Buying Then Losing a $2.1m HVAC Business

And the owner had mentioned that he may be retiring to start an upholstery company that he like, did upholstery. And he's like, oh, you know, he's not that important of employee. He only works a couple days a week.

Well, the reason he only worked a couple days a week was because he was doing H vac for his own company that he was building. And the owner had gradually let him siphon off customers over the years. Some of the, like, really large customers in the rural area, like the Sonic and the McDonald's, and they didn't have a good CRM.

So I talked about like, hey, maybe like, there's a world where like, if you get slow, I could sub work to you. I, you know, I have like the like lead generation engine. Essentially, like people call my number.

He's like, oh yeah, that'd be good. You know, talk to him a little bit. But like, okay, so first week, my business splits and that guy leaves.

And he, I later found out, like when I went through and did the math and I did a bunch of what's called OCR to read a bunch of old invoices, put them, parsed out the data, and found out that guy walked away with about a third of the profits of the business. When he left, he also took with him the hospital. And the reason why he walked away with such high portion of profitability was because all…

Those are specialized. And he was one of two people who knew how to do that. Now, when I bought the business, the owner said everyone was trained, they could do everything.

When I talked to the guys and I went on jobs with them, that was clearly not the case. This guy was one of the only ones that could do refrigeration. And that really burnt a lot of my revenue stream.

Year one, unbeknownst to me, the same week I bought, and this is, like, unreal. This had nothing to do with me buying. But there was one other competitor in town who had been the former owner's brother.

That guy got in a fight with his guys and they split. And so over the course of a week, I went from having one large competitor, well, one competitor probably like, I don't know, less than half the size of me, to having three competitors in the market. So competition tripled week one.

And they. Eventually that guy had another person split and then another person split. And so the, the market became a lot more fragmented and I was competing with a lot more people who were, you know, they were H VAC guys. They were charging as little as they could.

And so it. If I was going to compete, I had some serious margin compression. I was going to deal with, gosh, Dan.