Latest / The Buyer & Seller Podcast with Fexingo: Business Brokers, Exits, and Private Sales Explained / How a Plumbing Company Sold for 9x EBITDA by Standardizing Its Fleet
Transcript
- Lucas: You know that feeling when you're selling a business and the buyer keeps circling back to the same operational question — and you realize that one thing is worth more than the whole rest of the company combined? Luna: I've seen it happen with customer concentration, with lease terms. What was the one thing here? Lucas: A plumbing company in Phoenix. Family-run, about 14 million in revenue, 2.8 million in EBITDA. Decent margins, steady growth. They brought in a broker, got a letter of intent at 6.5x EBITDA from a regional private equity group. And the seller — let's call him Mike — he thought that was the ceiling. Luna: But it wasn't? Lucas: No. Because the PE firm's operating partner flew out for a site visit, looked at the fleet of 42 trucks, and said: 'I can't model your maintenance costs. You've got eleven different truck models, three different years, aftermarket parts on half of them. I'm pricing in a 15 percent capex overhang.' Luna: So the multiple wasn't about earnings — it was about the buyer's fear of what the fleet would cost them. Lucas: Exactly. And Mike had a choice: accept the 6.5x or do something about it. He pushed pause on the deal for six months. Luna: Six months? That's a long time when you have a LOI on the table. The buyer could walk. Lucas: They almost did. But Mike made a bet. He hired a third-party fleet manager — cost him about 40 grand for the engagement — and they did a full audit. Every truck, every engine code, every part number. Then they sold off 18 trucks and replaced them with two standardized models: Ford Transit 250s for service calls and Ford F-550s for heavy work. Same engine, same transmission, same part bins. Luna: And what did that do to the maintenance numbers? Lucas: Within four months, their monthly maintenance spend dropped by 22 percent. The fleet manager built a three-year forecast showing predictable costs within a 5 percent band. That went into the data room alongside the old numbers. The buyer's operating partner saw it and came back with a revised offer: 9x EBITDA. Luna: So the fleet standardization alone added roughly 2.5x the multiple. That's about 7 million dollars in additional enterprise value. Lucas: It was more than that, because the buyer also agreed to a two-year earnout with a 40 percent kicker if the fleet stayed within budget. Mike hit the target, earned an extra 1.2 million. Total consideration came out just north of 26 million. Luna: But not every seller has six months to pause a deal. What's the takeaway for someone who's looking at a potential sale in, say, the next year? Lucas: Start the fleet audit before you go to market. In fact, treat it as a pre-diligence item. If you're running a service business with more than ten vehicles — plumbing, HVAC, electrical, pest control, even landscaping — the buyer is going to discount you for fleet heterogeneity. They don't know how to price the risk. Luna: And the cost to fix it is relatively low. 40 grand for a fleet audit, plus whatever you spend on vehicle turnover. Compare that to the value uplift. Lucas: Right. And the thing is, the buyer's discount isn't just about maintenance. It's about the hassle of managing a mixed fleet. A private equity firm doesn't want to think about which truck uses which oil filter. They want a system. When you give them that system, you're selling them not just earnings — you're selling them operational simplicity. Luna: So the fleet becomes a negotiating tool rather than a liability. Lucas: Exactly. In Mike's case, the fleet audit also uncovered that he was overpaying for parts by about 12 percent because he was buying from five different suppliers. Consolidating to one supplier gave him a volume discount that actually improved EBITDA before the sale. That's just free money. Luna: And it's a proof point that operational improvements don't have to be about layoffs or cutting marketing. They can be about physical assets. Lucas: Yeah. And look, this isn't a 'paint the trucks and raise the multiple' story. It's about data. Mike had the fleet manager build a simple dashboard: cost per mile, maintenance interval compliance, average repair time. That dashboard went into the data room. The buyer didn't have to guess anymore. Luna: I want to ask about the earnout structure. The 40 percent kicker — how was that measured? Lucas: It was tied to a single metric: actual maintenance spend versus the three-year forecast. If spend came in under 105 percent of forecast each year, Mike got the bonus. He beat it in year one, came in at 103 percent in year two because of an unexpected transmission replacement on an F-550. But the buyer allowed a one-time adjustment for that because it was a known issue covered under warranty. So he still collected. Luna: That's the kind of earnout that actually works — simple, measurable, and tied to something the seller can control. Lucas: And the buyer was happy because they got a fleet that was predictable. They actually used the same fleet manager post-close. Mike's team stayed on for a transition period, but the fleet was already running on its own. Luna: So what's the one thing a service business owner should do tomorrow if they're thinking of selling in the next two years? Lucas: Audit your fleet — or any asset base that has a maintenance tail — and create a forward-looking cost model. If you can show a buyer that your biggest variable cost is actually fixed, you've just changed the conversation from 'what's the risk' to 'what's the premium.' Luna: And if you don't have a fleet, what's the equivalent? Maybe IT infrastructure? Real estate leases? Lucas: Exactly. The principle is the same: find the operational variable that the buyer can't model, and standardize it. For a dental practice it might be equipment lifecycle. For a software company it might be cloud infrastructure costs. The buyer's discount is your opportunity. Luna: I think that's a great lens. Honestly, if today's episode helped you see your own business in a different light — even a small one — that's exactly the kind of value we try to bring here. Lucas: Yeah, and if it moved your thinking forward in some small way, there's a link where you can support the show. It's buy me a coffee dot com slash fexingo. That keeps it ad-free and lets us dig into these operational stories. Luna: Absolutely. And we really appreciate that. Lucas: So back to the fleet — one more thing that Mike did that was smart. He didn't just standardize the trucks. He standardized the tool kits in each truck. Every service van had the same set of wrenches, the same diagnostic tablet, the same inventory of common fittings. That meant a plumber from one crew could jump into another truck and be productive in five minutes. Luna: That's a huge efficiency gain. And it shows in the numbers — lower overtime, faster service calls, higher customer satisfaction. Lucas: It also meant the buyer could onboard new technicians without a long ramp. That was a big point in the valuation discussion. The operating partner told Mike later that the tool kit standardization alone was worth half a turn on the multiple. Luna: So the fleet story is really a story about systems thinking. It's not just trucks — it's the whole operating model. Lucas: Exactly. And it's a reminder that the best way to maximize your exit is to solve problems for the buyer before they even know they have them.