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Tommy Barrett was working at a bar when he started a swimming pool company in Houston. He told his friends the plan from day one: build it, then sell it.
On the surface it was about as commoditized as a business gets. Texas Aquatic Enterprises (TAE) took care of commercial pools for homeowners associations, universities, and municipalities. That meant lifeguards, cleaning, chemicals, repairs, and renovations. In every bid, three to five competitors offered roughly the same thing.
About eight years in, Tommy asked his CPA what the company was worth. He was expecting millions.
She came back with less than $100,000.
He was crushed. Then he spent the next several years fixing what that number was telling him. When the business finally went to market, five offers came in within a week, and one of them was above asking.
Same company. Same industry. What changed was Tommy’s role in it.
What he believed
If you’re the one selling, you’re the bottleneck. Every operations fire stops the revenue.
Hire people smarter than you. Cheap hires you have to train don’t stick around.
Accounting is for decisions, not just taxes. Buyers will read your books line by line.
The right buyer matters more than the top bid.
Read every “standard” agreement. There’s no such thing.
The story
Tommy’s first edge was safety. Drowning is a leading cause of death for young kids, so TAE created a child safety policy. Any child under 42 inches wore a life jacket and a red wristband so lifeguards knew at a glance who couldn’t swim. Parents who opted out had to stay within arm’s reach in the water and sign a waiver.
Parents pushed back at first. But when Tommy sat across from an HOA board and showed them he was investing in their facility’s safety, they trusted him more. In 12 years of ownership, TAE never had a drowning.
That differentiated the service. It didn’t make the business sellable.
When the CPA came back with her number, she was quoting book value: cash, trucks, and equipment at a steep discount. It ignored the contracts and the reputation. The deeper problem was that Tommy and his partner were the business. They sold, they ran operations, and they paid bills by checking the bank balance.
So they rebuilt it department by department:
Accounting first. They hired a full-time CFO, who was shocked at how they’d been running the books. Within a few years, she was telling Tommy when he couldn’t buy equipment because a seasonal downturn was coming.
Then sales. They hired experienced salespeople and screened them with a personality assessment. Tommy’s rule: if someone can sell 80–85% as well as you, you’ve found a winner.
Then leaders for each function. Department heads handled day-to-day problems. A vice president ran things daily, and they gave him 10% of the company.
Tommy’s hours fell to about ten a week. Then he left for six weeks in New York. When he got back, the business had grown without him.
That’s when he picked up the phone. A formal valuation came back in the low seven figures. He’d hoped for about 2x discretionary earnings. It came in at 3.4x.
Lesson 1: A shockingly low valuation is a diagnosis, not a verdict.
Most small businesses are valued on seller’s discretionary earnings (SDE): the profit plus the owner’s salary and perks added back. Tommy learned the catch. If you’re doing a real job inside the business, a buyer won’t add your salary back, because they’ll have to pay someone to do that job.
So when the owner is the operations and the sales, a big chunk of the “profit” is really a paycheck. That’s why his number was so low. The business wasn’t worthless. It just couldn’t exist without him.
Tommy called that low number a blessing in disguise. It told him exactly what to fix.
Your move: get a real valuation now, years before you plan to sell. If the number disappoints you, look at it as a list of jobs you still do that a buyer would have to replace.
Lesson 2: Build the team that makes you optional, in the right order.
Tommy’s order is a useful template:
Clean books. You’ll hand a buyer three to five years of financials and answer questions on all of it. TAE’s buyers asked about a single $77 rental car charge. They also brought up an old $80,000 payroll tax mistake Tommy would rather have forgotten.
A sales engine that isn’t you. This is the step most owners resist, because they think no one can sell like they can. Someone 80% as good, selling full-time, beats you selling part-time between operations fires.
Leaders over each function, so problems get solved without you.
Then test it. Tommy’s six weeks away proved the business could run without him, both to himself and later to buyers.
Your move: pick the one function that would stall if you disappeared for a month. Hire for that first, and hire experience instead of potential.
Lesson 3: The best offer isn’t always the highest one.
Tommy’s broker had warned him a sale could take 12–18 months. Instead, she quietly emailed her list of pre-qualified buyers on a Friday night, before the business was publicly listed. Within a week, five offers came in.
The spread was wide:
The highest was above asking, from an acquisition firm.
The lowest came from a multi-state competitor. It was so low the broker called it embarrassing, and it required an earnout. Tommy had already ruled earnouts out. He’d done the work and didn’t want to stay on, chasing revenue targets to get paid.
The winner was a serial entrepreneur who bid slightly less than the top offer. He wrote Tommy a letter about how he’d treat the team, including honoring the vacation time long-tenured employees had earned.
Tommy took less money to get the right buyer. The promise wasn’t legally binding. He had months of phone calls and lunches with the buyer before the handoff and decided he trusted him.
The terms were clean, too. It was an asset sale into the buyer’s new company. Roughly 70–80% cash came at closing, and the rest was due in 30 days. To protect that balance, Tommy kept collecting the next month’s receivables. He stayed on for 30 days, then did a limited consulting arrangement of a few calls a month for a year. The buyer barely used it.
Your move: before you go to market, decide what you won’t accept. That could be an earnout, a long stay, or a buyer who would gut your team. Knowing your deal-breakers ahead of time makes a five-offer week easy instead of overwhelming.
The fine print
Two smaller lessons from Tommy’s process are worth stealing:
Choose the broker who teaches you. Of the brokers who called back, one had sold a pool company but barely gave Tommy the time of day. Another hadn’t sold one but spent 45 minutes walking him through her whole process. He hired her, and she delivered five offers in a week.
There’s no such thing as a “standard” agreement. Tommy’s attorney found the listing agreement full of problems. One vague clause could have let the broker claim commission when the partners sold other assets they owned, like real estate. The broker changed it once they explained.
What he’d do differently
Get the right people in sooner. Tommy said his first hire should have been a salesperson, not himself, and that a CFO should have come in right away. Their early, cheap, train-them-up hires kept leaving. Once they hired people who knew more than they did, those people took over whole departments.
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The through-line
Tommy didn’t change his industry, his customers, or his trucks. He changed one thing: whether the business needed him.
That moved his company from under $100K in book value to multiple offers at 3.4x earnings, in a week, with terms he chose.
If your valuation disappoints you, don’t argue with it. Read it as a to-do list.
To your future exit,
Andrew
Unlock Your Exit
Source: Built to Sell Radio, hosted by John Warrillow, interview with Tommy Barrett. Listen to the full episode here. Our takeaways are our own.