Welcome back to Wednesday’s Spotlight. Today, we look at Tew & Taylor, a Florida building inspection firm that two brothers bought for $2.1 million without an SBA loan. They doubled revenue twice, but a change in state law could restrict the work they are permitted to do.
A $700,000 EBITDA BUSINESS, BOUGHT AT 3X WITHOUT AN SBA LOAN
Doug Taylor, a longtime municipal inspector and building official, and Beverly Tew founded Tew & Taylor in 2008. The firm operates as a “private provider” under a 2002 Florida statute, passed after hurricane investigations found understaffed building departments skipping or rubber-stamping inspections. Developers and homeowners can hire licensed private firms for plan review and inspections, while the building department retains zoning and fire review and issues the permit. For contractors, that can mean an inspection the next day instead of a week’s wait for a municipal inspector.
By the time Jack Rauch and his brother approached Taylor about buying the business, it had five full-time staff, two part-time surge inspectors, and roughly $700,000 in EBITDA. Rauch had spent three years in the White House before moving into buy-side diligence at a Big Four firm. He planned to keep his job in New York and own the business with his brother as a side project. Over lunch, they agreed on a price of three times EBITDA, or about $2.1 million.
To make the deal work, Taylor agreed to finance part of the purchase and keep his license on the business because no bank, SBA lender, or conventional lender would finance buyers with no license or industry experience. The brothers contributed 10%, about $210,000. Taylor carried a $300,000 seller note at 0% interest, repayable in three annual $100,000 installments. Those payments also served as his fee for keeping his license on the business, with additional hourly pay for inspections he performed. A family office lent the remaining $1.59 million, roughly 76% of the purchase price, in exchange for a third of the equity.
The brothers grew the business by accepting jobs Taylor had turned down and charging the full minimum specified in its contracts. Taylor generally declined work more than a 15-minute drive from his other jobs and billed a one-hour minimum, even though the contracts required two. The brothers began billing two hours, received no complaints, and hired inspectors willing to travel farther. Revenue doubled in the first year.
The next expansion came after back-to-back hurricanes hit Tampa Bay. Rauch opened a St. Petersburg office and emailed about 40 mayors offering spare inspection capacity. Five replied, and four signed contracts to outsource part of their building departments. Revenue doubled again. The owners recovered their equity investment within six months and have since taken distributions of about $50,000 each in most quarters. The firm now has offices in West Palm Beach, St. Petersburg, Orlando, and Jacksonville and serves more than 15 counties.
Hiring a private provider also lowers the customer’s permit fees. HB 803 requires building departments to cut fees by at least 50% on commercial projects when a private provider handles all plan review and inspections. Counties are revising their fee schedules, with Columbia County offering discounts of up to 90%. Rauch estimates the Florida market for private-provider services at roughly $200 million.
Rauch considers legislative change the greatest threat to the business, since lawmakers could restrict the work private providers are allowed to do. He sought the trade association chair to help influence those decisions. The business also faces seasonal demand, with work peaking in summer when seasonal residents leave and remodel, then slowing from Thanksgiving to Easter.
Taylor had built a profitable business at a scale he was comfortable managing. The brothers paid about $2.1 million for it and doubled revenue by charging the agreed minimum and accepting work farther away. As the firm expanded, its value became more dependent on licensed staff, municipal contracts, and Florida law. Those are the foundations Rauch must maintain for the business to last.
MIDWEEK TAPE EXTRA
Spruce Pine's City Drive-In asks $1.275M on $370K cash flow, building included
Asking price: $1,275,000, including real estate and $234,500 of equipment
Annual revenue: $1,333,000
Cash flow: $370,000 SDE
Asking multiple: 3.4x SDE, with the building included in the price
Real estate: $900,000, owned
Employees: 5 full-time, 13 part-time
Seller support: Owners will stay for an agreed period
The City Drive In opened in Spruce Pine, North Carolina, in 1950. It runs from four buildings on a 0.64-acre corner lot with 300 feet of road frontage, about 4,800 vehicles passing daily, and 50 parking spaces. The original grill handles the main kitchen, counter service, and takeout, with curbside dining under the awning. A separate dining room has a full bar, and there is an area for live music. The business also hosts regional festivals, car and bike shows, and wedding receptions, runs a catering arm, and holds weekly karaoke and trivia nights. Hours run Monday through Saturday, with breakfast only on Saturdays. About $80,000 of inventory is excluded from the price. The husband-and-wife owners are retiring.
Translation, if you own one: the business keeps about 28 cents of SDE from every dollar of sales, which is strong for a restaurant and bar. Most of the asking price is the building, which accounts for about 71%. At the listing’s $900,000 real estate value, the operating business is priced at $375,000 (about 1x SDE), and equipment makes up $234,500 of that. Under North Carolina law, the bar’s ABC permits expire when ownership changes. A buyer can keep serving under them after notifying the ABC Commission, but must file its own application within 60 days.
COMING ON FRIDAY
A seller who accepts an earnout receives part of the price later, and only if the business meets agreed targets after closing. On Friday, we look at how earnout targets are set, who controls the results, and what a seller can negotiate before signing.
