Buying a Business? Here’s How to Find a Deal That Isn’t Trash

Hosts Stephen Olmon and Collin Trimble get tactical on the question they hear nonstop: “How do you actually find deals worth buying?” After seven acquisitions in three years, the Alarm Masters partners break down why quality lead flow is hard in fire & life-safety, what “deal size” really means in this industry, and how to build a sourcing engine that doesn’t rely on luck.

They walk through the real-world channels that drive acquisition opportunities—brokers, vendors, referral partners, conferences, and owner-to-owner relationships— plus the hidden tradeoffs between big competitive processes and smaller “hairy” tuck-ins. Along the way, they share the most common landmines they see buyers step on (key-man risk, messy RMR data, underpaid teams, weak SOPs, unrealistic add-backs), and how to tighten your buy box so the right deals start finding you.

If you’re serious about buying a “book of accounts,” a local competitor, or your next platform—but don’t have a repeatable way to source or qualify deals—this episode is your playbook to stop chasing random listings and start building real deal flow.

✨ What You’ll Learn

• Why finding good acquisition leads is so hard right now
• The difference between great deals and available deals
• The “hair” to expect in sub-$1M EBITDA / smaller RMR buys
• Brokered vs off-market deals (and why neither is automatically better)
• Vendor & partner channels that actually produce leads

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 Stephen Olmon
Collin Trimble

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Chapters

• 0:00 Introduction and Podcast Overview
• 1:12 Challenges in Finding Acquisition Leads
• 7:44 Evaluating Smaller Deals and Their Risks
• 22:39 Leveraging Industry-Specific Service Providers
• 25:16 Networking and Building Relationships
• 27:34 Local vs. New Geography Deals

Transcript

EE 08

Stephen Olmon: [00:00:00] Welcome to Entry and Exit. I'm Steven Oman, and this is my co-host and business partner, Colin Trimble. We run Alarm Masters based in Houston, Texas. By day and by night. We are very handsome podcast hosts. We try to break down the fire and life safety industry piece by piece and provide practical and tactical steps to scale your security company.

Collin Trimble: Let's get into it. Last week we talked high level about m and a deals that, um, we had some, some of our experience in, in the seven deals that we've done in the last three years. Um, one really often asked question is, how do you find deals we're interested in buying? What do we do? Where do we find them?

And is there any magic bullets? We're gonna talk through that. We're gonna spend a little bit of time talking about how we source deals, how you could source deals. Uh, we'll obviously give you some homework at the end if this is something that's relevant to you. Um, but we're gonna jump in real [00:01:00] quick because we got a lot of ground to cover and we want to make sure we give everybody the practical and the tactical and something you can take away if this is something you're trying to do.

So, buckle in. Here we go. Um, the first thing is, Steven, talk to us about. Why finding good acquisition leads is so hard today. You have first line experience in this. I think we've talked to, I don't know, hundreds of business owners, so give us a little preview of that 

Stephen Olmon: right off the top. This is a great industry, so there's not always necessarily people wanting to sell their business.

They like operating. We've, we've come across lots of people who've said, even last week, a guy said to both of us. What else would I do? You know, so I think that a lot of people aren't necessarily proactively looking to sell, obviously as you kind of start to maybe age out, sixties, seventies, we see some, some owners that just naturally you're gonna start thinking about that.

But there's not a lot of people looking to [00:02:00] sell earlier, at earlier stages in their career because maybe I'm biased, but it's a pretty great industry. Um, and then. You know, the, the higher quality deals are extremely competitive and a lot of those really high-end deals, let's say we're talking about a few million dollars of EBITDA in an attractive market, dare I say, Dallas, Fort Worth, or Houston, Texas, whatever it may be.

Uh, for those of you who don't know, I live in Dallas and I'm a extreme homer because it's just such a better place than Houston. Hmm, I'm kidding. So. The big deals, sometimes they're pocket listings, you know, uh, maybe even if they have some sort of broker on them, you know, they're. The first looks going to a large national buyer where they know that there'll be some sort of aggressive, multiple, likely offered, um, and, and pretty expediently.

You know, they're not gonna have months and months [00:03:00] and months of, uh, delays in due diligence. They're gonna act. Pretty aggressively. And so that's one thing on the really high quality deals, you know, the, you may not even ever see it or know about it until you just hear some announcement, you know, you see some LinkedIn posts and you're like, man, I, I would've loved to try to take a shot at that.

Yeah. I didn't even know that that was on the market. Yeah. Um, and then just generally speaking. The higher quality deals are gonna be represented. Um, there's going to be several different parties that are, you know, looking at it, offering on it. And so, um, that just, that creates a competitive environment that makes it very difficult for, you know, who we speak to a lot on this podcast of regional or independent operators.

So that, that presents some challenges. Um, and then, uh, the. The, uh, lower end of the market, you know, you might start to find more deals there. Um, some of them, again, like [00:04:00] they may be on some random kind of industry list of, you know, acquisitions that might be available. A lot of times that's out of date information.

Mm-hmm. Um, but the, the lower end of the market. Comes with, um, some sort of hair on it, right? Something that's not ideal. And so, um, you kind of have, you know, we're kinda making this binary, you know, these really attractive, larger deals, smaller deals that maybe aren't as attractive. Maybe they're more readily, readily available to find.

Um, but, you know, money doesn't grow on trees, neither do quality acquisitions. So even on the lower end of the market, even though there might be. Um, more available. You have to do a lot of work to try to find those that, that are worthwhile, even though there may be something that's, you know, 

Collin Trimble: not. Can you define for everybody what you mean by deal size for something that's on the lower end of the market?

Like what would you classify as the lower end of the market? 

Stephen Olmon: Yeah, [00:05:00] I think the easiest dividing lines a million dollars of ebitda. Yeah. Um, just right down the middle. Um, if you're looking at just pure RMR deals, I'd say six figures. Um, is, is how a lot of people in the industry might look at it. Mm-hmm. We probably look at 50 K of RMR and above is being a little bit differentiated because we've also seen.

The insides of those operations and the quality of those accounts. And so if you're looking at buying seven grand of RMR versus 107, like yeah, those are also probably, uh, just different realities and how those customers have been, uh, handled and what their expectations are and, and all sorts of different things.

So yeah, those are the kind of the main dividing lines, million dollars of EBITDA on that side. And then on arm R only probably a hundred K or less. Or, or more. 

Collin Trimble: Yeah, I think it's important to note that, um, it's really important. If you're gonna look for a deal that you need to do a whole bunch of work to figure out what exactly you want, and we talked about this on our last episode, and you gotta really figure [00:06:00] out, um, are you looking for a new platform in a different geography or are you looking for something in market?

Many, many of the listeners are probably looking for stuff in their own markets. Um, and so you have to kind of think about that. It's. Always, I mean, not always. It's generally gonna be easier to find stuff in your own market if you have relationships in those markets already. Um, but Steven made a really great point.

Um, the lower end deals, they've got the hair on them, you're gonna have that, uh, key man risk, which is like the operator wears 38 hats. There's gonna be lots of old, outdated technology. I mean, there's just gonna be stuff that you've gotta work through. Um, and. You know, there's a reason for that, right? Like if the operator was motivated to put a bunch of, pour a bunch of reinvestment dollars and improve the business, they would be not a smaller, lower end deal.

They would be a higher end deal, right? So it's all a trade off. So getting kind of used to that and figuring out what you need and what your quote buy boxes is, is really [00:07:00] important. 

Stephen Olmon: I, I actually think we should dive into, um, going off script here. Watch out. Watch out. I actually think that we should talk about.

The different types of, um, negative qualities of smaller deals. Yeah. Because you also have to decide what you're willing to stomach, what you're comfortable with, so, right. So yeah, we, let's ping pong back and forth. You come up with one and I'll come up with one. We'll do like five or six. 

Collin Trimble: Yeah. I would say, um.

Key man risk that's specific to sales relationships. So I've got a relationship with a developer. This guy is 25% of my revenue every year. He always sends me all of the deals. So key man risk associated with revenue. 

Stephen Olmon: Okay, I'll say, um, bad or missing data. So you're hoping to try to integrate these customers.

Um, into your existing operation in some way, shape or form, even if it's in a different market. Maybe you're thinking about trying to kind of blend it all together from your back office and [00:08:00] technology, whatever, and you need trustworthy data and a lot of times it's not, you know, the smaller the deal, the worse the data.

95 plus percent of the time. 

Collin Trimble: Yeah. On. I'm gonna, I'm gonna pig back on that and I'm gonna drill down even further and say messy or very undefined RMR data. So the contracts, the billing system, and the software providers, so monitoring systems or cellular communicator, uh, providers are not tying together.

So you may show a customer that we're billing them $25 a month for monitoring and sell, but then you look in the monitoring station, they've been offline for two years. Well, what's, what's going on there? Or you've got a customer that has, uh, 10 locations. None of them have RMR except for one of them. And it's a big number, but it's not specific to which locations have cellular communicators, which ones have monitoring, which ones have fire inspections.

So just messy and incomplete recurring revenue data that kind of exists up [00:09:00] here in the owner's head, or maybe it doesn't. Um, that also can be extremely challenging. 

Stephen Olmon: Another one is. Bad expectations or expectations of customers that are inconsistent with how you do business. So we've come across a few times where customers maybe.

Whether it was like owner bleeding heart, I've known these people decades, or it was just bad business practices. Mm-hmm. They weren't being charged for service calls or they were getting things for free. And we do that every once in a while, or if we make a mistake or whatever, maybe we want to do what's right.

But I think at times on these smaller deals, mom and pop, hyper-local. There's just a, there's a, they're kind of, um, doing things in a way they're not trying necessarily to scale so that, you know, the, the reactions or the interactions with customers don't match, you know, and so we've had to reset expectations with.

Certain accounts, certain customers, [00:10:00] because what they, you know, were promised by the former owner right? Is, is just not really realistic. 

Collin Trimble: Yeah. Uh, underpaid employees, employees that are drastically underpaid, technician, salespeople, bookkeeper, admin, whatever, and the organization, and they're well, well, well below market.

So you've got a deferred expense there that you probably aren't recognizing. Um, or, or maybe you are, and the owner's not willing to budge on that. Um, but underpaid salaries is a big, is a big Gotcha. 

Stephen Olmon: Yeah. And I'll round us out. Last one is just generally, um, poor processes. And if you're just buying accounts, maybe you can, um, mostly, you know, kind of come out unscathed from that.

Um, if you're, if you're actually doing a more, you know, complete acquisition, even if it's on the smaller end, that's gonna hurt worse. Mm-hmm. But. You know, a lot of [00:11:00] these, uh, smaller deals come with just a, a complete lack of documentation, lack of SOPs. We live on SOPs. Yep. You know, and so it just is, it's like playing on hard mode.

Mm-hmm. So, so those are some of, there's, we could keep going. Yeah. Um, but those are some things to consider of, okay, if I'm gonna go down market, there's more deals available here. But these are some of the types of things. I should expect to run into. So what's my plan to deal with those and what am I willing or unwilling?

To endure. You know, one we didn't totally touch on is really messy contracts. Yeah. That's something that you have to be really, really careful about. Yeah. And understand your own risk. Yeah. So that's all I'm saying is what's your plan and what sort of pain are you willing to endure to get that deal done?

Collin Trimble: Yeah. And I think, and this is, I wouldn't necessarily say this is. The deal has hair on. It may, maybe this would be classified as this, but another thing that we run into a lot, especially in [00:12:00] EBITDA transactions, are, um, sellers that have, um, unreasonable expectations around add backs. Um, we see that a lot, and sometimes that's broker driven.

The broker's not educated and thinks that a. Half a million dollar deal add-backs should be treated the same as a a $5 million deal add-backs. And so just one thing that I think as a warning before we move on from this, it is so easy to get hung up on. Add backs and various things. And ultimately what everyone needs to just realize is like, how much is this deal worth it to you on a purchase price perspective?

Like, how, how much is it worth to you? It may be worth more to you than it is worth to somebody else. So it may be worth you being more flexible, um, on some add-backs if the purchase price still falls sort of within your realm of acceptance. And you're just gonna have to be ready to know that like.

You're gonna get, uh, get unreasonable, uh, add back [00:13:00] expectations. A lot of times the, the, the operator and the owner is gonna wear literally 15 hats and they're gonna want to add back their whole salary 'cause that's what's standard. Um, but it, it really isn't because that salary isn't getting added back to net income.

It's gotta be replaced somewhere. So like, there's stuff like that, uh. All throughout the deal. And so I just, I would say as a word of warning, just, uh, just know what you're comfortable with and, and be willing to accept and don't get hung up on small stuff. It's not personal, it's just, you know, business.

So, uh, yeah. Anyway. Yeah, I think that's worth mentioning. Um, I wanna talk through. Um, what, what are the standard channels? I don't wanna spend a ton of time here, but like what, what are the standard channels that everybody knows about, uh, when you're looking for deals? So, so Steven, jump into what those standard channels are and also Yeah, gi give us some feedback on that.

Like where do you think there's actual value in some of those and where do you think it's almost entirely a waste of time? 

Stephen Olmon: Yeah. So obviously, um. [00:14:00] Business brokers, industry specific. That's actually a really interesting thing to touch on. Um, industry specific brokers, um, larger on, on larger deals is going to be the single greatest level of competition you'll face, right?

So a $2 million deal in Chicago, $2 million of EBITDA in Chicago brokered by like an industry specific broker. That's gonna garner lots and lots of competition. It's well trafficked. People are talking to those guys, um, on a regular basis. Um, sometimes you'll see deals, maybe it's 'cause you know, cousin Larry is a business broker and so, you know, it's kind like when residential real estate Yeah.

Uh, agents list commercial real estate. Right. And they don't know what they're doing. Yeah. And so they actually misvalue and I've had several friends in. You know, my commercial real estate friends get some great deals that way. There can be a little [00:15:00] bit of that in this industry, not a ton, but every once in a while you might come across a decent value.

I'm not saying you're stealing the deal, but you know, it's maybe a, a little, um, you know, lower multiple or something like that because it's a more generic. I can think of one specific deal that we pursued but did not acquire. Mm-hmm. Where the guy was just a normal business broker, really smart guy, but he really didn't know a lot about this industry.

Yeah. So, um, that's something, um, just generally kind of the business broker world is going to be, there's a lot of volume there. People are going, they think this industry more than many is very brokered. Yeah. I would say especially on the kind of mid to upper end, it's just common practice. Everyone kind of, it feels like it expects to do that.

They know it's just the right thing to do. 

Collin Trimble: Yeah. 

Stephen Olmon: So then that's just why there is a decent amount of volume there. 

Collin Trimble: I think also related to brokers, I just, I wanna, I wanna sit here for a second 'cause this is a, [00:16:00] this is a big one. Um. It. I think there's a misconception in this world that deals that are represented by brokers are inherently not as good as deals that are off market, and that's not been our experience.

We have talked to owners that are off market deals that are fantastic deals, and we've also dealt with off market deals that were awful. Um, and, and that cuts both ways with broker represented deals. But here's what I'll say. About brokers. A everyone's a broker in this industry. There's a lot of people that are brokers.

A lot of times it's people that offer services in the industry, uh, that are also brokers, and that's a natural fit. I could understand why that would be. Yeah. Um, but I'll also say this one competitive advantage to a broker is good. Brokers generally are going to bring sellers down to earth in terms of what's reality for market.

Or try [00:17:00] or at least try to be to do that. Um, and it's not always successful and not all brokers do that, but they can kind of be a voice of reason sometimes in a deal cycle. And so I think that if your perception is. I don't wanna find deals that are brokered, like all I want is off market deals. I would say you're gonna run into almost as much heartache and maybe have just as much of an expense as if you dealt with a broker.

Um, and so just keep that in mind. And also, the other thing is just because you have demand doesn't mean that broker is gonna flip you leads. There is a lot of demand for deals in this industry for a reason. Mm-hmm. And. These brokers are brokers because they have a lot of relationships, um, across the industry.

And if they don't know you and you've never worked with them, you're probably not super high up on their list. When a deal comes on the market and the deals you are gonna look at [00:18:00] initially are gonna be deals that have been passed over, just generally speaking, and that's. It's the way it is. Um, so I just think it's worth mentioning that 

Stephen Olmon: the other thing that's important when you are thinking about looking at broker deals is, um, that.

They're good brokers wanna play matchmaker. Mm-hmm. They don't, you know, the guys that spray and pray and send it out to 150 people. Yeah. Not a great look. Yeah. People do it. You know, the, the people that we really enjoy working with really are curating on both sides of the equation. Mm-hmm. So you do have to spend time getting to know them, sharing what your buy box is.

If your buy box is shifting, you need to let them know that. Yeah. Hey. We aren't looking at deals outside of Texas right now, you know, whatever it may be. Yeah. Um, whereas maybe in the past you were. And then the other, um, the, the other thing that's, um, important on broker deals, which, you know. Most people probably are aware of, [00:19:00] but it, you know, there are fees associated with that.

So if you're thinking about deal math, like is there a sell side fee? Is there a buy-side fee? You know, and thinking about your total cost on that acquisition, you just wanna be aware of, you know, uh, who you're engaging with and what those fee structures are. Mm-hmm. 

Collin Trimble: Yeah, and don't be afraid to pay a fee.

I mean, again, it's all part of the fact factoring into the deal, right? So what are you willing to pay? Another thing that I think is really important to note is it is more work for a broker to spray and pray because they have to deal with qualifying uh, buyers. And so they would much rather find somebody that is willing to be reasonable, that they know is a good fit rather than somebody in New Jersey looking to buy a deal in Dallas.

And I think that this is a really important note. If you are looking for a deal out of your market and you approach a a broker, it is going to be more challenging than if it is in your own market. And the reason behind that is because it is more likely to [00:20:00] close with somebody in market than it is somebody outside of market.

Uh, and there's a lot of like, deal dynamics around why that is. So what what likely happens is if they're bringing you a deal that's outside of your market, let's just say you're in Houston and you're looking for a deal in Dallas. They have probably already shown that deal to folks in Dallas and they have likely passed up on it.

So as a result of that, uh, you're gonna have some extra hair on that particular deal, and you've just gotta decide, is this part of your strategy or not? 

Stephen Olmon: May, maybe, maybe the seller is committing tax fraud, right? I don't know. Who knows? Who knows what. Yeah. Um, gosh. Um, so. Uh, so that's, that's a good amount on kinda the brokered world.

Yep. Um, kind of higher end. Let's, let's shift and talk about, um, what we're defining as, as kinda the lower end of the market. Think 600 K of ebitda, add-on, something like that. You know, 40 2K of [00:21:00] RMR, add-on, tuck in, that sort of thing. Um. Let's talk about sources and then also, you know, how to really extract value from those.

Collin Trimble: Yeah, I think just like everything else in this world, um, there are very few magic bullets and the ones that exist require time, uh, in investment. And so we get asked this question frequently, which is, Hey, where are you finding good deals and how do I get good deals fast? And you're not. So just change your expectation.

You are unlikely to get a steady stream of good deals quickly. Um, you have to spend the time building relationships with both brokers and vendors, suppliers, distributors, and all the folks that support this industry. Uh, we get great deals from our monitoring station that would be as close as a, uh, silver bullet [00:22:00] as I could give you in this particular discussion.

And. They have been really good deals, but they've been small. And also I think it's just worth noting that like that didn't happen overnight. Our vendors did not start sending us. Leads. That's right. Until we brought it up a lot and until we established a good relationship. And a good relationship is give and take, right?

So, um, just asking is one thing, but asking and providing them value in return is gonna motivate them to want to do more deals with you. So here's a list. Let's just, let's ping pong a list of vendor partners that could be, uh, or vendors or, or distributors or whatever. That could be a good source of leads.

I'll go first. Monitoring stations. That would be my first one. What would you say? 

Stephen Olmon: Really quick note monitoring stations, I would say are especially great for account add-ons and tuck-ins. Oh yeah. Great. Call-off. You know, they're wanting, they're wanting to retain Yes. Those accounts at their, you know, monitoring stations, so, right.

Um. Uh, I would say, [00:23:00] uh, due diligence providers, there's many industry specific due diligence providers and, um, they've just worked with everybody buying and selling and, you know, left, right up and down. And so, um, and, and actually one that we've worked with, we were looking at a second deal in like a few months, and he is like, man.

Where are you getting all these deals? Mm-hmm. I was like, well, it's just two. And he's like, that's a lot. Mm-hmm. And so I do think that, uh, the finding quality deals on a regular basis, it does really take a lot of work and it, it, you know, it doesn't, was it the, uh, you know, 10 year overnight success sort of thing?

Yeah. Um, so yeah, that's number two. 

Collin Trimble: In the same vein, I would say service providers, so that would be industry specific bookkeepers, CPAs, lawyers. Marketing vendors, maybe, um, technology providers, some of that, those are a little harder. But definitely for bookkeepers, lawyers, CPAs are a great, [00:24:00] uh, point of contact.

So, so here, here would be an example of an investment you would make. Let's just say that you don't use an industry specific bookkeeper for your business today. You may consider going and reaching out to a large industry bookkeeper and finding out if they are also a broker, uh, because if they are. Guess who's gonna get first dibs on those deals?

Their own clients. So like, spend some time on that and make that commitment. Maybe they're a little more expensive, maybe you don't like their process as much, but they're giving you deals. Um, so again, all of this is just kind of an investment and you gotta do, you gotta start early. 

Stephen Olmon: Uh, another one I'd say is.

Sellers that you've already bought from in the past. Yeah. You like, uh, owners. No owners. Yeah. And so, um, especially if you've gone through a successful transaction, proven yourself, you know, continue to build rapport through that process. Um, oftentimes kind of, um, owners talk. And we've even used, you know, sellers that we've worked with [00:25:00] in the past as references.

Collin Trimble: That's a really great point. Here's another one that I think is just, again, it's tough. People hate doing this. I, I'll be honest, I don't love networking. Um, Steven is great. He loves it. He wants to go talk to people. He, he gets energized in large groups of people. Believe it or not. I don't, I, I like small groups of people.

I like hanging out with a few groups. Um, and, but honestly, some of the best relationships and some of the best deals I've ever sourced have been at industry conferences and trade shows where I've been really intentional and gone to the happy hour and sat down at tables I didn't know and just started chatting with people.

Telling them about what we're doing, how we're trying to find great deals, asking them if they know anybody, asking if they have any experience. Um, and man, we have gotten a lot of emails after our conference where somebody will send us a note back and be like, Hey, I just, I just thought about this. I saw this guy who I knew through a cousin who's selling his accounts in Houston.

You may wanna reach out. I had this happen literally last month. A buddy of mine [00:26:00] is a, uh, financial planner, not in the industry. Good friend and one of his clients. The dad, I guess, owned a alarm company. He passed away. The client took it over, didn't know what she was doing, and wanted to, to connect. And so that was just me putting it out in the universe.

Hey, if anybody knows anybody willing to sell their business, you know, we are in the market. Um, and so, yeah, I think just to tie a bow on sort of some non-traditional sources would just be go to the industry conferences, go to the events, spend the time getting to know other operators and socialize the fact that you.

Want to do, uh, you want to be acquisitive and I think that you will see some fruit. It's just not gonna happen immediately. It's gonna happen over the course of several months. Yeah, it's good. It's a good list. Um, I wanna move into, um, local deals versus new geography deals and some of. I guess I'm gonna say [00:27:00] some of the nuance behind that.

Can you talk to us a little bit about the challenges behind, well, I guess start with local deals, start with why they are, you know, a little bit more of a no brainer, and, and then talk about what the challenges behind kind of new geographies. 

Stephen Olmon: Yeah, we touched on this a bit in a past episode, but obviously the integration pane on local deals, um, you can kind of underwrite that, uh, a little more aggressively.

Maybe you're willing to pay a little bit more because if you're able to, um, kind of eliminate any overhead from those accounts, especially on the, like more RMR add-on, tuck in, um, then from like a rolling in, that gross profit to your bottom line, you might be able to justify a little bit higher. Multiple.

Yeah. Um, and, and then also just without having any real notable geographic challenge, because it's ideally in your backyard, you know, we, we think about that probably as, you know, 60 miles, something like that. Yeah. [00:28:00] Um, up to a hundred, but more like 40 to 60 ideally, um, from where our large account base is and so.

You know, you already have, um, technicians covering, you know, kind of that footprint. And so just starting to integrate those and, um, serving them is just not as difficult. Um, and also like your team knows that geography. Mm-hmm. You know, and so there's just a lot of. Kinda nuance and elements. You don't necessarily think about these little things that add up in terms of how painful or not painful something is.

And so, um, yeah, that's, that's kinda the first thing that comes to mind on, you know, the, the local side. The challenge when you're. Um, you know, some people like Greenfield into new markets. That's not something that we do. Um, good on you. If, you know you can do that successfully, uh, that, that, that's like the Elon Musk, uh, what did he say?

Stare off into the abyss and chew glass. Mm-hmm. You know, like [00:29:00] that's greenfielding to me. Yeah. Um, and so we like to, you know, consider buying in new markets. Um, but that also has its own challenges, um, because like I said, whether it's unfamiliarity, um, there's, there's no real. Strategic, um, geographic play there, um, different labor market.

You know, there's all sorts of different things, um, where you, you may want to pay a higher multiple to just get into the market. That's right. But it doesn't feel as strategic, you know, as, you know, a, a local add-on. 

Collin Trimble: Yeah. I wanna just highlight two things from a valuation perspective that makes this challenging.

Um. If you find a deal, let's just say you're based in Dallas and you find a deal that's in Dallas, you are likely going to be a more competitive buyer for that deal than somebody outside your market. And the reason that is, is because you will effectively run all of the gross profit of that business.

You're looking at buying to your bottom line and, and the reason behind that is [00:30:00] you don't need to rent their office space. That's an expense gone. You don't need all of their back office employees. You don't need all of their salespeople. Maybe you don't need, uh, their technology stack. You don't need their electricity bill.

You need their revenue and their cost of goods sold. You may take some people if, if that's interesting to you, but generally speaking, all of that. Gross profit is gonna flow down to your bottom line, which is going to make your business significantly more valuable from a total EBITDA perspective.

Conversely, the person that is shopping from outside the market is gonna pro, probably take on all of that, uh, overhead and potentially more, and they're gonna have a lower ebitda. So when they think about immediate return, that deal is more expensive for somebody that doesn't already have. Is that overhead established within that market, which means it is going to be more expensive for you to buy a deal in a different market.

You are [00:31:00] probably going to think that you can consolidate all of the, those overhead expenses very quickly into your business. Let's just say you're looking for a deal in Dallas, but you're based outta Austin and you want to consolidate. The word of warning there is. It's gonna take a lot longer than you think, and you're gonna consolidate a lot less.

Um, every business has nuance and the disruption, like talk about disruption, even just doing a tuck-in where you're just buying accounts and folding them into your existing operation. High disruption, if you're gonna try to do. Different geo that runs their business entirely different. And you're gonna try to make your team learn two separate businesses.

That's the highest level of disruption you can get. So our rule of thumb when looking at deals out of our own market, looking at platforms, is we want that deal to be able to operate as an independent business without any support or back office help. We try to evaluate that deal as a standalone deal.

That is going to make you less competitive as a buyer unless you're willing to [00:32:00] overpay. But, but I would say that's a risk, at least from our perspective, we're willing to take over green fielding because you have everything for us is where's the next dollar of revenue gonna come from? That's our whole world is, is re recurring and reoccurring revenue service work and RMR, how do we maximize that as much as possible to provide stability?

Um, and so a deal in, uh, another market that's expensive but already has a history of 40 years of customers buying things from them is a lot less scary to me than investing, you know, half a million dollars into a greenfield where I have no line of sight. Even if it's just a single project, a lot of people greenfield into another location when they have one large project, but then all their people are dedicated to that one large project, so no one's growing the business.

So that project wraps up and they're like, okay, let's go grow now. Then it's like, what do we do? So I think there's just some nuance there. Between greenfielding and acquisition, obviously we are very, uh, bullish on [00:33:00] acquiring into new markets. Any closing thoughts, Steven, on EBITDA driven deals versus add-ons?

Um, anything that you think is worth noting before we move on? 

Stephen Olmon: The last thing I'd say is this is just kind of a one-off, you know, not all EBITDA is created equal. Mm-hmm. And so just because you see some sim or some, you know, marketing document of a deal in your market or someone else's, you know, different market maybe you're interested in that says $1.1 million of EBITDA or 623 K of ebitda, you need to know what.

Is actually forming that ebitda. It's not always just. Inherently beautiful cash flow, you know, you know, cash flow and EBITDA are not equivalent is my point. That's right. That's right. And so you need to do the homework to understand what is actually driving that and, um, what they're adding back. And so just, just be careful not to assume that that headline number is.[00:34:00] 

Cash by any means. 

Collin Trimble: I think that's a great point. That kind of moves us into the next section, which is what are some practical tips and what are some common mistakes that people make when looking for deals? Uh, I'll, I, I wanna start with just one, which is, um, relationships produce more deal flow than databases.

This is a really interesting, this is an interesting concept because in the organic side, if you wanna grow organically via sales and marketing. Um, I could create a playbook for you that's gonna produce predictable revenue. Um, and that is gonna be based on a sales process, a, a really scalable and robust outbound process.

And, and that's gonna help you get line of sight to how to grow organically. Um, just living on relationships, uh, organically would be something I would say, Hey, huge red flag. Relationships aren't scalable, unfortunately. The inorganic side when doing acquisitions. That's the whole thing is [00:35:00] relationships.

And it's just like everything else in this world. It takes time and effort. So you gotta spend time with these folks. So one massive mistake that I see all the time is I have a lot of peers in the industry who are like, man, I don't ever let vendors in my office. Or if I do, it's really rare because I don't, they're a distraction or whatever.

And then they say, well. I need deals now. Well, guess what? If you call that vendor and they're never in your office and you never let 'em take you to lunch, and you never give them their time, and then you call them and say, Hey, if you know anybody selling, lemme know you're not on a, you're not highing their list, you're not gonna be high their list.

So developing those relationships with your vendors, let them into your office, spend the time with 'em, see if you can do a favor for them, is a massive help. We, we had a, a manufacturer partner last year. Say, Hey man, um, I really need to. Hit a quota, whatever. Can you buy a couple extra cameras, throw 'em in stock, help me out.

Yeah, man, totally. Let me help you out. We bought the cameras, you know, we, we ran through 'em within the first 60 days, help that guy out. Turns out 90 days later, he had a deal. [00:36:00] He's flipped it over to us. It was a great deal. And that's the kind of thing you have to do whenever you're trying to build these relationships.

You've gotta socialize it and you've gotta put a lot of time in there and effort. So that would be just one, one tip that I would say is just. Develop those relationships with your vendors and be open to talking to them and, and if you have a, kind of keep vendors out of your office or whatever strategy, I would, you know, encourage you to change that quickly.

Stephen Olmon: Um, I'll do, uh, kind of two quick hitters. One is that, um, you have to be consistent so people get excited and like, yeah, I'm, I'm gonna. Buy, I am gonna find an acquisition, I'm gonna do an add-on. A lot of guys I hear say, I know I need to. Yeah. You know, and so they get really excited. They go hear someone talk or they see, you know, one of their friends maybe bought a deal, like, oh gosh, I need to do that too.

And they kinda do a sprint Yeah. For a month. Yeah. And they're like, yeah, you know, we're, we're gonna buy a business. And then a few months later, oh, [00:37:00] you know, I, I got busy, you know, we had a couple big jobs and, and so. It trails off, so you have to be consistent. Uh, so that's, that's one kind of. Quick hitter, which is obvious, but the reality of running a business, it's hard.

Yeah. It's hard to be consistent in this mm-hmm. In this area. Um, the other thing I would say is don't spend a bunch of time on deals that aren't actually a good fit for you. Yeah. So you need to know what your criteria is, what your buy box is. Then don't waste a bunch of time. I definitely have done this once or twice.

Yes. Where I spent too much time on something because I just, I wanted to do a deal. I convinced myself there was enough elements of the deal that was justified, my continued mm-hmm. Focus on it. And then after the fact, you know, kind of postmortem really shouldn't have spent, you know, those hours, you know, on that deal.

Um, because it really wasn't ever going to be the right fit for us. So those are kind of two. Two [00:38:00] others I'd add. 

Collin Trimble: Yeah, I wanna add something else to this, which is, uh, you're gonna go through a period of time where you're gonna get access to a lot of deals and you're not gonna get to move to the next phase of the process for various reasons.

Um, one thing that is really helpful, and, and you should spend some time on this, is developing what your story is. And I don't mean like. Where you came from and all that, that's important, but where are you going? Because a lot of these sellers wanna understand who the stewards of their business are gonna be and what phase they're taking it in, um, and having something that's.

First of all, you wanna be truthful. You certainly don't wanna mislead anybody. You also want to be honest about where you're going with the strategy and help people understand like, this is my plan. Uh, be honest about the hard stuff that you plan to do. Like, hey, if you're gonna change their brand name, you need to tell them that.

Um, if you're planning to, uh, hold the business forever, you need to be truthful about that. So that's, that's one thing, but also help sell that story to the sellers of like, what's gonna happen to their legacy, uh, [00:39:00] and their employees. What is your plan with their employees and their branding? Um, and doing that, I think is really, really important.

So understanding what your story and what your plan is and how it fits into your plan is really important. And then another bullet point that's not really related, but kind of is when you are talking to folks, whether that's a broker or a vendor, or a due diligence provider or a service provider. The more narrow you can get your buy box, the better you'll be served.

And people want to say, we'll, look at everything we said that that was the first thing we said when we first started looking for deals. And you know, how many deals we saw, nothing. We saw nothing because it was like, well, we don't know. Like you're you, you guys are just kind of kicking tires. But then when we got very specific about.

Our ebitda, our RMR requirements, our mix of commercial and residential. Our geo, very specific about things like the owner's role, post-close, all of those things. Um, we got a lot more deals because. People realize we're serious. We've got a [00:40:00] really tight definition of what we want. We still say, Hey, this is our buy box.

We like to look at non-traditional deals, sometimes outta markets. Here's some other markets we're kind of interested in. So if you see a deal, we're happy to look at it and give feedback. Sometimes we get deals that they're like, Hey, we know you're not a fit for this, but would you just provide feedback to us and just let us know, like what you think about that.

Um, that's an example of us doing a favor for somebody. Because they know we buy and we have look a lot of deals. And so they want our opinion on that. Um, so anyway, yeah. My two big takeaways. What's your story? Be honest, be truthful about it. And then number two is tighten up your, your buy box. It may seem counterintuitive, but you really want to tighten up that, that buy box.

And then, and then what, Steven, can you talk through, 'cause you were really the mastermind behind this, the importance of having a CRM of not just your deals. But also your due diligence providers and service providers that we're touching base with on a regular basis. You've done a great job of keeping in contact with everybody and kind of farming those lists.

Will you talk a little bit about that? Yeah. 

Stephen Olmon: Instead [00:41:00] of Mastermind, could you use Guru next time? I'd really appreciate that instead. Yeah. Um, yeah, look. Uh, sharing is caring. You, you, you have to be, if you care about this, you gotta tell people. Yeah. Um, you know, it's kind of like, um, it's kind of the, what you measure improves coming back to like the CRM and like touch points.

It's, it's just like working a sales pipeline, right. It's a relational pipeline, so to speak of, um. You know, when's the last time I spoke with X broker? When's the last time I had a touch point with YCPA or vendor, whatever it may be. Mm-hmm. And um, and then also like, what's the last update I gave them?

Letting them know that you just did a deal in a certain market or, or of a certain type. Um, and so yeah, those are the, the types of activities, you know, we're talking and, and I would say like shifting to homework. You need to start doing those things. Like yeah, you should have, I don't, spreadsheet's fine.

You know, [00:42:00] Google Sheets, great. Excel, whatever you want. Eat your heart out and write it down somewhere. Mm-hmm. Not on paper. Please let it be digital. Yeah. Um, and, uh, track, you know, who you are wanting to speak with. And then when you do just. Record that, and you'll start to build a history of your engagements out in the industry with others.

And then, um, you know, I think setting some sort of like tell five people yeah, come up with your buy box if you haven't, and then tell five potential partners, vendors, referral sources, whatever it may be. Mm-hmm. Other, other owners, uh, you know, people maybe that have retired out of the industry and let them know.

Like in the next 30 days, tell five people. 

Collin Trimble: Yeah, I think that's great homework. Uh, I think the two pieces of homework I had was, one, get your CRM, write it down, tell five people get your buy box, kind of do the prep work. And the other one was gonna be, be very tight [00:43:00] on what your story is around financing.

This is not a situation where you can figure it out after you're under LOI, you, you, you will run out of time. Uh, but particularly if you're gonna do this off balance sheet. So, um. The broker is likely gonna ask you that, particularly if this is your first deal, they're gonna say, Hey, how do I know you're gonna close?

Um, and so you need to be, be able and willing to be able to provide financial data or some type of letter of funding that you have that's ready to go for, to support that buy box. You, you just, if you don't have that, you're gonna just get disqualified really early. Um, and so having that, being really serious about it.

I think is really important. So, so yeah, I would say this is a tough, this is a tough topic in terms of trying to find magic bullets. 'cause there's, there's very few, it's, it's touch points, it's relationships, it's socializing. Um, we, we've had a lot of people say, man, we're really interested in sending out a cold e we're gonna hire an outbound person and all they're gonna do is send letters and CE emails and cold call.[00:44:00] 

We know a lot of folks who have tried that and had very little results. I think that that works maybe for the hot, like the, the consolidators at the very top end of the market. I think that that's a really hard approach for somebody that's in the mid-market. Um, and so I would just say if anybody's telling you that that's the magic bullet that.

Hasn't worked for us. That hasn't been a super successful strategy. We've tried, hasn't been great. Uh, but there's nothing like relationships and having those conversations. And if you start today, I promise you we're two guys that entered into the market three years ago, and we have done seven deals in three years, if we can do that.

You who's potentially an operator in this market for decades or whatever, can get deals as well. So spend the time on that. Um, as always, if you have questions, let us know. We get a lot of emails from folks asking us questions that we don't know. We just spent some time last week we got an email from somebody in the UK looking to buy a business.

They wanted to kind of talk through the strategy for how to niche down, and it was a great [00:45:00] conversation. We just emailed back and forth. Um, and we love that we're, I'm doing a 15 minute meeting tomorrow with somebody that's in another market that I don't know that's considering buying a business and they wanna run some numbers by me.

So, man, I I, we love that. Um, if you ever have questions, let us know. O of course. Don't forget to subscribe. Give us a review, uh, on the podcast app. Tell your friends about it and then hit us up. We'd love to. We'd love to get to know you, so thanks again for listening. Appreciate it.