Matt Drndak·May 30, 2024

3 Years Later, Climbing Out of the J Curve | Matt Drndak Interview

Matt Drndak is a serial small-business buyer who — after a formative early experience buying a Home Vestors real estate franchise at 19, losing nearly everything in the 2006 Florida real estate collapse, then co-founding and operating Sprayer Depot (a B2B e-commerce parts business) for nine years — acquired DHS, a Florida-based B2B e-commerce business selling replacement parts for construction and infrastructure equipment, in early 2021 for approximately $2 million (80% SBA, 10% seller note, 10% equity). The business had roughly $3.5 million in revenue and $500k SDE at acquisition, with seven employees. Matt entered with a deliberate investment budget, implemented an ERP, upgraded the website, and built out a remote team — enduring a deep J-curve in years one and two before revenue approximately doubled and SDE recovered significantly by year three. DHS differentiates through a massive long-tail SEO catalog, high-touch technical customer service helping contractors find the exact correct parts, and proprietary product data now being paired with AI tools to scale content. The business is operated semi-virtually (Matt visits from California every six weeks) with an on-site operations manager. Matt's long-term vision is to 10x revenue organically in the parts-and-ship model before potentially adding local service centers.

Deal facts

purchase price: ~$2m (slightly under $2m after renegotiation)
multiple: 3x SDE plus inventory, or ~4x SDE including inventory
sde ebitda: ~$500k SDE at acquisition
revenue: ~$3.5m at acquisition
financing structure: 80% SBA loan + 10% seller note + 10% equity
notes: Inventory was included in the purchase price at approximately a 4x multiple, or listed separately at a 3x plus inventory structure. 7 employees at acquisition, grown to ~11-12 by year 3. Revenue approximately doubled (~$7m) and SDE recovering toward double by year 3.

Why this business

Matt had prior experience running Sprayer Depot, a B2B e-commerce parts business for chemical sprayers, for roughly nine years. DHS — which sells parts for construction/infrastructure equipment via e-commerce — lined up directly with that experience. He also believed he could grow it faster than something he had less experience with, and he entered with a defined investment budget to implement an ERP system and ramp marketing. He was looking for a covid-resistant, technically complex niche where Amazon had not penetrated.

What's working

Revenue approximately doubled within three years of ownership, with SDE recovering toward nearly double from acquisition levels after a J-curve trough in years one and two.
Implementation of a legitimate ERP system that now collects proprietary customer and product data, enabling AI-assisted content and SEO improvements across a large SKU catalog.
Long-tail SEO strategy: detailed, technical product pages for obscure parts means DHS is sometimes the only result on Google for a given part, driving discovery.
High-touch technical customer service differentiates from Amazon and commodity competitors — helping contractors identify the exact correct parts to keep job sites running, which customers will pay a premium for.
Retaining a long-tenured employee with deep product knowledge who can answer customer questions without looking anything up.
Seller (Dave, a mechanic) remained available post-close as a technical resource and had already built YouTube videos and detailed product content that DHS continues to use.
Business is increasingly semi-virtual: Matt runs it from Southern California, visiting Florida roughly every six weeks, supported by an on-site operations manager.
EOS operating system implemented with a small leadership team, enabling more disciplined planning and scaling.

What's hard

Significant J-curve in years one and two: ERP implementation and other upfront investments consumed all earnings and more, leaving discretionary earnings near zero for the first couple of years.
Managing a large, complex inventory with many SKUs — stale and unsalable inventory is an inherent risk in parts businesses and required careful diligence.
Inventory was not tied to the accounting system at acquisition, requiring estimation and trust-based diligence rather than hard verification.
Translating the prior owner's deep mechanic expertise into scalable processes and training for non-technical customer service reps.
Balancing self-service e-commerce tools (designed for simple DTC transactions) with more complex B2B buying processes that often require back-and-forth communication.
Being geographically distant from the business (California to Florida) required building on-site management infrastructure before Matt could operate remotely with confidence.

Notable quotes

I grew up in Florida, my dad owned a solar contracting small business. I went to Florida State for a year, dropped out and bought a Home Vestors franchise — they're the We Buy Ugly Houses billboards. By the time I was 21 or 22, I, on paper, was a millionaire. Very much on paper though.

The first line of my criteria was 'covid resistant' — I don't even remember what that means anymore at this point but yeah, that was part of it for sure.

If you get a gasket that's slightly the wrong gasket, your machine is just not going to work and your project is still halted. So there's the combination of finding the right part that the customer needs and actually getting that to them as soon as possible.

We're at the point now where we finally have all the right platforms in place and I'm hoping we're at the point where we can legitimately start to scale. Our actual product knowledge, our actual customer feedback data — everyone has the AI tools, but not everyone has the same proprietary data input that we have.