Experience acquiring a skilled trades business

February 18, 2023

by a professional in Nashville, TN, USA

Hi all,

A client of mine is in late stage conversations to acquire a commercial electrical service business from a retiring owner. There are tons of opportunities for growth and efficiencies (no sales, no marketing, minimal software, no performance metrics, etc), but he does not come from a skilled trades background. Has anyone without a skilled trades background acquired a similar business, and if so, would you mind sharing their insights on how it has turned out / how you closed the technical gap? For example, did you get licensed? Thanks in advance!

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Reply by a searcher
from University of Pennsylvania in Portland, OR, USA

It is my experience that a critical component of the viability of an industry outsider succeeding as the owner of a trades business is the size of the business and the existence of field operations leadership. I purchased a ~50 person plumbing company in###-###-#### I do not have a plumbing license and never will. It would take 4 years of community college night classes and working full-time as an apprentice to earn a license in my state. Thankfully, the team doesn't need me to be competent in the trade, just in leading a team and managing a business.

We are growing the business top and bottom line, retaining the team, and upgrading with technology and process along the way. I care about the team's work and occasionally spend a day in a passenger seat for the purpose of connecting with team members and customers, but no one ever comes to me with a technical question or even a logistics questions like "can I change to the 10 to 7 shift next week?". Long-serving supervisors cover all that. Outside of a half dozen managers most of the team probably wonders what I could possibly do after I greet them in the morning and they head off for a shift of working in customers' homes. What they don't see is the day full of intense Excel modeling using the output of our CRM and supplier catalogs that informs adjustments to our pricebook and has held gross margin percentage steady despite inflation. Nor do they see negotiating with the department of labor and industry, evaluating consumer financing providers, documenting a new talent acquisition process, or any number of things unrelated to plumbing.

There are successful examples of buyers picking up small trades companies and I admire them. It is beyond my understanding how someone could drop in as a new owner of trades business, directly supervise technicians effectively, and also carve out time to drive the business forward.

Reply by a searcher
from The University of North Carolina at Chapel Hill in Austin, TX, USA

I acquired a specialty trade business, without prior knowledge and got trained but never compares to 20 years of experience. The key man risk issue is definitely a major concern because trades are high turnover industries, and there is a severe shortage of skilled labor in most sectors. So if your client does not want, or doesn't have the knowledge and experience necessary, to get licensed you have to include having at least 2 licensed employees in your model. Employees tend to ask for more money when they know you need them, having 2 reduces the risk there.

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