Speaker Bio:
CEO & Owner, Metro Wireless | Managing Principal, Hoffman Capital
Tyler Hoffman is CEO and owner of Metro Wireless, a Detroit-based wireless provider serving thousands of sites nationwide. He runs the company under Hoffman Capital, his self-funded investment firm — no outside investors — which has completed four acquisitions since 2022, most recently Volli Communications.
Before Hoffman Capital, Tyler worked in brand management at FCA Fiat Chrysler Automobiles, in Strategy & Operations at Deloitte Consulting, and as Director of Operations at an independent pharmacy.
He holds an MBA from Northwestern's Kellogg School of Management and a BBA from the University of Michigan's Ross School of Business.Outside the office, Tyler skis around 80 days a year (Utah is his favorite) and picked up pickleball during the pandemic. He's a self-described Detroit "Carhartt guy," guided by a simple rule: play long-term games with long-term people.
Host, Acquiring Minds | Founder of Acquiring Minds
Will Smith, Host, Acquiring Minds Will Smith is the founder and host of Acquiring Minds, a popular podcast about buying, owning, and operating small businesses, with a library of hundreds of interviews with business acquirers and entrepreneurship-through-acquisition (ETA) success storiessss. He digs into his guests’ full journeys, from the search process and deal financing to the challenges and wins of running the company they bought. The show publishes twice a week with stories, insights, and practical advice on acquisition entrepreneurship, and Will has described himself as being on his own path to acquire a business. Episodes are also on YouTube, and Acquiring Minds offers episode summaries, webinars, and a newsletter at acquiringminds.co.
Metro Wireless CEO Tyler Hoffman sat down with Will on the Acquiring Minds podcast to talk about buying Metro Wireless, surviving the loss of its largest customer, and building a long-term, investor-free roll-up in managed connectivity.
Editor's note: This transcript has been lightly edited for readability. Filler words, false starts, and repetition have been removed, and names and industry terms have been corrected. Timestamps refer to the original recording.
0:00
Will: Tyler Hoffman, welcome to Acquiring Minds.
Tyler: Will, thanks for having me. Longtime listener, first-time caller.
Will: Love to hear that. Tyler, you've gone from a desperate moment in your business that you barely survived to, just a couple of years later, $9 million in revenue, over $2 million of EBITDA, and a goal to reach $50 million in revenue by 2035. Not only that, this is actually something of a lifestyle business. You're not killing yourself, at least not currently. We'll get into that. Start us off with some background on you, please.
Tyler: Thanks, Will. I'm a Midwestern boy through and through. I grew up right outside Detroit and went on to the University of Michigan to study business as an undergrad. After that I moved to Chicago, where I was a strategy and operations consultant with Deloitte for a couple of years. Then I ran operations for a mail-order pharmacy, which is where I really got a good sense of operating a small business.
After that I went to Kellogg as a part-time student in their evening and weekend program. I knew I wanted to get into search, and I went through different thought cycles on whether to do a funded search or a self-funded search. During my time at Kellogg I had gone back into consulting and also started my search. About five years ago, I acquired Metro Wireless, an MSP based in Detroit, Michigan.
Will: That was concise. I appreciate it. Some follow-ups. First of all, there's something about you and your sense of whether you're employable. Are you employable?
Tyler: (laughs) It depends on how you look at it. At Northwestern, when I was getting my MBA at Kellogg, there was a nice way to say you got let go: you were "failing forward" or "failing upward." In a traditional sense, I was actually let go from all three of my jobs. It wasn't a mass layoff. It was a genuine firing from each role. In hindsight, it was the universe being polite and telling me I had to go pursue my own entrepreneurial path. But at the time, trust me, there was a ton of impostor syndrome, and frankly there was even in the early days of running Metro. So it's been an interesting journey.
Will: Was your decision to buy a business because you felt you just couldn't work for somebody else, or was there always an inkling you'd do something entrepreneurial?
Tyler: My parents were small business owners for much of my formative years. My dad had a small marketing agency. He's a man with a lot of charisma, so I call him the Jon Hamm from Mad Men. My mom had a small law firm for a number of years. The autonomy they had in their lives was pretty cool.
A couple of years ago I was digitizing old family photos, and I became very aware of how present my parents were in my life, especially in raising me. That really drove my desire to run my own shop. It was a stark contrast to what I'd thought the working world would be, working for Deloitte or another firm, versus seeing my parents work for themselves and the autonomy they got to have. That left an imprint on me and ultimately shaped the path I chose.
Will: It's interesting, isn't it? Many small business owners are run ragged by their businesses. They have no time. They're overworked and underpaid. Many of the sellers we encounter are like that. So being exposed to small business can mean being exposed to a horror show, or to the ideal, which is autonomy and freedom of time. And in your own journey you've tasted both. Happily, where we catch you today is more on the autonomy side.
So you decide that buying a business, as opposed to starting one, is your path. Is that because you were exposed to search in business school? How did you decide how to approach this?
Tyler: This would have been early 2019, and search hadn't really taken off the way it has now, which has been really fun to watch over the last seven years. I entered Kellogg knowing I wanted to pursue a search. In fact, I have a fond memory of telling my business school interviewer that I wanted to buy a porta-potty business because I was going to be the king of Michigan. I was going to be number one at number two.
Will: (laughs) You should have pursued that thesis just for the catchy name.
Tyler: I know. If my name were Scott, I could have had Scotty's Potties.
At any rate, I entered Kellogg knowing I wanted to do search. What I was going back and forth on was which type. The prevailing wisdom seven years ago was that you needed a top-tier MBA to raise capital for a traditional search, or you could pursue the EIR model. I'm a huge fan of NextGen Growth Partners here in Chicago; I think Brian O'Connor runs a phenomenal program there. So I spent a lot of time diligencing the various paths.
What brought me back to self-funded search was that I wanted to own every decision. After losing three jobs, I was very tired of reporting to different people and not owning the decisions and the accountability. I was also a guy who had to buy a business. I had a classmate at the time who was the type to do a traditional search. He'd buy a company if it was the right deal, but he didn't have to. In my core, I had to do it, become an operator, and get into the seat as quickly as possible.
With that in mind, self-funded made sense. Even if I did a smaller deal, there's a larger volume of opportunities at the smaller end of the market, so I had a higher probability of closing.
My final note on that: a mentor told me to "search before you search." What he meant was, during business school, start getting reps in talking to brokers and business owners, and find out whether you're going to enjoy the grind of search. It's well documented how much of a grind it is. I did that, I found out how much I loved it, and that helped inform my decision to go self-funded.
7:04
Will: You loved the search process itself.
Tyler: I did. I loved talking to the brokers. I loved learning about different businesses: commercial kitchen repair, lawn care, the trades, and the different ways to look at companies. And the seller stories were all super cool. Typically they were first-generation business owners, retiring baby boomers. I resonated with a lot of those owners on the calls I was taking.
One of my competitive advantages is the charisma I bring to a seller. It certainly helped on my first deal and on all four deals I've now done. It was also the first time in my life I got to do traditional sales: selling myself and my ideas, convincing a broker to get me on a call with an owner, convincing an owner to sell to me, getting a bank to lend me the money. All of that was super energizing.
Will: You said you were somebody who had to buy a business, versus your classmate doing a traditional search who was prepared to let his search run out without finding one. Say more about that difference.
Tyler: I knew I had to become an operator. If I think about the hierarchy of needs in my own life, the thing I need first and foremost is autonomy. I knew that if I could buy a business and become an owner, I could sustain myself independently and achieve some level of financial freedom, regardless of how fancy a life I'd have. I needed to own my own time, so doing a deal at all costs was the driving factor.
My classmate was more someone who, if he found the right opportunity and could see a path to a top-decile outcome in the traditional search world, would pursue it. For me, the economics were less important at that time, and frankly they still aren't that important to me. I had to be an operator.
It was funny. Toward the end of my MBA, just for fun, I took a couple of interviews with consultancies. A month before graduation, I had a brand-new job offer in hand. I loved case interviewing, so it was fun. And when you graduate business school, you've never had a higher market value. This offer was a lot more money than I'd ever made in a W-2 capacity, and I had just been let go from my most recent job. So I asked myself: do I keep doing my self-funded search, or do I take this offer and punt the dream a few years down the line?
I'm very glad I didn't take it. Luckily I was dating someone at the time who seemed to enjoy beer flights over tasting menus, so we were able to live the rice-and-beans lifestyle for a while, which helped me get across the finish line.
Will: Did your small business owner parents have an opinion on your chosen path?
Tyler: They were uniquely supportive. They had run small businesses, so they understood the roller coaster: some richer years and some leaner years. They knew this was something I had to pursue and they were very excited for me. They actually participated in my first deal from a debt perspective, which we'll get into, and they were ultimately super helpful. I earned their trust. I got a little nervous at some points in my first couple of years operating, but they were thankfully very supportive.
Will: You were on the younger side. A lot of the people I interview come right out of business school, but even for a business school grad, you were a little younger, right?
Tyler: If I recall correctly, I was 26 entering business school, so definitely on the younger side. I did my deal six months after graduation, when I was only 28. I had never formally managed anyone, and at close I was taking over a team of 11 employees. It was certainly a contrast to any professional experience I'd had up to that point.
Will: So for somebody who enjoyed connecting with boomer-type owners, and who was younger than the typical searcher with no management experience, you were still able to connect with these owners. What's the secret? What allows you, young and unqualified, to connect with these mostly older men?
Tyler: Keyword is "unqualified." (laughs) I'll give you one example. When I was under LOI on my first acquisition, I was renting a car every couple of weeks to drive from Chicago to Detroit to meet my seller at the Detroit office. A lot of what we do is put equipment on top of cell towers and rooftops. He had helped install his own first sites, the radios and antennas, and he asked, "Tyler, do you want to go check out one of our network POP sites?" I said, "Heck yeah, I'll climb on the rooftop with you."
So we went up on a rooftop, at least 30 stories, in suburban Detroit. I still have the pictures from that day in 2021. It was awesome. I felt so energized, not just about the financial opportunity but about the actual operations and what they do.
That kind of experience, meeting owners in person, is a differentiator for me. I now run a much more proprietary search process for my tuck-in deals, and my ability to connect with owners in person and build a relationship really matters. I have no doubt someone from Stanford or Harvard can beat me at an AI-driven cold outreach campaign with emails and postcards. I'll never claim to be a genius there. But I can out-compete on charisma, and on bringing energy and excitement to an owner's company, which at that point in their life often means more to them than the final dollar.
Will: It's so obvious to hear you say it, and yet so many people get it wrong. The point is that the interest has to be genuine, and yours is authentic. They see a younger person who really admires what they've built and is excited at the prospect of taking it over. That will resonate. We hear that a lot, but a lot of people don't get it right.
14:21
Will: You've given us a peek into Metro Wireless, but tell us formally how you found this business and what it was.
Tyler: I was running mostly a broker-focused process, because I was balancing a full-time consulting job, school on nights and weekends, and a search. It was during COVID, so travel had subsided, but it was still a lot of hours. That led me to focus on brokered opportunities.
Within that, I had a small thesis on wireless internet service providers. Instead of running fiber or coax cable to homes and businesses, they rely on wireless antennas mounted on rooftops and cell towers to deliver internet via line of sight. I found a brokered opportunity in Michigan in 2021. My search was mostly constrained to the upper Midwest, so it was a natural fit. I had no intention of moving back to my hometown, but it happened that way.
The business was actually under LOI the first time I found it, but I stayed in touch with the broker. To be candid, it was probably a lightly marketed opportunity, and it was the broker's first deal, so there was some newness to his process. That gave me a competitive advantage. Once I met the owner, went to see him in person, and brought my energy, I won the process pretty quickly.
Will: Why had the first LOI broken?
Tyler: As I recall, that buyer had two deals under LOI, pursued the other one, and released Metro Wireless.
Will: Say again exactly what Metro Wireless does.
Tyler: Metro Wireless is a managed IT provider focused on connectivity in the telecom space. The legacy business was the fixed wireless internet I just described. We're commercial-only, no residential. Think wireless internet over 4G and 5G. We're an official Starlink partner. We do a lot with microwave point-to-point fixed wireless, which people in our industry know well. Then we have a slew of managed services: managed Wi-Fi projects, SD-WAN, cell boosters, hosted phone systems, SIP trunking, and so on.
So we're probably not a traditional MSP in the break-fix help desk sense. We're more managed connectivity and IT for the commercial market, and our niche is the mid-market and now enterprise client base.
Will: Give us an example to drive this home. Who's an example customer and what do you do for them?
Tyler: An ideal customer is something like an oil and gas firm in Texas. We sell nationally and now internationally, which is pretty cool; we're doing our first deals in Australia and Mexico this year.
Say there's an oil and gas substation in Texas that needs 100% uptime on its internet connectivity. Going down for 10 seconds is unacceptable. What I sell them is unbreakable internet. I'll bond a Starlink connection with a Verizon connection, an AT&T connection, and a T-Mobile connection, so the client has carrier diversity. Even if the Starlink network or the Verizon network is down, I can still provide a pipe to the internet. We design that solution, install it, and manage it on the client's behalf.
A common question is, why doesn't the client just get their own Starlink dish? They absolutely can. But these clients want a fully managed, white-glove, customized solution tailored to their needs, and they're happy to pay a few hundred more a month for it. That's the niche I play in. I'm not competing with mass-market providers like AT&T or Comcast.
Will: Is every engagement a custom implementation?
Tyler: We've productized most of our offerings. There are some custom SKUs that come up deal by deal, and we try to keep things as streamlined as possible to reduce the chance of error. But in most cases, yes, it's a customized, tailored solution for our clients.
18:57
Will: Back to the plot. Give us some numbers. What can you share about the size of the business, including number of employees?
Tyler: Are you looking for current, or back at the time?
Will: At the time.
Tyler: In late 2021, the business closed out the year with about $4.5 million in revenue, about $1.2 million in earnings, and 11 employees.
Will: $1.2 million in earnings is on the larger side of the sweet spot for self-funded searchers. And it sounds like a recurring revenue business; these are all contracted?
Tyler: Correct. It's monthly, contractually recurring revenue, and our contracts auto-renew after the initial term, which is super nice. Churn is five to seven points a year. About 85% of our book is recurring, and the remaining 15% is project-based, think large Wi-Fi installs.
Will: You said you're MSP-adjacent, not a traditional MSP. MSPs are an extremely hot category now. I don't know if they were back then, but I'd expect a $1.2 million SDE business to sell for a pretty rich multiple even then, although five or six years ago was a different time. What was it selling for?
Tyler: I was able to secure it for about 3.7 times earnings, which was a phenomenal deal. As I mentioned, it was lightly brokered and lightly marketed, and MSPs in this space probably weren't as well understood or recognized as a good industry five years ago. With those two levers, I got it under LOI at a good price. It also helped that I matched the price the other potential buyer had offered, so there was no tension with the seller during diligence.
Will: On the surface, it looks like you bought well. There's going to be a twist as you get into operations.
21:19
Will: So the purchase price was $4.5 million?
Tyler: Correct.
Will: What was your structure to take down this $4.5 million business?
Tyler: Initially I intended to do a raise; you can still do one in the self-funded space. As I recall, the structure was going to be about 75% SBA debt and about 10% investor cash. I was very fortunate to be oversubscribed pretty quickly; 2021 was a great time in the market, with record M&A activity. The balance, about 15%, was seller financing.
About a month after we got under LOI, I became aware of the full standby note, which I'm sure your listeners know well. The seller and I recut the deal so he would take a portion on full standby, which let me bring less cash to close.
When that happened, I called my investors and said, "Thank you, but I've restructured the deal with the seller and I don't need to raise cash." Then I called my parents. They don't necessarily follow IRR models and how the step-ups work, but I said, "Mom and Dad, the base case IRR in a typical model is around 30%. Here's what a 30% return on your money looks like." They were kind enough to lend me a low-six-figure sum, and I paid them a one-time 30% return on it. So I only had to bring 5% to close, with the SBA loan covering most of it and the seller financing the rest.
Will: Let me unpack that. 75% SBA, 15% seller note, and in version one, 10% equity, which was mostly going to come from outside investors.
Tyler: Correct. My parents weren't part of that first version.
Will: Then you learn that with a seller standby note, you only have to bring 5% equity. The other 5% that gets you to 10% equity is a full standby seller note. And the rest of the structure stayed the same: a 15% conventional seller note and 75% SBA.
Tyler: Correct.
Will: Thank you for that transparency. So you get into the business. What did the transition look like?
Tyler: My seller was very gracious. He was willing to spend a full year with me on the transition. The business was largely what I expected; I'd had good access to the data and information I needed during diligence. But there are always things you learn. One big example: candidly, the seller's wife was far more involved in the business than had been disclosed to me before close. I think a lot of people who acquire businesses see that.
So one of my first transition priorities was successfully offboarding the seller's wife. The seller himself was able to stay on longer, so he was less of a concern. But transitioning his wife out within six weeks of close required some changes, and the team and I had to work on that immediately.
25:11
Tyler: The other unusual thing we did, which I wouldn't necessarily recommend to other searchers: the seller was very concerned about how it would be perceived that he'd sold the business. He was keen that I be announced as chief operating officer, and that we not tell the staff or clients that I was the new owner.
People in my circle and my mentors recommended against it, and in hindsight I probably should have taken their advice. All it did was create some pain and mistrust with clients and employees when everyone eventually found out. But that was the path we chose, and I had committed to doing it for the seller. The first few months were about getting my training wheels, starting to lead the team, and learning.
Will: Really interesting wrinkle. It doesn't get trust off on the right foot, and it creates complications where people continue reporting to him when you're actually the owner.
Tyler: That's where it fell apart. I can understand his perspective. He was worried about perceptions among his colleagues in the industry, his customers, and staff he'd had for many years, and I can see why he wanted to manage that. But within a couple of months, employees could see I was leading the ship and not deferring to the seller in day-to-day operations. Even if the team didn't address it with me directly, they could see what was happening.
Will: Was there a moment of truth, or did it gradually become clear?
Tyler: There was no big meeting, as I recall. It was more one-on-one conversations with staff over time. As typically happens with a change of ownership, staff get nervous, and they could tell something was clearly going on. I had a number of one-on-ones, including with the person who now runs the business day to day, who was promoted from within. It created mistrust with him for years, and we ultimately had to work through it. It's not something I'd recommend to any new searcher.
Will: What was the seller trying to protect against?
Tyler: He was a younger seller, about 40 at the time of the sale. He wanted out of the business for a few reasons. He had some personal matters he was working through, and his wife, who I learned post-close was deeply ingrained in operations, wanted out of the day-to-day. As a family, it made sense for them to exit. But a lot of his close friends either worked at the company or were in the industry in southeast Michigan. I believe it was a mental block for him, something he wanted to be very protective about, including with long-tenured staff.
Will: I wonder whether age was a factor. For any seller there can be trepidation about telling the staff. With an older, retirement-age seller, the staff probably expected a sale at some point. The worry there might be that someone inside thought they'd get the chance to buy it. Too many variables to generalize. But interesting that this was a 40-year-old seller, given that you said you build rapport with retiring owners.
Tyler: Absolutely. The three acquisitions I've done since all followed the traditional retiring-owner profile. The first one didn't. I think we'll see more of that in ETA going forward as newer companies get transacted on. But you're right, the first one didn't have that traditional profile at all.
Will: Other than that transition detail, and the customer concentration we'll hear about, anything else from your early days as owner? Was it otherwise the business you thought it was?
Tyler: There were things about the space I didn't fully appreciate. The only analogy I can think of is LCD TVs. At the time, the business was very focused on selling bandwidth over the fixed wireless network. Some clients were paying $1,500 a month for service, but margins had compressed so much that a new customer with the same profile might only pay $500 a month. I can't think of many things that have gotten cheaper over time except bandwidth, broadband, and LCD TVs. That was a challenge.
There was also a lot of exciting opportunity, which we'll get to. But the headline is that the products we sell today, in terms of new sales and contract value, don't really tie to the legacy business at all. There's been a huge transition in the book over time, and there will continue to be. Looking back, it's easy to play Monday-morning quarterback, but I'm not sure what I could have diligenced better. I probably still would have done the deal.
Will: So you get into the business and find that the core service offering is in transition. What you'll sell going forward is different from what generated the historical revenue.
32:22
Tyler: Yes. And my other short story on that: the network wasn't in the best place either. I thought it had high reliability and high availability, good uptime. Unfortunately, I learned post-close that the network would go down at least once a month, and customers would have an internet outage. That led to a lot of angry phone calls and cancellations.
Fortunately we're well past that now. But five years ago I wasn't a technical guy by trade. I'd never worked in telecom, and I didn't know servers from routers. It was a pretty scary moment. I was very fortunate to have the seller by my side in operations, but he only knew what he knew about how he'd set up the network and the company. It took me at least two or three years to understand industry best practices, and frankly I'm still learning. I talk to competitors and peers to understand what good looks like. I try to come in with low ego and a beginner's mindset.
Will: On being an outsider and the technical knowledge: is this a blue-collar, field-technician kind of industry?
Tyler: It's not a traditional trades or blue-collar business. The way I think of it, it's not highly human-capital-intensive. I have friends who run commercial cleaning or HVAC businesses, and to double revenue they probably have to almost double headcount. It's a nearly linear relationship. One of the better parts of my business is that if I doubled revenue tomorrow, the relationship wouldn't be nearly that direct.
Here's a great example. We had two field technicians when I bought the company at $4.5 million in revenue. When we dipped to $3.6 million, which we'll get to, we had two. And now that we're eclipsing $9 million in run-rate revenue, we still have two. Of course our total headcount is higher, but it gives you a sense of how the business can scale.
34:49
Will: Let's hear about the large customer churn and what it meant for you.
Tyler: This is probably my best war story, the one I tell fellow business owners at trade shows to show I've taken a few punches. It was August 2022, eight months into operating. Most, if not all, of the team knew I was the owner by then, and the seller was starting to step back as planned.
We had a very large customer. According to the quality of earnings report, it was 20% of trailing revenue. They were under contract at close, their monthly billings were growing, they were profitable, and they seemed happy. By eight months post-close, they'd grown to about 25% of revenue, which I'd later learn was about 50% of our cash flow because of negative operating leverage when they left. Your rent payment doesn't drop when a large customer leaves.
They called us one day in August 2022 and said, "Metro Wireless, we like you guys, but we're month-to-month now, we've found a new vendor, and we're moving the entire relationship in 30 days." No step-down. The whole business, gone in 30 days, and nothing we could do about it.
To my team's credit, it wasn't an execution or operational issue. To my seller's credit, it wasn't a relationship he managed; it was one of our sales reps, and he did his best to keep the account as long as we could. But at the end of the day, my cash flow was halved, which meant my purchase price had effectively doubled. It was a very scary time.
Will: 20% revenue concentration when you bought it, growing to 25%. This is such a key learning. For people who know, it's basic, but it's an easy miss: revenue concentration is not EBITDA concentration. They represented half the actual profit. Losing half the earnings in one fell swoop is painful enough. I'll ask whether you could still service debt and pay everyone. But even if you survive it, which you did, it effectively means you bought the business at twice the multiple, because you got half the earnings for $4.5 million. Double-dipping on the pain.
Tyler: Yes. My awesome deal, the one I was bragging to my buddies about on the annual Kellogg golf trip, turned out to be quite the opposite. And eight months in, we were deep in the J-curve, making a lot of investments: CRM, process and technology changes, new hires. We'd launched company-sponsored healthcare, contributing materially to medical, dental, and vision for our employees. We were doing all these things and selling the vision to the team, and then this large customer walked.
I'm lucky to say I didn't lay off a single employee, I never missed a debt payment, and I never missed a vendor payment. But there were weeks when I waited on customer checks to arrive on a Thursday so I could clear payroll on Friday. I'm getting goosebumps thinking about it.
All I could think about was the impostor syndrome. I'd been fired from every job I'd ever had. I'd borrowed money from Mom and Dad. I was deeply embarrassed. I felt like I was failing and wasn't going to come out the other side. There was no one to hold accountable but myself. It was a deeply scary moment, and it took time to recover.
Will: I don't want to pick at the scab, but I have to ask: was this a diligence miss? Is there something the audience can learn from?
Tyler: I go back and forth, and I'm willing to take accountability. I believe the right answer would have been to still do the deal, but with a seller note contingency. At the time, I understood the SBA didn't allow an earnout based on future revenue. But as everyone should know, you can create a contingent or forgivable seller note, so that if the large client churned for any reason, there's a formula to not pay out the rest of the note.
Even so, a seller typically won't take a deal with a 50% note. And I did get a great entry multiple, and yes, I doubled it overnight. It's hard for me to judge, and I'm biased because things are turning out for the better. But it's fair to say it was a diligence miss. I paid for a quality of earnings report, and my lender got comfortable with the narrative: an under-contract client with growing monthly billings that was happy. I have some accountability there, and I'll own it.
Will: Say more about this dynamic where they were 20 to 25% of revenue but twice that in EBITDA concentration. Was this customer unusually profitable, or is this just how the numbers fall when you lever up a business?
Tyler: The customer's profitability was in line with the rest of the book. The real story was operating deleverage. My cost base doesn't shrink as quickly as revenue. I can't cut my rent in half, I can't cut half a support technician's salary, and I can't cut a lot of fixed expenses when revenue declines. Costs shrink slower than they grow. I still needed the software, the people, and the physical space for the rest of the business.
So with customer concentration, think about what you can cut beyond COGS when you hit reverse operating leverage, and model it pre-close. I think that's very important and something searchers may not think about. I was a rookie dealmaker and didn't fully consider or appreciate it.
Will: I want to underline it. A lot of this comes down to fixed expenses. If revenue drops 10 or 20%, your earnings will likely drop much more, because your expenses don't move. The gap between revenue and expenses is your profit, so if expenses stay put and revenue drops, the earnings drop is amplified. You really need to model what a 10 or 20% revenue drop does to earnings. It's basic for some, but many listeners don't quite realize this dynamic, and it's a treacherous one.
And I'm surprised you were already in a J-curve from new investments, plus you now had debt on the business. My napkin math would suggest losing half your earnings would put you underwater. How did the math work?
Tyler: I was very close for a while. Back in 2021, prime was very low, and my interest rate was locked for three years at 5.05%. That saved me. My blended rate on my SBA debt today is probably about 8.2%. If I'd had that rate back then on my large SBA payments, it probably would have been a near-death experience.
The other thing, and I laugh when I say this: the entire team knew what had happened, so we went through a lean-and-mean phase and took pride in cutting costs. I renegotiated credit card processing rates. I went after every line item on the P&L. I went after the dumpster guy to save $50 a month. We canceled subscriptions we didn't need. Everyone leaned in, because by then they saw the vision of where we were going.
I'd love to tell you there was a single clever move, but it was hand over fist for a while. We had to grow revenue organically, at a time when the average new customer paid less than the average legacy customer, so we had to make it up on volume, bring charisma to sales, and build relationships with commercial clients.
Will: But it didn't cause you to question the viability of the overall business or market. It happened to be a big customer you lost. You still believed in the thesis and the long-term viability, and it was about surviving until you could breathe again.
Tyler: Exactly the way I think about it. The book of business perhaps wasn't the highest quality at that point. But I had developed a more thoughtful thesis on the industry. This was a space I wanted to be in, I saw what good competitors were doing, and I wanted to emulate that. I knew if I could get through the J-curve, this was a business I wanted to build.
One small example: we invested in Salesforce, not just as our CRM but as our marketing tool. We quote out of it, it now does our billing, it runs project management with Gantt charts, and it handles support tickets. No sane person would put such an expensive Salesforce implementation into a $3.6 million revenue business, which is where we'd dropped to at the bottom. Way too much investment for such a small company. But I had a long-term vision that it would be worth it. Doing things ahead of revenue was a theme in my decisions. Was that foresight, or did I get lucky? Hard to say. I do think luck has played a major role in getting where I am.
47:21
Will: How long did it take until you felt you were back at cruising altitude?
Tyler: Two years. By mid-2024 I felt we were in a better place, and by then we'd started selling a lot of new, differentiated products. There was an opportunity to become an official Starlink partner and sell their satellite service alongside our 4G and 5G internet, bonding the connections together. That was really exciting, and frankly a lot of our competitors didn't do it and still don't. It's a niche in the marketplace. T-Mobile actually just came out with a similar offering. Ours is more customized and white-glove, but they're seeing that need in the market too.
These more differentiated, customized solutions for enterprise customers who are willing to pay more have better margins, and those customers are easier to support. It took me about two and a half years to get really comfortable with the business: how to sell it, position it, market it, and price it. That was also when I started thinking more deeply about additional acquisitions.
Will: Before we get to that chapter, what did your personal life look like during those two hard years? I want to set up a contrast with today.
Tyler: (laughs) I'll be honest. I was living in downtown Detroit at the time. I'm a huge fan of the city and its resurgence, by the way. I was going into the office every day, negotiating with the dumpster guy and all of that. By early-to-mid 2024 the team was about 15 people. We'd turned over some bad apples and brought in new talent, which helped the business perform better, and the network had been fixed. But I was deeply involved day to day, in many of the sales cycles, leading operational improvements, and to some extent in the technical network work. Very operationally involved through about mid-2024.
Will: At that point, why did acquisitions pique your interest as an area of growth, as opposed to continuing with organic growth?
Tyler: I got bitten by the long-term hold concept. It's probably too early to say whether I'll do a diversified holding company like the Chenmark model. Right now I want to stay in telecom and telecom-adjacent IT. But I thought it was such a cool concept: if I don't have any investors on my cap table, why not do a long-term hold? I love what I do. My parents had their businesses for a long time. And the sellers I talked to had phenomenal lifestyles compared to the partners I saw in my consulting days, with the long hours, the travel, and the canceled flights.
It's no secret that I want to be a husband and a father, and this kind of work lets me live a good life. I'm not building for an exit. I want to retain my autonomy, and frankly I'm not sure what I'd do with the liquidity.
I'm also in the right industry for it. I hate to pick on e-commerce, but I wouldn't want to run a fidget spinner business. What happens when fidget spinners go out of style? In my space, I see owners who have built a recurring book over many years, and there's a moat. There's durability. Both my personal goals and the nature of the business are very friendly to long-term holds. That's my ethos, and since mid-2024 I've been putting more time into M&A and inorganic growth versus just organic.
Will: But why did deciding on a long-term hold lead to buying other businesses rather than just growing organically? Because it's faster, and because you'd already bought one, so you knew what it looked like?
Tyler: Well said. Something underappreciated in our space is that once you do a deal, you know what a deal looks like. A lot of owners in managed IT and telecom have never done an M&A transaction, never gotten bank financing, never run a process with attorneys. I now have a skill set many people in my space don't, which makes me dangerous. I can have a qualified conversation with owners, and I have social proof because I've done a deal.
Also, growing organically in my space is hard. I fight for every 10 or 15 points of growth. Luckily we grew 23% organically last year, but I can't promise that will always happen. In my space, it's much more common to grow inorganically. Unlike e-commerce or HVAC, you can't just put a lot of money through Facebook and Google ads.
Will: Because customer acquisition is slower and more difficult?
Tyler: Correct. B2B sales cycles are slow and drawn out, and the partnerships we rely on to co-sell are built over years, not days or months. Our clients have buying cycles too. It took me two years to figure this out, but pursuing inorganic growth, especially with my skill set, is the bigger lever.
Will: In mid-2024, was the business throwing off enough cash to redeploy into acquisitions, or were you contemplating raising equity? How did you envision approaching these deals?
Tyler: I had a lot of thought cycles on this too. The way I looked at it then, and still do, is that investor equity is rocket fuel. If I wanted to go fast and hard and have bragging rights at every golf outing for the rest of my life, I'd raise investor dollars, do more deals faster, and probably pay higher multiples, just to say I have the most assets under management. There's no shame or judgment for people who pursue that.
But on my hierarchy of needs, maintaining my autonomy and lifestyle is the most important thing. Adding the headache of an investor raise, quarterly meetings, monthly email updates, and all of that wasn't worth giving up the autonomy I'd worked so hard to build.
And Metro Wireless still wasn't throwing off much cash. We were still recovering. Debt service coverage was improving, and we could afford some of the improvements I wanted, but we weren't generating a ton of cash. So I had to chase smaller deals. Deals two and three were only about $250,000 to $300,000 in earnings, at reasonable multiples. By then private equity had discovered managed IT and MSPs, and I can't afford to pay those brokered multiples. I had to be very disciplined about any deal, certainly back in 2024 and still now.
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56:08
Will: To illustrate that, let's hear about deals two and three.
Tyler: Deal two closed in July 2025. It was a Michigan phone system business. I'd met the seller at a trade show just one month after my first close, back in February 2022, and I worked that relationship for three years, calling him every quarter or two. He'd semi-retired to Florida, built the business over 20 years, great guy, had just turned 70. The classic seller profile. He really wanted to make sure his clients were taken care of. I've never seen someone more passionate about keeping clients happy. I was taking over this man's baby, purchase price be damned.
He had about $300,000 in earnings, and we agreed on $600,000, about a 2x SDE multiple. Very fortunately, he seller-financed 80% of the deal, so I only had to bring 20%, and I was able to use recycled cash flow from Metro Wireless to fund it.
Will: A 2x multiple is really low, and 80% seller financing is an extremely generous structure. I assume that's because it was such a small business that you could command those terms?
Tyler: That's correct.
Will: Just calling it out. Continue.
Tyler: The point of the deal wasn't really the money or the accretive earnings. It was proof that my company and team could buy another company, tuck it in, and integrate it. In my industry, integration comes down to three things. First, sales continuity. Second, billing continuity: monthly billing cycles, matching terms, and taxation, because telecom taxes are very complicated and you have to get the tax rating right for each client. Third, support: you don't want a client calling our NOC and reaching a technician who isn't trained on their phone system. Getting those three right is the job, and I won't claim we always got all three right at the same time.
The other interesting thing: I was excited to do the deal, but my team was nervous. They saw that Tyler bought Metro Wireless a couple of years ago, and now he's bought a second company. Is he going to sell the combined companies to lower middle market PE and get out? Are our jobs at risk? It took months, not days, to convince the team that I'm sticking to my guns, I have no desire to sell, and I want to keep growing and doing acquisitions. I didn't expect that reaction. I met them where they were and worked to address their concerns, but it was a scary time.
Will: We're used to the target company's employees worrying about their jobs, but not usually the platform receiving the bolt-on. That's an interesting reaction.
Tyler: Then deal number three, where the momentum started to build. In August, the month after closing deal two, I was talking to my key phone system vendor and said, "I just closed a deal. If you hear of any owners looking to retire or sell, let me know. I've now got the social proof of two deals." He said, "As a matter of fact, I know a gentleman in Indiana who's probably looking to retire soon. Let me introduce you."
He had about $250,000 in earnings, and we agreed on $500,000, another 2x multiple. He had two employees he wanted to make sure were taken care of. We used a partial SBA loan and a partial seller note; I believe the seller note was 40% of the transaction. He also had two large customers, so we made it a forgivable seller note contingent on maintaining that revenue. I've learned my lesson over time. He was amenable to that structure, and so was my SBA lender. We closed in December.
Having done two deals within six months, July and December 2025, the world started paying attention. My team knew more deals were coming and was getting more comfortable with it, and people in the industry started to see what Metro Wireless is all about.
1:01:35
Will: Those were two pretty small deals. They're great for signaling to the industry that you're an acquisitive player, and the rest of the industry doesn't need to know they're quite small tuck-ins. You get your wings and learn how it's done before taking on more ambitious acquisitions. But it would take a lot of these to move the needle. Am I thinking about that right, or can you do these at high velocity and add revenue faster than I'm giving you credit for?
Tyler: There are two ways to look at it. Because I have no outside investors, all those earnings accrete to the business, which is great, and I can recycle the cash flow into more acquisitions. To your point, as we grow, a business doing $250,000 in earnings will move the EBITDA needle less than it does today. So yes, these small deals are very helpful for cutting my teeth and teaching my team an integration process, and we'll talk about deal four, which was larger.
But I do have a working thesis that there are many owners in the $250,000 to $400,000 earnings range, and because we've built a strong platform, technology-wise and people-wise, those opportunities at those multiples will keep being very appetizing. We'll keep chasing them.
Will: And if you can digest them quickly, and do two, three, even four a year, you're adding something like $1 million of EBITDA a year. After five years, you've added $5 million of EBITDA, bought at a very low multiple. That's a pretty productive five years. Is two to four small deals a year unrealistic, or is that what you're aiming for?
Tyler: From an organizational readiness perspective, to use a buzzword from my consulting days, my team is far more prepared to do M&A integrations than before. So yes, we can reasonably expect to do two or three a year, especially on the smaller side. We're more ready than we were a year ago, and we have the playbook. The lower middle market PE firms we go toe-to-toe with have their integration playbooks, and now we do too. It gets easier with time.
Will: There's one more deal. And this one was a step up, a bigger one. Let's hear about it.
Tyler: We completed this most recent acquisition in May 2026. It came from a relationship with the owner's son, whom I'd known in the industry for about three years. We'd co-sponsored events together, and I'd always thought highly of him, his team, and the business. He called me when an opportunity came up to buy his family's business.
For scale: a team of 10, about $900,000 in earnings, and a price of about $2.5 million, a bit under a 3x multiple. They're based in Ohio and do a lot of phone systems, a different cut than ours, but the throughline is a customized, white-glove approach. An ideal client for them is one we're onboarding right now: a large casual-dining restaurant chain across the US that you've certainly eaten at, and so have I. They have a unique quirk with their phone systems, and that's how we land those large deals. It's not a churn-and-burn shop competing with Comcast or Vonage. It's a customized solution.
During diligence, as I learned how the family business goes to market, sells, manages clients, and runs its NOC and support team, I got really excited. Having done deals two and three, I was ready for a larger one. We could roll up our sleeves and figure it out, which was very exciting to me.
1:07:01
Will: For a bigger deal, what does the structure look like? The same heavy seller note you got on the two smaller ones?
Tyler: No. The seller didn't have an appetite for a large seller note at the time. I'm laughing because that came back full circle. I'd worked with my original SBA lender on my earlier deals and had four notes with them. It's a lender every searcher knows and uses. I went through the SBA process and my diligence, got a term sheet, got a commitment letter, and went through full underwriting and credit.
The initial structure required zero equity from me, because the lender was giving me equity credit for the paydown on my existing business, and the seller was going to take a small contingent note. We got through the notaries: one came to see me in Michigan, another saw the seller in Ohio. Then came wiring day. The following day, I'm driving from Detroit to Ohio and the bank calls me: "We're looking at this legal issue in the purchase agreement. Even though it's gone through full underwriting and credit, our chief legal officer says we can't disburse the funds. We don't like the look of this deal."
Hugely surprising. What high-volume SBA lender waits until wiring day to tell you that? And it was a legal matter we had already addressed. I had full, unlimited indemnification on that particular matter, a disclosed right of set-off in the seller note for any damages related to that claim, and an escrow. I'd priced the risk, managed it, and covered it in the purchase agreement, and the bank had approved it. But on a final desktop review on wiring day, the bank pulled out.
So here I am driving to Ohio. We're all supposed to celebrate over dinner that night, and I have to meet the seller in person and say, "I'm so sorry. I don't know what's happening. The bank just told me they won't wire the funds." It was a huge disappointment, and I didn't know what to do. It was very scary.
Will: How did he react? He might immediately question your motives and think it's a negotiating tactic.
Tyler: That was my fear, and I want to be very clear that I would never intentionally retrade a seller like that. What came next is something I'm not super proud of, but I had no choice.
He fit the traditional seller profile, about 74 if I recall, and he's a very stoic person. I think you can only become that stoic after 30 or 40 years of running a small business. He frankly taught me more about handling adverse news that day than I'd learned in a long time.
I said, "Let me take the night to think through some solutions. Meet me for breakfast at the Bob Evans around the corner at 8 a.m." That night I looked at the Metro Wireless operating account and called my GM, who was running the business. I told him, "The bank pulled out. I can't find another bank overnight. The only way this deal lives is if I give the seller as much cash as I can and he takes a note on the rest. I need the $500,000 in the operating account." He said, "You can have $250,000." I said, "I know, but I need all of it. I need to wipe the account."
We'd been so proud because we finally had excess cash flow. I was going to be Mr. Capital Allocator and set up a treasury account. (laughs) I thought I was pretty clever.
So over hash browns and mediocre coffee at Bob Evans, I told the seller, "I can't get investors; that's not a path for us. No other bank will get this deal done now. The only thing I can offer is this amount of cash wired to you today, and you take a note for the balance." Sellers are often fatigued by closing day, and he was. Will, he looked down at his coffee, looked back up at me, and just said, "Okay."
I said, "I am so sorry. I didn't come all the way down here to retrade you. Frankly, I'm embarrassed. This isn't the reputation I want to build as an acquirer." He understood that I was acting in good faith and that this wasn't a tactic. But it felt really odd then, and it still does. Handling those situations isn't something you learn in business school. It only comes from operating and flying by the seat of your pants.
To make it more interesting, there were family members in the business whose roles didn't correspond to the duties and needs of the business, so I had to let a few of them go at close. I went from the roller coaster of getting the deal signed, to announcing changes to his team two hours later, to announcing to my own Metro Wireless team that we'd just closed. It was a nutty day, and I was exhausted by the end of it, staying at a little Comfort Suites in the exurbs of Columbus, Ohio. Quite a day.
Will: I'm digesting here. Did you need the seller to work with you during the transition?
Tyler: The seller, the father, wasn't in the day-to-day operations, so fortunately it was the rest of his team I needed to work with. For the people we knew we wouldn't retain permanently, we set them up with a generous severance. They helped with the transition and offboarding for a while, and we were happy to be a reference for their interviews. We did the best we could to take care of them. But no, the seller wasn't needed for the operational transition.
Will: This is something that's always hinted at but rarely discussed directly: letting people go when you buy a business. Usually I'm interviewing first-time buyers, and if people are let go it's gradual, getting the people who aren't on board with the new vision off the bus. But letting a handful of people go on day one as a first act, we don't hear those stories often. What was that like, and why were you so sure it was the right move in the first hours of owning the business?
Tyler: It became clear during diligence that to hit the EBITDA number we needed, we had to look at staffing, among other things. There are other synergies we're realizing during integration too, like turning off systems and vendor relationships we don't need. But we also needed to eliminate redundancies to run a healthy, optimized business, and I knew at closing which few roles wouldn't be needed long term.
The coaching I received was that telling those people at close was the most respectful and dignified way to handle it. I didn't want to tell the new team, "Welcome, everyone's staying, no layoffs," and then let people go three months later. That creates a lot of mistrust, and I knew that firsthand from my first deal. The most humane approach was to tell people at close: "We're going to transition you out. Here's a severance. We'd like your help with the transition, we're happy to be a reference, and if you need to leave early to interview, please go."
That's how we handled it, and it largely worked. I would probably do it again. But there's no good way to do it, and on a day that was already so hard because of the financing, it was the worst part of the job, by far. You have to find the most dignified way to do it and still be a leader. That's part of the responsibility of playing the game.
1:17:32
Will: How has the integration of this larger business gone in the four months since?
Tyler: The highlight, compared to my first deal, is that from a sales and growth perspective we're ahead of forecast. We're adding high-quality revenue on the voice and telephony side, including a couple of large deals. One is the restaurant chain I mentioned. Because of how that deal was sold, they'll pay for five years of service up front. If compound interest is the eighth wonder of the world, I think negative working capital is the ninth. We expect a seven-figure wire this year to pay for services up front, which is super cool. The rest of the business looks really healthy too.
I'd forecast about $800,000 of earnings accreting to the platform. I think that will exceed $1 million within 12 to 18 months from additional synergies. Nothing I can realize overnight, but we're doing a lot to save money on opex and SG&A. And the team is super high quality. We're already talking about raises for them, plus our healthcare plan and the 401(k) we just launched. The team is excited about it.
Will: Congratulations, that's great to hear. I only have you for a few more minutes, so let's zoom back out. You told me on the pre-call that you see M&A as the highest and best use of your time today. Flesh that out. What does your day-to-day look like, and how involved are you in operations?
Tyler: As I mentioned, there's a day-to-day GM, whose title is now president, running our core Metro Wireless business. He was with the business when I acquired it five years ago as an individual contributor, rose to run the support team, then all of operations, and now he's president. He's a really cool guy, about 40, with a wife who's a nurse and two kids. He came to the US as an Iraqi refugee about 20 years ago, and he's frankly living the American dream: the house in suburban Michigan, the Christmas decorations, all of it. He wants to build this business with me, and I see him as a partner. He called me last Saturday just to shoot the breeze. We're very close. I have his back and he has mine.
That lets me spend only 10 to 15 hours a week on the core business. It took years to figure out, but more of my time on the core business might yield a point or two of incremental earnings growth per year. If I allocate my time to inorganic growth instead, like direct sourcing, building lender relationships (I'm at or will soon be beyond the SBA cap, so I need to think about senior leverage), and driving the M&A process, that's a much higher-leverage use of my time. That's given me flexibility I didn't have two years ago, when I was in the office every day helping with support tickets.
My last comment on that: I'm trying to build a business that's sustainable for me to run. I don't want to build a business I feel I need to escape from and sell within two years. I'm very deliberate about how I use my time, and that probably looks different from many other operators today.
Will: So the fact that you work 10 to 15 hours a week isn't madness. There's a method to it: you're managing your own energy because you're in this for the long haul, not doing a sprint roll-up. I just came out of a webinar with Jeff Homer, who did the music school roll-up, about the financial architecture of committed-capital roll-ups, and a key ingredient there is velocity: breathlessly doing M&A for five years. You're decidedly not doing that. To be indefinite, it has to be manageable, meaning your lifestyle, your sleep, your hours per week.
Tyler: Well said. Because I have no outside capital, I personally guarantee every note I have, and that's currently north of $6 million in personally guaranteed debt. So when I do a deal, I have to be very disciplined and certain it's the right one. Yes, I'll go slower and do smaller deals, at least initially, and that's okay. I'm building my own shop with no outside capital and a permanent mindset.
I don't want to do a bunch of deals for five years, never amortize the debt, and flip it to private equity. That's just not my model. Yes, it's less sexy, and I know some of the stories you're referring to. But it's not who I am. I'm solving for autonomy and sustainability. If a deal comes across my desk that I want to do, I'll do it. I'm looking at a potential turnaround right now that interests me. But I won't become undisciplined and overpay for brokered opportunities just to hit an assets-under-management number and flip it.
1:24:24
Will: I said in the intro that you're targeting $50 million in revenue by 2035, so you're not without ambition. That's a big number, nine years away. But you have the advantage of age, because you started young. How old will you be in 2035?
Tyler: 42.
Will: So even at a manageable pace, you'd be a 42-year-old with a $50 million business. If margins were, say, 20%, that's a $10-million-a-year business. (laughs) I don't know why more people don't approach it this way. How ambitious is that $50 million number? You're at $9 million today, so you need to add roughly $5 million of revenue a year. Is that math right?
Tyler: The way I looked at it, I need to grow 24 to 26% net per year to hit the 2035 target of $50 million. That's a mix of organic and inorganic growth, and we'll actively chase both. We've been fortunate. Aside from the step-down a few years ago, we've averaged at least 15 points of organic growth per year, and acquisitions should now accelerate that. So we're a bit ahead of plan on revenue growth. But I need to stay diligent and keep the sourcing pipeline going. I have some leads, but I'd be surprised if I did three more deals in the next 12 months, because things take time to integrate. I'm opportunistic. Getting to $50 million while maintaining EBITDA margins is very important to me.
The last part we haven't talked about is impact. I've solved for my autonomy, and since we're talking numbers openly, I've likely solved for the economics of life. Now it's about how I give back and make an impact. I'll never be AT&T, but there are 33 people on my team today who rely on me to execute so they can make their rent or mortgage every month.
I recently moved back to Chicago because I want to be part of the Kellogg ETA community and encourage people like me to pursue this path. I stood on the shoulders of people who paid it forward to me, so it's time I do the same. Tomorrow, for example, I'm sitting on an ETA panel for the Kellogg Chicago Alumni Club. The economics will take care of themselves. You can't trust the spreadsheet math too closely, but things are trending the right way. So I'm thinking about the other things in life, which gets back to the lifestyle we talked about.
Will: When you encourage ETA for the right kind of person, do you advocate your particular model, or are you model-agnostic?
Tyler: My general guidance is to evaluate all the models. I flirted heavily with the EIR model and thought it was a cool concept. But the search fund studies and the anecdotes show acquisition rates are down, average multiples are up, and the deals getting done seem lower quality in some ways. I think self-funded search will probably become the predominant way to do a deal, and I recommend it because there's less competition, more deal volume, and you get into the operator seat faster. That works for someone like me, and I think it can work for a lot of people, especially on a rookie deal. There's no need to swing for the fences with a large personal guarantee; candidly, my first deal was a bit larger than my original strike zone.
So yes, I'd absolutely recommend the path, but go in eyes wide open. I'm aware of two searcher deals that have gone sideways and are in workouts with their banks right now. You have to be careful. On the whole, though, it's been a phenomenal experience.
Will: The way you did it, intentionally or not: you're building something big where roll-up is a core part of the long-term strategy, but you didn't get cute with acquisitions early. You earned your stripes. Many searchers want to work on the business, not in it, as quickly as possible. They want to do what you're doing today, the strategic and M&A work, with a president handling operations. I see that model work well only after the owner has worked in the business and gotten an education for the first one to three years. Do you agree?
Tyler: Earning your stripes is a big component of it. I'm laughing because only recently did we think about setting up a treasury account and an operating account sweep. I thought I'd be having that conversation in 2022, but instead we were talking about dumpster fees and credit card processing.
You have to earn your stripes because the conversations I have with owners at trade conferences aren't about treasury sweeps. They're about how you're handling an operational issue, or how you're installing a dish and antennas for a client. You have to talk the talk and walk the walk with sellers and with staff, because you'll lose your staff's trust if you don't know how to run the business you acquired.
There was a time I had to be deeply involved, and I can still get into the weeds and take on operational projects. We run on EOS, the Traction system, so I have quarterly rocks with my team and take a chunk of the business to work on myself each quarter. Right now, with the new phone system business, I have pockets of vendor bills everywhere from all the acquisitions, so we're running a vendor consolidation strategy, and I'm going to try to save $80,000 to $100,000 a year in upstream COGS. Projects like that show the team I'm still deeply involved. But you don't earn that on day one. It takes time.
I was probably too quick to want to get away from day-to-day operating at first, but years later I'm very glad I had that time in the seat. And frankly, I miss parts of it, especially now that things run so much more smoothly than they did. There are days I reminisce. A lot of sellers say the same thing: you don't talk about the glory days and the treasury accounts. You talk about the time you waited on a big customer payment to arrive on Thursday so you could make payroll on Friday. Those are the war stories.
Will: Last question. The industry is broad, so speak to your niche, but we see a lot of private equity and searcher activity in managed service providers. Speaking to the searcher audience, what's your sense of the opportunity?
Tyler: Keeping it broad, managed IT and telecom services, especially B2B, have a really good profile: contractually recurring revenue. I'm lucky to have only a few points of churn a year, and I think many firms are like that. A customer can go three months without calling you, so in a lot of cases it's mailbox money. Some projects help juice cash flow, but a good candidate is typically 85% or more recurring. The fundamentals are very strong and I think will remain so. I'm not too concerned about AI risk at a high level; I think it's a little overblown, at least in the near and medium term. Time will tell.
What's challenging is that multiples are so much higher than a few years ago. For a searcher getting into an MSP or telco business today, paying 6, 8, or 10 times for platform businesses with north of $2 million in earnings leaves very little margin for error, and limited upside. The businesses are great, but multiples have been bid up by lower middle market PE and searcher interest.
So ideally get in through a proprietary process, where you have more margin for error. And look, a lot of my deals have had hair on them: the legal issue on the most recent deal, the large customer at Metro Wireless. You might have to take on a bit more hair and roll up your sleeves for a couple of years to get to a better place, and then start thinking about deals two, three, and four. That's how I think about it. Enter the space, but go in eyes wide open and be disciplined about purchase price.
1:35:08
Will: Any final thoughts? How do you prefer people contact you?
Tyler: I encourage folks to reach out. The best way is LinkedIn; just search my name, Tyler Hoffman. I also have a website, hoffmancap.com, and my email is there too. I'm happy to talk with sellers who might be interested, searchers, and prospective searchers. I'm trying to spend more of my time giving back, so I'm happy to chat.
Will: Thank you for that offer, Tyler, and thanks for coming on and sharing your story with so much transparency here on Acquiring Minds.
Tyler: Thank you, Will. Glad to be here.
This interview originally aired on Acquiring Minds.
Tyler can be reached at hoffmancap.com
