$600k/year side hustle?

Yo Side Hustler:

Here’s a serious narrative violation: my bud makes $600k per year working 10 hours a week while owning… a plumbing company.

Honestly I wouldn’t believe it I didn’t trust this guy with my life. Here’s how he does it.

First off, he bought it in 2020 with an SBA loan.

10% down, $1.35M price, seller’s adjusted cash flow at the time was $600k. So he paid 2.2X cash flow. Not bad!

Here’s the deal though. He executed the classic ‘new school’ approach:

• Offshore VA’s answering phones 24-7

• Optimize Google business listing and ratings

• Train plumbers on sales and customer service techniques

So, the result? Well you probably noticed that the owner’s cash flow is the same. It’s still $600k, but that does not include the debt service on his $1.1M loan. So EBITDA is much higher.

But my friend is only working 10-20 hours a week. How? Training his staff, hiring people he can trust, and investing in their training. Pushing down day-to-day decisions. Giving his GM some equity.

Now, to be clear, it was NOT easy. The first couple years you can bet your sweet booty my dude was running around freaking out and running an absolute $hitshow.

It was a total baptism by fire. He had no idea how to run a plumbing company and it showed. Turnover was huge, customers were pissed. But, he chopped wood, kept going and now has an amazing business.

The problem: he just can’t seem to grow it past this point. It’s natural for every entrepreneur to want to grow. Grow or die, right? It’s proven to be very very difficult. And truth be told he has no passion for plumbing.

He gets one great plumber in, then one quits. Lead flow is all or nothing. When it rains it pours. That makes it very difficult to take on new payroll and equipment burdens.

He’s at a very natural ceiling and busting through it would cost hundreds of thousands in painful marketing and hiring experiments. There is a reason MOST plumbing companies stay right in this 4-8 truck/tech range.

What to do? He’s rapidly coming around to the opinion that there is nothing to do. He has a terrific income and plenty of family time. He’s turning his ambition to other side hustles to generate income.

And he’s flirting with buyers for the biz. He’s cultivating a buyer that will pay more like 4x for this company now.

Why would they pay almost 2x more than he did when the company is just about the same size? Because it doesn’t require a full-time owner. That’s the power of systems and delegation.

And remember his actual EBITDA after debt service is probably $750k, so now he’s turned this $1.35M company into a $3M in a few years.

Pretty cool right?

Here’s some other stuff I found interesting this week:

Last week I teased a deep dive into security companies. The crazy part is I could not find one decent security installation company for sale in the US. I was planning to run the numbers on 5-6 of them and get a sense of the market. There just aren’t many on the market at all. I think this is bullish for the industry, big time. I’m still digging into this, stay tuned.

My 1-minute guide to negotiation. Don’t overcomplicate this.

This podcast changed my worldview. Not kidding, just listen to it. When you think you’ve seen everything possible, think about this: https://podcasts.apple.com/us/podcast/the-fort-an-entrepreneurship-podcast/id1410549811?i=1000645973176

See you next time. Next week I’ll talk about my pal who is basically collecting mansions - and getting paid to do so.

Kriss Berg