Christian Bateson·April 11, 2024

Getting Unstuck by Buying a Business | Christian Bateson Interview

Christian Bateson spent a decade as a Wall Street derivatives salesman after being laid off from Bear Stearns in the 2008 crisis, growing increasingly miserable and struggling with alcohol before discovering BizBuySell and realizing small businesses traded at a fraction of the leverage multiples he'd seen in distressed debt. In 2018 he bought Resolute, a 20-year-old Atlanta-based new-construction cleanup company, for roughly $1.5m (about 3x SDE) using an SBA loan with about 25-30% equity down, deliberately switching from an asset to a stock deal to preserve legacy GC contracts. Leaning on his finance background for underwriting and negotiation leverage, and delegating field operations to a manager while he focused on sales and bidding, he grew the business from $2.5m to a projected ~$7.5m in revenue by 2024, powered by a major data-center contract, despite a 30% Covid-era revenue dip. A second acquisition in 2020 -- a residential/janitorial cleaning business bought against multiple red flags he knowingly ignored -- has stagnated and lost a third of its revenue post-Covid, illustrating his broader theme that deal quality is never fully knowable in advance and that a founder-dependent business without a real manager is especially risky. The episode is as much about psychology and self-management (delegation, comfort with discomfort, autonomy for employees, finance skills as an edge) as about deal mechanics.

Deal facts

purchase price: $1.5m (business) + $500k AR = ~$2m total; stock purchase
multiple: 3x SDE (plus one turn for AR, negotiated down so AR effectively came with the business)
sde ebitda: SDE ~$500k at time of purchase (2018)
revenue: ~$2.5m in 2018 (year of purchase); grew to $3.75m in 2023 and projected ~$7.5m in 2024
financing structure: 10-year SBA loan (prime + 2.5%, ~8% at the time) of $1.24m; ~$411k equity injection (~25-30% of deal); $50k holdback on AR held in escrow for a year; no outside partners or investors
notes: Second acquisition (a residential/janitorial cleaning business, ~2020, during Covid): advertised at $185k SDE, Bateson recast to ~$250k SDE, agreed price $625k (~2.5x), plus a side letter for additional payments beyond the SBA appraised value of $550k. Bought for $650k asking, negotiated to $625k with an SBA-lender valuation shortfall covered via side letter.

Why this business

After 10+ years as a Wall Street bond salesman (Bear Stearns, then a distressed-debt shop), Bateson was deeply unhappy, drinking heavily, and felt he was taking entrepreneurial-level risk without entrepreneurial-level reward. A friend mentioned buying a paintbrush manufacturer, which sent him down a BizBuySell rabbit hole where he discovered small businesses selling for 3x cash flow -- a revelation given his experience trading distressed debt at 8-10x leverage multiples. He set criteria based on avoiding what he'd seen wreck companies while trading distressed debt: no technology (moves too fast), no retail (Amazon risk), no bad lifestyle hours, and something physical/outdoors after 20 years behind a desk. That led him to service businesses, and specifically to Resolute, a 20-year-old new-construction cleanup business in Atlanta whose founder-brother wanted out.

What's working

Stable, recurring service business (construction cleanup) with low capital intensity and high labor-cost variability, which cushioned the Covid shock
Bought in a high-growth Sunbelt jurisdiction (Atlanta/Georgia) that is pro-development and has secular population/construction growth, offsetting construction's cyclicality
Delegated field operations entirely to a trusted manager (Brandon) with real autonomy, while Bateson focused on sales, bidding, and customer relationships -- his own strengths
Won a large, multi-year data-center cleaning contract that roughly doubled revenue (from $3.75m in 2023 toward ~$7.5m projected in 2024)
Speaks fluent Spanish (learned from childhood farm labor jobs) which helps bridge the gap with a largely Hispanic frontline workforce
Kept many processes manual rather than automating, intentionally, to stay close to frontline pain points and stay attuned to the business

What's hard

Second acquisition (janitorial/residential cleaning business) underperformed: he ignored red flags -- the seller was the charismatic, hands-on driver of the business, growth was Covid-driven and not repeatable, his own field manager warned him against it, and the SBA lender's valuation came in well below the agreed price, requiring a side letter for the difference
That second business lost ~30% of revenue once Covid ended and has not found a repeatable growth formula; requires in-person sales (driving to offices) rather than the online bidding process that works for Resolute, which doesn't fit Bateson's strengths or lifestyle preferences
Struggled to promote frontline cleaners into manager roles -- two failed attempts before finding a manager (a former Army vet) who could handle it
Labor/hiring is difficult -- e.g., finding a qualified forklift/low-lift driver for the data-center contract took multiple failed hires
Had to switch mid-deal from an asset purchase to a stock purchase after realizing an asset deal risked losing decades-old GC contracts that wouldn't novate to an unknown new entity
Had a cash crunch in year one as growing accounts receivable (from $500k to ~$900k) outpaced cash on hand, requiring him and his wife to inject more personal capital
Wife was initially very resistant to the financial risk and personal guarantee (specifically refused to let assets in her name be used as SBA collateral), requiring him to negotiate loan terms and eventually switch lenders

Notable quotes

You can buy a small business for three times cash flow -- like, what?

I was sitting on my desk looking out the window over Century City and just saying, it can't be worse than this. If I buy a business and it goes bankrupt and I have to file bankruptcy, I won't feel worse than I do now. So what the hell -- I have no downside.

You will always tend to overestimate how much change you can effect in one year and underestimate how much you can affect in five years because of the compounding effect of doing things the right way.

In buying a business you never can tell how good it or bad it is until you buy it. You can do your due diligence, and when you buy a good one, a really good one, you can still screw it up. And when you buy a bad one, you can still fix it.