Brad Dower is building an 8-figure EBITDA firm by acquiring and integrating businesses in a fragmented market. In this session, he breaks down how he’s using a buy-to-build strategy to accelerate growth, without relying on private equity. From structuring LOIs to hiring a COO to scale operations, Brad shares the levers that have allowed him to grow fast while staying focused.
What you’ll get from this session:
• How to identify and pursue acquisitions in fragmented industries
• The deal structures Brad is using to scale without giving up control
• What changes when you go from solo operator to platform builder
• How to operationalize growth through a strong COO hire
• Lessons from buying businesses out of legacy networks and PE-backed platforms
Why it matters:
• Acquisitions done right create leverage and speed—but demand operational readiness
• A strong integrator unlocks founder capacity to focus on strategic growth
• Acquisitions don’t require outside capital—but do require a plan
TRANSCRIPT
Greg Alexander: Hey everybody, this is Greg Alexander. You’re listening to the Pro Serv Podcast, brought to you by Collective 54. This podcast is for owners and founders of boutique professional services firms, so if you’re in the business of marketing, selling, and delivering expertise for a living, this is for you. This show aims to do three things. It aims to help you make more money, make scaling easier, and make an exit achievable. And on today’s show, we’re gonna talk about how to do acquisitions in a fragmented market. Some refer to this as the buy-to-build strategy. And there’s lots of interesting things happening now because of some demographics and some technology enhancements. And we have a great member with us, his name is Brad Dower, and Brad is in the middle of doing this, so he’s going to share with us what he’s learned. So, Brad, for those that don’t know you, would you please introduce yourself to the audience? Yeah, thanks for a great introduction, Greg.
Brad Dower: My name is Brad Dower, I am a CPA, and we are in the middle of doing an accounting roll-up strategy. So we have focus on CPA firms, mainly in the tax and accounting space.
Greg Alexander: Okay, sounds great. So, tell us a little bit about. What it is that you’re doing, when you started to do it, and maybe some lessons learned along the way.
Brad Dower: Okay. Yeah, I started this in 2019, acquiring my first small book. It was $25,000, so obviously not very big in today’s… but it’s kind of getting my feet wet, right? Leaving my corporate job, convincing my wife. That I, you know, was gonna leave my cushy job to go do my own thing, so I needed something to kind of hang my first shingle. So I did my first deal, it was small, and then we’ve kind of grown ever since, and we’ve done 4 in the last year. All fairly sizable deals, anywhere kind of the $1.3 to $2 million range. And so we have been growing rapidly, through acquisition. It’s been fantastic. You know, like, I tell everybody, last year we did 1 million, a little over $1.2 million in sales, and then April this year, we did over that in one month. So, acquisition has been our biggest driver. Kind of lessons learned is… I mean, I would say the biggest one and biggest headache we’ve ever had was just a culture issue. It was a female-run firm, and they marketed mainly to females, and so coming in as a male owner, that was just a big hurdle to overcome. And so, really focusing on making sure they’re fitting your niche, and not trying to… you know, M&A is really exciting and a lot of fun. Chasing the deal is probably the most… is what I love doing now, versus doing tax and accounting work, for sure. You know, going out and getting the, you know, $5, $10 million deals is what we’re kind of in the range we’re doing now, is a lot more exciting than doing a $1,000 tax return to me.
Greg Alexander: You know, that was one of the questions I had, is, you know, how did your life change when you went from being a practitioner, you know, doing tax returns to being somebody who’s building a platform and doing acquisitions, like. What is your life like on a day-to-day basis?
Brad Dower: I would say it’s still very chaotic, because I do a lot of client-facing work still, so tax season is very stressful. I’m still reviewing some more of the higher technical issues, have not been able to hire somebody at our local office. So all of our other offices, kind of back M&A structure, is we’re looking for a team to be in place. There’s a lot of small… CPA world is very fragmented, and there’s a lot of CPA offices that run a million-dollar books out of one CPA and basically his wife. I won’t even touch those, right? There is no business there, there’s just that CPA. And so we typically want a strong team in place. And really, these… the way we’re going these days, a lot of the grunt work is getting automated, and so we don’t necessarily need some of the lower-level employees. We need a good admin that’s going to be interacting with the clients, and then we need some more senior level that can actually complete the work. And that’s kind of one of our biggest… if we look at a business and it’s a 90% margin, you know, most people get super excited, I just turn around and run away. Like, I… it’s just… it’s because it’s not going… unless we have capacity to fill it on our end, right? But otherwise, the name of the game when you’re typically, kind of doing this… doing the accounting roll-up, is client retention. And so, we… and then we always structure our deals based on our retention, too. And so, whenever we’re executing a deal with the seller, there is a seller carry piece in there, and we’re typically shooting for 40–20%. Of a seller carry, kind of minimum in that range, and then it’s typically tied to retention, and then there’s clawbacks in the contract that reduces the seller carry piece for anything that falls below. We always aim for 95, typically we end up around 90% year 1 through 3, and depending on how sophisticated the seller is, you know, we… I always try to push the envelope in favor of myself as much as I can. And so we’re always trying to aim for, like, a 3-year retention of callback.
Greg Alexander: So one of the reasons why I asked you to be on the call today is because when I spent some time with you in, Bernie, Texas, where I live, you came by the house that night, I was really surprised and pleased that you were able to pull this off without having to go to private equity and raise a ton of money. You’re able to do these deals creatively. Meaning they’re affordable, because many of our members are in that situation. They would love to start buying some companies, buying books of business, but they’re capital constrained, and they think they can’t do it. So, what advice would you give a member who wants to do this, but feels they’re capital constrained?
Brad Dower: I would say they need to get creative. I have closed multiple million dollar deals with zero cash from my pocket. One of the ones this year that we closed in January was another tax firm based out of Jersey. Purchase price is around 1.5. We actually used the proceeds from tax season to pay the down payment in April, even though we closed in January. Then used basically bank financing for the other piece, and then we did another one. We did zero down. Again, and that was 60% bank financing, 40% seller carry, and we put zero down day one, minus the bank, 60%.
Greg Alexander: When you say sell a carry, I know what that means, but some of our listeners may not. Can you explain that term?
Brad Dower: Sure, yes, whenever the seller retains a portion of the note, so we’ll have, you know, a million dollar purchase price, keep math easy, you know, if we have a 40% seller carry, the seller is actually carrying that note for $400,000, right? Then we’re gonna go either get bank financing for that $600K. And so we can actually buy it in the… and then it keeps everyone aligned. So, I also will not do a deal if the seller does not want some kind of seller carry piece. That’s typically, you know, they want to disappear to Cancun, and you’ll never hear from them again, wherever they happen to be going. You know, it’s a retention game at the end of the day. And so we definitely want to make sure that the clients and the seller are both engaged to make sure that retention happens. Because I tell everybody that works for me, we are in the client retention business at the end of the day. You know, it’s like, we’ve got to keep the clients happy. And so we… this is what we have to do.
Greg Alexander: Now, this is attractive to many of our members because they’re trying to grow organically by investing in sales and marketing. Which is doable, but slow. You know, one client here, one client there, one client here, one client there kind of thing. You’re doing something entirely differently, which is you’re buying clients in bulk, and then you’re retaining them, and 90% client retention for the first 3 years, that’s a very impressive stat. So how do you hold on to the clients after you acquire the book?
Brad Dower: Most of the sellers are, you know, it’s been their baby for 30 to 40 years. Their technology is antiquated at best, and so we really up the client experience, kind of from day one, make that transition. And depending on the size of the firm, the smaller ones we roll right into Dower & Associates kind of brand. Some of the larger ones, we actually, you know, operate as a house of brands for a few years, and then we roll them over into a single brand down the road is the plan. And so we’re able to provide a better product at a quicker and faster than they’re used to. And so, you know, at the end of the day, the client wants their financials in a timely manner, or they want their tax return in a timely manner. And so we’re able to turn that around. You know, I always joke when we go look at firms and you ask what their workflow management solution is. And they point to their conference room table. I’m like, that’s not workflow management at all. You know, not when you’re trying to do 10,000 tax returns, right?
Greg Alexander: Yeah, yeah. So, part of the integration plan, which is my next line of questioning, is taking a business that might not be using technology at all, or in a sophisticated way, and then implementing your tech stack to run the business. Did I summarize that correctly?
Brad Dower: Yes.
Greg Alexander: And is there resistance by the employees or the clients to embrace that approach? And if so, how do you get around that?
Brad Dower: So we do a roll, kind of, roll it out slowly, right? Kind of, typically the first tax season you know, we’re not changing the main… so TAC software is obviously one of our biggest, platforms we use, so we don’t change that year one. Typically, our goal is to find an acquisition with the same tech stack that we have for the most part, but we get them into our system slowly. And it really comes into employee onboarding at that piece. And so we create… have a series of basically onboarding, not only for our employees, but our clients as well. You know, they’re little short, you know, 1-5 minute videos. Hey, here’s how you use this software tool. And our larger clients, we actually… we’re more hands-on with them at the very beginning, and when we want them to ask questions, we educate them, because we find the more we educate and more hands-on at the beginning, then, you know, once we’ve been with a client for 3 to 4 years, I send over their tax return for e-signature, they don’t ask questions. And then, you know, you spend almost minimal time kind of managing that relationship, once you kind of, on the front end, front-load that.
Greg Alexander: Now, some of the questions that I’m getting from members regarding the bank financing is, you know, who are the banks, and what do the terms look like? So… and my recommendation is to start with whoever they’re banking with. And that might be a good place to start to get going, but I would assume as you do more and more and more of these things, you might have to establish other lenders. Is that true, and what does a loan look like?
Brad Dower: It’s definitely true, and as you start moving up, as we’ve discussed, Greg, it gets tougher as you start looking for the larger checks. Then sometimes it actually gets easier if you can… because there’s a lot of people that want to write that $10 million check that don’t want to write the million dollar check, but it’s a different level of bank or investor that you’re dealing with. I mean, typical bank terms, we’re a 10-year amortization, and right now, we’re typically around 9%. With the bank we’re at, we bank with Oak Street Financial, who’s a first financial bank, and they specifically do professional service firms, mainly in the CPA, insurance, and we’re talking about other space, they do a lot of, I think medical practice is their other big. Aspect that they do, and financial advisors. And so they’re actively out there trying to find deals. In that space. They’re pretty easy to work with once you get a good relationship with them, you know? But we are, like I mentioned to you, kind of outgrowing them. Since we’re actively pursuing. You know, most firms probably do 1 to 2 deals a year. We’re trying to execute probably 5 to 10 deals a year.
Greg Alexander: Yep. And… Because you’re improving the operations of the firm, retaining the clients, installing technology, etc. I’m assuming part of your thesis is, is that when you own the firm, you can run it better, more profitably, therefore you can pay off the debt, maybe on an accelerated schedule, or at least not get into trouble where you’re violating any covenants. Is that accurate?
Brad Dower: That is accurate, yeah, I mean, like I said, we buy deals zero down, and they still cash flow. And some of those, like, we structure them, so, like, kind of back to the financing piece, the seller carries are typically a 2-3 year time period, so a lot of your cash flow gets eaten up in years 2 to 3. I’m not really worried about making money today, I’m worried about making $100 million in 3-5 years. That’s where my mindset is, right? And so if the business is basically cash flowing itself and servicing the debt, once we hit past the seller carry piece, then obviously cash flow improves dramatically, and so we’re a few years into this process, so as we start rolling off some of the seller carries, our cash flow improves a lot, and typically we just take that cash and go buy more businesses versus paying down the debt. Because, like, like you had mentioned earlier, you know, we are in the game of multiple arbitrage you know, we’re buying these things 2 to 3X, typically, and the goal, if we can, you know, get to the 10 million plus EBITDA, is we’re looking minimum 8, and hopefully closer to 10 to 12.
Greg Alexander: Yeah, I think you will get to 12, because 90% retention is a very sticky business. And you’re not going to have a lot of the challenges that a lot of firms have. For example, you’re doing thousands of tax returns, so you don’t have a client concentration issue you’re buying teams in addition to clients, so you don’t have an over-dependence on the founder. It’s just… it’s gonna be less risky. And the bigger you get as you’re learning, the more stable your business will be perceived to be. Therefore, the higher multiple somebody will be willing to pay it. This is probably the reason why there’s been so much activity in the accounting space, lately. One thing you educated me on, which I’ve done some homework, and I feel that it’s beyond the CPA space, is that the baby boomers are retiring. And to retire, they need to sell their firm, but there’s not a lot of buyers for firms like this, so you’ve carved out a nice niche for yourself. Because I think one of the questions that listeners are probably asking themselves right now is, why would anybody sell their business for 2 to 3 times EBITDA? So can you… can you help explain that to us?
Brad Dower: Mainly because the accounting space, the old, was basically one times gross revenue. And CPA firms, a well-run CPA firm is typically running, you know, 30% to 50% margin. It’s a great businesses to be in, and so they are just not sophisticated enough to realize… and they’re smaller, and so we’re staying out of the space where private equity’s really interested, right? Once you kind of hit 2 to 3 million EBITDA plus. So we’re trying to stay in around that million dollar EBITDA range. Kind of $750K to a million. There’s enough kind of room in there for us, to make it worth our time. And so we’re staying out where PE is, and so the multiples are definitely down, because PE’s not overpaying, you know, kind of as cyclical as PE gets. They’ll overpay for a certain industry for a while, and it’ll come back down. And so we’re not really hitting some of the large deals, and so from our side, we’ve kind of mastered integration, you know, at least I hope so.But, we have, I don’t know, like, a 5-600, you know, checklist, item checklist that we have sitting on Monday.com, right? And so this is what happens here, this is what happens to this, is everything from QoE all the way to, like, 6-month post-integration of what needs to happen and when it needs to happen.
Greg Alexander: Yep.
Brad Dower: And it’s just because we just keep repeating the process, right? So we keep adding to that checklist every time, and you know, I come from the Marine Corps background, so we like to make everything what we call idiot-proof as much as we can, you know, so… You know, and some of the stuff you do, like, once, right, and you forget about it, like, oh yeah, we need to do that. And so I have our team write down everything and create a checklist on it. Even if it takes you 30 extra seconds on the next deal to do it, like, at least we thought about it, and maybe we didn’t need it, right?
Greg Alexander: Yeah. Let me ask you this. The reason why private equity doesn’t come down market to where you’re at is because
Brad Dower: It is, yeah. We are typically less than 1%, kind of for our transaction costs.
Greg Alexander: And we kind of have a boilerplate.
Brad Dower: you know, LOI and APA and all that kind of stuff now, so we just kind of basically have to replace names. You know, we try to concentrate our businesses in certain states, so we know kind of the rules already, what’s going to apply in there. So we’re kind of centralized in the Northeast, Texas, and the Northwest, currently. And so, once we’re there, and have our APAs already ready to go, and have our, you know, bill of sales, and kind of all the other transaction documents, right. Once you’ve paid for it once, you know, our attorney, instead of spending 50 hours, whatever it’s gonna take him to get through it, you know, it takes 5.
Greg Alexander: Yep. Yeah, so the more deals you do, the lower the cost, because you’re just, you know, reusing work that was done previously, which is an interesting point to point out. How are you finding the deals, or are they finding you?
Brad Dower: Initially, like, definitely hitting the pavement hard to go out there and source deals and talk to brokers. You know, now that we’ve been doing it long enough, a lot of the brokers actually reach out to us, say, no, we can close transactions. So that’s been helpful. Or just… the CPA community is fairly small, as most professional service kind of, you know, are. And so, as CPAs are retiring, you know, no transition, like, I’ve got a buddy who’s not even really… doesn’t want to retire, just looking to exit out and get into education, wants to be a professor. He just calls me and says, hey, I want to sell my business to you. I’m like, great, let’s do it. You know, and it’s that easy. And so, the deals, as you get bigger and do more deals, they kind of find you. But, like, in the CPA space, there’s a bunch of different brokers out there, specifically for CPA firms.
Greg Alexander: Got it. You know, in listening to you talk, it sounds so simple, but it can’t be this simple, otherwise everybody would be doing it. So, what is hard about it?
Brad Dower: What is hard about it? Well, I tell everybody I just lucked out. You know, accounting became the new sexy industry, and I happened to be a CPA at the right time, with a little bit of an entrepreneurial mindset. What is hard about it? From a family perspective, which is probably one of my number one drivers, is why I actually started my own firm, because I wanted to spend more time with my family. I have to travel a lot, right, as you’re gonna go meet these new firms, and so on the road quite a bit. You know, it’s a… we both know Charlton Evans, and he calls it a badge of dishonor, you know, when you’re, like, status on different airlines and different hotels. So… Yeah, so unfortunately, or fortunately, you know, sitting on a couple million Hilton points, you know, and airfare points, and everything else. And then… really just integrating new teams, and everybody has their different personalities, and I kind of have a no BS attitude and don’t put up with a lot of crap. And so, thankfully, I hired a COO who’s much better personally than I used to… than I am. And so, really knowing your strengths and weaknesses, and finding somebody to kind of help offset your weaknesses. has been key, because at the first, I definitely struggled, kind of, interpersonal skills at the beginning. You know, because the Northeast is totally different than Northwest, and then Central, and then the Bible Belt, and everything else, and… you know, if you bring up Jesus one place, people frown upon you. When you bring up another one, everybody’s like, you know, praise the Lord, right? So just simple things, like, different dynamics. And what else? And then, as we’ve grown, financing has gotten harder. but, you know, hopefully we’ll solve that sooner than later. But, like, the deals, they just kind of start coming to you. What else has been hard?
Greg Alexander: Let me ask you this, interject, that was a great answer. Do you have to kiss a lot of frogs to find a good deal? Or, you know, for every 10 deals you look at, you’re doing 5 of them? Like, what’s the math?
Brad Dower: I would… Yeah, there’s a lot of bad deals out there, but we’ve gotten more selective and specific on what we want, and really narrowed down our focus. I could easily close probably 10 by the end of the year if I wanted, but they wouldn’t really fit what we want. And so finding the right deal is… can be difficult at times, and so I, you know, anything back to the members is really focus in on what is your deal parameters, and then stick to it, not just be like, oh, well, we can add a million dollars of EBITDA if we do this, but, you know, X, Y, and Z are out of, kind of, our parameters, because That’s what’s gonna cost you, you know, as you said, you know, the dump tax, right?
Greg Alexander: You know, for members that are listening to this, we’re talking about EBITDA arbitrage, and Brad, being a CPA himself, is very familiar with that term, but many of our members are not from the accounting industry, and they might not know what that means, but just to give an example, if he’s buying a million dollars in EBITDA, And he’s paying, let’s say, 2 times for that. That’s 2 million bucks. The next day, because it’s part of Brad’s firm, which is of greatest scale, it’s probably worth close to 6. So… Just think about the value creation there. And then, by the time he gets done with the roll-up, and he crosses over that magical $10 million threshold, now it’s worth 10 to 12. So, that’s how value is created in this EBITDA arbitrage way. And most professional services sectors the CPA space… CPA space being one of many. are highly, highly fragmented, for all of the reasons that we know. So that EBITDA arbitrage opportunity exists in consulting, in marketing agencies. In IT shops, in architectural firms, etc, etc. That’s a very real opportunity. One thing that I would say about this to listeners is that, you know, Brad is a Marine. And he’s a con… he’s an accountant, so he’s extremely detailed-focused. It doesn’t surprise me that he has a 500-point checklist. Integrating these things is not easy, so you’ve got to be very, very strong in your organizational skills. And he is, and that’s probably why it’s working. He also has a degree of self-awareness, which would be the last point that I would make, and that, as a Marine, an accountant, that maybe the people skills isn’t his gift, so he has partnered with somebody that’s really good at that. And this is a human business, and the soft skills are just as important as the hard skills. So if you’re somebody like Brad, who has great heart skills, think about partnering with someone that has great soft skills, or if you’re somebody that has great soft skills, think about partnering with somebody that has great hard skills. It really does matter, because if that client retention number craters, these deals blow up on you. That’s what can kill these things. Holding on to the clients is the name of the game. And as Brad stated at the outset of this interview. he’s in the client retention business. He’s actually not even in the accounting business. He’s in the client retention business, and we all have to think that way. So, Brad, any final closing thoughts that you might want to share, or should we wrap it up?
Brad Dower: I think we can kind of wrap it up, so I think we covered everything pretty well.
Greg Alexander: Okay. Well, listen, we’re very happy that you’re part of Collective. You made a contribution to our collective body of knowledge today, so on behalf of the members, let me speak for them, and Publicly, thank you for your contribution, we appreciate it very much.
Brad Dower: Thank you. I’m glad I can be a part of the collective, so…
Greg Alexander: Okay, great. Alright, a couple calls to action as I wrap this up. So, if you’re a member, and this buy-to-build concept is interesting. Please attend Brad’s role model session, where we’re going to do a live Q&A, and you can ask your specific questions to him. I’m sure many of you have questions beyond the ones that I was able to ask in this format. If you’re not a member and you’re listening to this, and you found this topic interesting, and you might be curious about what other topics we cover, go to collective54.com and fill out an application, and somebody will get in contact with you. But thank you for working me into your busy day, and I wish you the best of luck as you try to grow, scale, and someday exit your firm.