These two businesses are similarish in size. Dallas is a bit bigger, they've got very complimentary offerings. And so if the cross pollination thesis was that the weaknesses or things that Austin isn't doing, it can learn from Dallas and vice versa.
Acquiring Minds
How 1 SBA Loan Brought Down 2 Businesses
Episode
Excerpts · 478 segments · ~1:34:10 long
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03:45 Background: construction to consulting13:10 Meeting Matthias, operating partner deal17:23 Equity structure and personal guarantee24:37 Austin landscaping business details31:55 Dallas acquisition thesis43:01 Undisclosed commission liability surfaces53:35 Employees stealing customers, competitor1:03:58 Dallas bankruptcy and personal fallout1:16:25 Shutting down Austin business1:23:07 Custom AI-built software for landscaping
All sounds great on paper. Yeah, it really seems like a good strategy. Okay, so what happens?
Yeah, so I think this is kind of where it all goes south here. A couple of months, maybe less than a couple months, a month and some change into the Dallas acquisition.
The one of the sales guys there, the sales guy, in terms of like driving revenue, maybe 60 or 70% of the revenue came from him, approached Matthias and was like, hey, so you know, now that the transaction is closed and everything, are you going to pay me the commission that I mowed from last year or is the seller going to be paying me the commission from last year? And that was kind of a surprise…
Especially because during the negotiation there was like in construction there's this whole. And this is like the messiest part of buying a construction business. The work in progress component of the transaction.
The seller negotiated to keep 5% of the work in progress that should have come to us for commission. And we said okay, for the commission, sure. Like you sold that. That was the commission structure.
5%, you know, whoever sold it is kind of the assumption. But I guess the understanding for him was for him. So we felt that. So we already paid that commission for the work in progress.
Um, and he felt that he hadn't. So that was kind of the, the first kind of Red flag for us was, okay, this. This sales guy is not happy.
He's owed actually quite a bit of money. It was somewhere around a hundred thousand dollars.
Wow.
Which it's $100,000 right off the bottom line. And it's $100,000 times the 3.5 multiple that we paid. Right. So we're exactly. We're already. Now we're in the hole significantly.
So we approached the seller about the situation and want to understand, hey, what's going on here? There was a little bit of he said, she said, in terms of the commission wasn't earned. We looked at the books ourselves, and we were pretty convinced that this was a very valid claim for commission.
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