Driving Growth Through Private Equity Partnerships to Scale Home Service Brands

But just a reminder to everybody, all financials are is the output from everything else that goes into the business, operating the company efficiently, driving leads, converting those leads. What's your average ticket once you've made that conversion? All those things that make a business great, that's the part that really matters. The numbers are just the output of all those things. So the numbers are important, and it is the metric that a buyer will use. But you have to tell the story behind the numbers. That's really what matters, is the story behind the numbers, not just the numbers themselves. The Home Service Millionaire, Tommy Nello. Before we get started, I wanted to share two important things with you. First, I want you to implement what you learned today. To do that, you'll have to take a lot of notes, but I also want you to fully concentrate on the interview. So I asked the team to take notes for you. Just text notes, N-O-T-E-S, to 888-526-1299. And you'll receive a link to download the notes from today's episode. Also, if you haven't got your copy of my newest book, Elevate, please go check it out. I'll share with you how I attracted and developed a winning team that helped me build the $200 million company in 22 states. Just go to Elevate and win.com/podcast to get your copy. Now, let's go back into the interview. All right, guys, welcome back to the Home Service Sex for podcast. Today's going to be awesome. I got two of my good buddies here, Rob Parker and Eric Van Damme. They are experts in financial modeling, private equity, capital markets, and mergers and acquisitions. Rob is based in Birmingham, Michigan. He's a managing director at Piper Sandler. He's got a huge history, I'm going to let him kind of explain his history. And Eric's also a managing director at Piper Sandler, also based right near where Rob's at. And they'll go into that. And you know, they got a vast history of the M&A side. Rob was one of the founders of, he was the founder, I believe it, court and partners. He has a vice public and private clients on numerous mergers, acquisitions, LBO cross border, a capital raising transaction across a variety of industries. Eric Van Damme is a managing director and head of residential commercial services at Piper, bringing over 15 years of experiences with over a hundred transactions. Eric has experience with middle market mergers and acquisitions. He's previously worked for multiple New York based private equity firms and has held positions at Barclays Capital and Lehman Brothers. Glad to have you both. This is the first time in a long time I've actually had two guys on the podcast. Thank you. You guys did the A1 deal. It's been about a year and a half. And that was super fun. I mean, these guys know what they're doing. Both these guys, I mean, it was like a six months process and just quality of earnings. The internal audits we did, the third party audits, the going to a partner paying six grand for a study in the garage during the street. There's so many things we had to get ready for building the SIP. We'll talk about all that stuff, but let's just start with you Rob. Tell us a little bit about the journey which you've been up to where you're going in the future and just what you love about what you do. Yeah, sure. Well, first of all, thanks for having us. It's great to be here. Great to see all the success you've had building A1 and even since the sale process a year and a half ago. So congrats to you and thanks again for having us. I started my Wall Street career in New York at a firm called Donaldson, Lufkin, and Genrette. I was in the Mergers and Acquisitions Group, worked there for a number of years in New York. We had a large Los Angeles office when the head of that office went to UBS. He brought me and a few others with him. So I went out to L.A. for a few years and worked with him at UBS doing Mergers and Acquisitions and Leverage Finance. I'm originally from Detroit, Michigan. That's home and as I was thinking about starting a family, raising a family where I wanted to build roots and build a family, I wanted to move back home. So I did. Move back home and joined Comerica Bank, had a small Mergers and Acquisitions Group. Join those guys. It was a great experience. We had a lot of fun. Those were great years. In 2009, when they took tarp money, like all the big banks did, they told our little M&A group they're going to shut us down. So at the end of 2009 was maybe my darkest day in my career. Comerica said, "We're going to shut down this group. You guys are small and profitable and don't necessarily cost a lot for us. But we're really turned upside down as a result of the great financial crisis. And we're just going to focus on our core lending business. So they shut us down." So in the beginning of 2010, my partner and I started our own firm. We were entrepreneurs. We started at my partner's kitchen table. We were at my kitchen table and literally built it from nothing. And into a firm, it was called "Corten Partners." We built it brick by brick and eventually had five offices in Europe, three in the US. And in January of 2019, we were acquired by Cowan. Cowan's a publicly traded Wall Street investment bank. So my life kind of came full circle. I was back part of a big public Wall Street investment bank again. I ran the cell side M&A group for them and then ultimately ran the business services sector group. I was with those guys for a while and then earlier this year, left Cowan to go join one of our competitors, Piper Sandler, where I am now and thrilled to be there and be part of such a great organization. Yeah. And so in the scheme of things, Cowan versus Piper, I know you're not going to talk bad about one, but what's the difference between Cowan and Piper? Yeah. Good question. I mean, they're similar in a lot of ways. They're of the publicly traded Wall Street investment banks. You know, there's the very largest players, B of A, Goldman, JP Morgan. And then there's firms that are on the smaller side of the large public companies. Cowan's one of those. Cowan's now part of Toronto Dominion Bank. And to me, that's the biggest difference. Toronto Dominion Bank is a very large commercial bank and they're heavily regulated, like all those banks are. And it's just a different environment from what Cowan was and what Piper is today. And for me, being part of a nimble organization that lets people like Eric and I and our team be more entrepreneurial, that's just a better fit for someone like me and I'm glad to be there. Yeah. That's cool. It's a big, big move. Eric, let's talk about you. You're a hell of a golfer. I know that. You do a lot of golf and let's talk about your humble beginnings and where you're moving. Yeah. I mean, it's going to sound really similar to Rob. I started my career out in New York, so started off at Lehman Brothers and Barclays Capital on the investment banking side. From there, I went to a private equity firm, Buster Capital Partners when they were investing their fifth fund, which was a $4 billion fund. And then rounded out my tenure at a $2.5 billion hedge fund called Kingdom Capital doing long short equities and similar to Rob, my wife and I are both from Michigan originally wanting 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 from 2013 to 2018 when County had acquired us. And now we're making the move over to Piper, but it's interesting over that evolution. 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 one of the most rewarding experiences for me was supporting you on the A1 transaction. I think when me and you first met $4 million dollar EBITDA business, 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. Yeah, I know. You know, I always tell people they're like, how is PE and I'm like, you know, I'm one of the lucky guys because you guys said, well, set dogs amazing, Mike's amazing. You're really going to like them. And it's never easy, but I'm an employee now, which is weird, but I don't feel like they really let me take the keys and run with it. We had a great first year when all that HVAC stuff was going on, bad weather, lots of mergers and acquisitions, lots of competition. Everybody's like, PE is getting big into the fencing, PE's getting into pull service, PE's going into pest control, PE's getting into roofing. And it's like, and then you got guys like Ken Haynes and are like, something's got to break. It's just a matter of time. What do you? And I don't know who to pick. I'll go back and forth. So Rob, in your eyes and we've got a lot of questions here that I'm probably not even going to follow, but I'll go through a lot of them. But is this thing going to be like, you got to do a deal eventually? And also is it like, is there ever going to be this home service? Is this just going to be like Walmart gobbling up everything? Yeah. Well, there's a lot about the home services sector that appeals to private equity, that appeals to investors and appeals to the capital class. The addressable market sizes are massive. These are huge markets. They're very fragmented. Every town has four or five companies that can fix your garage door, for example, or 500. Or 500, yeah, in some cases. Yeah, exactly. They're super fragmented, which creates an opportunity for organic growth. So if you're a best in class operator, you can take share from the less sophisticated competitors you have, or you can grow inorganically through acquisition. So that appeals to the private equity class. In the residential world, there is typically very little if any customer concentration. So if you lose your top five customers, you barely even notice. So there's a lot about the sector that people like the nature of the demand is nondiscretionary. If your garage door is broken, you have to have it fixed. It's a security issue if nothing else. So the nature of the demand is very strong. So it really appeals to private equity. And I think that appeal is durable. So the private equity interest in the sector is going to remain for a long, long time. So I feel very, very good about that. And it's not really a surprise that there's been this kind of interest. And I just think more and more, I feel like Eric and I have a conversation every week with a new private equity firm or a new family office or even more and more sovereign wealth funds, large pension funds that have interest in the sector. There's new interest every week. And I don't think it's going to stop for a while. Yeah. 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, more scale, you can get better purchasing contracts with your suppliers. You can add more sophistication around your digital marketing strategies, which can help you grow leads and accelerate revenue growth, 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. And Tommy, I'll tell you, I mean, there is a lot of interest in this space and I'm sure a lot of your viewers and your listeners are getting calls all the time from private equity. One thing I would say is it's really important to not just look for the money. It's important, but the last dollar is less important than getting the right fit. If you're going to roll especially if you're going to roll, you want to have the right fit. The right part of the partner that shares your vision that sees the world, the way you see the world that wants to grow the business, the way you want to grow the business that will treat your people, your customers, your suppliers with kind of respect that you have. So taking time in the process to get to know these groups, see what their vision for growth looks like and make sure that fits with yours is very important if you're going to have a good partnership. I agree. Let's go over some just basic terms like sip arbitrage, buy and build, like let's just talk about some of the things because some of the listeners, I got taught this stuff probably the first time I talked to Eric like five or six years ago, but I feel like a lot of people that's just overwhelming to figure out what is all this stuff. So I don't know Eric, you want to just talk us through some of the nomenclature of the M&A world. 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 addbacks to get to an adjusted EBITDA number? So anything that is non-recurring in nature, 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, you know, certain companies may look to be growing. Are you growing your business profitably and really kind of expanding your EBITDA and your earnings power 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 account, you don't see a line item that says EBITDA. You have to calculate it and really kind of understand that, but that's the baseline that businesses are valued off of. Yeah. And then like, when we did this, what is the quality of earnings? Yeah. So, a quality of earnings is an accounting analysis or review of a company's financial statement. So it's not an audit. It's not that detailed. It's not necessarily the same as an audit, but it's a review of the numbers and an assembly of the numbers in a format that a buyer would actually be underwriting. So number one is a scrub to make sure the numbers are accurate and they're being reported the right way. Number two, it's making sure they're compiled in a way that the buyer can actually underwrite. So for example, a lot of private business owners might have some personal expenses that they put through their business. All those personal expenses will go away when they're no longer the majority owner. So something like that can be added back. There may have been a one-time item that occurred a year before, two years before, that's not going to recur again. That's an expense that can be added back. So they look for those sorts of adjustments to take, get the most accurate representation of the actual earnings that they're looking to buy. One of the things that I always talk companies is sooner than later, I'm curious how you guys feel about this, but switching to a cruel versus cash, even when you're going to get a loan for the business. We had a delayed draw, a term loan for 20 million, explained to me, what's the purpose? Obviously, a cruel is when you actually fulfill the work versus when you sell it, cash is just whenever you sell it, you kind of count it. And there's some fancy things you could do, like prepay for advertising when you're on cash, but at some level, it's smart to switch. When is that point and why is it important? 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 a cruel 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 a cruel based accounting 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. So the sooner that you can get to a cruel based accounting, the better because it's the best representation for you to track your business and really kind of understand your numbers. I will just add that CPAs give a lot of bad advice. Most low and CPAs say, you got all this cash time to buy. I see a lot of small businesses that go out and they spend all their money at the end of the year buying trucks and prepay and marketing. And I'm like, you don't have any cash left in the bank in the operating capital. So be very, very wise on who you listen to. And I want to talk a little bit about reviewed or audited financials. I mean, that's, it's a lot of work. And I remember it took me five tries to get the right CFO and man, does it make a difference? Oh, yeah. So let's talk a little bit about reviewed versus audited and it was the right time to go down, down that route. Yeah. I have audited financial statements when you have leveraging in the business. So a bank is going to want the statements to be audited for a couple of reasons. One, because it's an assessment or a judgment that the numbers have been accurately prepared and compiled and the CPA firm, the auditor is rendering an opinion. So they're signing their own name that these numbers are represented accurately. So that's important for a bank and important in a leveraged environment, which is what you'll have most likely when, when you sell your business. And you know, one thing I just, a point I want to make about this, we're, we're spending a lot of time talking about financial metrics and financial statements. And that's important because that is the output. And it's the metric that a buyer needs. It's like the scoreboard and it's what a buyer needs to look at to assess what they're willing to pay for a business, but just a reminder to everybody. What all financials are is the output from everything else that goes into the business, operating the company efficiently, driving leads, converting those leads. So the numbers are important and it is the metric that a buyer will use. That's really what matters is, is the story behind the numbers, not just the numbers themselves. And let's talk about that. So when we told our story, we called it a SIP and I, you know, go to just like it's a SIP, I think they're the same things. Can we just, I'm just trying to get this definition, because this is confusing stuff to a lot of people that never, they've thought about selling their business. Even as they grow larger, they need to understand these definitions. 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. And it goes into detail around, you know, the investment highlights, being a market leader, you know, having sophisticated digital marketing strategies, being an employer of choice, kind of dominating your market, it goes into the growth strategy of the business. 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 financials of the business. 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, well, 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. We may get 31st-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. And the, the SIM is something the same thing. Exactly. Yeah. Just different. Yeah. So SIM, I mean, so the SIM is confidential information memorandum, and there was a time in our world when those documents were driven out of Microsoft Word, and they were like books, literally like a book. Very wordy, very lengthy, a Word document, and we called them a memorandum. The industry made a conversion some years ago to PowerPoint, a picture is worth a thousand words. Right. So these presentations today are far more analytical, more graphs and charts, and those kinds of things that, again, tell, support a story, less wordy, and as it converted to PowerPoint, and that kind of a style, if you can't, it went from memorandum to presentation for SIM to SIM. So it can's not wrong. When we sold, we sold Gettle for Ken had the fortune over with him and with bomb capital. When we sold Gettle, we may have called it a SIM back in those days, and it's, it would be a SIM today. Okay. I got three more questions before I flip the page. Okay. So service time versus job versus house called pro, you guys said it was definitely really good that we were on service tighten. What does that make a difference? Someone's going to grow to north of 10 million of EBITDA. Obviously, it's more enterprise solution, but there's a lot of companies, I mean, you guys also did four seasons that had their own CRM. So talk a little bit about, if I'm thinking about a CRM in the future and I want to get the highest value, what should I be thinking about? You know, it's, 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 tighten kind of revolutionized the industry 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? So if you're not getting the amount of leads and kind of filling the capacity that you need for the day, you give your sales reps a little bit more flexibility to offer more discounts to make sure that they can fill the bore. Or if you're not getting the leads, you need to put your foot on the accelerator and spend more marketing dollars to drive some of those leads. But being able to make real-time data-driven decisions is absolutely critical throughout your organization. Yeah, I mean, there are software applications out there that can help companies in very weather-dependent sectors like lawn care or roofing. Look at where the weather patterns are going to be and help you decide how you're going to sequence your jobs that day based on weather. So these tools are very sophisticated in terms of running the business. The other thing they've done is these ER, these really great ERP systems that are dedicated to the home services industry allow companies that have traditionally been very localized, very local, advertised on the radio and in the yellow pages, support the local little league. It allows these kinds of businesses when you have a good ERP system that's tracking good data and keeping good metrics, then you can scale beyond just your own local market. And that's how, that's really been, as Eric said, it has really been revolutionary in terms of letting private equity come in and say, okay, I can take a business with great sort of local economics and I can scale it and I can manage that business now because of these great ERP system. So I was listening to who's the most motivational speaker of all time, Tony Robbins. He was on Fox or CNN or something and he goes, what's the S&P done the last 15 years? And he's like, it's done 12%. He goes, take all the P in the same time, even the ones that went under, he goes, it's 15%. So two and a half percent better and on top of that, he said a lot of people never had access to get into P was like those who it's like, you got to know somebody to get into these investments. Well, what I was shocked about was I didn't understand the whole process of how P worked how they use leverage. And then the company that they bought from, they bought the company, still pays the debt payment, right? The shocker when I found out I had a big wire going on every quarter and that's an interesting concept because I just don't think people know this stuff and I wanted to, we're going to talk about a lot of stuff. We could go over on this, but I want people to understand this concept of how P works, how they Al P's work, limited partners, what does the timeline work and then how did they use leverage like they got five times leverage and, you know, an HVG they get up to seven. So explain that a little bit. Yeah. So well, leverage can be a very powerful tool, both in a good way and in a negative way possibly, too. And if you use a simple example, so let's say your company's bought for $100. Those $100 all go into your pocket, every one of them. Well, let's say the PE firm that bought your business for $100 provided $50 million or $50 in equity, $50 in debt. Let's say you want to take $10 of your 100, so you've got $90 in your pocket. You take 10 and put it into the deal. You don't own 10%, you own 20%, you're 10 of 50, there's only $50 of equity. So that's the power of leverage. You put $90 in your pocket and you still own 20% of the company. So leverage can be a very powerful device that these firms will use and if you think about the private equity business, it's a tough business in a lot of ways. There is a lot of capital that's been allocated to the private equity world. There are a lot of those firms out there. There's family offices, there's all sorts of these private capital pools. Municipality, there's different people with pension funds. A lot of those will do direct investing. That's right. They're all competing for a lot of the same deals, which drives up valuations. So for the price that they have to pay to buy a great business, for the investing window that they have, typically four to six years. That's a short window to try and double or triple your investment. So leverage is a powerful way to do that. Another powerful way to do that is by doing a lot of acquisitions, which you see a lot of these firms do. You mentioned delayed draw term loan, a DDTL, that's a lending facility that gets put in place by a bank at closing that you can then go tap into to do acquisitions. So using leverage can be very powerful in the private equity world, both for the private equity firm and their investors, as well as for the entrepreneur that rolled equity into the new deal. 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 your humble enough to say, I don't have all the answers, right? 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 they can surround you in your management team with the right resources to take the business to the next level, 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. 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. And so they can be a tremendous partner to you and just helping you navigate some of those strategic initiatives. Yeah, I think there's a lot of things that people are thinking right now because everybody's like, I heard about this till I heard about this deal. I'm getting older, do I want a role equity and how does that look? And what are some of the factors that you should consider when advising clients on mergers and acquisitions in various industries? I think the first thing we do is we always ask our clients like, 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. And 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, role equity, continue on with the business. And so if somebody wants to exit, they may be better positioned for a strategic buyer. But if somebody is young, hungry, wants to role 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. Platform. When people hear that word, what does that exactly mean? Because everybody wants to be a platform these days. I want to be a platform. I want to be, I've got the model. You got to replicate my model. And you know, a lot of these people haven't even been more than two markets. They haven't proved themselves. They haven't done any green film, which is just organic growth for those don't know that term. Yeah. So a platform, if you think of a platform, a platform is sort of as a name implies. It's a platform is a structure that can support a lot of things on top of it. So in the private equity world, in our world, a platform is the initial investment that a private equity firm will make. It is the sort of the anchor investment or the platform investment. It's the original one that they will then use to add companies onto. So go do acquisitions inside of that platform. So maybe it's a roofing platform or an HVAC platform or garage door services platform. There is the initial core company with a management team and ERP system processes technology. All of those foundational things that you need. And then you go out and do acquisitions of smaller companies, maybe a little less sophisticated, but that's okay because you don't need them to do that. You've already got that, but they've got great relationships. They're strong in their market. They've got a good name. You then add them onto your business as the platform and you've created something that's a larger and more valuable. So this is kind of personal. Adam Koffee talked about this on the podcast. Ken Haines talked about this on the podcast with the Reds Group, Frank with service champions. They all said they bought companies that were great in their market, but they didn't make them adapt. The economies of scale, buying from one vendor, getting the right interest programs that works for everybody, call centers that could be expanded, training centers, marketing practices. Am I a big service agreement or is just one market to a service group? Is the other market, is this guy selling more financing or not? How is it considered a platform when you're not bringing those best practices into place? And you're just saying, go ahead and run it the way you've always done it. Right. It used to be enough. It was a time where you didn't need to affect a business that you acquired literally just adding those earnings onto the platform and making the platform that much bigger made the whole thing more valuable and that arbitrage in valuation. So you paid one price for this add on acquisition. But when you plug those same earnings into the platform, the whole thing is worth a much higher price, a much higher valuation. And that was enough. There was a long time where that was, that was simply enough. They didn't really need to be very integrated. They didn't necessarily have to report their financials on the same system in a timely manner. We've had clients, but not too long ago clients who were bringing in financials every month from different divisions on totally different systems and aggregating everything in Excel. Literally that sort of basic today, it's more difficult to get away with that. Because more and more capital has come into home services, the expectation of sophistication has gotten higher. So it would be tougher today to go do an acquisition and just not do anything to it. Leave it alone. Not at least improve the processes, improve the systems, get it integrated onto one ERP, one financial reporting system. It'd be difficult to do that today and go sell the whole thing later for a premium valuation. Yeah. It robs exactly right on those comments. The other thing too is those groups, like they're able, they have enormous buying power. So overnight, they're able to, given their size and scale, whatever company that they would kind of talk into their organization without a doubt, they have to be buying better than what that organization is on their own. 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 five, 10, 15, 20 million dollar 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 a level of integration as well as what is your value creation playbook? 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. One of the big questions that we had with A1, was this just COVID pricing increase? Was it just everybody raised their prices or was this truly better business processes, higher booking rates, better ticket averages, higher conversion rates? We were able to prove that we actually became a better company. And I think everybody's going, I'm going to sell right now, it's top of the market. They went from like two million, even into 12 million and they're like, man, and then you realize in a lot of new construction, we've dived into that too, but people, if you don't show a pattern in two, typically it's three years, they're going to go back the last three to five years. And they're going to want to see a pattern and you guys kind of one of you dive into that a little bit. 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. 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 mixed shift up in the business. And so there was a couple different things that a one was doing three to five years ago. You guys used to just sell the garage door. Now you were selling a complete system with the motor, the sensors, all the different components that 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. So 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. Yeah, we did lose groups in the A1 process because they were concerned that there was some COVID pricing in there and the lift and average ticket was driven a lot by inflation and things that might come down eventually and normalize and revert back to the mean. And Eric's exactly right. And that's a good example of if you look at the headline numbers only, you can draw one conclusion. And that can be dangerous when you unpacked it further and really dug in and ask questions, you saw that really there was a mixed shift going on. Where people were learning how to convert service leads, maintenance leads into system replacements because it was the right thing for the customer and they were, they learned how to do that. They were able to identify that and let the customer know that's in their best interest and they were doing more and more of that. And that really what was going on behind the numbers and for the groups that dug in, they saw that conversion happening at A1 and it made them appreciate the businesses more. Yeah, I think that's an important aspect too for business owners that want to sell their businesses, 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 and that's something that we pride ourselves on. Yeah, let's talk a little bit about residential commercial and new construction because in the garage industry, there's a lot of, they do anything they can get their hands on. We do gates, we do home depot, we do all these things, but you know, and I don't think a lot of these guys know where their real drivers are a profit and EBITDA. So talk a little bit about how private equity or an investor or a strategic and I know these things fluctuate depending on who the buyer is, but if I'm a buyer, if I'm an OEM manufacturer getting into the service side of it, it might make sense to buy new construction. But the multiple is going to be lower. Just talk to me a little bit about commercial, Rezzi versus just new construction. Yeah, sure. I mean, there's, each has its pros and cons. I mean, there's a lot of value to be had in all three. But if we just take a look at each one, starting with, let's say, new construction, new construction, what's good about it is those jobs can be big. I mean, if you have, if you get the chance to, let's say that the contract to install new garage doors in a brand new neighborhood, you know, there can be hundreds. Or thousands of homes in that neighborhood, that is a massive contract. So that scale leads to efficiencies. Those are a lot of, let's say in the case of A1, there are a lot of A1 stickers that'll be on a lot of garage doors in a lot of new homes. That can have value and that can convert over time to replacement business, repair business, maintenance business, or as those homeowners move to different places, they'll remember A1. So there's value in sort of being the incumbent. The tricky part about new construction is it can be lumpy. New home building fluctuates with the economy, with interest rates, with mortgage rates, with financing, with consumer sentiment. All these things can influence new home construction and it can be a little bit lumpy. If you look at the commercial side, commercial can be very valuable and there's a lot to like about it. Commercial work tends to be a little bit more, like let's take roughing, for example. Commercial roughing can be a little more complex. The items in that commercial structure, let's say it's a data center, really the roof cannot fail. If there's a massive water leak, that's a very expensive equipment that gets damaged. So the cost of failure is very high. That work requires very steady maintenance inspections, make sure everything is right. It's not going to fail. That part of it's really valuable, but the downside to commercial can sometimes be concentration, longer payment terms and it's a maybe slightly more sophisticated buyer that isn't using emotion in their decision and it's typically making their decision off more of a pricing spreadsheet type analysis. Then there's the residential side. The residential side, the best part about it, it's so fragmented, so big. Many, many, many individual homeowners, one of our former clients who we recently were with, made a comment, he said, I would rather have 5,000 individual homeowners purchasing guys to deal with than one tough purchasing guy from Walmart. Having lots, that fragmentation has a lot of value. It can sometimes be a slightly more emotional buy. If you come in and you've got a very tight quoting process, it's done on an iPad. It's very clean, it's clear, it's organized, the homeowner understands it. The technician came in, they were polite, they were respectful, they took their shoes off, all these kinds of things. A homeowner can say, you know, they're more expensive, but trust this person. I think they're going to do right by me and you can get better pricing if you do some of those kinds of things. The pricing can often be in your margin profile, therefore, can often be a little bit better in the residential side. There's been this theory out there that I've been hearing and you guys have seen this a lot of going out and buying a company before I sell, and it's not as easy as people think without systems, processes, and most of all the integration process. I think back in the day, you could get away with it. Hey, I'm going to go buy this company and add this to my eBay to get the multiple the arbitrage off of it. How important is when it comes to M&A's integrations and just if you think you're just going to go buy slop up three companies going as one, what's going to happen? 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 that can really help the companies that you're buying, take their companies to the next level. 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. A, are we under spending 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, 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. But if you're going to be a platform event 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. I agree. I think that the best companies in the world, they know exactly what they're going to do with this company. The integration, I had no idea until we built this integration checklist, there's so many things. Just what are the benefits? The HR department alone, onboarding to this new company, what is insurance of like workers comp? Are you using Aflac? The trucking situation, when you buy a company of the old trucks, do they got to conform to the new trucks? If I'm a buyer, I want to feel like I'm in the same company, same type of service everywhere I go. I don't want these like, man, it's way different in that company than this company, way different, here, way different there, and I think the market's getting smarter. 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, 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. 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 a platform and help companies out, figuring out what those bottlenecks to growth are, and how do you unlock them? You know, one of the things we really, when Dan Miller came on, he was pretty adamant about, we need a VP of corporate development. We need the right CFO. We need to get a good controller. We need a strong HR team. We need to look like the full gamut. We had to build out the org chart for a while. It wasn't like, I love sales, I love marketing, I love the technicians, but I think a lot of companies, they have a core CFO, or they don't even know what HR is, and they don't even know. Corporate development is a fancy way of saying, someone going out, finding opportunities to buy and do the M&A process. So how well rounded do you need to be? And I guess it's a different if you're a platformer or not? Your example with Dan Miller is a good one. I mean, I remember in my own business, a court, you know, when my partner and I started, we did everything. I was the one managing QuickBooks, there was one time I forgot to pay our health insurance bill. My wife called me. She's like, the health insurance isn't working, so I went into QuickBooks and paid it. We were doing everything. And over time, as we brought people in, and we had talented people in roles that they were well suited to do, that's when our business really grew, and that's a small example. I think in a business like A1 or a lot of the clients that Eric and I deal with, having experts in a seat, in a role that they're well suited to perform. And in many cases, our way better to do that work than the CEO is. The CEO's job is to inspire, motivate, be the visionary, grow the business, make the hard final decisions. The CEO shouldn't be involved in getting the numbers organized. You should be interpreting those numbers and doing those kinds of things, but someone has to do it. And so the more you've got talent in place in these critical roles, HR, finance, IT, if you're a platform, you have someone who runs mergers and acquisitions, you have someone who runs integration. You have some of those key roles filled. The CEO can go do what they need to do and really grow a business and create something scaled and valuable. When we, the process kind of finished up, the money stood in this account for 30 days, started losing hair. And then all of a sudden, this phone call came and there's 25 people or 40 people on this call. It was the most unemotional thing. It was like, yes, yes, yes, it was like the money was being released. And I thought, man, this is going to be crazy. My whole life is going to change. I love those calls. It was a cool call. And the money came in and you celebrate, you know, there was a lot of people that came out of that process that did really well. But it's like you turned the page and it's like, now we got to go again. And I think a lot of people that are used to doing it their way and these PE guys, they've got their own thoughts too on how they're going to run the business. They want it done their way. They don't the average, you look at like Mike and Doug, they're working on, I think five or six of these companies at once. They don't want to be looking at these completely different reports that don't even look anything alike. And you got to interpret it your own way. They're like, here's how we need you to look and that was great for us. And it's really smart. They said, here's the PowerPoint. Here's how we want your numbers to look going forward and it was a couple of months worth of work. But now they use us to raise money from LPs because they're like, these guys really conformed pretty quickly. Good data. That's easy to interpret and organized well leads for the best decisions. There's no doubt about it. Yeah, it was crazy. I mean, what is a good percentage, even our profit? I mean, you could talk to probably both of those, but where should a good company? And I know that that fluctuates depending on commercial new construction. There's a lot of, but if it's residential retrofit, what is good and what's a red flag? What's like too much? Where's the kind of sweet spot? Which subsect here we're talking about, HVAC, garage doors, roofing, I mean, there's not one. So let's just talk HVAC plumbing electrical. 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 mean. It's 25. What's going on here? Are people under paid? Are we not giving good enough bonuses? Is that a red flag? Or can you get behind that? I think it's important to unpack the numbers. What is driving that in, for instance, you know, with this one particular company, they add 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 margins. So they were at the upper end from a gross margin perspective from where they should be. And, you know, more of that trickled down to the bottom line. Gross profit, gross margin. Yes. Let's talk about that. Yeah. I mean, in a lot of ways, it's a proxy for how valuable your customer perceives your service. Because really it's, at the end of the day, it's the margin you get on the product you sell without a lot of the, without the SGNA, without the sales costs, without the administrative costs of the company, all those kinds of things. It's kind of your product margin in many ways. So it's a great way. It's one of the first things that a lot of people will look at is, so how valuable do your customers view your product or service and gross margins and indication of that? Why did I have everybody that knew me that have never worked for me in an executive position? Even Facebook or LinkedIn buddies call me up and say there's a company doing a survey and research. They want to know about you and they want to know about the industry. And I know this answer, but can one of you take this one? Yeah. Sure. I mean, it's, so if you think about a private equity firm, they take in money from investors. And those investors are institutions. There are endowments, insurance companies, ultra high net worth families, all these sorts of large institutional pools of capital and they invest that money on their behalf. So they have a fiduciary duty to those investors that they're going to really do a very thorough due diligence process. And part of that process is, in a business, and A1 is maybe a little unique, you're literally your picture is on every single vehicle out there on the road. You know, it's important to understand, to do a background check on you and to call people that maybe you've worked with in the past to get an unfiltered view. If you called somebody that works with you today, they would be more inclined to say favorable things because you're their boss. If you call somebody that doesn't work for you anymore, but used to, that might be a good way to get an unvarnished view of what you're like in the workplace. Are you a motivator? Do you inspire people or are you negative and are you, you dress people down in a public way and do you detract from the business and by the way you operate? It's important for them to understand as much as they can, you know, I'll tell you that the single most important factor I've observed in doing this for nearly 25 years in a successful investment is the leader, the leader and that leader's team. You can have a great idea, great concept, great industry, bad industry. What matters the most is who is the evangelist at the top, it's leading the organization and who is the team that that person has surrounded themselves with and it makes diligence on that individual just really important. It's not just background check things that you can find on Google or you can hire a firm like Crow and others to do kind of a background review. It's also calling people who used to work with you and saying, what is he like in the workplace? At what point, how big, like I find peace coming into a $4 million EBITDA, are they doing that stuff or is that only like north of a certain amount? I feel like it's happening more and more, maybe not at $4 million EBITDA, maybe not that throw, they'll definitely do a background check. That's not that hard to do. I mean, heck, you can find out a lot just by going to Google, they'll definitely do that. They may not do the call around to form, you know, people they find in your LinkedIn or people who used to work with you. They may not go quite that far, but diligence is getting, it's more, every year, I feel like it's a little bit more thorough. 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 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, you know, 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 earnings analysis. 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. And that process typically takes three to six months or what's a typical process look for a company north of 10 million. We normally say it's six months from higher to wire. So from the time we get hired and signed 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. And part of that, part of why it takes six months is we spend a lot of time, the bringing a knife to a gunfight comment, we spend a lot of time upfront preparing. And that's really important because when you launch the process and we're having live conversations with real potential buyers, that momentum at that point makes a big difference. Like you not want to slow down, you want to have answers to their questions. You want to be prepared and everything organized and assembled, it makes it as easy as possible for them to really assess a one in that case so that they stay longer. And the more you have groups in the process all the way till the end, the longer you've maintained that competitive dynamic, which means you keep prices up and can possibly even raise them further, further along in the process. One of the things he always said is we need three or four good lawyer firms that understand mergers and acquisitions. He's like great. They're going to red line. It's their, it's their cousin's uncle that used to be a divorce attorney, redlining some stuff that doesn't make any sense. How important is the lawyer that you hire to do the work? 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. 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. And you need to have a law firm that can help you if there's 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'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. Well, you guys have done some big deals. I mean, lots and lots of them. You guys did Ken Goodrich, York with Darius, you've worked with David for seasons. There's a lot more of those deals out there. When you're looking at the leadership, and Darius said that's the number one thing, like he goes into companies on these add-ons and likes to remove the guys because he's like, it's an uphill battle. All these guys want to do it their way and they don't understand technology. He's like, dude, it's a nightmare. But then again, you're losing the purse that was holding that glue. So this depends on how good you're remarking that list. But let's just talk about what you guys see, the PE companies really like when they see a leader. And what are some of the attributes? Is it strong financial background? Is it strong marketing? Is it just a great culture? Are they a culture driver? What are some of the aspects that somebody should aspire to be before they even think about getting involved with private equity? Yeah, that's a really good question. I've seen great CEOs come from a financial background. I've seen great CEOs come from an engineering background, sales background. I've had great CEOs that had MBAs from top business schools, we've had great CEOs who never even finished high school and everything in between. So there is no particular background. There is no one path that we could recommend somebody follow. People are kind of born leaders or they're not. And I think to me, what I would say, a great leader is one who is able to get the best out of the team that he or she has, you're a motivator. Your passion for what you do inspires and motivates others to be better than they ever thought they could be. So that the whole is greater than the some of the individual parts. I think inspiration, motivation, concern, passion, those are the things I think make great leaders. You also, there are some nuts and bolts things. I mean, you definitely have to understand what the numbers are telling you and you need to have vision for the business. I mean, you need to be someone that is thinking six months in advance. Where is my industry going? Where is my business going? You have to be a visionary and you have to set a strategic plan based on your vision of the future for your company and you've got to be able to motivate people to execute that plan. Rob is exactly right and groups want to see that there's a really good culture and that's hard to define. What 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 glass door? 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? You know, 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? But what are you doing to really instill a good culture inside your organization and that's what groups want to see? You know, I hear these stories of unsophisticated private equity companies come in and some of them, they try to cut their way, they try to cut marketing, they cut the initiatives. You know, we do this pinnacle trip you guys are familiar with. We do these things that we spend quite a lot of money on our people and I've seen, I know of a case right now that this is going on. They came in and they're like, they really shake up the company a lot and they get rid of things. They try to cut their way and I understand like, cutting dead weight. Like I understand that and typically they might bring in their own CFO because they want to really know the numbers to their monies, their limited partners on the line. But when we're looking at PE, what are some of the things to look out for? And I know, obviously you guys are going to bring up any names, but you know, there's some unsophisticated companies getting into this realm now. 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 you know, what we encourage our clients is, you know, especially the management presentation process, it isn't just the private equity firm interviewing you. 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, you know, value to your portfolio companies, but really doing a lot of due diligence on urine on that private equity firm 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? 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. Yeah, I've been doing this since the late 90s and there was a time in our world where you saw more of that, you saw more of this of the private equity world being a financial engineering game, using leverage, selling off assets, cutting costs to generate a return, very difficult to do that today. It's way too competitive that dynamic, everyone kind of gets the same leverage deal. So we're going to value the business much higher where you can't cut your way to success. Really, and maybe there are a handful of exceptions, but really the way you're going to generate returns in the private equity world today is by making the business more valuable and growing it. So I haven't seen that in a while where a private equity firm comes in with with the motivation to cut their way to a return. You really don't see that as much anymore as way more today about growth, which then goes back to Eric's point is does the CEO align with the private equity firm on what's the best way to grow the business? And there might be different PE firms might have different views on how they want to grow it. And that's why it's really important in the process to make sure you're getting to know these groups. You're doing reference calls with other CEOs that are with them now. We're with them before and maybe have been sold. So find out, you know, how do these guys do it? Do they only grow through acquisition? Do they bring anything to table on digital marketing or some other area to grow a business? And find the one that best aligns with you and that part of the process really becomes critical. I reached out to Jonathan today with Morris Jenkins, and I was just thinking about this. If you are in your late 50s, 60s, maybe 70s and you're looking to get out completely, you've got to have another guy that actually like has taken that culture, could lead that. A lot of people, you do not want to be like empty handed going. When I leave, there's really, we're going to have to strain somebody because that's a big risk. You know, that could be the glue of a company. So if you're talking to somebody that's like, you know, I still want to be involved. I just want to come in Mondays and Thursdays. And I don't want to be like all into this business like I've been the last 30, 40 years. You know, what do you tell somebody and what's the best way to go about that? And what is the PE company looking for in that situation? 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 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. Build your bench. Yeah, build the bench to get those individuals going. And, you know, if you're not doing that and maybe not having the right conversations, if you have an awesome not number two, but, you know, they're not sure like when it's going to be their turn to take over, like, 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, you know, helping them understand like, what is their career, your trajectory and what is that going to look like? Yeah, communication too. I mean, I think like like many things in life, good communication between the CEO and the private equity team that he or she is working with, as long as a communication is really good, really that gets in front of any, any issues. I mean, if, if the CEO doesn't want to be the CEO at the time they exit the business, so the new buyer is really backing somebody else, that's okay, as long as there's enough time to prepare for it. And that's, that's true really when it comes to succession planning, how long the CEO wants to be there, as long as you're communicating well with the private equity firm, there's no surprises, time to prepare anything, anything that can be accepted. And that's what I said to court tech and I just told the team, I said, look, probably not the guy going to want to travel to New York in a formal board meeting, getting ready to take us public in five years on the next roll. And he said, great, we'll find an ace training for six months to a year, figure out what you want to do and what you love to do. You're still going to be around. I said, yeah, I will. And I said, I just, it's not as fun when it gets to that massive level, it's like you're going to want to, you said an Ivy League black tie guy that likes to talk to banks and understands more of the Sarbanes Oxley IPO, what are the market conditions and I get that and I'm okay with that. And I don't even want to try to mold myself into that. Right. So as long as you're communicating properly with your investors, they just don't like these big surprises because there's a lot of money on the line and they'll figure it out. They usually do. Yeah. What are some of the regulatory key regulatory conditions that home service business owners need to be mindful of during an M&A process? 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 and the roofing space. There's certain markets where it's okay to utilize subcontractors and, you know, outsource your install crews in certain geographic markets, like the Pacific Northwest that you have to have W2 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 look out for? I just got a few more questions and I know we got to get going. When picking someone to come and represent you and do what you guys do, there's a lot of companies out there. There's a lot of great ones. What do you think the differentiating factors is some people go with the best price? How does the even pricing work for what you guys do and how do you know you're getting somebody good because I've seen you guys have even kind of showed me you've gotten some companies three, four, five times more times even by doing it right. Yeah. Yeah. I mean, it's, I think for a lot of people, there are a lot of different criteria for that decision. I think ultimately, even with an institution, even with a, you know, in earlier in my career, I did a lot of work for big public companies, you know, Masco and companies like that, I T R W and big, big companies like that and folks like that, private equity firms or entrepreneurs like you, I do think there's an emotional part of it. I do think there is a big part of the decision and there's sort of the, the, the check the box stuff. They will do references on former clients of ours, they'll look at what kind of valuations we've gotten. They'll know how well do we know this sector, are we going to articulate it well? Are we going to get the story quickly? Do we have experience in the sector? All those things matter, but you probably don't even get invited to sit down and present your qualifications if all those boxes haven't already been checked. I think at the end of the day, there's a view of who has the most conviction about why this business is valuable and who is going to go out and get me the best possible deal. And that's oftentimes leads with price, but it's not just price. It's price, it's fit, it's legal terms, it's all the things that go into a deal. Who's going to go get me the best deal and who do I trust to tell me straight? If they don't think this is a good deal, they'll tell me. They won't tell me to just take it because it's in their interest, they'll give me the right advice. So I think a lot of it is an establishment of trust, a relationship that's been built over time. And then just who do they believe is going to do everything they can to go deliver the best possible deal and it's sometimes hard to define, other than just kind of know it when you see it. I think there's a big part of that still in our business today. You want to add on anything to that? 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? 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? Is it being an employer of choice and really owning the labor in your market and having a better training center than anybody else that you can grow your capacity? Is it being an acquire of choice and having a better value creation playbook on how you're going to grow the business? 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 and how are they succeeding and we really try to unpack that in a lot of detail. If you're in a big deal and you've got a really good platform and it's coming down to the last month, how many hours do you think you guys are put because you guys sometimes have a couple of things you're juggling, but you guys both work together as a team. What's like a busy work week look like? No two weeks look the same, I mean, they're all different and I mean, and we are as one of the things I think has been an advantage for us is that there are two of us. We're two senior people in our organization and we're both all in on the deals you work on together and that makes a big difference. No two weeks are the same. You know, that last month is intense. You're juggling multiple groups through due diligence, you're juggling multiple groups in a purchase agreement, legal negotiation, multiple groups in an economic price value you know, negotiation and you've got to manage it all in a way that makes each one feel like there's competition they could win, but they could lose too. So they got to feel like, okay, I've got a chance. I feel good. They're treating me fairly, I think they're giving me good information, but they're not letting me think it's mine. I still have to go compete and win and at the end of the day, I think at the end in that final month, when Eric and I can say it was a successful outcome is when our clients happy and we got them the best price that was available in the market with the partner they wanted to be with and everyone in the process, all the buyers, the one that won and all the ones that didn't win felt like they were treated fairly and that we were honest with them and we were fair with them. That's when he and I have done our job and that second part is it's as important as the first part. Our business is very much a reputation business and treating people the right way and being fair with people and giving people a fair chance and being honest with them is it's an important part of the process. I think it's an important part of why people will stay in processes that he and I are leading because they know they're going to be treated fairly and we're not going to just string them along to prop up somebody else. And you guys know the who's who? You guys know all the major players who backs out at the last minute, who's notorious for taking advantage in just wasting time, your time, your precious time that you're management meetings. You learn some of those the hard way. Yeah. Not happens. And not everything is going to be perfect. Some of these larger institutional buyers want everything, every tea to be crossed and I started. And other companies are like, this is a great company they can see beyond things. Is there a lot of times where PE guys, the head of the fund will call you up and they'll be like, we need this deal. Oh, for sure. Is that a like common practice where they're like, this is the one because last year was really bad year for deals. It was like nothing was really going. What is the market temperature right now? What's up with interest rates? What should we be looking for this next year and two? Yeah. I mean, I'm happy to start. I mean, I'd say that there is last year was an interesting year across 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 is also some caution around where are we from a macroeconomic standpoint? Where are we heading into a recession? Interest rates are rising. That is becoming a lot more expensive, 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. So the cost of debt is high, which certainly has an impact, but there's some talk on when the Fed can start 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. Yeah. Tommy, there's so much money in the world that wants to invest in the middle market. Private companies in the middle market in the United States have been such a great place to invest and will continue to be. There's a lot of money that wants to do deals here. And yeah, 2023 was lighter in terms of volume. There are 21 and 22 or very hot years. Interest rates had cycled up so much. We will probably do for a little bit of a breather. 2024 is ramping back up. I think that there's going to be a need to begin returning some capital to all these institutions that invested in these private equity funds. So they can go raise the next fund and keep investing in this space. So it's the long-term dynamics and our sector are so good, and there may be a year or two or a quarter or two here and there that are a little bit lighter. But there's always activity, there's always, there's always money for a good deal. And so what Eric and I have focused our time on is finding good deals because there's always a market for those. Final questions here. Somebody wants to reach out to you Eric, what's the best way to do that? I can either reach out via LinkedIn or my cell is 248, 941, 1151. And that's the first time I met him was through LinkedIn the only time I checked and Eric I thought it was 90 years old, very calm, collected and I'm writing all every deal, he's going to every deal possible. I filled up my whiteboard and just he said, Hey, and that's what's great about you guys. You took a chance saying you're smaller and I was four million, but I know you're going to grow this thing. You play the long game and you guys kind of have a good amount that you want to be involved and you're not going to go to the three technician, 500,000 EBITDA, where is that kind of basement that you guys get started with typically and you stayed with me because you believe in what we were doing, but I think I was below your threshold at the time. 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. Yeah, I mean, there is no hard and fast rule. I mean, we like to work with great companies and work with great people. And there isn't a hard and fast, a sort of a bright line where we won't go below or go above it. For us, it's about finding, finding winners in their space and being their advisor. And if we do our job right, we can be their advisor multiple times over and over. We'll sell it the first time. Then we'll sell it the second time and maybe take them public the third time. So we don't really draw hard and fast rules on size. We want to meet winning companies. And it's no one wants to reach out to you. Rob. Perker at psc.com. Okay. Perfect. And two final questions. Is there any books that you guys would recommend? I think the private equity playbook was pretty cool. Kind of defines all the stuff. Is there any books that someone should or has to read to kind of learn more? Yeah. That's a good question. I'm an avid reader. There's a lot of great books out there. When I went to business school, I was inspired to go and then pursue a Wall Street career because of a book I had read called Barbarians at the Gate. The little dated now, it's the story of the very famous story of the leveraged buyout of RJ Arnebisco, which took place in the late 80s. I actually made a movie about it too, with the same name, Barbarians at the Gate. That book, it's interesting. It's a page turner, very well written, and it really talks about Wall Street and that process. Now, it's in the 80s, which in some ways were that was the heyday of Wall Street, but so much of what happened there still applies today. Strategic, tactical, thinking through, holding firm on a price because you have conviction that that's the right price. Or other people trying to find creative tax structures to pay a little bit more. All these kinds of things still happen today. I thought that book was inspired me to go to Wall Street, inspired me to have the career I've had today. So I would recommend that one. The book, I would say, probably the best business biography I've read is Shudog by Phil Knight. I thought it was a really good book, a really good story. Barbarians is memory of the details of building it from way back in the late 60s and 70s and his business lessons that are sprinkled throughout that book. I thought we're outstanding. I'd recommend that one as well. 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 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 per professor that came up with a concept called Porter's Five Forces, which really 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? 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 how can they compete a little bit differentiated and take advantage of maybe where they sit in the ecosystem. Love it. Last thing we talked about, I think I hit almost every question. So I'll let you close us out. Robbie, you can go first and Eric will finish us out. We can talk about anything and everything. Maybe we forgot something. Maybe there's one final message you want the listeners to hear. Yeah, I guess I would just say, if there's a final message, I would first want to say thank you again for letting us be here, what an honor to be here with you. So thank you. I think the final message I would say is the private equity industry has still misunderstood. Even going back to when Mitt Romney ran for president and how he was portrayed and vilified a little bit, the sector is still not very well understood by people. And I guess the message I would leave with you and your listeners is that isn't true. It's a group of very smart, talented and Eric and I were just with a former client of ours and he said, you know, one thing about your industry, people work really hard. He said, I really haven't. They're basically good people too. These are genuinely good people who want to build businesses, make companies better. And I think that's true. No industry is without its jerks that there are a few, but most people want to create value in these companies and doing it by investing in people, investing in technology and making the business more valuable and it can be a very fun journey and it can be a very lucrative journey. And I would, any of your listeners that are thinking about it, I would encourage them not to discount it. It can be a really fun and lucrative journey. Yeah. 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. 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. So having really strong Google reviews, being a market leader in your geographic market, you know, 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. That speaks to having, 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. Build the last John Warlow. Well, thanks guys. It's a pleasure. Really appreciate it. This was great. Thanks, Tommy. Thank you. Hey there, thanks for tuning into the podcast today. Before I let you go, I want to let everybody know that Elevate is out and ready to buy. I can share with you how I attracted a winning team of over 700 employees in over 20 states. The insights in this book are powerful and can be applied to any business or organization. It's a real game changer for anyone looking to build and develop a high-performing team like over here at A1 Garage or a service. So if you want to learn the secrets, tell me, transfer my team from stealing the toilet paper to a group of 700 plus employees, growing in the same direction, head over to Elevate and win.com/podcast and grab a copy of the book. Thanks again for listening and we'll catch up with you next time on the podcast.