Justin Willess·October 14, 2024

Business Collapse After Going All-In | Justin Willess Interview

Justin Willess, a 45-year-old mechanical engineer and 20-year consultant from Northern Virginia, left consulting to buy a $8.5m construction subcontractor specializing in painting and industrial flooring — a business with $12m in revenue and a quoted $2.5m SDE — using a ROBS 401k rollover ($830k equity), an SBA 7(a) loan ($5m), conventional financing ($1.7m), and seller financing (~$1.7m). What looked like a compelling deal at a ~3.4x SDE multiple quickly unraveled: the seller had intentionally low-bid jobs to inflate the WIP and reported margins, the accounting team was weak or compromised, and working capital was severely underestimated. The seller relationship deteriorated immediately post-close, with the seller demanding control, refusing sweep-account draws that left Justin draining his last $170k of retirement savings for payroll, and ultimately — after Justin refused to make further seller note payments citing a missed DSCR threshold — using a confession of judgment clause to garnish all bank accounts and $5m of AR overnight in September 2023. With courts unwilling to hear emergency relief motions and payroll impossible to fund, Justin was forced to shut all 80 employees out and walk off every job site on September 22, 2023. Despite a genuine operational turnaround — revenue had grown to an $18m run-rate and EBITDA was on track for $1.8m — the business collapsed just as it was reaching sustainability. As of the episode recording in late 2024, Justin was fighting potential foreclosure on his home and possible bankruptcy, while his wife had returned to dental hygiene work. He remains committed to acquiring again, citing the need for rigorous seller character diligence, mandatory quality-of-earnings, avoidance of confession-of-judgment clauses, and choosing proactive legal counsel as his core lessons.

Deal facts

purchase price: $8.5m
multiple: ~3.4x SDE
sde ebitda: SDE ~$2.5m (quoted at acquisition; actual 2022 net ~$122k over 6 months; 2023 on track for $1.8m EBITDA)
revenue: $12m at acquisition; grew to ~$18m run-rate by September 2023
financing structure: SBA 7(a) $5m + conventional financing $1.7m (same bank) + seller financing ~$1.7m + equity ~$830k via ROBS (401k rollover)
notes: Deal comprised two entities: a construction/painting/industrial flooring subcontractor and a janitorial/S-corp. Seller retained ~$2m AR pre-close in a 'sweep account' line-of-credit for buyer. Seller note included a confession of judgment clause. Six-month lender payment deferral at close. Monthly debt service ~$93k.

Why this business

Justin was drawn to construction because of geographic tailwinds in Northern Virginia — stable government funding, booming data center construction, and post-COVID activity — combined with his hands-on engineering background. He wanted influence and impact in an organization he could own and grow, something his 20 years of consulting had denied him. Construction kept rising to the top of his search as a fit for his skills and the local market.

What's working

Inherited a strong president who maintained key customer and vendor relationships through the transition
Grew revenue from $12m to $18m run-rate and improved EBITDA toward $1.8m by the time the business was shut down — genuine operational turnaround underway
Hired a controller on day one, which was one of the best decisions of the process
Identified and removed moles and poor-performing staff (bad estimators, weak accounting team) and tightened job-costing discipline
Reduced AR aging from ~80 days to closer to 60 days over the first year
Maintained calm, steady leadership throughout extreme adversity — kept team confidence

What's hard

Seller misrepresented profitability: jobs were intentionally bid low to inflate the WIP and reported revenue pre-sale; gross margins were ~30% vs. 39% represented
No quality of earnings report was done — relied on internal review and CPAs without forensic depth
Seller financing included a confession of judgment clause that allowed the seller to unilaterally garnish all bank accounts and AR ($5m+ frozen overnight in September 2023)
Seller became an active saboteur: demanded to be copied on all emails, asked buyer to fire a whistleblower employee, called the lender to report the business was being run into the ground, violated non-compete by soliciting employees and working with competitors
Sweep account line-of-credit was controlled by seller, who refused draws — forcing buyer to drain remaining $170k of 401k for payroll
Working capital was severely underestimated; summer construction seasonality created a cash crunch immediately after closing
Construction is intensely working-capital-intensive with 60-day AR cycles vs. 30-day vendor terms
Legal team was reactive rather than proactive; confession of judgment clause was never flagged by attorneys or lender
A judge with a poor reputation refused emergency motions from buyer, lender, and surety — the garnishment was not lifted before the business was forced to close September 22, 2023
After closure, bank auctioned assets (~$500k recovered), then filed foreclosure on the personal residence; buyer facing potential bankruptcy as of episode recording
At close, business had 40 employees; grew to 80 by shutdown — all lost wages

Notable quotes

Calm is contagious. I've got a lot of people looking at me as all of this is happening wondering how we're going to figure it out. One of my biggest jobs throughout this was to be calm, maintain an even demeanor, and shepherd people through all the challenges.

The frustration of knowing that something is wrong but not being able to do anything about it is just a burden that you can't imagine. It wasn't the fact that I was going to have all these issues come to find down the road financially — it was Bob's not getting paid this week, and Bob's got a mortgage.

When you buy a business from a person, you are doing business with that person and they have a significant amount of influence, control, leverage over how that whole transaction is going to go both during acquisition and afterwards. So character assessment is critical.

I always slept good. I never had a sleepless night. And I say that because I worked my ass off and I had a clear conscience at the end of the day. All we have are our values. Don't compromise on what they are, because it's the only thing you might have when everything else goes to hell.