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- Inside the Buy Box
Hello home service operators,
What's inside your buy box as you're looking for acquisitions inside your industry?
I share my answer below, but I want to hear from you. Reply to this email or shoot me a message on LinkedIn with your thoughts.
Now, it’s time for some resources worthy of a few minutes of your time…
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What I Look For (And Don’t Look For) When Buying a Biz
We pass on way more deals than we say yes to. That’s because a bad acquisition can drag you backward. The wrong ingredients slow growth, burn cash, and distract from the business you already know how to run.
Over time, I’ve learned what actually matters. And more importantly, I’ve also learned what doesn’t.
What Matters Most
If I’m looking at a business today, I want to see $5M+ in revenue, in a market we don’t serve yet, and primarily service or residential replacement work. Plumbing is a big plus because it keeps revenue steady. A strong gross margin and the same CRM we use make integration that much smoother.
On the flip side, some things don’t matter at all.
Marketing spend? Irrelevant.
Insurance pricing? Won’t last.
Equipment costs or software stack? All of that gets replaced day one.
What Raises Red Flags
There are a few patterns I’ve learned to avoid:
Underinvestment in technology. If the systems are outdated, I’m inheriting expensive catch-up costs.
Underinvestment in fleet. Old trucks and neglected assets mean headaches right away.
New construction. I shut that down the moment we walk in the door.
Low gross margins. You can try to fix them, but customers don’t respond well to sticker shock when prices double overnight.
At best, these slow you down. At worst, they become a drag you regret buying.
Why the Owner Matters
Numbers matter, but culture eats numbers for breakfast.
One thing I overlooked early was how the seller talked about their team. If the owner has nothing good to say about their people, that tells you everything you need to know about the culture they’ve built.
And culture doesn’t change overnight.
Other Miscellaneous Deal Drivers
I also look at whether the seller is willing to hold a note. Are they will to put their money where their mouth is. Clean financials, COD customers, and strong local relationships all signal a business worth serious attention.
The Play Changes With Scale
When we were under $10M, we bought plenty of companies in the $1–$2M range. Those moved the needle back then. Today, they don’t. The facts change as you grow, and so does your buy box.
The Lesson
Great acquisitions come from discipline, not optimism.
Look for the right size, right mix of work, and solid margins.
Avoid red flags that slow you down, no matter how tempting the deal looks.
Pay close attention to the owner as you’re buying their culture as much as their revenue.
The wrong deal creates more problems than it solves, while the right deal accelerates everything.
That’s why we say no more often (way more often) than we say yes.
Make Good Things Happen to Your Business
Appletree Business Services knows HVAC and plumbing. They understand ServiceTitan, Housecall Pro, and the ins and outs of M&A. That means less stress for you and more time to focus on running your crews.
With Appletree, you get:
Proactive advice (not reactive responses)
A clear tax strategy that saves time and money
A one-stop shop for bookkeeping, payroll, taxes, and acquisitions
Don’t wait for good things to happen to your business. Make good things happen, starting with taking control of your finances.
Appletree is offering a free financial and tax review or 10% off QOE for acquisitions. All you need to do is schedule an appointment here.
It doesn’t matter if you’re actively seeking acquisition targets today or you’ll be doing so in the future, define what’s inside your buy box.
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👊 John
Disclosure: Some of the content and links in this newsletter are sponsored or affiliate links, which means we may receive payment or earn a commission if you click through or purchase. However, all opinions expressed are entirely my own.
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