Derek Croft·November 25, 2024

High Margin & Big Upside in Lice Treatment | Derek Croft Interview

Derek Croft is a former mechanical engineer turned Bain & Company senior manager who left a track toward a ~$750k/year consulting career to acquire Lice Doctors, a nationwide at-home lice treatment business, in December 2023. The business operates an 'Uber for lice' model: customers find the company via Google, call a central dispatch, and a technician is sent to their home — with coverage across 40–45 states and 200+ technicians. Derek inherited the deal from an investor group that had already placed it under LOI; he came in as the operator, retaining majority control while the investors hold a passive equity stake. The business generates roughly $3m in revenue and ~$1m in EBITDA, financed primarily via SBA loan at 80–90% leverage, at a 4.5–5x EBITDA multiple. What attracted Derek most was the combination of near-negative working capital, ~55–60% gross margins, a strong organic SEO moat, geographic diversification across dozens of markets, and obvious operational upside — including hundreds of missed calls monthly, underpenetrated geographies, and room to raise prices. His primary challenges are high technician turnover (the core supply-side bottleneck), no recurring revenue, heavy Google dependency, and the cash constraints that come with heavy SBA leverage. In year one Derek focused on operational infrastructure — replacing Google Sheets with a CRM, deploying scheduling software to speed dispatch — while targeting to double revenue within one to two years.

Deal facts

multiple: 4.5x–5x EBITDA
sde ebitda: ~$1m EBITDA
revenue: ~$3m
financing structure: SBA loan (80–90% levered) + outside investor equity (investors brought the deal, retained equity stake)
notes: Deal was already under LOI by an investor group when Derek was brought in as operator; he inherited the deal and gave up more equity than typical in exchange. Closed December 18, 2023. Derek retains majority control (51%+) with full operational authority; investors are passive. Exact purchase price not disclosed.

Why this business

Derek was attracted to Lice Doctors because of its regional-competition moat (hard to displace with capital alone), near-negative working capital (credit card payments collected before payroll goes out), high gross margins (~55–60%), nationwide footprint with very low market penetration, and obvious operational levers — missed calls, underpenetrated markets, room to raise prices — that a consulting background made him confident he could pull. He saw a business that was 'successful in spite of itself' and top 1–2% of all deals he had reviewed.

What's working

Strong SEO presence — top 1–3 organic ranking in nearly every market — drives 90%+ of leads at low cost
High gross margins (~55–60%) from an hourly billing model (~$480 average ticket) against $30–45/hr technician pay
Near-negative working capital: credit card payments collected at or next morning after service, before weekly payroll is due
Geographic revenue diversification across 40–45 states provides resilience; a bad week in one market is offset by others
Urgent, non-discretionary demand (lice is an acute problem families need solved immediately) supports pricing power
Nationwide footprint and SEO authority create a durable moat against smaller single-operator competitors
Low capital expenditure — no office, no vehicles, technicians supply their own transportation
30-day guarantee with ~1% claims rate reinforces customer confidence without material cost
Business showed near-perfect post-COVID revenue recovery, validating durability
New scheduling software deployment (replacing text-based dispatch) expected to dramatically reduce missed/slow bookings

What's hard

High technician turnover — similar to Uber driver churn — creates constant recruiting and training burden
No recurring or repeat revenue; nearly all customers are one-time, requiring constant new lead generation
No product differentiation or proprietary process — technically anyone can replicate the service
Heavy reliance on Google (SEO + some PPC) creates platform risk; one algorithm change could impair lead flow
Being 80–90% SBA-levered constrained cash for growth investments (e.g., delayed a key software purchase longer than optimal)
Gave up more investor equity than desired because the deal was already under LOI when he joined — less upside retained
Inherited a business run entirely on Google Sheets; operational infrastructure upgrade has been a major first-year project
Payroll provider dropped them on December 20 — two days after close — forcing an emergency switch over Christmas
Supply-side bottleneck: demand exceeds technician capacity in many markets, so marketing is not the binding constraint
Low brand awareness of the at-home lice treatment category itself — most consumers don't know the service exists

Notable quotes

I went from mechanical engineer to — I did an interview with a news article where they called me the quote unquote lice King of America. So I don't know how much I want that title or not, but it was at least given to me by one journalist.

When I first saw Lice Doctors it was easily — you know I looked at hundreds and hundreds of deals at this point in time, hundreds and hundreds of sims — it was easily top one, two percent, maybe just even top five deals in general I had seen at all. And so it was very obvious to me that this was a deal worth taking.

We are almost always paid before we have to pay our employees because our employees we pay them each week but they have to do their service and then they're paid a week after and they're the vast majority of our expense. So it's almost negative working capital — which small business, large debt, cash matters a lot — and it's very easy to manage this business from a cash flow perspective because cash comes in before cash goes out almost always.

They built this business, it's big enough for me to want to buy, it's doing lots of money — and wow, look at all these levers. It was just perfect from that perspective.