60 Days After the M&A Deal: The Seller's Guide Nobody Gives You

Intro & the death-valley problem

Andrey: Hi everyone, I'm Andrey Sokurec, and today I have the true pleasure of introducing Jason Cramer. Jason is VP of Business Development and a partner here at Homestead Road. Jason, welcome.

Jason: Thanks, Andrey. Great to be here.

Andrey: We're going to have a coffee.

Jason: All right. Cheers.

Andrey: Cheers. And it's been — how long? About two and a half months since we did the merger. We want to give you an update on what's going on. First, let's start with your background. Maybe you can share your background, your experience, how long you've been in real estate.

Jason: So my background is real estate. I had a franchise with a national franchise company for about 17 years, and about eight years ago I ended up leaving them and starting my own business in the same field. So about 23 years of flipping houses. I came into that business through finance, through the mortgage department, and started buying foreclosures — I started trying to find ways to refinance people's mortgages and then transitioned into being an investor. I found an attorney who trained me in how to buy foreclosures and ended up flipping houses that way. I saw a billboard for a national real estate flipping company, bought a franchise, and started doing that.

Andrey: And I've known you for — wow, gosh — almost more than 20 years.

Jason: Just over 20 years.

Andrey: Yeah. So we just did a merger. As an operator, you were doing about 35–40 deals consistently, right? What were three pain points you had as a small operator?

Jason: When you're small, you don't really have the capacity to do everything yourself — you don't have the financing. My three main things: because I didn't have a huge employee workforce, I had to find people who could do a lot of different things well. In other words, I had to find people who were able to buy houses, manage the construction process, and sell them. Finding good people was probably the number one thing. And then what would happen is — after you train them in and they learn the business and they see how much money you can make flipping — they invariably want to go out on their own and start doing it themselves. So you have to go back to the drawing board, find another unicorn, and retrain them, only to have them jump ship.

I did primarily wholesaling, but we did a fair amount of rehabbing as well — a very capital-intensive business. So the second pain point was not having sufficient capital. The third pain point was: if I'm the sole operator, all the responsibility falls on me. There's a lot of stress if there's a problem with a project, or if something in your tech stack breaks down, or a house starts on fire — whatever the case may be, all that responsibility falls on me. So those were the three things motivating me to try to scale. It's very difficult to scale a business when you're going back to the drawing board finding new people and you don't have sufficient capital. Very capital-intensive business — between advertising and financing, it adds up.

Andrey: Okay. So three points: finding good people, capital-intensive, and the stress of wearing all those hats — if the house is on fire, if you need to change cartridges, if you need to do payroll. I remember the death valleys when Alex and I tried to scale. We were doing 50 deals, and then we'd hit a hiring-and-firing cycle. Then 100 deals — another death valley. Then 200, 300, 400, 500. Different markets kept breaking our systems. Whatever we built, we had to rebuild. It just takes time. It took us about 20 years to build the system. But from the start, we wanted to build a platform that would consolidate and operate in multiple markets — though that's a different objective. If you want to be a small lifestyle-business operator, you probably don't need to go down that path.

What happened when Jason listed with a broker

Andrey: So what kind of inspired you — because we had this conversation for a long time — what inspired you to pull the trigger and do the merger?

Jason: I had looked at an exit in the business even when I was with the franchise company. You build a business up, but this type of business is very transaction-oriented — you're only making as much money as your last deal. There's no residual income like you'd have in a rental business. No sticky revenue. So you just keep flipping, keep flipping, keep flipping. At some point you ask yourself: where's the light at the end of the tunnel? What's my exit strategy?

I started looking at that even back in the franchise days. I actually went to a business broker and looked at listing it. They comped out the business and gave me an idea of what they thought they could sell it for.

Andrey: How did they comp it out?

Jason: It's a multiple of owner discretionary earnings — I think two or three times. About three times.

Andrey: Three times. That's what they gave you as the price — like a realtor telling you what your house is worth. That doesn't mean we're cashing our chips.

Jason: Exactly. And I went back to the legal department at the franchise and they said no. At that point you could buy a franchise for $50,000 — why would somebody buy your business for a million dollars when they can go to the franchisee and get it for $50,000? So I was a little disheartened about that whole process. Over the next two to three years I came to the conclusion that if I wanted an exit strategy, I would have to build the business from scratch myself. And so that's what I did, and got it to the point where we started talking.

But I had also gone and previously listed the business again with a different business broker, and they went through the whole process of finding potential buyers — this time for my own business. They had a lot of interest: 30, 40, 50 different prospects within the first 30 to 60 days, only to find out that no one could figure out the business model. No one understood how we made money or why somebody would ever sell their house for 75 to 80 cents on the dollar. At the end of the day, I canceled the listing.

Andrey: So you listed the business, you got 30 prospects looking at your business, and zero offers.

Jason: Zero offers. I didn't even get to the point of an LOI. They tried to get an LOI signed a couple of different times, but they never even got to the LOI stage.

Andrey: And probably there are reasons why it's hard to sell. These businesses are very capital-intensive. Number one, there's no recurring revenue, and it's also risky because you have to have a lot of capital involved. It's pretty subjective and complicated — it's not like making widgets. Every house is a little different. The learning curve is very—

Andrey: All right. So, Jason, you got 30 prospects, zero offers, zero LOIs. And how much time did you put into selling your business? It takes time to prepare the business, to have those meetings, to respond to those 30 requests.

Jason: Yeah. They kept me pretty busy for 30 to 60 days. A lot of energy, a lot of positivity — business brokers are very confident on the front end. It's supposed to feel like this is going to happen. "Here's the worst-case scenario, common scenario, best-case scenario" — but it was never even a possibility that it wouldn't sell. That wasn't really brought up. And then they hook you: "Well, we've got another guy. We've got another guy." After the 20th or 30th prospect you start wondering, "At some point, are we going to get an LOI?" "We've got a guy that's pretty close." And it never got beyond that. After 90 days or so, we signed a mutual agreement to cancel the listing.

Of course, they then had you on the hook for anyone they had previously shown the business to — you'd still have to pay commission through a certain time window. But that didn't really matter because they didn't really have anybody anyway.

Going through that process actually solidified something in me: it prepared me — framed me for our negotiations — and put me in a mindset where I realized there was only a small pool of people who would understand my business well enough to invest in it.

Andrey: That's because — even though we have a full 60-page presentation to explain the business model and the numbers — it's really hard for a person outside the business, a non-strategic buyer, to evaluate it. But I would probably recommend, if you're watching this and you have a similar business: go through the exercise. Put your numbers together, create your plan, document your tech stack. Because it takes time, and if the right moment comes and someone makes you an offer, at least you have those documents prepared. Part of that is understanding exactly what they're buying — what are you bringing to the table? What's your intellectual property? Why can't somebody just recreate it? That was another question that came up: "Why can't I just throw money at it and rebuild your business?" That's a valid concern. And there weren't too many people out there rebuilding what I did. There was something there. But it was almost impossible to sell through the traditional business-broker model because they couldn't find somebody who understood the business.

Jason: That's a really good point. It's almost impossible — I don't know a single operator who was able to sell a company through that route.

The two-way agenda: why we did this deal

Andrey: So what were your two or three main objectives in doing the merger? What motivated you?

Jason: The first was to take some money off the table — to take some chips off the table. You build something up and you want to see some value come out of it, other than that transactional hamster wheel where every day you go out and shake the tree to see what falls. New deal, new advertising — that kind of thing. So that was the first thing.

The second was to reduce the risk — to not have all the risk personally guaranteed. Credit lines, every aspect of the business, all on my shoulders. I wanted to offload some of that. And then the third was to scale. I didn't have all the components to scale on my own. That takes an incredibly long time when you're doing it alone.

Andrey: So we covered your objectives. Our objectives — we had a very simple agenda. We already have infrastructure, but we wanted to add an additional stream of revenue, an additional lead-generation source, because you had a proven model for generating leads. You did a phenomenal job marketing to consumers. So number one: to have a predictable additional lead source at a predictable cost. Number two: to bring in talent to help us grow and scale. It's incredibly hard to find someone with your level of expertise. And also to bring your network of contractors — your wife Chantal is working here now. Subcontractors who were doing rehab with you are a real resource we can utilize.

Jason: Synergy.

Andrey: Exactly. The message we tried to crystallize is: together we're better.

Giving up control without giving up the company

Andrey: Let's talk about concerns — from you as an operator. Share your concerns and I'll share mine.

Jason: Coming into this situation, I was in control. That's a double-edged sword — I wanted to give up the responsibility, but when you merge with somebody else, you're also giving up that control. And that is scary.

Predictability was another one. I was running a business where I knew what the leads generated. All the systems were dialed in to my level of comfort. I could predict the income fairly well. But what's going to happen after the merger? That's the big question. And the way the deal was structured — part of the price was based on the performance of the acquired assets — which gave me a feeling that after selling I would sort of lose control. It's a weird feeling for a control-freak operator. I've been self-employed for over 30 years.

Andrey: You said unemployed.

Jason: Yeah, I've been unemployed — I have not had a W2 job since 1994. I've been unemployed since '94. But I'm in control of my destiny. And so now I've got to give up control. It's unpredictable. "Are these guys going to mess my business up? I'm going to sell this to you, get a portion, and then it's just going to fall apart." It took me a while to come to grips with that. And I think that's probably typical of most owner-operators. They like that responsibility to a certain extent. Maybe it's risky, but people get used to that risk. I haven't had a W2 job in 30 years and I've always made my mortgage payment. So that was a difficult step.

Andrey: That's very emotional for a lot of people. You took so much time to build your business.

Jason: It's my baby.

Andrey: It's your baby. For us, the biggest concern was trust — and I've known you for a long time, so the trust level was there. Number two was cultural fit. Number three was the unexpected: what we're really buying is a lead-generation engine, but what if Google shuts down your account? That's a little risky for us too. But I think it worked out. We've been two and a half months in and I'm super excited to see the results. Maybe you can share what the results look like so far.

The double-the-gross-profit surprise

Jason: My business was pretty predictable going into this — about 35–40 deals a year, clockwork, every year. Same ad spend, and about mid-$20,000s in gross profit per deal. So 40 deals brings about a million dollars in gross profit — before any expenses, just gross profit. That's what I'd been used to over the last seven or eight years.

Now, granted, there's some seasonality at play, which actually probably works in our favor because November, December, and half of January are not the best two and a half months in Minnesota for this business. But even so — we're at 11 deals, and I believe our gross profit is about double. So we're on track to basically double unit volume and double gross profit per deal — meaning roughly quadruple the total gross profit on the same ad spend, the exact same lead-generation systems. The only thing that's changed is taking those leads and plugging them into a system.

Andrey: As of today we're at 11 deals and $545,000 in gross profit — gross profit before marketing expense. If Jason year-over-year for the last seven years generated a million dollars in gross profit and we did it within two and a half months, that's a really, really good result. So impressive.

What surprised you about working inside a bigger and more structured organization?

Jason: I guess — you don't know what you don't know. You go through this whole process of running your business and you think you're being super efficient, that nothing is slipping through the cracks. And then after two and a half months you find out that maybe there was some slippage. How do you justify that? Even if everything was wholesale and we just doubled — how was I losing 50% of the deals? That's eye-opening.

It leads into just how important it is to have systems in place, and people who can handle the various aspects rather than one person wearing ten hats. When everybody is in their own department, it becomes more efficient to process the leads and generate — you squeeze the juice out of the leads. They're the same leads, from the same website, with the same everything. The only variable is how those leads are handled — and that's creating this humongous increase.

Andrey: That was the most humbling experience for me when I went to Harvard Business School and we had a private-equity playbook class. They showed us a picture ranking how efficiently different ownership types run businesses — self-employed, founder-owned, family office, government, and then public companies. Founder-owned business is the least efficient. I could not believe it, but that's what they showed. If you buy a business led by its founder, there are no processes, no systems, no real accountability, no structured compensation plans. You come in with a playbook — it's a checklist — you fix this, that, and that. That was a big, humbling experience. Because I thought I was so efficient. I'm doing this, I'm changing the cartridges in the printer. But in reality, you shouldn't be doing that. As an executive or CEO, you should only focus on high-ROI activities: building relationships, finding capital, working on strategy. You need someone else fixing the printers.

Jason: Exactly.

The seller's prep playbook

Andrey: Your role now is VP of Business Development. We want to roll up one or two operators in the next 12 months, focusing primarily on the Midwest — a market that is stable, predictable, and one we understand very well. You'll be doing the pre-integration and integration work. So what advice would you give to people who are considering this, but maybe aren't ready to sell right now — somewhere six months to two years out — on how to prepare themselves both mentally and operationally?

Jason: I would start by doing your homework and understanding what options are available. Go through the process so you become convinced of what's actually involved in the sale of your business. For me, I had to go through that experience with a business broker. If you do engage one, make sure you're not locked into exclusivity for too long — I wouldn't tie that up for more than 60 days. They should know within 60 days whether they're going to be able to do this or not.

If a traditional broker can't sell it — and that would be the first time either of us ever heard of it happening — then start keeping track of your numbers and your data. Because that's how these decisions get made: how much are you paying for leads? Where are the leads coming from? Start documenting as much as possible.

For me, I had some processes — they weren't super detailed. But get your data together, figure out what your processes are, document your tech stack. That makes it easier if you do decide to integrate, because the integration of the leads and the acquired business into your buyer's system is itself a significant step. I was glad to be on the inside during that process — I knew the tech stack, I knew where the leads were coming from, and I had a financial interest in making sure those acquired assets continued to produce revenue.

Have all that stuff lined up in advance. We have a spreadsheet with all the different tech stack components. Get everything lined up, do your homework. Envision yourself taking some chips off the table and being able to scale by merging with a bigger company.

Andrey: You did a really good job organizing everything — the technology, the data room. We use Google Drive and Dropbox, built out a template for financial statements and reports, all of that.

So let's walk through the documents and the preparation. What do people need to do right now — in advance — to increase the sellability of their business? I've seen businesses where people show up with a box of receipts and settlement statements. What's the first step?

Jason: When I started the business, my CRM was a notebook. I would wander around with a journal like this — this was my CRM.

Andrey: I didn't see that in the deliverable assets.

Jason: At some point that's not sufficient. We ended up with a CRM for leads, a separate CRM for project management and transaction coordination, and a tech stack that included websites, automations through Zapier, call tracking through CallRail — all of that wrapped up into a package I could actually deliver.

The valuation is based on income — so your books have to be accurate. I would highly recommend, in addition to documenting your lead-generation processes and how you turn those into money, making sure all of your financials are in alignment. I've had a CPA for the last 24 years. All of my tax returns are signed off by a CPA. So when someone asks what's going on in the business, I'm not handing them gobbledygook. I can say: here are the sales, here's your cost of goods sold, here's your gross profit, here's your advertising spend. That's the kind of upper-level chunk of value people are looking for. How much is this making? And you have to have the documentation to substantiate it. You can't be paying business expenses out of personal accounts, buying stuff for cash, or doing deals on the side. Everything needs to be documented.

If you haven't already done this and you want to pursue an exit, I would highly recommend documenting everything — starting today.

Andrey: I like that you had really well-organized financial data: how many leads you received, how many appointments, what was the gross profit per wholesale, gross profit per actual deal. You need to support the story with numbers. And you did a really good job.

For any business owner or CEO: you have to have your data, so you can compare, present, and make the case. It's important to make your business sellable. If you don't have your tax records, your financial records, a proper CRM — there's nothing to sell. And even if there were, you wouldn't know it because you wouldn't be able to track any of it.

There is a lot of value in businesses like ours — companies that buy houses, fix them, and sell. What we want to do is help people unlock that value: take a little bit off the table, have that financial security for themselves and their family, maybe establish college funds for their kids, and also be part of the bigger picture. There are a couple of options: you can completely step away, or you can take an executive role in the business, or even come on as an acquisition manager if talking to people is your thing and you'd rather not run day-to-day operations. There's something for everybody.

What's next: rolling up Midwest operators

Andrey: Jason, what's next for you — the next two to three years? How do you see yourself?

Jason: For this phase, definitely helping grow the business by replicating the process I went through to get here in the first place. Basically rinsing and repeating. I'm more of a marketing and sales guy than an operations guy, so I'm the acquisition-manager type personality. This is basically just switching from acquiring houses to acquiring businesses.

Andrey: So now we're switching Jason from buying houses to buying companies. So if you have a house to sell or a business to sell — this is your guy. Look me up, Google it, call me.

All right, we're going to wrap it up. We'll give you updates — we've only been two and a half months into this project, but so far the results are very encouraging and backed by real numbers. And if you're thinking about or considering our roll-up program, or if you have any questions, I think the earlier in the process you join us, the more value you can get. It may not be time to sell yet, but if you have questions or you're just collecting information — reach out, and we'd be glad to connect you with Jason. He's our VP of Business Development, and he'll share the experience and help you prepare the business for transition.

Jason, anything else you'd like to add for people who may be thinking about this but not ready to sell yet?

Jason: Ask questions. There's no such thing as a stupid question. I tell my kids that all the time. If something in what we've talked about doesn't fully make sense, just ask — reach out, ask questions. I'm happy to answer anything. It's a process. One step at a time.

Andrey: All right. Thank you everyone for watching, and Jason, thank you. We're glad to have you on the team, and we're excited to share — maybe in another two and a half months — the final numbers at the three-and-a-half-month and six-month milestones.

Jason: That's great. Thanks. Looking forward to it.