Peter deBaptiste·February 19, 2024

How to Buy a Big Plumbing Business (as a Non-Plumber) | Peter deBaptiste Interview

Peter deBaptiste, a former lower-middle-market bank lender and president of South Florida food-delivery company Delivery Dudes (which he helped scale and sell in 2021 after fending off Uber Eats, GrubHub, and DoorDash), turned to self-funded search after a friend introduced him to the concept. After a failed mulch-blowing LOI cost him $35,000, he bought Joe Cole Plumbing, a 35-employee, ~$500k-$1.5m EBITDA South Florida plumbing contractor split roughly 50/50 between high-end residential construction and commercial/residential service, beating out roughly 22 competing offers largely on personal rapport with the seller. He financed the deal with an 85% SBA loan plus a 5% paid seller note and a 5% full-standby seller note, raising only a small equity check from his father to maximize his ownership stake. The transition surfaced classic search-fund lessons: he underestimated how many hours and hires were needed to replace two workaholic master-plumber sellers, discovered too late that key office staff turnover pre-dated closing, inadvertently triggered a foreman's resignation by posting a salary range, and learned that technical trade knowledge and tribal institutional knowledge are far harder to replace than expected. Despite five-out-of-ten-good years by his own accounting, he never came close to missing payroll, credits strong seller support for a smooth-ish transition, and is aiming to double the business over five years while keeping a sale as an option rather than a certainty.

Deal facts

multiple: 3-5x SDE/EBITDA range (typical for self-funded search deals in this size band; construction component pushed multiple down from what a pure residential-service plumbing/HVAC shop would command, which he said would go over 5x, possibly 8-9x for a fully service-only comparable HVAC business he looked at)
sde ebitda: SDE/EBITDA of $500k-$1.5m (business was in that range)
financing structure: 85% SBA loan, 5% seller note paid over time, 5% seller note on full standby (no payments, accruing interest for 10 years, counted as equity by SBA), remaining ~5-6% cash equity raised from his father (not required, but chosen to maximize ownership)
notes: Two sellers (Joe deBaptiste... actually Joe Cole, founder, plus a second partner); Joe's two sons remained in the business as leadership. Closed June 2022, right as interest-rate/recession headlines hit. Working capital was included in the deal; had a line of credit as a financial cushion. Business had 35 employees at time of interview (fewer at closing). Business ~50/50 split between construction and service; ~30-35% of revenue was ultra-high-end residential construction (Miami Beach custom homes $10m+), rest split between residential service and commercial service for national retailers/grocery chains (Whole Foods, Marshalls, Lululemon).

Why this business

Peter grew up in South Florida and spent his career around 'boring' family-owned businesses first as a lower-middle-market bank lender, then running Delivery Dudes (a South Florida food-delivery company) through a brutal competitive fight with Uber/GrubHub/DoorDash to a 2021 exit. A friend (Morgan McCauley) introduced him to the search fund concept, and Peter was drawn to skipping the zero-to-one startup phase and taking over an existing, approachable, cash-generating business. After a failed LOI on a mulch-blowing company, a broker who was pitching a fencing deal mentioned a plumbing business (Joe Cole Plumbing) almost as an aside, saying Peter 'wasn't a fit' because he lacked a plumbing license. Peter pursued it anyway, connected personally with seller Joe over dinner (Peter framed his pitch around wanting the same family lifestyle Joe had built), and won the deal despite competing against ~22 other offers because he was local, relatable, took Joe to dinner, and wasn't going to fire the staff or push out Joe's sons.

What's working

Personal, trust-based rapport with the seller (taking him to dinner, expressing genuine interest in the lifestyle/community fit) won the deal against ~22 competing offers, including from PE-backed rollups
The business's diversification across residential/commercial and service/construction gives revenue stability -- no single line of business is more than ~35% of revenue, so a downturn in one segment (e.g., high-end residential construction) doesn't sink the company
The construction component scared off many typical home-services buyers, which suppressed the multiple into self-funded search range rather than the 8-9x a pure service business would command
Full-standby SBA seller note plus a modest cash equity raise (from his father) let him retain roughly 90%+ ownership while still doing a fundable deal
Strong, highly supportive sellers who worked hard through the transition and helped him hire and delegate rather than 'cashing out and coasting'
Prior operating experience (7 years scaling Delivery Dudes from ~20 to 125 employees, running the corporate team, managing people issues) gave him confidence and pattern recognition for the inevitable operational fires
Evaluating a seller's personal lifestyle (house, boat, kids' schooling, debt load) as a fast qualitative proxy for how healthy a business really is, versus just trusting the financials

What's hard

Lost a mulch-blowing deal after ~3 months and about $35,000 in dead-deal costs when the seller went 'ghost' near closing, apparently after realizing his after-tax, after-debt, after-bonus take-home wouldn't be worth selling
Underestimated how much labor he needed to replace: two seller-operators each worked ~100 hours/week (including 24/7 on-call emergency service), and he had budgeted to hire only one replacement but needed at least two, plus additional office hires
Didn't realize during diligence that two 'A-player' office staff (a 10-year bookkeeper and billing person) had left about 6 months before closing and were replaced by comparatively weaker hires -- a blind spot in diligence around recent employee turnover
Posting a market-rate salary range for a new hire (advised by the sellers) inadvertently exposed that a long-time lead foreman had been promised that exact role for years; he quit with one day's notice, followed later by another supervisor
An employee who'd left about a year before closing started a competing plumbing company and quietly poached major customers over Peter's first year -- something no amount of diligence could have surfaced
Progress billing and working capital in the construction side of the business are opaque and easy to overbill; Peter discovered post-closing that some jobs were ahead of where they'd been billed, temporarily depressing reported revenue
Underappreciated how much technical/tribal plumbing knowledge (accumulated over decades) is locked in the seller's head and can't be learned or hired quickly -- customer problems that surface only once every five years, for example
Maximizing ownership (minimal equity, max leverage) meant less cash cushion to chase 'low-hanging fruit' investments and less room for salary once family expenses (two kids, nanny, new car) grew beyond his pre-acquisition lifestyle budget
Came in with a 'strategic visionary' mindset from his startup background rather than first learning to be the hands-on operator the seller had been, which he says in hindsight was the wrong sequencing

Notable quotes

It's the smaller -- a lot of guys go for ultra small deals and they'll say oh just go buy something that does like 300,000 of SDE, get in the game... versus if you're buying something that's like a $20 million business you're paying a high multiple, you're leveraged to the gills, you got bank covenants... and when you're starting at a high multiple you have to grow in order to hit your outcomes versus if you buy something a little bit smaller all you have to do is maintain.

He's like, listen, you're the only one who took me to dinner, you're the only one who wasn't going to fire all my employees, you're the only one who I felt like would keep my kids working in the business.

I thought that the employees wanted a clear vision, thought that they wanted leadership and an opportunity to grow in their career, and what they really wanted was direct instruction from an expert in the business. And that hit home for me so much.

I had two people who were fairly new and I didn't realize... they had two A players before and those two A players got replaced with like C players and I had no idea.