John Ikalowych Bought a $5M+ Hail Repair Business at Under 4x. It Collapsed.

The Setup John Ikalowych came to acquisition entrepreneurship from a career he describes as filled with success. Like many self-funded searchers, he wanted ownership, control, and the leverage that comes from running a real business instead of renting his time to one. He partnered up and went hunting for a deal with visible cash flow and a price that looked like a bargain. HailCo fit the profile on paper. Automotive hail repair is a niche within auto body, driven by weather events, insurance pay cycles, and a mobile workforce of technicians who chase storms. The business was throwing off roughly $2M in reported earnings. John and his partner bought it for under a 4x multiple, financing the deal with an SBA loan that carried a personal guarantee. The Deal - Purchase price: north of $5M enterprise value - Reported earnings: ~$2M - Multiple: under 4x - Structure: SBA 7(a) with personal guarantee covering both partners - Partners: John plus one co-owner On entry, the numbers screamed opportunity. A sub-4x multiple on $2M of earnings in a niche with insurance tailwinds reads like a steal. That should have been the first question, not the closing argument. Why was a business with this cash flow available at that price, to these buyers, at this moment? Operating Reality Hail repair is a weather-dependent, technician-dependent, insurance-dependent business. Three variables, none of which the new owner controls: - Storm frequency and geography dictate revenue. No hail, no work. - Paintless dent repair technicians are mobile, scarce, and loyal to whoever pays fastest. They will follow storms across state lines and leave a shop mid-season. - Insurance carriers set the pricing power and the payment timeline. Working capital swings are severe. When earnings are concentrated in a handful of storm seasons and a handful of technicians, the durability of that $2M number is the entire diligence question. A trailing-twelve snapshot flatters a business that might be two bad seasons away from zero. The Collapse The business did not survive the first two years under new ownership. John wrote a six-figure personal check trying to keep it alive. It shuttered anyway. The SBA personal guarantee means the bank can pursue his personal assets for the unpaid balance, a fact that searchers often acknowledge intellectually during closing and feel in their bones only on the way down. Operating Lessons - A sub-4x multiple on a seemingly strong cash flow business is a signal to investigate harder, not celebrate. Markets are not that inefficient by accident. Ask what the seller knows that you do not. - Weather-driven and event-driven revenue requires multi-year earnings analysis, not TTM. One good hail season can distort a three-year average. Model a zero-storm year and see if the business survives. - Technician retention is the P&L. If the top producers walk in year one, the earnings walk with them. Lock in comp, non-competes, and transition incentives before close, not after. - Insurance-pay businesses eat working capital. Understand the days-sales-outstanding curve before committing. SBA debt...