Operating Hvac With A 3+ Hour Drive To Work?

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04/07/2021 Redacted Redacted

searcher Massachusetts Institute of Technology - MIT Sloan School of Management Massachusetts Institute of Technology

OPERATING HVAC WITH A 3+ HOUR DRIVE TO WORK?

Searchfunder brain trust! Has anyone made their first acquisition in a company that's a lengthy drive from where they live?

In my quest to buy an HVAC or plumbing company in South Florida, I stumbled across one small ($300k-$500k cash flow)  air conditioning company that's a 3 hour drive from where I live. Current owners live out of state. This would be my first acquisition in the industry.

Typically, I'd ignore anything far away. However, this business is within driving distance, so it's not like I need to take a 2+ hour flight to visit the business. And it's already run remotely. The way I could see this working is I'd go for at least two days each week and run it remotely the rest of the week. But, while I'm OK with trading off some growth & efficiency by being relatively far away, I want to make sure I'm not risking the whole company imploding!

Would love to hear thoughts and personal experiences!

2 likes 341 views 34 comments

admin Massachusetts Institute of Technology - MIT Sloan School of Management Taylor University Stanford University - Graduate School of Business - 04/07/2021

Thanks for your post ^[redacted]‌! Tagging a few Searchfunders that have commented on running a company remotely in the past and might be able to share some hard won wisdom here:

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searcher The University of Chicago - Booth School of Business Indian Institute of Technology, Bombay Louisiana Tech University - 04/07/2021

We can talk about this Charles. My view is that for that small of a company, I would recommend you being there 5 days a week at least for the first 6 months. You have to get into the details of a small business (especially this small) before you can let go of the reins and be comfortable with it running on its own.

My 2 cents
Vijay

like reply | 2 likes

investor Columbia University - Columbia Business School University of Colorado at Boulder - 04/07/2021

i agree with Vijay. you gotta be on site. 4 days a week is probably fine.

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searcher Massachusetts Institute of Technology - MIT Sloan School of Management Massachusetts Institute of Technology - 04/08/2021

I didn't even think about reducing the amount of time I'm physically there over time. Doing in-person 4-5 days a week for 6 months wouldn't be the worst thing in the world... so long as my significant other is OK with me not making dinner during the work-week for a while!

I'd still only buy the business if I estimated I could run it semi-remotely from day 1, but post-acquisition, I'd actually start in-person. Builds in a margin of safety.

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searcher Stanford University - 04/07/2021

I'm happy to talk about it. I believe you would uncover what you need to know during due diligence. 1. Ask the current owner how often in the last 2 years they have visited. Ask them to what they attirubute their ability to be remote. 2. Find out who will be managing things locally in your absence (if necessary). 3. Figure out if any local presence is necessary at all. For example, if the company is just a website kicking out leads, then it's not clear what a local person would even do. But it i

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searcher Hillsdale College - 04/07/2021

I have a friend in central Florida who owns a gym (there's not much more hands-on than a gym!) and is on site about 2 days per week. He lives 90 minutes away, so it's a bit easier for him to get there than it will be for you, but it's definitely doable depending on the people on the ground and the deal thesis.

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searcher University of Virginia-Darden - Darden School of Business Brigham Young University - 04/07/2021

Depends on who the license holder is and how good he/she is at managing the day to day.

I'd love to connect regarding the HVAC industry!

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searcher Massachusetts Institute of Technology - MIT Sloan School of Management Massachusetts Institute of Technology - 04/08/2021

You reminded me of something I didn't mention: the target is a divesture from a larger HVAC company, which originally bought it from the founder a couple years earlier. So, I need to figure out if the parent company is providing resources to the subsidiary that I couldn't provide, e.g. buying inventory in bulk or remote technical support from the head office. Although I believe the license holder isn't very involved in the day-to-day (physically or otherwise), the head office's staff and resourc

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searcher University of Virginia-Darden - Darden School of Business Virginia Commonwealth University - School of Business - 04/08/2021

I bought my company and it was 1.5 hours away. That commute was brutal in the beginning when I was trying to learn the business. Do yourself a favor and just get a cheap apartment in the place the business is. Then go back there when needed once you're in a somewhat steady state. Also you should be aware that your folks need to see you as the new owner. So you will need to be there every day at least in the beginning.

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searcher University of Texas at Austin University of Kentucky University of Richmond - 04/08/2021

This was my thought exactly. 6 hours in a car a day is too much of a waste of time and you need to be there 5 days a week early on. Get a cheap apartment for 6 months and spend 3-4 nights a week there -- that is if there is never a plan to move your family to the new city.

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searcher California Maritime Academy - 04/08/2021

My wife worked for a business that was in this same position. Owner built the business with systems and processes, moved out of state and ran it remotely for a few years and sold it. The purchasing company tried to acquire it remotely but couldn’t manage to learn the existing systems and processes remotely. The purchasing company ended up moving half their executive management to the purchased company to get a wrap on what they purchased.

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searcher Columbia University - Columbia Business School University of Minnesota - Twin Cities Campus University of Wisconsin - Madison - 04/08/2021

I would try and double the EBITDA and hire an Ops manager. Or get an apartment

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searcher The University of Michigan - Stephen M. Ross School of Business University of Michigan - Ann Arbor - 04/08/2021

I definitely agree with the need to being on site for the first 6 months. I acquired a company with its headquarters a two hour drive away from my home. I spent 4 days a week there for the first 6 months with the intention of deciding whether or not to move after 6 months (or potentially keep my home and buy a small condo there). Then COVID hit and we were shut down for 3 months, working remotely the best we could. We’ve opened the office back up and I now spend just one day a week the

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searcher Pepperdine University - Graziadio School of Business and Management University of California, Santa Barbara - 04/08/2021

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searcher University of Idaho - 04/12/2021

Our thoughts, exactly.

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searcher University at Albany, State University of New York - School of Business - 04/08/2021

Yes, my first one was 2 hours. There are 4 in negotiation 4.5 hrs, 2.5 hrs, 5 hrs and 6 hrs from me. Granted these are insurance practices that can be run from any computer and I only expect a minimal run off. In my case, it will start with weekly visits and gradually but rapidly drop to totally online.

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searcher Park College - 04/08/2021

I like it, Charles. Jump in there!

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searcher The University of North Carolina at Chapel Hill - Kenan-Flagler Business School United States Naval Academy - 04/08/2021

Hi Charles, I'm in a similar position of looking to remain in my current residence while acquiring a business further away. My perspective echos a lot of previous comments about planning to be on-site 5 days a week at first. Another thing to consider beyond just the immediate post-close is how seasonal the business is or what long-term growth initiatives might demand. I'm currently pursuing an acquisition with crazy seasonality that will demand attention something like 7 days a week for 2 mo

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searcher University of Illinois at Chicago - 04/09/2021

The first company I bought was 2.5 hours away from where I currently lived. The company had middle management in place that was planning to stay on and sign employee entrance agreements. When I was first introduced to the company, I had a really cute idea: I would commute a few times a week then manage things remotely on other days(very similar to you). The company was in an industry I had no experience in. By the time we closed, I had signed a lease for an apartment near the company.

The

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searcher IESE Business School Université de Technologie de Compiègne Universidad de Navarra - 04/09/2021

Pretty much aligned with your point of view, David!

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searcher The Johns Hopkins University - 04/09/2021

Hi Charles, I'm still searching and don't have firsthand experience with the distance issue you're considering, so I won't speak to that. I would however like to connect as a fellow South Florida searcher, and would love to hear where this one shakes out. Please message me at [redacted] Thanks!

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searcher Massachusetts Institute of Technology - MIT Sloan School of Management Massachusetts Institute of Technology - 04/13/2021

Just sent you an email!

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searcher Brigham Young University - 04/09/2021

Charles - Tim Clark (who is a member of this community) was of great help to me as I did my search, closed on my purchase and learned to operate it. He has been buying and selling businesses for 20 years and told me he’s never lived close to any of them. And it’s never been a problem. That said, for a service business I think you wouldn’t want to be much more than 3 hours away- especially if it’s your first one.

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searcher Brigham Young University - 04/09/2021

FWIW I have been looking at tack on acquisitions to fold in with my business and would buy something up to 4 hrs drive from my house. Like you I would plan to be in the office a couple of times a week for the first year. But for the first 3-4 months you should assume you would need to be there every day in order to learn the business, learn which of the staff are good and which ones you need to coach up or replace; what is working and what can be improved

like reply | 1 like

searcher Brigham Young University - 04/09/2021

Now that I’m two years into it, I go to the office only once per week for 2-3 hrs and the rest from home. And my office is 15 minutes away. But it took a lot of fixing problems (HR, IT etc) to get to this point

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searcher - 04/10/2021

I've managed several businesses that were remote, some as far away as 7,500 miles. You need to be in the trenches with your new staff for at least 6 months especially in a service business. In addition, the hvac business is getting harder and harder to staff with good technicians.

You will need a good system and structure in place and find one person to manage the operation who reports to you. Having too many directv reports in a small organization will just cause lots of problems.

like reply | 0 likes

searcher Florida International University - College of Business - 04/11/2021

You can spend 3 days on site and 2 days remote. As you implement your 100 day plan and set it up for success the less you will have to be on site. Also, consider the idea of having a General Manager on the business.

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searcher Columbia University - Columbia Business School - 04/11/2021

Encouraging the business has been run remotely by the current owners. I think the key is in having strong management in place to ensure the business is operating as it should. You'll probably need to be prepared to be local in the office as needed for transition of management, along with up front time with the team when you first acquire the business of course.

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searcher University of Illinois at Urbana-Champaign - 04/11/2021

Its remote ownership but the work/employees are not. Personally I would look for at least 3 days on site with crews/customers for the first 90 days and possibly more since you don't have any experience in the business.

like reply | 0 likes

searcher Harvard University - Harvard Business School Northeastern University - 04/11/2021

Thanks for sharing, all. Glad to hear from some of those who have tried it

like reply | 0 likes

searcher Massachusetts Institute of Technology - MIT Sloan School of Management Massachusetts Institute of Technology - 04/13/2021

Wow, got a bunch of great responses here! It seems like there's agreement that this is definitely feasible so long as, at least for the first few months post-acquisition, the owner can be on-site every week. It was good to see nobody say this is totally impossible or extremely ill-advised! If I end up buying a company that's a bit of a drive away, my plan is to get a cheap apartment (or maybe even a camper van... just because I need an excuse to buy a camper van) and be prepared to spend up to 5

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investor Thomas A. Edison State College - 04/15/2021

Get a small apartment near the business. You'll need to be boots on the ground at least for the first few weeks to learn the operations, build relationships with the key staff and gain their respect. If they don't get facetime with you they will slack off.

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searcher INSEAD Université de Liège - 09/12/2021

I personnaly invested in HVAC companies max 1h drive from home. That was was basic criteria

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searcher Hillsdale College - 09/12/2021

My friend owns a gym a 2 hour drive from his house and after 6 months of staying in an apartment near the gym he is now down to a couple of days a week and the rest of the time from home. It can happen but you’ll need a great GM if you don’t want to be miserable.

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