Kaustubh Deo·April 13, 2023

How to Buy a $2m Tree Business | Kaustubh Deo Interview

Kaustubh Deo is a former private equity professional (Bain Capital distressed debt, then Searchlight Capital Partners) who self-funded a search focused exclusively on Seattle — his hometown — and acquired a residential and commercial tree services business doing approximately $2 million in revenue. The business was run by a father-and-son team who each led a crew four days a week and handled all sales on their fifth day, making it one of the most owner-dependent deals imaginable; Kaustubh negotiated a significant SDE reduction via pro forma to account for replacement hires, a new commercial lease, and other costs the sellers had never incurred. Thirteen months post-close, the transition is largely complete: the father retired at three months and was replaced by an internal promotion, and the son finished his 12-month SBA transition and departed, replaced by an open-market hire. Operationally, Kaustubh has introduced CRM software, digital contracts, weekly safety meetings, and a new tree healthcare service line, while acknowledging that SOP documentation and middle management remain gaps. He rates the financial performance around 4-5 out of 10 but the overall experience a 7, finding unexpected fulfillment in community involvement, watching team members grow, and building a real culture — a sharp contrast to the abstraction of institutional PE.

Deal facts

sde ebitda: SDE adjusted downward significantly via pro forma; seller's SDE not stated; buyer's SDE estimated at 15-20% margin on ~$2m revenue
revenue: ~$2m
financing structure: SBA loan (mentioned as part of deal structure; seller financing and equity breakdown not specified)
notes: Father-son owned tree service in Seattle. SDE was reduced substantially from seller's historical figure via LOI-stage pro forma negotiation to account for replacement hires, new office lease, and other costs. Buyer insisted deal be priced on buyer's pro forma EBITDA, not seller's SDE. 12-month SBA-maximum seller transition for the son.

Why this business

Kaustubh wanted to move back to his hometown of Seattle and own a business permanently rather than flip it. He was attracted to the tree industry's resemblance to HVAC and plumbing (skilled trades, defensible pricing, passionate workforce), the company's focus on tree pruning which generates recurring/reoccurring revenue from a large email list of ~7,000 clients, and the ability to build a real employee culture with career growth paths. He specifically liked that the business had a large recurring client base rather than being removal-focused (one-time revenue).

What's working

Large existing client email list of ~7,000 giving a strong base of returning customers for pruning work every 2-4 years
Successfully promoted an internal crew leader to replace the retiring father three months post-close
Son completed a full 12-month SBA-maximum transition and left on good terms
New crew leader hired via open recruitment to replace the son, stabilizing the team
Moved from paper-based processes to a CRM system (online payments, digital contracts, automated follow-up reminders)
Weekly safety meetings implemented; aerial rescue training added
Hired an ISA-certified arborist focused on tree healthcare as a new service line in December
Operating in his hometown gave credibility with brokers and sellers, and deep local geographic/cultural knowledge
Young median team age (~26) made cultural integration as a 29-year-old new owner easier
PE background gave him strong KPI and financial dashboard discipline to manage anxiety and assess business health
Joined the board of the regional International Society of Arboriculture chapter, deepening industry ties
Provides full medical, dental, and 4% 401k match — better benefits than his PE firm

What's hard

Extreme owner dependency — father and son each ran a crew four days a week and handled all sales on the fifth day; no management layer whatsoever
Transitioning sales coverage was difficult; went through multiple ISA-certified arborist hires before stabilizing
Business was run out of the seller's home; needed to find and lease a commercial building, adding a new cost
Maintaining crew quality without an owner on every crew is the ongoing operational challenge
No prior KPIs, dashboards, or measurement systems; had to build all reporting from scratch
SOPs and process documentation remain weak — Kaustubh finds them uninteresting and acknowledges this needs improvement
Year one financial performance is described as a 4-5 out of 10 (not failing, not great — 'chugging along')
Seasonal business adds complexity; every season looks different before you have a full year of context
Still running parallel old and new workflows (handwritten work orders alongside digital contracts)
110% emotional energy consumed — describes the business as a 'real grind' and can't imagine buying another business right now

Notable quotes

I think I had to go through a little bit of a grieving process of like oh the business I buy is not going to be as high quality as what I'm used to looking at.

The business used to be run out of the seller's home whereas we obviously needed a lease like a real commercial building so you have to make some assumptions around what that's going to cost.

This wouldn't have worked if the sellers weren't like extremely understanding and aware that this business is not going to generate the same income that it did for them right because you need to make all these new hires and therefore the multiple I could pay had to be based on the earnings I could generate.

Running a small business is a lot of really little small days like a lot of little problems you're dealing with day in day out and then you look back on like a couple months of that and you're like oh wow we made some real progress here but you almost don't notice the progress as it's happening.