Patrick Lange with Business Modificaton Group

Intro: [00:00:07] Broadcasting live from the Business RadioX studios in Atlanta, Georgia. It’s time for Buy a Business Near Me. Brought to you by the Business Radio X Ambassador Program, helping business brokers sell more local businesses. Now here’s your host.

Stone Payton: [00:00:32] Welcome to another exciting and informative edition of Buying a Business Near Me. Stone Payton here with you this morning. This is going to be a good one. Please join me in welcoming to the broadcast with Business Modification Group Mr. Patrick Lang. Good morning, sir.

Patrick Lange: [00:00:50] Good morning, Stone. Thank you so much for having me on.

Stone Payton: [00:00:52] Yeah, we’re excited about having you on the show. Man, I got a ton of questions. We won’t get to them all, but maybe a good place to start is if you could just share with us mission purpose. What are you and your team out there really trying to do for folks now?

Patrick Lange: [00:01:08] Yeah, absolutely. We specialize in the sale of heating and air companies around the country. And so kind of to that mission, I find that there’s on in the trades, there’s plenty of buyers lining up for the guys doing ten, 20, $30 million in sales, but most of the country’s doing $5 Million in less. And I found that there was nobody really helping them. And so five years ago, I switched my entire business. I was selling, you name it, gas stations, convenience stores, bars, restaurants, flower shops. And five years ago, I made the decision to exclusively just sell heating and air. And we’ve been blessed and fortunate to stay busy ever since.

Stone Payton: [00:01:45] So yeah, let’s back up even a little further. If you don’t, if you don’t mind. What compelled you to get into this line of work of buying and selling businesses in the first place?

Patrick Lange: [00:01:56] Yeah, I came from a financial planning background, so I had a financial planning company and I sold it in 2008 and I bought a small service company, so I bought a swimming pool service company and we grew that over the next five years, probably buying, selling, growing, trading, doing a little bit of everything. And I went to a beanie meeting and I met a guy who told me he was a business broker and I’d never heard of one. And he told me what he did. And I thought, Well, I’ve been doing that for myself for the last few years. I didn’t know you could make a living doing it. You could and told me what I had to do to get started. And I did. So that it kind of ended up here by chance, but have been fortunate. I’ve been a broker for probably 15 years now, 14 years, something like that.

Stone Payton: [00:02:41] So if an investor, an entrepreneur, is looking to at least entertain the idea of purchasing a heating and air business, what are some of the things that they should look for? Green flags and red flags, I guess would be a good way to frame that.

Patrick Lange: [00:02:57] Yeah, absolutely. One of the biggest things misconception that people don’t realize is the first part is many look at doing it through SBA funding, which is an incredible option. But most states require you to have a license and heating and air, and the SBA doesn’t want the seller remaining around to to be that license holder. So biggest red flags, if you don’t have a license, you need to find a license holder, be a cash buyer. That’s where a lot of people call me and get derailed. At the onset, they didn’t realize that. So addressing the licensing issue up front. The other thing is, is buying a business that’s built on service and repair. New construction can be a dangerous business in the trades quite often. A lot of times it’s a race to the bottom. It’s all about volume and low margins. And so buying a business that’s built on service repair and has a good reputation of first kind of key things I stress looking for.

Stone Payton: [00:03:52] Well, I got to tell you, my only real frame of reference for the heating and air business I went to to college, got a marketing degree, and I do find I’m very blessed. But my best friend growing up, he went in and learned to trade and did a heating and air work for the school system and always had his own business. And Curt can buy and sell me three times over. So it’s a it’s a very lucrative business. Right.

Patrick Lange: [00:04:17] And, you know, and I never do that. I’m completely I was completely ignorant to the trades and how I kind of got on the trade side is I, I listed a heating and air company for sale where I live and bought it. I love businesses with barriers to entry and it was a small business and I bought it and I ran it for a little over two years. And when I went to sell it, I realized once again, as I mentioned, there was nobody kind of helping the small guy and started learning about the trades. And I was blown away. I mean, I sell a lot of companies doing ten, 15, $20 Million a year. So I had no clue what could be made. And I see a lot of multimillionaires because of the trades.

Stone Payton: [00:04:59] So when someone’s getting ready on the other side of the equation for on the selling side, it occurs to me and I’ve had an opportunity to to interview some business brokers as well. There’s some you’ve got to get some ducks in a row, right? If you want to get a good market price, you got to get your books. And what are some some things you’ve got to start thinking about when you’re when you’re trying to get ready to sell?

Patrick Lange: [00:05:23] Yeah, there’s really four things I tell people to focus on. And the first one you mention is your books in order. Many people treat their business like it’s their personal checking account. And and everybody is always trying to reduce taxes. And and we have a saying that’s kind of a joke and not a joke is you can’t get paid to steal twice. You can’t hide hide everything from the federal government and then expect somebody to write you a check for it. So so that that’s the first thing is making sure your numbers are in order. The second thing is I stress people specifically in heating and air is get yourself out of the van. If you’re the best technician, the best installer, the best salesman, the best bookkeeper, the best front desk person that your company has, you’re wearing all those hats. You don’t have a business, you have a high paying job. And nobody calls me and says, Hey, I want to buy a business where I work in the sun for 15 hours and then go home and do paperwork for 5 hours. And so getting some separation you in the business, the second building up back on the service base and buyers really don’t like the new construction component so so focusing focusing your business on on service and repair as opposed to that new construction and and then building a good reputation for yourself out there. So that would be the four things that I, I kind of get people to focus on right away. And that typically leads to a higher dollar figure.

Stone Payton: [00:06:53] So what’s the most rewarding for you, man? What do you enjoy the most about the work?

Patrick Lange: [00:06:59] You know, the people? I think a lot of people say that is kind of a marketing thing, but I get to help so many incredible people that 25 years ago didn’t like. Their boss started a little business and for the last 25 years they’ve been employing the community. They’ve been taking care of oftentimes second and third generation customers. They’re supporting the local little league, the high school football team, just great people, great blue collar. To me, it’s it’s kind of small town America, you know, that just somebody who started with nothing but a truck and a dream and many of them and turn them into incredible businesses, wherever that is on the spectrum. For them, it doesn’t need to be a $20 Million company, it could be a $2 Million company. And so so the people I get to work with, the the dreams I get to continue keeping on and the legacy I get to keep helping to continue on.

Stone Payton: [00:07:54] So what’s the toughest part? What’s the most challenging is is it finding the sellers, finding the buyers, getting them to meet in the middle? What’s the toughest part?

Patrick Lange: [00:08:08] You know, the market has been strong in the last few years. There’s been a big private equity push into the market. So it’s not really it’s it’s not really the deal. It’s it’s having finding the sellers with realistic expectations. So unfortunately and I and I say this jokingly only as a way for me to deal with it, I get to tell a lot of people their babies ugly, you know. And what I mean by that is, you know, most small business owners, myself included, their families. Their family was raised in their business. Husband and wife team, late nights, no vacations, and their business becomes their baby. And many people don’t go to somebody soon enough about what does it take to build value in their business. They just go to work and then they come to me 30 years later and say, Hey, I want to sell my business and there’s no real value to it. And so it’s heartbreaking to sit with somebody and say, hey, nobody’s going to want your business because the way you built it. So that for me is the hardest part of my job is is kind of telling somebody that, hey, you’ve done it wrong, and which is why now I spend all the time I can public speaking, doing podcasts like this, writing articles for industry publications to say, here’s what you need to focus on to build value. And once again, I’m not saying every business needs to be a 20, 30, $50 Million corporation, but you should get compensated for what you’ve spent the last 20 or 30 years building and and doing some things right is what does that. And so that really would be the hardest part of my job right now.

Stone Payton: [00:09:35] I think you may have just answered this question, but I’m going to ask it anyway. I’m curious, how does the whole sales and marketing thing work for for you as someone who’s putting these deals together, is it that education and it’s getting out there and yeah, how how do you get your new buyers and sellers kind of into your circle?

Patrick Lange: [00:09:59] So from a seller side, absolutely. Outreach in education, I speak any opportunity I can. I write articles for four or five industry publications. I leave as an example. Tomorrow I fly to Texas to to be at an industry trade show event. So I try to be out there giving out as much information as I can. So that would be on the seller side. From a buyers perspective, we’re extremely strategic in our marketing and we track data, we track information and we’ve accumulated buyer list. So we market it not only to other heating and air companies, but buyers that we’ve worked with online articles. I spend a ridiculous amount on marketing to try to get somebody’s business in front of as many eyes as I can. And the hardest part of the job, obviously, is letting everybody know your business is for sale and nobody knowing it’s your business, right? I mean, everything needs to be confidential. And so so we do everything we can to have a big platform, because I believe the more people that are looking at it, the better price we’re able to get from a selling perspective. And so it’s a combination of those methods.

Stone Payton: [00:11:10] Well, you just touched on something that I’ve been curious about, this confidentiality thing. How do you how do you navigate that, that landscape where you’ve got all this confidential information, but you’re out there trying to help them market their business? I’m operating under the impression there must be some distinct methodology or process that you’ve got to use because you’ve got to maintain the confidentiality, but you’ve got to get the word out there to the buyers, right?

Patrick Lange: [00:11:35] Yeah, absolutely. So it is a fine line to walk and really a great question and one many sellers often worry about. And so, you know, we do that when we market our listings, what we call blind listings. So if it’s a heating and air company, we’ll use somewhere you’re familiar with in Atlanta, I can say ten year old heating an air company in Atlanta. You’re not going to know who that is. But if I say in Thomasville, Georgia, 50 year old heating an air company, well, it’s not a big enough town that has a lot of 50 year old heating and air companies with it. So people are going to know. So so we’re the wording we use the location we use a buyer is going to want to know a general location. But if it’s a small town, we may say southwest Georgia and or or northeast Georgia or, you know, depending on what state you happen to be. And so that’s the first part. And then when a buyer reaches out to me, we have them sign a nondisclosure agreement that basically says if they say anything to anybody, we’re going to sue them, that it’s confidential information and they need to understand that before we give them that information. And and so we have them sign documents that basically say they’re not going to say anything to anybody. And we also try to vet our buyers. So it takes a little longer to get a buyer into our system. But we want to know, are they local competitor? Are they somebody down the street who just happens to be fishing to see who’s available? So so we try to do everything we can to maintain that confidential nature until they’ve already signed something that promises they won’t say anything to anybody.

Stone Payton: [00:13:03] So let’s talk about deal structure for a moment because. It doesn’t always have to be. Here’s your check. Thank you for the business. Right. It can it can look a little different than that, right?

Patrick Lange: [00:13:14] Yeah, absolutely. And so it really depends on who the buyer and who the seller is and what they’re looking for. There’s lots of buyers out there currently looking for some seller financing that can help them often get over the licensing hurdle that SBA may provide an issue with. And so sometimes there’s a seller note involved that once again, the market specifically the last two years in the trades has been super strong. So most of the deals that we’ve done don’t involve any type of seller. Note two years previous. You’d see a lot of seller notes and I think those days will certainly come back. Like anything, it goes up and down and the market’s no different in buying and selling businesses. And so so I think you’ll see that come back. And oftentimes for a seller, there’s tax advantageous or tax haven. It’s advantageous tax. I thought it was easy for me to say that there’s there’s good reasons for them maybe to consider holding a note. The real downside in a business like heating and air is there’s typically not a lot of assets involved. So the risk to the seller becomes a little bigger than a business that had a lot of assets that you would come back and let’s say repo if the buyer doesn’t doesn’t make payments in a heating and air company kind of the blessing and the curse is the the low asset. So when you own it, you don’t have to have a lot of capital because you’ve got some vans, some ladders, some vacuum pumps and really that’s it. So if you hold the note and that seller doesn’t pay, you’re only recourse is now to go get some used fans back. Chances are the employees are gone and now you’re starting back at square one. So for for many people, that makes them nervous or apprehensive about holding.

Stone Payton: [00:14:55] All right. So what about timeline? And I’m interested for both sides of the equation as an investor, someone who might be thinking about doing this, how far out do I need to reach out and start having a conversation with you? And as a seller, how far out do I need to be building a real relationship with someone that has your specialized knowledge and expertise to get me ready?

Patrick Lange: [00:15:19] So let’s take the seller first. And so to me, there’s yesterday for a seller, it’s always as soon as you can. In my opinion, it’s making sure you’re getting your ducks in a row. The market’s going to change, and what people are looking for may change and staying on top of those changes. So most people don’t know where to go to get that information. They are incredible at fixing an air conditioner, but they don’t know anything about selling a business. And that’s for most people in most industries across the country. So the sooner you get that information, the sooner you can start making sure things are lined up properly and you’re focusing on those things. So so that answer is always sooner rather than later. On the buyer side, I think doing as much education as you can ahead of time is beneficial, but really each deal is going to be different and the market is always going to be different and interest rates are always going to be different. Right now, SBA loves heating and air, so if you’re already in that space, it’s very easy for you to buy somebody else with no money down and often cases so. So when the time is right for you is when I start focusing on it. Because many people look at say, I want to buy three years from now. Well, the reality is the market’s going to change so much in the next three years. What you learn today may not be extremely beneficial when it’s time to write that check.

Stone Payton: [00:16:41] Yeah, no, that makes perfect sense. All right. If our listeners would like to reach out and have a conversation with you or somebody on your team, what’s the best way? Whatever you feel like is an appropriate is appropriate. You know, a website, phone number. I just want to make sure they can connect with you, man.

Patrick Lange: [00:16:56] Yeah, absolutely. I appreciate that. And so my website is Business Modification Group. Once again, my name is Patrick Lang and I’m all over social media, Facebook, LinkedIn, connect with me anywhere you can and you can call me directly. 3524404604. That’s 3524404604. I’d love an opportunity to help out any way that I can.

Stone Payton: [00:17:22] Well, Patrick, thank you so much for joining us today. Man, you’re doing important work. We appreciate you. And yeah, just as I promised when we opened a conversation, exciting and informative. Thank you so much.

Patrick Lange: [00:17:37] Hey, I really appreciate the opportunity to come on with you today. I’ve had a great time.

Stone Payton: [00:17:41] All right. Until next time. This is Stone Payton for our guest today, Patrick Lang with Business Modification Group and everyone here at the Business Radio X family saying we’ll see you next time on Buy a Business Near Me.