Overcoming a Career Rut by Buying a Custom Manufacturing Business
This story begins with a classic blessing in disguise.
After starting his career off strong, including an MBA from the University of Virginia, Bruce Vann found himself fired from three jobs in a row.
Painful as it was, this professional rut was the first crucial step in his journey to successfully buying a business and becoming an acquisition entrepreneur.
It Started in a Rough Patch
Bruce started his career in product management at the insurance giant Geico. He learned a lot there, but Geico’s market positioning as a low-cost insurance provider meant it was also a frugal employer, and Bruce saw a limitation to his earning potential at the company.
He enrolled at Darden, the business school at the University of Virginia, and upon getting his MBA started another job as a division CFO, a role he stayed in for 3 years.
But it was never a good fit, and at this point Bruce’s career started taking a turn. He was fired 3 times over 4 years.
Needless to say, the string of setbacks was extremely demoralizing for an ambitious guy like Bruce.
“Fortunately, by the grace of God, I pulled through — definitely with the support of my family,” Bruce recounts. “But it was a very, very rough and low patch for me.”
Re-Discovering Acquisition Entrepreneurship
Realizing that being a traditional employee might not be his calling, Bruce started looking for a new path, beating the bushes to see what other opportunities existed.
He’d always wanted to be an entrepreneur, even writing about it in his Darden essay. And high school, he had sold candy and drinks to his classmates so he didn’t have to get a job to “feed his fast food habits.”
“So once I had a taste of [entrepreneurship] back then, it was just a matter of figuring out how to get back to it in my adult life.”
A colleague in his network mentioned buying a business.
Bruce recalled doing a case study at Darden about search funds, but he hadn’t really thought about acquisition entrepreneurship since.
This time around, however, the concept grabbed him and wouldn’t let go. He started searching for a business to buy almost immediately.
Mechanics of the Search
Neither geography nor industry were that important to Bruce. For the right opportunity, he was open to moving and acquiring his way into an industry he didn’t know.
But he did have three criteria that were important:
- A business he could scale.
- A business he couldn’t mess up “...with my high-falutin’ MBA ideas. Because we all have them, and think we know what we’re talking about. And then the market gives you a slap in the face and says, ‘No, this is what I really want.’”
- A reasonable price and acceptable multiple.
Like many entrepreneurs who actually succeed in buying a business, Bruce treated his search like a job: checking the listings every morning, reaching out to brokers, updating his spreadsheet of deals, and reaching back out to brokers to stay top-of-mind.
Bruce recalls, “My now wife, she said, ‘Oh my gosh, you don’t have a job, but you are outworking everybody I know with the way that you’re searching.’”
Looking back, he believes this discipline and persistence was indeed key to his success.
“Doing search, if you are a persistent person, it doesn’t really matter how smart you are, per say. You have to have a certain level of it, but beyond that you just have to be extremely persistent in executing and keeping your deal flow up.”
BizBuySell for the Win
Bruce started by using “proprietary search.” He reached out cold to business owners who hadn’t actually listed their businesses for sale and asked whether they might be interested in selling.
Proprietary search is a common tactic used by search fund entrepreneurs and private equity shops, but it’s laborious, slow, and often yields disappointing results.
Bruce also found that the owners he contacted this way had unrealistic expectations.
“Deals are much harder to come by, and then most sellers, they just think that [their business is] far more valuable than it actually is. They may want 8x EBITDA for a business that is shrinking.”
So he turned his attention to BizBuySell, where the majority of businesses are represented by brokers.
The owners of these businesses are in the mindset to sell and, if their business broker has done their job well, have reasonable expectations for what their business might be worth to a buyer.
“What I found was that sellers who have a broker, they come down to earth for their valuations.”
Failed Attempts
Bruce started negotiations with a few sellers.
One was a concrete contractor selling for an acceptable multiple. Unfortunately, the broker ghosted him, only to come back months later to say they’d sold to another buyer at an increased price. “That one stung,” says Bruce.
Another target was a landscaping company, but the seller proved too difficult to work with. When Bruce asked for detail on a few add backs — a reasonable, even expected question — the seller called him a nuisance.
“OK, well fine, I’ll back away from this deal. Apparently, this is not a good fit for me,” Bruce recalls. “There has to be that chemistry between the buyer and the seller.”
(A year later, the broker who was representing the landscaping company for $1.5M reached back out saying the price was now $850,000. Bruce was relieved: “Man, I dodged a bullet with that one!”)
Enter: LuXout Stage Curtains
Six months into his search, Bruce saw LuXout Stage Curtains on BizBuySell.
The company had been around in some form since the 1940’s and today was in the business of manufacturing the heavy fabric curtains used for stages at schools, theaters, and churches.
It did seven figures in sales every year, and Bruce liked that it seemed “hard to mess up.” It had a long history in a niche industry and a pretty good lock on the mid-Atlantic market.
As a bonus, the business was coincidentally based in Richmond, Virginia, an hour from where Bruce grew up, and walking distance to the grocery store where he shopped during college. Acquiring LuXout meant he wouldn’t have to move after all.
Getting a Deal
Another thing Bruce liked about LuXout was the price.
“I got this company at an awesome multiple. When it was all said and done, it was at a 2x. Two times EBITDA for a company that had been growing pretty substantially.”
Bruce attributes the great price to an underpriced deal. What was reported as SDE (seller discretionary earnings) was in fact net income because the owner’s compensation was included in the calculation.
Adding to Bruce’s good fortune was the fact that the seller wasn’t motivated by squeezing every last cent out of a sale.
Instead, he prioritized finding a buyer who could serve as a capable successor, and take care of his company and his people.
Bruce was just that individual, and he acquired LuXout for a great price.
“The moment I purchased the company, my net worth went up substantially.”
Week One at LuXout
For many rookie business buyers, their first day as owner of their newly acquired business is nerve-racking.
In one fell swoop, they are the new boss to sometimes dozens of employees. And the simple fact of new ownership can trigger immediate turbulence within the organization.
That’s what happened in Bruce’s case.
“People were really on edge. Multiple folks crying, people blowing up at each other. Just in the first week.”
While he’d been a manager before, he’d never managed so many people (LuXout had 25 employees) nor had he managed through a turbulent moment such as this.
It was trial by fire, and Bruce simply had to navigate the human drama while his employees adjusted to the new reality.
“Some of [the problems] warranted me solving them. Other ones, I said, ‘This does not affect the bottom line of my company. You all need to figure this out as adults,’” Bruce recounts. “So you just kinda use your judgment.”
Surviving COVID
The other curveball was COVID.
Bruce closed on the business in February 2020, just weeks before COVID would upend life around the world.
Not only that, LuXout’s primary market is schools, theaters, and churches — all of which are in-person institutions.
“I would say that second quarter of 2020, nothing was happening. It was sort of like we were a ship without a paddle.”
But one thing that he had liked about LuXout during due diligence was the long sales cycle. The time between when a school, for example, orders a stage curtain and that curtain is installed is many months.
This had the effect of smoothing out COVID’s punishing effect on sales. In fact, 2020 was their strongest year to date because they were delivering on orders that had been placed in 2019 or even 2018.
The company would feel the bottom-line impact more in 2021, but it was still less dramatic than businesses with tighter cash cycles.
Bruce thinks the worst is behind them. “Now in 2022, it looks like we’re going to be in a really good spot for growth.”
In addition to the post-COVID surge in sales, Bruce has identified entirely new markets to go after.
“It would not surprise me at all if we grew 25 to 50 percent this year.”
Echoes of History
Bruce is African-American, and one of the most gratifying elements of his acquisition was the business’s location in Richmond, Virginia.
Richmond was the capital of the Confederacy during the American Civil War, giving it particular historical resonance for African-Americans.
Owning a business there is a powerful symbol to Bruce, and the realization of a dream. “I just feel elated. Elated, elated, elated.”
And even beyond the historical significance of his ownership is the security it will provide his family and future children.
“Hopefully, if it works out, when myself and my wife have children, they won’t have to necessarily go work for someone else. They can if they want to, but they won’t have to go and beg somebody not to fire them three three times when they know they’re qualified.”
Final Thoughts: Go For It
Reflecting back on his discovery, and then journey through business acquisition, Bruce says his only regret is not pursuing the path sooner.
“I didn't understand how realistically doable it was.”
He didn’t think business acquisition was accessible to him, but instead reserved for Ivy League types or the already-wealthy.
“And to me it was always like, the whole thought of a search fund, okay, that's what the kids at HBS and Stanford do,” he says. “I probably was one of the least wealthy folks among my classmates [at Darden]. So, I wouldn't have thought that I was gonna even be able to do something like that.”
Happily, that same colleague of his told him to take another look at buying a business.
“If you do this thing the right way, you may legit get 400-500 percent return and have to pay 6 percent on the capital. And that difference you keep. So, if you find something that's relatively stable, to me I think it’s worth it to just go for it.”