#219 What It Really Takes to Buy a Local Service Business in 2025

Buying a small business? In this episode of Jackquisitions, we follow Chris Barr’s journey to acquiring a pressure washing company using smart financing—combining cash, earnouts, and trusted advisors. From submitting the LOI to executing deep-dive due diligence, Chris shares what it really takes to close a successful acquisition.

You’ll learn how to build the right team, evaluate financials and legal risks, and structure a deal that fits your vision. Whether you're just exploring acquisitions or in the weeds of a deal, this episode offers an insider’s look at getting a service business acquisition across the finish line.

⚡ What you’ll learn

• What Chris looked for in an ideal pressure washing business—and how he sourced it
• The creative structure behind his LOI and financing approach
• Why specialization matters: How Chris leveraged his real estate pros for M&A success
• The step-by-step due diligence checklist across financial, legal, and operational domains
• How to avoid major pitfalls in banking and legal negotiations
• The must-have advisors you need on speed dial when buying a business
• How to evaluate seller-provided info and spot red flags before it’s too late
  
  
  

If you’re buying a local service business or scaling your portfolio, this episode gives you a framework to approach acquisitions confidently—with the right strategy and team in place.

👤 Hosted by:

 Jack Carr  

 👤Episode Guest:

Chris Barr  

💼 Shoutout to Appletree Business Services

 HVAC and plumbing pros—ditch tax surprises and unresponsive accountants. Appletree handles your books, taxes, payroll, and acquisitions, and they know tools like ServiceTitan cold.

🎁 Get a free tax & financial review or 10% off a QOE report.

 👉 Book a call here — tell Patrick Jack sent you.

💼 Special Thanks to First Internet Bank!

 Looking to buy or expand a business? First Internet Bank is a National Preferred SBA lender specializing in acquisitions for the skilled trades. Their SBA loan program offers up to 90% financing for business acquisitions, partner buyouts, and commercial real estate—plus optional lines of credit to fuel future growth. Unlike traditional lenders, they take a “how can we” approach, making deals happen for both first-time buyers and experienced operators.

👉 Special Offer: Mention Owned and Operated for a reduced good faith deposit and a complimentary deal review + buyside prequalification.

Connect with Alan Peterson from First Internet Bank here to get started 

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John Wilson, CEO of Wilson Companies
Jack Carr, CEO of Rapid HVAC

📌 Disclaimer:
Some links may include UTM parameters for tracking. Episodes may feature paid sponsors, but all opinions are our own. Always do your own research before making business decisions.

Chapters

• 0:41 Chris's Journey to Finding the Perfect Business
• 2:59 Navigating the LOI and Due Diligence
• 4:25 Building the Right Team for Acquisition
• 23:37 Starting Operations and Due Diligence
• 28:44 Navigating Owner Transition and Training
• 39:39 Final Thoughts and Next Steps

Transcript

119 Transcript

Jack Carr: [00:00:00] Hey guys, if you've been sticking around for the Chris Bar Saga, this episode is going to absolutely be awesome for you. So we've started with Chris Barr, who he is. We learned about how to be the best buyer possible and what to look out for. We've gone through a few iterations of businesses. We've looked at a pool business and art framing business, and then he found his perfect business from episode one, and he has it under LOI.

So in this episode, we get to talk about his LOI, his strategy behind it. We get to look into. How he's gonna start due diligence and who's on his team. This episode is fantastic. If you're buying a business, stick around for the, the details. Appreciate it. Everyone.

Welcome back to Jack Musicians. We have Chris Ball. What's going on, Chris? 

Chris Barr: Man, it goes. Due diligence is upon us and yeah, welcome to the jungle, man. It's, uh, 

Jack Carr: it's a ride. So, I mean, last time we left you, you were [00:01:00] thinking about putting in an LOI on a pressure washing company, um, locally. Uh, and in your geo, the company you wanted according to the first step.

Yep. And like everything at B2B, just like you wanted primarily. So like dreams do come true. A as someone who says you're never gonna find that 

Chris Barr: you found it insane. Yeah. Um, so it's funny 'cause the. First episode dropped and I went back and watched it. I haven't, I haven't watched any, the episodes. So after getting over the cringe of hearing yourself talk on camera for the first time, um, I got to the portion where I was just, you said, describe your perfect business.

And I'm like. Man that is every box checked for what I ended up finding. And we've got a long way to go. Um, there's, you know, a million things that could kill this deal during due diligence. Um, but that being said, it's really, really exciting to have a. So much synergy, such a warm relationship with the owners, the exact business [00:02:00] I wanted, exact area.

So, uh, yeah. Few complaints on my end. So far, at 

Jack Carr: least, one of the most common and expensive mistakes that I see in acquisitions in the home service space is not getting serious about accounting. Whether you're buying a business or you're already running one, you need the right financial partner to save you time, money.

And headaches. That's why we partnered with AppleTree Business Services. They are a one stop shop that'll help you get through the due diligence process, but then they'll partner with you after to help you out with payroll and bookkeeping and taxes. They know home services. They're fluent in tools like ServiceTitan and House Call Pro.

If you're tired of the surprise tax bills, or an accountant who ghosts you when you really need them, AppleTree is the upgrade you deserve. Listeners of the show can get a free tax and financial review, and if you're buying a business, they'll give you 10% off quality of earnings. Just head on over to AppleTree business.com.

Talk to Patrick. Click the link, let them know Jack sends you and they will take care of you. [00:03:00] And so with that, I have a, a key question, right? It's you closed on LOI. The LOI was an interesting LOI with this creative financing that generally you don't see. Did they just accept that first round they said we're good with that, or was there some back and forth?

Chris Barr: We, they accepted the, um, the amount that I was gonna put down at close, and we said that earn at will be TBD during due diligence. So we left it a little bit open-ended. I came in with a purchase price that was well above what I initially wanted to lead with, or what I think the business is worth. But that being said, you know, we were in a interesting position to get first crack at it before it went back on the market, and you know, again.

Lois are very contingent. We saw a lot of opportunity to kinda whittle that purchase price down the eventual target purchase price. We held firm on what we're doing close, but you know, uh, it was a little over aggressive with that to lock down the deal. You know, we'll probably whittle it down during due [00:04:00] diligence.

But, um, yeah, we were able to get it signed on and, you know, into our, you know, our mini back office we have here and, and get the analyze. 

Jack Carr: And so like a perfect example, you said, welcome to the jungle. So now like that was the easy part. Well this is all the easy part compared to running a business. Yeah.

But this is the, the LOI was the, the easy part. You get that signed and now it becomes. Real. Yeah. Right. And so talk a little bit about, before you start, talk a bit about kind of the, the people you have in your team. Sure. Not, I don't need like names or, yeah. Um, but like what positions, so you said, we were talking before this call that you just had a extremely long call with an accountant.

Yeah. So you have an accountant. Does the accountant do m and a? What? Tell us a little bit about that position and then let's hear the other ones. Sure. 

Chris Barr: Um. Is a little bit of context. I won't get too in the weeds. You know, again, from the commercial real estate background and the commercial real estate portfolio that we have, [00:05:00] a lot of these team members have been in place.

Um, you know, it's the same accountant that we that's managed our entire real estate portfolio. They've been our kind of right hand man. The accounting firm is Kemper, CPA, they're, you know, top 100 in the nation. Um, we also have a valuations expert who specializes in m and a. Um, who's not our key right hand man, but he's on the team and consulting with us as we move forward.

Um, and same with the attorney. Um, it's the attorney who's also handled, you know, m and a transactions before. He's a transaction attorney. He's been our right hand, go-to attorney for a long, long time with the, the portfolio that we currently have. So I. I would love to take credit, but a lot of that team is kind of baked in and already in place and we examined switching up when we, you know, we're gonna take this to contract, but we, we have a solid ecosystem in place already.

So it seemed like for congruency sake, just kind of keep the same players and, you know, take on additional local [00:06:00] attorneys, or again, a valuations expert within their house as. 

Jack Carr: So question for you. Do, are you, I, I guess I, I don't know these people, but are you worried that, that these individuals are not from this space?

Right. So for example, if you get in an, we always push really hard, I push really hard whenever I'm dealing with someone who's looking for a business is to focus on an m and a attorney who does this, like does lower middle market. Yeah. Stuff. Yep. And I always push that because if you get an M and a attorney that's for a big M and a attorney, you're going to have to pay a significantly higher bill because they don't understand the actual risks and rewards involved with this transaction.

Mm-hmm. Um, for example, like your indemnity clauses and your warranties and guarantees, like all that needs to be important. But that being said, right, you're not buying a hundred million dollars m and a, you're not even buying a $20 million business. You're buying with, you know, five or a $1 million business without real estate.

Like, it's a [00:07:00] very small deal in, uh, in comparison to like the m and a market. Mm-hmm. And so do you worry about that across your accounting team? Or Right. They, they don't look at m and a, your due diligence team. They don't look at small and m and a. Right. Because if, as you could imagine, right? Just another counterpoint is like somebody who does due diligence for these small deals understands, I think, a little bit better that owners like to use it as their pocketbook.

And so that's what they're looking for. They're looking for. Uh, specific transactions where owners kind of work around the system. Mm-hmm. Versus when you're a hundred million dollar, you know, m and a transaction. Like you're not looking for the time that the, the owner probably not even adding back the time that the owner took his wife and, and his best friend out to dinner.

Yeah. Like that. That $200. Probably isn't relevant as much as making sure that there's not massive fraud. Sure, 

Chris Barr: sure. 

Jack Carr: Right. [00:08:00] Yeah. And so does that, does that worry you or how are you mitigating for that specifically? 

Chris Barr: No, great question. And I think it's a, it's a matter of trade-offs, you know? Um, the reason that I end up sticking with our kind of OG team.

They do have the versatility. Our attorney has done MMAM and A on 

Jack Carr: MMA 

Chris Barr: back to my roots. Um, yeah, I mean, I wish, but, uh, the long arm bar of the law. Um, so he's done m and a for transactions, much, much bigger than ours. He's also worked on deals much, much smaller than ours. Um, kind of same with our accountant.

You know, that valuation specialist they have in house mm-hmm. Has worked on stuff bigger, worked on stuff smaller. So both are versatile enough for me to feel confident that they could handle this transaction and for what I'm sacrificing in specialization, which definitely has crossed my mind. It's, it's been.

I wouldn't say a major concern, but it's, it's been something [00:09:00] we've put thought into. We get familiarity and we get people that really, really understand our levers that are important to us. 'cause as we discussed, the things that I might try and to negotiate in a deal and the things that are important for me and sticking points for me.

Maybe, and we know they're very, very different than your sticking points. 'cause everyone has Yeah. Different needs. So they're very familiar with our needs and what our priorities are and, and you know, what we're gonna be looking for most. Um, and just on that call with the accountant, yes, he was very, very adaptable of kind of starting to see that, okay, this is kind of used as a personal pocketbook for the owners and is able to kind of shuck and jive.

Um, with that model, even though it might not be his bread and butter. So what we sacrifice in, uh, specialization we make up for and familiarity, and then kind of knowing our particular levers that are important to us. So I'm comfortable with it. 

Jack Carr: Yeah. I mean, it sounds like you had a team. I think the most important thing is A, that you have the team starting, but b, that you.[00:10:00] 

Um, I, I'm gonna say that you, you're kind of a unique instance. I would definitely recommend going out and getting specific specialists just because if you aren't the specialist and um, you, you're not gonna get that familiarity like Chris is getting to make sure that you're finding those specialists.

And so, for example, somebody in the space that we're not sponsored by them yet, or unfortunately is who I've used for all four of my deals is SMB law, right? They, Eric, um, and Kevin Henderson, uh, they run a small. Uh, m and a firm, or excuse me, they run a legal firm for small m and a deals. Uh, they've done, I think they're like the fourth largest growing firm or some crazy metrics, um, last year, but I was their first deal.

Uh, and then I've continued to use 'em because absolutely amazing. They only focus on these kind of deals, so they're very, very knowledgeable. Same thing for, for CPA firms and due diligence firms that, you know, I know this is not really to you, Chris, but this is just to the audience is like, Hey, focus on people who know what they're doing.

Because if you don't, you [00:11:00] can end up spending way more and get less. Um, so I'm trying to think. Uh, AppleTree, uh, business, they're a sponsor. Amazing. So they do due diligence. They do m and a, they do the consulting on the front end, and then they actually do payroll, bookkeeping, and um, payroll, bookkeeping, and.

Tax, um, tax stuff on the backend so you can utilize them and stick with them through they already know your business. It's an easy transition. Like those are the type of groups that I would definitely recommend. Um, but sweet. So you have your, your accountant, you have your valuation expert, which usually comes with the accountant.

Uh, or at least they know the reference person. If you're doing a seven A, they will, they will buy one or they'll make you buy one, uh, from a third party. You have your lawyer, um, you have your broker. Your buy side broker? Uh, anyone else? I'm missing bank. Your banking partner? Probably, yeah. 

Chris Barr: And we have a lender that we have a very, very long standing relationship with.

So especially when I was search, you know, starting the [00:12:00] search process and I was wondering kinda like, what's the price range I should be hunting? And you know, I was able to just give him a call and say, you've got my balance sheet, you know, you know where I stand. What size can I realistically take a swing at?

And he said, you know, half a million to a million, maybe up to 1.5. So I'm like, all right, that's my purchase price range. So, um, yeah, again, we've got a longstanding relationship 

Jack Carr: there that we can lean on. So definitely, yeah, definitely recommend getting involved with your bankers early on. 'cause they'll give you that.

They'll say, Hey, let's look at your financials. Let's pre-qualify you. Let's figure out how we can do this. And that's what the key is. Like you want a banker that's going to, to tell you, how can we do this? Not, don't do this, or you can't do this. It's like, how, what is the steps necessary to get there? Um, you're going conventional, right?

Yep. Most people listening are gonna go SBA seven A. I just got in an argument with another banker about that, but, um, that's neither here nor there. It's different. I just always, I just always think I'm right. Yes. Which I was in this instance over someone who does this for a living. Uh, but they were arguing over variable versus fixed.

Uh. SBA loans. I was [00:13:00] like, no, I'm pretty sure most SBA loans are in this industry are variable. Yeah. They're like, no, no, they're not. They're not. And I was like, yeah. I mean, I've been to market three times. Like yeah, they are. And 

Chris Barr: I'm not even using SBA from the, you know, limited research I did on them way at the beginning of the process.

Yeah. I'm pretty sure it was, it was variable. But, um, 

Jack Carr: yeah. You 

Chris Barr: know, and again, different strokes for different folks and just, I'm gonna, I'm gonna, 

Jack Carr: real quick, I, yeah. Before I'm gonna, I'm gonna, you know. Uh, what do you call it? Pitch, uh, under, oh gosh, I'm blanking here. I'm gonna, I'm just gonna pitch, uh, our other sponsor, which is Alan from, uh, first Internet Bank.

Once again, not like, not the guy I argued with. Very good. Alan's amazing. If you guys really do need an SB loan, go and talk to him, especially early on in the process. Get ahead of it. Uh, I think we, there's a website up where you can get in contact with an Alan, A-L-A-N-F-I-B first internet bank.com. Alan first f ib.com.

Uh, amazing guy. And really knows what he's doing specifically in HVAC two, which is awesome for me 'cause I get to [00:14:00] talk to him about these kind of things. But we'll have him on the show here at some point and, uh, definitely would utilize him. Yeah. So Chris, um, okay, so you go, you've got LOI signed, you're going into due diligence.

There's, there's kind of two sides of due diligence that we talked about. There is a, like an operational due diligence and then a financial due diligence. What, what have you started? Where are you at? 

Chris Barr: Yeah, and I kind of really broke it. Into three actually. Legal, financial, and operational. Awesome. Fair, fair, fair.

You know, I, it's, it's crazy 'cause I really felt like it was best to kind of dive into the financial financials first. I mean, if the math doesn't, math no. Sets me weaned through a bunch of legal Momo jumbo and that I love it. You know, I was just doing some Googling on the business and owners and like saw a few legal things pop up and I don't.

I'm not an attorney, so I don't know what kind of impacts these things have. If they're deal killers, I, I hope to got not. Um, but then I was like, well, shoot, maybe I should do [00:15:00] some legal first and kind of get some, you know, clarity on that to make sure I'm not having to weed through the financials if there's a deal killer on the legal side.

So it's, 

Jack Carr: yeah. Let's clear something up before you start though. Um, are you doing stock sale or asset sale Asset purchase? So then the legal is less important because it is a new entity? Yes. So for people who don't understand, stock sale is essentially you're keeping the same business, you're keeping all the liabilities.

A lot of sellers like it because it's a, it can be tax beneficial to sellers. Um, buyers don't like it because you have to. I have, you have to take the business. You're buying the stock of the business versus just buying the assets of the business, shutting it down, getting a D, BA, and then it's a new business.

So Rapid Response is not was the original name of the old owner's company. I have a company that owns Rapid Response and owns the IP and owns everything. Asset sale, about the trucks, about the goodwill, about the website, the name, blah, blah, blah, blah, blah. So you are doing an asset sale, uh, which then removes a significant portion.

The risk. I know that [00:16:00] you mentioned, and we won't dig too far into it, that though there's some extenuating circumstances on this where it's a, um, it is a Fran franchise opportunity. Yes. 

Chris Barr: And so there is that, and also, again, this is just kind of history in real estate stuff. We are. Like so insanely terrified of litigation.

You know, it's one of those things mm-hmm. Where any yes, man, as you should be, an asset purchase does shield us from a lot of that. But like, I don't want, like, you're probably good. Like, I, I don't like that doesn't, that doesn't cut it for me. This thing needs to be, especially on a legal standpoint. Squeaky squeaky clean because like, oh my god, legal stuff is just kind of the bane of our existence.

We were in apartment rentals for years and that was, yeah, again, I imagine that's something that's a, a big touch point for us. So Yes. And um, but you know, in regards to the financials where I was really trying to get started. Um, you know, they gave us a big Dropbox with a bunch of DD items from previous buyers, and I was like, [00:17:00] gung-ho.

Okay, we've got it. I've got all the materials in front of me. Let me sharpen my pencil and dive in. Even though this is the pro part of the process, I'm really uncomfortable with. And pulled open bank statements, credit card statements, general ledgers, tax returns, and was like. Nope. I dunno what I'm doing.

Jack Carr: Nope. I'm so glad you said that though. Like, that's so important is, is I was so lost in sauce. Yeah, yeah, yeah, yeah. Yeah. So I mean, due diligence is a serious thing, especially quality, uh, QOEI think it's quality earnings. Um, yeah. It's just making sure a, that the earnings are good. Yes. Right. You, you pay somebody Yep.

To go through and make sure that the jobs are good, they match up. Perfectly with what they said they did. You're not, you're not getting paid, right? If you're buying a pressure washing company, but you're running, you know, your dog, he's running his dog walking business through your, that company and that's how he's taking in the money for whatever reason.

Or he is paid by his aunt $50,000 in a laundering scheme. Like, you wanna make sure that, [00:18:00] that you're not paying for that because that's not the business that you're buying. That's the first thing. And then, uh, from a quality of earning standpoint, and the second thing is making sure that. All the money is accounted for.

Right? That they're not lying. Yeah. That's tax returns, that's ledgers, that's deposits, that's making sure everything lines up. And it is a lot. 

Chris Barr: It's, it's a lot. And then, you know, again, I came in with a, a sharpened pencil rate to roll up my sleeves and do the work even though it's not what I like. But here was kind of my two big takeaways from that.

Okay. Is I realized, one A, this is what I pay an account for, but this is really more of a. A test run in managing, I'm gonna be operating and overseeing and managing a process. Like my job in due diligence is not to go sharp. My pencil and do the work is to guide and direct the process that I'm having other people do.

So this is a good chance framework to take some practice at giving direction to a team and setting them off the races rather than trying to take on everything for myself. So I, I kind [00:19:00] of viewed it. As an opportunity, um, was one big takeaway. And the second big takeaway is yes, that quality of earnings, making sure all the math ties out.

Like I need that for me to feel comfortable moving forward in the transaction, but it's not just me. I'm gonna take this to a lender and the lender is gonna need that to all tie out because mm-hmm. They're only gonna go off tax returns and anything outside of a tax return, they're gonna need verification receipts, et cetera to see that the math, math is maths.

Um, you know, so I realized. It's not totally me driving this, like there are, there are needs also via my lender that'll help guide the process. Yeah, so those were kind of my two big takeaways from the financials that I've just started a whopping 36 hours ago. 

Jack Carr: Right. Yeah. Drink it from a fire hose. And so with that though, right, that's the financial side.

Mm-hmm. And I think you're doing the right thing. It's, you get very 32,000 foot overview helping like, Hey, this worries me, this worries me, this worries me. I know the industry. You might not, [00:20:00] um, can we figure this out? Can we figure out, Hey there, her. They have an add-back for the brother. Um, like, what?

Let's talk about that. Let's go through all the add-backs. Let's make sure they're all correct. And, but then that starts pushing into operational, like, okay. Let's go through the operations. How many people, how long have they been there? What are they getting paid? What's the bonus? Structure and commission structure?

Mm-hmm. Like the, all of the, uh, how many contracts do they have, making sure their contracts are valid and they're not expiring within the next six months. Real estate, if they're in real estate, is that assumable loan. Like all of the things that you need to do from an operational standpoint. You can't really pay somebody to do.

Yeah. So how are you starting to look at that as you figure out financials first, then start wasting your time on opposite. Yeah. And legal, 

Chris Barr: you know, and that's kind of the, one of the things that, and I could please steer me otherwise if I'm, I'm barking down the wrong tree here, but, um. I felt like it's best to kind of get the [00:21:00] financials and the legal underway.

'cause that's where like the things that are true deal killers are gonna cause me to walk away, will show up, um, because they're definable and, and clear. Um, operations is not something I was necessarily gonna save to the last minute by any means, but I wanted to get a picture of. Verifying some financials, verifying some legal before I start getting in there and really understanding the day-to-day and how the ops work and who their people are.

And doing all of the interviews with employees, clients, all et cetera. 

Jack Carr: Yeah, I mean, I wouldn't interview any employees or clients until you get to close. 'cause that hurts them. It hurts you. Okay. If the client, if the employees don't know about it, if they already know about the sale, it's a bit different.

Yeah. But that's why I lost all my employees day one is 'cause they let it slip. They let it slip that the business was sailing before it was supposed to be selling. Oh, okay. Gotcha. So that's, that's, in my opinion, the best thing to do is come in day one, sit everyone down and give everyone the spiel. 'cause what, what, what employees don't like is they don't like the unknown Yeah.

Of like, Hey, what's gonna happen? [00:22:00] So if you can quell that day one hour one, you're gonna be fine. We're not changing your pay. We're not getting rid of anything interesting, like just relax. It's just a new owner. That's it. Yep. We're gonna try and grow and give you guys more opportunities. See, and I, I would believe you 'cause you've done it before, 

Chris Barr: my thinking and kind of how I was planning on doing it is sitting them down to again, not hit them with the surprise of, Hey guys, nice to meet you.

I'm the new owner. Um, but to sit them down before close and say, Hey, listen. This is what's going underway. Yes. Ownership is changing. You still have a job. Not only do you still have a job, I need you to stick around for me to be successful. So tell me about your experience. What do you like about working here?

What are, again, closed door. I'm a new guy. I'm, I'm an outside person. What would you like to see improve? How can I make your life better? And then starting that kind of camaraderie on the front end. To ensure that nobody comes in day one hour one's. Like, wait, new owner, screw this. I'm out. So, 

Jack Carr: yeah, that's hard.

I mean, the downside becomes right. It's like, well, what if you don't close? Yeah. And then now [00:23:00] that hurts the old owner. It's, it's just like, it kinda get messy really quickly. Sure. I mean, I don't want that to happen for anybody. Um, but that's why the general consensus right, is you just wait day one, it closes.

You go in, you talk to 'em, it's the same thing. Right. You're just moving the timeline to before or after. Mm-hmm. If there's unnecessary risk in doing it before versus doing it and after, I don't think there's a right or wrong way other than like, Hey, you really need to understand that. Um, that the risk then I is not closing and then hurting the old owner.

Yeah. Um, because now that employees are worried and they were, you were selling and now you're not selling and someone backed out and like, what's, what's the deal? Yeah. You know, it's just a unknown is what kills people fair. But what I would challenge is I'd say, Hey, I would start ops now. Okay, op ops, like, it's, it's a time sink, right?

There's zero money that you really have to spend on it. The ops due diligence. Um, while you're running financial, which again, like you're saying is a very good, um, example of what you will have to be doing when you're running [00:24:00] a business, right? Because you are gonna be running operations for this company and you're gonna be de out de.

Delegating out the financials and, and all these tasks and everything like that. So it's a good mix of both because you will have to do those ops at some point, especially with the size business you're buying. A hundred percent. But I, I'd dig in right away. One, because, because if you find something, uh, it's free to do.

Yeah. And if you find something that's like a deal killer. So the reason I'm, I'm. Pretty adamant about this is I found something that was a deal killer in one of my businesses. So before I bought Rapid, I was looking at a business down in Napa, which is where I was living. Uh, I have a, I had my house that was, uh, less than a mile away from this location.

Like it was beautiful. The problem was, it was, um, the real estate that they were in was Grant. It was, it was. Critical to the business and they were grandfathered in with the old owner of the building complex to have zero increases in rent on a commercial building for [00:25:00] 20 years. What? Yeah, so I found that because I went and talked to the landlord saying, Hey, like, hey, they're thinking about doing this.

I just wanna make sure that we can go through the terms. And they, they were like chomping at the bit, like at, no, we are going to raise you up as much as possible, as quick as possible to get you to market. And I went. My net is 200,000. You are going to raise my rent 20,000 in three years. I'm not gonna have any net.

And so I ended up killing the deal because of that, that, and I found out the owner that the landlords were pretty adamant that the owner was operating in a common space, which they weren't gonna allow anymore, um, to the new owners. And so that was gonna kill like 400 square feet of critical area to the operation.

And so, um. Those two things. Like you can't, you like the, like, that's dead. I can't buy that business. Um, and so. That would've hit me. I mean, I still would've had to pay the due diligence and whatever, but [00:26:00] at least I didn't wait another two weeks and run out something else. It like, we found that out pretty quickly.

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Chris Barr: Um, some news and updates I got, um, from them earlier this week, which I viewed as a giant win and a positive.

So I'm [00:27:00] excited to get your take. But, um. The broker hid me up and said, Hey, listen, they wanted me to relay something to you. They haven't offered this to any other perspective buyer yet, but they just really like you. They, they're really excited to work with you. So in the listing it says that they're gonna hang onto their current space and whoever the new buyer is is gonna have to find their, you know, own new lease to, of flex space to, you know, set up shop at.

Um, they really like you, so they have a spare, you know, 400 square foot office and they're down to just kind of split off a space with you and kind of work hip to hip with you. Um, if that's something you wanna do, rather than go find your own space, employees already know where it's at. They're already familiarized.

Makes transition and training really, really seamless. 'cause I don't have to pick up the phone and call, might pop my head out the door and say. Hey, Rumi, like, got a question for you. So, um, I, I really like that idea and again, it saves me also on, on, you know, a lease dollars. So again, I, I viewed it as a big kind of win to just be working legitimately, physically, hip to hip with [00:28:00] them, uh, in the same space.

So, you know, operation Catched, it's 

Jack Carr: double-edged sword. Yeah. Um. The good side is exactly what you said. Like if you guys have a good relationship, and I mean, like I said, there's extenuating, extenuating circumstances here, but if the relationship is good and the owner wants to stay and he is running a different business and like all this thing, then yeah, that can be fine.

Um, the other bit though, and if it's not critical space on a location basis, generally, I would say, um, like if, if the owner's going to stay, a lot of people want to get out from under the owner's thumb. Right. If, if it's not critical to location. And so understanding that, um,

I, I guess what I'm getting at right, is it's very hard to take over from a managerial and leadership standpoint where the, the team still has to deal and work with the old ownership. Does that make sense? Like [00:29:00] that's why I always recommend a really quick. Training period. I don't like the six month or the, the year long.

Yeah. Keep the owner on stuff I like. I was a three week and done, like, get him outta here. I don't want, I don't want anyone calling him like, unless it's me needing something. Yeah. But from a team standpoint, like I'm the leader. I'm going to be the one that's helping you. I need to figure this out. Um, so it's like a do, it's a double edged sword because it helps you, but if they're good, but if they're not good, it hurts you.

So it's like this ehs I 

Chris Barr: see. And that's one of the things where, you know, again, I, I defer to you because heck, you've done it and done it successfully. I have not, but I really like the long extended overlap in training and transition. You know, I'm not. I, you know, 

Jack Carr: just, you know, 

Chris Barr: I'm, and I'm sure again, you've, you've done it and I have not.

But 

Jack Carr: honestly, though, I hope, I, like, I seriously, I, for jokes aside, I really hope that, that it is a good transition. I've transitioned with three owners now. Mm-hmm. And all three of them. I, I like you, you really need to get, push them out the door [00:30:00] because, uh, what we find, and what I found by this podcast and going through and talking with people and the workshops is what you end up finding is like that the ownership stays on usually in, in the hvac, plumbing, and electrical fields as a, like, qualifying agent.

Mm-hmm. And it ends up becoming a nightmare just because he's like, I don't wanna run a business anymore. I just want to be in service or sales. I just wanna be in the field again. And then he gets out in the field. But he hasn't grown his business. You bought a $3 million HVAC business that's been like that for 30 years because he doesn't know how to run a business.

He's gonna sit there and tell you you're doing everything wrong. Mm-hmm. For the next Right. 10 years, you keep him on. Yeah. And, and that, that culture is going to actually reverberate into your team. It's, Hey. This price is too high. Well, no, it's not. You just have been underpricing for the last 30 years, which is why you haven't grown.

Like that's, that's the kind of conversations that, that I've had personally with the owners and have had, you know, antidote and [00:31:00] anecdotal evidence. Yeah. Sorry, I hate that word, but, uh. Uh, but that, that's what I've seen. Yeah. And I've seen it over and over and over. It's like they put him in a service role that he doesn't do good 'cause he can't sell because he doesn't believe in your new pricing structure, which brought him up to market.

Mm-hmm. Or he doesn't believe in the new marketing way. You're, you're showing you're sending people out to, to leads for free. Now what is this? I'm not doing that. I'm charging them each time. You know what I mean? It's like this crazy stuff that, that maybe they'll, it's just an a trades thing. Mm-hmm. Like an old head trades is like, they know better.

Yeah. I, I, I posted on fa uh, t Twitter the other day. I said, Hey, people got into owning a business for two reasons. A, they're, they were born into it. Like your dad is an entrepreneur, your mom's an entrepreneur. You grew up selling candy bars and lemonade stands that number two is you don't like being told what to do, and that's you.

Yeah. You probably heard my, and that's Jack. Yeah. That's me. And, and so, but like, that's also everybody that I deal with in, in the traits. It's like this old guy just doesn't want to be told what to do and how to do it. Roll ads, 

Chris Barr: man. And [00:32:00] you know, it's funny 'cause hearing you talk about this, it style wise feels like it highlights the.

Are separate and different approaches that we've run into on other topics, which is you really are a huge fan of independence, growth. This is all about growth and your ability to, to scale something up. And I am really much more have a preference for stability. You know, I like, again, if he's kinda like, uh, my, the reason I like a longer and lengthier transition period is I'm buying something.

Because it's been previously proven to be successful because you have been doing something right for 15 years. So I want as much time hip to hip with you to be able to understand mm-hmm what you've done over the past 15 years to keep this ship afloat and to be able to replicate it. Um, so I don't really mind end like being under the guy thumb.

Fine, I'll sit comfortably under his thumb if it means I can, you know, sponge and get as much by [00:33:00] osmosis that I possibly can. To ensure that stability. That's again my mindset, but Well, what, when 

Jack Carr: we bring you back, we'll 

Chris Barr: see. 

Jack Carr: Yeah. I'll, I, I, honestly, I hope, I hope it's sad for you because, um, I've yet to see it.

Yeah. But I'm open and I'm open to seeing that and I actually hope that you get that. It sounds like you guys are gelling and getting along really well. Love like some of the owners I get along with, well now that we're not working together. Mm-hmm. Right. They're just other HVAC business owners that, or X HVAC business owners that I can talk to and bounce things off of.

That's all wonderful, but. Yeah, I, I think we're gonna, we will see on this one. Yeah. Um, and I really do hope that it's in your favor. The, the nuance to Admiral is that 

Chris Barr: it's a, again, they're doing some franchising rollout and I'll be a franchisee, so there's kind of gonna be some inevitable, I'll never be totally out from under their thumb because there's this franchise aspect to it.

So, um, that kind of makes things unique and it's, again, going back to. [00:34:00] Man. Um, it's funny when I found out about some of that legal stuff that I mentioned, I like the first thing that came back to mind. I was like all flustered about, I was going for a walk and then I remembered. It was hard 'cause I was like, man, I like these guys so much.

I'm enjoying them. The relationship is so warm that like it's I and I can tell and I'm the presence of mine to see that it's making it difficult for me to be objective. And the first thing that came back into the mind was when you talked, you and I spoke on episode one. I. Of, is this a symbiotic or is this an adversarial relationship that you're gonna have with the sellers?

Yep. And I'm like, see, this is why you gotta remember what Jack said is because as great as you get along with these guys, they might have some skeletons in the closet. They're intentionally hiding. They're gonna lie to the government, they're gonna lie to me. And so as much as you like these guys.

Remember that this is inherently gonna get adversarial and so like, don't fall in love too fast. So the wisdom of this show has already, you know, come back a few times at me. So, 

Jack Carr: yeah, I mean, [00:35:00] it's a good reminder during this phase though. Yeah, right. During due diligence. It's like that's when you're uncovering those skeletons and all of the, I.

Um, kind of the honeymoon phase of Oh, it's gonna be so great and you should definitely buy my business. 'cause it's easy. Yeah. And I only work 10 hours a week and I make 300,000, $400,000. Yeah. Uh, my wife, I just pay her just because I want to pay her. Uh, and da da da da da. And then you're like, open the books and you're like, oh, none of that is true.

None. Yeah. I, the operational due diligence, I. Talked to, you know, to whoever the distributor and the distributor's like, no, dude, that guy's working like 60 hours a week. He calls me at 10:00 PM at night to get that equipment. Yeah. You know what I mean? Like, then you're like, oh, so it's not just all finding Danny Owen and Yeah.

The, you know, we, we, they didn't pay us for 90 days last month because it, you know, they couldn't because they were out, they told me that they were behind on, on jobs and, you know what I mean? Like, you find all this stuff out when you start cranking down on the, the, the ops and then on the financial side.

Yeah. So, I mean, I hope, like I said, [00:36:00] hope is a great word for this, this kind of time in, in the process. I wouldn't get married to the business because if something does come along Yep. Uh, you can mitigate that risk again, like we talked about in one of the last episodes with price. Yep. Boom. First thing you do is I'm never afraid if you do find like true fraud or true, uh, mis, maybe not fraud, that's a strong word.

You don't want to. Insinuate that they purposely did this, but a, a miss in funds that wasn't there or, or didn't hit right or whatever the case may be. Like we are re-trading and I wouldn't be afraid of that. Uh, because at the end of the day, you are the one taking on the risk from the bank. You're the one putting the private gua or the personal guarantee, it's your real estate that's up for, um, auction if you go bankrupt.

So making sure that you are covered, and that's the key to all of acquisitions is price, price, price. Negates risk. Yep. So, 

Chris Barr: yeah, the one thing that, you know, that we're also gonna be working into pricing, and as I mentioned, you know, [00:37:00] we have a, a price of close and then a target purchase price to be achieved through an earnout.

And maybe this is naive of me, but that target purchase price. So you'd even currently it's over where I want it to be, but like I'm kind of okay with it. I'm kind of, you know, again, I'll imagine we'll still whittle it down, but what I'm much more. Interested in re-trading and negotiating on is that price at close, because that's what I'm gonna be on the hook for with the bank.

And so again, if we need to keep their earnout as what, you know, as the eventual purchase price, I might leave some money on the table, but like, honestly, it doesn't really bother me that much. What I'm most concerned about is where I, my hind parts are exposed and where I'm on the hook for the bank. So my RET trades, I'm planning to, to target that price at close rather than the target purchase price.

Again, that could be naive. Agreed. But that's, 

Jack Carr: no, that's, that's actually, I think that's a better call. It's like, hey, if, if we can once again reduce risk through creativity, it's like, hey, let's reduce the, the, for sure. [00:38:00] Personal guarantee portion. Yeah. And then the non guaranteed, well, it's still guaranteed, but in a different way.

Yeah. To the seller. Uh, work on the seller's note, keep the sellers note the same or bigger, take down purchase price. 

Chris Barr: No, that's a, that's a huge, that's a deal killer for us personally, is I'm going under enough debt as it is to where that they, I am not. Doing a well, an earnout. An earnout is a seller's note.

No, we're not perform sellers note. No, we're doing as a, we're not doing it as a note per se, where I'm obligated to pay them. It's, it's based, it's based on the over just You're doing 

Jack Carr: some super creativity. We're done. We're getting, we're done. Yeah, I got you. So, um, but points withstanding the amount that you're going to owe the owner after the fact of the close of the deal based on revenue or net, that part is gonna be, it's, it's gonna buffer, right?

Yeah. Because as you, your net goes down, you'd have to pay them less. As it goes up, you pay them more, it works out. Yep. Yep. Um, completely, completely agree with you there. Uh, what was I gonna say? You had a great point that I wanted to, to touch on. Um, yeah. Don't get married to the deal was a big one. Uh, not until it [00:39:00] closes, making sure that you're going through due diligence with a clear head, um, going back and, and, uh, you can always, you know, you don't, you don't want to retrade, but if you need to retrade, make sure you're, you're going to, you're open to it.

Um. I don't know. Let's, okay. Well, I had, I'll, I'll think of it later. Yeah, we'll add it in. Cut it in. Uh, no, that, that's awesome though. I'm, I'm very excited for you, Chris. It's the perfect business. Like you said. It's what you wanted. It's, it's in the right geo. Uh, there's some funkiness to it, but there's never, I mean, it's very rare that there's a deal this size that doesn't have any funkiness to it.

And you're, you're powering through it, man. Yeah. Like, this is awesome. That's all you can do. Uh, how are you feeling mentally? 

Chris Barr: You know, I had a few, um, freakouts earlier this week. 'cause again, I was so gung-ho to like, dive into due diligence. Like now the real work commences and I felt like I took two looks at it.

I'm like, I have no idea what the heck I'm doing. And it was a little bit, uh, like kicking in the [00:40:00] pants. Um. Yeah, I got, got my ass kicked in a little bit, but then again, I viewed as an opportunity. I kind of zoomed out, realized I'm, I'm directing the process, not, uh, in the trenches. Um, so I'm, I'm feeling pretty good at this point.

The other, I just off that big call I had with my accountant. The moral of the story is get access to their QuickBooks. Like, you know, again, rather than doing this back and forth of, no, your form is incorrect, redo it. Like, just gimme access to the QuickBooks and we'll recast this all from scratch ourselves.

So now that I've kind of got that directive, my account's on board that I'm feeling, I'm feeling pretty good. I honestly, the, the weird part, and I don't necessarily wanna, we can, if you wanna go down on the rabbit hole, but, um. The things that I'm most concerned about at this point are macro issues that are bigger than anything that I can really forecast or mitigate.

And what I mean by that is tariffs, you know? Um, and I know that lots of people have lots of different opinions on tariffs. I'm not here to speak to [00:41:00] those opinions. I'm not an economist. I, but they're, again, thinking of chemical costs. I'm thinking of parts and equipment that goes on these trucks, these pressure cleaning systems that might need.

Replacement, et cetera, et cetera. And how is tariffs going to impact that? And I just really don't know. And at the same time, it feels like my entire adult working career has been handcuffed by macro issues. IEI started graduated college in spring of 2020, and the height of COVID, you know, I had to sit on the, I don't wanna sit on the sidelines anymore.

I want a deal make, I wanna learn to dance in the rain rather than hide under the bed. But there is a potential big macro issue impending that I, that nobody really is able to have a crystal ball and tell what's gonna go on with that. So, um, 

Jack Carr: yeah, but at least you can start planning for that, right? So you start planning for that day one.

Dig in. I mean, as you're going through due diligence, like the answer is, it's right in front of you. What is your chemical costs? Yeah. What percent of the [00:42:00] business is the chemical cost from an, from a COGS perspective, right? Yeah. Oh, it is. Um, my guess, I, I don't know pressure washing that well, Chris, but I know the chemical side of, of, um, car wash industries.

So my, my, one of my best friends runs one of the largest chemical companies for car wash industries. Yeah. And the chemical price per car that you wash is like 13 cents. It is absolutely negligible love, and that's the point is like it's highly concentrated chem that you then spray onto a car and let's sit and it's 13 cents in the car wash industry.

So like the margins are so high there and the cost is so low that you can dig into that, right? That's something that you have the numbers on. You can look at and say, Hey, their cogs last year for chemicals were. 2%. 2% of revenue. Yeah. If this were in a worst case scenario, right. Tariffs hit you. The worst case scenario is you actually aren't able to get the, those same chemicals, which is more [00:43:00] of a different issue.

Mm-hmm. Like they run out and you can't import 'em. Yeah. But if that doesn't become the issue, it's a pricing issue and they say triple, you know, you go up to 6%, can you, can the business eat that in that cost? And the answer is like a. Yes or no. And if it's yes, then like don't worry about it. Yeah, 

Chris Barr: no, that's true.

Jack Carr: Don't you know what I mean? Like that's, that's the sitting on the sideline things is, is. You can only worry about so much. Yeah. Like we don't worry about it in our and for our industry and tariffs are fucking wild. Yeah. Excuse the language, but like 30% on a $10,000 unit, like it is wild how much that they're raising prices on HVAC units.

Yeah. Yeah. But we can't do anything. Like they're, I'm not going to be able, any, able to do anything except a, get better at se selling units. That's it. B um, get better at getting the p parts and pieces for units to fix them in case they break and we we're not gonna be able to sell 'em. C, get better at financing units so that people can get financing easier and, and.

You know, be able to buy 'em. But like, those are the things I can [00:44:00] handle. Yeah. Only focus on those, you know, like whatever very stoke of you. I'm all about that. So the rest, yeah. Yeah. I mean the, but it, it's the realist in me. Absolutely. Like I can't do anything about it. Yeah. So just own it and keep moving.

Yep. No, I'm a hundred time with you, so. Awesome, man. Well, I'm excited. Happy. So start the ops due diligence now. Yeah. Um, just so that you can truly make sure you're not finding anything stupid. Um. That's, that just like blows you away. Like, oh my gosh, these guys are operating, you know, something ridiculous and you're just like, I'm not doing this by.

Yeah. Um, continue with the financials. You got your team in place, you got your, your loit legal, and you have your accountants and you have your, uh, broker. So you're ready to go from there. Awesome. You're ready to keep moving. You have your banker. Um. And, uh, what would you have a timeline on how long you have for due diligence to finish?

Chris Barr: Yeah. Um, and it's technically 30 days, but they're pokey about getting us our stuff. And so due diligence starts at receipt of all documents requested. So, 

Jack Carr: um, Hey, yo, [00:45:00] what a great way to do that. Yeah. 

Chris Barr: Um, so again, well it's, it's 30 days. Um. It's a bit flexible and they've, and they've mentioned verbally, I've brought it up a couple of times and they said, Hey, listen, if you need extensions or something like that, no big deal, just let us know.

Yeah. So, um, yeah. And then 60 days total to close, um, including that 30 day. Due diligence timeline. So we're, we're, we're there, there in around the third corner. Man, it's crazy. Um, the other big thing is I'm gonna need an ops manager for this. So, um, actually this is, this is a great platform if anybody wants to potentially come and help run a, uh, pressure washing business down here in West Palm Beach, Florida.

Slide into my dms, um, would love to potentially talk about it. I've got a few people in mind. Uh, really good buddy from the sniper platoon, um, a cousin, you know, a few others that I've tapped and have in mind. But that's also part of my ops due diligence is I gotta, I gotta find somebody to help me run it.

Yeah. 

Jack Carr: Yeah. Awesome, man. Well. Great. Thank you for listening. Keep, I mean, I'm blown away. This is so [00:46:00] cool. I'm, I'm really pumped. Same. Keep listening to hear Chris finish out his journey. Hopefully, uh, we're gonna hope that next, next month he doesn't find anything crazy and we are on to a PA that's next steps.

Um, if you like what you heard, leave us five star reviews wherever you listen, like. Comment, keep it engaged. Share at book market, whatever it takes to keep this, this, uh, whole thing going if you're liking this content. And head on over to owned and operated.com for more stuff like this. Appreciate y'all.

Have a good one.