- The challenges Kevin faced during his early CEO journey.
- The importance of flexibility during ownership transition.
- Why operational transparency is a game-changer for new business owners.
- The value of patience and adjusting expectations in an industry that’s new to you.
- How employees respond and adapt to ownership changes.
Finding and acquiring a business is no easy task – but the real work begins after the close when you’re officially the one in charge.
Kevin Couper is no stranger to this journey.
In a span of merely four months, Kevin’s leadership at Kyle Plumbing has been filled with revelations, lessons, and critical decision-making moments.
“It’s kind of a rollercoaster,” he says.
From grappling with unexpected financial discrepancies that tested his determination to the hands-on approach to understanding the intricacies of a business transition, he has a unique insight into the challenges, triumphs, and lessons facing any would-be acquisition entrepreneur.
Let’s look at what he has learned in the first four months of being a CEO.
Kevin’s Journey From Accelerator to Business Owner
Before we get into what he learned, let’s look at how Kevin became the owner of Kyle Plumbing.
Kevin’s journey from Accelerator to business owner took about nine months.
His motivation to be an acquisition entrepreneur was the allure of entrepreneurial freedom and flexibility, a dream that has become a reality with Acquira’s guidance.
Situated in West Palm Beach, South Florida, his well-established business employs 23 people who cater to both commercial (60%) and residential (40%) plumbing needs.
The convenience of the company’s location, a mere 30-minute commute from Kevin’s residence, made it an attractive option for him. Moreover, the prior owner’s decision to sell, influenced by health concerns, presented Kevin with an opportunity.
The path to acquiring this business wasn’t straightforward. Early in the deal-making process, Kevin identified discrepancies in the financial data the broker provided.
Initially, Kevin provided out a $750,000 SDE, which he says “logically went up to $900K in looking through his personal expenses.”
|Read more: How To Use SDE To Value A Company|
6 Initial Lessons Learned
Let’s start by looking at 6 key lessons that Kevin learned during the first four months of being a CEO.
- Transitioning Ownership: It’s essential to have flexibility during the transition phase, says Kevin. While initially, it might be beneficial to have the former owner involved, there comes a time when they might hinder the new owner’s ability to make decisions or implement changes. This highlights the importance of having an arrangement where the involvement of the previous owner can be adjusted based on the needs of the business.
“You definitely want to build in flexibility there,” he says. “I was super, super grateful for them to be there the first two to three weeks, and then it’s like, ‘Alright, cool, now actually get to work.’ And then they’re kind of in the way a little bit.”
- Operational Transparency: Kevin realized there was a lack of clarity in the way of his understanding of the business's operations. The former owner ran things based on accounts receivable and payable only, leaving Kevin in the dark about other critical operational details like ongoing jobs, work progress, etc.
“I don’t know what I don’t know. What’s going on? Where are the jobs? Where’s the work in progress? How old is this account? So that was kind of a struggle.”
- Patience is Crucial: Transitioning from a white-collar environment – namely finance – that valued speed, efficiency, and fewer mistakes, Kevin had to adjust his expectations. The new business had a different pace, and mistakes were more frequent. The need for patience became evident as he navigated this change.
- Handling Mistakes and Chaos: Mistakes are part and parcel of the business, especially in industries that deal with multiple moving parts, like construction and plumbing. What’s vital is not the elimination of these mistakes but how one handles and manages them.
Kevin says he would have general contractors calling to complain about work. He was worried that they were saying they no longer wanted to work with him but realized that mistakes happen.
- Managing Perceptions: Despite the challenges and complaints, the business continued to get new bids.
This showed Kevin that even if there are issues or complaints, they can be overcome by the business’s overall reputation and response mechanisms.
- Adapting Mentally: It’s essential to mentally prepare and adapt to the realities of the business. While some aspects can be tightened and improved, others are inherent to the industry. Adjusting one’s mindset to roll with the punches and manage the inherent chaos is crucial for success.
“It’s just the nature of the beast,” he says.
How Employees Handled The Ownership Change
Upon Kevin’s introduction as the new owner, the immediate reaction from the employees was a mixture of apprehension and uncertainty.
A significant portion of them were concerned about the security of their jobs, as they questioned, “Who’s this guy?”
This anxiety was further amplified by the simultaneous presence of the former owner during the announcement, creating an environment of unease.
You could tell a lot of people were scared for their job,” he says. “They just wanted to make sure they had job security.
“You could tell many people were scared for their job,” he says. “They just wanted to make sure they had job security.”
Recognizing this, Kevin made sure to have face-to-face interactions with all the employees. He brought in Acquira’s Management-Run Framework team, which provided additional support, allowing for personalized engagement with each of the 23 employees.
Kevin’s emphasis was on building trust and rapport. He wanted to reassure the team that they were valued, emphasizing that the employees are the company’s biggest asset.
Kevin promised them that he’d take around 90 days to ascertain their needs and preferences to further bolster this sentiment, ensuring that any changes or benefits introduced would genuinely reflect their desires.
“I’m just going to learn from you. I’m not going to get in the way. And then I’ll figure it out,” he says.
Kevin acknowledges that building this trust took more time than he initially anticipated, so much so that he often found himself unable to finish any work in the office due to continuous interactions with the staff. This prompted him to often work from home to manage his workload.
However, these initial investments in time paid dividends.
Kevin established a leadership team, thereby creating a structure that empowered the employees, giving them more voice and agency in the business.
He took an active listening approach, which starkly contrasted with the management style of the former owner.
“So that was a big difference for them,” he says. “It’s kind of a game changer because I empowered them to have a voice, and I listened to their opinions.”
New Opportunities By Listening To Employees
Kevin has been listening to new ideas from his employees – both feasible and not.
“I usually just try to handle it right away if it’s a good idea, like one guy had said, ‘Why don’t we do backflows?’ And I was like, ‘What’s a backflow?’”
He learned from the service manager that the company had been referring backflow jobs to other businesses, missing out on potential revenue.
A quick assessment revealed that performing backflow services could be fast and lucrative; for example, two referred jobs alone were valued at $1,000.
Kevin discovered that to tap into this market, all it required was a $500 licensing and certification fee.
He decided to incorporate backflow services into his business offerings, including promoting the service through marketing to further capitalize on it.
“They feel more comfortable coming to me with things,” he says of his management style.
Hiring and Firing to Get What He Needs
Kevin has been proactive in shaping the team since taking over the business.
“I’ve hired and fired a lot,” he says.
He relied on existing staff and new hires to flesh out his leadership team, noting that his people, culture head, and senior estimator were new hires. He also hired a VP estimator who will also serve as general manager.
To ensure a smooth transition of the business, Kevin strategically decided to hire an estimator and a People and Culture specialist. The owner and his wife managed these roles previously but they will be retiring after Kevin took over the business. This proactive approach by Kevin will help ensure the business's continued success by filling the gaps left by the previous owners.
When Kevin stepped in, his head of finance and head of service were already part of the company.
A third key hire was Kevin’s junior estimator – “Who really isn’t an estimator,” he said. “He’s a super talented service plumber with management skills. I created a hybrid role, promising him a GM role shortly.”
“Finding roles that fit people's strengths is important.”
Learning About Working Capital
Kevin gained crucial insights about the importance of having additional working capital when acquiring a business. Here’s what he learned:
- Understanding Different Sections of Working Capital: While he initially understood working capital as something that’s wrapped up in the purchase price with the bank, he later realized there’s more to it.
- The Need for Extra Capital: Kevin emphasized the importance of having extra funds. He refers to it as a “shake and bake fund,” suggesting it’s almost like 10% of the purchase price. This fund allowed him to move quickly post-acquisition, helping him cover bills, purchase trucks, laptops, and other essential items, and also invest in recruiting talent.
- Benefit of Immediate Investment: Having additional capital enabled Kevin to hit the ground running without waiting for the business to generate revenue. This is particularly crucial in the early stages of taking over a business, where resource investments can pave the way for smooth operations.
- Preparedness for Unexpected Financial Challenges: Kevin faced unexpected financial setbacks, but thankfully, he had additional cash on hand to address the shortfall. Without this, he might have faced significant operational challenges.
- Advocating for More Capital With the Bank: Kevin learned the importance of being proactive when negotiating with the bank. By presenting a clear rationale, such as needing funds to buy new trucks or equipment, he was able to secure additional capital without additional underwriting requirements.
- Cash is King: Kevin’s experience reinforced the adage that cash is king. Having more liquidity gives businesses the agility to adapt, grow, and weather unforeseen challenges. “More cash is always good,” he says.
|Read more: Why Working Capital Is Crucial For Success|
Over the course of his first four months as CEO of Kyle Plumbing, Kevin has encountered a myriad of challenges and revelations that shaped his approach to business leadership.
Among the pivotal lessons he learned were the importance of flexibility during ownership transition, the need for operational transparency, and the value of patience in an industry you’re not familiar with.
He has also learned the significance of effectively managing mistakes, recognized the impact of company reputation, and realized the necessity to mentally adapt to industry-specific challenges.
These insights can serve as guiding principles for current and aspiring entrepreneurs.
If you’re interested in becoming an acquisition entrepreneur, consider taking the same Accelerator program+ that Kevin did. This supercharged program will ensure you get to an LOI (Letter of Intent) within four months. That’s because Acquira’s team will conduct the search for you based on your unique investment thesis. The program also includes our world-class MBA-level training materials and access to a robust community of fellow Acquisition Entrepreneurs (not to mention Acquira’s team of acquisition experts!).
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- Ownership transition requires built-in flexibility for smooth changeover.
- Operational clarity is essential for understanding and managing business specifics.
- Adapting mentally to the industry’s inherent challenges is crucial for success.
- Investing in relationships with employees paves the way for trust and productivity.
- Liquidity and working capital are foundational for tackling unexpected challenges.
Acquira is a business acquisition in a box service. We help entrepreneurs buy businesses and we invest in them and their chosen businesses. We are here to help ensure that each business we work with is posed to make the biggest positive impact possible for its owners, employees, and community.