408 - When to Buy a Large Consumer Business
The subject business of today's interview is unusual. It exists to solve a consumer pain point in a few key markets, primarily Dallas and Houston. Taylor Mattingly is based in Houston and was actually a customer of Energy Ogre, a service that helps households optimize their electricity costs in Texas's unregulated and convoluted energy market. Taylor did a traditional search, which unlike an SBA deal allows for an acquisition of this size. We don't say revenue explicitly but suffice it to say that hundreds of thousands of customers pay $10 per month for the service. Now, consumer businesses tend to have low quality revenue, and traditional searchers therefore prefer B2B opportunities. But Energy Ogre is unusual in this way as well; the revenue quality is very high for a B2C business. We get into it. We also talk about deal structure, which looks different than the 80/10/10 style of an SBA deal. You'll hear Taylor comment that the 55% leverage they used is actually high-ish for a deal like this. (And they could do that thanks to the aforementioned revenue quality.) Finally listen for Taylor's enthusiasm for his partnership. Taylor and his search fund partner John were friends going back to high school, so when they embarked on this journey together there was already trust there, built up over years. A great feature of a partnership if you can get it. OK, here he is, Taylor Mattingly, co-CEO of Energy Ogre.