Michael Kelker·September 12, 2024

Control & Family Drivers of a SelfFunded Search | Michael Kelker Interview

Michael Kelker is a mid-career corporate operator (Georgetown MBA, background in aerospace manufacturing at Pratt & Whitney and various GM roles) who in his early 40s self-funded the acquisition of Timberline Pallet, a 40-year-old custom pallet and crate manufacturer in the Quad Cities region of Illinois/Iowa, closing in June 2020 at the height of COVID uncertainty. The deal was sourced off-market via a community banker tip on a company whose prior buyer had backed out; the total price was $2.2m (including working capital), financed via SBA 7(a), a seller note covering an appraisal gap, personal savings (including retirement funds), and equity from his mother and now-CFO Brandon Barons. Timberline's core advantage is its specialization in custom, oversized crating and pallets for agricultural equipment manufacturers — especially John Deere — which commands better margins and deeply sticky, decades-long customer relationships versus the commoditized standard pallet market. The most dramatic chapter of Kelker's tenure was the 2021-2022 lumber price spike, in which his primary input cost tripled to quadrupled while demand surged; he survived by aggressively expanding his SBA credit line and working through a $1.5m committed inventory position with his banker-turned-CFO guiding the bank relationship. Revenue has roughly doubled to a ~$5m run rate over four years, with Kelker now navigating a cyclical downturn tied to John Deere contractions and broader agricultural weakness; he is implementing EOS, building a bilingual leadership team, and exploring adjacent acquisitions through his holding company GBR Riverdale — named after his three daughters — with a long-term legacy-building rather than exit-driven mindset.

Deal facts

purchase price: $2.2m total ($1.8m for the business, ~$400k working capital adjustment)
sde ebitda: SDE ~$500k
revenue: $2.5m at time of purchase; ~$5m run rate at time of interview
financing structure: SBA 7(a) loan + seller note (covering ~$100-150k valuation gap) + equity from personal savings, mother (search fund investor), and CFO/partner Brandon Barons; ~10% equity down (~$220k)
notes: Closed June 5, 2020 during COVID. Appraisal came in ~$100-150k below negotiated price; gap covered via seller note structured as working capital adjustment. SBA line of credit expanded to $1m at peak during lumber price spike; additional $500k bridge loan taken and fully repaid within ~12 months. Drew from personal retirement savings to complete capital stack.

Why this business

Kelker was specifically looking for a manufacturing business because of a lifelong affinity for tangible goods rooted in his family's history (grandfather built diners through Swingle Manufacturing). He was not initially interested in pallets — he had been looking for machine shops — but a banker tip revealed Timberline as a stable, 40-year-old business with blue-chip customers, strong margins, and a motivated seller whose prior deal had fallen through. The business was 20 miles from home, which satisfied his core requirement not to relocate his family.

What's working

Custom and specialty pallet/crate manufacturing for manufacturers (especially agricultural equipment like John Deere harvesters) rather than commoditized standard pallets, enabling stronger margins and stickier customer relationships
Long-standing customer relationships spanning decades; customers treat Timberline as the last thing they think about — high reliability and service quality drive retention
Revenue roughly doubled from $2.5m to ~$5m run rate over four years, with margin percentages largely preserved despite major reinvestment
CFO/partner Brandon Barons (former community banker) proved critical during the lumber price crisis, translating financials to the bank and securing expanded credit lines
Implementation of EOS (Entrepreneurial Operating System) with bilingual (English/Spanish) rollout, improving team clarity, culture, and leadership accountability
Niche focus on oversized and specialty crating (e.g., 300-inch/25-foot crates for augers) that most competitors avoid, providing pricing power
Regional geography naturally limits competition; pallet economics favor local production within ~100 miles

What's hard

Lumber price crisis of 2021-2022: wood costs (50-70% of product cost) rose 3-4x while demand surged, requiring panic buying and over-commitment of inventory — at peak, committed lumber equaled ~$1.5m against a $1.8m business valuation
Customer concentration risk: heavy reliance on John Deere and its supply chain, which is now contracting due to agricultural commodity price weakness and John Deere layoffs
Industry demand softening post-COVID: from an $8m revenue year in 2022 (partly inflated by elevated lumber pass-through) back to a ~$5m run rate, with the broader pallet industry in a cyclical downturn
Learning the business from scratch with no prior industry knowledge — described as 'assembly without a manual'; required humility to learn from long-tenured employees and customers
Closing during peak COVID uncertainty (spring/summer 2020) required a gut-check decision to proceed despite macroeconomic unknown
Getting new customers in a mature, sticky market means effectively stealing from competitors — organic customer growth is difficult

Notable quotes

For me it was very much about control and that's one thing that when you're working with a private equity company they are always going to retain the control because they're the one bringing the majority of the money. I didn't want pressure to sell. I wanted control and I was willing to get a much smaller company in order to make that happen.

I'm not a good employee anymore and all I'm doing is changing the nature of being an employee if I'm out of control.

We basically have as much work-in-progress and inventory as the value of the company in this time period and we went to the bank and I said look I might have messed up but I'm doing it because I've got product and the order book is full.

I own the company but I know nothing. You've been here for 12 years, you know everything — help me.