Lucas Phillips·February 20, 2025

How to Buy & Transform a 120-Year-Old Manufacturer | Lucas Philips Interview

Lucas Phillips bought Newark Auto — a 120-year-old New Jersey manufacturer of replacement carpeting and interior parts for classic and vintage cars — at age 23 for just under $1 million (just over 3x SDE of ~$300k), using a 90% fixed-rate SBA loan and a family-assisted down payment. Coming from a startup background (co-founded a student-run coffee chain at Northwestern), he pursued ETA specifically to build a consumer-facing e-commerce brand on top of an entrenched B2B manufacturer with thousands of proprietary patterns — an almost unassailable IP moat in a long-tail niche. The transition was brutally hard: a chronically late workforce (including an alcoholic lead cutter who had seizures on the job), an office manager running a parallel paper-based workflow on Windows XP, and severe personal anxiety that required medication. Over four years he modernized the factory with CNC cutting machines, replaced Fox Pro with cloud ERP and offshore contractors, and built a Shopify storefront that now generates more revenue than all dealer accounts combined, growing sales from $1.25m to just under $2m. He has since completed three bolt-on acquisitions — a headliner manufacturer in Georgia, a Porsche specialist in Oregon, and a shuttered high-end European car interior business in California — each adding thousands more patterns to his system at minimal cost, positioning Newark Auto as a consolidator in a fragmented, aging industry.

Deal facts

purchase price: just under $1m (including ~$70k inventory)
multiple: just over 3x SDE
sde ebitda: SDE just under $300k
revenue: $1.25m at acquisition; just under $2m in 2024
financing structure: 90% SBA loan, 6% fixed interest rate for 10 years; family helped with down payment
notes: Fixed rate SBA loan (paid premium of ~0.75 points to fix). Inventory was ~$70k of raw materials (carpet rolls), no finished goods. Business is Newark Auto, a 120-year-old manufacturer of replacement carpeting and rubber mats for vintage/classic cars, located in New Jersey.

Why this business

Lucas wanted a physical product business — not services — that was distributing a differentiated product B2B but had untapped potential to go direct-to-consumer via e-commerce. He was specifically looking for something old-school and inefficient that he could modernize. Newark Auto fit perfectly: it had thousands of proprietary patterns for classic car interiors, a defined (if archaic) manufacturing process, and no Shopify presence. The moat from accumulated IP and the long-tail niche nature of the product (replacement carpet for a 1950 Packard, etc.) also appealed to him. At 23 and coming from a startup background, he was comfortable with transformation risk and saw it as one of several entrepreneurial chapters, not his only shot.

What's working

Deep IP moat: thousands of proprietary patterns covering virtually every classic car year/make/model combination, making it nearly impossible for a competitor to enter without years of investment
Long-tail e-commerce: direct-to-consumer Shopify site now generates more revenue than all dealer accounts combined, and the business has grown from $1.25m to just under $2m in revenue
CNC machinery modernization: digitizing hand-traced patterns and implementing CNC cutters massively improved throughput, consistency, and quality control
Cloud ERP and software stack (Xero, ShipStation) replaced Fox Pro/Windows XP/matrix printer workflow, enabling offshoring of office functions
Offshore/nearshore back-office: replaced a $75-80k/year office manager with a contractor in Bolivia at ~$24k/year, saving $50k+ annually
MSRP pricing strategy: implemented value-based pricing with a fixed dealer discount, allowing him to sell direct at MSRP without undercutting dealers, protecting channel relationships while growing DTC
Bolt-on acquisitions: tucked in a headliner manufacturer (Georgia, ~$50k), a Porsche interior specialist (Oregon, ~$50k), and a shuttered high-end European car interior business (California, acquired assets for price of a used car); patterns plug into existing CNC/digitization workflow
Negative cash conversion cycle on special orders: customer pays upfront, Lucas then orders fabric and fulfills; no working capital trap
Competitor exit: primary Porsche competitor went out of business due to health issues, sending all those customers to Newark Auto; potentially $1m in additional Porsche revenue within a year

What's hard

Labor crisis at acquisition: all five or six manufacturing workers were chronically late (some arriving 90+ minutes after start), related to each other, and resistant to change; four of six left within weeks of a raise-for-punctuality offer
Key-person risk with the alcoholic lead cutter: the only person who knew all the patterns was an alcoholic who had seizures at work; Lucas had to retain him until patterns were digitized
Personal toll: severe anxiety, panic attacks, lost sleep, ended a long-term relationship due to no time, went on an SSRI for two years to function
J-curve on capital: after debt service, only ~$150k left annually, yet required large investments in CNC machinery ($50k digitizing software/hardware, $50k+ CNC machines), cloud software, and each bolt-on acquisition adds another J-curve
Has not been able to pay himself a meaningful salary; relies on family financial support for growth capital
Channel cannibalization risk: going direct-to-consumer competes with existing dealer relationships; required careful MSRP management
Data complexity for e-commerce: listing every permutation of year/make/model/body style/fabric/color across thousands of patterns requires hundreds of thousands of SKU lines; no clean databases exist for older vehicles
Long-term office manager (20+ years) could not adapt to new systems and was covertly continuing old workflows; eventually replaced
California bolt-on was a shuttered business with unfulfilled customer orders and chargebacks; integration will take 1-2 years just for digitization, plus reputation repair

Notable quotes

I was an anxious wreck. I think I knew that I would need to get rid of all of these people and I had just bought a manufacturing company and I didn't know how to do anything and I only had 90 days with the seller and I was going to need to get rid of all of them and learn what they're doing without even them being there. And that was a terrible position to be in.

Walker said, Lucas, you burned the boats. The only way out is through.

I went on an SSRI for a couple years to deal with — to kind of make sure that just the basis of just stress that I had could be dealt with so that I could just focus on getting done.

I'm a Data Business masquerading as a manufacturing business. There's a lot of value in the data.