From Corporate Refugee to Successful Business Owner: A Powder Coating Acquisition Journey

The Journey Begins

Marvin Carlo's entrepreneurial journey began in an unexpected way. After a successful corporate career that included roles at Texas Instruments, JP Morgan Chase, and other companies, Marvin found himself miserable in a high-paying executive position. In a pivotal conversation with his wife, he realized he needed to make a change or risk serious consequences to his health and wellbeing.

With no concrete plan, Marvin resigned from his corporate job and embarked on a search to acquire a business with his longtime friend and business partner, David Bridgeforth. Their criteria were simple: they wanted a B2B business located in either Dallas or Tampa.

The First Acquisition

Through a business broker, Marvin and David discovered an industrial powder coating operation in Tampa. Despite initial hesitation, they ultimately decided to pursue the acquisition. Using a combination of SBA financing and a Rollover for Business Startups (ROBS) transaction to tap into their 401(k) funds, they were able to purchase the business for $2.1 million.

The transition from corporate executive to small business owner was not without challenges. Marvin had to quickly learn the ins and outs of powder coating, manage a largely Spanish-speaking workforce, and deal with customer concentration issues. However, the partners were able to implement operational efficiencies and technology upgrades that improved the business.

Expanding the Portfolio

A few years into owning the Tampa operation, an opportunity arose to acquire a struggling powder coating business in Dallas. Marvin, along with two other partners, was able to purchase this larger operation for just $400 out of pocket, taking on its debts and liabilities.

Within 45 days, they turned the Dallas business around from losing $50,000-$75,000 per month to breaking even. Shortly after, they landed a major aircraft manufacturer as a client, which transformed the business's prospects.

Merging and Selling

Eventually, Marvin and his partners decided to merge the Tampa and Dallas operations to create a more attractive acquisition target. The combined business had an EBITDA of around $3 million.

In late 2018, a publicly traded company in the metal finishing space expressed interest in acquiring their business. They offered a 7x multiple on EBITDA, valuing the company at approximately $21 million. Marvin and his partners decided to accept the offer, resulting in a highly successful exit.

Key Lessons and Insights

1. The Importance of Partnership

Marvin credits much of his success to his business partners, particularly David Bridgeforth. Having complementary skills and clearly defined roles helped them navigate challenges and grow the business effectively.

2. Adapting to Change

The journey from corporate executive to small business owner required significant adaptation. Marvin had to learn new skills, manage different types of employees, and deal with the day-to-day realities of running an industrial operation.

3. Seizing Opportunities

The acquisition of the Dallas business demonstrates the importance of being open to unexpected opportunities. By leveraging his newly acquired expertise in powder coating, Marvin was able to turn around a struggling business and create significant value.

4. Tax Planning

Through a combination of factors, including the initial use of a ROBS transaction and maintaining C-Corporation status, Marvin and his partners were able to take advantage of the Qualified Small Business Stock (QSBS) exemption. This resulted in significant tax savings on their exit.

5. Understanding Industry Dynamics

Marvin's experience highlighted the regional nature of the powder coating business. This insight proved valuable in understanding the limitations and opportunities for growth and consolidation in the industry.

Advice for Aspiring Entrepreneurs

Marvin offers several pieces of advice for those considering acquiring a business:

1. Know Yourself: Understand if you're truly wired to be a business owner. The challenges and rewards of entrepreneurship are not for everyone.

2. Choose What Fits You: When searching for a business, focus on industries and operations that align with your skills, interests, and tolerance for certain types of challenges.

3. Be Prepared for the Unexpected: From customer concentration issues to sudden opportunities, the journey of business ownership is full of surprises.

4. Leverage Networks and Expertise: Marvin's success came in part from connections made through his search journey and the expertise he developed in a niche industry.

5. Consider Tax Implications: Proper structuring and planning can lead to significant tax benefits, as demonstrated by the QSBS exemption Marvin and his partners were able to utilize.

Conclusion

Marvin Carlo's journey from corporate refugee to successful business owner illustrates the potential rewards of entrepreneurship through acquisition. By leveraging his skills, building strong partnerships, and remaining open to opportunities, he was able to create significant value and achieve a life-changing exit.

For those considering a similar path, Marvin's story offers valuable insights into the challenges and rewards of buying and growing a small business. While not every journey will mirror his exactly, the principles of adaptability, partnership, and seizing opportunities remain universally applicable in the world of entrepreneurship through acquisition.

Article created from: https://www.youtube.com/watch?v=5b_JLnuKIjw