Summary List PlacementOn an early June morning, while many businesses were closed due to the coronavirus pandemic, Mike Botkin stopped for gas on his way to his office where he worked as the COO of an Orlando commercial real estate developer.
The roads were mostly clear, except for a line forming at the pumps ahead of him — rows of landscaping trucks.
An idea began to take shape in his mind, and by September he had a plan: a local 45-year-old landscaping business was listed with a local brokerage for $650,000 and he wanted to buy it.
Do your homework first
The company had a stellar reputation and a list of loyal clients, but Botkin still saw a lot of opportunity to grow.
After discussing it with Nick Huber, the self-storage entrepreneur best known for preaching his gospel of the “sweaty startup,” Botkin took his pitch to Twitter with a goal of lining up investors to finance his purchase.
The offers flooded in from self-identified “micro private-equity” investors, and within 45 days, Botkin agreed to a six-figure deal with JD Ross, co-founder of the real estate marketplace Opendoor and general partner at 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, and also the micro details of operations,” Ross told Insider. “A partner who can go from operating at ground level details to birds eye view without getting a nosebleed is someone I want to bet on.”
Moving quickly to close enabled Botkin to negotiate favorable terms and a substantial discount from the seller’s asking price, and in December, Botkin left his corporate office job behind to step into his new role as the owner and operator of B&B Landscaping. By February, he had already improved monthly sales by 14% according to documents viewed by Insider.
Botkin spoke with Insider about his strategy for finding exceptional business opportunities in often overlooked industries.
Identify businesses with predictable demand
Botkin’s exposure to the landscaping sector actually pre-dated his life-changing fuel stop. In 2019, his employer had acquired a lawn-care business, and he saw how the crew stayed fully booked, even as the pandemic-driven downturn led the company to cut workers from its hospitality businesses.
While demand for mowing and mulching is seasonal, it is also highly predictable. Grass doesn’t wait for the market — it just grows, and property owners need it cut.
Other popular sectors among the sweaty startup set include: waste management, car washes, HVAC services, and self-storage business. In other words, look for who stays busy when others aren’t.
Analyze the barriers to entry — and the path to profit
A common trait of these businesses is that they have relatively low barriers to entry. Practically all you need to start a landscaping company is a lawnmower and a truck.
Couple that simplicity with the reliable demand for services, and you get a lot of people starting profitable businesses, but relatively few growing past a certain scale.
Botkin sees big growth potential in taking a blue-collar business that has hit that ceiling, and applying white-collar management and marketing techniques to maximize cash flow.
“To me, this business is labor and fuel, because if I can control labor and I can be efficient with fuel, I’m going to make money,” he said.
Research the customer base and market trends
One of the key advantages of buying a business versus building one from scratch is that you get a built-in customer base, which would other wise require a lot of time and money to grow.
In researching several available lawn-care businesses, Botkin could see that B&B had the best reputation and an attractive 60/40 mix of residential and commercial customers.
As he examined service contracts ahead of his purchase, he noticed that several agreements were older than he was, and a few lacked street addresses.
That kind of loyalty only comes from sweat equity.
Not only that, Botkin knew from his career in real estate and other data that metro Orlando is poised to see significant residential growth in the coming years, bringing new customers to the area.
Scout the competition
Last, but not least, the sweaty startup strategy often involves taking an asymmetric approach to your competitors.
As Huber put it in a tweet, “Who would you rather compete with? The group of folks with VC money and Stanford degrees or the guy down the street who used a fax machine?”
Indeed, Botkin was shocked to discover on his first day in charge of B&B that what he thought was an office phone was in fact just a fax machine, and that the company phone number went straight to a voicemail service.
“A lot of those businesses are owned by an older generation,” he said. “They’re living in techniques and processes from the 80’s.”
Like most of its competitors, B&B had no meaningful digital presence, and the sign-up process for new customers was slow and inconvenient. Botkin quickly changed that, and says it has already led to new clients.
Botkin continues to figure things out as he goes, drawing on his corporate experience and counting on his crew of 14 to do what they do best.
So far, the early results are promising. Sales were up this January over the same month last year, and the busy season still ahead.
“We think we can conservatively grow this to a million dollars a year, within the first 18 months.” he said.Join the conversation about this story » NOW WATCH: The racist origins of marijuana prohibition