I finished the deal in Northern California that night and headed back to Fresno the next day and drove over to Vern’s shop. I walked in and we exchanged pleasantries in his office before heading out to his warehouse. He owned the whole building and kept the thing immaculate. I felt like I could have eaten off the floor in the warehouse. The floor was coated in a high-end epoxy and someone mopped it almost daily. I am not advocating for this. It may not have a great return on investment for you. What it did tell me though was that he kept his equipment in great condition.

As I walked the length of the warehouse with him, we talked about the financials but I had not yet seen them. I knew that the revenue that he was claiming was probably correct just because I had a lot of experience with these deals and companies of his size at that point. I knew how many trucks and dispatchers he had and it all seemed to line up. I figured that I would have to spend some time diving into the financials but I would wait until a later time to do that.

As we walked through the warehouse and discussed financials though, we walked right past the inventory. Inventory, while important to most people, is of almost no importance to me. I don’t like carrying a lot of inventory. In Fresno, there are supply houses all over the place and their core competency is inventory. My core competency is service and installation. I would rather not have much inventory at all and let the supply houses do what they do best. What I was very interested in were the 4 Rigid sewer cameras sitting in front of the inventory cage. They looked immaculate and I needed at least two more for my own plumbing shop and I knew that they were 10,000 dollars each. We walked farther and I noticed the 40,000 dollar hydro jetter and a small backhoe sitting on a trailer. The backhoe was a bobcat small backhoe that I really could use that was a little older but it had been cleaned thoroughly after every use and looked almost brand new. The backhoe and trailer would cost me well over 60,000 dollars. I saw his trucks and they were all under 60,000 miles on every one of them. He had 6 trucks. I was mesmerized.

I asked him what he wanted for the business and he gave me a number. I realized at this point that he only wanted a number slightly higher than what his assets were worth. I offered him a number about 100K dollars less than what the assets were worth and he countered at very slightly higher than the asset value and I accepted. I literally had still not seen the financials. I had never done a deal like that before but I didn’t want to lose this deal and I felt like I couldn’t lose just because his assets were worth so much.

We walked into his office and I sat down and he asked what I was doing. I said “I am writing up an asset sale agreement on my laptop. I want to get this done right now so that we don’t have to do this again.” He kind of chuckled. He wanted a fast sale for cash and I had to give it to him. I wrote it up right there, sent it to his printer and we signed it and I gave him a 10,000 dollar check on the spot as a down payment and told him that the rest would be wired to his account the next day. I called two of my office staff and asked them to come over and start interviewing staff to find out where they could fit at our company. I also asked them to start going through the assets to move them over to our shop. Vern gave us 30 days to move our stuff out so he could sell the building separately.

The deal went off very well and a couple years later, while I write this article, we still have a dispatcher that used to work at Vern’s shop. Additionally, the investment paid out really well for us and it took care of Vern. I really like looking back on deals like that where everyone wins. Not every deal makes sense this way and most companies’ assets have almost no value so I wouldn’t do this with just anyone but when you run into a company like Vern’s company, it may make total sense.