Meredith Schlinker, Michael Schlinker·August 26, 2024

Young Couple Starts a Family Business By Buying One | Meredith & Michael Interview

Meredith (27) and Michael (30) Schlinker, a couple based in Houston, acquired Background Connect — a 10-year-old pre- and post-employment screening company (consumer reporting agency) — for roughly 3–3.5x SDE on just under $500k in cash flow and just under $1m in revenue. Michael, a transaction attorney who had worked M&A deals for private equity clients, led the deal process; Meredith, who came from commercial real estate finance, took the operational lead post-close. They self-funded the acquisition with an equity injection under $300k using an SBA loan brokered by Matias Smith. The business offers background checks, drug screens, employment verifications, motor vehicle records, and other hiring-related screening services to B2B clients, primarily HR departments across Houston and nationally. Key attractions were the ~50% net margins, nearly 100% repeat client base (no formal contracts but naturally recurring orders), a retiring seller willing to stay on for an extended transition, and a regulatory moat under the Fair Credit Reporting Act that keeps the business from being fully commoditized. Post-acquisition challenges included managing client anxiety over the ownership change, navigating chain-of-command dynamics with the seller during transition, and Meredith building confidence as a young manager leading a team all significantly older than her. Growth levers being pursued include digital marketing (building an online presence that was near-zero at acquisition), local HR industry event networking, word-of-mouth referrals, and possible expansion into adjacent services like credit checks for apartment rentals. The couple sees this as the foundation of a family business empire, with Michael remaining a full-time government attorney for now while eyeing future acquisitions.

Deal facts

purchase price: between $1.5m and $1.75m (3–3.5x SDE of ~$500k)
multiple: 3–3.5x SDE
sde ebitda: just under $500k SDE/EBITDA
revenue: just under $1m
financing structure: self-funded; equity injection under $300k; SBA loan via loan broker (Matias Smith); potential seller financing considered
notes: Sellers remained involved post-close in extended transition. Two employees plus seller. Business is ~10 years old at time of acquisition.

Why this business

They wanted a white-collar, remote-capable B2B business they could both relate to and grow, avoiding home services or trades which felt less familiar. Meredith preferred a business environment closer to her finance/commercial real estate background, and Michael liked the idea of a buy-and-build opportunity with a retiring owner who hadn't kept up with technology. Background connect ticked all their boxes: recurring clients, high margins (~50%), regulatory moat, and a seller willing to stay on for an extended transition.

What's working

Nearly all revenue is from repeat clients — most existing clients place orders every month even without formal contracts
~50% net margins on just under $1m in revenue with a small team of four people
Extended seller transition helped reassure long-standing clients during ownership change
Michael's legal background provides in-house fluency on FCRA and state-law compliance, a meaningful operational advantage
Technology improvements implemented post-close impressed the seller and improved efficiency
Complementary skill sets: Michael handles big-picture and deal/legal concerns; Meredith manages day-to-day operations and client relationships
Regulatory compliance requirements create a natural moat against commoditization

What's hard

Clients reacted more negatively to the ownership change than expected — the seller's personal relationships were more central than anticipated
Chain-of-command issues during transition: seller was accustomed to directing employees directly, requiring Meredith to assert herself as the new manager
Meredith's confidence managing employees significantly older than her (closest in age is 13 years older) required internal adjustment
Volume is unpredictable day-to-day — clients don't always give advance notice of large order batches
Geographic constraint to Houston limited the pool of businesses to search
White-collar-only constraint further narrowed already slim pickings in a single metro
Planning for family/maternity leave as the sole full-time operator is an unresolved challenge

Notable quotes

I do basically these deals at higher levels of sophistication day in and day out or I did in prior life, so I was very confident that if I found the right opportunity we could get a deal done assuming we could make the numbers work.

My rates were astronomical — I couldn't afford to hire myself. So the fact that I see these firms hiring me not just for a couple hours here and there but working me around the clock constantly keeping me busy, it makes you realize man, the real value in this kind of ecosystem is in owning the business and having access to those cash flows.

I didn't think that they would care as much. So it's been good to have him for relationships and sales, but I think the managerial aspects have been what we've been having to kind of figure out through time.

I've seen a ton of growth in Meredith — she's kind of stepped up to operate this thing, learn how to lead it, and frankly drive the organization forward.