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In this episode of Owned and Operated, hosts John Wilson and Jack Carr are joined by guest Nathan Lenahan, co-owner of Bart's Heating and Air. Nathan shares his journey of rapidly scaling his HVAC business through strategic home service acquisitions, growing from a $1 million revenue company to over $10 million.
He discusses the challenges and considerations involved in merging companies, including integrating cultures, compensation structures, and deciding whether to rebrand under a larger, more recognized name. They’ll also get into the importance of people management, maintaining company values, and the shift from acquisition-led growth to focusing more on organic expansion.
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00:00 Introduction and Initial Challenges
00:56 Nathan Lenahan from Bart's Heating and Air
01:30 Growth Through Acquisition
04:10 Operational Challenges and Solutions
06:47 Team Structure and Management
08:39 Cultural Integration and Compensation
12:52 Future Plans and Strategic Decisions
23:41 Merging Business Models: Challenges and Strategies
27:41 Navigating Banking and Credit Challenges
31:08 Long-Term Vision and Family Involvement
37:21 Acquisition Strategies and Deal Sourcing
46:32 Conclusion
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Episode Hosts: 🎤
John Wilson:@WilsonCompanies on X
Jack Carr:@TheHVACJack on X
Episode Guest:
Nathan Lenahan: (https://x.com/n8lenahan)
Bart's Heating and Cooling: (https://x.com/Bartsheatingair)
Owned and Operated Episode 155 Transcript
Nathan Lenahan: After our first year where we lost money essentially. And so it will be at over 10 million now and just pretty much HVAC.
Nathan Lenahan: Number one, it's all about people, right? Get in and make sure you don't break the number one rule in small business. And that's messing with people's money. Hey guys, just don't worry about any other services. Just get the 5 million in one service first, and then you might know what you're doing.
Nathan Lenahan: Acquisitions are sexy.
John Wilson: Recently we've been buying off supplyhouse.com and we've been able to get plumbing, HVAC. and electrical stuff off there and my biggest concern was timeliness like hey if I need this thing pretty quick can I get it and you for sure can so that was awesome. So deliveries are fast they ship coast to coast and you can call them and you can get expert support with real people which is awesome.
John Wilson: So check out supplyhouse. com for buying supplies. Welcome back to Owned and Operated. Today we've got my friend Nathan from Bart's Heating and Air on the show. Welcome in, Nathan. What's up, guys?
Jack Carr: Hey, Nathan. For those of you tuning in, you should probably watch it. This is going to be episode of Two handsome bald men ganging up on John and making fun of him the entire episode.
Jack Carr: So we're very excited today.
John Wilson: Yeah it's going to be my long luscious locks will be challenging to mock. I'll just, I'll be doing a lot of hair flips. It's going to be good. The topic of the conversation today is going to be growth through acquisition. And I'm really excited to talk about that.
John Wilson: And I think you're just a great person to talk about it with because you are actively. So could you give us a little bit of how'd you get to where you are today and what does Bart's look like now?
Nathan Lenahan: Yeah. Bought our first HVAC company and DFW in late 2021, November doing literally like a million in revenue.
Nathan Lenahan: So we took it from a million to 1. 7 million in our first year, which It doesn't sound like big, that big a number, but man, we sure messed up 70 percent
John Wilson: growth. That's 70 percent growth.
Nathan Lenahan: I know the percentage sounds sexy, but it didn't feel sexy. But so 1. 7 first year and then January of 2023, we ended up acquiring our second one, just a little bit bigger, 1.
Nathan Lenahan: 2 million and revenue. And ended that year at 3. 6. So we're at like a 65, 70 percent kind of acquisition, percentage and then the other 30 percent plus organic growth. And then we just completed our third acquisition here in 2024. And that one's doing about 5. 8 million.
Nathan Lenahan: So we're on pace for, 10 and a half million ish For going forward on run rate and, trying to get that up higher. Still on that kind of 70% revenue has come through acquisition and the other 30 percent through organic. And we're starting to look to flip that a little bit, but we'll see how it goes.
Jack Carr: And are those all going into the Bart's brand? Are you rebranding all three of those to.
Nathan Lenahan: This last one, I don't think so. It's bigger than it's bigger than Barts. We're going to end up around four and a half million this year for just Barts. And then with the new ones called Christmas air, all the numbers say we should rebrand to Christmas air.
Nathan Lenahan: Cause bigger better SEO, better volume on website traffic. And and they just have a cult following. It's a TBD a little bit. But most likely we're going to we'll go towards the Christmas air.
John Wilson: That is that's the right move. I, when you first brought this up two months ago or I don't even remember what it was and we started like looking into it, I was like, he's got to reverse brand this thing.
John Wilson: Because the, but it's such a weird decision to take on the acquired brand, but it is the right one in this like very rare case. This is the right decision.
Nathan Lenahan: I can't disagree with you on that. It's hard. You put your heart and soul into a brand and you're like, Oh, this is it. But I think for a thousand reasons, you're right.
John Wilson: Yeah. Yeah. That's well, I'm just glad you guys got there because that's a decision that you're going to be thankful for the next decade. That's the right decision.
Nathan Lenahan: Yeah. Yeah.
John Wilson: That's awesome.
Nathan Lenahan: Got lots to figure out still on the culture compensation and culture and then combining everything still, but we're working.
Nathan Lenahan: Yeah. Yeah. That's to come. For sure.
John Wilson: I was talking with a couple of friends of mine. Earlier in, in the week, I think it was Monday and we were talking about growth through acquisition and then the acquired growth percentage. And obviously it changes over time a lot. I'd never done the math until Monday on what my percentage of revenue was bought versus organic.
John Wilson: We are now the opposite of what you guys are or 70 percent organic and 30 percent acquired. But if you would have asked me in 2020, Two, two years ago it would have been like exactly what you're describing. 70, 30 acquired versus organic. And even, I feel like that's going to be a really challenging number to change as we grow, unless you buy like massive companies.
John Wilson: Cause you know, we're looking at a couple of deals now and it's I'll still be 70 percent when I'm done. It'll be like 71%.
Nathan Lenahan: Wow. Yeah. Same idea. We, I think we're a little behind you on that cycle, but we're trying to figure out that lead gen machine and really build that at the level we need to.
Nathan Lenahan: So we can flip that script a little bit. Cause we have some ambitious goals.
Jack Carr: I think it's so cool though, because realistically, our stories are very similar, but we are a year behind you. And so like we bought a year. We bought our second one a year after you, numbers are all similar within a couple hundred thousand.
Jack Carr: And we just, I'm excited if I have a little 5 million 5. 8 million come through the trench, I'd be very happy right about now, but it's interesting. It's very interesting. And with that, what has been some of the hardest parts of integration for you as you're taking on kind of these bigger companies?
Jack Carr: I know one of them was out of your service area, correct? Your typical service area.
Nathan Lenahan: Yeah. Yeah. It was about 90, almost 90 minutes away from like the current one still in DFW. So that's good. We basically cover the Northwest quadrant of DFW and we don't really have a desire yet to go across it because people don't realize that service area is essentially the state of Connecticut.
Nathan Lenahan: And so just trying to get that level of scale, man, I'd rather have service route density than saying I'm everywhere in DFW. As far as integration, honestly, the first two acquisitions, no people came with it except technicians. So integration is super easy because they basically all got paid better coming over and and in some ways treated better.
Nathan Lenahan: So I think culturally we know who we are and people are really excited from day one. To come over. And then this last one has been, outside the admin bullcrap of getting software and billing and all that stuff switched over. Dude, the people have been incredible. It's our first team that has actually come over and they've been unreal.
Nathan Lenahan: It's everything we thought it was at more.
John Wilson: That's awesome. What's the team size now?
Nathan Lenahan: Yeah. So it's about I think 17 people, 18 people right around there.
Jack Carr: All HVAC too. Across the board, no plumbing, no electrical, just HVAC only.
Nathan Lenahan: On the Bart's brand, we did introduce plumbing in the last 90 days or so.
Jack Carr: Okay.
Nathan Lenahan: Yeah. So not moved over to Christmas yet, but. Maybe one day.
John Wilson: So the whole company is 18 people like, Oh
Nathan Lenahan: no, office. Sorry. So the new acquisition Christmas, they are about 18. So we're probably right around 38. All
John Wilson: in a lot breaks at 30 employees. And I'm sure you guys are starting to feel that.
John Wilson: Where do you feel like the gaps are starting to show up?
Nathan Lenahan: I think it's just really, trying to nail down expectations in between any kind of management layers and really getting information to cascade down. It's, like one of the things I say, like you have to say something seven times before it's in anyone's brains and you got to say it the same way over and over and over again.
Nathan Lenahan: And so trying to get the, like the repetitions in at every level to really Send the messaging that you want. And then it just means you can't send a lot of messages. You got to send very few messages and they have to be very simple and they have to be very consistent. And so trying to do that across when you have multiple locations, and I know you've consolidated John, it's painful when they're not in the same location.
Nathan Lenahan: And so we've consolidated the mark brand. Arts brands to one location. And then that's our aspiration in the next 12, 18 months to, to really be in a much larger location with all the brands. So I'd say it's that communication, really nailing it down. And then just consistency on and knowing who you are.
Nathan Lenahan: So knowing who you are as a company, how you compensate at every single level and and then what do you do when no one else is around? Like, how do you make decisions? How's that guided? Is that values is that the mission of the company and all those things? So I think it's a lot of soft stuff.
Nathan Lenahan: And then just trying to get reporting and financials straight so that everyone has a number and they know if they're doing good or not, regardless of whether the boss is in the room.
John Wilson: Have you introduced HR recruitment yet? I guess that's what I want to walk through like the the infrastructure.
John Wilson: Sure. Because I think that's what's going to break if I'm going to basically double the team size, double the revenue, like is accounting there is marketing. There is HR there. So like, how have you gotten the teams there in this state of rapid growth?
Nathan Lenahan: Yeah. So right now of the owners there's four owners.
Nathan Lenahan: We're all partners. Two are in the business full time. One of those guys is like very much operations, GM type, role, he's running everything. The other one is a financial accounting. He's been a CFO type role. So he's really pushing hard on the administrative side with, the cash management and money management systems.
Nathan Lenahan: So that's the level up there. And then next level, you essentially have the GMs, one for bards, one for Christmas air, and then you have some shared services behind the scenes, but you got it. We do have an HR person slash recruiter. We do have, let's see, we got four or five with after hours and overseas, like six people taking calls and doing outbound and all that stuff.
Nathan Lenahan: And then you have, I think we're at like 20, around 20 techs and installers, et cetera, in there. And then you have a couple of warehouse guys and then a few salespeople. So I think that's it. And then marketing is outsourced.
John Wilson: There's been a couple of times in my life where we doubled in acquisitions.
John Wilson: And Jack, I think you just did too.
Jack Carr: Yeah we just went through this process. We. It all, it breaks everything. It breaks everything. Just
John Wilson: absolutely everything.
Jack Carr: Yeah.
Nathan Lenahan: I'd say we do have me and this exact leadership team, like we've built a company and sold it before. We all worked at WeWork as well, where our P and L went from, 4 million in revenue to 220 in less than three years.
Nathan Lenahan: So we've gotten to see growth and what that looks like. So we over index on kind of the, some of the infrastructure in the beginning. And we have we're over that's why I'm not in the business day to day right now. We were not ready yet for that burden on the P and L, but it's a huge piece of making sure it doesn't break so far that it's actually holding us back.
John Wilson: I think we probably flirted with that line when we were growing. We, in 2021, we tripled in head count and that was a real challenge. And it took the next two years because we went from one location to four and we. I wouldn't even say knew how to run one location very, if I'm looking back at myself, I don't think I really knew what I was doing with one, let alone four.
John Wilson: And yeah, it is funny. Cause I've gone back and forth on do acquisitions help and like when to use them and how to think about them. Cause I think now. My team is like very cautious about acquisitions where we used to just, kick down the door. Let's freaking go. But now it's there is so much focus every day.
John Wilson: I'm doing the thing. And it would like we have a few right now that we're talking to and like all of our conversations are how much is this going to disrupt the organization and can we do this without interrupting our service managers who are driving results every day? And can we do this without interrupting accounting that we need them to do their job every day?
John Wilson: And how much of a burden is this going to be on HR? It's just a totally different experience than what it was a couple years ago when we were just like, yeeting through windows to do deals.
Nathan Lenahan: I feel the same way. If I'm honest with you, like acquisitions are sexy, like it moves the needle for a lot of people.
Nathan Lenahan: And for us, it was all about getting that base. And I think you were, you and Rich were probably one of the first ones to tell me, Hey guys, just don't worry about any other services. Just get the 5 million in one service first. And then you might know what you're doing. And and I pushed back pretty hard on that, but the, I think there's a lot of there's a lot of wisdom in that because, for us, it's just, are you doing this well enough and how much can you move the needle with that?
Nathan Lenahan: And we'll be at over 10 million now and just. Pretty much HVAC, plumbing is really small piece of that so far. And going to the next level, is not as exciting or it's a bunch of acquisitions aren't necessarily the most important thing now, right? Like we have a base that we can work with, but for us, it's either adding geography or adding a new service, that's like the two biggest drivers behind if we did additional acquisitions because I don't just necessarily need a whole bunch more HVAC revenue.
John Wilson: Yeah. And I think what starts to happen and you're at the size now where it happens. Is like you can at 10 million you have enough to like organic growth becomes meaningful where you couldn't organically grow 5 million last year, but like next year you could like you literally could just organically add 5 million.
Jack Carr: We also have the ability to start like actually building a brand too, right? Cause you're at 4 million. You're really just focusing on your marketing is all towards leads leads, and now it's towards branding. And who are we in this bigger picture, which is really nice. It seems but also, I think the difference changes John for you is.
Jack Carr: We're when you acquire when you're small, you're able to buy through those large step changes. So theoretically, right? You're buying through the five and you're even buying through the ten in this case, which is a really nice
Jack Carr: Ability to have that then incoming cash flow to be able to pay for the head counts to fix those systems Versus trying to organically grow through it is so hard because the cash isn't just it's just not there for the bloat
John Wilson: Yeah.
John Wilson: Yeah, I agree
Jack Carr: If you had a 50 million company come along and was like, Hey, let's do it. And then it pushed you through, the next two changes. I think it's a different conversation for you, but a 2 million little HVAC shop just isn't going to get you through that, that 50, 000 or 50 million mark.
John Wilson: We have a, we have one that we're looking at that's a five and a half million and I would have to add literally zero. Overhead individuals to take on five and a half million dollars revenue because we were already going to grow nine million organically next year. So five million is just okay, it's wild.
John Wilson: It's really like wild. Yeah, I assume it changed. I'm sure it changes later on, but it's crazy. That's crazy. Okay. All right. So when did your deal close, Nathan?
Nathan Lenahan: August 28th. So we're about 45. Yeah.
John Wilson: All right. Yeah. So we're pretty far in everyone's on service Titan. Like you said, integration is going well.
John Wilson: Can you walk us through the steps?
Nathan Lenahan: Yeah. Honestly, some of the integration that would be the most painful usually, Is I'd say on hold while we're still working through the, reverse merger and branding and making sure that we're all on the same page there because, they're change management's hard.
Nathan Lenahan: And so we're in there just trying to build trust. The biggest thing is. We shared kinda our plan with the sellers and the previous owners, and it's, number one, it's all about people, right? Get in and make sure you, you don't break the number one rule in small business, and that's messing with people's money.
Nathan Lenahan: So trying to get payroll straight, make sure there's no errors. And we still had some small hiccups, but trying to get that straight. Make sure the people spend time with the people, build trust, they have access to you and you're visible. And then in behind the scenes, you're doing all the.
Nathan Lenahan: The painful things like we, I think spent about eight and a half hours on the phone the second day, just trying to get Verizon to switch over, phone numbers to us. So we have control on that's one of the hardest ones. And then, just wrestling through trying to get all the.
Nathan Lenahan: Uh, all the pings on my credit because we had changed all the accounts over and they got to run credit again to make sure that we're legit and all this stuff. At the end of the day, it's just you just got a huge checklist. I think we have 150 items or something that we're just running through and making sure that we have everything we need to be successful going forward.
Nathan Lenahan: But it's been so easy going on that. This has been the easiest one for us so far. Because we've done it twice before. Now we actually have a team that's helping us with things that had access, they have an incredible GM who's running the business and running the show, the seller had kind of not been around a whole lot, and he really hard as GM.
Nathan Lenahan: Yeah, so it's been super smooth so far.
John Wilson: Yeah. When do you think you start, if I think about doubling in HVAC, like there's the initial list of things you have to do, and then there's the value optimizing stuff. Yep. So renegotiating with vendors. Hey, my, my volume just doubled nailing down marketing.
John Wilson: Like when do you think you get to the value add stuff?
Nathan Lenahan: We're already deep in it. So we've already renegotiated with vendors. To be fair, that's how we actually got this deal. It was through our account manager for our suppliers, sheer supply. They've been unbelievable and they introduced us to them.
Nathan Lenahan: So we actually had the same vendor. They had a vested interest to give it to another, a Mandarin standard. Dealer like us. And and so we closed the deal showed that credibility and. Yeah. Renegotiated prices along the way. So we already had new pricing in place basically day one.
Nathan Lenahan: And then we started pushing more of Hey, how do we get that next level? What's how do we do better here? And so we're. Renegotiating for like the next fiscal year as well. But yeah, it's crazy how different the pricing has been on equipment for us and, just trying to push that down.
Nathan Lenahan: We're not in some multifamily new construction levels yet, but trying to get there, yeah, soon. So it's, that's an early powerful renegotiating. So service Titan. We want to go over there. They're on house call pro currently. We'll move over. We're in the middle of negotiating that right now, trying to figure out what it is.
Nathan Lenahan: Certainly be anchoring on some of my friends is numbers that they have to make sure we're good there. But yeah, so service time will be one of the big moves hopefully here at some point if we combine obviously, and then yeah, I'm marketing going deep there.
Nathan Lenahan: So they are kicking our butt. We had the same SEO journey. We had some issues with a new website. Both are SEO kind of tanks. And and so they came up with a new provider. We came up with a new provider and they're kicking our butts on the SEO side. And so we've been going deep on like, why that is, how do we mimic that?
Nathan Lenahan: And maybe we just put more horsepower behind that brand. Yeah. So working through that and figuring out where else you want to spend. Cause a lot of these acquisitions, they don't really spend much of any money in advertising or on the marketing side.
Jack Carr: Yeah. Yeah. Yeah.
Jack Carr: That makes sense. So one of our biggest issues we had with acquisitions was the cultural shift after, right? We do things a very specific way. And when you're buying small, a lot of Employees chose small because either, hey, they didn't want to work for a big company, they didn't want to focus on revenue, whatever the case may be.
Jack Carr: How has that change been or was the company like enough in size and culture that it was pretty smooth?
Nathan Lenahan: I'd say culture has been relatively smooth. The first one was easier because we didn't know. We just didn't know enough. And so we said, Hey, whatever the previous owner has made promises on or done, we're going to stick with that for a while until we figure out who we truly are.
Nathan Lenahan: And I'd say after our first year where we, we lost money, essentially, barely we're right around breakeven, but then you still have to pay debt. So it was not breakeven. And we had to put more money in, like you, you get real serious about what a company needs to look like.
Nathan Lenahan: And so we ended up joining certain path later that, that next year and re revamping the whole deal. And we, it really helped us establish who we were, how do we compensate, how do we run calls? How do we do business? And and I think that's created just a little bit more rigidity.
Nathan Lenahan: around, this is who we, this is how Barts does it. And and I realized that everyone's going to be attracted to that and that's okay. We will be your biggest cheerleader if you want to go somewhere else, but this is who we are and this is who we're attracting. And if that means there's gonna be some turnover, then I would classify that as healthy turnover and I'm okay with that.
Jack Carr: And so when you bought Christmas now that's the real question, right? Is their whole team You don't want 17 people turning over, but at the same time, you still want them to do the Bart's way and the Nathan way, essentially the certain pathway. So how has that transition been?
Jack Carr: Because if I'm going to be blunt and vulnerable on this podcast right now, we lost almost the entire plumbing company we bought because of this issue right out the gate. And it's because they were not the rapid way, which is very similar to your way. I'm sure. But they were just a different.
Jack Carr: They're a different culture, different people. And so how has that transition been and how are you managing that?
Nathan Lenahan: Yeah, it's a great question. And it's actually the reason why the two companies aren't more integrated so far, because there's a completely different culture of compensation and and there's some deeply embedded things that they were challenging on the Christmas side, especially.
Nathan Lenahan: So there's, they don't do any kind of commissions. And I'm like, okay why, help me understand this. And so we are spending a lot of time going in there and it's easy to just smash two companies together when they can't stand on their own, but Christmas can stand on its own as can Bart's right.
Nathan Lenahan: And so that is also an option that, many private equity, other companies do we're not private equity, they do that. They just run both brands. And so I won't say that's not an option and that's how we're running it right now with some of the back office, has been combined and we're working to do that.
Nathan Lenahan: But we have been empowering the GM with a lot of time and decision making ability and time to show what he wants to do and where he wants to go. And we are showing him how that fits into our overall picture. And we can talk as much as we want about yeah, we're just going to smash them together.
Nathan Lenahan: But that is the main reason that they are not the same brand already is because. I still love the parts brand. What are we going to do with that damn thing that we just put all this money into for the last, years. And part of it says, okay, we'll just go make that a commercial arm and we'll go after that.
Nathan Lenahan: And then other steam says that's just a distraction. Let's just go Christmas all in. And so there is no, I would say true decision made. We have a timeline established. We have all the decisions that have to be made within that timeline. And then we have a commitment from all leaders to move forward based on that, and so right now we're just doing the we're still dating. We're still trying to figure out, what this marriage looks like. And and we haven't lost anyone yet. Jack, but there, that's certainly a risk. It's absolutely a risk. And we've been asking questions. Hey, how would you feel about if we change compensation like this, but it should never be a negative to them as far as I'm going to make you make less money.
Nathan Lenahan: That's not what we're trying to do. We're trying to show you upside for
John Wilson: going on two years. I've partnered with service scalers to do our Google ads, PPC and SEO. And the results have been huge. It's been really exciting to watch as our website consistently jumps up rank as we're using more technology and we're moving faster than our peers who are all using legacy home service marketing companies.
John Wilson: We use service scalers for PPC, our local SEO. Our on page website SEO and our LSA. So give them a call if you're looking for leads. And
Jack Carr: normally switching to a heavy, and I know a lot of this conversation revolves around the type, like you keep saying who we are and I don't think it was something that I understand when people said that about their company.
Jack Carr: Prior to owning my own company and when they say who we are, at least for us it's a lot about it's culture, but it's also like business model. How do we present ourself to customers? What are the customers that we go after? Who are our customers? And so it's just a, it's an interesting dynamic when you smash these two companies together or don't in trying to figure out, Hey, some business models don't work without.
Jack Carr: Certain compensation structures and if that's not correct, then how does that all feed into each other? But interesting and so what can you are you able to share that timeline? So like our timeline was six months on our last deal. It was six months merge and we just come came out of that and it's been like Not so wonderful, and then now we're finally starting to j curve and actually make money, which is extremely fun from a P& L standpoint.
Jack Carr: Six months doesn't seem bad.
John Wilson: Six months is it's almost always like the first year is a shit show, and then it starts to get good at like month 18. Yeah. So six months, I'm like
Jack Carr: Six months But we also still Hoffman employees. So like they already knew what to do right out the gate. So we had people.
John Wilson: It
Jack Carr: sounds like
John Wilson: you've got a strategy.
John Wilson: It sounds like you've got a strategy.
Jack Carr: We just take a Hoffman's guys and then we run them. I don't see
John Wilson: what the issue is here. I think this, I think you're doing fine.
Jack Carr: I didn't tell Hoffman that when we interviewed him though. So
John Wilson: yeah,
Jack Carr: no, yeah, you didn't tell him that I was actively stealing his employees as a headhunting group.
Jack Carr: I'm like,
John Wilson: I distinctly remember that,
Jack Carr: but so that what's the timeline that you're looking at, Nathan?
Nathan Lenahan: Yeah. So a decision by December and we have a more firm kind of
Jack Carr: Is it a decision by Christmas?
Nathan Lenahan: It's actually like the 10th of December or the first week or so.
Nathan Lenahan: Why? Why do you ask that way?
Jack Carr: It would be a decision on Christmas by Christmas.
Nathan Lenahan: Oh yeah. That would have been way better, honestly.
John Wilson: Yeah. That would have been way better. Honestly. I feel like you missed the timeline a little bit. I feel that
Nathan Lenahan: you missed.
Jack Carr: Huge
Nathan Lenahan: miss there.
John Wilson: Yeah.
Nathan Lenahan: Huge miss there. But I think.
Nathan Lenahan: There's a lot that goes into it. And that's we're thinking about select Bart's as an example, who we are. We have a mission. We have values, change lives to the trade, create smiles, do it every day. That's our mission. Our values are simple. There's only four of them.
Nathan Lenahan: Being on our key promises, have fun, serve others, and and then we have a compensation philosophy. Like we want to be in that 75th percentile. Paying on the higher end for people. We want the best talent. I'd rather have higher quality, but fewer people than the other way around.
Nathan Lenahan: And , so that's who we are as Barts. And so trying to make sure that if we do the same thing for Christmas, are we gonna transfer over those things are like, we still want buy-in from that company. We'll have conversations with them, we'll go through build out.
Nathan Lenahan: They just went through all their, their quarterly rocks and the cascading of those and how everyone. From my perspective, everyone should have at least one number that they own personally, and they should know the overall number that they're contribute to, and actually I'll ask any person in the company at any time with that number is, and they should be able to, to talk me through it.
Nathan Lenahan: And so we're trying to build that rigor. But I'd say decision by December or Christmas by Christmas. And then I'd say before busy season. So by end of Q1, we are running together.
John Wilson: How are you thinking about continuing to use acquisitions after this?
Nathan Lenahan: It's we have some real constraints, balance sheet is only so big at this time.
Nathan Lenahan: Availability of debt is only, like we're, we've maxed our our SBA at the moment because of how we're structured and all that stuff. So it's not like we have four guys who have four independent, 5 million or whatever. Cause that's not. Just despite that would have been awesome.
Nathan Lenahan: That's not how we decided to do it. So we have some real constraints there figuring out. So I think it's going to slow down a little bit and we'll just go to the most, fortunate opportunities. I think anything we'd be open to stuff outside of DFW and I'm going to do capital partners out there, but.
Nathan Lenahan: Jack, when you said, Hey, John, if you had a 50 million business you could buy right now, that'd be a real needle mover for you right now. I'm like, yeah, John wants to give up some control or a lot of control. Like that. That may be the case, but
John Wilson: a lot of control. Yeah, I couldn't take it down.
Nathan Lenahan: Yeah. I don't want to do that. So
John Wilson: yeah.
Jack Carr: Yeah. With that though the first two of your deals were, smaller 1 million size deals. John. With that does the bank open up different types of funding at that kind of, he's passing the 10 million mark, he can now get a 1 million line of credit essentially just on.
John Wilson: Yeah. Like. Conventional debt essentially opens up at five million of EBITDA. Okay. At five million, that's the easiest way to think about it. You get access to real banking at five million of EBITDA. You get access to real banking light at two and a half million and like just maybe. And that was like back in 22, 23 economics realities are different two years later.
John Wilson: So I, I think 5 million is probably the right guess here. And then the way that looks, it's different terms. So it's, like you're putting 30 percent cash infusion their seven year AMS. Five year AMS. It's a different type of debt. Like SBA is very friendly debt. Yeah. Okay. And this is not that.
John Wilson: Yeah. Five million of EBITDA. And I think what starts to happen bigger you get is and we felt, I think I've even talked about it on the show, but the external pressures become significantly more real. So if I was going to go bankrupt and I was a 5 million operator, probably happens every day, I don't know but like the external people looking at what you're doing, there's not as many, they just they put a lot of guardrails on you.
John Wilson: If we go bankrupt now, we would cause a real issue. And all of the vendors are obviously aware of that because the amount of credit extended just with a normal vendor might be nearly a million. Yeah. And we have a number of those banking and credit and all it gets more complicated, the bigger you get, and we're still like figuring it out, honestly, it's still an active, like we're trying to figure out what the rules are, because when you start nearing and crossing a million dollars of extended credit on a short term line, they want much more visibility.
John Wilson: Then you are used to giving, which I would do is it does totally make sense. It's just if you don't know it's coming, it's Whoa, okay. What do you mean
Nathan Lenahan: the financial colonoscopy pretty much?
John Wilson: Yeah. Like we're having to start to provide a Quarterlies and monthlies to just our vendors in order to, which that's a new thing for us.
John Wilson: Yeah. That's a new thing. Yeah. But our rate of growth is just so significant. And you're probably going to deal with the same thing. Like your rate of growth in HVAC, like our HVAC vendors will sit at five to 700 of credit extended. And our HVAC department is roughly the size of yours. So your vendors are going to have the same concerns.
John Wilson: Because that's a lot of credit and your volume just doubled, so that's going to become a whole thing
Nathan Lenahan: Yeah, I I had a good conversation with our You know, like we got upgraded on the banking at chase recently and I was like, okay The one number I want to know is at what point do you stop asking for a pg for me?
Nathan Lenahan: That's tell me the number like show me the money here. And yeah When they finally said it, they said 50 million in revenue. And which I think EBITDA matters way more, but it was fascinating. That's a big number.
John Wilson: Yeah. Five, yeah. 5 is a big number too. How many companies ever get to 5 million of EBITDA?
John Wilson: Like realistically, it's going to be and I don't even know. Yeah. Yeah. Okay. So you said you had big goals for what you guys are doing. Walk me through what this thing looks like in 10 years
Nathan Lenahan: and 10 years. We're three years and we, our first one was. 50 million in five years trying to get to a hundred million and less than 10.
Nathan Lenahan: And I think it starts at DFW and, then we're looking for other places to go, but we have to get to try trade at least with electrical and plumbing. We are pushing hard on trying to add some tech layers on top of that, to just. Distinguish us a little bit, but yeah, a hundred million plus over, over the next seven years is the, the goal.
Nathan Lenahan: And more importantly though, I think it's just building a great company. We can be proud of that. That's profitable, and so like I have four kids, they're all older, 22, 19, 17, and 13. And three of the four have worked in the business so far. One of them potentially wants to, go long term.
Nathan Lenahan: And it's that's really exciting to me to have that opportunity to do those things. But, we're similar to, I won't say we've nailed it down like Hoffman or some of these other people who have this really wonderful long term vision, long term hold, but we do intend to hold long term. We're not really interested in any kind of, divesting or bringing in other partners.
Nathan Lenahan: We like having the control and we like building, what we want to build.
John Wilson: I'm looking forward to seeing what happens the next year or two years as you almost want to say are forced To focus on organic just because you like you said you've run out of like available Lending because that's what happened with us.
John Wilson: Like we still had capacity in sba, but we just didn't want to because we really we had just grown a bunch. So we just went forward and it is amazing. You start figuring out all the stuff and the business just starts exploding.
Nathan Lenahan: We're really excited. Literally before this, what I was doing was going through every single Google pay per click call that we were getting and which is all in.
Nathan Lenahan: And a God awful channel. Good Lord. A hundred and 31 calls last month. Like our vendor told us, Oh, you're, 85 a call is what you're averaging right now. I call bullshit on that. I'm like, I don't see 131 calls. So I'm literally going through every call right now. Matching it to every call and service type to see if there's any revenue coming from it.
Nathan Lenahan: Like I'm listening to the calls really quickly to get an idea. And it's literally probably more like 160 to 200 a call because 40 percent of them aren't even being like it's, it was never a call. There was no call received, there's no phone number, there's nothing associated with it. So it's fascinating cause we're doing that on every channel to really rebuild our marketing, tracking and decision making on a That's going to be a muscle that's on a daily basis, not a monthly or whatever else after the fact.
Nathan Lenahan: So we're, we know what good looks like and we're just, we're trying to get ourselves there.
John Wilson: I think the bigger you get and you start to be able to like add in these layers and I don't know why, but for some reason. And I think maybe the why is like we're just moving outside of it and being able to look back and digest What we just went through which like you guys are still in the thick of it, so you can't digest it but in a year you will be able to But like at starting at a million a month to that two million a month I think we've talked about this in our chat but like All of the infrastructure and all the stuff that gets to get added But one of the exciting ones is you get to add like an internal marketing team at some point somewhat early in so fun end Yeah.
John Wilson: And it really, yeah it gets fun. And even if you we still use some, we still use external vendors, but like it just makes it so there's other people driving the bus on like, how do we get the leads every day? Yeah. It'll be interesting. Yeah.
Jack Carr: Yeah. Cause really, until you get to that point where you're getting Nathan it's you just like you're doing today.
Jack Carr: It really is. It's me, it's you. It's the owner who's going through and making sure that marketing, the amount we're paying out. The absorbent amounts are paying out every day, every week, every month is being realized in actual leads. And I would love to have somebody to take that over.
Jack Carr: Cause it is such a time sink, like to actually have to go through and reconcile a hundred and what? 10 calls just to make sure that you're actually like, Hey, it isn't 81. It's this now I need good data. Get it for me. Yeah,
Nathan Lenahan: well, and I'm more than anything. I want to be able to know how to hold them accountable.
Nathan Lenahan: I think that's what I'm really trying to get at. It's not about I need to do this necessarily. It's about, I want to understand this because it doesn't matter if it's an outside vendor or in house, if you don't know how to call the bullshit flag or hold them accountable or go deep where you need to.
Nathan Lenahan: That's, I think that's the mark of any good owner or leader is like that curiosity that Sherlock Holmes of I can go investigate anything and get curious. Want to model that for other people on the team as well.
Jack Carr: Yeah. It's also being a good steward of your money too, right?
Jack Carr: You have only so much cash flow you need and everybody, I wouldn't say everybody, there's a lot of people though throughout the business that hold out their hand and you have to make sure that. They are being accountable at the end of the day.
Nathan Lenahan: Sure.
Jack Carr: Just keeps growing.
Nathan Lenahan: Christmas is running so much more efficient than Bart's.
Nathan Lenahan: And so we're, it helps ask a lot of questions for us to say Hey, what are we doing here? Do we really need to spend this year? And, is it worth it? And we don't have the good enough answers I'd say on that right now. So helping us challenge a lot of things.
Jack Carr: That's cool.
Jack Carr: How does the customer list look comparatively? We talk a lot about the ability to outbound to internal customers. And a lot of that is from a internal customer list. What was the your customer list at Bart's compared to Christmas?
Nathan Lenahan: Yeah, I think we're right around 10, 000 for Bart's and I want to, don't quote me on this, but I think right around 14, 000 for Christmas.
Nathan Lenahan: It's going to be a pretty meaningful lesson. I think we're around 2, 500 Numbers between the two overall, so building the base is, that's the part we're excited for because if you know how to run that well then our plumbing should be able to take off across both brands.
Nathan Lenahan: If you want to do electrical in the future or anything else. And so I think that's the excitement is trying to build organic. You already nailed it, John. Like I'm way more excited about organic and proving that we meaningfully in the future. And I think 30 percent is the number that's always on the back of our head.
Nathan Lenahan: We want to beat that sometimes for sure, but.
Nathan Lenahan: How do we maintain 30 percent growth organically year over year? And if you want more than that, then,
John Wilson: you
Nathan Lenahan: know, there's other investments you have to do whether that's acquisitions or, headcount ahead of time or whatever.
John Wilson: Timeline. But I like to think that the best use case for growth through acquisition is either getting to a minimum to be able to grow meaningfully organically, which is I think where you're at now, or using it to cross a threshold.
John Wilson: And that's or I guess my third, but it didn't come up here is like entering a new trade. It's much easier to just acquire. But yeah, I think yeah, getting to that, like minimum point. It's all, it's almost escape velocity. Yup. Like you've entered escape velocity. We're like, okay, now you can invest a million dollars if you chose to, and it wouldn't be unreasonable to invest that into marketing.
John Wilson: And you would be able to really drive.
Nathan Lenahan: Yeah. We would have loved to have bought Christmas first, right? That's the size of the company that we wanted in the first place, but we just, we couldn't, we didn't have the credibility and we didn't know enough what we were doing and we're getting outbid.
Nathan Lenahan: So we decided to be in the game and I wouldn't, I'll be honest with you. I wouldn't wish the 1 million to. three and a half, four million journey on anyone. My God, it's hard. I'd rather start from scratch. I'd start from scratch. Literally.
John Wilson: Yeah.
Nathan Lenahan: Yeah. It's
John Wilson: challenging.
Jack Carr: I agree. Unfortunately, as someone right in the middle of it, I also agree.
John Wilson: Yeah. It's it's a lot. I like most of my career was there, so I feel like I still remember it. But it's, yeah, it's a lot. I'm glad that's not the case anymore. So you're going to be integrating you're going to be building. You've got a busy next 90 days ahead of you. You guys are aiming for 50 million first and a hundred million next.
John Wilson: Those sound like good goals to me. What else do you guys would think would be helpful as a resource to people looking to. Growth requisition.
Jack Carr: Yeah. I just mean, so a lot of Right, a lot of searchers, they come in here or people that are growing through acquisition and they see yeah, oh three XI have to buy it at a three x multiple and or four x or whatever the market is saying on Twitter or their m and a coach is saying, and they absolutely get screwed, including myself.
Jack Carr: There's
John Wilson: ways to underbid and over, so like we have, I would say for most small companies. If you're buying a million dollar company and paying the three times like you're doing it wrong, but if you like we have a company we're talking to right now and I think we're at like a five.
John Wilson: Might be like four and a half or five to them, but the moment you start merging shit, literally a million dollars of their overhead goes away a million dollars. And then probably another 500, 000 of materials because we buy so much better because we're so much like we just have different buying power.
John Wilson: So for them, it's a five times, four and a half times, but for us, it's like a two times or a two and a half. Like it's like we're adding, it's like EBITDA. It's wild.
Jack Carr: Yeah, that's cool.
John Wilson: Just straight to the bottom. Cause we don't need any overhead to add it. So I do think like multiples matter, but the math gets weird when you're just literally talking that thing in.
Nathan Lenahan: It's all about the definition. And that's what, like anytime anyone asks on that. Like you just named Hey, what's the multiple for them versus what it is for me. And the same thing for us, like our, is there multiple include ad backs or is it exactly how they say they're writing it and reporting to, the IRS, because if that's what you're saying, then you were paying like a six X on this thing.
Nathan Lenahan: But if it's anything reasonable that you get rid of and you show like what you better was for people actually doing jobs and all that stuff, we're closer to a little over a four X, and that's for them. And that's before we see our efficiencies. It really just depends, you can define it however you want to say the numbers.
John Wilson: I remember doing a deal. And this was like three or four years ago, but it was like 2 million in revenue. And I think it was like a four times to them. And we ended up buying it. It was like maybe 900, 000 or a million dollars or something like that. And we bought it and it really ended up being like almost a one times or like one and a half.
John Wilson: It was just because I think as you start getting into this, like everything on the P and L changes. Which is fun when you start merging them together because really all you're getting, all you're getting out of a merger is the phone calls. So if I'm looking at this, if I'm looking at a 5 million tuck in, then like their labor rates going to change, their materials are going to change their entire overhead structure goes away.
John Wilson: It becomes part of mine, but it goes away and their revenue changes because we changed their price. So it's Like nothing matters. It's like the it's the weirdest because you'll explain that to someone who's like buying their first one and they're like, yeah But what's like gross margin? I'm like, I don't think you understand It doesn't matter like nothing matters Like how many times does the phone ring a day organically and that is actually our leading metric for am I gonna buy this thing?
Nathan Lenahan: I love that Oh and it goes to explain why people like pe can come in And look like idiots based on the price they're paying and actually can make a ton of sense for them You know, and so many, because their math on back end is all that matters. It doesn't matter what it's doing here. It's matters what it's going to do in the future, and the new PNL.
Nathan Lenahan: Yeah, I think you nailed it.
John Wilson: And how did you go about sourcing deals? What was the big way you found these?
Nathan Lenahan: Yeah. So number one, we just went straight traditional right through a broker. We just talked to a ton of brokers. And DFW got our name out there, end up taking down a small deal.
Nathan Lenahan: A second one ended up being a hip pocket listing that was never listed again through a broker. And so we had a little bit of credibility from closing our first one. And and then after that, like we took a break for a little bit and then I'd say this year. Yeah, probably this whole year. Anybody that would listen, we were telling them what our criteria was and that we're buying businesses and to think of us and especially our suppliers.
Nathan Lenahan: And we moved over to a new supply house, a distributor and and they've been absolutely wonderful. And so they, as soon as we, we just kept peppering, I was like, I just heard of this right one. And it was literally. It was a company that was kicking our butt and our, where our, we live in our, two of our owners live in Flower Mound, Texas.
Nathan Lenahan: So it's right up on the north side of Fort Worth, Dallas. And and this company is from Flower Mound and they're just, they are just cult following. If someone posts on Facebook or next door, 30, 30 referrals to them before anyone else shows up. And so we're like, we want to, we want to buy this company.
Nathan Lenahan: This is who we want. And it turns out that was the company that was introduced to us. And, so we hopped on that as fast as possible. No is off market. We dealt with the seller the whole way. He's him and his mom, super high character. And so I'd say just having the credibility of getting deals done and nailing that down.
Nathan Lenahan: And now you have people who are actually listening. And I'd say we get. Shoot, maybe two leads or three leads a week of mostly off market deals from suppliers and other people that may not be in our strike zone, but and then the last thing I'll say really quickly, because you're talking about growth through acquisition, we have a really simple pitch to people and it's four things.
Nathan Lenahan: Number one, we'll give you terms and a price that we know we can close on. Number two, we're going to take care of your people. Number three, we're going to take care of your customers. Number four, we'll honor your legacy, if that's something that matters to you. And so getting that really down and then just being likable, like as soon as we can meet someone in person listening, asking a lot of questions.
Nathan Lenahan: Lots of questions about their people. Not only should you be the person that people are sending leads to, you should be able to close them when they come.
John Wilson: Yeah. I actually don't really know that I've ever thought about supplier. That's a good one. I had a supplier send a cold lead to me maybe a month or two ago, but I couldn't do anything with it.
John Wilson: I'm really disappointed because I found out an hour ago that a competitor of mine and that's especially disappointing because one, I would have bought them and they're, it's probably very similar in DFW and in Tennessee, but there's nobody private anymore. There's only three companies that I can think of private North of 10 million in my market, like three.
John Wilson: And this one was seven. And there's still not many of those. Yeah. I can only think of five or six. So this was one of the five or six companies that was private and they sold I don't even know. They didn't even go through a broker. It was like a fat, I was like, dude, I would have closed. That sucks.
John Wilson: And I obviously should have been like better at like proactive, like what you just did doing outreach through vendors and suppliers and contacts. Cause I'm sure we would have found out somebody would have told me that.
Nathan Lenahan: Even when we sit down with the CEO of our suppliers or the presidents, like we're like, when they ask how we could help introduce us to opportunities, introduce like every just over and over and over again, they were just training a new guy through our space.
Nathan Lenahan: Hey, you told him if he talks to anyone that wants to sell, We're the first people we go to because now we're one of the bigger, customers of the supplier, they know we're going to stick with American standard, for the time being. There's a lot of incentive there and that's been our most fruitful channel presently by far.
Nathan Lenahan: Yeah. I agree.
Jack Carr: That's where we get most of ours as well through. Is the supplier. They're out there, the sales guys out there talking to 50, 60 companies and, they get to go out to lunch and have all the details and enjoy that time together. And then when they say, Hey, I'm thinking about moving on that there's some of the first people to hear about it.
John Wilson: Yeah, I think that always blew my mind because people would say that and I'm like the literal last person I would ever tell is my supplier because I don't want them to get funky with my credit. Yeah. We talked about growth through acquisition. We talked about Bart's crazy growth story turning into Christmas now potentially by Christmas, find out soon if people want to connect with you and hear more how can they find you?
Nathan Lenahan: Yeah, I'm pretty active on Twitter and LinkedIn at Nate Linehan and. And then the number eight, 'cause I've got lots of street cred and Lenahan , L-E-N-A-H-A-N. And then or you can check us out@bartshv.com. That's our or Christmas air.com. Either one a yo. Yeah, we are, we serve the northwest quadrant of DFW.
Nathan Lenahan: That's awesome, man.
John Wilson: Awesome. All Thanks for coming on today. If you liked what you heard, make sure you check out owned and operated.com.
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