299 - Best of 2025! Surviving $250,000 in Employee Theft to Build an $8.5M HVAC Empire with Austin Linney

0:00The quarter of a million dollars that was missing, stolen from the business by the former office manager. We brought in, in the last 44 days, what they did almost in all of 2020. It's insane, dude. And so I called all the owners the next day. And I said, I've told every CEO, no thanks. I'm taking the CEO role. So I said, look, here's the deal. I'll give you this if you give me the phone number. and you gave me the GMB and you gave me your customer list. And she goes, I don't care. I think I made like$300 ,000 off of that customer list.

0:39All right, welcome back to another episode of Nickonomics. And on today's episode, I sit down with entrepreneur Austin Linney, who bought a$3.8 million HVAC company, relocated from Texas to rural Pennsylvania, quickly uncovered$250 ,000 of fraud, and somehow grew that HVAC company to a$9 million company in a little over one year. And in this episode, you're going to hear why Austin believes that entrepreneurial success hinges on direct involvement and how he was able to achieve such amazing results in such a short period of time. You're going to love this episode. And if you do, please like, subscribe, share with a friend.

1:15Love you guys. Let's hop into it. So we own a, what we call anti-private equity group. so we actually give a shit about humans. So that's right off the bat. I mean, if I just didn't shoot across the bow right off the gate, I cut my teeth in real estate and we will get there. But this company right now buys trade companies. We started with HVAC, plumbing and electric. We purchased that 16 months ago as a first acquisition and we just opened our second. We do plumbing, HVAC, electric, commercial install, residential install, homehold generators. So your thesis essentially is services, in particular home-based services, is where you're getting into?

1:56Well, spending seven years in real estate, you have investors' houses and an AC breaks. And until an AC breaks, that's kind of your first foray into the game, right? And so my brother-in-law, who had been around the block a couple of times, I got some AC quotes in the middle of July in San Antonio. And one was like, I felt like you feel like it's high, but you're not really sure it's high. And so you're like, I might go with that. And you don't know. And so he said, call this guy named Philippe. He's like, I think it'll be cheaper. And I called him and he's like, yeah, it was like$7 ,000 cheaper.

2:33And I was like, what? I was like, what? And so I called back the company and I go, well, I got a bid for this. He goes, oh, I mean, we could do it for this. And he came down like six grand. And I was like, oh, okay, hold on. I was like, so then I started, you start getting into the game, right? And you start learning. And what I did, Airbnbs at a large scale, hotels all around the country. And I realized that the investor is always the one that gets paid last. These companies seem to get paid. And so then I read Buy Then Build, and I was just over lenders. And what we decided, the basic thesis was, we're tired of going to banks.

3:12We're tired of dealing with lenders. We want to create and buy cash-flowing businesses. We want to become the bank, use the profits from the businesses to then go invest in real estate. So flip the paradigm on its head was basically why we started this kind of venture. And the first thing you got into was HVACs? HVAC, plumbing, electric. Yes, sir. Dude, that is so crazy to me. $7 ,000 difference? Oh, I'll do one better. We've been interviewing, right? We're hiring. So I interviewed with my local, the biggest competition we have. They own seven different companies. It's a long story. I interviewed their lead installer.

3:51This is the dude that does all of North Pittsburgh and everything. I said, just for shits and grins. I said, we feel like we're high in our area. I said, for shits and grins. I said, if we were to install this HVAC and this furnace, what would you charge? He goes, well, it's funny that you say that. He goes, I just got my cousin a price. They gave me a friends and family discount that was$19 ,700. We sell the same system for 11 ,000. And we feel like we're high. And so, okay, wait, we're hitting all of our margins at this number. Okay. And what you realize in this space is like data is everything, right?

4:33And what I mean by that is, so we bought a company that had closed down in our local area. So I live in a rural area with small towns. So I had been looking for the owner of this company for six months. I could not find him to save my life. What does that mean? You knew that there's a company. I thought they were still in business. I wanted to talk to him about maybe I heard he was wanting to retire. Yeah. So I couldn't find him. He lives off the map. And then my sales guy sends me a DM and he goes, this guy's selling two garage full of HVAC equipment. That has to be a company. I was like it has to be a company and it's in the area I said give me his number so I go out there the next day and his wife answers the door and she goes please get all of this crap out of here she goes he's been doing this 50 years she goes I want to go RVing she goes please and so I said okay well maybe I said what you got to have and she said it's a little much So I said, look, here's the deal.

5:39I'll give you this if you give me the phone number and you give me the GMB and you give me your customer list. And she goes, I don't care. So she says, look, you got to add another thousand onto it. So listen, this is people that had no, they had, they literally shut everything down. They didn't want anything. He had made plenty of money. So when I tell this story, I don't want anybody to get frustrated and say I fleeced them because I gave them more than they asked for. Okay. So just so we're clear. so so so they wanted the equipment gone so i said i'll be here tomorrow i'll be here tomorrow okay with the trailer it'll be gone i paid them the money they went rving the next day they're happy as a clam i have since made in eight months i think i made like three hundred thousand dollars off of that customer list and so oh so you just bought the customer list you didn't buy any of their supplies or inventory equipment i bought all the equipment i bought the gmv i bought everything for 9 500 bucks is that the business that you bought or is this like a tack on this is a roll up on this is a tack on jeez so yeah okay i feel like the scientists at los alamos right now when they discovered that they could split the atom and they were like oh my gosh nuclear power is incredible could we harness this you know what if we could harness this you know how much power we could generate through what i feel like them right now because i'm like austin lindy if i could harness him can we harness him i don't know but if we could it would be amazing no so i'm going to try to harness you a little bit here yeah yeah you're fine your first acquisition yes was in a rural town.

7:193.74 million. Okay. HVAC, plumbing, electric. 80 % commercial HVAC. 80%. They did plumbing, a little bit of electric, if not nothing, but mainly focused commercial HVAC, electric plumbing. 23 years in business. Yes. And you moved from Texas to rural Pennsylvania to oversee this operation. So the seller had been in the business from 16. He was 66. He'd been in the trade for 50 years. Okay. Oh my gosh. So when we get in contract and we know we're going to close, that was a stupid move on my own part too. When we know we're going to close, don't ever say that in a transaction ever again. Okay. But I was interviewing, I was interviewing CEOs to run the business.

8:05Okay. We're talking about like, we got big plans. So we're talking about, I'm flying around the country talking to guys that had built a hundred million dollar portfolios. And what year was this? This was 18 months ago. 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. I'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.

8:35I'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 into the show. I'm trying to convince them to not go with PE, go with us, give them a huge chunk and then grow it. And I'm meeting them and they say all the right things. And they know all the right people and they do all the right things. And I had like eight meetings in Pittsburgh and it was the middle of winter and I was driving up.

9:07It's an hour and 45 minutes to where we bought. So from the airport, I'm driving. My mentor sends me a song. This is a true story. I swear to God. He sends me a country song about living on a big ranch and having your family and having everything that you need. Right? It's the first time I heard this song and it hit me. It's nine o 'clock at night. I'm exhausted. It hit me. Are these people going to get me closer to my dreams than I am of myself? And so I called all the owners the next day. And I said, I've told every CEO, no, thanks. I'm taking the CEO role. And they go, okay, well, that's new.

9:49So then I called my fiance. Thanks for the heads up, Austin. I called my fiance back in Texas. I said, pack up all of our stuff. We're coming up here in six days. So I literally like was there. And she said, well, guess what, Austin? all of your exes now live in texas okay i'm not moving to pennsylvania there's good news is she's down for an adventure that's awesome but i really think right and i think this is something that's not talked about enough and this is why i want to bring this up to point especially if you're getting into your first business i thought i ran businesses like i thought i knew like i had like three four person shops in different residential coaching, consulting, the business would not be around today if I wasn't on site, period.

10:37And I've only shared bits and pieces of the fraud that we uncovered, the quarter of a million dollars that was missing, stolen from the business by the former office manager, and the toxic people that were doing 5 % sales projects and making sure they got their commitment. What does that mean, 5 % sales projects. So we have to hit a 40 % gross margin, 35, 40 % gross margin. They were hitting 5%. So they were getting their commissions. They were selling projects so they could keep, so they could get their commissions, but the company wasn't making any money, but there was no bookkeeping. So nobody knew that the company wasn't making any money.

11:15And so all these things that you uncover in, and look, I'm all for passive ownership, right? And here's what's crazy. In the 17 months of doing this, I've changed my entire viewpoint on almost everything I believed up in business. Everything. You cannot get me to purchase another business if it doesn't make me want to sing from the mountaintops because of all the pain of basically rebuilding this entire business. And here's where it gets fun. So through all that pain, we're going to go from doing$3.2 million last year to almost$8.5 to$9 million this year. Holy crap. That's a massive jump, Austin.

11:56Yes, it's big. I feel every bit of it right now. Yeah, I feel every bit of it. We can't hire enough. The leads are flowing in. The commercial projects are supposed to be last year. Got all pushed to the same month. I want to touch on one thing before we get into the economics of the business. And you said it. I think that is one of the most dangerous things that I see on social media. it's not, Hey, anybody could buy a business. I don't agree with that, but I also don't think it's the worst thing in the world. Right. I think, you know, theoretically almost anybody could buy a business, but not anybody should put that to the side.

12:34This like idea of I'll just buy it and hire a CEO is the wrong idea, man. Like if you do not understand this business, or if you don't understand business at a high level and have the support and infrastructure necessary to give you insights and transparency into how that business operates in real time, you're screwed. You are at the mercy of that operator or that seller. Let's have a conversation that nobody talks about ever. And it needs to be talked about more. And this, I'm the president of the company now. Okay. I handed over CEO Reigns three months ago to my CEO. He is absolutely amazing.

13:09I swear to God, I've never met somebody as driven detail oriented 20 years in the business. I gave him, we gave him ownership in the private equity group. That's how amazing this human being is. He's not allowed to leave. He's in the witness protection program. I'm in best friends with his wife. I made him buy a house here. He's not going anywhere. He's amazing. He's amazing. But let's call it what it is. This is a true story. My pulse, don't get me wrong. I'm everywhere. I'm hiring. I'm down in projects. I'm everything. But my majority, besides my reports I get, my pulse on the business is a Google review of three sentences.

13:49What do you mean? Hear me out. Okay. I have 44 employees. We went from 18 to 44 employees in 13 months. I'm probably going to go to 60 in the next three months. Probably go to 80. Okay? So there's a million sales out there. There's a million vans. We're in five different customers' houses a day. There's a$2 million project there, a$2 million project there. There's eight people over there. We're down there. Parts are coming in everywhere, right? How can you keep track of all that stuff? And then Frank says, Pat did a good job. I'm really happy with the work that the company did. Five-star review.

14:27That's actually my only full-time feedback loop in the business. Yes, I can look at the P &Ls, but that's still what people don't understand. If you don't understand the mechanics of this business and the lead times and all these things and the technology that's changing. If you talk to all these owners, because I do, I talk to all these owners at the golf tournaments and everything. Do you want to know why they're getting out of the business? It has nothing to do with wanting to retire. They're tired of all the technology changes. They don't want to do it again. They think the Freon stuff is stupid.

15:04They think the Wi-Fi things are stupid. They don't want to do it. It's not that they're tired of making money. Again, you're hitting on this point where had you just hired a CEO, you wouldn't have known that was the metric. And that seems like a really simple metric. Oh, Google reviews. Are we still getting five-star reviews? But after getting in and seeing the whole scope of the business, you decided, actually, that is the best metric that we need to follow. and you've probably set up the CEO for success and said, hey, this is your job description. This is what you need to focus on, et cetera.

15:37A thousand percent. But you've got one key metric and that's - Well, it's also a thing of this. So I'm also, there's multilayers to this. I'm also the face. Like I'm the one going to the chamber, like he goes to, but I'm the one going to the chamber. I'm recruiting people. I'm setting up new projects. I'm sourcing business, new acquisitions. And this is the truth. This is a true story. Because I just have a weird personality. This was like right into our relationship, like three months in our relationship. And he's like, oh, man. He's like, we had a killer day today. And I'm like, oh, yeah, we did.

16:10I'm like, what's the deal? He's like, dude, 300 grand. I'm like, oh, no shit. I'm like, yeah, dude. He's like, no, you don't get it. He's like, we paid$300 ,000 worth of bills to vendors. I was like, hey, don't ever tell me that again. i was like i was like i was like understand that i operate from an inflow point of view i was like i get that you're excited about paying bills but let me know when the money comes in and i'll feed off of that because i'm out there selling for us and i was like keep your keep your bills to yourself and like i've had that situation before where like i handed it off and they're like, Hey man, we got caught up on AP.

16:52And I'm like, I was purposely delaying those payments. How that was like$300 ,000. I was like, we don't have the cash. No, it's so, it's so funny. Right. Because, and this is something also that people don't talk about. Right. And I, this is it. People don't get this. I'm 41 years old. I don't know how you are, how old you are, but what, what happened? What happened when I was a kid, this is a true story. When I was a kid, you made 50 to 70 grand a year. You were killing it. When the hell did we reach the, you need to make 250 to 400 grand a year to survive, right? And so what I mean by that is you got to understand what I grew up with.

17:32My dad was very wealthy. My dad was a doctor. He made plenty of money, but it wasn't for me. It wasn't me. Okay. I've been on my own since I was 17. But what I'm saying is it's amazing how comfortable you can get paying ridiculously large bills and seeing ridiculously large checks. I mean, dude, this is a true story. We brought in, in the last 44 days, what they did almost in all of 2020. That's insane, man. It's insane, dude. But guess what? We also have about a million dollars worth of vendors to pay, too. It's like you just get, I don't know, I'm not comfortable is not the right word, but you just get like, oh, here's$120 ,000 check.

18:13Like, cool. Oh, well, here's$120 ,000 payment. Awesome. Well, and when you have people in your office, like your business office manager, or if you have an AP clerk who's just making payments out to vendors, their job is to manage the vendors. Their job is to make sure that they're caught up in paid. Like, they're not thinking about what the cash balance is. They don't care that they're pushing it out, you know, an extra two weeks so they can buy us some time. So for them, that is an exciting day because I've had this before where they're like, hey, we got caught up on AP. and it's like whoa whoa oh oh crap damn that was not what i wanted to do true story i can only say this because i know they won't listen the day that i lost it like there was no inventory no nothing in the business like period there was nothing i mean everything was done on paper like rebuilt the business period look i'm actually not blaming him because this is what they were doing but i had a guy in our company who buys stuff for us he went and bought four thousand dollars worth of sawzall blades and like two and we didn't have a lot of money in that week and i just looked at my ceo and i was like what is going on i was like that's enough sawzall blades for like the next three years like what the f*** are we doing and dude you're in the phase you're in the phase this is one of my favorite phases okay i've been managing healthcare businesses for a long time but you're in the phase of people either who are in real estate or managed a fund that like went and managed a business and then like actually got their hands dirty.

19:48And I liken it to when somebody comes up to me and is like, Hey, Austin, did you know that health insurance costs like a thousand dollars a month? And you're like, you're like, yeah, man, welcome to being an adult. Like your stories, your stories are fantastic. I got an even better one for you. I got an even better one for you this is you're hey you're finally in those hands are dirty i got an even better one for you i've been on site the last two weeks i've been on site i'm talking about steel toe boots hard hat middle of summer hot as shit picking up garbage delivering i mean like we're behind we got caught up on this project yeah i got a new guy new guy he's been around for like a month he was gone to the military for two weeks he's on deployment unacceptable back he came back right this is a True story.

20:36Are you ready? There's nine guys there. Everybody knows who the fuck I am. He's new. All right. I walk up the stairs. He looked me dead in the face. He goes, hey, not to be rude. He was like, what do you do for deets? And I went, what do you do? Yeah. What do you do for the company? My company. Okay. The company, like the company's name. And I go, I'm the fucking owner. He goes, oh.

21:06because they so weren't used to seeing me in a hard hat and a yellow visor and like work boots because they're used to seeing me at the office. And he was like, I'm gonna be honest, I didn't recognize you. He's like, normally look dressed up nicer. Like, but that's how much in the trenches we are that like, that's the conversation that I got a new guy who I barely even spoken to. Like that's you're in it, baby. And you have to be. And I liken it to being a musician. If there's any musicians out there. If you look at songwriters like Neil Young, even Bob Dylan, like their chord progressions are simple.

21:40C, G, D, E minor. They're not playing, you know, I don't know, F major, minor seven with a six suspended. They're very easy, but they've had to put in the time so that now they can play the easy stuff. They can write the easy stuff. Like it takes a lot to even get to the point to make it look easy. And that's where I think you are, right? Like you've been in the trenches, you've really gotten to know the business and now you can understand the easy things like, Oh yeah, we focus on this. There's two things that have come with this, you know, 16 months that I think has changed my life and they're very important.

22:17Right. And I don't think it's anything anybody talks about in one I've coined as leadership through the generations. And what I mean by that is you got to understand, I have employees from 17 to 70 on my payroll. Okay. My 50 and up guys, if you bring any raw, raw shit around them, they'll tell you to pound sand. They don't care. Okay. Then you go 30, 40. They're starting to have families. They want to buy a house. They're more about, is there growth potential? And then you have the 17 and 21 year olds and eight guys that just got out of high school that would run through a brick wall if you asked them to.

22:56And so you can't talk to them in a broad stroke. You have to understand where they're coming from. That is on the back of the second thing. You have to understand the lens that everybody in the company, in their role, sees the company. Okay? My job as a president, visionary person, I have to be three, five, ten years ahead. I also have to be a week ahead, a day ahead, and a minute ahead. Okay? So I have to be all those things. Okay? A project manager who's scheduling the jobs and ordering the parts is on a two-week time schedule. That's as far as you can see. The dispatchers on a one-day to two-day schedule.

23:37The person that's answering the phones on an hour by hour. The technicians on a day by day. When you understand the way that everybody looks at the business, then you can understand where they're coming from. And nine times out of ten, we're all saying the same thing, but we're all looking at it on a different time horizon. And if you don't understand people's differing perspectives, you can blow the whole thing up. It turns into a real problem. Even in the divisions within the company, each sector is a different person. My service technicians, because I tell them so I can say it out loud, those are my prima donnas.

24:12They're my real housewives. They deal with a lot of people's things. The heat doesn't work. The AC doesn't work. They're in people's homes all day. They have dogs. That's a different game altogether. You know who the installers talk to? Nobody. The installers are your Clydesdales. They're your Budweiser horses. They want to work. If they don't have work, they want to go home, and they want to go fishing. They don't want to be around. They don't do the hang around. They don't do that. They show up. They don't talk. They go to work. Then you got the plumbers. The plumbers is kind of like the outsiders.

24:48They're wearing a lot of weird boots because they're dealing with shit all the time. you never really hear from them it's literally they're literally dealing with it literally doing shit but here's my favorite quote to them when they complain about being up in a sewer all day i said did your job description say florist i was like you work you i said you work where the poop goes oh you must be a joy to be mad at the end of the day wading through crap oh austin this one customer i don't know what they eat but their turds just clog up every pipe yeah i got it's really hard i got you ain't ready you ain't ready for this story i'm telling you right now austin it's really it's really hard i actually contracted hiv and hey let me ask you one question did your job description say florist then get back out there get back to work i got a customer story that i don't think we could share on the podcast but it's so good it's ridiculous but it's also really nasty.

25:45But I mean, and that's what's interesting, right? They don't put that in the books, bro. No, they don't put that in the books. You know why? Because those guys don't write the books. The theorizers write the books and they talk to people firsthand and say like, hey, what was that like? I want to say something and it sounds so stupid because I want to say things that people don't say out loud when you're a business owner because this is real life. Okay. We had a lot of theft and bad expenses in old AR in the first year, right? And we're trying to invest in the company and we're buying vans and we're trying to out we're trying to grow and we're hiring and i'm investing in ipads and we're spending a ton of money right like one-time expenses and we had some months where the business wasn't profitable right but we fixed that right in like like a two two months stretch we fixed it okay now we're killing it right i had somebody look at the pnl to give us their point of view had been in the business and here i am like embarrassed to hand them the P &L, like fully embarrassed.

26:47And he says this and it changed my entire life. I think I got off the call and just ran through a field with no shirt on. I was so excited. He said, look how fast you fixed it. He goes, look how fast you fix it. He goes, you were hurting here. You fixed it there. You're profitable there. He goes, that's really amazing. He goes, you did great work. And I go, I go, hmm. Okay. So your P &L doesn't always have to be perfect, but how you respond to it matters more to people. Like, I know that sounds so simple to say, but I come from a world where real estate, you have to perform every month. It's not a question.

27:28And so for them to say like, no, you did a good job. Like, look at how quick you did it. You're like, oh, and then a month ago, the bank sits down in a meeting with us at our office and he goes, damn, this is a really good P &L. I went, okay, I'm good. I was like, dude, you can get out now. I was like, you just made my way. Did you start crying? Oh, dude, I think I cried. And like, it's amazing. Those like one sentences can change your whole life because that's what it's about, right? Like this is, Reg talks about this all the time. If you're not willing to operate your business when your business is being able, asking it to be operated, I'm sorry.

28:08it's going to be rough for you. Like if you're not willing to go pick up the furnace so you can do an install the next dude, let me explain something to you. Do you know how many times I've had a rabbit's foot in my pocket saying prayers, walking up to the mailbox for what are you talking about? For checks to pay bills. okay. Like what they don't understand is like, think of all the things that have to happen in order for a business to be great. And so unlike what I would classify as, and I can say, because I spent two years in it, we don't classify businesses in the health sector as actual businesses.