An Entrepreneurial FATFIRE Update (One Year Later)
Update: 46-year-old, four kids, living in a low-cost Midwest region. Net worth now estimated between 15 and 25 million, up from about 11 million a year ago.
Business Portfolio: The holding company strategy in play
In 2019, we formed a holding company with the goal of acquiring one business per year and building a diversified portfolio. A year ago, the portfolio consisted of three companies, a small in-house team (President, Marketing Director, CFO), and the support of my wife and me. Here’s how things have progressed since then.
Business #1 — Flooring Company (Southwest United States)
– Original acquisition: Our first and strongest EBITDA performer.
– Trajectory: Revenue grew from 8.5 million to 13.5 million; EBITDA increased from 1.0 million to approximately 1.4 million in 2021.
– Current status: The general manager has proven to be a capable leader, and expansion into additional locations is underway. Marketing investments have the potential to drive revenue toward 18 million in 2022, reinforcing the company’s financial foundation for the group.
Business #2 — Flooring Company (Upper Midwest)
– Acquisition timeline: Late 2020; pre-acquisition, 13.5 million in revenue and breakeven.
– Turnaround: Achieved 19.5 million in revenue for the year, roughly 40% growth year over year; EBITDA reached about 1 million, reflecting solid performance given the purchase price of 2.25 million.
– Outlook: Leadership autonomy has enabled strong performance, and the company is positioned to become a dominant player in its market.
Business #3 — House Painting Company (Midwest)
– Outcome: Disposition completed for $1 (purchase price was 350k plus 100k to attempt a turnaround).
– Rationale: Expected 3 million in revenue and 300k EBITDA, but the franchise model and aggressive marketing/subcontracting dynamics proved unsustainable under our leadership style. With higher upside potential limited and other portfolio companies exceeding 10 million in revenue, we chose to exit.
– Key takeaways: Avoid franchised models; larger, more durable businesses tend to offer better resilience; failure is part of entrepreneurship and does not diminish our capabilities.
Back on the Acquisition Trail: Fueling growth with cash flow
Healthy cash flow from the flooring subsidiaries and a redeemed REIT investment provided roughly 2.5 million to deploy in early 2021. We also added a highly capable intern—a college junior who now leads deal sourcing. He’s fearless and has added a dynamic edge to our sourcing process.
Acquisition #4 — Flooring Company (Midwest)
– Target: A 9 million revenue business with 500k EBITDA.
– Deal structure: Purchased for 2 million in June 2021; 600k cash down, 400k seller note, and 1 million financed.
– Operational insights: The closing was smooth, though post-close there were HR and leadership gaps. A key takeaway was the importance of validating the owner’s claims about the ability of the existing team to operate under new ownership. We eventually recruited a new general manager.
Acquisition #5 — Flooring Company (Southern US)
– Rationale for pursuing: With 2.5 million available and limited upside from the earlier small deal, we sought another acquisition in 2021.
– Opportunity and due diligence: A large, seven-figure multi-location network (23 locations) with 35 million revenue and 3 million EBITDA. The seller’s cash flow was strained due to a heavy upfront deposit structure, and the balance sheet required careful handling.
– Deal structure: Approximately 8.5 million purchase price (2.5x multiple). The seller left 2 million in cash behind, with significant owner financing and careful liquidity planning: 1 million cash upfront, 4.5 million bank financing, and 3 million seller financing. A portion of cash was held as a pledge to mitigate risk due to seasonality and potential cash burn.
– Due diligence and closing: The process was challenging due to limited on-staff financial personnel. The owner announced the sale to staff the day after LOI signing, which created a unique dynamic. The acquisition closed in early September.
– Post-close performance: Cash did dip as anticipated (roughly 2 million down to 200k during the Nov–Feb period) but has since recovered toward 2 million. The acquired team has demonstrated drive and leadership, executing aggressively in the market. Early indicators suggest potential for substantial revenue growth and EBITDA expansion, contingent on continued leadership effectiveness.
Holding Company: Scaling and strategy
The scale of Acquisition #5 necessitated structural upgrades to the holding company. We added two more marketing professionals (bringing the total to three) and a training/development role to standardize and improve cross-portfolio execution. An offsite in Cancun helped refine strategy for 1-year, 3-year, and 9-year horizons, targeting 500 million in revenue by 2030. Our current trajectory projects approximately 100 million in revenue and around 7 million EBITDA by year-end, placing us on a strong growth path. We’ve learned that, while initial acquisitions can be achieved at 3–4x multiples, larger-scale platforms approaching 150 million in revenue and 10 million EBITDA typically command 9–11x multiples—creating the potential for exponential returns as we expand within the same sector.
Leadership and operations: What’s working now
- Day-to-day operations are increasingly managed by the portfolio President, while my wife and I focus on quarterly strategy and portfolio-wide initiatives, including travel.
- We anticipate adding one more acquisition toward the end of Q3 this year.
Real Estate: Strategic property investments
A major real estate move involved purchasing a long-term home in Phoenix in anticipation of relocating when the children are ready to leave home. We acquired a 2.7 million, off-market property with strong rental appeal (approximately 200k in annual rental income) and favorable views. This property is currently rented, with plans for future remodeling and potential new construction in about two years. A notable moment: after receiving an unsolicited, all-cash offer of 4 million with no inspections, we chose to hold—the decision aligned with our long-term strategy and “diamond hands” approach to property assets.
FATFIRE-inspired lifestyle adjustments
As income has increased, we’ve prioritized balancing work with enjoyment. Highlights include:
- Engaging a clothing stylist for a wardrobe refresh, a substantial but worthwhile investment in personal branding.
- Upgrading travel with a Business Centurion card and leveraging airline rewards for international travel.
- The Camelback Mountain residence and upcoming European family vacation, leveraging travel rewards to fund family experiences.
Lessons learned over the past year
- The leadership team matters: a talented, aligned team—especially a strong portfolio President and capable general managers—makes a substantial difference.
- Franchises often constrain profitability and flexibility.
- It’s essential to step back and let the team execute; the role shifts to strategic oversight and governance.
- Premium travel experiences are not just indulgences; they’re part of maintaining energy and focus for long-term goals.
What’s on the horizon for the next year
- A private flight is likely to be part of future plans.
- Portfolio revenue target: 140 million with a robust annual recurring trajectory.
- Personal milestone: enjoying more time on the golf course.
Book recommendation
Pleased but not Satisfied by D. L. Sokol. Although a hardback may carry a higher price tag, the insights are well worth the investment.
Closing thought: The journey toward FATFIRE is about more than financial milestones. It’s about building a sustainable, enjoyable path where purposeful work meets meaningful experiences. If you’re pursuing a similar path, focus on durable, scalable opportunities, a strong leadership team, and the strategic balance between growth and lifestyle.
Nick
Note: This article is a professional consolidation and rephrasing of an original personal update. All figures are approximate and intended to illustrate high-level progress and strategy. For exact financials and timelines, please refer to the original source material or official company disclosures.
