James Bloom·June 26, 2023

How to Buy a Business & Grow It to $25m | James Bloom Interview

James Bloom spent his corporate career in finance and business management at Lockheed Martin, Air Products, and Versum Materials, eventually running a $500m specialty chemicals division before deciding to buy a business when relocating back to the East Coast for family reasons. In 2019 he acquired Excel Mechanical Contractors, a commercial HVAC and plumbing business near Baltimore, for $785,000 (2–2.5x SDE) via SBA financing and a seller note — a deal the SBA's own appraiser valued at $1.35m, indicating immediate equity on entry. The business had plateaued near $3m in revenue with two anchor customers (Walgreens and JCPenney) and an experienced management layer that handled day-to-day operations. Bloom structured the deal as an equity sale to preserve existing customer contracts, then immediately invested in customer relationships and service quality. When COVID hit, JCPenney went bankrupt and Walgreens locked down sites, forcing a pivot into commercial construction — starting with a NIH project — which became the primary growth engine. By mid-2023, the company had grown from 8 to ~80 employees, added an electrical division on track for $5m, and was projecting $25m in annual revenue with a $40m backlog and a target of $100m within five years, aided by a new capital partner with a strong DC/Virginia network.

Deal facts

purchase price: $785,000
multiple: 2 to 2.5x SDE
sde ebitda: SDE ~$300-350k
revenue: ~$3m at acquisition; projected $25m by end of 2023
financing structure: SBA loan (majority) + 10% seller note (10-year term) + ~$100k buyer equity; $125k SBA line of credit also secured
notes: Equity sale (not asset sale), structured to preserve existing customer contracts. SBA appraiser valued business at $1.35m vs. $785k purchase price. Buyer has put in additional ~$250k out of pocket post-close to fund growth. Capital partner (Steve Khalifa) brought on in January 2023. SBA appraisal at ~$3.6m when revenue was ~$12m (roughly one year prior to interview).

Why this business

James wanted a business that was recession-proof and not going to go away anytime soon — everyone has air conditioning and plumbing. He was looking for a service-type business with a long track record of performance in a sustainable industry, cash flow sufficient to pay himself a $100k salary, and a geography near Allentown, PA. He also specifically wanted a business where the owner had stepped back and management was in place, since he lacked direct mechanical industry experience.

What's working

Exceptional customer service and responsiveness became the primary differentiator — identifying design flaws and solving problems larger contractors ignored
Word-of-mouth reputation compounded rapidly: every satisfied GC or customer became a source of repeat and referral work
Union membership provided a reliable pipeline of trained, vetted labor and market intelligence from workers who know competitors' capacity
Pivoting into commercial construction during COVID (starting with a National Institutes of Health project) unlocked explosive revenue growth when the service side was disrupted
New electrical division launched, on track for ~$5m in first full year, driven by existing mechanical customers requesting electrical work
Capital partner (Steve Khalifa) brought banking relationships, customer network in DC/Virginia, and financial resources to support continued growth
Backlog of ~$40m as of mid-2023, providing high revenue visibility into 2024

What's hard

Customer concentration risk at acquisition: Walgreens and JCPenney were a very large share of revenue; Walgreens account was later lost due to a corporate contract restructuring decision
JCPenney went bankrupt during COVID, which eliminated a major customer and forced an accelerated pivot to construction
COVID nearly shut down the service division entirely as customers locked down their sites
Funding growth was difficult: banks unwilling to extend meaningful credit in early years of ownership; Bloom had to fund ~$250k of growth personally out of pocket
Service business growth was neglected as construction business consumed most attention and capacity
Government shutdown at acquisition closing delayed close by ~3 months after Bloom had already quit his job in Arizona
Growing from 8 to 80+ employees required maintaining quality standards at scale — selective 1.5-year search for first project manager

Notable quotes

I am purchasing this company not because I want to change it but because I saw it as a good company, high performing company. I don't think that you guys are doing great things and I'm not here to change that. I'm here to help that continue to grow.

We're not focused on how are we going to make a dollar today. We're focused on how are we going to have a customer for the next 10 years.

I always call it a snowball right, a snowball rolling down a hill continues to build and build and build. That's really what's happened here.

This business is us. Although it's a separate entity our assets are tied to this business, our financial health is tied to this business, and everyone else can leave but I can't. I am this business, we are this business.