What’s the right way to sell your custom installation company? Max Angst of MAXSYSTEMS thinks he’s found it. After 36 years of operating his successful company in Van Nuys, Calif., Angst is transitioning the ownership of his CE Pro 100 company to his director of operations for the past 7 years, Mark Newsome.
“Mark has wanted to own the business for many years, and it seems like the right time,” says Angst. “It is a good opportunity for him; it is a good opportunity for me. It’s a way to make sure the company continues on without any hiccups… it seems logical… it seems like the way things are supposed to happen.”
The ownership transition has actually been in the works for a long period of time. After a health scare a few years ago, 64-year-old Angst began slowly handing over the reins to 38-year-old Newsome with the full transition happening in April when Angst turns 65.
“I was happier to do it deliberately than just kick-off and have somebody inherit the business. I get to be around for a while and do what I want. It’s still been very emotional. I’m wondering what happens when I’m not ‘Max at MAXSYSTEMS’ anymore.”
Thirty-five-year-old Newsome and Angst have operated the business together for many years.
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“He oversees half the work and I oversee half the work. We run about 40 projects at any given time in various stages of completion. Our office staff writes bids, checks inventory and accounting, and provides support. I have another dozen guys in the field. That’s the business. It’ll operate pretty much as it always has been,” says Angst.
“I call all the 30-year-olds working me ‘my kids,” says Angst affectionately. “I know that not every customer wants to talk to somebody of my age and not everybody wants to talk to a kid. By going out in pairs, any time we meet a new developer or a new designer, we have our bases covered. Whichever way it goes, one of us becomes the dominant conversation party. It’s a very young industry. For the past several years, I have not gone on any sales calls without one of ‘my kids.’ So just as we have been doing in sales and on our projects, it is a natural thing to hand off the company to the current generation.”
In terms of selling the company, Angst considers himself lucky that he has Newsome on staff taking over the company. Also, the structure of the ownership transition was made easier because MAXSYSTEMS has always focused on maintaining strong cashflow. As Angst noted in the 2017 CE Pro profile article, his ability to maintain $250,000 in cashflow at all times enables the company to pay out cash bonuses to employees immediately.
“If you’re a medium-sized company, like we are, you’re not big enough to be swallowed up, and even if someone bought me for $3 million, I’d pay big taxes. It’s not the same thing. I got lucky I had Mark. The company is profitable and prosperous, and we’re all having a good time. I think any integration company owner would be happy to turn over their business to people in their own business who are excited by it. I’m excited,” he says.
“If you’re a medium-sized company, like we are, you’re not big enough to be swallowed up, and even if someone bought me for $3 million, I’d pay big taxes. It’s not the same thing.”
— Max Angst, MAXSYSTEMS
Angst says the ownership transition will give him income for the next 7 years. He and Newsome are discussing a role where Angst looks for new business opportunities for the company.
“It’s a good deal for me, the company can well afford it, and it was easy. It didn’t require him to mortgage his parents’ home. It was a little more casual than it might’ve been if I had suddenly decided I wanted an exit plan. It’s something that we have talked about for five or six years,” adds Angst.
40 Years of Lessons for MAXSYSTEMS
It was back in 1982 when Angst first started in the low-voltage business as an employee for an alarm parts company. Four years later in 1986 he launched Max Security, which eventually became MAXSYSTEMS as the company migrated beyond just alarms.
“I originally wanted to just operate an alarm company. I wanted to have 1,000 people sending me $25 a month. I thought that would be a pretty good life. But along the way, I kept getting asked, ‘Do you do this? Do you do that?’ We went from offering just alarm systems to installing phones, networks and satellites. I thought satellites were going to make me rich… and then they were free. That led us to all of the automation systems. We became much less of a security company and much more of an integrator,” says Angst.
Today, only about 4% of MAXSYSTEMS‘ revenues come from alarm systems with about $90,000 per year in RMR from a few hundred accounts.
“When it was just an alarm company, I thought I would retire to the account base built on the recurring revenue. Initially, the recurring monthly revenue was 30% to 40% of our revenue. Today, it’s much less but we do dramatically more work. When we became an automation company, when we became an integrator, everything changed.”
That change meant for Angst looking at a different business model and different exit strategy.
“I learned that if you were doing $2 million, $3 million or $4 million a year, you aren’t not on the radar to be acquired any big security companies. But if you were doing $7 million, $8 million or $9 million a year, it is a different thing. We haven’t been able to get there. We haven’t had enough of an impact, no matter how outrageous I tried to be on media to be noticed nationally. Other than being famous in CE Pro for a month. (MAXSYSTEMS was the cover story profile in CE Pro’s December 2017 issue.) I have to tell you that I loved the notoriety.”
So instead of focusing on RMR, MAXSYSTEMS focused on large custom projects. That focus was much more rewarding to Angst.
“At the end of a project, especially one where we were able to do some high-profile stuff, nobody was happier than I was to hear people say in a casual conversation, ‘You did that? It’s totally, totally cool.’ Well, I was happier,” says Angst.
COVID-19 was initially a blow to the company, but then the demand skyrocketed.
“From March 2020 to March 2021 was the worst time we’ve ever had. But the last few months have been the best business we’ve ever had. We did it as much business in 90 days than we did in the previous eight months. We’re finally on the road to being a much bigger company. I will do what I can to help them get there and they’ll make their own choice,” he says.
What’s the Next Chapter?
If he had to do it all over again, Angst says he would not do anything differently.
“I had a wonderful time in this industry. There have been little moments when we are meeting a new developer or a contractor, and I can now hear my team echoing my schtick and my jokes about lighting systems, money, checks… all the little things I say that I think are cute. To hear them now saying those things tells me I have had an effect on them. I wouldn’t have done anything differently,” he says.
So what’s next for Max Angst?
“Emotionally, well, what will I do? I have no idea,” he admits. “I’m going to be at arm’s reach for a year or two. I have no doubt that Mark can take it over, but if a client would rather talk to Max, I’m going to be around. I think over the next year and a half, the company is just going to become known as Mark of MARKSYSTYEMS,” he concludes.