Eric Van Dam
Appearances
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Yeah, absolutely. So a SIP stands for confidential information presentation. So if we were selling somebody's business, we put this document together that will ultimately go to buyers once that they've executed a confidentiality agreement. And this document really serves as the baseline for why somebody should pay a great valuation for their business.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
And it goes into detail around the investment highlights, being a market leader, having sophisticated digital marketing strategies, being an employer of choice, being an acquirer of choice, kind of dominating your market. It goes into the growth strategy of the business.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
So as important as your historical financials are, it's even more important, what are you going to do the next five years and how are you going to get to your goals? And then going through the business overview, the history, service offering, customers and markets, employees, management team, as well as the financial side of the business.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
And at the end of the day, it's, you know, that document is probably somewhere between 50, 60, 70 pages long, if not longer, but that serves as, you know, for the investors, their first impression of the business to submit what we would refer to as a first round bid or an indication of interest to kind of get into the next round. So we may contact a hundred different buyers,
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
We may get 30 first round bids. We need to figure out who are the top five to 10 investors or buyers for that business to come in to meet the management team. So as investment bankers and advisors, we're really narrowing the funnel of who are the most qualified and best partners to meet the management team at the next level of the process.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Exactly.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
You know, it's interesting. Back in 2015, when we did our first residential HVAC deal, you know, there was a number of private equity firms that, you know, kind of had a knock on residential HVAC. It's not scalable. It's too unsophisticated. It's too blue collar. Really, that was the opportunity. But I think in a lot of respects, Service Titan kind of revolutionized the industry.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
by giving companies data to make more data-driven decisions throughout the organization, really looking at your KPIs to really drive the business. So whatever ERP or CRM system that you are on, being able to have the data to make data-driven decisions on how are you going to optimize the performance of the business.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
So if you're not getting the amount of leads and kind of filling the capacity that you need for the day, Do you give your sales reps a little bit more flexibility to offer more discounts to make sure that they can fill the board? Or if you're not getting the leads, do you need to put your foot on the accelerator and spend more marketing dollars to drive some of those leads?
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
But being able to make real-time data-driven decisions is absolutely critical throughout your organization.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
The other thing that I would say too is, and not all private equity firms are created equal. There are others that can add more value than certain firms. But Tommy, one of the things I respect about you a lot is you're humble enough to say, I don't have all the answers, right?
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
And you always want to surround yourself with who's the best marketing person, who's the best HR person, who's the best technology person. Well, private equity firms have a huge network of resources. And so if you can partner with the right private equity firms and create they can surround you and your management team with the right resources to take the business to the next level.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
I mean, that can be enormously powerful in helping you build tremendous equity value, helping your business just become more valuable in the valuation multiple that you may get, because maybe you decide, hey, I'm going to become more tech enabled, and that's going to drive a higher valuation multiple based on what type of technology you implement into the business or how you're going to build the business going forward.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
There's ways that private equity firms who all they do is buy businesses and grow them and exit them. You may have a challenge that you're going to run into that you haven't had to deal with before. But guess what? The private equity firms, if they've been doing this a long time, they've probably had to help out other businesses out as well.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
And so they can be a tremendous partner to you and just helping you navigate some of those strategic initiatives.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
I think the first thing we do is we always ask our clients, what are your goals and objectives overall in the process? And then we will design the process to really achieve those goals and objectives. So, for example, we may have a business owner who is 65 years old and is just ready to retire and wants to exit the business.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
In that type of scenario, that's probably a better fit for a strategic buyer. just because private equity firms really want to see business owners roll equity, continue on with the business. And so if somebody wants to exit, they may be better positioned for a strategic buyer.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
But if somebody is young, hungry, wants to roll equity, wants to be a platform, wants to pursue an add-on acquisition strategy, that could be a better fit for a private equity firm. And so we really try to understand those goals and objectives, and we will design a process to achieve those goals.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
I want to be a platform.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Yeah, Rob's exactly right on those comments. The other thing, too, is those groups, they have enormous buying power. So overnight, they're able to, given their size and scale, whatever company that they would kind of tuck into their organization, without a doubt, they have to be buying better than what that organization is on their own.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
And in a lot of circumstances, Rob and I will see larger platforms that are able to buy 30 to 40% better in pricing than where maybe a 5, 10, 15, $20 million EBITDA business is able to buy on their own. And so There are efficiencies that can be gained, but there is a much higher bar in today's market for level of integration, as well as what is your value creation playbook?
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Are you just financial engineering and kind of throwing a bunch of companies together? Or do you have a real value creation playbook on how to buy a good business and make it great by helping it improve revenue and improve EBITDA? And if so, that is what the private equity firms are really paying premium valuations for.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Yeah, that's exactly right. And Tommy, as you may recall, in your process, what we did is we created a KPI data book for the private equity firms to really unpack how is the revenue growth being driven? Is it by pricing growth? Is it by volume growth? Or is it by mix? And one of the things is different investors were looking at the average ticket growth.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
We really had to unpack that so that different private equity firms really understood that wasn't just purely inflation. In fact, when you really unpack the data in a lot of detail, you guys did a great job driving the mix shift up in the business. And so there was a couple of different things that A1 was doing. Three to five years ago, you guys used to just sell the garage door.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Now you are selling a complete system with the motor, the sensors, all the different components that go into it. The other thing that your sales team did a great job of is you gave the customer options. You gave good, better, best options, and you empower the customer to make decisions.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
But you also educated the customer on what were the benefits and the value proposition of choosing a more premium or higher-end garage door. And so you guys, which was driven by your strategic initiatives inside the company, were helping drive up the average ticket. But it wasn't just purely pricing. It was some of the initiatives that you guys put in place.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Yeah, I think that's an important aspect, too, for business owners that want to sell their business is making sure that they have an advisor who will roll up their sleeves, really get down into the weeds and really understand the numbers, the business drivers so that they can explain and really help the ultimate investor and buyer universe really get more comfortable with the numbers and the story overall.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
And that's something that we pride ourselves on.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
The market is a lot different today than what it was in 2020 and 2021. So it is really important to make sure that you are integrated. And you asked the question earlier, what does it mean to be a platform? What it means to be a platform is really having what I would refer to as a shared service center at the top.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
that can really help the companies that you're buying take their companies to the next level. And so as you think about the shared services, you could have a VP of marketing or a chief marketing officer that's really going to help companies analyze and assess how they're allocating their marketing budget.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
A, are we underspending or are we overspending or are we allocating our marketing budget inefficiently? Are there higher return on investments that we could be allocating our dollars to drive more leads?
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
helping them get better purchasing, buying contracts with equipment or insurance and benefits at better pricing than where they're at today, helping them with best practices across their sales process, maybe implementing technology with a quoting application. helping them with recruiting and training and really taking the company to the next level.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
But if you're going to be a platform and you really want to do add-on acquisitions, it's important to figure out how are you actually going to help those companies grow and take it to the next level. And having a shared services team that can really help those companies is just an important aspect to think about.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
And one of the things, I mean, private, Tommy, you'll remember this from your process, but in almost every single deal that you should do, you should ask the seller, what are you looking for in a partner? Private equity firms ask you that question in every single meeting.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
But you should ask, if you're going to buy a business, ask them, like, what are you looking for in a partner and how can I add value? Maybe they're having a hard time getting trucks. Maybe they're not getting enough leads. Maybe they're not getting enough employees.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
And so you can figure out how can I help them recruit more employees or how can I help them get more leads or how can I help them get more trucks, right? But if you really want to be, you know, a platform and help companies out, figuring out what those bottlenecks to growth are and how do you unlock them.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Which subsector are we talking about? HVAC, garage doors, roofing? There's not a one.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Yeah. So I would say best in class from a gross margin perspective for HVAC and plumbing would be somewhere between 50% to 55% gross margins. And then from an EBITDA margin perspective, usually call it like 18% to 20% is best in class. We've seen some probably as high as 25%. But in general, that's what I would say.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
I think it's important to unpack the numbers. What is driving that? And for instance, with this one particular company, they had a little bit of a unique marketing approach and they had an extremely high ROI on the marketing dollars that they were allocating. And so there was a good explanation for why they were driving that, but they were also at 55% gross margin.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
So they were at the upper end from a gross margin perspective from where they should be. And more of that trickled down to the bottom line.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
it's just intense and you probably remember it, but think about all the different advisors that all the various buyers had. They had accountants, they had tax advisors, they had insurance and benefits, they had lawyers, they had third-party consultants doing, you know, market assessments and industry research. And so,
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
The one thing that we always tell our clients is don't bring a knife to a gunfight, right? It's really important to assemble your deal team, get the right advisors. And so we were representing you as an investment banking advisor, but we also hired EY Parthenon to do the market study. We had FTI Consulting doing the quality of earnings analysis.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
And there was so much preparation work that really went into it so that we could be well prepared for the due diligence process and really ensure that we have a very successful outcome that also has speed and certainty to close.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
We normally say it's six months from hire to wire. So from the time we get hired and sign an engagement letter to the time you get wired all the funds that hit your bank account, it's about six months on average. There's some processes that potentially could move a little faster and some that may move a little bit slower, but on average, six months.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
I think it's really important to make sure that you have a law firm that is active in the mergers and acquisition market. So we see a lot of business owners that may have a very good corporate attorney that may not be an expert in mergers and acquisition.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
And that corporate attorney can still be extremely valuable in the process, providing support in the history on some of the contracts and some of the background on the business. But it's really important If you're selling your company, think about the private equity firms are going to have law firms from New York, Chicago, Los Angeles that are extremely active, extremely quick.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
And you need to have a law firm that can help you if there is a tax issue that comes up, if there's an employment issue that's going to come up, if there's something else that comes up during the process, you know, you're going to want their advice and you need to understand what is market terms and what is not so that you can really focus your resources on getting a deal done on the best terms for you.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Rob's exactly right. And groups want to see that there's a really good culture. And that's hard to define. How do you define what is a good culture? But you can look at, you know, what is your technician turnover? What are your ratings on Glassdoor?
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
What are some of the things that you're doing inside the organization to empower your people and get that excitement out of them and get the best out of your employees? Are you going bowling with the guys? Are you playing in softball games? Are you creating awards and all sorts of incentives for them that fire them up and get them excited at the end of the day?
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
But what are you doing to really instill a good culture inside your organization? And that's what groups want to see.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Well, that's what I mentioned earlier. Not all private equity firms are created equal, and there's a lot of differences among them. But it's important to run a process where you have a lot of different options. And what we encourage our clients is, especially the management presentation process, it isn't just the private equity firm interviewing you.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
It's as much about you interviewing the private equity firm and asking them questions around, give me an example of when a situation went wrong and how you handled it. How are you adding value to your portfolio companies? But really doing a lot of due diligence on your end on that private equity firm.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
And even when we get down to the final two or three groups, we'll even ask for a list of references of former business owners, former CEOs. And we let our management teams reach out to them and talk to those individuals to really understand, you know, what is that private equity firm like as a partner?
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
And so it's important to make sure that you're doing due diligence on the next group too, to make sure that your goals and objectives are going to be achieved with the right partner.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Yeah, I mean, succession planning is always important. I mean, kind of thinking around, like, what is your time horizon? But really assessing your team and the depth of your team. You know, if you ever get hit by a bus, who's going to take over, right? And that's an important question, even for your family, that...
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
could be inheriting your equity ownership for the business, but really making sure that you're growing the next layer of the team, even directly beneath you, but even directly beneath that next person too.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Yeah, build the bench to get those individuals going. And if you're not doing that and maybe not having the right conversations, if you have an awesome nut number two, but they're not sure when it's going to be their turn to take over, you don't want them leaving to go to a competitor as well. So it's always, I think, important to make sure that you're building the team,
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
you know, helping them understand like what is their career trajectory and what is that going to look like?
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Yeah, I mean, so I think each of the subsectors, you know, it's a little bit different, but I mean, in certain markets, you know, permitting and getting the right licenses for your taxes is an important part of the process. In the roofing space, there are certain markets where it's okay to utilize subcontractors and, you know, outsource your install crews in certain geographic markets like
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
the Pacific Northwest that you have to have W-2 installers as well. So it really, like each of the different subsectors, it's a little bit different across the board, but I think most business owners are kind of aware of what are some of those key threshold items that they need to be on the lookout for.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Yeah, I think the only thing that I would just build on to Rob, which I think is exactly spot on, is we love what we do. And we have a ton of enthusiasm for our clients. And we've been fortunate to work with some of the best of the best. But one of the reasons why I love my job is because I get to work with so many successful business owners and really understand how do they compete?
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
How do they differentiate themselves? And one... One area that I think we've had a lot of success helping our clients achieve some of the highest valuations in their industry is really understanding what is their secret sauce. And for every company, it's a little bit different. Is it your sales process? Is it being more sophisticated with your digital marketing strategy?
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Is it being an employer of choice and really owning the labor in your market and having a better relationship training center than anybody else so that you can grow your capacity? Is it being an acquirer of choice and having a better value creation playbook on how you're going to grow the business?
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
It can be anything you want it to be, but really understanding and diving deeper into those companies and really understanding what sets them apart and what has made them successful. And we're fortunate. We've got to work with some of the best of the best, but that's what gets me up every day and just gets me super excited about our job is just understanding how are those companies winning?
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
And how are they succeeding? And we really try to unpack that in a lot of detail.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Yeah. I mean, it's going to sound really similar to Rob. I started my career out in New York. So I started off at Lehman Brothers and Barclays Capital on the investment banking side. From there, I went to a private equity firm, Vestar Capital Partners, when they were investing their fifth fund, which was a $4 billion fund.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Yeah, I mean, I'm happy to start. I mean, I'd say that last year was an interesting year across, you know, a lot of our residential service clients are impacted by weather. And it was one of the most mild weather years since 2016. And so it was a little bit of a slower year. There was also some caution around where are we from a macroeconomic standpoint? Are we heading into a recession?
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
And then rounded out my tenure at a $2.5 billion hedge fund called Kingdom Capital doing long short equities. And
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Interest rates are rising. Debt is becoming a lot more expensive. Inflation. Yeah, inflation, all of those different factors. I think the market tone today is cautiously optimistic. There's a lot more comfort that we're beyond the recession risk. And so I'd say the business environment is improving for deals. Interest rates are still very high.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
So the cost of debt is high, which certainly has an impact. But there's some talk on when the Fed can start investing. lowering the rates, which would be tailwinds for our industry as well. So activity is picking up, and I think it's going to continue to accelerate into 2025.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
similar to rob my wife and i are both from michigan originally wanted to get back to the midwest be closer to family and friends and ultimately raise our family there so back in 2013 i moved back to michigan and joined the firm that rob had co-founded court and partners and we grew the firm tremendously you know from 2013 to 2018 when cowan had acquired us and now we're making the move over to piper but it's it's interesting over that evolution
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
They can either reach out via LinkedIn or my cell is 248-941-1151.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Yeah. I mean, we always want to meet really good, strong leaders that have great businesses. And, you know, today, even if today it's a little bit small, if you're growing rapidly and have big ambitions, like those are the business owners that we want to meet. And so we always want to kind of expand our networks and the business owners that we know overall.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Our first residential HVAC services business was in 2015 when there was very little interest in the category. Today, we've done 16 HVAC and plumbing services deals. We've expanded that really across the whole residential services spectrum. We've done pest control, lawn care, roofing, siding, windows and doors, garage door services, and
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Yeah, Barbarians at the Gate is a great one that inspired me to go into investment banking. But I think to add another one, a school or a book I had to read when I was in business school was called Understanding Michael Porter. And Michael Porter was a very well-known Harvard Business School professor that came up with a concept called Porter's Five Forces, which really
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
breaks down an industry, gets into the competitive intensity of that industry. How much negotiating leverage do you have with suppliers? How much negotiating leverage do you have with customers? Are there threat of new entrants? Is there a threat of substitute products or services?
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
And I think it would be a great book for business owners to really read and then take a step back and understand how does their business fit into this industry? And, you know, how can they compete a little bit differentiated and take advantage of maybe the ecosystem.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
I would just say as well, I mean, Tommy, it's been, thanks a lot for having us. And it's been awesome to see your journey all the way from, I think when we first met in 2017 or 2018 to where you are today. And, you know, I know the future is even brighter for you.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
I think, you know, what I would maybe leave some of the listeners with is, you know, even if you're not planning on selling your business, build your business like you are and really understand like, what are those key value drivers that investors would look for in my business? building brand equity.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
One of the most rewarding experiences for me was supporting you on the A1 transaction. I think when me and you first met, you were a $4 million EBITDA business.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
So having really strong Google reviews, being a market leader in your geographic market, creating sticky customer relationships. And how do you do that? Perhaps with maintenance agreements and kind of really building up your maintenance agreements and capturing the lifetime value of that customer. having really good technician retention rates.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
That speaks to being an employer of choice, building a good culture, having high margins, really good organic growth profiles. But think about all of the different attributes that really drives value in a company. And even if you want to pass the business down to the next generation, or if you want to sell the business, it's always important to build the business in the most valuable way possible.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Pleasure. Really appreciate it. This was great. Thanks, Tommy.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
I was fortunate enough to join your advisory board and watch you really grow that business from four of EBITDA to 28 of EBITDA and seeing what you guys are doing today and how much success you are having post-transaction with the right partner has just been really rewarding. So congrats on all your success.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
I think the other thing that I would just build on Rob's comments is there's real economies of scale. And what I mean by that is one plus one equals a lot more than two. So when you're doing add-on acquisitions, when you're getting more scale, you can get better purchasing contracts with your suppliers.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
You can add more sophistication around your digital marketing strategies, which can help you grow leads and accelerate revenue growth.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
helping companies with recruiting, training, technology, the sales process, building in consumer financing, implementing technology into those businesses, you can really help a lot of maybe smaller mom and pop companies that are really good businesses, but make them great by adding that value creation playbook and those economies of scale into those businesses as well.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Yeah, well, maybe I'll start with EBITDA. So EBITDA is a terminology that gets thrown out a lot. And what it stands for is earnings before interest, taxes, depreciation, and amortization. And the other thing that business owners should think about is, you know, what are your ad backs to get to an adjusted EBITDA number? So anything that is non-recurring in nature,
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Maybe business owners are running through personal expenses that may not exist going forward. But it's really important to understand what is your EBITDA because that is the baseline for how businesses are valued at the end of the day. And so certain companies may look to be growing. Are you growing your business profitably and really kind of expanding your EBITDA and your earnings power?
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Because companies are valued based on a multiple of that EBITDA. So I'd probably start there. and really encourage your listeners and your audience here to really understand their numbers and understand that EBITDA because it isn't, you know, that isn't a terminology that when you look at your income statement from your accountant, you don't see a line item that says EBITDA.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
You have to calculate it and really kind of understand that. But that's the baseline that businesses are valued off of.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
I think the sooner the better that you can do it because really any investor or any buyer, if it's a strategic buyer, they're going to be using accrual-based accounting. And so if you're having reviewed financial statements or audited financial statements, they're even going to be wanting to see you on accrual-based accounting.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
Because ultimately, that is the best representation of where your true earnings of the business are. Because if you're prepaying expenses or you're not properly accruing for bonuses that are going to hit in December, you could artificially inflate or maybe have an earnings number that's too low at the end of the day.
The Home Service Expert Podcast
Driving Growth Through Private Equity Partnerships to Scale Home Service Brands
So the sooner that you can get to accrual-based accounting, the better because it's the best representation for you to track your business and really kind of understand your numbers.