Mike Keith·January 16, 2025

How to 4x a Contracting Business in 3 Years | Michael Heath Interview

Mike Keith, a 39-year-old St. Louis native without an ETA background, pivoted from house flipping and a corporate roofing sales job to buy State Line Garage Door in November 2020 for $250,000 (1x SDE, $2.5m revenue) via SBA loan with two silent partners. He brought in Jesse, a friend and experienced industry operator from a competitor, as his on-the-ground manager and incentivized him with equity (5% growing to 20%). The business exploded from $2.5m to $7.18m in year one — which nearly killed it, as the sellers wife's primitive bookkeeping caused missed billing dates and a $600k vendor crisis that put Mike in a panic attack on a New Jersey train platform. After clawing through that cash-flow crunch with partner loans and a late line of credit, Mike hired a director of operations who systematized back-office functions and reduced his time to ~5 hours a week; Jesse's repricing of underbid jobs lifted net margins from ~1-2% to ~9%, generating roughly $800k net on ~$9m revenue in peak year 2023. In May 2023 Mike co-acquired two pool companies (Pool King Recreation and Florida Pool and Spa) for cash with his majority-stake partner in a 49/51 split, refinancing conventionally afterward, and now runs three businesses while eyeing a pool-company rollup in the St. Louis market.

Deal facts

purchase price: $250,000
multiple: 1x SDE
sde ebitda: SDE $250k (owner not paying himself a salary)
revenue: $2.5m at acquisition; $9.52m peak (2023); pool businesses ~$6.4m combined
financing structure: SBA loan for $250k, 15% down payment, 10-year amortization; pool businesses paid cash then refinanced conventional 7-year loan; equity injection ~$37,500 per partner across 3 partners
notes: Garage door business (State Line) bought in November 2020 for $250k (1x SDE). Three-way partnership with two silent partners; operator Jesse given 5% equity with path to 20% plus 5% net profit bonus. SBA loan paid off in late 2022 or 2023. Pool acquisitions (Pool King Recreation and Florida Pool and Spa) closed May 2023 for cash, then refinanced; 49/51 split with majority partner who owns ~150 businesses.

Why this business

Mike had been flipping houses and holding rentals as his entrepreneurial outlet but found the path to financial freedom too slow and took a painful $80-100k loss on one flip. A broker friend and a local entrepreneur who owned ~150 businesses convinced him that buying an established business with a proven track record was lower-risk and offered better returns than real estate. When the garage door opportunity appeared, it coincidentally aligned with Jesse, a friend and experienced garage door operator who was undervalued at a competitor — the stars seemed to align and Mike pulled the trigger.

What's working

Bringing in Jesse as operator with industry expertise and aligning his incentives with equity (5% vesting to 20%) created a committed, high-performing manager who doubled gross profit margins by repricing jobs the previous owner had been underpricing
Hiring a director of operations (Fallon) who replaced the owner in back-office functions, cutting Mike's time involvement from 20-30 hours per week to ~5 hours per week
Building out a lean, fully-remote team with flexible schedules and strong compensation, resulting in low turnover among key staff
Establishing a line of credit based on receivables once they understood the cash flow cycle, which stabilized the business through uneven billing and collection timelines
Leaning into technology (Seline for lien waivers, digital bidding platforms) to reduce bookkeeper hours and improve billing consistency
Revenue visibility of roughly 6 months due to GC relationships and project pipeline, allowing the team to anticipate slow years (like 2024 election-year drop) in advance
Subcontracting model as a flex capacity lever — filling schedule gaps by subbing out labor while maintaining project management oversight
SBA loan fully paid off, freeing partners' properties from collateral and eliminating debt service

What's hard

Catastrophic early cash flow crisis: grew from $2.5m to $7.18m in the first year but had no working capital, no line of credit, and were nearly cut off by vendors owed over $600,000 due to missed billing dates and poor books from the seller's wife
Being held hostage by the seller's wife for nearly a year — she would not train Jesse on operations unless she remained employed, despite being unable to use email, running dial-up internet, and keeping books that were incomprehensible
Transition chaos on day one: seller's wife had never sent an email, used QuickBooks Desktop, and managed everything via snail mail — far more primitive than diligence revealed
Seller handed over all operational control (employee contacts, accounts, schedules) before deal closed, which damaged the business when Mike walked away from the cleaning company prior deal
Three-way partnership diluted Mike's upside significantly — he put in $125k personally but earns only a third of profits; in hindsight he had sufficient capital to buy solo
Minority 49% ownership in the pool businesses creates vulnerability — majority partner could fire him or sell without his consent
Project-based revenue swings dramatically: $9.52m in 2023 dropped to ~$3.34m run rate in 2024 (election-year slowdown), creating stress even with advance knowledge
Early years net margin was only 1-2% because the previous owner had been consistently underbidding projects; took until 2022-2023 for Jesse's repricing to flow through to the bottom line
Personal toll: panic attack waiting for a train in New Jersey when previous owner called screaming about a $600k vendor bill; family stress throughout

Notable quotes

I had a panic attack right there. I'm sitting there, it's supposed to be a nice happy time to go visit her brother that I've never met, and it's cold in the winter sitting there waiting for the train, and I'm just blank face staring at the sky like not knowing what the hell to do.

Small businesses sometimes they're small because the owner wants them to be small. They don't really care for growth, they don't have any ambitions to go get any bigger. So wouldn't look past them.

I think you know the three-way split — I think it worked out, you know. There was my tuition paid.

Understanding the cash flow is the biggest thing. If you don't — getting that line of credit day one. I mean, you have to have it even if you don't need the money.