From Searcher to Sponsor: How to Buy a $22m Business

The average annual value for a contractor is anywhere from $75,000 to $150,000 worth of product purchases a year. And that's just somebody who's doing two or three projects a week. So not a crazy amount of volume.

And so it doesn't take a lot to create really healthy local distribution businesses. You could have 20 customers and you'd have a multi, you know, $1.5 million business with customers that are that valuable. But... It takes some time where initially we kind of have to take a step back or sideways in order to make room for that.

we're trying to navigate it as best we can because we don't want to take a big step backwards in terms of net income but it's playing out we're seeing a big uptick with all the new stores and you know they've done the restock orders they're continuing to to buy more product to continue to restock and it makes it so that we go from having thousands of customers who call us for technical support to…

That's a model where FloorGuard can 10X, 20X the amount of revenue that we do. If we continue to go down that model versus selling direct, we would cap out. And I don't know where we would have capped out, but it's a much smaller market of contractors who can buy directly from a manufacturer.

And that 15 million of revenue was 15 million of revenue from chemical? From chemical, that's right. Yep. So essentially you're shifting that, which this dance is shifting that $15 million in chemical revenue that was being sold directly via website orders to these bigger contractors that do a lot of epoxy business.

Yeah. you're shifting all of that into the distribution channel, which will mean dollar for dollar, they're less profit. But once you've shifted it into these distribution channels, those distribution channels will unlock much, much greater penetration and allow these much smaller contractors, which is probably an additional 80% of the market to buy in smaller quantities. It's very powerful.

well it's it it doesn't take a lot to believe that that would be the case especially as we dug more into the data so we look at some of the states where we're selling into and where we sell direct we might have three or four customers and that's it for the whole state of and i'm making it up but let's say minnesota as an example because we don't have a local distributor there four contractors

It doesn't take much to believe that you could get to 20 in the whole state of Minnesota because there's hundreds of epoxy contractors in every single state. When you look at our competition, the epoxy depots of the world and the Cimarron's of the world, they're opening up stores left and right because it's the same model. I mean, construction doesn't matter if it's epoxy or if it's just…

for that day or the day before and they don't have a whole lot of money to be able to float a whole bunch of inventory so it's it's it doesn't take a lot to believe that and you know it's it's it we need to enable our distributors by giving them our initial kind of customers as an investment into their business but it's a it's a flywheel that when it starts turning they start to see all the sales…

It's a better model, in my opinion, than having company-owned stores, which a lot of our competitors are doing because that comes with a ton of overhead. The amount of having to put somebody in there and actually staff it, the lease, all that sort of stuff. Here, if we can get a distributor to, and a lot of these are just exclusive floor guard distributors. They don't carry anybody else's product.

they can you know we basically multiply our marketing dollars we multiply our sales force without having to um without having to spend all that money because we're not we now have their marketing dollars their sales team there's a network effect that comes in here that that is beginning to play out and i think you know if we have a conversation in a year i hope to say you know we've we've seen a…