Russ Hadlock·February 29, 2024

The Front Lines of a Crisis | Russ Hadlock Interview

Russ Hadlock exited a successful Peloton-accessory e-commerce company he built during COVID and, wanting safety and stability instead of another startup swing, bought a two-location auto glass and 12-volt accessories business (The AutoGlass Clinic/Mobile Radio) on Washington's Olympic Peninsula in November 2022 for roughly $2.3-2.5m revenue and ~$600k SDE, financed with an SBA loan, 10% seller note, and 10% equity down. The deal was an asset purchase, and Russ was blindsided by second-order costs that came with a fresh legal entity: his landlord doubled rent once he saw the SBA-required 10-year lease was leverage, insurance and payroll-tax rates jumped as a 'new risk,' and the business was temporarily dropped from the Safelite insurance-claims network, cutting roughly half of revenue collection for two months. Payroll ran far above plan, an expensive replacement hire for the departing owner underdelivered, and a severe unexplained revenue collapse beginning October 2023 erased the year's earlier growth, leaving Russ having personally injected roughly $100k of his own cash and the business's full-year P&L down six figures. At the time of the interview he was mid-crisis: negotiating an SBA loan modification (extending the term from 10 to 20 years to save ~$80k/year), executing layoffs and pay cuts, changing insurance and fee structures, and consolidating two locations into one to survive the winter before the spring/summer busy season. The episode is a real-time, unresolved account of a buyer confronting the gap between the emotional comfort of buying 'small and safe' and the actual operating complexity and financial fragility of a high-transaction, insurance-dependent local services business.

Deal facts

sde ebitda: SDE just shy of $600k (described as $550k-$600k)
revenue: $2.3m-$2.5m gross revenue
financing structure: SBA 7(a) loan (80%) + 10% seller note + 10% buyer equity (down payment); asset purchase (not stock sale)
notes: Business: The AutoGlass Clinic and Mobile Radio (auto glass repair + 12-volt/auto accessories installation), two locations about 40 minutes apart on the Olympic Peninsula, WA, founded 1982 by previous owner's father. Closed November 2022. Previous owner stayed on payroll ~6 months to train Russ; also hired a general-manager-type replacement at ~50% higher salary than budgeted, shortly before close. By October 2023, Russ had deployed roughly $100k of his own personal capital to keep the business afloat. Full-year 2023 revenue ended up roughly flat vs. 2022 (up ~20% through summer, then erased by an October revenue collapse of 20-30%+). As of the interview, in early 2024, Russ was in the middle of an SBA loan modification (proposed re-amortization from a 10-year to a 20-year term, saving roughly $80k/year), had cut payroll (layoffs, pay cuts, restructured commissions), changed insurance and benefits, added a 3% credit-card surcharge, and was working to consolidate two locations into one.

Why this business

After selling his stake in a Peloton-accessory e-commerce company he had built and exited (for a 'high six figures' sum), Russ wanted stability and safety rather than another 'zero to one' venture. He deliberately sought a boring, recession-resistant, essential local services business rather than repeat the volatility of building on the Amazon/e-commerce platform. A friend sent him the listing for a multi-location auto glass and 12-volt accessories business; he was drawn to it because it combined a recession-sensitive discretionary side (car audio/accessories) with a recession-resistant necessity side (auto glass repair, largely insurance-paid), plus two locations and two customer income bands, which read to him as diversification and stability ('dumb and safe'). He also personally 'shopped' both locations undercover before the seller knew who he was, and liked the culture and the rapport he built with the seller, whom he saw as operationally strong where Russ (a sales-and-marketing-oriented operator) was weak.

What's working

The underlying business model (two locations, two disciplines, insurance-backed auto glass demand) gave real diversification of geography, income tier, and revenue source, which was the original safety thesis
Complementary skill sets with the seller: Russ is sales/marketing and growth-oriented while the seller/business had strong day-to-day operational discipline built over 25 years
Bought a competitor's small book of business at a good price to add incremental revenue ('dollar cost averaging through acquisition')
Proactively reached out to the SBA lender before missing any payments; lender offered a loan modification (extending 10-year term to 20-year, saving roughly $80k/year) which meaningfully eases the cash crunch
Willingness to make hard operational changes fast: payroll restructuring, layoffs, renegotiated insurance/benefits, new fee structures, and consolidating two locations into one to preserve efficiency

What's hard

Underestimated how a standard asset-purchase deal structure (rather than a stock sale) would trigger all-new vendor relationships: rent on the primary location was doubled by the landlord once he saw the deal depended on a 10-year lease for the bank, insurance costs (garage liability, van, health) rose 20-30% as a 'new risk,' and payroll tax/L&I rates changed under the new legal entity
The auto glass business is tied into an insurance-claims network (dominated by competitor Safelite Solutions); the new legal entity was dropped from the preferred-vendor network at close, cutting roughly half of revenue collection for about two months (Feb-March) while work was still being performed but not paid
Deal fatigue and sunk-cost thinking caused him to push through red flags in the final 60 days (rent doubling, a costlier-than-planned GM hire, and realizing the operational complexity of high-transaction-volume/insurance billing) rather than walk away
A replacement operations hire brought on right before close was paid roughly 50% more than budgeted and wasn't as capable as hoped, eating deeply into projected SDE
Payroll ran far above plan (seeing $100k+/month vs. an expected $50-60k) for reasons he struggled to fully diagnose, compounded by prior undisclosed deals/raises made by the seller before close
A severe, unexplained ~20-30% revenue collapse starting in October 2023 erased the year's earlier 20% growth, leaving 2023 roughly flat and full-year P&L negative by six figures; Russ theorizes it's tied to a broader economic pullback plus Safelite absorbing more overflow work as industry-wide demand tightened
Emotionally difficult to personally deliver layoffs and pay cuts to employees he had promised to take care of, unlike doing so as a manager inside a large corporation
In hindsight, he believes he should have bought a bigger business (bigger = statistically less risky) but let fear/emotion override that logic and instead sized the deal to what felt personally manageable
Searching alone (not in a group/search fund) meant he had no peer dialogue to help him catch his own blind spots
The seller/previous owner, having run the business debt-free and paying himself a salary rather than carrying SBA debt, had a fundamentally different day-to-day financial reality and couldn't meaningfully advise Russ once the crisis hit

Notable quotes

There's no better way to create wealth, like just hands down no better way, and I'm convinced of that wholeheartedly.

In hindsight, that was probably a very big mistake. I just didn't peel all the layers of the onion back and really think about it.

Nobody tells you about that pain. You can go through a termination at a big corporation as a manager, you're anointed the guy that gets to send somebody home. It's painful, but I'm doing it from a perspective that I acquired this company and I made you a promise that I was going to take care of you, and I'm not upholding my end of the bargain.

If it had said automotive in it, I didn't even open it. I had no interest in automotive, none.