Six Months After Buying a Small Business: What I Wish I Had Known

On January 9th, I woke up and realized I had quietly reached my six-month anniversary as the owner of Kelly Green, an interior plant design, installation, and maintenance company.

The realization caught me off guard. Time had flown by, and I had barely noticed.

It felt like the right moment to pause and reflect...on what I had just lived through, where I was standing, and where I wanted to go next. For the first time since closing, I finally had a bit of room to breathe. And after all, I hadn’t bought a business just to keep it running. I had bought it to lead it, shape a strategy, define a mission, and do something meaningful. So far, though, operations had consumed every free minute of my time, leaving little space for any of that.

So I took stock.

On the wins side: I maintained 96% of my customers, reduced costs by 15%, made every SBA payment on time, hired and trained my first employee, learned the language of plants, and learned far more than I ever wanted to know about pests.

On the losses: I lost my largest customer... yes, the largest...and with them, 20% of my revenue (ouch). I had to file insurance claims twice due to minor car accidents. I was deeply sleep-deprived from waking up at 4 a.m. five to six days a week. My hands hurt constantly from the steady accumulation of scratches from plants that do not care about your feelings.

At some point, I found myself asking the question I think every entrepreneur through acquisition eventually asks: Did I make the right call buying this business?

It was a hard question to sit with after quitting my job and investing all my resources into becoming an owner. Had it all been a mistake?

The question gave me a bellyache. And bellyaches, for me, are a sign that there’s something worth exploring. When I explore, I ask “why.” The first “why” that came up was: Why does this feel harder than expected?

That introspection led me to a few realizations. Some challenges were things I could change, like expanding my team to free up my time from operations so I could focus on growth. Others, though, were things I wish I had understood more deeply before closing. It’s the latter I want to focus on here, because I suspect other searchers may face the same blind spots during due diligence, not due to a lack of rigor, but because information is imperfect and, quite simply, you don’t know what you don’t know.

So this post reflects on the due diligence gaps I identified after my first six months as a first-time business owner that bought a small business through ETA.

Recurring vs. One-Time Revenue

Kelly Green designs plant installations, installs them, and maintains them. That means two revenue streams: installations, which are one-time projects, and plant maintenance, which is recurring revenue, and the part of the business that truly attracted me.

During due diligence, I asked the seller how much of her revenue was recurring versus one-time. She told me the ratio was 90/10. That meant I could expect roughly $342K a year just by maintaining existing customers. In a high-margin business, that level of recurring revenue would comfortably cover the SBA loan and allow me to pay myself a reasonable salary.

Toward the end of due diligence, just before closing, I asked the seller to train me on her invoicing process. That’s when I realized she was only invoicing about $22K per month, or roughly $264K annually. That meant recurring revenue was closer to 70%, not 90%, and materially lower than I had anticipated.

The seller didn’t try to mislead me. I think she simply didn’t track her revenue sources and spoke from gut feeling. I had tried to validate the recurring revenue percentage, but neither the P&L nor revenue-per-customer figures made a distinction between revenue streams. I didn’t think to ask for invoices early on; I was working on building trust, and accessing that level of customer data felt intrusive.

By the time I discovered the lower level of recurring revenue, we were close to the finish line. I trusted that the seller generated a lot of one-time work through word of mouth. She didn’t even have an online presence—not even a Google profile—and yet had been able to generate business. I moved forward knowing I was buying less recurring revenue than I had initially believed, based on the hope that I could generate the same amount of one-time projects, or more, with some investment in marketing.

It turns out that getting new business in this industry takes time. Even when I do land a new prospect, converting them into a customer can take anywhere from two to six months. Decisions around plants take time. As a result, growth has been slower than I expected.

If I had known this earlier, I likely would have structured the deal differently. For example, by introducing an earnout tied to revenue targets. I also would have prepared very differently, including hiring a salesperson from day one. Instead, I closed and went straight into operations, leaving little time to intentionally focus on growth.

The result? I generated about 6% less revenue than the former owner over the same period, even with a boost from holiday sales and investment in basic marketing. Yes, there is such a thing as a J-curve, and I am living through it. However, I believe that curve could have been flatter if I had discovered this discrepancy earlier.

Accounts Receivable and Cash Flow Challenges

As a searcher, you learn about the cash conversion cycle, or in very simple terms, the time it takes to get paid. You learn that the faster you collect accounts receivable and the longer you can delay accounts payable, the better. My clients clearly learned this lesson, too 😓.

Kelly Green operates on net-30 terms. I bill on the first of the month, and clients have 30 days to pay. The reality is that some customers are three to four months behind. They will eventually pay, but the follow-ups are a headache, and carrying $20K in accounts receivable is stressful for cash flow in such a small company.

How did I not see this during due diligence? Well, the balance sheet consistently showed between 2-6K in accounts receivable, which did not feel too extreme as a percentage of revenue. So I did not worry about it too much. What I did not understand at the time, is the impact a transition has on accounts receivable.

When I acquired Kelly Green, I structured it as an asset purchase to reduce the risk of acquiring liabilities. That meant the underlying LLC changed. I had to resend W-9s and certificates of insurance to every client. Coordinating with clients and insurers took months and delayed payments. In many cases, it caused payments to be sent to the former owner.

Now, I was incredibly lucky to have found a seller with integrity. Every time a payment landed in her account, she immediately let me know and transferred the funds. But what if she hadn’t?

Another surprise: how many clients pay by check. Checks are awful. They take longer to arrive, require manual deposits, and then take four to six business days to clear. All of that artificially extends the time it takes to get paid.

I now have lived experience of why working capital—or a generous line of credit—is critical when stepping into ownership. You never know how long clients will take to pay, and this is especially true during a business transition.

So, what would I do differently next time? I would:

• Carefully verify accounts receivable instead of trusting the balance sheet, knowing that small businesses don’t always have the sophistication to properly track A/R.

• Give a stock purchase more serious consideration. A stock purchase could have preserved continuity and reduced early friction. Given how clean the company was, the additional risk would have been minimal compared to the operational headaches I faced.

• Ensure the purchase agreement is explicit about how any funds paid to the seller after closing are handled.

Product Quality and Customer Retention

A female entrepreneur I highly admire once told me that the quality of the product your business delivers is an essential pillar of success. She vulnerably shared her experience acquiring an e-commerce business that sold beauty products. After the acquisition, she realized the product itself was not fulfilling its promise to customers, and as a result, repeat purchases were low. She was forced into an expensive, constant fight to acquire new customers, which ultimately wasn’t sustainable.

I learned that understanding the quality of the product you are selling is key.

In my opinion, the core product sold by an interior plantscaping company is ambiance. You achieve ambiance through reliable, high-quality service and beautiful, healthy plants.

Failure in either area results in costs, most often in plant replacements. Through industry research during due diligence, I became aware of this dynamic and asked the seller if I could shadow her on her route. Protective of her clients, she agreed to show me only a few. Some plants looked amazing; others didn’t. But I didn’t yet have the experience to know what was an acceptable aesthetic, or which plants were healthy versus declining. Plants can be stressed or dying while their foliage hasn’t yet gotten the memo. I know that now. At the time, I didn’t.

So I took over the business “as is” and quickly realized that far more plants needed replacement than I had anticipated. On top of that, while I was still learning, I killed a few plants myself.

The result was thousands of dollars spent replacing plants to keep customers happy and retention high...a significant and unexpected hit to cash flow.

In the future, I would spend more time inspecting the product and understanding what “good” truly means in the context of the industry and customer expectations. I would try to access data on repeat purchases, churn, and stickiness. And if possible, I would explore adding language to the purchase agreement to protect against low product quality.

The “Newness Effect” When Taking Over a Business

Kelly Green was founded in 1997. When I acquired it, the owner had been in business for nearly 30 years and had retained many clients for over two decades.

You know how you don't think about your Netflix susbscription at all until something changes? Like when they stopped the ability to share your account with all your friends. Suddenly all you are talking about is Netflix.

That is kind of what happened with Kelly Green. Customers had not thought about their plant care for a very long time. When I stepped in, suddenly they had to think about it again. And when they did, they started reviewing whether Kelly Green complied with all their requirements. Surprise, surprise ...it didn’t. Not because Kelly Green had done anything wrong, but because contracts had been signed long ago and never revisited. Now there was an incentive to review them.

This triggered a wave of new service agreements and insurance requirements. Some clients required significantly higher insurance coverage than the seller had carried. Others required entirely new types of insurance.

In some cases, I negotiated reduced insurance requirements in exchange for limited access hours. In others, I couldn’t. The result was substantially higher insurance premiums and less flexible service routes, reducing efficiency.

A secondary effect followed. Some customers started looking more closely at their plants and began calling me within weeks of the transition. I panicked at first. But after walkthroughs and conversations, I realized many had been unsatisfied for a while. They hadn’t spoken up because they were busy, or because they genuinely liked and trusted the former owner and gave her the benefit of the doubt.

As the new, unknown variable, I didn’t get that grace. Instead, I inherited the dissatisfaction and the cost of fixing it through expensive plant replacements to maintain retention.

I wish I had known to anticipate this. I’m not sure how I could have, but now that I’ve seen it, I can’t unsee it. I suspect this dynamic exists in many long-standing businesses. If I were to do this again, I would proactively budget at least 10% in additional costs from day one to absorb the impact of being new.

Would I Still Buy the Business Knowing This?

Honestly, yes. I love the work, the industry I am in, my customers, and I feel I lucked out with a wonderful seller that is now a mentor and a friend.

None of these issues were deal-breakers, they simply made the journey significantly harder than I expected. And I can do hard things.

Knowing these challenges would have allowed me to prepare better and set more realistic expectations around cash flow, expectations that would have influenced other personal financial decisions I made during this time.

The lesson here is the power of knowledge and preparation. The more you know, the better. Otherwise, you end up catching up, like I am 🤷🏽‍♀️. Hopefully, this post helps you expand that knowledge about your own deal.

For anyone interested in doing a deep dive into my experience acquiring Kelly Green, I’ll be hosting an Ask Me Anything on February 4th. Sign up here.

I look forward to seeing you around!