Chandra Rao·May 9, 2024

Holdco Origin Story: The Bumpy Road to $3m EBITDA | Chandra Rao Interview

Chandra Rao and his 50/50 partner Colin (who they met through Muay Thai training) have built a holdco with three divisions — electrical construction, underground/fiber construction, and fiber splicing — across five acquisitions in Minnesota, projecting ~$12m revenue and ~$3m EBITDA. Chandra stumbled into entrepreneurship via acquisition by accident (buying out a SaaS friend's credit card debt in 2014), then spotted an opportunity to replicate the model with traditional businesses while still working at Koopa, a spend-management SaaS that went public and provided his financial cushion. Their first acquisition (Gopher Electric, 2018, $500k) nearly killed them: construction's brutal payment terms created a $300k loss in year one and forced them to liquidate personal savings the week of Chandra's wedding. Their most painful chapter was bringing the Gopher seller in as a 33% equity partner to lock up his master electrician license, only to discover years later he had been embezzling by hiding personal construction costs (a pool, a barn) inside project job costs; they withheld the $200k seller note when fraud was discovered. The breakout business was a pair of underground construction and fiber splicing companies acquired in May 2020 for $2.1m, which caught a massive federal broadband infrastructure tailwind and grew from ~$1.5m to ~$8.25m in revenue with strong margins. A fifth acquisition — a trailer manufacturer whose seller faked terminal cancer and fabricated financials — was divested after 18 months as a distraction. Chandra's consistent lesson: seller notes are invaluable post-close protection, action beats analysis paralysis despite the lumps, and sharing the stress load with a trusted partner makes the journey survivable.

Deal facts

purchase price: Gopher Electric: $500k; Miller Electric: $600k; Underground Construction + Fiber Splicing: $2.1m total; Manufacturing/Trailer Co: $1.85m (incl. $1m real estate)
multiple: Gopher Electric: ~1.4x SDE; Underground Construction + Fiber Splicing: ~5x SDE (asset-heavy); Miller Electric: ~2x SDE
sde ebitda: Gopher Electric: ~$350k stated SDE (actual first year -$300k); Miller Electric: ~$250k SDE; Underground Construction: ~$400k SDE combined with fiber splicing at acquisition; Current holdco target: ~$3m EBITDA on ~$12m revenue
revenue: Current holdco: ~$12m projected; Underground Construction: ~$7m; Fiber Splicing: ~$1.25m; at acquisition Underground+Fiber: ~$1.5-1.65m combined
financing structure: Gopher Electric: $180k down + seller financing (5-yr term, 10-yr am) + SBA Express line $350k + Lending Club $80k personal loans; Miller Electric: 20% down + conventional bank debt + seller note; Underground+Fiber: conventional debt + 10% seller note; Manufacturing: conventional loan + seller note (~$250k) + ~10% equity down
notes: Five total acquisitions in holdco; one (manufacturing/trailer company) divested September 2023 after 18 months. Partnership with Gopher Electric seller as 33% co-owner of Miller Electric was unwound via $650k buyout ($450k bank-financed + $200k seller note); seller note withheld after discovering embezzlement. Sixth acquisition (larger underground construction company, ~$10m revenue) fell apart one week before close. Real estate in manufacturing deal appreciated; seller note renegotiated down ~$150k due to fraud. Colin (50/50 partner) was operator from the start; Chandra joined full-time May 2021 after leaving Koopa (SaaS company that went public).

Why this business

Chandra had accidentally become a small business owner by buying out a SaaS co-founder's credit card debt and running the business profitably; after selling the customer list for little and moving on, he connected his experience ('I just have to buy businesses') with his partner Colin's family construction background. They found Gopher Electric on BizBuySell and saw an opportunity to buy cash flow at a low multiple with heavy seller financing. Subsequent acquisitions in underground construction and fiber splicing were driven by synergy with the electrical construction platform and a macro tailwind from federal broadband infrastructure investment.

What's working

Underground construction and fiber splicing businesses grew from ~$1.5m combined revenue at acquisition (May 2020) to ~$8.25m in 2024, with fiber splicing alone generating ~40% EBITDA margins
Federal and state broadband infrastructure bills (Infrastructure Act, American Rescue Plan) poured 'gasoline' on the fiber buildout market, creating a massive demand tailwind the business benefited from largely by luck of timing
Keeping jobs geographically close to headquarters on underground construction reduces hotel, per diem, and fuel costs, improving margins versus competitors
Partnership structure between Chandra (finance/sales background) and Colin (construction/operations background) allowed stress-sharing and complementary skill sets across multiple simultaneous transitions
Seller notes used as leverage against post-close fraud discoveries — withholding the $200k note from the Gopher seller and renegotiating $150k off the manufacturing seller note
Pivoting away from the distracting manufacturing acquisition to focus entirely on the construction and fiber platform where they have deep expertise and large city-build contracts

What's hard

First acquisition (Gopher Electric) generated a $300k net loss in year one due to severe working capital strain from construction payment terms (net 90 effective), taking on projects at the finishing/low-margin stage, and the seller having forward-billed and collected revenue before close
Had to personally liquidate savings and stock to make payroll, including the Friday Chandra flew to his own wedding, ultimately injecting $80k personal loans plus $350k SBA Express line on top of the original $180k down payment — true acquisition cost closer to $880k
Brought the Gopher seller in as a 33% equity partner to lock up his master electrician license; he turned out to be a poor cultural fit, drove out three of seven journeymen from Miller Electric, and was eventually discovered to have embezzled by hiding personal construction costs (a pool, a barn) inside project job costs
Anger and resentment from the embezzlement permeated Chandra's mood for months, affecting family relationships and requiring significant internal work to let go
Manufacturing/trailer acquisition (Acquisition 5) had fraudulent financials — seller booked deposits as recognized revenue showing fake 30% EBITDA, and fabricated a terminal cancer diagnosis to accelerate the sale; business lost money immediately and required 18 months of management attention before being sold
Doing two problematic acquisitions simultaneously (manufacturing company + unwinding the bad partner) while managing fast-growing underground construction created extreme management bandwidth strain
Sixth acquisition — a $10m-revenue underground construction company — collapsed one week before close when the seller's 'greed glands turned on' as construction season started
Electrical construction service margins are thinner than HVAC/plumbing because journeymen must be dispatched even for small jobs, making residential service work economically challenging

Notable quotes

I just have to buy businesses. I just want to buy cash flow, I just want to buy SDE at that time.

We are not good at due diligence but the theme I think of this is going to be we stumble forward and there are so many reasons not to do a deal — you can come up with any number of them. No deal is perfect, so it's easy to get stuck in that 'I don't want to take this risk.' We just jump in head first, then you never buy anything.

He built himself a pool and when he built himself a pool there's cement cost, there's construction costs — well he hid that cement cost under a Miller Electric job that had cement cost using the same vendor. So when we're doing job costing we're like oh this came in a lot higher, and then his explanation is 'oh well we needed more cement.'

I had to reflect back and think, is hanging on to this worth it? And it's just not. Emotional response was only a net negative to me. If I am making an impact that is to the negative on the people I love most because I'm grumpy all the time or because I'm carrying this additional anger for somebody who doesn't matter — they just don't matter in my life — then I've got to do the work internally to say, let it go.