the First Year
- Due Diligence in an Acquisition
You can connect with JD by X (Twitter) or Email: @dirtyhandsops or jd@mtnvalleyplumbing.com
Additional Resources:
- Access our archive of video interviews on YouTube
- Get in touch with show hosts Casey Minshew and Feras Moussa at – info@equitylaunchpad.com
- Looking to invest in M&A opportunities or partner with an advisor to acquire, scale or sell your business? Visit Equity Launchpad
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🎧 Podcast on Apple: https://podcasts.apple.com/us/podcast/doubling-revenue-in-a-plumbing-hvac-company-through/id1740382586?i=1000692208450
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Transcript
00:00 all right on today’s episode we
00:01 interviewed JD where we talked about you
00:03 know what it looks like to transition
00:05 and go buy a plumbing HVAC company right
00:08 some of the mistakes made UPF front and
00:09 then going on and acquiring two more
00:11 right and starting to build not a small
00:13 company but really build a midsize
00:14 company that is you know starting to
00:16 have cloud and going into different
00:17 regions and strategically buying them so
00:19 Casey what were some of your takeaways
00:21 man you’re gonna hear me say this a
00:22 hundred times in these intros when I
00:23 meet these guys that are quick starts
00:25 right I mean JD did not think for a very
00:28 long time he didn’t stew he went bought
00:31 a business solved problems bought
00:33 another one solved problems bought
00:34 another one and very quickly you know
00:36 had some some great growth in the
00:38 business and you learned along the way
00:40 that was a lot part of my my startup
00:41 acquisition side just went and got got
00:43 involved now has it been the best story
00:45 in the world no but you learn so much to
00:47 get you to the next one and sometimes
00:49 action speaks a lot more than
00:52 spreadsheets and all the other stuff
00:53 yeah ultimately you got to bet on
00:54 yourself right and you make those
00:56 mistakes on that first one and like he
00:57 said I mean that first one is not meant
00:59 to be the home run right it’s that
01:00 second that third one you start to get
01:01 smarter you get you start to get
01:03 economies of scales you start to get
01:04 more efficient and you can start to roll
01:06 with it so lots done pack on this one I
01:08 mean I learned a lot and it’s got me
01:09 more excited about HVAC and
01:14 plumbing all right guys just take one
01:16 second here real quick when you’re
01:17 buying a business ensuring the financial
01:19 health of the company is critical and
01:21 that’s where a quality of earnings
01:22 partner comes in quality of earnings
01:24 gives you confidence in the financials
01:25 of the company that you’re purchasing it
01:27 aims to protect your investment and
01:29 ensure that you’re stepping into a
01:30 profitable business on data Patrick of
01:32 okell Advisory Group is your Dynamic
01:34 quality of earnings partner he’s here to
01:36 help you buy the right business on your
01:38 timeline Patrick’s entire practice is
01:40 focused on business Acquisitions your
01:41 Niche is his Niche and over the past
01:44 decade Patrick’s helped more than 200
01:45 buyers like yourself successfully
01:47 purchase and operate enduring profitable
01:49 businesses in fact Patrick’s helped some
01:51 listeners of this show so if you’re
01:53 buying looking for help with the quality
01:55 of earnings Financial due diligence
01:57 Network capital and more head to
01:59 oconnell advisory group.com or just
02:01 click the link in the show notes hey JD
02:03 welcome to the show hey thanks for
02:05 having me guys man have you JD all right
02:07 and today’s episode we’re gonna talk
02:08 about Plumbing HVAC and all the above so
02:10 JD you want to give a little bit of
02:12 background about yourself yeah uh so I’m
02:14 from Birmingham Alabama originally went
02:16 to college at the University of Alabama
02:18 I was actually there for Nick sabin’s
02:19 first game fun fact wow that’s cool
02:22 right um got a degree in electrical
02:25 engineering that I promptly never used
02:27 so right after college I went in the
02:28 Army I was a COR of Engineers officer
02:30 for the United States Army for great
02:32 four years didn’t want to do 20 got out
02:34 of that that brought me to Colorado
02:37 originally when I left the Army I had a
02:39 career in commercial elevators of all
02:41 things so I joined a company called
02:42 Shindler elevator went to San Francisco
02:44 for about two years as a project manager
02:47 supervisor type went to Phoenix a lot
02:49 more Hands-On uh field supervision role
02:52 in Phoenix for a couple years and then
02:53 came back to Denver with a different
02:55 company to to like take over a
02:56 construction department for them was
02:58 looking for the next thing and the
03:00 corporate world and just just wasn’t
03:02 finding it had a couple good things come
03:03 my way but it it either required moving
03:06 or taking a weird side step or something
03:09 like that I was sitting on a job offer
03:11 actually to go work for a guy back in
03:12 California to run a small business of
03:14 all things and I was talking to my wife
03:16 and we’re like hey we really want to
03:17 move back to California we love Colorado
03:19 I decided you know the best way to get
03:21 to stay into Colorado is to invest in
03:23 Colorado so we decided to put our time
03:24 and our money into the state and I
03:26 started looking for a business to buy
03:28 that was the summer of 21 so covid
03:30 pretty much uhuh started looking around
03:33 got in touch with some Brokers had some
03:35 awkward just learning how to buy
03:37 businesses learning how to like make
03:38 offers not even buy business I had to
03:40 make offers and meet owners right chased
03:42 a couple companies actually had a deal
03:44 that I got in I got a signed Loi on ran
03:47 through diligence realized it just
03:48 didn’t make any sense I had a dead deal
03:50 which which was super awkward because I
03:52 told my employer at the time that I was
03:53 about to buy this company and then it
03:55 fell through um managed to be able to
03:57 stay on with that employer found
03:59 Mountain Valley in uh the spring of 22
04:03 and it was a little smaller than what I
04:04 wanted to buy but it just checked a lot
04:06 of boxes right like they had a great
04:09 recurring customer base it was kind of
04:11 in a remote location so it literally had
04:13 like a physical barrier to entry for
04:15 competition to come in and it was in an
04:17 industry that I was pretty interested in
04:18 the plumbing and HVAC industry oddly
04:20 enough I actually went and looked at the
04:22 business totally on a lark I was
04:24 actually chasing a different company and
04:26 going to a franchise Discovery day and
04:28 this one came up as an SS Park and I’m
04:30 like sure I’ll drive the hour and a half
04:31 from Denver after Des Park and look at
04:33 this thing and it it just made a lot of
04:35 sense so did the deal got in her Loi uh
04:38 closed on it in June of 22 and we’ve
04:41 been Off to the Races ever since bought
04:43 a second company really small deal
04:46 seller finance deal just a a phone
04:49 number and a website in the spring of 23
04:52 plumbing company that got us out of
04:54 essess park so originally if you’re not
04:56 familiar with Colorado geography essess
04:57 Park is a very small town there’s about
04:59 6 homes in just in that service area but
05:02 it’s about 30 minutes away from like the
05:04 main Front Range of Colorado where all
05:06 the bigger cities are like like Denver
05:08 Boulder Fort Collins cities people have
05:10 heard of and so that that second
05:12 acquisition got us a customer base a
05:14 small one albe it but a customer base in
05:16 Northern Colorado we moved the shop
05:19 slowly down to the Loveland area which
05:21 is which is kind of near Fort Collins um
05:23 and then in the fall of
05:25 23 um believe it or not I had the
05:27 opportunity to buy a company called JD’s
05:29 Plumbing just made sense right you kind
05:33 of uh that was a much bigger deal um
05:38 that was a a true million dollars in
05:40 Revenue about about 300 in sde uh closed
05:43 on that at the end of September in 23
05:46 and we we kind of slowly merged them all
05:48 under one brand name the JD’s brand name
05:50 is still out there but the minute
05:52 somebody calls in we tell them oh hey
05:54 it’s you know it’s Mountain Valley now
05:55 we move on with a customer relationship
05:57 from there we’ve been reading that
05:58 roughly when I got into this the last
06:01 full years of financials uh for Mountain
06:03 Valley they were doing a a little over a
06:06 million dollars a year in Revenue uh we
06:08 just closed out last year about $4 and a
06:10 half million do of Revenue so in two
06:12 years it’s it’s grown about 4X which is
06:15 painful and I would it’s painful and I
06:17 would not recommend it but here we are
06:20 we’re gonna we’re gonna uncover that I
06:22 got to know about that so there’s a lot
06:23 to unpack this you’re in a service
06:25 business you’re you’re 247 I imagine
06:27 yeah we’re not really a 247 company we
06:30 do close at 700 p.m. and we don’t work
06:32 weekends we don’t have on car anything
06:33 like that and that’s another decision
06:35 I’d be happy to talk about but we did
06:36 get away from that stuff all right so so
06:38 let’s unpack so first of all you’re kind
06:40 of in the elevator space which we really
06:41 like those businesses we got very close
06:43 them too we got close on one of those
06:45 because I mean talk about a good mode
06:46 right know abouts and it’s they’re
06:48 unionized and it’s it’s hard to even I
06:50 don’t even want to get into that yeah
06:51 and so but then you obviously went off
06:53 ended up buying this first plumbing
06:54 company right Mountain Valley yep you
06:56 know and you me as you mentioned it was
06:57 a million dollars of Revenue what was
06:59 the the SD
07:01 uh the last so the seller Gary he had
07:05 very much so um like he was ready to
07:08 retire and so the last year of SD was
07:10 like it was like 75 grand it was not
07:12 much oh wow I think yeah the trailing
07:14 three years was like 130 okay but but
07:18 yeah I mean like that last year it was
07:20 it was clear he was you know ready to go
07:22 don’t worry we bought a deal from a Gary
07:23 too so and did you buy that did you get
07:26 did you get a good multiple yeah what’
07:27 you buy that for all about 2.2
07:30 that’s
07:31 very and then it came with um it came
07:35 with real estate so so so you know the
07:37 ins and outs of the SBA I was able to
07:39 finance it as a real estate deal so I
07:41 had on a 25 year term yeah I mean so
07:44 real estate at 25 that’s nice yeah and
07:47 um uh this was back before interest
07:49 rates went up and so I mean my debt
07:51 service was like three grand a month it
07:53 was nothing it’s a no-brainer nice I
07:55 mean yeah it’s always sweet if you can
07:56 because you know if you can buy
07:57 basically doing multiple Arbitrage right
07:59 buying business but at a real estate
08:01 multiple so and honestly you’re going to
08:04 up your first business like that’s just
08:05 all there is to it you’re going to make
08:07 some real mistakes and having that
08:09 multiple it it’s it’s just risk
08:12 tolerance right like if your multiple is
08:14 low your debt service is stretched out
08:16 you’ve got a lot of room to make
08:17 mistakes and you’re gonna make them just
08:19 just be prepared walking into it
08:22 absolutely so you bought that first
08:23 business clearly was kind of you know a
08:25 little tired right how many employees
08:27 was it and what of that first let’s say
08:28 that first 6 months like and or some of
08:31 the the learnings and mistakes you made
08:32 then yeah so it was seven employees six
08:35 field technicians and we had a girl in
08:37 the office a woman in the office and I
08:39 didn’t really change much for 6 months
08:42 this was a very old school plumbing
08:44 company it was paper billing it was time
08:47 and material billing there was no flat
08:49 rate we would bid like a furnace but we
08:51 did the pace we worked at was incredibly
08:54 slow we did about one furnace a week and
08:57 that was pushing it like it was it was a
08:59 furnace or a boiler or a remodel every
09:02 week we do like one a day now it’s I
09:04 mean like or two some days it’s it’s you
09:05 know the pace is as dramatically grown
09:09 it was just an part which as I said it’s
09:11 it’s a town of about 6,000 houses had a
09:13 very dominant position I would say but
09:15 it was so underprice and of course
09:16 you’re going have a dominant position if
09:17 you’re that cheap right so for the first
09:19 six months I didn’t really do much we
09:21 had some Personnel challenges on a
09:23 different podcast I talked about my
09:24 master plumber let’s just say he’s self-
09:26 selected to leave through some actions
09:28 and you know the
09:30 and that mes with your license right
09:32 yeah it does which I saw it coming um I
09:35 was able to get another guy in pretty
09:37 quick but still yeah like for the first
09:38 six months man you’re you’re ready to
09:40 like like you’re Sweating Bullets about
09:41 that license it’s a it’s a bit unnerving
09:43 I don’t have the master plumbing license
09:45 I do have the mechanical license so I do
09:47 all the HVAC stuff the boiler stuff but
09:49 the plumbing license is a whole another
09:50 animal and yeah we had that challenge
09:53 but aside from that really there weren’t
09:54 too many challenge we had one really big
09:56 project which thank you Gary I had I had
09:58 this job for it’s $120 or $140,000 a
10:02 very large boiler change out and oddly
10:05 enough like it was It was kind of
10:07 beautiful because so we required a down
10:10 payment and then there’s like an
10:11 eight-week lead time it’s a very large
10:12 commercial boiler and so we were able to
10:15 sit on this giant down paint while we
10:16 waited for the material to come in so it
10:18 was a huge boom to my working capital
10:20 which in the first six months you really
10:22 kind of need that kind of stuff well you
10:24 always need that kind of stuff in the
10:26 first six months you really need that
10:28 yeah man tell me about it so the first
10:31 six months I didn’t really do anything
10:32 but I mean it was clear that that like
10:35 some things needed to change one there
10:36 was no scheduling so I didn’t really do
10:38 like a ride along or anything with Gary
10:40 before I bought the company so like day
10:42 one I show up and the way they scheduled
10:44 things was just I mean looking back at
10:46 it was awful so like there was no system
10:49 like like the like the lady at the front
10:50 would take your phone call she would
10:52 write down make a paper job ticket for
10:54 you she would look at she had these like
10:56 three seven slot dividers like one for
10:59 each week so going out three weeks then
11:01 one slot for each day and she would just
11:03 look at the slots and be like well I
11:05 think you know Tuesday next week looks
11:07 kind of empty let’s put you on Tuesday
11:09 so she stick your paper ticket there and
11:11 then Tuesday would come around all the
11:12 guys would come into the shop we’d pull
11:14 out all the tickets for Tuesday we had
11:16 these like chip Clips on the wall in my
11:18 office we’d throw them up there and then
11:20 whatever tickets we just didn’t feel
11:22 like doing the day before we’d get to
11:23 those I mean it was a disaster there was
11:25 no scheduling there was no dispatching
11:27 there was none of that kind of stuff so
11:30 I kind of knew like we need to organize
11:32 this we need to get it better and we
11:34 need to work on our pricing too so I did
11:36 raise our labor rates and our material
11:38 multiples that’s about a 20% increase
11:41 honestly I’ll tell anybody that’s buying
11:43 a brand new business especially one in
11:45 the condition kind of like this that
11:46 there’s probably room to raise your
11:48 prices when you first step in like
11:50 within a month or two you know almost
11:51 always and I mean unless you’re buying
11:53 like a really sophisticated High
11:55 multiple business if you’re buying this
11:56 thing at like two or 3x Eva you can
11:58 probably raise your price
11:60 and so I did raise the prices and it was
12:02 like a 20 15% raise it wasn’t even that
12:05 much the only people that complained
12:07 about it worked for me you know kind of
12:09 tell you something about how that
12:10 business was right so like the customers
12:12 will never take that and you’re like
12:14 they all did yeah no nobody that’s not
12:17 the customer we need I mean well yeah
12:20 and there was no thought like that like
12:22 like they wanted every customer no
12:23 matter how cheap it was you know and
12:25 there was no thoughts to like maximizing
12:27 tickets or getting you know good
12:28 multiples on r new or how much money did
12:31 you bring in this week stuff like that
12:33 just wasn’t really thought of you know
12:35 so I knew we needed some work on on
12:37 scheduling like internal operations of
12:39 the business I knew we needed some work
12:41 on pricing we build time material which
12:44 has always not set super well with me
12:46 like I just don’t like the idea of it I
12:48 think it makes sense in a commercial
12:49 space but in a residential space you’re
12:51 telling a customer you’re going to pay
12:53 me 140 150 bucks an hour until I’m done
12:56 like that’s just that that doesn’t sit
12:58 well with me I wouldn’t like that want
12:60 to know a number just tell me how much
13:01 it’s G cost is well like well known
13:04 right it doesn’t have the risk that the
13:05 commercial stuff has which is like
13:07 you’re G one problem that opens up
13:08 another problem you know it’s just it’s
13:10 a much it’s easier to give you fixed
13:12 pricing too well if you think about it
13:13 too so if you are billing somebody time
13:15 material your best technicians that work
13:18 the fastest bring you the least amount
13:20 of money because they’re just burning
13:21 through t i I actually had two or three
13:23 like pretty skilled technicians brag
13:26 about how fast they were running through
13:27 their tickets and I’m like you
13:29 understand we’ve built
13:30 hourly here right like this is not like
13:32 you’re actually less valuable to me now
13:34 I mean it’s it’s it’s kind of a screwed
13:36 up situation that’s that’s the way it is
13:37 you know unless you start charging like
13:40 some kind of flat fee just to show up
13:42 which we we probably could have done but
13:43 we didn’t but anyway so I knew we needed
13:45 to do some like dispatching organization
13:47 some pricing tighten up stuff like that
13:50 right there’s a lot of different
13:51 software Suites out there I started
13:52 exploring them got us on one called
13:54 service Titan which know anything about
13:56 the industry it’s it’s pretty dominant
13:58 they just they just went public recently
13:59 yeah I’ve heard of service Titan yeah
14:01 I’ve heard yeah yeah it’s very powerful
14:04 dispatch billing all your stuff right
14:06 yep yeah very powerful piece of software
14:09 pretty happy with it uh it’s expensive I
14:11 will say but there’s some real advantage
14:13 to it especi I could I could talk about
14:15 it for a long time you probably bolted
14:17 on your other Acquisitions with it right
14:18 you probably were able to take them yeah
14:20 that’s that’s nice yeah yeah and then um
14:23 I threw in with this uh uh this company
14:25 called the new flat rate which I still
14:27 strongly recommend we have since left
14:29 their program but I do really think it’s
14:32 great for a company that was in a
14:33 situation like mine where there’s just
14:35 no like flat rate price book or anything
14:38 like that that’s available to you you’re
14:39 building it all from scratch so they
14:41 give you that like like they give you
14:42 this this price book they give you some
14:44 pretty good sales training it’s a good
14:45 thing to jump into especially that but
14:48 what is that called it’s called the new
14:49 flat rate strongly encourage people that
14:51 are out there it’s not H specific right
14:53 is it the kind of thing where they come
14:54 sit down with your team for a week or a
14:56 couple of hours and understand the
14:57 business and then give you a flat rate
14:59 book of suggested you know pricing based
15:02 on what you guys do or how does that
15:03 work it is pre-built for plumbing HVAC
15:07 electrical and I think they do and
15:09 granted this was almost two years ago
15:11 now so and and they also had like
15:12 chimney sweeping God so they specialize
15:15 in the industries they know the pricing
15:16 should be in those Industries and
15:17 markets got it gotta got it yeah yeah
15:19 they’re kind of like if you ever heard
15:20 of a company called nextar they’re kind
15:22 of like nextar light is what I like
15:24 super light like nextar is a really big
15:26 animal you get into that it’s I would
15:27 say it’s a cult but that’s one their
15:29 story
15:30 but but these guys yeah it’s it’s they
15:32 give you some training they’ll help you
15:33 build this price but they have a
15:34 template for it I will say I’m not
15:37 sponsored by I don’t get any kind of
15:38 Kickbacks I’ll give you my honest
15:40 opinion of them it is a bit weird I
15:42 would say because like they’ve got it
15:43 set up they use some kind of weird
15:44 language you can customize it all and
15:46 make it way less weird but it it does
15:48 take some getting used to I still think
15:50 it’s a great thing the reason we left it
15:52 is is the technicians just never really
15:54 understood it and it was hard to enforce
15:56 it and they were going off menu a lot we
15:59 made something that made a lot more
16:00 sense the technicians but I would say if
16:02 you’re if you’re coming from from zero
16:04 on this it’s a great program so to roll
16:07 that out roll out service Titan lo and
16:09 behold every technician quit because
16:12 what you’ll learn about about trade
16:14 companies is that they really are like
16:16 two types of technicians in residential
16:18 service there’s the guys that want to
16:20 just get paid hourly they wanted to be
16:21 as simple it’s all about just fixing the
16:24 problem as fast as humanly possible get
16:25 in and get out right these are kind of
16:27 like your low service level companies
16:29 there’s nothing wrong with them you can
16:31 make plenty of money doing that stuff
16:33 what I was trying to do is transition
16:34 our company what I would call a high
16:35 Service Company where we’re getting
16:37 bigger tickets we’re providing a higher
16:40 level of service we’re getting the
16:41 customers faster we have a more
16:43 complicated process to sell stuff and
16:45 then yeah we we sell stuff to you we are
16:47 we’re a business we are here to make as
16:49 much money as possible and if if the
16:51 customer doesn’t like it we’re okay
16:53 getting told no by a customer every once
16:55 in a while or you know 30% of the time
16:57 whatever it winds up being so those two
16:60 technician types don’t always play nice
17:03 together and so the guys in the first
17:05 group they all wound up quitting going
17:06 their separate ways I held on to a
17:09 couple of guys and honestly the guys
17:11 that are still with me that that stuck
17:12 with this I got one guy I think he made
17:14 120,000 last year and he took three
17:17 months off for the birth of a kid right
17:19 like it’s you know these guys are making
17:21 great money now we’ve got a performance
17:23 package that pays them very handsomely
17:25 we’ve made this a career that that pays
17:27 a true living wage in a state like
17:30 Colorado where they can afford to buy
17:31 houses now and have families and wives
17:33 and stuff like that which was pretty
17:35 awesome because you were you were
17:36 talking about earlier when we first
17:37 joined it was like you were talking
17:38 about payroll right you were talking
17:40 about man you pay weekly you pay on the
17:42 spot yeah not even like a week late like
17:44 week
17:45 of which is again man somebody and I had
17:49 another conversation earlier this
17:51 morning with another person you know
17:52 comp compensation drives Behavior right
17:56 get the compensation right it drives
17:57 Behavior so you the show the you got rid
18:00 of the guys that were not incentivized
18:02 to to make more money they just wanted
18:04 that consistency and you said hey guys
18:07 I’m now GNA force you to be a sales
18:08 agent when you go in there you’re gonna
18:10 learn on upsells you’re gonna learn how
18:12 to talk to them you’re you know all of
18:14 those things that then it sounded like
18:16 you grew your revenue from what a
18:17 million to four million is is
18:20 that yeah so I bought basically two 2.2
18:24 million of Revenue if you’d say 2.2
18:28 right 2.2 bought and then that grew to
18:30 four so but I mean hey growing through
18:32 Acquisitions is also a grow a fair
18:34 growth strategy so that’s yeah 4.6 a
18:37 that’s where we’re at okay that’s good
18:40 so so two questions how did you find
18:42 that first business we didn’t actually
18:43 talk about that and then I want to tr
18:44 just into that to the larger acquisition
18:46 that you did uh Brokers so I went
18:48 through every business I’ve bought has
18:50 been through transor Colorado Okay trans
18:53 World good grp yeah so uh again I’m not
18:56 sponsored by anybody 85 90% % of
18:59 business brokers are probably straight
19:00 up Crooks but the 10% you find that are
19:03 really good are worth their weight in
19:04 gold and so I managed to find the 10%
19:06 that I like and good Lord they’ve
19:08 they’ve honestly been assets like I mean
19:11 there’s still business broker games they
19:12 play don’t get me wrong but you start to
19:14 see through it and like you find guys
19:17 and they bring you good deals so um the
19:20 first one I did Chris canwell is
19:21 actually the owner I think he’s the
19:23 owner still I don’t quite know how trans
19:25 work it’s a like local franchises right
19:28 so um Chris owns the one here in
19:31 Colorado and then he owns one in Vegas
19:33 as well I think he’s moved out to Vegas
19:35 since then but Chris kwell is the one
19:37 that found Mountain Valley and then I’ve
19:39 also got another one Ross haes who I
19:41 would I would recommend anybody he’s
19:42 actually sold a business for a friend of
19:44 mine as well Ross was like the buy side
19:46 broker which I I don’t quite understand
19:49 where the line is here they they all
19:50 work for Trans they get paid by the
19:52 seller but sure one of these guys is a
19:53 buy side guy and yeah I mean I’d say
19:56 this like every time you call Ross and
19:58 ask him a question I I made you know
19:60 $20,000 so I don’t know I mean you can
20:03 say some bad things about Brokers but
20:05 you know these guys I’ve done three
20:06 deals with them I’m very happy with all
20:08 three no I mean they add value they’re
20:10 there for a reason so then they brought
20:11 you that that larger one so talk through
20:13 kind of what that act what what did you
20:15 do in terms of due diligence what how
20:16 did you put the deal together you know
20:18 what was the debt what was the equity
20:20 and the multiples well yes I mean I’d be
20:24 remiss here if I didn’t say one thing
20:25 I’ve been harping on recently one thing
20:27 I wish I had done in the first six
20:28 months of owning this business is like
20:30 tightened up my financial reporting a
20:32 lot better than I did so now I do my own
20:35 books like I have an accountant that
20:37 like helps me out like like actually the
20:38 taxes and everything but like internally
20:40 we do our own bookkeeping we do our own
20:42 payroll well I’ve got a payroll provider
20:44 but like we do our own bookkeeping I I
20:46 spent a lot of time in QuickBooks Online
20:48 I did not know how to do that when I
20:49 bought a company and I wish I had done
20:51 it from Day frakin Zero because I mean
20:54 like we’re all business owners here you
20:55 can hire a manager you can hire
20:57 technicians you cannot hire a business
20:59 owner accounting is a critical function
21:01 that always gets overlooked and then you
21:02 have to do the cleanup and life is not
21:04 good in the cleanup ask me how I know us
21:06 only two years to get the whole
21:07 organization cleaned up across multiple
21:09 companies it’s a pain but it’s critical
21:10 yeah that’s exactly what happened to me
21:12 so I wish I had done that and then like
21:13 if you’re going to throw in a CRM on top
21:15 of that like service Titan it has to
21:17 integrate with whatever Financial tools
21:19 you’re using and if it doesn’t you’re
21:21 even you’re even more screwed right even
21:23 further behind and so I found this deal
21:26 with JD’s plumbing and I think they had
21:29 another buyer working or something like
21:30 that so it was it was it was not off
21:32 Market but I couldn’t write an Loi on it
21:34 that’s that’s one thing trans World
21:35 scared about like if you get an Loi it’s
21:37 exclusive once you have it agreed to
21:39 right I guess not all Brokers do that
21:41 which is ridiculous but they were
21:43 working through another deal it I guess
21:45 it fell out and they they came to me
21:47 first and I said sure I’ll you know I’ll
21:49 Rite an Loi I wrote an Loi my original
21:52 financing was with live o it still all
21:53 is with live o and I called him I said
21:56 hey would you guys Finance this and uh
21:60 they said yes in like less than two
22:02 hours I basically said are you sure you
22:04 want to do this like they didn’t even
22:06 think about it they just said yeah we’ll
22:07 do it which which is a great thing about
22:08 live o like they’ll Finance your deal
22:11 live o sponsors our conference they’re
22:13 awesome we love live o they’re awesome
22:14 man yeah so the problem I had and what
22:17 held the deal up for three months is my
22:19 financials were an absolute mess and so
22:20 I had to bring in another accounting
22:22 agency they had to clean the books up it
22:24 cost like $6,000 it was awful got
22:27 through it though I had financials it
22:28 all made made sense did the deal right
22:30 so honestly man like that third deal was
22:34 was was a tenth of the work of the first
22:37 deal because and and this is what I say
22:39 anybody that’s aspiring to do this your
22:40 first deal is the hardest one by by far
22:43 and honestly what I would say is if you
22:45 can get in and get a small company and
22:47 and get it maybe it’s not big enough for
22:49 you but you can do more deals beyond
22:51 that and the second deal the third deal
22:53 the the 10th deal whatever it winds up
22:54 being they’re so much easier and so much
22:57 more profitable and so so much better
22:60 that honestly just get the first one
23:01 done make sure you don’t go bankrupt and
23:03 then and then start doing more that’s
23:05 that seems to be kind of the path here
23:07 it’s great advice man you learn from the
23:08 first one make mistakes and you got to
23:10 make sure you don’t make a mistake that
23:11 kills you and then that opens up the
23:12 door to the next one you know JD it
23:14 sounds like okay so you so you you don’t
23:16 have like a formal team helping you to
23:17 do diligence and look at all this stuff
23:19 you’re and that’s not your background
23:21 you’re not this is like you’re Financial
23:23 background accountant three of these
23:24 things so what is kind of your like
23:26 three bullet points when you’re due
23:27 diling these Serv compy what are those
23:29 key things you’re looking at um yeah
23:32 yeah I know we all say EA but you know
23:35 truly you should be looking at cash flow
23:37 net income things like that so how do
23:39 how are you looking at it especially in
23:40 the service based side you know so I’ve
23:43 got I still have the spreadsheet models
23:45 I made for my first deal I I pull them
23:48 up sometimes for a good laugh yeah
23:49 they’re not worth the the 10 megabytes
23:52 of data storage I pay on Google you know
23:54 it’s they were so far off you know I
23:56 think what I look for most what I’ve
23:57 looked for in my last couple of deals is
23:60 is revenue revenue really tells the
24:02 story and if they’re lying about Revenue
24:04 what else are they lying about you
24:06 especially if you’re buying within your
24:08 industry you know what your expenses are
24:09 going to be you know what your gross
24:10 margin is going to be so revenue is what
24:12 you’re really looking at so the way that
24:14 I validated is I look at their bank
24:16 statement so if the amount of money they
24:18 put in that month roughly matches their
24:19 revenue and do it like over a 12 month
24:21 time frame right so if like their 12
24:23 months or their their last 18 months of
24:26 of deposits match their revenue well
24:28 then even if they have a set of acrel
24:29 books it should be pretty darn close you
24:32 know and and if they’re right about that
24:34 then I’d say that’s a great smell check
24:37 the next thing I like to look at is
24:38 their tax returns if their tax returns
24:40 all match and you know they’re at least
24:41 not lying to the government if they’re
24:43 not lying to the government they’re
24:44 probably above board and then beyond
24:46 that like I do like to look at like
24:47 their Google ratings one thing I really
24:49 like to buy is Google ratings if they’ve
24:51 got like a 4.9 JDS had a 4.7 but it’s in
24:54 Denver which is a much more challenging
24:56 Market to work in the second company I
24:58 bought had a 4. n that’s that’s a great
24:59 thing those are the things that we’re
25:01 really buying funny that 4.7 is the low
25:03 bar in your mind I think 4.7 is still
25:05 great so oh no I’d say 4.7 is is the is
25:09 the floor in my opinion yeah sorry Casey
25:15 you’re okay I can tell you how to get it
25:18 up it’s fine room for improvement once
25:19 you kind of establish that like they’re
25:21 not really lying then like you know what
25:23 their expenses are at that point you can
25:25 be pretty confident I think if you’re
25:27 buying so like both these business I
25:28 bought there around a million Revenue
25:29 that’s that’s not big enough to justify
25:31 a true quality of earnings I had heard
25:33 there was a company doing like a very
25:35 abbreviated quality of earnings now for
25:37 like $7,000 that that might be worth it
25:39 for a first-time buyer I think I’d
25:41 encourage you to do that I would do what
25:43 I just told you like like do what I
25:44 would call kind of a smell check make
25:46 sure everything is passing the smell
25:47 check and then pass it off to a q guy
25:49 and pay the Seven Grand one thing I did
25:52 do so I had a deal that fell through
25:54 before I bought Mountain Valley and I
25:56 did a uh a a buyer B had another
26:00 business broker give me his opinion of
26:02 the value of the company so truly
26:04 independent third party that I was
26:05 paying I guess it wouldn’t be
26:07 independent but I’m paying this third
26:08 party right and he put together this
26:10 like 100 page report very detailed about
26:14 his opinion on the value of the business
26:15 which is effectively is what they do
26:17 whenever they intake a new customer to
26:19 sell this guy’s name is Jim desay he’s
26:21 actually with TransWorld and Denver
26:23 right now dude honestly so I’ve got an
26:25 NBA that I earned and the the $3,000 I
26:28 spent with Jim to get this done was
26:30 probably worth more than my NBA I
26:31 learned so much and like and like going
26:33 through the dead deal and everything
26:35 that was quite the education everybody
26:38 should do a dead deal once it’s great so
26:40 JD you know a lot of the people that are
26:41 probably listening have you know you’ve
26:43 you’ve knocked down in your acquisition
26:45 world in the last what two years you’ve
26:47 knocked down three three Acquisitions is
26:49 that about right yeah yeah that’s a an
26:52 impressive rate even if it’s they’re
26:53 small it doesn’t it doesn’t matter it’s
26:55 an impressive rate so I mean what’s your
26:56 advice to some of the people that are
26:58 sitting back back and they’re waiting
26:59 for that perfect deal or they’re having
27:01 struggles to engage what’s your advice
27:03 because obviously you’re going at it do
27:05 a self-funded search and do it while you
27:07 work full-time I did that because that
27:10 it takes a lot of the pressure off like
27:11 if you’ve got like if you’re sitting on
27:13 two years of living expenses and you’re
27:15 trying to buy a business and not work I
27:17 I wouldn’t do that that’s that’s just
27:18 too much pressure I was able to like do
27:21 my day job and come home and maybe skip
27:23 out at lunch and go look at a company or
27:25 something like that you can do it too
27:27 the other thing I would say is you will
27:28 never find a perfect business every
27:30 business has some hair I would agree
27:32 yeah yeah yeah and in fact like the way
27:35 that I found success in buying
27:36 businesses so for the first like three
27:38 to six months six months every Loi got
27:42 rejected and like honestly I think what
27:44 was going on I don’t know but I think
27:46 what was going on is I was quick to
27:49 write an Loi and say yep I love this
27:51 deal here it is I think they took my Loi
27:53 and shopped it and like they found
27:55 buyers they liked better which dude
27:57 they’re gonna do that you’re probably
27:58 the worst buyer out there because it’s
28:00 your first one you have no track record
28:03 they can’t even prove you’re going to
28:05 close how are they going to tie this
28:06 this this like 70 60 70 year old seller
28:09 up for a month or two or three and then
28:11 you get to the finish line and back out
28:13 right y the these guys they want their
28:16 their trusted buyers to buy from their
28:18 clients right so realize you are the
28:21 lowb the totem pole you are going to get
28:23 screwed you’re going to get cheated
28:24 you’re going to get like treated awfully
28:27 just keep riding LOL wi so the way I
28:29 found success was I committed to writing
28:31 one Loi a week I figured every business
28:34 had a value whether that value was what
28:36 they were asking whether it was above
28:38 which it never was or whether it was
28:40 below and uh most of the time it was
28:41 below right so I’d go look at a deal or
28:43 I’d find something like like there was a
28:45 there was a commercial Landscaping
28:47 Maintenance company that I thought was
28:49 kind of cool they did snow shoveling and
28:51 stuff and uh yeah I wrote an offer and
28:54 it was it was below asking price but
28:56 like this is what I thought it was worth
28:57 right so i’ I’d write an offer about
28:60 once a week and by the time I was done
29:02 with it I actually had a franchise that
29:05 wanted me to sign with them which I
29:06 guess all franchises do and I actually I
29:08 had two businesses to pick from there
29:10 was a uh there was an electrical
29:12 contractor that like we had a handshake
29:14 deal but he wouldn’t sign my Loi for
29:17 whatever reason and so I kept looking
29:18 and I and then I found Mountain Valley
29:20 and so by the end I got to say like like
29:22 there were three people that wanted to
29:23 go to dance with me I picked the one
29:25 that I like the best so put paper on the
29:26 street man you’ll find something
29:29 action right study goals getting into
29:31 action and that is the that is the
29:33 hardest thing to do honestly man it
29:34 sounds easy but to be disciplining to do
29:37 that and then to execute once once yeah
29:39 on once they do sign it now now you got
29:41 to go do the work right yeah yeah and
29:44 then I look back on that first deal like
29:46 I was going through some of the old
29:47 email I was looking for some documents
29:48 recently and like it was a painful deal
29:50 man I mean it was it was painful we had
29:54 there was it was painful I’ll just leave
29:57 at that I can’t believe believe how how
29:59 rough that first one was but how rough
30:02 the first one was the third one was that
30:04 smooth like it was we I mean it was the
30:06 easiest thing I think I’ve it’s it’s the
30:08 easiest $1.1 million I’ve ever spent
30:11 right yeah actually that’s the question
30:13 so the third one you you how much what
30:15 was the SD and it sounds like you bought
30:16 it for 1.1 million right yep yep I
30:19 bought it for a 1.1 I think I mean I do
30:21 think it was so it was definitely not my
30:23 best deal it was a bit overpriced but
30:25 the reason I was willing to pay a bit of
30:27 a premium buy strategic buy is okay to
30:29 pay up a little bit so H well yeah so
30:33 the real the real problem with Mountain
30:35 Valley was geography right so we had um
30:38 all of our customers were pretty much
30:40 within one ZIP code which is good in
30:43 some ways but it’s really bad in others
30:45 and it’s a very unique zip code and so
30:47 Mountain Valley was not going to be a
30:49 long-term super profitable valuable
30:52 business it was only in esss park so
30:54 most of my effort ever since then has
30:56 been to expand us we want to keep that
30:58 core Market but also expand out of it as
31:00 well just to create a better bigger
31:02 company and so and so the JD’s
31:04 acquisition was something that I
31:06 honestly I kind of needed so I paid a
31:09 little over 3x I think it was like 3.2
31:12 is what I paid on S A good multiple
31:15 which yeah so what I would say also too
31:17 if you’re doing a business in your own
31:20 like if you own a plumbing company
31:21 you’re buying a plumbing company you can
31:24 you can basically acquire these
31:27 companies and not expand your overhead
31:29 right so if I had been smarter about it
31:32 I would have done it faster but we don’t
31:34 have that office anymore we all run out
31:35 of one location I’ve got one set of
31:37 dispatchers one set of customer service
31:39 reps one set of technicians now you know
31:42 so you could basically do all that extra
31:44 revenue and increase your overhead
31:46 pretty minimally yeah no that’s the
31:47 beautiful thing of scale so it’s called
31:49 economies of scale and was there real
31:50 estate in that JD one kind of just how
31:54 do you just did a straight traditional
31:56 acquisition with live o so yep yeah
31:59 uh standard s SBA 7A deal got it so you
32:02 probably you probably put three 400,000
32:04 to to close to buy that deal and then
32:06 the rest kind of financed nope I uh I
32:09 put it um so I have a down payment no I
32:13 had um standard 10% in the first deal
32:16 and then they’ve done the second deal I
32:18 put 15 grand in it was a $90,000 you
32:21 know small deal the third ones it was
32:23 nothing down they were willing to do it
32:25 for nothing down oh awesome so aome
32:28 again kud kudos to live o um they will
32:31 they will do deals awesome perfect that
32:35 is a great way to segment into our
32:37 questions yeah I got some com for you
32:39 after congratulations to all your
32:40 success man I mean that’s pretty
32:41 exciting and uh hey we’re not there yet
32:43 but we’re on our way hey again we got to
32:45 celebrate every day right I mean that’s
32:47 that’s that’s all we get absolutely
32:49 indeed this payroll you got it done in
32:51 an
32:54 hour cool so uh we’re GNA jump into our
32:57 rocket round and this is when we
32:58 interview Our Guest ask three critical
33:01 questions jie what do you like to do in
33:03 your free time pretty much anything
33:04 physical so I’ve been doing Brazilian
33:07 jiu-jitsu for a while although I just
33:08 had an ACL tear so I’m kind of out of
33:10 commission but anything physical right
33:12 so Brazilian jiu-jitsu skiing running
33:15 weightlifting that kind of stuff playing
33:16 with my kids you know and my wife that
33:19 kind of stuff and my new dog I got a new
33:20 dog recently oh fantastic awesome and
33:23 what’s been your most memorable moment
33:24 in your business journey man you know um
33:27 leader ship changes I would say so or
33:30 like key employee changes so I mean I
33:32 briefly mentioned like the original
33:33 Master Plumber these are these are very
33:36 honestly man I’m a bit of a softy I
33:38 don’t like firing people I don’t like
33:39 that I like to think of us all as a you
33:41 know one big happy family truth is you
33:43 know we’re all really players on a Major
33:45 League baseball team here right so it’s
33:47 it’s it’s a bit of a struggle sometimes
33:49 to convince myself to make these
33:51 difficult leadership changes or you know
33:53 key employee changes but they’ve all
33:56 worked out amazing I’ve got a guy HVAC
33:59 general manager now that is I mean like
34:01 he has brought the company from frankly
34:03 a lot of the success is due to him um
34:05 I’ve got a new Plumbing manager it’s
34:07 about six months in now that honestly I
34:09 was at the point of shutting down the
34:10 plumbing side of the business it was so
34:12 bad I brought this guy in and it’s just
34:14 rocket ship it’s been great so while
34:16 these decisions are very difficult I’m
34:18 I’m really proud of myself for uh for
34:21 you know you’re the only one that can do
34:23 this you got to do it and it’s it’s
34:25 worked out every time no I mean that’s
34:26 being the same thing I’m probably a
34:27 little too nice and one of the it’s the
34:29 Band-Aid you don’t want to rip off but
34:30 every time you do you’re like man that
34:32 felt so good afterwards Y and you know
34:33 it’s a phrase that I heard and I try to
34:35 live by it more now which is like the
34:37 second you think someone is not a fit
34:39 you’re gonna let them go eventually it’s
34:41 kind of better to do it sooner than
34:42 later right and then kind of it helps
34:44 you get to that next Hill right and kind
34:46 of R it does so people either on the
34:48 train or not all right JD what is your
34:50 favorite tool or resource
34:53 Twitter my goodness it is it is such an
34:56 amazing networking thing like uh I I
34:59 never would have thought this but
35:00 Twitter X now whatever you want to call
35:02 it my goodness it is uh you will meet
35:05 some really great people um there’s a
35:07 couple guys on there that I follow and
35:09 talk with a little bit that are running
35:10 hundred million dollar plus like home
35:12 service companies and they’ll share like
35:15 financial goals like like what chunk
35:17 like what your gross margin should be
35:19 what your overhead percentage should be
35:20 and you know dude like the Insight you
35:22 can get from these guys in a couple of
35:24 tweets it’s phenomenal I I I enjoy
35:27 Twitter as well I still have Twitter
35:28 it’s still I have not upgraded to the
35:32 X awesome JD wealth of knowledge so how
35:35 can um people get a hold of you y uh so
35:38 I am on x/ Twitter as dirty hands Ops
35:42 which the name sounded really cool when
35:43 I got it now I feel like it sounds kind
35:45 of
35:46 dirty you’re welcome to email me I can
35:49 put my freaking email here in the show
35:51 notes but it’s JD at mountval
35:52 plumbing.com that we abbreviate mountain
35:54 so it’s MTN Valley plumbing.com or find
35:57 me on shoot me a DM I’ll get back to you
36:00 perfect JD a wealth of knowledge man and
36:02 I love how you go at it and thanks for
36:05 being here with us toight thank you hey
36:06 thank you guys appreciate it talk to you
36:08 soon thank you for listening to the m&a
36:10 Launchpad podcast if you’ve enjoyed
36:12 today’s podcast and would like to
36:13 support us please leave us a rating and
36:15 a review after you listen I’m Casey muu
36:17 and I look forward to talking with you
36:18 next week
