From Banking to Home Renovations: One Entrepreneur's Journey in Business Acquisition

The Decision to Buy a Business

After 25 years in banking, including stints at failed institutions like Merrill Lynch and Silicon Valley Bank, Yan decided it was time for a change. He had dabbled in real estate investing on the side, which sparked his interest in owning a business.

While casually browsing acquisition opportunities, Yan came across a home remodeling company in Atlanta that aligned with his interests and limited real estate experience. Unlike many searchers who commit to buying a business before finding the right opportunity, Yan was pulled in by this specific listing.

Victoria Renovations: The Target Company

Victoria Renovations was an established home remodeling business in Atlanta with several attractive qualities:

• 10 employees (6 field staff, 4 office/sales staff)
• $6 million in annual revenue
• 60 projects per year averaging $100,000 each
• Two-thirds of business from referrals
• Strong project accounting and business processes
• Comprehensive employee handbook

The company focused on residential remodels, ranging from master bath renovations to whole-house gut jobs and additions. Projects typically ranged from $75,000 to $900,000.

The Acquisition Process

Yan structured the $4 million acquisition as follows:

• $400,000 from his 401(k) via a ROBS transaction
• $50,000 of his personal funds
• $50,000 from a business partner
• SBA loan for the remaining balance

There was no seller note involved. The seller agreed to stay on for a transition period to assist with knowledge transfer.

Early Challenges

Despite his due diligence, Yan faced several significant hurdles in the first year:

Licensing Issues

Obtaining the necessary contractor's license proved far more difficult and time-consuming than anticipated. The process took over a year due to bureaucratic delays with the state licensing board. This nearly derailed the acquisition, as the SBA lender was hesitant to close without proper licensing in place.

Partner Dispute

Yan brought on a partner with construction experience, but the relationship soured within three months. This led to a costly legal battle and buyout, ultimately costing around $120,000 in legal fees and settlement costs.

Employee Turnover

Several key employees left shortly after the acquisition, including:

• A project manager who departed within the first month
• An office employee who left just before closing
• Some long-term employees who were uncomfortable with new ownership

Sales Leadership Challenges

Finding the right person to lead sales proved difficult. Yan cycled through a few candidates before promoting a project manager internally to take on the sales leadership role.

Navigating the Transition

Despite these challenges, Yan's corporate experience helped him stay calm under pressure. He approached the business acquisition like previous turnaround projects he'd managed, gradually gaining clarity and building his knowledge base.

Key strategies for success included:

1. Leveraging his network of subcontractors and vendors as subject matter experts
2. Being transparent about his background and willingness to learn
3. Making quick decisions on underperforming employees
4. Maintaining open communication with clients and staff

Growing the Business Through SEO

Facing a slowdown in 2024 due to economic uncertainty and the election year, Yan focused on improving the company's online presence. He discovered that despite having a visually appealing website with numerous project photos, Victoria Renovations was barely visible in Google searches for relevant keywords.

Rather than hiring an expensive SEO agency, Yan took a DIY approach:

1. Consulted with an SEO expert for guidance
2. Used AI tools to optimize image tags and metadata
3. Rewrote project descriptions using ChatGPT to incorporate relevant keywords
4. Regularly monitored search rankings for target phrases

This effort quickly paid off, with 25-33% of new leads now coming from organic search traffic. The influx of business has been so significant that Yan hasn't had time to finish optimizing the entire website.

Current State and Lessons Learned

After 21 months of ownership, Victoria Renovations has rebounded from an initial dip in revenue:

• First year revenue dropped to $4.5 million (25% decrease)
• Now on track to reach $6 million again in 2025
• $2.75 million in booked business for the next 3-5 months

Key takeaways from Yan's experience:

1. There's no amount of due diligence that will give you the full picture of a small business. Be prepared for surprises.
2. Negotiate harder on price to give yourself a margin of safety for unexpected challenges.
3. Push for more direct contact with employees before closing, if possible.
4. Be prepared to make quick decisions, especially regarding underperforming staff.
5. Leverage your network and be willing to ask questions as you learn the business.
6. Don't underestimate the power of SEO and online marketing for lead generation.
7. Understand the potential tax benefits of acquisition structures like ROBS and QSBS (Qualified Small Business Stock).

Despite the challenges, Yan remains energized and excited about the business. His corporate skills in managing people and problem-solving have served him well, even if the learning curve was steeper than expected.

Advice for Aspiring Entrepreneurs

For those considering a similar path, Yan offers these insights:

1. Be prepared to work hard. Buying a business is not a passive investment.
2. Understand your risk tolerance and ability to navigate ambiguity.
3. Don't rush into partnerships without thoroughly vetting potential partners.
4. Take advantage of resources like ROBS if needed, but be aware of ongoing administrative requirements.
5. Look for businesses with strong processes and systems in place.
6. Be willing to get your hands dirty and learn every aspect of the operation.
7. Stay adaptable and open to new strategies, like improving your online presence.

While the journey of acquiring and running a small business comes with significant challenges, it can also be incredibly rewarding for those willing to put in the effort and learn along the way.

Article created from: https://www.youtube.com/watch?v=DEOY-QcDJok