Intelligence from meetings

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  metricExit timeline: end of year 4 / early year 5
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  beliefChes Booker's acquisition thesis: buy 4 commercial roofing companies in Midwest markets (St. Louis, Chicago, Minneapolis, and Indianapolis or Ohio - Columbus/Cleveland/Cincinnati), roll them up with Capstone's existing book of business, implement execution strategy over 3-4 years, then exit at 9-11x multiple.
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  metricTarget EBITDA per acquisition: approximately $1.5M–$2.5M per company (4 companies), keeping the purchase multiple under 4x.
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  metricTarget acquisition multiple: under 4x EBITDA on entry. Example cited: paying 3.5x on a $1.5M EBITDA company = ~$5.25M per deal, described as 'a steal if the criteria is correct.'
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  metricExit target multiple: 9x–11x EBITDA. Sellers may push for 3x–5x on entry.
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  metricTotal financing target: $35M. Ches referenced needing '$35 million bucks' with no interest for 2 years and an exit in year 5.
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  metricExpected private lending interest rate: 12%–18%, interest only for 2 years. Exit target: end of year 4 / early year 5.
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  metricTarget EBITDA margins for acquisition targets: estimated 10%–20% depending on market. Capstone's own gross margin on a recent St. Louis project was ~40%, pricing $1.50/sq ft below local competition and $4/sq ft below national competitors.
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  metricCapstone's current business: 19 employees, $38M in revenue (referenced by Ewing from prior conversation), operating a sub-only model. Previously had 120 employees, scaled down to ~6 over 18 months.
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  metricOrganic growth projection for Capstone without acquisitions: Ches and partner Sean Cannon believe they can grow to $3M–$4M in revenue with just the two of them over the next 3 years.
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  beliefIdeal target profile: 2nd or 3rd generation commercial roofing company (reroof/replacement/recovery focus), Midwest markets, sub-only or near sub-only labor model, lean overhead, 10 or fewer employees, strong recurring relationships with 6–24 industrial/warehouse portfolio owners, no government work, small fleet, no maintenance division (or minimal), website outdated/minimal online presence.
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  beliefRecurring revenue defined as: same client using same roofer for 10+ years across a portfolio of 10–50 industrial/warehouse buildings at different lifecycle stages, typically needing a roof every 1–3 years per building. Not multi-year contracts — relationship-driven repeat business.
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  beliefHighest-value customer type: industrial portfolio owner who is actively acquiring older buildings (value-add), as each new acquisition typically needs a new roof, which can be financed into the purchase.
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  objectionConcern that target owners will be suspicious of buyer's intent — specifically that they'll think Capstone wants to gut their operations and take their clients, which could make the right targets unwilling to sell.
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  risk flagFinancing is not yet secured. Ches has meetings with private lenders in the next 3–4 weeks. Without financing, target identification and outreach cannot fully begin. Ches views this as the critical gating item.
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  risk flagKey man risk at acquisition targets: the owner or a specific employee typically holds all client relationships. If that person leaves post-acquisition before earnout is complete, recurring revenue could evaporate.
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  risk flagIntegration risk: targets with heavy equipment, large in-house crews, and maintenance divisions will be difficult and costly to transition to Capstone's sub-only model. Targets with too much overhead are a bad fit.
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  risk flagTarget debt is generally undesirable. Acceptable debt limited to equipment and real estate only. Any other debt is a disqualifying or complicating factor.
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  risk flagTargets doing primarily government/institutional work are disqualified: no recurring client relationships, always low-bid, prevailing wage requirements make sub-only model difficult.
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  risk flagTargets with no established portfolio clients (i.e., high-volume bid shops / estimating machines) are disqualified even if all other operational criteria are met.
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  beliefCapstone plans to use earnout structures for sellers, transitioning their operations to a sub-only model gradually (new jobs go to subs, in-house crews phased out). Maintaining stability during transition is critical to keep the seller engaged through the earnout.
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  buyer signalChes is open to buying only 51% of a target (leaving 49% with seller) to reduce cash outlay and align seller incentives toward the exit multiple, especially for younger owners. May consider other splits (70/30, 60/40) depending on situation.
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  beliefChes identified a specific potential St. Louis target: 'Seal Flash Roofing' (owner: Mark Stealfleisch), believed to be a 2nd-generation company with strong local portfolio-owner relationships. Estimated to match ideal target profile.
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  beliefChes estimates 3+ similar targets exist in St. Louis and 6–12 in Chicago, with comparable numbers in Minneapolis. Most were founded in the 1980s–early 1990s; owners likely in their 60s without clear succession plans.
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  beliefCapstone's sub-only labor model is already operational across multiple Midwest markets via 4 labor broker relationships. Labor is considered the lowest-risk component of the rollup thesis.
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  belief90%+ of target clients want single-ply roofing systems with 20-year warranties on industrial/warehouse buildings. Metal roofing is not a primary focus; metal over metal recoveries are rare and mainly institutional/government.
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  beliefChes believes the sub-only model has not yet spread to Midwest markets the way it has in Florida/South Georgia, creating a competitive pricing window. Capstone is $1.50/sq ft cheaper than local competitors and $4/sq ft cheaper than national competitors while maintaining ~40% gross margins.
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  next stepChes Booker to meet with private lenders (2 relationships via partner Sean Cannon) within the next 3 weeks to validate financing appetite for the $35M rollup thesis. Goal: confirm terms, structure, and lender interest before green-lighting target outreach.
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  next stepCapstone plans to run a direct mail letter campaign to 40–60 Midwest commercial roofing targets (20–30 focused on St. Louis initially). Ewing's letter campaign tool will be ready before Ches completes his financing rounds. Ewing recommended 'Handywritten' for robotic handwritten letter service at $5–$7/letter.
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  promise receivedChes Booker committed to giving Next Chapter 3 weeks to complete private lender meetings before expecting full engagement on target sourcing.