295 - Best of 2025! Surviving the "Buyer's Trap" to Build a $6M HVAC Empire with Jack Carr

0:00I'm the quintessential, this is exactly what you don't want to happen, happens type of person. I'm going to buy a company. I'm going to leave my cushy W2 job making multiple$100 ,000 a year and buy an HVAC company in a state that I don't live in, move there. It ended up being that day two, I was up at 3 a.m., 4 a.m. in the morning watching YouTube videos. I had too many calls coming in and I didn't know what to do. But would I do it again? Yes, 100 % for two reasons. one.

0:31Right now, you're in the sexiest unsexy business, which are home services and in particular HVAC. So I own a HVAC plumbing company in middle Tennessee. We are slated to do five to six million dollars this year. Really excited for that. About going to hit probably 20 employees this year.

0:55We're long have you been doing this? I have been only doing this. I bought this company in 2022, a kind of the height of the purchasing explosion that we saw on MNA. I jumped on the train and I bought a sub$1 million HVAC company two and a half years ago. Oh my gosh. Sub$1 million. Oh, it was painful. Yeah. So you bought a job. I will even worse than that. So I'm like the, quintessential this is exactly what you don't want to happen happens type of person so I'm like oh yeah I'm gonna buy a company I'm gonna leave my cushy w2 job making multiple hundred thousand dollars a year and buy an hvac company in a state that I don't live in move there okay well we just like glossed over that wait what were you doing what were you working it's a long story but I'll keep it like really quick for everyone who's heard about me before I'm sure you've heard the story but I had a few entrepreneurial moments in my life.

1:53I made some businesses. I sold the businesses. One was a agricultural repair company, sold that. It was kind of a side gig while I was still working at W2. What was the W2? The W2 was ops manager for wineries. So I ran nine different wineries, everything that wasn't making the wine or selling the wine, we took care of. So my team up to 40 people did all the capital projects and the HVAC. And so there was a little bit of history with HVAC, but not a ton on the side i started up and ran an agricultural repair company which went around to the wineries that had broken equipment in the fields fixed them took money i exited out of that circa like 2018 and around the same time got really into bitcoin and started up a bitcoin mining farm yeah shut up where yeah in reno nevada reno nevada what was your kilowatt hour cost it was like i want to say it was seven cents all right it's not bad so it wasn't bad it wasn't amazing it wasn't like so i remember looking at like apple old apple orchard facilities in washington where you could get like three cent power and i was so excited didn't end up pulling the trigger on it like i said it was it was 2018 i'd already been mining for a while but i wanted to go big now are you still mining no i sold the entire operation we got up to 30 some units mining at any point in time we mined through a decent portion of of kind of the downswing of the market and then when the 2020 kind of boom happened we sold off everything right kind of right before that sold off all the equipment excuse me so like we did this happens to me sometimes if you're seeing stepbrothers you know the scene where they're like in their bunk bed and they're like did we just become best friends yeah it was like yep so just quickly my My experience was in home health and hospice and I bought a medical billing company was the first company that I bought.

3:42So it's like it wasn't the same, but it was tangential. So it's like similar to you, right? You're running the ops at these wineries and then you go into a space that's tangential, right? So you had experience with, let's just say, facilities management or maintenance, whatever you want to call it. And then obviously you went into the HVAC space. And Chris and I, my business partner, we launched a company selling Bitcoin miners in October of 2021. In the first three months, we did$10 million in revenue. It was freaking nuts. And then we've subsequently gone on to lose like$1.5 million over the last three years because mining has been totally unproblemable.

4:19And for people who don't know, the way that Bitcoin is produced is through mining. And there's like three variables. There's the price, there's the difficulty rate, and then there's the price of electricity that you have, right? So anyways, we've just gotten freaking crushed over the last few years. I started with S9, Antminer S9s, moved to the S11 series. Oh, God. And then that's when, so I saw the same thing that you guys saw. I was like, hey, the S11 series was going to get, you know, overtaken. We came into the upswing and I said, I got to offload all this equipment now to somebody who wants to run it for long term, maybe has cheaper power.

4:51Who knows? But that's what we did. So we ended up selling most of that equipment. We sold the location and we sold, you know, a little bit of Bitcoin at that time. And so after that point, you know, I was pumped, right? I said, yeah, I don't need to work a W2 for a little bit. i'm gonna retire you don't have to tell me how much but like give me a ballpark you had like high six figures low seven figures eight figures like what like where were you sitting no i wish eight figures i wouldn't be here today if it was eight figures but it was enough to take a couple years off okay i mean i've already told you my salary so you guys can yeah i can guess that it's a multiple of that a low load single digit multiple of that we bought an rv it was me my wife and my son we said hey we don't know where we want to live napa was a beautiful you know it was wine industry is beautiful but not really great for families like there's one park in all of the napa valley there's no families so we said let's go let's go find out what's what's out there it's you know on the back end of 2020 i've just been working my butt butt off there and we sold them we said okay let's go see what's out there that's rad on the day we're leaving my wife goes I got to tell you something.

5:59I'm pregnant. And then six weeks in, we go, okay, let's do the ultrasound. And we go, oh, it's not one, it's two. So we had twins. So we had twins, a two-year-old. And we said, okay, well, you know, like this lifestyle is no longer conducive. We bought this business in Nashville. So I found Nashville. We had a few locations we were looking at. I bought this sub$1 million HVAC company. And day one, actually the day before day one, so day negative one, everyone quits everyone except the person on my phones quit gosh so the old owner went around telling all the supply warehouses that he sold the business the supply warehouses told the employees and the employees weren't happy so day one somebody who has never ran a service call in my life never been an hvac guy like we i managed hvac vendors but i wasn't an hvac technician especially from a residential standpoint.

6:55And the reason I chose HVAC was because I didn't really know HVAC. It was a moat to me. I knew how to do carpentry and plumbing and high voltage electrical troubleshooting from the winery days. But we always contracted out HVAC because it was so important because there was 172 ish million dollars in wine under HVAC at any point in time. So we made sure that that was third party. It was hard to figure out. I couldn't do it. Oh my gosh. This is the moat. And that moat ended up becoming a headache because everybody quit. And now the moat became the millstone. So I'm like the quintessential, like what the worst case that could happen when you buy a business.

7:36Let's pause. Let's pause here for a second. How much was the business? How much did you buy it for? We bought it for 600 ,000, 600 and change. SBA private. Okay. I think you'll probably be able to resonate with this. when you make a couple million dollars at first you think it's a lot of money and then really quickly you're like you're kind of in no man's land you've got enough money to do like to do something cool but not enough money to like really go big or just retire for the rest of your life or do whatever you want and if you do one thing you're kind of betting the farm right like like this you did the sba so you pg'd it that 600 grand probably wouldn't have bankrupted you, but it would have been a massive slug, right?

8:18It would have been a massive hit to your family. And it's just a scary, uncomfortable place to be. So you said, hey, I'm going to buy a business thinking there's a moat here. This is smart. I'm putting my money down. I'm in a growing market in middle Tennessee. And then everybody quits. What did you do on day one? So luckily or unluckily, the old owner still had two-week transitionary period of me, just two weeks and so it was me and him running calls and so he had some experience but he was more of a salesman than a than an actual technician technician right yeah so it ended up being that like day two i was up at 3 a.m 4 a.m in the morning watching youtube videos on the 10 i remember this to the t the 10 most the 10 most common problems on an ac unit because i bought this thing in june So like it wasn't, oh, you, it's kind of slow season though.

9:13It's like, we got to go. Hey, my freaking air is out. It's Tennessee in the middle of summer. Humidity is 98%. Get the freak out here. Yeah. And so I'm like struggling trying to figure out HVAC as quick as I can, waking up at 3 a.m. Luckily I have the owner's help, but he wasn't much help because he wasn't a good technician. So it was a lot of self-learning. Well, next month, it'll be a year since I started this podcast. I've had over a hundred interviews. It's been a ton of fun, but I promised my wife at some point I would decide whether or not this was going to be a business or we would just continue to pay for it out of our pocket.

9:43And I'm exploring monetization, to be honest with you. There's not a ton of costs, but I do want to figure out a way to cover the editing and the packaging and the promotion costs of putting this podcast together. So I am looking for sponsors. I don't know what that looks like. If you've enjoyed this podcast and you've ever found some value and you want to sponsor, reach out to me, nickatcofounders.com, and let's get back into it. Luckily for me, I've done a lot of electrical troubleshooting. So that knowledge transferred really well. A contactor is a contactor. Half of the issues you're going to get on an HVAC unit are electrically based.

10:18Full disclosure, once you get past the word HVAC, you start saying words like contactor. I'm checking out. I have no idea what you're talking about. That was like that was the saving grace for me as an owner buying small was that I knew that. So, you know, my financial aptitude was OK. My marketing aptitude was pretty good from a failed winery experience. But where I was best at was, you know, mechanical troubleshooting. And so I was lucky enough to have that skill because if I didn't and I bought a sub one million dollar job and this thing same thing happened, like I would have been wrecked. There's no way.

10:53the pros were it was a smaller company you didn't have a lot of overhead right so except for the person who was taking calls you didn't have a lot of overhead you probably had some rent and then the loan i'm gonna guess your loan payment was somewhere in the ballpark of like six to eight thousand dollars a month bingo so it was like it was it was a it was a low prime back then right because it's 2022 so it was like 7k a month was your thought like all right i could float this worst case for like three months but i just i gotta figure either how to do this myself or hire somebody or were you in like the fetal position i talked to uh reg zeller the other day and like he was telling me about one of the times he had a refinery he's like i'm gonna go bankrupt this is it i'm in the fetal position in the bathroom at 3 a.m you probably had moments of both but like did you just hop right into fix it mode or were you freaking out for a little bit honestly i was so lucky that i was that i was still kind of in the honeymoon phase of it So I was in the honeymoon phase where I was really happy to be there.

11:51So even though like the shit hit the fan, excuse the language, but like, it was sink or swim, and I just decided to swim. So I was up at four morning watching YouTube videos, I do all rock out the day do my eight calls. And then at night, I would do all my paperwork. work lucky i still had that like new ownership energy to get me through there was definitely moments of fetal position but i think the bigger thing was just like how do i get help like i need help asap let's get some people in here when did you get that first technician in so i got the first technician shortly after wasn't the best technician but i try to view it as it was a time in a place.

12:29So he was a terrible person.

12:37So how do I explain that? So for example, this is the kind of person that that person was is he asked me, Hey, Jack, do you mind if I borrow the truck this weekend? My daughter's units broken, I'm going to go my tools are on it, I'm going to go and fix it. I was like, Yeah, sure. Of course, like me being the nice new owner, go fix your daughter's unit thinking that her daughter his daughter lived 10 miles away 60 miles away I get a freaking thing in the mail from New Jersey saying I owe a toll oh my gosh four states away it's like 2 ,000 miles from us and I'm like hey what the heck is this man he's like you told me I could go help my daughter fix it and I was like yeah not in four states away that's pertinent information that you should have disclosed prior so he didn't last much longer than that I don't think actually he lasted anything longer than that when I found that out.

13:28I laugh about it now, but I was definitely not happy. Dude, I would have been freaking pissed. At that time. So I want to link. I'm going to have you give me a couple episodes. I'll link in the show notes if you want to listen to the rest of your journey because I'm sure you've told this story many times. But what I find fascinating is 2022 is not that long ago. Essentially, you bought this business two and a half years ago. and you've gone from a$600 ,000 company to five,$6 million in top line revenue. Has that all been organic growth or has that been acquisitive? So there's a bit of both. Okay.

14:01I'd say probably 50, 50 half of it's been acquisitions. We've gotten very good at buying tuck ins, which are small, you know, mom and pop shops, kind of like my original purchase that really nobody else wants, right? PEs too, they're too small for private equity. They're a job for most people who want to get into this game So what we do is we come along and we say hey You're not going to sell this to anybody. We will offer you something It's probably not the millions that you're hoping for but you have a large customer base. It's worth something We'll give you money for it and that's what we do And so we tuck those companies in we just really take their google business profile their book of business and maybe a truck Maybe one employee and transfer it all over What's your focus?

14:45Is it geography? Is it like, hey, we're just going to gobble up this area? Or are you just being, hey, anywhere that I see something's for sale, I'm going to go out and try to get it? I mean, anything within our service area will take. We definitely have a strategy on which direction we're moving in Middle Tennessee. But we are agnostic as long as it's service area driven. We estimate that we're going to take about 50 % attrition rate on that. But then the other 50 % of customers will become long-term customers. So to get to that 5 million, how many companies have you purchased in the last two and a half years?

15:14So we've purchased four. There's a question mark in there because like, what's really a company? What's a company? Is a customer list a company? Is the Google business profile a company? Yeah, yeah, I get what you're saying. Exactly. And then there's size. So like we bought, hey, I have a 50 ,000. We made$100 ,000 last year off this customer list. It's 100 customers. I'll still buy that. Like that's still value to me at the right point in time. And so we bought, Like I said, that first$800 ,000 in top line revenue for$600 ,000, which we vastly overpaid. Big watch out to everyone. Don't be jack because you're going to end up with a new business that you're the only one who works there and you paid over half a million dollars for.

15:59So I fell into the buyer's trap. But the second one, for example, was another$600 ,000 in revenue that we bought for$12 ,000. So that's like the extremes of both sides where it was probably worth a little bit more than that, but not a ton more. You bought$600 ,000 in revenue for$12K. What was the next deal you did? I think we did another deal for$211 ,000 in top line. We paid$25 ,000 for that. Wow. And the next? The next one we bought was more of a strategic for vertical. So we wanted to say, hey, we want to go from HVAC to also do plumbing. So we bought a plumbing company that was more of a merger type situation that did two million in top line.

16:43We had to shut down about half of it just because it was new construction work. We're only service residential service. And so we paid adequately for kind of that half of the business. I can't say how much we bought that for. That's good. But that was two million in top line. Two million in top line. And then really one million in top line after we shut down the first half of the business. And then the rest was organic growth pretty much. Wow. Okay. So you essentially purchased, I'm just doing the math in my head, 800, 200, 600. It's like you purchased, I'll just round up 2 million plus one, 3 million.

17:16So you've organically grown$2 million in the last, at least$2 million in the last two and a half years. That's probably accurate. Yeah. Dude, that's a lot of growth for a home services company. Yeah. It hurts. Yeah. Our net is terrible, but everything goes back into the business. I'm a huge proponent of, I'm probably one of the least paid people at the company. I don't have a boat. I don't have, and you know, like the, the traditional owner, the eight check owner you see on the internet that has like this awesome boat and like a F two 50 lifted truck. Like I don't, I drive around in a beat up old truck.

17:50Every dollar goes back into marketing and growing the business. Cause that's the goal. I love the acquisition strategy of like, it's crazy. The multiples you've been paying for some of the, for the top line revenue. However, businesses that are this small can be really difficult. I mean, your first acquisition is a perfect example of that, right? Like it can all fall apart. These aren't businesses that have really good systems, processes, and people necessarily. Yeah. So you're bringing organization to them. Are you financing this through personal SBA? Like no debt? How are you buying these businesses?

18:23Yeah. So we still have the SBA line open, right? You can, for anyone who knows SBA, you can do the linear math on there. We've spent$600 of our SBA line. We can spend up to$500 ,000. If it's the same NAICS code or whatever, it's 0 % down. So we are leaving that open for a big acquisition opportunity. All the rest have been on creative financing, seller financing, or we just paid cash. We paid cash, bought them out, and called a day. So I want to go back to this first acquisition because there's one thing that I just want to talk about. Yeah, of course. There's a lot of people in ETA. And this is one thing that I make fun of people for.

18:59which is I'm going to buy a business. I'm going to buy a business and I'm just going to hire an operator. Yeah. Easy. Just answer the phone. Just answer. Yeah. Oh, they have a fax machine. I'll be printing money. Dude, I'll introduce this thing called email. But I think what that does, especially for people who are getting into industries that they don't know is they don't ever get into the weeds. They don't ever understand the business. Do you think that having to learn the business on such a granular level, like becoming a tech for the first couple of weeks or months, has that been have you looked back at that as like a blessing or have you not thought about it and that no 100 complete blessing i deal with a lot of people who ask me jack i want to buy an hvac company or i just bought an hvac company and i'm having this issue in this issue right and what i've ran into and what i've noticed uh is that a lot of people are afraid to change the business right you know the business needs to change for growth perspective right a lot of our growth is because I've implemented the systems.

20:01The people that work for the company, I hired. So it's my culture. It's my ownership. When you buy, say, a$3 million top line, hey, half a million dollar net, there's maybe like this one guy who's a manager who doesn't want to ever change or this technician is the lead tech and he doesn't want to do it this way. And if he leaves, everybody's going to leave. So you're scared. You're afraid of, not you personally, but like this hypothetical person is afraid of changing their business, even though they need to, they know they need to, to grow. I see that a lot. I keep saying we, we, as in, you know, I run the help run owned and operated.

20:38And so I see that a lot. And that's a huge issue. I never had to do it, deal with it. I am, I'm the worst like paternal figure when it comes to that. I just say, just do it, rip the bandaid, like let them quit. I just don't have any kind of sympathy or empathy there because it was so rough for me. And, and I know that that had to happen for me to fully understand my business, but also for me not to be ever afraid of making changes in my business. Right. Cause if I have to go back to being a tech, then I got to go back to being a tech. It is what it is. I think anybody who's successfully scaled a business at some point has to figure out the business on a granular level.

21:15So you, I'll use a house analogy again, I'm out of my depth here, but effectively you built your house from scratch, right? Like, you know, the plumbing, You know where everything is laid. A buyer who buys a business, they buy a home, an existing home. You know, that home could be 100 years old and they don't know necessarily all the plumbing under the house. They don't know that, oh, I actually capped that. The previous owner capped this line several years ago and they ran a new line. And so when you start digging in the dirt, you're like, wait, is this line they just left in or what's going on here?

21:48And so if they don't actually jump in to figure out the business, it's going to hinder their ability to scale because you don't understand how things work. So you were forced into it, which is great. And you were able to like build it from scratch. But I think people forget whether or not you're building it from scratch, you've got to get into the weeds. Like I've never met anybody who was successful that wasn't in the weeds at some point in time. There is no such thing as like just a passive income business that you buy through the SBA. That's been the weirdest thing about entrepreneurship for me is that the realization working with the owners who are making it and owners who are struggling is the owners who are making it are oddly obsessed with their business, including myself now, like every single detail about their business, you ask them, they know, they know what their ROI is what they're on this specific market.

22:34And they have a marketing person, but they still know the intricacies of their business, which I've realized is so important to understand kind of across the board. Totally agree. So I want to move a little bit, you've been scaling, which is awesome. And you have started to hire overseas talent to help you scale. So yeah, sorry, finish your question. No, no, no. So two part question. The first part is, what are you scaling to? Like, what's your goal? And then the second part is, how are you using overseas talent in a home services business? Yeah. So our goal is 20 million by 2030. So pretty hefty goal.

23:11I mean, it's still a few more years of 100 % year over year growth, so a little bit more pain. But one of the ways that we've been able to really effectively do that is by outsourcing our talent, right? So and obviously, you can't outsource a plumber, you can't outsource an HVAC rep. But what you can outsource is kind of back of office abilities. And so our ability to find really good back of office staff has been an absolute key to driving the business forward because we can hire three, four people for the same cost as a singular domestic individual. But not only that, what we found is they're better retention.

23:51Like they're so much happier in that spot than the domestic employees are, unfortunately. So tell me what positions those are. Like, what are you hiring for? To go into kind of a diatribe story on this one. So our customer service rep position, We were going through a customer service rep every 90 days, give or take. So every 90 days, we would cycle through a domestic customer service rep. We originally started and we hired a customer after hours customer service rep that was in the Philippines. She's amazing. She still works for us today, a year and a half later. But we originally started her after hours because we didn't have all the systems worked out.

24:25So her goal was just, hey, anything that comes in after hours, you book it. Just book it, book it, book it. She did so well that once our customer service rep hit their 90 days, they cycled through for whatever reason. We moved her into full daytime. She's still there today. We replaced her with after-hour service, another Filipino after-hour service. And then we brought on a weekend after-hour service, our bookkeepers in the Philippines, HR, recruiting, all in the Philippines or Jamaica. And so we've just been really passionate about any kind of position that we can get, assisting role position that we can get from the Philippines or outsource, we will do that.

25:06What about things like billing, collections, scheduling? Yeah, those types of things. Are those done in-house or outsourced? Well, when I say outsourced, I mean, it's all in-house. Yeah, that's a bad way for me to put it. You're right. Yeah. So, I mean, what we ended up finding was dispatch was a very difficult position because dispatch is like a, it's a puzzle. there's a there's a lot of aspects to it and they have to be very in tune with the technicians in the field and they're ordering parts from warehouses and so there's a lot there and so that's our only back of house position that is local so we we found that we put dispatch here we keep them local but in terms of like answering phones booking calls being bubbly and friendly philippines south america jamaica all absolutely amazing amazing hires has that made it easier for to roll in these tuck-ins where you just have systems and processes already in place?

25:59100%. So for example, one of the best ways for a tuck-in to be successful, right? Because you're just buying a list. You're buying phone numbers. That's it. You're buying an inbound phone number and 6 ,000 outbound phone numbers. That's all you're buying, right? And so you're paying 10, 15, 30 ,000 for this list of phone numbers. And how do you get them to go from Joe's HVAC, who Joe's been their guy for the last 30 years and now this rapid response is calling me what the heck and so there has to be a bridge there and that bridge is we we call we text and we direct mail and email just to let them know we're partnering we're going to own all their their warranties and guarantees and we'll take care of them and we'll give them maintenances they just want to know that they've been taken care of and one of the keys to being successful all right now's the part of the show where I feel the most uncomfortable but my therapist says I need to face my fears so here we are.

26:50I've started a newsletter and I want you to subscribe. And what you're going to get every single week are the aggregated conversations from that week that I have on this podcast with an overview of what their business actually looks like. I'm also going to throw in a review of one or two businesses that are listed for sale. I'll give you my opinion on whether or not the EBITDA multiple is good or there's customer concentration or there's red flags or green flags. And then lastly, I'm going to give you one piece of actionable advice every single week on how to buy your first business. So click the link below, subscribe to my newsletter, and let's get back at the shelf we offer on those companies at a 50 attrition rate but we generally see a lot less because we're very active in calling their customer base and having the overseas employees that are dedicated just to that function right so i mean to call 6 000 customers at 100 customers a day and you can do the math it's going to take two months and that's just like singular calls not even like, hey, they didn't answer, let me call back.

27:45So there's a full function there of I can pay somebody$6,$8 an hour, and they're going to bring in so much more value by if they can raise attrition rate from 50 % to 80%, that 30 % on 6 ,000 customers is astronomical, right? I know a lot of people listening will say like, yeah, it makes sense. I'll hire someone overseas, I'll pay them six bucks an hour as opposed to$15 an hour locally. So the cost savings makes sense. And they may even have the desire to do it. And maybe I'm wrong with the numbers. I'm just saying like, cool. I would love to find local people for$15 an hour. Oh, that's what you're, I thought you're laughing at the$6.