MAU 3 | Acquisition Criteria


When thinking about acquiring a business, you have to take your time and kick around a lot of ideas before finding and settling on one. Steve Kennett found that diamond in the rough and acquired Phoenix Industrial Cleaning. Steve is a 30-year veteran technology sales executive. In this episode, he joins Domenic Rinaldi to share his professional journey and his decision to own his own business. He shares his acquisition criteria must-haves and what attracted him to Phoenix Industrial Cleaning, Inc., and gives some tips on how you can grow after acquisition.

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Steve Kennett: Acquisition Criteria And Growth

My guest is Steve Kennett. He was looking to own, in his own words, a small business, a boring or unexpected business that had steady revenue and would be scalable. Steve found that diamond in the rough and acquired Phoenix Industrial Cleaning. Phoenix is a business that provides large scale industrial cleaning and interior protection largely to the packaging and food manufacturing sectors. I’ve known Steve for many years and I happen to know that he took his time to find the right business to acquire. He looked at a lot of businesses and kicked around a lot of ideas before finding and settling on Phoenix.

Given Steve’s extensive sales and marketing experience, he was confident that once he found the right opportunity, he could leverage those skills to scale a business. Sure enough, that’s exactly what Steve has done, growing Phoenix by over 60% since taking over. Steve, congrats on all the success. I understand you’ve become a yardstick for your buddies looking to take the plunge maybe into business ownership themselves.

Thanks, Dom. A lot of people that are reflecting on where they are in their career, what they want to do, and the time it takes to do things. They’ve reach out to me and talk to me about the process and doing their own analysis of whether this is the right thing for them.

I want to know what’s happening with Phoenix because you’ve had such tremendous success since taking over and I’m not surprised at all. I also think that was a diamond in the rough opportunity. Take me back to the beginning. When did you first think about acquiring a business? Did you come from a family of business owners?

First of all, my dad was an optometrist, so that’s somewhat of an entrepreneur. After I left college, I ran into some of my friends’ fathers that had gone through this process. Over a few years, I started seeing myself in that role as opposed to moving through corporate ranks or uprooting my family and moving around the country for my career. I saw one executive from Quaker Oats that left there and bought a small roofing coatings business. That interested me. Why would someone like that move that direction? Another friend of mine’s father owned a small electrical components company that built electric blankets, speakers and stereo equipment. I saw the lifestyle they were living and the gratification that they were receiving in managing and running their own business. It’s somewhat of a family business. I started seeing myself at some point in the future that that’s probably a good fit for me in the long term. I didn’t necessarily know it was going to be this under the radar thing, but I knew that somewhere that’s probably a good place for me.

This was early in your career and then you went off to have a long career in the software industry.

Many people getting out of college, there’s a lot of technology industry, businesses and companies out there looking for young people to market, sell and develop products in that area. Back when I was getting out of college, that was at its infancy. It was interesting back in the late ‘80s where you were starting to see these careers pop up and finding roles for people like me in there to sell and market. It was a rewarding career in sales. You’re working with a lot of executives and you’re making decisions that impact large companies providing great value. There was a lot of satisfaction in working with big companies and executives and learning how companies do business. I got a lot of gratification from that over the years.

When did you first start digging into and looking at the option of owning your own business?

This is probably similar to other people out there reading. As business cycles go through recessions and growth, you tend to look at other opportunities in your career. Several years ago, when the Great Recession hit. Where are those opportunities now because our company is shrinking? I started looking, then I settled in and said, “I got to keep working and get through this recession.” Once I sensed that we were coming out of the Great Recession and that it was okay to make investments and take on a little bit more risk, I started saying, “It’s time.”

To actually make something happen and execute on it takes time. Click To Tweet

When you start saying it’s time, then you’ve got to think about how long it takes to do things. To make something happen and execute on it takes time and building a, “How do I get there?” and making sure it happens. I started building a network of people asking about people they might know that’s retiring, that own businesses. I started talking to business brokers and looking at small companies, understanding how they work, how they become profitable and those kinds of things. Right around after the recession, it started improving.

I know it took you many years to ultimately find Phoenix and consummate that transaction. You and I had looked at a business many years ago and it wasn’t the right fit for you and maybe it wasn’t the right time. Bring me from that point forward. How many businesses would you look at on an annual basis on average? What was your experience like? What did you learn along the way as you were looking at these businesses? Did you find businesses that you said, “I thought I liked that industry, but now that I got a chance to look under the covers, I’m not interested in that anymore.” I’m interested in the journey that you took.

I started doing my homework, going online and looking at businesses for sale. One of the things that’s more of an internal part of this process is learning to define yourself in owning a company like this versus a corporate career. You’ve got to start thinking about defining yourself as a small business owner. Once you to start doing those things and looking at the companies, you start looking at them differently than what they do per se. Once I got to that stage in the process and started looking at the numbers of business opportunities around these things, it helped dramatically allow you to vet out what kinds of things made good sense. Typically, I wouldn’t say I looked at a ton of companies, but I would go through looking at close to a dozen or so maybe each year. It’s learning to see how they run, what they did and whether they were a good fit for me.

A dozen in a year is a fair number of businesses to look at. As you were going through that process, I’m sure there were businesses that you found that maybe you started to go down the path on and do some significant diligence on. Can you talk about that? What caused you to pull away from those transactions?

I’ll talk about one in particular. It was a window blind manufacturing company and it was a successful one. You’ve got to define what financial return you’re looking for every year and those kinds of things. That limits what you want and this particular company had a nice profitable return. It was interesting from that perspective and you wanted to figure out how you can fit yourself into that. I met with other companies that had similar businesses here in Chicago and how they ran. What I liked about it was that he was making his own products in some way. That helped differentiate his margin and the products that he had. I was talking to them. One of the things I found that impacted my ability to work in that business is it was a one-man shop. He did it all. He was working long hours and I don’t think I was ready to transition like that into a business where I was maybe doing all of the heavy lifting and the business component. I was looking for something more that I could help strategically and then evolve into a more significant role in the company. That’s when that one fell apart for me.

You’re hinting here to a topic that we talk about a lot, which is your acquisition criteria. What were the things that you started to tick off that were must-haves versus nice-to-haves? When you look at your list of must-haves, not being the guy that’s doing all the work, can you talk to us through some of the other things that are must-haves in a transaction?

One of the things that came from this blind business was, what is my real expertise in? Is it calling on consumers or is it calling on businesses? I’ve been selling to businesses all my career. I understand how businesses buy things. I understand how dollars are approved and how decisions are made. I started thinking a little bit about companies that sell to other companies and that was a big criterion for me. This is different for everybody, but I was looking for an owner or someone to help me transition the business over time and allow me to keep the momentum the companies have going. I wasn’t looking necessarily to get the keys, walk-in and just run it. I needed some help and I was looking for resources to allow me to have the right role from the beginning. Those were good components. Also, a business that was in a market that had a steady revenue stream. It looked like something that would continue and that you could allow that steady revenue stream to keep doing what it does while you figure out ways to grow beyond that. Those were the kinds of things that I was looking for.

It makes perfect sense to the M&A Unplugged community. Steve gave you a key nugget here. If you’re looking to buy a business, it’s important to first take an inventory of yourself. What’s important to you? What are you looking for in a transaction? Because it’s different for everybody and you need to start there before you launch into looking at deals and transactions. That might change over time, but it’s important to understand the things that you’re looking for out of a transaction. Steve, you mentioned that you assembled a group of advisors. Who did you go to? What types of people were you seeking out? Who wound up being the people that were most helpful to you in the process?

I did meet with some of my friends’ fathers who own small businesses. I talked to them about taking on the risk and responsibility of owning a business. I got a sense of, “I own a small business, but what does that mean?” It means more than what it says on the surface, so I learned to understand what that is. I talked to other previous business owners. I talked to some people that are in the financial industry and better involved in investment banking and financing of companies. They have lots of relationships with owners of small family businesses and what they did to be successful.

MAU 3 | Acquisition Criteria

Acquisition Criteria: As business cycles go through recessions and growth, you tend to look at other opportunities in your career.


In anybody’s network, you’re 1 or 2 people away from a lot of interesting companies and guys that were in private equity, that were looking to raise money and do this in a different way or attorneys that specialize in that. You’ll find people that help guys like me if you’re looking to finance businesses and how that all works. You’ll find a lot of interesting people in your own personal network or one-step removed that are involved in this world.

Were there any particular types of advisors that were most helpful to you or the people that had run businesses? Did you happen to find an accountant or attorney that helps you think through and shape your acquisition criteria?

An accountant that specializes in small businesses and that’s the one that I work with. He was keen on some of the things. He helped me identify some of the things that are important like the flow of cash into the business, the recurring revenue components, the depreciation of assets. All these things are important to a business model that maintains a good positive cashflow and is consistent. My accountant was integral to getting me focusing on those types of things than what the company does. I would encourage anyone looking for a business to identify someone that works with small business, either an accountant or people in the banking industry that work with small business owners. That will help you identify what’s good and not good and what’s important and what’s not important.

Let’s move into the Phoenix transaction, but before we talk about that, you described you were looking for a business that was boring and unexpected. Talk a little bit about that because it ultimately became a key criterion for you.

Under the radar was probably the biggest thing. I tell people that if it has any hint of being sexy, that is not good because if it does, that means there are a lot of other people that are interested in it too. You’re looking for things that are not drawing a lot of attention but is a profitable and consistent business. That’s something that I was looking for. Even this one, the first time that this was presented to me, I was like, “I don’t know if I want to do that.” Over the time of exploring it, looking at the business components and the industries that it was in, the customers that it had, the recurring revenue, and how the company was managed, pieces started coming together for this one. That’s why I proceeded to the path of making an offer and making it happen.

Your first impression of Phoenix Industrial was you didn’t know that you wanted to do it. Talk me through how you started to get comfortable. What was the path that you followed?

Prior to this one, there had been other similar types of companies that I looked at in maybe janitorial space. It didn’t excite me much, but this one had enough of an interesting customer base. It was something that was unique. It was providing a valued service to large manufacturing companies that needed this service on an ongoing basis.

Can you talk about the services that Phoenix offers, the breadth and depth of what they do?

Phoenix Industrial Cleaning provides some cleaning services to manufacturing facilities that create dust in the process of manufacturing. Let’s say a company in the packaging business. You’re cutting paper and cardboard, and you’re creating and putting adhesives on paper. All of this creates dust and that dust gets into the air handling systems, the floors, walls, and ceilings. All of this type of dust can be a potential risk to a manufacturing facility. Given the complexity of how companies manage manufacturing, engineering people have it to a science in how they create a profitable business model around their manufacturing facilities. Part of that is maintaining compliance with safety and a clean environment for the people in that business.

In anybody's network, you are one or two people away from a lot of interesting people or companies that are looking to raise money. Click To Tweet

Companies in the food manufacturing business are constantly keeping a priority on safety and the environment that they build their products in. Phoenix provides that service to companies in the big packaging world, the confectionery industry, which is big in Chicago, and the large institutional bakery type businesses. You can imagine that the silos of flour and sugar and all of that needs to be cleaned on an ongoing basis. We’re constantly in these large manufacturing facilities providing that service of cleaning that area.

That hit the criteria of not sexy, but not sexy makes money.

If you put a list of my customers on a PowerPoint, that is a sexy list of customers. They’re billion-dollar multinational companies that are profitable. We have a nice customer base and maybe that’s too sexy, but I’m proud of the kinds of businesses that we work with.

You got introduced into the deal, you’re looking at it, you weren’t interested at first and then you started to take a shine to the business. What were the next couple of things that you did in the process as it unfolded?

From a financial component, you had to take a close look at how the flow of the business happens and the cash comes in and out of that business. I spent a lot of time analyzing how the company runs and how it brings money back into it and pays for itself. I spent digging deep into the numbers and understanding how that works. The last thing you want to do is get into a business that the flow from a financial perspective doesn’t work. That’s probably what would keep anybody looking at a business up all night. You wanted to make sure that was there and it met your criteria personally and professionally, and it works for you. That was a big priority.

You made an offer on the business and then you start digging in on the financial side. The accountant that you referred to, did he help you with the diligence on the financial side? Did you bring in a third party at that point in time?

My accountant was the acting analyst on the financials. He came back with a positive response to the business. He made a comment, which is interesting, “When you have a lot of money coming from the business in your account, you should be nervous. When you have a little money in your account, you should be glad because that means your money is working, people are working and more money’s coming.” He identified that in the cashflow of this business in particular. He said, “This is how this is going to run. You’ll find that the more you work, the more money will be going out ahead of that, but that’s good. That means you’re aging. Your AR is growing and you’re keeping your guys busy.”

Was there anything that he found in his diligence that caused him to help you manage the business differently once you took over the range? Did he find a few things and say, “I don’t think you should run it this way. We should change this and this?” Fundamentally, the business is sound.

I managed this business while I was working for someone else before. We identified the size, profitability, and targets in our business that would allow us a logical transition to a more full-time role in the business. It helped and we planned it all out. It wasn’t like, “I’ll keep working and hopefully, this will go.” We figured out where that watermark is and profitability point to take a larger role in the business.

MAU 3 | Acquisition Criteria

Acquisition Criteria: If it has any hint of being sexy, it’s not good because that means there are a lot of other people that are interested in it, too.


You stayed with your job and slowly transitioned into this business. Once you hit the bogey that you were looking for, it made sense to then move into this business full time. That’s on the financial side. Let’s look at the operational side. The accountant is doing financial diligence. What were you doing on the operational side to understand and get comfortable with how the business was being marketed, their workforce, and all those sorts of things?

There were two things that attracted me to this business. One was the company had not been marketing itself other than consistent mailing of postcards out to manufacturing companies, which was old school. I was interested in coming from technology to investing more in a digital marketing strategy. Now, when people are looking for services and they’ve got a problem, they go online. They’re in the market when they do that. Your hit ratio, if you’re doing digital marketing, is much higher, especially for something as specific as what we do. I saw an opportunity there. I also like this business from an employment perspective.

There was a general manager that had been with the business for about twelve years. He understood the manufacturing environments, the OSHA safety rules and how to manage all the risk of safety that’s involved in this business. You have people on lifts, walking around on the roofs of manufacturing plants and handling equipment. The company was prepared to carry on managing all the complexity of working in those environments. In looking into that, it gave me confidence that the company could continue to quote and execute work in complex and risky environments because you have people doing up on lifts. Understanding the safety records of companies, what they’re certified to do and the process of doing those things, the company checked all those boxes.

Certainly, one of your key criteria was infrastructure. You didn’t want to come in and have to be the guy. You wanted to know that you can come in, manage the business and not have to be the business. Was there anything on the operational side that caused you to take a step back and worry a bit that maybe there wasn’t a good solid foundation?

There were a couple of things. The ownership was not local. It was in Florida, so he wasn’t giving it the eyes and showing his face as much as he should. I was concerned that maybe things were lacking there. Going back to safety, it came out in the process that there had been some injuries in the company in the past that had caused a red flag. I want to make sure that it wasn’t something that was going to happen again because there is a risk of safety issues with this type of work. That was the big thing. Is that something that I could improve on if I took on the business or is it something that was too risky?

How did you get comfortable that you thought the safety was good enough or that you can improve it enough that you’d be comfortable?

There’s one person in the insurance industry on the brokerage side. We talked a lot about building ongoing education and safety programs that would be part of the new management moving forward. Monthly training and review were something that we could put into the process. There’s a modification in insurance, not to get too deep but how safe is this company? We felt that given the right procedures and ongoing education, we could reduce our risk, improve our mod, and get better insurance rates moving forward. That’s what we did. We executed on it and we had a high-risk mod when I purchased the company. Now, it’s 0.88 which is below one, which is exceptional. I turned that negative into something of an opportunity.

You offered up another key nugget and key learning for people out there looking to acquire a business. There’s no perfect business. Every business has blemishes. In your case, they weren’t doing any marketing. Safety might have been an issue, but you did your homework to figure out that you could correct matters and it wasn’t a structural issue that you could improve things. You got past it and were able to acquire the business. It’s important for people to understand. If you’re out there looking for the perfect business, it doesn’t exist. I’ve been doing this for a long time. I haven’t represented a client yet that has a perfect business. If you’re a buyer looking for one, you’d probably want to go do something else. It’s not out there.

When you’re talking to other people about acquiring businesses, what’s the tipping point in you personally that allows you to take on that risk and go for it versus just looking? You have to think about time and where you’re at in your career and saying, “Whatever age I am now, where do I want to be in five years? Where do I want to be in two years? What do I want my retirement to look like?” You’ve got to build a plan on how you’re going to get there. If you don’t do things, you’re not going to get there. It got to a point that if I don’t do something, it’s going to take me two years to get to find a company, acquire a company and make it successful. You can imagine the time it takes to do all these things and you go through these all the time. You get yourself wrapped up in that and you need to make a decision to achieve what you want to achieve and when you want to achieve it. If you don’t do those things, the time goes by and nothing happens. Think about where you want to be in two years and how are you going to get there.

Make a decision to achieve what you want to achieve and when you want to achieve it. Click To Tweet

It does take a couple of years to find the right deal and then close on the transaction. It’s not an overnight thing. Every now and then we see people get lucky that they’re out there for six months and they find the right thing, but it’s rare. It takes time.

You’re putting a lot on the line when you buy these companies. You’re putting your own personal assets and your career on the line, and how do you define yourself. Getting to that tipping point that says, “I’m ready to do it. I’m ready to make an offer. I’m ready to take this risk,” it’s hard for people. You need to look at your retirement, where you’re going with all of those kinds of things and how you’re going to get there. All of that has to come into play when it’s not only the right business for you, but you personally are ready to make that move.

You go through all the diligence, get comfortable, line up your lending and your working capital lines, close on the transaction and take over the reins. Bring me through the transition. Did it go the way that you had hoped and planned for? Were there surprises that you hit along the way? What was that like?

The first year I owned the business, it did exactly what we thought it would do, which was good. It didn’t grow but it didn’t shrink. It created the same amount of revenue that had done for the previous years that the company had been doing business. If we take the reins, take the keys and let it do what it does, it did that, so that was a good thing. It then became, how do we grow the business? Part of it was the digital marketing component. It was encouraging the management team to be more aggressive about going after large business. The previous ownership had been reluctant to take some of those kinds of risks. He was comfortable with a certain revenue stream.

To grow, you’re going to have to take on new business and new customers. We identified a couple of big opportunities from a revenue perspective in my second year that transformed the company and almost doubled the size of the company. Our second year was fantastic. Working with large roofing projects, we found an opportunity to subcontract with re-roofing projects in some of these large facilities where we could provide a great deal of assistance to those projects. That created a market that was out there for us, but we hadn’t been aggressively tapping into it. That was a nice upside that vaulted us into growing and investing more aggressively in digital marketing.

Seeing this growth that you had in a couple of years is outstanding. Even keeping things steady that first year is always tough because there’s always that transition and slotting in, does the company lose some momentum? Kudos to you for keeping the ship steady and growing it. Looking back at the entire process from when you first started thinking about acquiring a business to where you are now, if there were 1 or 2 things that you would offer to people that are in your shoes, what would that be?

I get tremendous gratification for working for myself and running our own business. Whatever bad days you have in owning your own business, it’s a good day because you are the boss and it’s your business, and you’re growing something special that you’re going to be rewarded for. Any bad day I have, and everybody has one, I’m still glad that I own and I am passionate about owning this business. That’s legitimately true. I feel that way about it. There’s great satisfaction. Getting through all it takes to own, identify, purchase a business and get to a mature state in it is extremely rewarding.

I would also keep my eyes on the other side of that wide open that owning a business means that you are financially responsible for the flow and the cashflow of the business. Managing all of those things week in and week out such as the payroll, bills, taxes and your own personal finances, those are all your responsibility. Learning how to do that successfully in a business is something that you have to learn to do. Each business is different. Learning how to manage the finances of a business is extremely important and the gratification from it are the two things I would tell people.

Are there any books that you’ve read, whether it be business or non-business, that had an impact on you and the way that you think about business ownership?

MAU 3 | Acquisition Criteria

Acquisition Criteria: When you have a little money in your account from the business, you should be glad because that means your money is working and people are working, and more money is coming.


There’s a book out there called Good to Great. When you first start managing a business and when people do the job is one thing, but when people do a job and make it better, that’s the kind of people that you’re looking to hire in your business. That’s one of the things, “How do I make things better?” I look at things that way now, maybe more than I ever did, which is good or bad. I’m finding people that take a role and make it better. As I’m interviewing people into the company, I always try to gauge whether this person is going to be someone that just gets the work done or someone that gets the work done and creates a bigger contribution to your company. That’s a big thing that allows you to keep investing in your business and making it better are the people that you hire and the ways that you’re trying to make your business better creates value in the company and good employees. I’m looking for people that will take ownership of their roles and making it better.

Steve, thank you for being our guest and congratulations on a successful transaction, but beyond the successful transaction, for taking the business to the next level. Kudos to you. For anybody that’s reading this, if they wanted to get in touch with you and if they had a need for some industrial cleaning services, how can they reach you?

My email address is [email protected] and our website is You can go to our website and you can call us directly from there or email me directly. I’d be happy to talk to you more about business ownership or how our company could help your company.

Thanks, Steve. It’s been such a pleasure to have you on.

I appreciate it. I’ve enjoyed it. Thanks.

To summarize a few key things that Steve brought up, first is understanding your acquisition criteria. It’s important. Before you launch a search to understand what you’re looking for, that requires you to take an inventory of yourself, your strengths and weaknesses, and be honest with yourself about where your capabilities and interests lie. The next thing is lining up the right set of advisors. Having the right set of advisors can make all the difference in a profitable transaction and an unprofitable one. If you’re looking to acquire a business, every business out there has blemishes. It’s understanding whether or not those blemishes are things that you can overcome and even improve upon. That’s where the upside is going to come from.

Steve acquired Phoenix Industrial and he knew they weren’t marketing. He came in and applied his skillset to the business, and he’s been able to grow the business by 60%. Understanding the right time to take the plunge, both financially and emotionally. You have to have the money put aside and be ready to take on the risks, but you also have to be emotionally ready to take the leap of faith and put it on the line and be a small business owner. Those were tremendous insights from Steve. I appreciated him coming on and sharing those with us. If you would like to learn more about the process of acquiring or selling a business, please visit our website at Feel free to reach out to me at [email protected]. I look forward to seeing you on the next episode of the M&A Unplugged podcast. Until then, please remember that scaling, acquiring or selling a business takes time, preparation and the proper knowledge.

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About Steve Kennett

MAU 3 | Acquisition CriteriaPhoenix Industrial Cleaning is one of the most well known industrial services companies in the Midwest. We offer a wide-range of services that will help your business stay safe and efficient.

Phoenix has proven experience in Interior Protections Installations, Industrial Cleaning and Customer Services for over 30 years. 


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