How a Twitter thread about landscaping led to a six-figure investment
- As the pandemic slowed many companies over the past year, Mike Botkin noticed that one sector was booming.
- Botkin delved deep into the landscaping industry and built a pitch to buy a local business.
- He shared his plan on Twitter and landed a deal with Opendoor co-founder JD Ross within 45 days.
- You can find more stories in Insider’s business section.
One early morning in June when many businesses were closed due to the coronavirus pandemic, Mike Botkin stopped to get gas on the way to his office, where he was working as the COO of a commercial real estate developer in Orlando.
The roads were mostly clear except for one line that formed by the pumps in front of him – rows of landscaping trucks.
An idea took shape in his head, and in September he had a plan: A 45-year-old landscaping company was listed with a local agent for $ 650,000 and wanted to buy it.
Do your homework first
The company had a great reputation and a list of loyal customers, but Botkin still saw plenty of opportunity to grow.
After Botkin talked about it with Nick Huber, the self-storage entrepreneur best known for preaching his gospel of the “sweaty startup,” he took to Twitter to seek investors to fund his purchase.
The offers came from self-identified “micro private equity” investors and within 45 days Botkin agreed to a six-digit contract with JD Ross, co-founder of the real estate market Opendoor and general partner of the Atomic Venture Fund. Ross and Botkin declined to publicly disclose the exact amount.
“Mike showed on Twitter that he understood the key drivers of the business as well as the micro-details of the operations,” Ross told Insider. “A partner who can go from working on the ground to a bird’s eye view without getting a nosebleed is someone I want to bet on.”
Thanks to the rapid closure, Botkin was able to negotiate favorable terms and a significant discount on the price requested by the seller. In December, Botkin left his job at corporate headquarters to take on his new role as the owner and operator of B&B Landscaping. By February, he had already improved monthly sales by 14%, according to Insider.
Botkin spoke to Insider about his strategy of finding exceptional business opportunities in often overlooked industries.
Identify companies with predictable demand
Botkin’s contact with landscaping preceded his life-changing gas station. In 2019, his employer had acquired a lawn care business and he saw the crew stay booked even though the pandemic-induced downturn caused the company to cut workers from the hospitality industry.
The demand for mowing and mulching is seasonal, but also very predictable. Grass doesn’t wait for the market – it just grows and owners have to cut it.
Other popular sectors in the sweaty startup set include: waste management, car washes, HVAC services, and self-storage businesses. In other words, find who stays busy when others are not busy.
Analyze the barriers to entry – and the path to profit
A common characteristic of these companies is that they have relatively low barriers to entry. Virtually all you need to start a landscaping business is a lawn mower and a truck.
When you combine that simplicity with reliable demand for services, you get a lot of people starting profitable businesses, but relatively few who grow beyond a certain level.
Botkin sees great growth potential in starting a blue-collar company that has hit this cap and using white-collar management and marketing techniques to maximize cash flow.
“For me, this business is work and fuel because if I can control the work and use fuel efficiently, I’ll make money,” he said.
Research the customer base and market trends
One of the main advantages of buying a business over building a business from scratch is that you get an integrated customer base that would otherwise take a lot of time and money to grow.
By researching several available lawn care companies, Botkin found that B&B had the best reputation and an attractive 60/40 mix of residential and business customers.
When reviewing service contracts before making his purchase, he found that some contracts were older than him and some street addresses were missing.
That kind of loyalty only comes from sweat capital.
Additionally, Botkin knew from his real estate career and other data that Metro Orlando would see significant residential real estate growth and new customers in the area in the coming years.
Explore the competition
Last but not least, the sweaty startup strategy often involves an asymmetrical approach towards your competitors.
As Huber put it in a tweet, “Who would you rather be competing with? The group of people with VC money and Stanford degrees or the guy on the street who used a fax machine?”
In fact, Botkin was shocked to discover on his first day in charge of B&B that what he thought was an office phone was actually just a fax machine and that the company’s phone number went straight to a voicemail service.
“Many of these companies are older generations,” he said. “You live in techniques and processes from the 80s.”
Like most of its competitors, B&B did not have a significant digital presence and the process of signing up for new customers was slow and inconvenient. Botkin was quick to change that, saying it has already resulted in new customers.
Botkin continues to find out what he does by drawing on his corporate experience and relying on his crew of 14 to do what they do best.
So far, the first results are promising. Sales in January rose year over year, and the busy season is yet to come.
“We believe we can conservatively grow this to $ 1 million a year within the first 18 months.” he said.