Owned and Operated #81 - Business Acquisition in the Home Service Industry

What To Know Before You Buy.
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John shares his advice when it comes to acquiring a service company. From plumbing to HVAC, John's got the playbook on what to scout, where to scout it, and how to make it yours. His advice? Start small, focus on residential, and prioritize service-oriented businesses for the win. And before you think about uprooting your life for that business dream, John suggests staying rooted in your current community. Leverage your existing connections and make waves right where you are.

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Owned and Operated Episode #81 Transcript

Okay, so you're getting ready to buy a service company. Let's talk about what that looks like. So there's a lot of different variations of the home service company. There's plumbing, there's HVAC, there's pest control, there's roofing and you need a general idea of what you want to be looking for as you're thinking about these acquisitions.

And where to find them. So let's dive in. When you start to look for acquisition targets, it's honestly not that hard. So people really overcomplicate it. Maybe they try to go for a big size, maybe they try to do whatever. But

Ever since 2020. Most of the home service trades have been getting consolidated at a faster and faster pace. So what that means is the further up markets you go, the bigger the business, the more competition that you're going to face when attempting to buy that business. So prices get higher. Competition gets steeper.

So generally it's a good idea to start thinking about starting something or buying a little bit smaller than you'd like to. When you want to start seeking out acquisition targets, here's the things you need to be looking for. Are they residential or are they commercial? Highest values are in residential, so that's proven time and time again.

The most valuable businesses are residential businesses. Are they service or are they new construction? Service is the more valuable business by a long shot. New construction businesses tend to have little to no value at all. So you want residential, you want service. Now, the next thing, what you need to do is you need to start locating them.

So I think people overcomplicate the locating of a business. There are some easy ways to do it. When I found my first and second business, what I started doing was I just started mailing letters. So I got on Google and I searched plumbing company, Akron, Ohio, and I started sending letters.

I sent a hundred at a time to anyone with under a hundred Google reviews because that probably meant that I could buy them. So you can use reviews as a good metric for how big a company is. If a company has less than a hundred reviews, they're likely very small. 2, 3, 4 techs. If they have 500 reviews, probably a 20 to a 40 tech business.

If they have a thousand or more reviews, you're dealing with a real business and they might be too large for you to buy. So you wanna look for under a hundred reviews and you just send them a letter. There's a lot less competition for this size of deals and if you can target them so that they can be exactly what you're looking for, residential service businesses in whatever industry you're seeking now, my general advice is people should just acquire in the market that they're already in.

You already know your market. You already have some connections. You already know people there. And that the hardest part about that first little bit is getting leads, getting customers, and if you already are established somewhere, then that's, a good fit. What you don't want is you don't want to Uproot your entire life, move across the country, bring your family, try to get settled in a new area, and completely change careers into one of the toughest jobs there is, which is managing a small business. So stay rooted where you are. Send out letters. Let people know that you're a part of the community and see if you can strike up a deal.

Now, almost every deal that we've done has a component of seller financing, so I would encourage you to bring that up. We talk about that on the newsletter, how to bring that up, how to talk about it, how it's a win for the seller, as well as a win for the buyer. So you can use seller financing, you can use cash, and you can also get SBA notes. That is preparing to acquire business.

The where is wherever you are. The what is a residential service company in a trade that you feel like you are interested in and the how is with seller financing or bank notes.

Thanks for tuning in to Owned and Operated, the podcast for home service entrepreneurs. If you enjoyed today's episode, please hit the like button and subscribe to the podcast. If you have any questions or topics you'd like us to cover, feel free to reach out. You can find me on Twitter at at Wilson companies.

I'll see you next time.

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