• I Submitted 5 Indications of Interest (IOI’s)

  • Reviewed 26 deals across 15 industries.

  • Pursued 8 deals, submitted 5 IOIs.

  • Stats for IOI Deals:

    • Avg revenue: $4,600,000

    • Avg Adj. EBITDA: $1,250,000

    • Avg asking price / EBITDA multiple: 5.33x

  • Unfortunately, I didn’t win any of these deals

• I met in-person with 2 Owners

  • This can be a big differentiator for me. While not always practicable, I will plan to travel (even by plane, if needed) to meet with owners when the business is strong and I need to set myself apart.

• I submitted my first Letter of Intent (LOI)

  • I put in my first formal offer for a 33-year old residential HVAC business in Florida.

  • That deal is discussed in more detail below, but I ultimately lost the deal to a local contractor who bid for the business.

• I reviewed a managed services provider with over $1M in EBITDA, specializing in remote database management and consulting on practices like database cloud migrations, data analytics, and cybersecurity.

  • Here’s a snapshot of what a remote database management company does: it remotely manages a businesses’ critical data systems, ensuring smooth operations without on-site presence

• Why I liked this opportunity:

  • Good recurring revenue (~50% of sales were contractually recurring).

  • Minimal Capex requirements, indicating an asset-light model.

  • Strong team with technical expertise would remain post-closing.

  • RDM services are growing and resilient because even when money is tight, companies still need their data kept safe and running smoothly, which means steady demand for these services.

  • Very clear growth opportunities via direct sales team expansion (recent VP Sales retired and owners believed this was the biggest need).

After meeting directly with the owners, understanding their goals, and aligning on future prospects of the company, we were all excited about the prospect of moving forward together. However, I regrettably had to pass on this deal because:

1. There was a sharp decline in 2023 consulting revenue. While RDM recurring revenue had expanded in 2023, it didn’t even come close to offsetting the dramatic decline in consulting revenue.

2. The owners’ valuation expectations were unchanged, despite the 2023 declines. The owners also wanted to be paid for the “potential” of a SaaS product they’d developed in-house - but that product had yet to generate any revenue.

• I submitted my first letter of intent for this longstanding Florida HVAC business, which had:

  • $1.5M+ in earnings,

  • 0% new construction exposure,

  • 40% service & maintenance revenue,

  • GREAT team in place (experienced techs, a service manager, install manager, and operations manager),

  • 30% EBITDA margins, and

  • a VERY attractive valuation at 3.8x EBITDA.

• The broker called me directly about this opportunity - as it never went listed publicly. He enjoyed working with me on a prior listing he had and thought I was a good fit for this business.

Despite putting in an offer for full asking price, highlighting my HVAC background, and attempting to connect with the Seller, I lost the business to a local contractor - one the Seller recognized in the community. The Seller also preferred to sell to someone that didn’t need to use his license to qualify the business after closing (which I would need).

• Never Assume; Make an Offer!

  • I almost walked away without making an offer when the owner of the remote database company said he thought his company was worth $10 million. Yet, after submitting an IOI at nearly half that price, I landed a meeting.

  • Key Takeaway: Don’t hesitate to make an offer - you might be surprised that your offer is more competitive than a Seller initially suggests.

• Recurring Revenue isn’t a Silver Bullet

  • The database management firm's disappointing 2023, despite having 50% recurring revenue, taught me a valuable lesson about the risks of project-based income.

  • Key takeaway: be wary of any project-based revenue that involves discretionary spend from customers. Ask yourself, “is this a business that provides a “need” for customers or a “want” for customers?” If it’s a “want” business, then it better have very attractive characteristics to pursue it.

• Quality Deals over Quantity

  • Although I’m glad to have seen good deal flow in October with 26 legitimate prospects, I want to stay disciplined by only pursuing deals I’m confident are worthwhile

  • Key takeaway: I’ll continue to prioritize finding quality deals rather than get too concerned about how many CIM’s I can review in a month.

• Know any business owners I should connect with? If you think of any small business owners who are at or nearing retirement age that you think I should speak to, I would love an introduction!

• Thoughts on Proprietary Outreach in HVAC? Brokered HVAC deals are fiercely competitive. I'm considering direct outreach to HVAC business owners to find some under-the-radar opportunities. Insights or advice on how I might approach these conversations would be greatly appreciated.