E184: Chandler Reed On His Journey as an Entrepreneur and the Success of His Green Energy Business

[00:00:00] Ronald Skelton: Hello and welcome to the How2Exit Podcast. Today I'm here with Chandler Reed. He is with Get Green NOI, and we're going to talk about his experience as a participant or a ETA. He acquired his business through the ETA method acquisition entrepreneur. And, we're gonna, uh, we're gonna have a good time here.

We're going to talk about his journey through that process. Thank you for being on the show today Chandler. 

[00:00:23] Chandler Reed: Awesome. Thanks for having me, Ronald. And congratulations on the success of your podcast. I know you're shooting up the charts and that's great to see. And I'm honored to be a guest. 

[00:00:31] Ronald Skelton: Awesome. Awesome. Some of the different charts, they do different things. The charts I'm shooting up on are really cool because they're just about like the quality of the show and stuff and not so much. It's just, you have to beat everybody else in downloads because a lot of the guys pay a lot of advertising and pay, to get eyeballs on theirs.

Which we're trying to grow organically. One of these days I'll just cave and I'll dump money at it. But I just thought, I really thought we could just like kind of take over the chart, organically. So, if you're out there listening, please like subscribe. Hit that like button, it's going to help both Chandler message, get out there and it's going the help the show a lot.

So let's start off with your origin story. Kind of, who are you? What's your background? And then we'll get into, how did you stumble across this first deal that you've done?

[00:01:11] Chandler Reed: Yeah. So, like you mentioned, my name is Chandler Reed. I was born and raised in Tampa, Florida. Still here today to where I bought my first, business is located here. Um, I went to school for finance and real estate, uh, which is what I kind of cut my teeth in. My first two jobs right out of school, with a multifamily private equity investment firm, and then a full service developer here in downtown Tampa.

So full stack, just real estate investment, financial modeling. That was kind of my, my thing. And then COVID hits. So this is, yeah, so COVID hit, COVID hit, but, uh, all of a sudden, uh, I'm sitting here, I'm working from home. I start hopping on Twitter. I'm writing a lot about what I'm doing in my day job. Kind of joining a retweet real estate, Twitter.

As people refer to. And I'm there for about a year working from home. Kind of getting frustrated, like, Hey, I know I could probably be doing something more than this. So kind of the entrepreneurial inklings were coming to mind, but I had no idea what would end up happening, which I'll get into now.

So a long story short, I'm scrolling through Twitter one day and Moses Kagan, who is a big real estate Twitter account had retweeted the tweet from my now business partner Sam Rosati. Ronald, I know you know. Sam had a deal here in Tampa. It was pretty hairy. A lot of strategics passed over it.

The deal landed in Sam's lap, but Sam didn't want to run the business as it was a turnaround. Two, Sam didn't know anything about multifamily real estate, which is what I had kind of the background and experience in at least for a few years out of school. And then, three, you had to be either willing to move to Tampa or already in Tampa.

And I checked that box. So long story short, I DM'ed him. Three months later, Sam, myself, and then I brought in, uh, my mentor at the time who I'd still consider my mentor, but he's kind of a multifamily veteran. All three of us closed on the business together three months later. And, uh, yeah, so I found my first deal through Twitter. Had no idea what ETA was, what SMB stood for.

That people bought businesses of this size and I've slowly discovered that this is a very thriving and burgeoning community. 

[00:03:12] Ronald Skelton: It's interesting that a lot of people, they, there's so many routes to get to this, right? They learn, learned it through school. Like if, if you're doing your finance degree, you probably, your school might may or may not have an ETA program.

It started in the Ivies, but it's, when I was, when I did my master's degree, my MBA was like 2007 when I graduated, I think. I don't remember ever bringing up acquisition entrepreneur or anything like that. And I have a master's degree in marketing. I took all the business courses.

You'd think I'd heard about it. But it just wasn't a topic back then. It was still probably mostly in the Ivies, right.

That said, um, I didn't know about it either until like I, one of the things, one of the reasons I found out about it is I was in real estate also. Single family houses, and investor. I owned a little real estate investment firm. We were doing a little, we were probably one of the bigger ones in town, but we were doing lots and lots of deals. And the market kind of drowned it up because we were focused on stopping foreclosures and negotiating bank owned properties.

And when the market got hot, those things kind of tailor, tailor off. And I'm thinking, do I really want to do real estate anymore? Am I burned out? Or, you know,there was a kind of a recurring theme on that. So I hired a performance coach to come in and kind of work with me to see if it was me or the business.

And, uh, one of the things he said is you should be playing a bigger game. So I started looking for a bigger game and that, you know, Google it around looking for that. Stumble across this. And I think, wait a second, I'm really good at running businesses. Not as good.

Starting them from scratch and like coming from scratch anymore. Maybe because I just like getting older and don't have the energy, I don't know. But just the idea of stepping in and taking over and making something work. As well as the previous owner or better, was something that really appealed.

So, but you came across it like, you seen this and you're like, okay. What was your initial thought when you seen him tweet something that said, Hey, if you're, if you live in the area and you got more, I think it said, if you had more time than you have money or something like that, 

[00:05:02] Chandler Reed: More hustle, more hustle than capital. Yeah. 

So basically I saw the tweet and I don't know if it was divine intervention or what, but it almost felt like the tweet was made for me because the three qualifications that he was looking for, I checked all those boxes. And yeah, so it was, you have to have a little bit more hustle than capital because there's going to be a turnaround.

We could talk about that too, but largely long story short, it was a primarily seller finance deal. The end of the capital stack. Had the no multifamily real estate, which I did, or at least well enough to be comfortable doing something like this. And then I was already in Tampa and I had no plans on moving anytime soon.

And the operator needed to be based here in Tampa. And yeah, so that's what I was like, Hey, I don't know what's going to come out of this, but let me send him a DM and yeah, the rest is history. 

[00:05:47] Ronald Skelton: So you sent him a DM, he responds, you guys probably jumped on a Zoom or a call, what was the first call like?

Did you think, do you think it was still for you? Or do you think that you blew the first call? Most people get on the first call with a seasoned investor. They think they blew the first call when they really didn't. 

[00:06:02] Chandler Reed: Yeah, well the first call actually went like pretty well in my opinion. Funny enough, Sam and I both are from Tampa.

We had no idea who each other were. He was familiar with the firm I was working for at the time, which was kind of, it's like a big high profile development here in Tampa. So he was like, Oh, all right, if you're working for them, that must mean something. multifamily real estate, all right, it's starting to add up here. And we both ended up being graduates from the same university, university of Florida.

So we kind of hit it off pretty instantly. Started throwing out names like, Oh, I know that guy, I knoW that guy. Know that girl, know that girl.

So it went pretty well, but Sam obviously knew, I mean, he could gather that I didn't really know much about ETA in the process, but, his that's what you know, he contributed to the partnership. It's rinse wash repeat for him. He knows how to do these deals in his sleep. I was there to provide the you know the hustle. The boots on the ground.

[00:06:51] Ronald Skelton: The boots on the ground, right? So Sam, he's been on the show before and he actually has a program where he helps people like do this. So he looks for these type of deals where I know he could be a you know, contributor to it and a partial owner on it, but not the general operator. So did you end up going to his like, I think he does these retreats right? Like a two or three day events and stuff?

[00:07:15] Chandler Reed: Yes. Yeah, you're referring to the boot camps. No, so I didn't go to the boot camp, but obviously Sam teaches the boot camp. So he's got that playbook and better than his mind. Funny enough, like I'm now kind of working on him or with him on kind of scaling the bootcamps. I went to the last probably five of them here in Tampa, Florida.

Recognize that it's an absolute gold mine for the people that come through. Saw the people that he's helped buy businesses. So I didn't, I wasn't a direct participant in the bootcamps, but I was a beneficiary of the kind of (...).

[00:07:44] Ronald Skelton: Knowledge. So he didn't, I was just curious. I wondered if you, if he made you do the bootcamp before you guys, before you closed the business. But you managed to get one closed.

And so he, so that's good. Now talk about the business. It's a green business, according to the name. You and I've talked about, but tell everybody what the business is, what it does, and kind of the status or the state of it when you got into it. Cause I kind of know the story, but it would benefit everybody to know why he needed somebody that was willing to put in some hard hustle.

[00:08:15] Chandler Reed: Of course. Yep. So the business that we bought, in its state back then was strictly a, uh, basically a light, a commercial lighting contractor. With a focus like 99. 9 percent in multifamily real estate, hence the need to know multifamily real estate. Basically what this company did was go to large apartment complexes.

Think, you know, the 40 plus building garden style communities with 600 plus units, all the way to some high rises. But basically what they would do is they would go and retrofit all the existing lights. That back then, at least when this company is founded in 2014, we're non LED. This is kind of back when LED lights were a little bit nascent.

Now, you know, you can get them everywhere, but, this company would go into apartment buildings, replace all the lights. The owners would realize a massive energy savings. As using one of my favorite clients terms, uh, what our biggest value add was we only had, or they only had one neck to choke if the project went wrong.

So we were completely turnkey. We sourced all the materials and all the install. There's government rebates, uh, municipality and utility rebates for doing these kinds of green energy projects. So we had secured that on behalf of our clients. So it was just really a one stop shop to get kind of your lights efficient.

And obviously now, um, you know, LEDs are everywhere. So, but we saw that the business itself, had some, some opportunities to improve. So kind of the turnaround story, but also it was a massive turnaround story. And I know the running joke in this business or in this space is, you try to not buy yourself a job.

And I bought myself 10 jobs. At the time, the, the company was doing 900 K in revenue, like trailing 12 months. They had some shared services between the sellers new company, which was a smart home installation business that had a recurring revenue piece to it. So, that's kind of why the seller was selling it.

He had this other faster horse. So we kind of got at this time, attention, resources. And a lot of instances, some employees and shared services away from the lighting business that we bought to the smart home business. And so what was left was a business that, served the big need. Like there's going to be lights at apartment buildings forever.

And just, he just found a faster horse. So at the time the business, when we bought it, it was doing 900 K, in trailing 12 revenue. Uh, basically was a total lifestyle business. So this guy, he's running all sorts of stuff through it. So it was kind of a little hairy as far as like, some of the headbacks and like, Hey, we're not, not really sure what we had here. But in its heyday, the business was doing about 1. 5 in EBITDA.

Six, 7 million bucks top line. Had, about a dozen employees. So, we kind of viewed it as, Hey, we have a playbook. This business, there's nothing wrong with it. It's just a seller, basically gutted it to focus on this other one. So we at least have a playbook to probably get back to where that was.

And then working at, in my previous real estate roles, sustainability and ESG have been coming kind of for lack of a better term, the hottest girl at the bar. In commercial real estate, everyone wants a piece of it. And so I'm like, okay, I've seen where the market is trending, as far as the green energy and sustainability. We're buying a business that serves those same clients, but we're only doing lights.

Let's get this, bring it back to its former glory and then reposition it to sell some of the kind of in the same bucket types of products, to these same clients. Cause we already have the relationship with the clients. They're buying it from someone. Why not us? And so, yeah, so hence the change from the company that we bought was Onyx Energy.

We rebranded it to Get Green NOI and then started tacking in some other projects. So obviously, the lights are still our bread and butter, as, uh, a horrible joke and pun. I like using it's the lighting vertical keeps the lights on, as we're growing these other verticals, which are now EV charging stations.

So low flow plumbing fixtures and solar is going to be kind of the fourth leg of this tool, but solar is a whole different ball game, that I've learned. And it's, it's kind of the wild west out there right now. So we're sticking to what we know and slowly growing out these, uh, the LED or the, uh, EV charging and water efficiency stuff right now.

[00:12:14] Ronald Skelton: So you guys primarily in that still, that Tampa Bay area or? 

[00:12:19] Chandler Reed: Oh yeah, that I completely glassed over this. No. So the company was headquartered here in Tampa. That's where the, the seller. He's from here. That's where he built, some previous companies. That's where his base. So another really attractive thing I liked about this business was, the business, and we still do sub out all of our labor.

So yes, it will eat into the margins a little bit, because obviously we're getting a markup on our labor, but it allows us to work nationwide. So we, for example, just since we've taken over, we've done a project in suburban Seattle. We closed one out earlier this year in Manhattan and pretty much everywhere in between.

Although I will say our kind of like core kind of, wheelhouse markets are basically states have touched Georgia. In the Southeast and of those states, primarily in Florida, right here in our backyard.

[00:13:03] Ronald Skelton: Yeah. So, like what's your market scope? That if you just look at, I think you told me apartment complexes with 600 units or above?

[00:13:12] Chandler Reed: Yeah. So, I mean, I would say that's just, I was just trying to paint a picture of our typical client. I mean, we'll work on apartments as small as probably like, I think the smallest project we've done is probably like 50 units, but it was kind of a nicer product and the fixtures were nicer. So the, the ticket was higher.

But, I think the biggest one we've worked on was nine, almost a thousand units, just in one single apartment community. We've done portfolios for people before. But yes, primarily in the multifamily sector, we've done some onesie, twosie ones off, one offs for industrial buildings. We looked at a couple of hotels, but,we bought the business inthat was servicing multifamily. Our backgrounds, me and my business partners were all multifamily. So we're just trying to play in what we know. 

[00:13:54] Ronald Skelton: What's the market like for that? Like if you just look at areas that you currently service, how many, um, apartment complexes are available out there? I mean, is this a thousands or? 

[00:14:07] Chandler Reed: Oh yeah. I would say a couple hundred thousand. At least on the institutional scale. And that's the thing too. It's, more being built, granted they do have the newer kind of energy efficiency fixtures off the get go now. But. in about the useful life of those is probably, of those lights are probably like six, seven years, depending on what the type of product you're using.

So now we're even getting to the point now in the maturity of this business where we're going in and replacing already LED lights. So yeah, your ROI pop isn't going to be as much, but your community is going to look a lot nicer. And a lot of cases that's gonna allow you to raise rent or have residents not bug you about it.

So it's just a good kind of value add continuing deferred maintenance piece. 

[00:14:45] Ronald Skelton: So what was the process that you guys went through when you did the, like you're brand new to ETA. You don't know LOIs. You don't know that. So Sam, walk you through most of that, but talk about the first couple of calls you had with the seller.

And then, how did Sam convince the seller you'd be the general manager over to be running it? Cause you'd never done it before. 

[00:15:06] Chandler Reed: Yeah. So luckily, between myself and then my mentor that I alluded to earlier. My mentor knew him and kind of lived down the road with him, from him in Tampa. So kind of same thing.

So I think what sold Dave, our seller on it was if I just came to him myself, he'd be kind of like, what are you talking about? No way. But the fact that I had Sam who knew how to run transactions and knew how to operate small businesses and my other partner Bert, who knew the multifamily space really well, I think in back in years past, Dave, the seller had tried to sell Bert on some products. 

Whether it was the lighting or the one of the other kind of multifamily vendor businesses he had started in the past. So he got comfortable pretty quick and he saw, I guess I left the lasting impression on him too, that I was going to be able to take on those 10 jobs and kind of ride the ship. And most importantly, make sure that he got paid because the biggest kind of crux of the deal was,if we would have brought it to an SBA lender as we were talking off offline before this, they would say, thanks, but no, thanks.

This deal is unfinanceable. So we ended up structuring the deal, kind of a, 25 percent of it was a cash down and then 75 percent of it was a, an earn out. So he, had to get sold on me because, you know, if we didn't do well, he wasn't going to get paid back or, exactly. 

[00:16:27] Ronald Skelton: For the 25 percent down, you can, you don't have to call out names. You can say investors or you, was it you or a combination of you and the investors or? 

[00:16:36] Chandler Reed: Correct. It was a combination of me and the investors. And then I got some sweat equity as well. So I put in, so it made sure that we're all head skin in the game and aligned, aligned financially. but then I was getting the upside for taking on the ten gems.

[00:16:50] Ronald Skelton: Okay. And then the, what kind of like, what did the first couple of weeks look like? You show up, does it have employees you got to win over? Or like, you close this thing, I'm trying to think, well, before you close, how did you, how did you untangle the financials? Do you know you had a good deal?

Did you like have a due diligence team look at that and give you analysis or? 

[00:17:11] Chandler Reed: Yeah. So we did not, as we were talking off offline too. We did not get a quality of earnings on it. It was a little bit, given the kind of terms of the deal and the basis of the deal, it was more of like, Hey, I think we have something here.

Let's not even worry about it. The demand is there and let's just try to go run it. But it was primarily, so the deal was brokered. Um, so, you know, we had the SIM, um, the seller was using a broker for it. So we got the most recent financials. We were looking at it. We saw the projects in the pipeline.

And so we kind of came to a conclusion that, Hey, this deal has got some legs. And then Sam, obviously with his plethora of knowledge in the industry, and he's a CPA too, so he can crunch kind of numbers and knows how to underwrite a deal. So, I knew how to underwrite real estate, but not small businesses, but some of the kind of properties transitioned over.

[00:17:57] Ronald Skelton: Yeah. We were talking about this quality earnings report before the show and how people, are avoiding them for deals. Now, a deal like yours where, you probably had structure in it to where, to minimize your risk is one thing. We were talking, you brought up the subject that, we don't think that people using SBA loans should be buying companies without some type of formal quality of earnings or due diligence on the financials.

There is a, I don't want to say misnomer or a myth out there that because you're using SBA and a bank that they're going to vet those financials and if they approve it, it's okay. And that's a very dangerous myth and the fact, and the reason I told you, I tell you once we got on the air, why. They don't care necessarily that it's a good run business because it's a person, they do, and they don't.

They do to the fact that they need to make sure it has the money to pay the bills. But if it doesn't, if you've got enough personal assets, they're going to have you personally guarantee that loan. And if you have other assets in real estate and, anything else in the world, they're going to have you pledge that as collateral.

So often a lot of people get into these deals and they, maybe they have other businesses or they have real estate and,they pledge all this other stuff and they think that the, well, the bank would never approve it if, if it wasn't a good deal. I mean, that's not true. They just had enough collateral that the bank said, well, if this guy can't straighten this out, we'll take all this stuff.

So that's the reason that you have to be really cautious about it. Now, if you go in there and you don't have a bunch of assets and you managed to pull one off, what are they going to take? So maybe there'll be a little more stringent on it. Maybe they'll take a deeper look at it, but, understanding the financials and understand you've got something, there's something there as you put it.

Clearly, is critical in any situation. Right. Usually what you see a little bit of, there's a lot more of. So when you said the financials are hairy, you get in there, you start running this, was it as good or as bad as you thought it would be or worse? 

[00:19:51] Chandler Reed: It was, I think it was a little bit better than we thought it was going to be.

I'm talking things like, you know, he's running all sorts of personal expenses through it. And then we kind of got a firm picture of like, okay, this thing's going to spit off this amount of money. We're not going to be running the same types of personal expenses through it.

And also, we're also going to be actively growing sales on the sales side and they had previously just been doing all inbound. And getting back to that employee question, there was literally, uh, and call this ultimate key man, right? I said the business in the state only had one employee at the time and he was a project manager.

He was running everything. Request comes in, he goes on site, does a bid. They sends a bid out, gets accepted, doesn't get accepted. He wasn't doing any sort of followup or salesy or anything like that. So it was truly like, almost like a passive, business for this guy. So with all these factors in mind, and also going back to your question on selling him, so before we closed on the deal, we all went out to lunch together. Me, Bert and Sam, Dave, the seller, and then Richard, the one employee.

There, and we kind of, I was doing a sales pitch for him because, maybe he didn't want to work. He liked the way, everything was kind of comfortable and kind of passive in the end. And we, you know, had plans to grow this business. So we had to make sure that he was okay with the vision.

And we assured him that, Hey, you're going to be a cornerstone of this business. And we're going to build this thing around you on the operation side. Then we need you along for the ride. Another thing we did too was the seller also had a bonus incentive, a stay bonus for him. So we made sure that was in kind of all of our agreements.

And, we also gave him a little bit of a pay bump and instituted a bonus structure as well for him. So the better that we did, the better that more money he made. So it ended up being a pretty, despite all the hairiness of it, it ended up being a pretty good win win for all parties involved.

[00:21:36] Ronald Skelton: Did he stay? 

[00:21:37] Chandler Reed: Yes. Still here today. And we, we can get into that too, but, yeah, so he's still here today. We did have to let some people go that we had hired because, as I'm sure a lot of small businesses were the victims of, uh, the kind of interest rate spike in 2022 and now the kind of higher, higher for longer, interest rate.

Season that we're in right now, uh, it negatively impacted our business big time, but, like I said, when I told him at the first launch, like, Hey, you're going to be a cornerstone of the, cornerstone of this business going forward. And,if we're absolute worst case, we know, we already know the sink and survive and kind of default only Richard mode, because he'd been doing it for about a year and a half at that point. So worst push comes to shove, it'd be my salary first and then Richard. 

[00:22:22] Ronald Skelton: So you mentioned that um, you know that he was ,going out doing bids and sending them off and either got approved or not,not approved. And there was no real follow up. Did you guys take a deep dive in, say the last 12 or 18 months worth of those bids? Or those proposals and revisit them and like follow up with those? 

[00:22:41] Chandler Reed: Yeah, so a lot of them, and truth be told, you know, a lot of them were at sale or they were dead, they had already used another vendor. But I use that every single outstanding bid that we had, I was like, all right, if we win this great, it's basically gravy.

We didn't have to do any work for this. The seller had already paid for all the kind of costs to get out there, all that stuff. But I use it as a good launching point as to develop, start developing relationships with all these clients. Because then the kind of especially within multifamily, multifamily is commercial real estate but it's kind of a different beast at the same time. It's a little bit funkier. The people that work in there are a little funkier, but I love all of them. They're great people.

[00:23:14] Ronald Skelton: And they all know each other. Like there's, a lot of people don't get that. Like, for real estate investors, we have RIA. It's Real Estate Investment Associations, and we all meet, the apartment owners have their own apartment owners association, and they all meet and we hang out and at least once or twice a month, we'll go learn something together, go out to dinner afterwards.

I was in the real estate world for a long time on the residential side. And, I ended up owning the RIA for a while. There are local real estate investors association in our town. But, the thing is you, there's a community around that. So that's the reason I was asking to, you know, one of the ways you could definitely build rapport on that space is just reaching out to everybody and go, Hey, I'm new to the owner.

How's it going? So, 

[00:23:51] Chandler Reed: Exactly. Oh yeah. We did a bunch of that. So in our world, that's National Apartment Association, and then they have kind of the sub chapter. So barrier apartment association. So in those first few weeks, I was going to the, any event that they had. I don't care how silly it seemed or how cool it seemed.

I was there. I was getting my face out there, passing out business cards. Letting them know, Hey, you remember Onyx Energy, we're now Get Green NOI. So same great service. We're just breeding some new life back into it. But with those stale bids, I would just use it as kind of, the point I was getting to was, this is a really strictly relationship driven business.

Once you got a client, you got to do everything you can to make sure that they're taken care of. Because not only one, are they going to send you a bunch more business down the road with, these institutional people. Like our biggest client, for example, is Graystar and they manage like 750, 000 units.

They're like by far in leaps and bounds, the top dog in the space. And they all talk to each other too. Like we've won so many projects because we've done a great job for guy A, and he tells girl B, Hey, just use get green to improve the lighting at one of my communities. They did a great job. It was seamless. I highly recommend you and we just get inbound emails like that. So, relationships are everything in this world. 

[00:24:59] Ronald Skelton: A lot of people don't get this either. Lighting is big at, uh, on real estate. Even in sometimes in residential, depending on where you're at.A security light over a parking area, yeah, on a residential thing, will make the difference of whether or not your cars get broken into at night in the right neighborhoods.

Right.We use them out in the country cause I, you know, I always live rural. We have security lights that come on cause it's pitch black. There's no light whatsoever. If you don't have one going on, I kind of liked the pitch black. When we moved out in the country in Oklahoma, I made a, I put a switch on ours, which we could turn ours off.

They don't normally turn off their normally dust, dusted on type of thing. But, uh, a lot of people don't get that. In an apartment complex, you could actually turn an apartment complex around if it's, be starting to fall into C class. You could turn it around a little bit from just having better lighting outside, having better security. People feel safer going to and from their cars or less vandalism.

So you have less spray paint on the walls, right? Putting a light over the dumpster. So just different weird things that you would think, wouldn't think that, people think they can get away with things when there's no light in a particular area. 

[00:26:00] Chandler Reed: Yep, a hundred percent. So yeah, that's a big,you know. Typically we're going in and replacing lights, but yeah, we've done a bunch where we're coming in and adding it. So that's our same, investor same thesis. 

[00:26:11] Ronald Skelton: So I like that. I like the business. So I like the idea, but i'm a big fan of putting something in every business, like how can I make some recurring revenue off of it, right?

I think so, how do I, do you guys have a maintenance contract or something you guys can add to it? Even if it's a 10 or 20% bump?

[00:26:27] Chandler Reed: Yeah, so that is something that I've been, it's been almost been the bane of my existence since we acquired it. I'm trying to figure it out. So candidly, I think if we had our own in house labor, we could do something like that, especially here locally.

But, if it's kind of hard for us to guarantee that we're going to maintain your lights if we just did a retrofit out in Washington, Seattle. We're here in Tampa, you know, there's something, if we can get our subs on board and we can get like, Hey, a predetermined price of like, Hey, every time a light goes out here, you promise us it's only going to be 15 bucks an hour for one of your guys to go out there and fix it.

That's something that is certainly on our horizon for us. Another thing that we've explored too, it's not like a truly like in perpetuity recurring revenue, but, especially on some of the higher ROI projects where there's no LED lights existing. Doing sort of like a shared savings program, but again, then we'd have to front some of that projects on our balance sheet, the upfront cost. Which we're just kind of too small to do right now.

[00:27:24] Ronald Skelton: I get it because I kind of got burned out on the whole thing. I ended up owner financing off all my properties because I didn't want to deal with a lot of it. But in order to maintain just a few dozen properties, we usually would, a minimum of three. Uh, so if we needed a handyman, we would go out and find three different handyman services, not even three, three handyman.

Cause some people had two or three people working for them. Cause if I called you and I needed something done, I needed it done. And even like lawn care. So a lot of our properties, if they were in areas that, were kind of lower income, we bumped the rent up a little bit and we'd like, look, you don't take care of the lawn.

You don't take care of the maintenance. We'll come out, we clean the gutters every quarter. We mow the lawn every week. Your rent's a little bit higher, but you know, like, well, I want to do it myself. I think, okay, then you pay the fine from the city because in the fines of Tulsa start off at $500, for not mowing your lawn.

So if your grass gets 12 inches tall and they pick up a stick, you don't know anything until the city sends you a $500 mowing bill, right? Cause they post the door and they don't the, the renter doesn't tell us. So I got sick of that enough. So it's like, look in this area, we're going to take care of your lawn, but that we, and the lawn guy was my, one of my relatives, my cousin owned a lawn service, right?

So, but if he couldn't show up, I had two more to call. I knew who I could call because that lawn got mowed since some time of the year. Sometimes like, definitely weekly during the spring and the summer. But as soon as it started dying off, somebody went by and, drove by the neighborhood and check that lawn at least out every week.

So I think the same thing would have to happen for you. It's not just finding one guy, or one sub, you have to have two or three that you can call on because something breaks out, those guys expect that you've got a service contract and expect it to be fixed. You know, immediately.

So in your local market, I don't know how you would solve that, but I love that idea. I love the idea of how do you get recurring revenue off of every business. There's gotta be, if you're a SaaS, premium support, if you're a, like, you know, what do you guys, could offer. 

[00:29:10] Chandler Reed: Yeah, so I think like what it might end up shaking out and this is something we'd probably, and I knew how to do this in a prior work life. But a lot of times there's some, it's in the same bucket.

It's not actually prod like doing the projects, but there's some like green certifications that, you have to continually upload your utility bills to remain compliant and stuff like that. That's something that fits kind of under our umbrella that I think would make a lot of sense. And then the other thing we've been kind of floating around too, but again, we probably have to front some of the project costs in our balance sheet.

It was on the EV charging station side doing kind of like, Hey, maybe we'll split the cost with you to get the station installed at your community. And then we split the revenue 50 50 in perpetuity. 

[00:29:51] Ronald Skelton: I know a company that my wife used to work for in Tulsa that had all, they put those in all over the place.

I think it was, I think it was called Francis electronics or something like that. But, uh, they installed charging stations. That's what they did. And their revenue model was they would, they pay for the install and the equipment and the landowner would get a portion of,the proceeds from the charging, the rental.

But I looked at his business model and, luckily for, I'm not going to pick on the guy, but luckily for him, he's, man, his family's got money as well money. Because the pro the road, the roadmap to be a truly profitable is very long term. Recovered to recoup the cost of putting that equipment there.

Cause the equipment was outrageous. Maybe it's still is. You have a licensed electrician install something that can, charge all the different vehicles, like superchargers and stuff. So, so you're currently installing those two?

[00:30:41] Chandler Reed: Yes. Yeah. That was a the third kind of leg of the stool right now. The second one was the water efficiency stuff, which that was pretty easy.

Just replacing toilets and water faucets and shower heads. But yeah, the EV charging stations are, um, they've been picking up steam this year. 

[00:30:57] Ronald Skelton: So there's a company here in California, that I'm not supposed to know is for sale, but I know, because I know one of their employees. I won't call out their name, but they do power management.

So they put the, they basically swap out your power meter. And then the power meter goes through software that they can see, and they can give you like reports and stuff. and the power company can, drive by and do the bill, you know, meter reading and stuff like that automatically because it's so it's the wireless meters, but this is a third party company.

They do it for everything like military installations and all that other stuff to where maybe the entire apartment complex, it's one bill, but you might be able to meter each individual building, with these remote media and say, Hey, you got a problem in this building. I'll give you a good example why a business owner wants something like that.

We were living in an apartment here in California and a landlord came by one day and he's like, Hey, can I come into your, knocking on all the doors. And he knocked on our door and say, Hey, can I come in into your apartment? And I was like, Oh, sure. I don't know why. And he says, I think we've got a plumbing leak.

Our water bill for the apartment complex is through the roof right now. And I was like, I can tell you why. And he's like, well, I said, uh, it's like, you don't go knock on the door upstairs. See the aluminum foil over the windows? I said, yeah, you, you do free water here basically. And they're, they're growing in there.

I can smell it on a hot summer day. I just don't want to be the rat and call the cops with the, you know, this was before it was legal here. And, I was like, they're growing in there and they're using your free water. 

And they're, they've got a hydroponic system in there. Same thing with electric, you know,they had grow lights, right. And now they're paying their own electric bill. Cause we were individually metered on that one. But if you're in a big place, where it's like some, it depends on the unit.

Most units I think are still, if they do the combined water bill, they still pay the individual, individual electric. But, yeah, that would be something you could do too, is like, what other services are there? What else can I monitor that would be, you could alert the, there's all kinds of sensors and wireless things these days.

What could you do to alert somebody they have a leak, right? You could do a flow meter on the main pipe going into each one of the units when, each one of the buildings and be able to tell a landlord, there's something wrong with this because at 3am you shouldn't have water flowing, consistently every night at, you know, nonstop. You've got to leak somewhere, right? 

[00:33:08] Chandler Reed: Exactly. So it's certainly something I've got my mind on and I'm the same way as you. Like my biggest thing with this was like, all right, once we get the projects back up and going, like, how can we get some recurring piece on this? And it's just a matter of figuring out something that's a win win for our clients and I.

[00:33:22] Ronald Skelton: Was a, the goal and the vision that I always have for companies, how do you get the recurring revenue to cover all the expenses? And then all your, all your sales are now, they're icing on the cake, right?

Your normal, your employee costs, your marketing costs, your, your salary. Your goal is to get all that covered by something that's recurring. Right? That, they just, you get every month and you know, what's happening. Is the business cyclical, cyclical? Like are there times of the year it's just hard to get anything done? 

[00:33:48] Chandler Reed: Yeah, so I mean it's the times of the year that our clients are on vacation. So summer and then this week was impossible. Then we got about a week and a half two weeks or so in december where hey, we might get something signed up. And then, other than that it's see you in 2024. 

[00:34:04] Ronald Skelton: Yeah. So it's same thing with this podcast business. So you're the only show I have scheduled between now and Christmas because it's historically hard,to get somebody scheduled, during this time of the year, so I pre record a lot of shows.

So that's one of the things that, we talked about the quality of earnings report. A lot of people look at balance statements and income statements, trailing 12 months. One of the things I want to know from every business is, from the accountant to whoever I'm having look at things is, is the business cyclical?

What are the cycles, right? What are the, if you buy a business, a product based business in January, based off of the last trailing 12 months, right? And the owner takes a lot of the cash out of it and doesn't leave you a cash. And you don't know that 75 percent of that business's income comes between, Black Friday and the first of the year.

Now we're going to, how are you going to pay those employees until thanks, between now and Thanksgiving, right? There's just things you, people overlook and don't think that almost all businesses, um, have some type of cycle.

There's slow points and high points. But understanding when those are and how you manage them, it'd be critical. So what is the status now? You guys are, uh, growing. You have back to multiple employees. Are you still pulling 10 jobs? What's the timeline? Before I do that, it's been how long since the acquirers?

When did you acquire it? 

[00:35:20] Chandler Reed: We acquired it April 30th, 2021. So about two years now. 

[00:35:24] Ronald Skelton: Okay. So you've been in a couple of years where, what, how far have you made it? How many jobs do you have? How many hats you wearing currently? 

[00:35:31] Chandler Reed: Yes. So I'll just take you back. So 2021, it was just still me and Richard, the one employee that transition. January 2022, uh, we had done,we got in the business, like just pretty much like it was about if you annualized it, our kind of stub month. I guess there's a couple of sub months in 2021.

So the trailing 12, when we bought it was 900 K. If you annualize our 2021, it was about 1. 1 million bucks. So a little bit of growth. But we were getting stretched and the commercial real estate or the multifamily transaction market was out of COVID and starting to heat back up. Interest rates are basically zero.

So people are buying apartments left and right. Which for us, especially in the value add department buying worlds, all of our projects are kind of on their docket. When they buy an apartment, they want to fix it up. Fix it, fix up the lights. They want to put it in the EV stations. They wanna do the low flow plumbing projects 'cause they kind of flush with cash and cash was cheap back then. 

So 2022 starts, we're ripping, we make our first three hires, uh, in 2022. I thought I was a genius. Business is going great. We hired a couple VAs too. We're really systematizing all of our processes. I'm like, okay, great. So in 2022 we end up doing 3 million bucks. Top line. Almost have, you know, a good chunk of that seller note paid off. Which by the, the minimum payment, so I can dive into a little bit that. 

So the earn out, I talked about it was basically a minimum of either like a minimum payment, or a percentage of our gross profit. So the better we did faster seller got paid back. So it kind of incentivized him to introduce us to all of his old clients. Tell us how he used to do stuff, all that stuff.

So things are ripping. And then fast forward, luckily, we had projects signed up past September 2022. But September 2022, interest rates absolutely gets jacked up. That kind of froze all of the transactions in multifamily, which is a good source of our revenue and why we did so well on 2022. And also, for the, for 2023, the budgets were basically slashed because all the dollars that you were planning on improving your community with, all of a sudden are now going to pay off your interest expenses. Which have like doubled in some cases, seemingly overnight.

So 2022 is great. We made those three hires and we had two VAs. So the total head count at that time was seven people, between our offshore and onshore team. Then flash forward to March, like the first or second week of March, 2023, and we had signed 10 K of contracts. So we ramped up our overhead. Thinking, we're gonna go from 3 million to 6 million.

We're just gonna double just like that to, oh gosh, we're in trouble here. So unfortunately I had to let go of the three, in-office hires that we had made, in 2022. We had to let go of one of the VAs, which left us me, Richard, and one of our VAs, who's like a operations manager, coordinator. She helps me a lot with our kind of internal day to day stuff.

And so, yeah, so that was a scary, talking about cyclicality. Yeah, not only, or season, not only just season, but we're very cyclical too, as a commercial real estate market does well. We do well, and vice versa. 

[00:38:40] Ronald Skelton: So the interest rates, was that because, commercial loans are all,variable? Like a variable interest rate or is that because? Yeah. 

[00:38:48] Chandler Reed: Or at least in the multifamily world, the kind of the typical structure for this, like on a, brand new build, like sexy class A type products. Someone's going to come in and buy it with a fixed loan, they're going to, they're a longterm holder. But with the kind of the value ad loans, they're all floating to believe they're shorter term.

Cause they're going to be doing a bunch of CapEx improvements to it. And then once it's stabilized after they finished the CapEx and the rents have been jacked up, then they go take perm on it. So all of our, 

[00:39:16] Ronald Skelton: So they got hit instantly and hard? 

[00:39:19] Chandler Reed: Very. Yeah. Very hard. So it turned off basically overnight. So to paint a picture, one of our biggest clients, I won't name them, but they had bought, they bought 40 apartments in 2022. And after, from september 2022 to where we stand today, they, one was a six, six community portfolio. They basically bought an eight apartments. Going from 40 last year to, now, basically eight.

So a big drop off, so that impacted us very heavily. cause it basically shut off a good amount, like 50 percent or about a third of our revenue, overnight. And then also being, to your point, project based. If we don't have projects getting closed,we're not eating. So we basically had to get to a default alive mode, basically almost to the first iteration of the company that we bought it.

And, button down and get ready for battle. But maybe it was the business guy, obviously, those are the first three or four, including the one VA. Four people I've ever hired and having them let them go, less than a year later was certainly a rollercoaster. I kinda got, I was drinking from a fire hose there, but, I think whether, whatever you want to call it, the business gods were listening to me and rewarding me for my, my sacrifice.

But come April of 2023, after doing 10 K, basically, in that first quarter. April, we signed up 800 K worth of projects. I think everyone had kind of realized like, all right, rates are here to stay higher for longer. We want to make these improvements. We know what our interest expenses are going to be now. Let's just get back to it is, and everything's just going to be more expensive. 

[00:40:55] Ronald Skelton: I thought it was going to be shock factor, right? The shock factor is, Oh my God, what are we going to do? And now you got a little extra, it kind of helps you in some sense, because now they need to save money.

They got to make up, either through rent increases or through other methods, cutting their electric bills and other methods. They kind of got to make up for the fact that they're more money's going out than it used to go out. So, 

[00:41:15] Chandler Reed: Exactly. Yeah. So once they kind of understood, like everyone was just playing their money super close to their chest.

And so once they kind of realized like, okay, this is a business environment that we're operating in. All right, let's start going to spend money again. So coincidentally, that just happened to be April for us, which was good. It helped us kind of steer the ship back, but kind of, the summer has, April is a big bump, like I said, summer is slow for us because people are out of the office. And then in September, things started picking back up again. October was another gangbusters month.

November, December on track to be pretty solid as well. But kind of as we sit today, we have 1. 7 million bucks of contracts signed. Which, a lot of which are still ongoing right now. And in between that timeframe, we're able to pay off our seller note, which is good too. So now we're officially debt free.

So, we've had some kind of the highest of highs and the lowest of lows in 2023, but we're still here to take it. 

[00:42:12] Ronald Skelton: Yeah. Cool. So, what does it look like now? I mean, I get to, you're adding products or the market starting to clean up. What's the vision? Is this a long term hold? You're going to become a hold co? Or you guys growing this for the next three or four years and plan to exit? 

Or what's the, like the ETA is typically buy it, grow it, sell it. That's what they teach in the college. Like it's a five year cycle or max a 10 year cycle. What is your game plan? 

[00:42:38] Chandler Reed: Yeah. So for me now I've gotten, just one, I've learned the business super well. I feel like I have a really good grasp on it now. Whereas in the previous kind of, uh, first couple of months, a year, year and a half or so after the business. I felt like we were kind of, building the airplane while we're flying it. 

Now I kind of got a good grip on this. So I see the levers that I need to pull. And so now kind of like our go forward, we think everything's stabilized. If anything, it might get better once some distressed sellers start selling or rates come back down to a little bit normalcy and people start buying apartments again.

So my goal is now for us to basically, take myself fully out of it. We're going to go hire, going back to the relationship thing. I think it was not a mistake, but a lesson that we learned, was we hired kind of a more inbound sales rep to kind of help me with the projects that we were already getting. Versus hiring someone that could do both and go get new clients.

So one of the first things we're going to do is hire a new kind of, Vice President level on the sales side that knows all the clients we're trying to get in the door and it's just a text, call or email away. LinkedIn message away from starting to get some deal flow from them. And once we start getting some more projects in door, it's basically my, my, my goal with the business is, we get operations ticked and tied.

We grow revenue, we break operations, we fix operations, then we grow revenue again, and that's just kind of a continual cycle. So, we're thinking of, now we kind of have our vision, we have these three projects, um, trying to add recurring revenue, to your point. That's probably going to be a special project that I work on, but as far as like the blocking and tackling of doing the projects in our core competencies, as I said today.

I know exactly the people that we need to get in and the levels that we need to hit. And so my goal is to hire people to kind of get myself out of the day to day of it and obviously provide guidance, still be the leader of the company, but kind of get that down from at some points where fricking 80 to a hundred hour weeks down to, Hey, I'm sitting in on the weekly meetings.

I'm doing the one on ones with the key kind of employees and director. Kind of direct reports, and letting them do their thing. 

[00:44:40] Ronald Skelton: Awesome. Awesome. What is the, do you mind sharing what your profit margin is on this type of transaction? I mean, what is your goal? What is it kind of, what did it start off with and what are you kind of working towards?

[00:44:52] Chandler Reed: Yeah. So our goal, we want to hit, our gross margins are about 35%. Oh, wow. Yeah. Yeah. And then our kind of net margins or net income margin is right around, it can vary depending on how many projects we're doing at one time and where the projects are located, because, the best thing in the world, it's like we get six different clients that all have a project in Atlanta, Georgia or something like that. And then we can kind of get some shared services and logistics and really kind of bump that gross margin up.

But our fixed costs are kind of what they are. And so the, it's about 15% right now, which I'd like to see it more, but kind of the nature of the business. There's a million other people that are doing the stuff that we do. It's kind of a commoditized business that have kind of compressed those margins down.

But, um, in my mind, my goal is to kind of get it back to where it was doing six, 7 million bucks a year in revenue. And around, kind of like a million bucks, I think is my target in EBITDA. And then, whether if I'm only working five hours a week in it and it's doing a million bucks and I'm just, getting that check every quarter.

I'm completely fine with that. If someone comes to me and says, Hey, here's, here's our offer and it's something that I like. Hey, let's, you know, let's slip out of it, but I don't think we're going to be, pursuing any acquisitions or trying to grow anything super, super crazy because, I've learned in the past. Like I said, I was kind of unfamiliar with ETA and I kind of bought the hairiest type of business you can buy and kind of the business, the, the worst type not to use worse.

Cause you know, still make money, but, the hardest type of business model you can buy project based construction. So, I'm going to take all my lessons and knowledge from that and probably eventually go and, apply it to a business that's a lot easier.

[00:46:33] Ronald Skelton: You bought project based construction that without recurring revenue. And in a very competitive market where you don't have a competitive edge, you don't have a moat, right? If there's nothing, that's one thing I would say, if you could do two things, find out a way to carve out a section of the market, that's for you. Like there's a moat, you do something so much better than anybody else that you're known for X.

Cause that's tough. That's like, kind of what I look for inside of any business I look for is, maybe it's intellectual property. Most of the time, it's just, they've carved off a piece of market that they're better at than just anybody else. They made a name for themselves or something. Otherwise you're always going to be a commodity, right?

You're going to be, everything goes to the lowest bidder. 

[00:47:13] Chandler Reed: Exactly. Yep. So I've, I think in my mind, at least I've taken on one of the toughest ETA routes that you can go down. Being at one to turn around and then two the construction project based business. So I've cut my teeth doing that. And then I'll probably look to, um, for something that's a little bit easier. A good like equation or a good metric.

I know you're talking about your KPIs across your various businesses. One I've been trying to focus on now is I'm kind of looking down the road and seeing like, all right, what's kind of next for me is, uh, my return on headache. Yeah, you can make a ton of money, but if you're, you can't sleep at night, you're getting migraines, you know, you're losing.

[00:47:50] Ronald Skelton: I will venture to suggest you shouldn't use the word easier. I don't think that they're like, there's no such thing as get rich quick. There's no such thing as an easy business. There's different ones. And there's ones that, there are ones that are more skilled towards your management style. More, I mean, if you were a, natural born salesman and all you did is you eat and sleep, sales, you used to, you cut your teeth, selling cut no, CutCo knives, door to door or rainbow vacs. Owning this business wouldn't bother you a bit because you live and sleep being the, being the salesman. 

Salesman are attracted to you because you know that world. to be honest, that's who I'd recor, recruit.

That said, not everybody is that right. And, kind of what you need to be, if you're going to go into project based construction, man, you better be a rockstar salesman. You better be able to sell CutCo knives to housewives that, you know, whose husband better never find out she spent, a couple of grand on some knives.

So that said, none of them were easy. I actually was working on a book for a long time for the real estate world called Get Rich Quick, My Ass. But I was just going to cover all the, you know, the falsehoods that are out there about, this program or this program, even ETA, there's this isn't get rich quick either.

There's a lot of hard work. Yeah, you own the business. So you'll probably make more money. Be honest in the first three years, you probably got paid more in your previous job than you paid yourself in the first two years of this business. 

I'm reading it, the, I've heard it about six or seven times. I just evaluated a business that said they're using it. Uh, Profit First. Have you read the book? I've heard of it though. 

Yeah, it's a different model where you basically pay the profit and then you pay your income before you do anything else.

And it makes you get really scrappy on the rest of the stuff. I've heard it four or five different times and I've heard people really doing successful with it.

One of the companies I evaluated recently, they're running it, and I don't think they would have survived if they weren't, I think they would have given up a long time ago. Uh, but they just engineered it to where that's, it works for them. 

The other one if you got two books to read over the holidays while you're slow. The other one is Who Not How, um by Dan Sullivan. 

[00:49:48] Chandler Reed: Yeah. I've just added that one to the list too. 

[00:49:50] Ronald Skelton: Cool. Two books for you. I look forward to hearing how the story progresses. Is there anything,a shout out? You, is there anything our audience can do for you? Like they own a, I don't know, like, hey, if you know somebody owns an apartment complex, I'm, give me a call or what, how do people reach you?

What do you want them to reach you for? Uh, this is your chance to pitch something guy. 

[00:50:08] Chandler Reed: Gotcha. Perfect Yeah, so on the Get Green NOI side, yes, if you know a commercial real estate owner, I would say on the industrial side anything over 5, 000 square feet on the apartment side. Anything over probably 100 units or anyone that works for a big institutional property or community manager, feel free to send them my way.

Just give me the contact info. I will get them on the phone as soon as I can, And try to help them out with any one of our couple of projects. And then anyone who's curious about ETA, doing what I did, although I'd recommend probably buying a different business than what I bought, but Hey, there's a right answer for everyone.

But go check out my Twitter. My Twitter is at Chandler Reed SMB. I talk basically all things. Small business, ETA, what I'm learning, what I've learned about ETA to date and any new cool stuff on that horizon. And then I know we talked about Sam's kind of bootcamp earlier, but I'm helping him kind of spread the good word on that and try to avoid,some of the pitfalls that we're seeing on Twitter that, to me I thought was common knowledge, but apparently it's not.

I promise you, if you go through the bootcamp, you're going to be well prepared more than, I would say 99 percent of the people in this space that aren't going through the bootcamp. 

[00:51:17] Ronald Skelton: Yeah. I haven't been to his bootcamp yet, but I've followed him on social media. I've interviewed him. I really think it's a, I recommend it if somebody's out there thinking about doing it. I don't know when the next one's coming up.

But, uh, follow you on Twitter. I'm sure you'll post about it. Follow Sam on, on Twitter. He talks about it when he has them going on and, uh, definitely, there's two ways to do this. You can buy, you know, a hundred dollars worth of books and try to do it on your own and it's very painful. Or you can go out and team up with people in the community, find a mentor, find one of the guys teaching it and work with people in that community and get things done.

The latter is you chose the easier of half of those two paths, right? If you didn't have Sam to lean back on and you didn't have your business partner to lean back on that have been in business for a long time, this last rough spell could have been really disastrous, right? it's the confidence somebody has that have been through it a couple of different times.

Like, hey, this is going to be okay. Let's just keep chugging along, right? If you're going through hell, keep going. They may not notice you're there. Like, it takes somebody that's been through those, you know, those hard times to go, look, we're just going to keep chugging along.

We're going to do X, Y, and Z. This too shall pass. So, um, thank you for being here today. I want people to reach out to you and connect with you. And we'll call that a show. 

[00:52:30] Chandler Reed: Awesome. Thank you so much, Ronald. I appreciate it. Thanks for listening to everyone. 

[00:52:33] Ronald Skelton: Awesome. Hang out for just a second.