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Take Five #020: A real life play-by-play of the first day post-acquisition

1. The first day post-acquisition: a real life play-by-play

Jordan Novgrod has been detailing his search and successful acquisition in his Small Business Acquistion newsletter, with a full post on what it was like day 1 of the transition:

“When I walked in, all eyes were on me and everyone was basically in shock. The seller/founder of the company had started it over 25 years ago, and all but one of the employees had been working for him for over 10 years. The selling of the company was a total surprise to each of them, as we had kept it quiet. My speech outline is below, and I pretty much stuck to it while not reading it verbatim.

Reading stories about some crazy questions asked at these meetings, I did not know what to expect. There were no questions, so it turned out to be a brief meeting.

I then began setting up a desk and started to learn how the company actually functioned. It was surreal being super excited while all of my employees were upset. Doing my best to not show too much optimism while they came to terms with the transition. Most of the employees later discussed the betrayal they felt when learning of this news.”

From "The First Day" in Small Business Acquisition

2. A thread on persistence in deal-making:

3. Reflections after year 1 of searching full time

Jesse Sunquist wrote a great post on Searchfunder detailing his top takeaways from dedicating the past year to searching for a company to acquire. Great lessons and honest reflections about the grind:

Search is so personal; don’t waste your time comparing yourself to others

When I first started I used to get so jealous hearing about the searcher who picked up a $1.5MM EBITDA company for a 3.5x multiple after only 6 months of searching. What's not in that soundbite is that the searcher is 28 years old, single, and moved across the country for the opportunity. Would I love to close an opportunity like that? Sure, but that's not the life stage that I’m in. I wasted too much time in the beginning comparing my experience and my deal criteria with others and quite frankly it was a waste of time. There's so many personal decisions that come into play with a search; focus on you and your why and don’t get caught up keeping up with the Jones’.

From “Reflections after 1 year of searching full time” on Searchfunder

4. The Economy of Everything in Home Service Businesses

Looking to acquire a home service business? Angi published a report on key trends they are seeing in 2022:

• The home improvement market is $475B and grew 26% in the past year.
• The size of the market in total project volume is 665.6M projects completed annually, with year over year increases in both improvement projects and emergency projects.
• The total home service market serving single family houses is $500.2B
• Home equity gains of 7.6 trillion over the past 2 years could pay for 12 years of consumer spending at the 2022 level.
• The number of home service pros is 6.1 million people working for approximately 2.5 million businesses.
• The total housing stock is continuing to rise to a total of 143 million housing units, including 93.5 million single family homes, which remain Americans most popular way to live. The average age of the housing stock continues to rise, to an average of 47 years.
• The ratio of the prior year’s home equity to the current market size is 38:1, a 6% increase from 2021, despite the larger TAM this year, reflecting the role of large home equity gains in fueling home service spending.

Source:https://www.angi.com/research/reports/market/#ixzz7bRAFHLxr

5. Balance in SMB Ops: “It’s really difficult to work on the business when you’re constantly getting pulled in to work in the business.”

In between closing on his 3rd business acquisition and welcoming a newborn into the world, Tom Birchard has his hands full this week— but still managed to write down some thoughts on balancing hiring between a subject matter expert (like an expert tradesman) vs. some general high-caliber folks who are great leaders from outside the industry:

It’s really difficult to work “on the business” when you’re constantly getting pulled in to work “in the business.”

I saw this just the other day. We have a developing leader on one of our teams. He manages other managers, something I’ve written about before and is an entirely different animal than managing individual contributors. He’s doing some great things but still learning how to effectively lead in that role, and at scale with such a large team and business. I overheard him on the phone with a newer technician, coaching him on how to troubleshoot a system that wasn’t cooling. It was honestly a work of art, he was so effective at explaining things and helping the technician think through what could be causing the issue.

But…once he hung up the phone, I challenged him on what led up to him fielding that call and helping that technician out. See there’s a lead technician designated to be the first line of defense in helping a technician who’s struggling. The second line of defense is the service manager, and this guy would be the third option. He admitted that he hadn’t asked the technician if he’d tried option one or two. I can totally understand why, he was clearly so good at coaching that technician through that technical issue, that in the moment that brings more fulfillment than probably any other task on his plate. I do that all the time too, we all do…drifting towards what’s comfortable vs. what’s the highest and best use of our limited time.

So, all that being said, what’s one to do when facing this dynamic in leading an SMB that wants to continue to grow. As with all things, I think it’s a fine balance. I think you need the subject matter experts who have the experience and the answers. But I also think you need to start sprinkling in some high caliber outsiders. These would be extremely talented individuals who came from a different industry. They might be a great leader, but not be all that familiar with HVAC or plumbing. Mike Botkin who’s an SMB landscape operator has talked about one of his best hires being a General Manager from Chick-fil-A. If you can then get the outsiders working well with the trade experts, I think that’s where the magic can happen and you can do some big things.

From “Drawbacks to Having All the Answers” by Tom Birchard

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