Dan Drake·October 31, 2024

Buying a Business to Build a Life | Dan Drake Interview

Dan Drake, a CPA and FP&A professional from Seattle with 10+ years in finance supporting blue-collar industries, bought Industrial Applied Electric (IAE) — a nearly 50-year-old MRO distributor specializing in electrical components for heavy machinery — in Bend, Oregon, in 2024. The deal was driven by a lifestyle goal: he and his wife had long planned to settle in Bend to start a family. The business had a listed SDE of only ~$140k, too small on its own, but bundling in the owner-occupied real estate (which represented ~80% of the ~$2.05m total purchase price) added a $90k rent addback and enabled 25-year amortization with seller financing at 5%, making the numbers work. Mid-diligence, Dan discovered a 20% YTD revenue decline and renegotiated a ramp-up payment structure — starting at $6,600/month and escalating to $11,500 by year five — to protect early-year cash flow. The business's core value proposition is an unmatched regional inventory of hard-to-find electrical components for mining, logging, and construction equipment, which customers confirmed has no regional competitor. Two months in, Dan is focused on digitizing inventory, modernizing invoicing, and deepening relationships with his top 15 customers before expanding regionally, with a five-year goal of doubling 2023 sales.

Deal facts

purchase price: ~$2.05m (business + real estate combined)
sde ebitda: SDE ~$140k business only; ~$230k when $90k owner-paid rent addback included
financing structure: 100% seller financing; 10% down, 5% interest rate, 25-year amortization, 5-year balloon; no SBA loan used despite initial intent
notes: Real estate represented ~80% of total purchase price. Seller countered buyer's SBA offer with seller financing at 5% vs ~7% SBA rate plus ~$100k price increase on real estate (to ~$2.05m), resulting in lower monthly debt service. Debt service restructured mid-diligence: year 1 starting at $6,600/month ramping to $11,500/month by year 5 due to 20% YTD revenue decline discovered. Business founded 1975, turns 50 in 2025. Business name: Industrial Applied Electric (IAE), Bend, OR.

Why this business

Dan and his wife had long wanted to settle in Bend, Oregon, and used ETA as the vehicle to make that move. He sought something in the industrial or construction supply chain, knowing that sector was a strength of the Bend region. The real estate bundled into the deal changed the math enough to make the small SDE workable, and the business's 50-year reputation and critical niche — wide-range electrical components for heavy machinery downtime — gave him conviction.

What's working

Highly differentiated niche: widest inventory of electrical components (starters, alternators) for heavy machinery in the region — customers confirm no competitor offers this
Strong word-of-mouth reputation built over nearly 50 years; customer validation confirmed organically (airport encounter with branded-shirt customer who praised the business unprompted)
Tenured, expert team of 3 (10+ years each) provided smooth transition and deep institutional knowledge
Met employees before closing, enabling early rapport-building and a head start on day-one activities
Seller financing at 5% with restructured ramp-up payments gave significant early-year cash flow cushion
Real estate as collateral provides safety net and appreciation upside
Wife retained remote finance job, providing income backstop and reducing pressure to squeeze near-term performance
Small-spend, critical-uptime positioning means customers prioritize them even in downturns

What's hard

Significant revenue decline discovered mid-diligence: down 6% in 2023 vs 2022, then down 20% YTD April 2024 vs 2023, threatening debt service coverage
Key-man risk across all three employees — owner (mechanical genius, irreplaceable knowledge), sales manager (retirement-age, primary customer relationships), warehouse manager (long tenure)
No inventory management or POS system; all invoicing is handwritten triplicate; website is just a warehouse photo — major modernization needed before any growth is possible
Very small deal flow in Bend made the search difficult; had to accept a smaller SDE than originally targeted
Customer concentration: ~100 customers total, many concentrated in construction/mining/logging which can be cyclical
Owner staying only through end of year, after which his deep mechanical knowledge may be permanently lost

Notable quotes

I couldn't meet the owner because he unfortunately fell and had to go to the hospital. But I was in town so I was like okay well let's just do it. It was marketed as Industrial Supply for mining, logging and construction. And here's your SD located in the middle of Bend. I was like, oh that's a good location.

I told the broker: I like this business, it's just not big enough for me to take the risk, move my family down and buy this thing. If we can buy the real estate with it, that's different math.

I got the year-to-date April financials and they were down 20% versus 2023, which was down versus 2022. And immediately I looked at that, said some four-letter words, and started getting into kind of proforma P&L and debt service free cash flow situations.

I ran into somebody at the airport. He's wearing a company branded t-shirt — Person's Crane Service. I said, hey, do you buy from Industrial Applied Electric? And immediately, with no context whatsoever: 'Oh, Houston? Yeah, we love working with this team. They can help us solve all these different downtime issues and electrical issues that nobody else can do out here.'