Growing EBITDA from $750k to $2m in Under 3 Years | John Hubbard Interview

Deal facts

purchase price

$2.5m

multiple

~3.4x EBITDA at acquisition (paid $2.5m on $741k EBITDA); guest says current business (~$2m EBITDA) could command a 5x multiple, implying a potential ~$10m exit

sde ebitda

$741k EBITDA at acquisition (2021); grew to just under $2m EBITDA by 2023

revenue

$5.5m at acquisition (35 employees); ~$5.5-6m in 2023 with 28-30 employees; projects reaching $12-13m within a couple years

financing structure

Search fund model with investor Sam Rosati of Pursuing Capital; stock purchase (not asset purchase) which let sellers avoid capital gains tax in exchange for roughly a 25% discount on price; guest personally invested $0 of his own money and retained 70% equity via cap table

notes

Deal sourced via searchfunder.com; guest found investor Sam Rosati through a cold post, closed in 60 days after deal fell into their lap after ~90 days of searching. Investors have since been fully paid back. Guest is also a 10% investor in an HVAC roll-up company in Tennessee.

Why this business

John Hubbard acquired Express (now Express Custom Trailers), a trailer manufacturer in the Clearwater/St. Petersburg, FL area, in 2021 via a search fund backed by investor Sam Rosati. He didn't target the trailer industry specifically for personal passion reasons; the deal came together after he posted on searchfunder.com seeking capital, connected with Sam, and the opportunity fell into their lap. He credits his background (13 years military, 2 years as a cop, running a window/door replacement business, building houses) as giving him comfort managing a blue-collar workforce rather than any specific affinity for trailers.

What's working

• Strategic pivot from selling to ~15 trailer dealers (averaging -6% margin per trailer) to focusing entirely on custom commercial trailers (30-35%+ margins), which he executed by firing all dealers in person within his first year
• Custom/commercial trailers create sticky customer relationships since clients invest months in R&D/design with Express and won't easily switch manufacturers over small price increases
• Low customer concentration risk in practice: when their single largest customer (25% of revenue) dropped all orders for 2023, word-of-mouth referrals and a large new account (Greenworks Tools) backfilled the lost volume within the year, partly because industry lead times make customers easy to retain/replace
• Consolidating two separate facilities (previously requiring driving half-finished trailer frames across town through traffic) into one new 40,000 sq ft contiguous facility, which should add capacity (~20 more trailers/year) and modestly improve margins via reduced duplicate overhead (utilities, security, insurance)
• Plans to add a second shift rather than build a much larger facility outside the city, giving flexible capacity that can scale up/down with customer demand
• EBITDA grew from $741k to nearly $2m in under 3 years while revenue stayed roughly flat (~$5.5-6m), driven almost entirely by margin improvement, not revenue growth
• Diversifying personal risk by becoming a passive minority (10%) investor in other operators' deals, including an HVAC roll-up in Tennessee

What's hard

• Lost his single largest customer (25% of revenue, 150 units) going into 2023 when they simply decided not to order trailers that year
• Regrets the rebrand to 'Express Custom Trailers' -- in hindsight wishes he'd named it 'Express Commercial Trailers' since 'commercial' better conveys what they actually do (custom is misleading to affluent hobbyists wanting one-off trailers)
• Believes the niche commercial-custom strategy caps how big the business can get (shipping/logistics limits scale -- trailers can only be delivered one at a time by pickup truck, unlike mass-market dealer trailers)
• Grappling with the psychological shift from 'buyer mode' to 'seller mode' only ~2.5 years in, and the difficult decision of whether to sell for a large payout versus hire an absentee CEO and keep compounding cash flow
• Struggles to identify who could even run the business as a hired CEO given how niche the company is (a dealer-network CEO or a mass-manufacturer CEO wouldn't fit the custom-commercial model)
• Emphasizes the importance of paying off all debt/seller notes before making a sell/hold decision, since an outstanding loan clouds judgment
• Learned to set firm boundaries on unsolicited outreach from aspiring searchers after his first episode -- was spending an hour a day replying to generic requests for time before he started declining anything without specific, concise questions

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