Speaker 1When I first heard the numbers from today's guest, I thought I had misunderstood them. $200 million in revenue, $30 million in EBITDA by the end of the year, and the team just did their first acquisition in March. Some of my more ambitious guests aim to get to $100 million in revenue over 5 or 10 years. So how could it be possible to get to twice that number in nine months? Well, in today's interview, you will learn. Jordan Dubin and his two partners are rolling up the garage door repair industry, and Jordan does a phenomenal job of breaking it down. We hear their thesis around the garage door industry, their strategy of attack to consolidate the industry, what they standardize and centralize in their acquired businesses, and what they leave untouched. The deal structure offers a lot of information, but we don't know how to get to the bottom of it. to owners and lots and lots of numbers. Speaking of which, do note this distinction between what Jordan is doing and what the typical acquiring minds guest does, which helps answer the question, how have they done this? Most acquiring minds guests are looking for a single good business to buy, typically using an SBA loan. By contrast, Jordan and his partners have a very dialed-in thesis in a category, home services, where they had years of experience as private equity associates, and they went out and raised $35 million to pursue this vision. When you have a war chest of $35 million, you can make moves in an industry where not a lot of consolidation is happening. So what Jordan and team are doing here is more in the vein of traditional private equity. Still, many, if not most, of the themes we hit on can be applied to your self-funded search. How to think about an industry, where an industry is on its consolidation curve, or if it's even on one, how to relate to owners, how to differentiate yourself as a buyer, how to best position yourself to perhaps one day sell the business you're trying to buy. These should be your considerations in a self-funded search, as much as they are Jordan's in a $200 million roll-up. This was an exciting story in a rich education, the best kind of interview, so I hope you agree. Here is Jordan Dubin, co-founder of Guild Garage Group. Announcements. Chelsea Wood has run the Acquisition Lab for five years, and in that time has witnessed the searches of hundreds of aspiring buyers, and had calls with thousands of them. So Chelsea knows what separates those who succeed in closing a deal from those who don't. And this Thursday, December 12th, she's hosting a webinar on how to build a business that's not just a business, but a business that's not just a business. She's also hosting a webinar with Acquiring Minds to share her observations with us. In this one-hour session, Chelsea will dive into the key mistakes she sees searchers make, and how to avoid them to ensure a successful close and ownership period. This is part two of Chelsea's presentation last month on the same topic. There was so much to say, we split it into a two-parter. And it's not just a presentation, it's a live office hour session with time for Q&A. So bring your questions, and take a big step forward in your acquisition journey. Come learn from Chelsea's expertise, and avoid the missteps that trip up many first-time buyers. It's this Thursday, December 12th, 11 a.m. Eastern. That's 11 a.m. Eastern, an hour earlier than our usual noon time. The link to register is in today's show notes, or on the Acquiring Minds homepage, acquiringminds.co. Welcome to Acquiring Minds, a podcast about buying businesses. My name is Will Smith. Acquiring an existing business is an awesome opportunity for many entrepreneurs, and on this podcast, I talk to the people who do it. A PEO run by a searcher for searchers. If you're running a company with less than 100 employees and providing health care, you're going to need to be a searcher. You're going to need to be a searcher. Insurance to them. You may secure better benefit plans at a 15 to 30% discount through a professional employer organization, or PEO. Aspen HR, run by search fund veteran Mark Sinatra, understands the needs of search operators and provides HR compliance, flawless payroll, HR due diligence support for your acquisition, and Fortune 500 caliber benefits, all for a fraction of the cost. And tis the season to evaluate your employee benefit plan. Most new clients reach out to Aspen 90 days before year end or their renewal date. So before they get slammed, check out AspenHR.com or contact Mark directly at mark at AspenHR.com. Jordan Dubin, welcome to Acquiring Minds.
Speaker 2Thanks for having me. It's fun being a long-time fan and now finally being able to be on an episode.
Speaker 1Well, that's great to hear. It's always fun for me too to have a listener on. Well, Jordan, you and your two partners are building a large business in the garage door repair industry. And by large, I mean getting to 200 million in revenue, 30 in EBITDA by the end of this year. And your first acquisition closed only in March of this year. That is an incredible pace. Let's hear about it, Jordan. How did this hyper growth roll up begin?
Speaker 2Yeah. Well, thank you again for having me on. So I think like a lot of the stories and the entrepreneurs you have on your show, it's a long, long path getting to today. It's certainly not linear. But I guess I'll start with my own background, which is that I've been in the business for a long time. And I think that's what I've been doing for a long time. And I think that's coincide with Sean and Joe's background when we do eventually meet in the narrative of guilt. But I grew up in New York City. I went to school up in Boston, played football in college. And I think where you could probably say for me, this journey really started was sophomore year of college. Kind of the first year I was thinking about potentially doing some sort of business internship. At the time, I had no idea what I wanted to do. I grew up with a father who was a who worked in finance for a hedge fund. I didn't think I wanted to do that. But kind of my knowledge of, hey, what are the other parts of the finance ecosystem was not very broad. And I was lucky enough to get introduced to two guys by the names of Matt Perlman and Alex Sloan, who at the time had just graduated from Harvard Business School, and were building out a portfolio of Burger King for a while. And I think that's where I started. And I think across the Southeast United States. And so I became effectively their first ever intern before they probably even needed an intern. And they've grown their business, Garden Station Partners, today to be one of the truly premier lower middle market private equity firms in the US. But at the time, their office was literally one of their dad's townhouses.
Speaker 1So I- Come on. I think that's like the best. Yeah, exactly. They're a big deal. It's a great, it's a great entrepreneurial story. Like you said, they very modest start, I guess. And I guess you were there. I guess you were part of that.
Speaker 2Yeah. That's my claim to fame is being their first ever intern. But I learned a ton from them that summer. And I think the bigger thing was, I was 19 years old, very impressionable. And these two guys who were 30- 30, 31 at the time. I mean, they were like gods in my eyes. They were so cool. They were so smart. And I just loved being a part of what they were building. And I think to the extent I really understood the actual financial engineering that goes on behind the scenes, I think I found that interesting. But it was more just the dynamic, the energy, the relationships they were forming with all these underlying people. And I think that's what I learned. And I think that's what I learned from them. sellers of Burger King franchises. And I think that was the first time I had kind of had a light go off in my head, where I was like, I could see myself doing this down the road. I don't know if it's doing it as a part of a franchise system or doing it in QSR. But I love this idea of meeting with sellers all across the US, forming relationships, forming bonds, and then building something together and taking disparate parts. and creating something much larger.
Speaker 1Jordan, let me jump in with that. Because I have to say, to your credit, you thought that was cool. And you could see their vision. Because I would imagine that when they were starting, ETA wasn't a thing. I mean, people have been buying businesses forever, etc, etc. But ETA, as we understand it, with its own name and label and courses, wasn't a thing. Franchises still aren't a thing. And even less so then. So I would imagine two guys working out of a house, working out of their house or whatever um buying un unsexy fast food uh franchises was and there and there was no precedent for this like now they are the precedent so people doing this today will point at them and be like see these guys did this really cool thing so that gives me you know 25 year old 35 year old coverage to go do it but they were they were real trailblazers with this model so anyway i i just would imagine it would be very easy to to scratch your head roll your eyes dismiss it and yet you were taken with it you saw the vision so say more yeah i
Speaker 2think you hit the nail on the head i think you know spending an entire summer with them again when you're when you're 19 years old and here come these two kind of 30 year old guys um who have their shit together they're confident they're smart i mean i think it would be hard not to leave that summer being like i want to be matt perlman and alex sloan and that's exactly what i did um but i think you know to more specifically answer your question um it wasn't about the sophistication it wasn't about the financial engineering uh the sexiness or unsexiness of what we were doing it was i just so much appreciated and loved how they formed these relationships and bonds with all these different families and owner operators across the u.s and they knew them not even on a first name basis by their nicknames and they had funny inside jokes and they you know knew exactly hey when we go to memphis we go to this restaurant because that's the restaurant they love and that's what i was drawn to um and and you know fast forward to today and you know we'll go through the whole story and there are many more kind of things that went into starting guild but to this day that's my favorite part about guild is you know the different relationships and bonds that i've been able to form with all the different owners that have joined guild and and really just having almost like families in different states that i consider like second families to me um and having traditions with them having inside jokes with them um so yeah so i think i think that answers your question it does
Speaker 1it does that's great and it is such a good precursor because from what i know from the pre-call uh and from the videos you you really are um the connections that you're making with the owners are a key part of your of your playbook for lack of a better word i don't want to make it sound clinical
Speaker 2go ahead yeah i think uh you know we have uh 14 deals closed today and of those 14 i think five of the owners kids call me uncle jordan so i'd like to believe to uh the connections we form although how old are
Speaker 1you jordan that does make you that does make you seem old and you're like what
Speaker 220 what i'm 27 um yeah i'm 27 young uncle young uncle jordan
Speaker 1all right young uncle jordan
Speaker 2um so yeah so i think you know that was kind of the spark that started the fire spending that summer with alex and matt and you know i think i think i point out why i become you too i i want to be you too and you know our relationship my relationship with with matt and alex has grown immensely over the last i guess decade um and they have been two of the most influential people in my life uh i think you know i i never grew up with a brother they're probably the two closest things i have told the brothers and so they really laid out the roadmap for me um and they said look you gotta start with investment banking and then you know go to a great private equity firm and then take it from there see see where things go you'll probably change your mind this is not what you want to do but start with banking and then and then do private equity and so i did just that so ended up working in investment banking um like many people do in the finance world right out of college spent two years at goldman sachs um and then after goldman sachs i went to a private equity firm called l catterton um my first day on the job at l catterton i met joe delaney and sean slaszek so they had both done three years of investment banking at different banks at city and barclays um and i'd done two years at goldman um but we were a part of the same associate class so i think there were eight associates in our department and i was a part of the same associate class so i think there were but we all came in together and and that's where i met my two partners uh joe and sean and then while we were at catterton and we spent about two and a half years there you know the beautiful thing about our experience was we basically exclusively focused on buy and build investing and so you know we saw under road and then worked on platforms across veterinary clinics collision repair optometry clinics med spas hvac electrical plumbing and so our two and a half years there was truly like a learning grounds where we found out the playbook and learn the playbook firsthand from brilliant partners at l catterton i think you know one of the things we got to experience at l catterton which makes it such a unique place to work is when you're at the associate level your work on the deal is not limited to just the underwriting process you know you of course do the three-month sprint where you don't sleep and get the ic memo across um but that's just the beginning then you basically work hand in hand with your portfolio company and and serve a role almost as like the vp of finance for that company through the hold period and so especially for joe and sean who you know have been working with for a long time had portfolio companies at the time that were roll-ups so alliance animal health which was a vet clinic roll-up and len the plumber which was an hvac and plumbing roll-up um every day they got to do the exact things uh we do at guild uh and every day they were charged with putting out the same fires that we have to put out a guild and so you know i i think that all of us uh felt very very confident in this playbook uh and and then this investing style and so when we ultimately made the decision hey this is something we'd like to do on our own and take this leap and take this massive risk um we felt confident in it august felker
Speaker 1is a two-time successful searcher first with a traditional search fund the second time around he did a self-funded search today august runs oberly risk strategies an insurance firm with a dedicated practice group for searchers and acquisition entrepreneurs like you if you've got a business under loi oberly will provide complementary due diligence on that business's insurance and benefits program a great no risk way to get to know august and team they love helping searchers they've worked with hundreds oberly is a specialty insurance brokerage for searchers by a former searcher check out oberly-risk.com o-b-e-r-l-e hyphen risk.com link in the show notes well that's a great background jordan and i have to say um you know one of the things about this podcast is that i try to show that eta is not just for people with a certain pedigree um because a lot of people with that pedigree that that pedigree is overrepresented in the eta world because the top business schools are among the first to be represented in the eta world and they're not just for people with a certain pedigree places that have taught eta explicitly um private equity basically is eta at an institutional level and so a lot of people come down here from private equity so so those people like you are um overrepresented in this world but i try to show enough examples uh just a lot of examples of people who don't have that background um to show that this is open to all with your story however where i'm getting the impression that really the your ability to move is fast as you've moved quite frankly let's just not beat around the bush it probably is not something that somebody who i mean you just said you guys had cumulatively cumulatively a lot of experience doing precisely what you are now doing um and further that you jordan at least have had your eye on doing something like this since you were 19 so you have been plotting i mean maybe maybe you have been doing something like this since you were 19 so you have been doing something like this since you were 19 so you have been doing something like this since you were 19 distractions in there or whatever but at least you know this is this is something it feels like this is a a vision years in the in the making is that overstating it uh
Speaker 2that you know that's the disney version of it uh i think you know at 19 i i thought i wanted to do this and and as you correctly pointed out will there were certainly distractions along the way um but then you know i came back to it um and I think Katterton, Katterton was a really good experience for all of us. us because you know we learned so much about this investing style um and that that was really where we learned kind of the financial engineering side of it versus what i got exposure to at 19 years old which was the relationship side of it the camaraderie side of it the team building side of it um but i think that for us what we saw and one of the reasons we had the confidence to go out is um there are all these lower and middle market private equity firms who are paying these high premiums for residential and commercial services platforms when they eclipse 20 million of ebitda but they're not the ones going and starting them from scratch they're not the ones willing to go stack pennies and fly around the country to create that scale because at the end of the day when you're a private equity firm whether you're the smallest lower middle market private equity firm or you're a large middle market private equity firm like an l caterton uh you have so much money to deploy that constantly time and time again i i would hear the partners at caterton during the ic discussions ask is the juice worth the squeeze and so there is always going to be a threshold of a deal of a company that is too small to warrant the attention and time of a lower middle market private equity firm even if that business is growing 20 25 even if that business has best-in-class management and so i think we saw that niche and that gap as hey here's where we can put our thumb on the scale here's a niche we can own and play in where we're not trying to be someone we're not we're not trying to be heroes and go head to head with every single private equity firm every single well-capitalized private equity firm with a deep team of operating partners um this is the part of the ecosystem where three 20 year olds can actually be uniquely advantaged uh and create something very special
Speaker 1and so three 20 year olds yeah yep yeah wait actually let me let me let me pause you jordan because i want to get into the thesis in some detail but first of all for those who don't know the private equity world l caterton is a name that anybody in private equity would know this is a
Speaker 2um yeah i mean l character's great firm they're they're i wouldn't say it's as well known as a blackstone or a kkr but but they're pretty well known in the consumer space um and as you can probably tell i think the world of l caterton and the partners there um that they're we we myself joe and sean would not be where we are today without
Speaker 1them and you said that you saw how private equity firms like l caterton don't go you know it's the juice worth the squeeze they don't below go below a certain threshold of ebitda yet down here uh in the lower lower middle market of eta we always hear that things have gotten so competitive that private equity is dipping below uh two million dollars of ebitda and so if you so the the needle to thread is to find that business that's 750 000 of ebitda or sde up to a million and a half below that it's too small of course there are countless acquiring minds guests who are counter examples but the conventional wisdom below 750 is too small above a million and a half of sde or ebitda you're going to start competing with private equity but i'm hearing you say that private equity doesn't go that low so so square that circle for me well
Speaker 2i'll actually i think it's i'll try to think about it a little bit more i'll take a step back and kind of challenge something you said well i think one of the things i get frustrated with when i hear people kind of talk about the thresholds and all that is i think the worst thing you can do is box yourself in and say hey here here's my spreadsheet here's my criteria if it doesn't check these boxes it doesn't work for me if it's below 750 it's too small if it's above 1.5 million of ebitda it's too big i think that you're you have to stay flexible you have to stay nimble most of the most of the private equity firms i've seen yeah they're usually looking for one million dollar plus ebitda businesses um however that doesn't mean you can't compete in that one to three one to four million dollar ebitda range uh similarly uh i guess the rule of thumb as you pointed out is hey don't go below 750k of ebitda for all the reasons i acknowledge and understand um but we've acquired now two businesses that do between four hundred thousand and five hundred thousand of ebitda that in the whole period we've owned them have all reached 750 000 plus of ebitda and had we kind of said to ourselves hey we're never gonna dip below 500 we're never gonna dip below 700 we may have now partnered with two of the fastest growing companies we have and so i think that in this world of lower lower lower middle market eta roll ups private equity whatever you want to call it there are so many other things you have to look at so many other intangibles non-financial metrics you have to look at to really see okay this is a company primed for growth um and i think that's where we've been really successful is our willingness to be creative our willingness to evolve and we're ever evolving um to best position guild for growth i mean not including tuck-ins because those obviously get very small our smallest partner company has four hundred thousand dollars of ebitda our largest partner company has seven and a half million of ebitda there's no private equity firm feedback platform that would ever tell you our ebitda range is four hundred thousand to seven and a half million like yeah someone would laugh at you um but that's exactly what we've done
Speaker 1well i i want to return to the 401 jordan and and and talk about some of the intangibles that you saw in that particular business that that enticed you to go that low back to the thesis formation so there you guys are at l catterton thinking we can do something like this for ourselves we see that there's a gap in the market because private equity isn't going to go is we're willing to stack pennies as you put it um and we feel like we have a lot of experience with the playbook here tell tell me more about how this what this thesis looked like and how it took shape
Speaker 2yeah so it's funny because in many ways it feels like just yesterday but in other ways it feels like a lifetime ago um myself joe and sean we used to stay late at the office we're talking one two three a.m and talk about this and for so long it felt like one of those things yeah we'll talk about it we'll pretend we're gonna do it and then it's never gonna happen um because it's so scary there's so much risk and i think one day we were just like it's time to put up or shut up you know every single person in finance talks about doing this but you know we got to burn the ships we got to do it and so i think we came to the conclusion that you know we just got to commit to this and talking about it strategizing trying to source on the side when you have a full-time job you're just never going to get anywhere and so so that that was kind of us getting started but in terms of the thesis generation you know we had spent a lot of time looking into the residential and commercial services categories in our last year at elcatterton um ultimately we ended up settling on residential services as kind of the category uh that we wanted to create a platform in and ended up acquiring letting the plumber which was an hvac plumbing and electrical platform uh and going into the hvac market along with what seemed like every private equity firm at the time and still to this day and it's been a lot of fun and it's been a lot of fun for me and it's been a lot of fun for me and it's been to my understanding a phenomenal investment uh for elcatterton but one of the things we saw about the residential services category more broadly that was really enticing was there was real industrial logic that supported consolidation uh you know you had all the underlying attractive parts about the industry and the companies you know things being non-discretionary um you know having very good free cash flow conversion all kind of the line items you check when you're like hey if i'm going to do a roll up what are the five things that matter um but aside from just those five things you know what you saw with hvac was when you take four businesses and bring them together if you really do have strong intentional integration you can right size those p l's so quickly and you know whether it be procurement savings go to the manufacturers and you know what you're going to have to do is you're going to have to figure out what you're going to have to do in the next five years and then you're going to have to figure out what you're going to have to do in the next six years and then you're going to have to figure out what you're going to have to do in the next six years and then you're going to have to figure out again there is real industrial logic that supports consolidation you're not just shoving things together for the sake of gaining scale and so our thesis which isn't a novel one um was this does not just apply for HVAC, plumbing, and electrical, but in fact, this speaks more broadly to the residential services category as a whole. So what is the next frontier in residential services that doesn't have every single private equity firm in it already, but has at least one precedent transaction that we can point to and hold on to to give us comfort that this is a category that institutional capital likes and has interest in?
Speaker 1What's a precedent transaction? Or what was it in your case?
Speaker 2For us, it was A1. But I think that point is a really important one. You know, when I. A lot of people kind of ask me about the Guild story, and they are thinking about doing something similar or just want to understand how I made the decision. You know, one of the things I told them, I tell people, which is very true, is, you know, it's all great and good to say, hey, we're going to go into this category where no private equity firm is and find the next frontier. But I think you have to be very intentional that, you know, the next frontier has to have some sort of proof point. If you're going to. If you're going to play a role in the ecosystem, a role in the food chain, you don't want to go into a category where nobody has established any type of platform. No one has built out the proof points for the industrial logic that supports consolidation. No one has kind of put up a benchmark, a watermark for, hey, this is what a scaled platform trades for. You just don't want to do that. And so you want to find a category that doesn't have a million private equity firms running around. But yet there's one precedent transaction. And on the precedent transaction, sure, it's good to know where a scaled platform trades. But more importantly, hey, this is a best-in-class scaled business. Let's reverse engineer what they do to understand what the tech stack is in the category, how you have best-in-class employee retention, how digital marketing plays a role in the category. And so the ability to learn. To learn from someone else is critical. And I've always thought what's made Guild so successful is we're not the first mover. We're the second mover. And we'll probably talk about A1 a lot over the next several minutes. I have so much respect for that organization and their founder, Tommy Mello. I mean, he is a visionary. He truly is. And he redefined this category. And so much of what we do. So much of what we do. What we do at Guild today is modeled after A1, not because we're trying to rip them off of their ideas or practices, but because they're a best-in-class business. And they've shown how to be hyper-successful in the garage door category. And they've really lifted this entire industry.
Speaker 1Jordan, let's give a little context. So A1 is an organically grown or. Give us 60 seconds on A1. Yeah, sure. And Tommy Mello.
Speaker 2And let me apologize in advance. I find myself doing this a lot where I talk about the garage door category as if everyone knows as much as I do. I get yelled at a lot by my friends and family about this.
Speaker 1But. Wait, you don't know who Tommy Mello is? Friends and family? You don't have a poster of Tommy Mello in your bedroom?
Speaker 2So Tommy Mello, he's an entrepreneur who founded this garage door company, A1 Garage Door. I think it was like in 2008 or 2009. And he organically. He organically grew it to be about $100 million of revenue and I think $20 million of EBITDA. And then sold it to a private equity firm in November of 2022. Private equity firm by the name of the CoreTech Group. And then the CoreTech Group, their whole thesis was, Hey, you have this unbelievable best-in-class business that's growing 20% to 25% a year organically. Let's supplement this growth with M&A and create a best-in-class organic growth engine with a M&A platform, which would have been amazing. And so they weren't like Guild in the sense that they got their start through M&A. Their heritage, their start was all organic growth. And then when the CoreTech Group came in, they tried to introduce M&A. You know, I think they've continued to. To be very successful on the organic growth front, less successful with M&A, but it's still an amazing business. And it's grown incredibly over the last two to three years. But yeah, I think that answers your question.
Speaker 1Yeah, it does. And Tommy Mello is still the CEO.
Speaker 2He sold majority stake, but he's actually still the CEO.
Speaker 1And Tommy Mello is an influencer. I mean, he's very online. He's a personality. So anybody can Google him and see lots of Tommy Mello. But to be clear what you said, he built $100 million in revenue organically.
Speaker 2Yeah, over 10 or 12 years. Wow. Yeah, very, very impressive. Very, very impressive.
Speaker 1Yeah, we don't hear that number very often. And when we do, it almost certainly involves acquisition, being the nature of this podcast. But so anyway. And I think to give him credit
Speaker 2to, you know, he introduced a lot of things into the industry that he saw in HVAC and plumbing and landscaping that previously no one in the industry had been doing. You know, Service Titan, which we think is the best digital CRM system to use in the residential services space. He brought that to the garage door industry. He brought the concept of branding and wrapping your trucks to the garage. So, you know, he grew A1 a ton, but he also, like, really helped reinvent the industry. And so, again, I try to give credit where credit's due. And I sometimes feel sad about the fact that we're competitors, but he's built an amazing business.
Speaker 1Great, great background. Okay, so now returning to your thesis. So one of the things that you just articulated is, you know, you use this phrase last frontier or new frontier or next frontier. So I guess in private equity land, there's always, you know, looking for the next category where there's opportunity. And HVAC is long since picked over. It's the poster child for private equity being hyperactive in the category. And so you were looking for other residential services, home services categories. And one of your criteria. One of your criteria was that there at least be a precedent transaction, which you just described, Tommy Mello selling to Cortec. What other criteria are there? How else? What else did you use to zero in on garage doors?
Speaker 2Well, I'll just kind of set the stage for you. And it, you know, you can do all you can do all this desktop research, desktop diligence, and you can gather all these facts. But as I tell Joe and Sean. All the time, and I think they're ready to punch me in the face now after I say it for the 100th time. But, you know, this is not taking a final exam and your college fin class. It's yeah, you can gather all the research you want. You can have all the expert calls you want, but how you win and how you create is getting out there, getting in the game, convincing owners to join your vision. And so but obviously, the research is important and understanding what you're. Walking into is important. So here were the facts that got us so excited. You had a category that was 92% fragmented, had roughly 15,000 independent garage door repair companies on the residential side, had a total addressable market of around 13 billion on the commercial side, 20 billion. Um, the category was set to grow. 7 to 9% over the next 5 years, because it had historically been in the Stone Age, you know, digitalization was just starting to be rolled out. Owners were leaning into branding best practices, and so you had this category that was about to hit its breakout point similar to, honestly, HVAC 10 years ago. Um, and it kind of set the stage perfectly where. Yeah. Yeah. Yeah. Yeah. Yeah. Hey, I mean, you know, do you want to go in and be the acquirer of choice? Of course. But just getting exposure to this category would make for a great investment. Um, so that that's kind of what we saw. Um, and then, you know, as I alluded to earlier, and I don't mean to sound like a broken record here, there was real industrial logic that supported consolidation in the same way that in the HVAC industry, as you built scale, you could go to the manufacturers, you could go to. Um, and then, you know, as I alluded to earlier, and I don't mean to sound like a broken record here, there was real industrial logic that supported consolidation in the same way that in the HVAC industry, as you built scale, you could go to. the manufacturers that provided the doors for you, the manufacturers that provided the motors for you. You could go to the people in your ecosystem, even like the service titans of the world or the insurance providers or even the providers of fleet management. I think today we have like 600 vans on the road. You're telling me that person buying 600 vans can't get better pricing than the person buying 10? So all the same things that, again, made HVAC so successful existed here. The only difference was there weren't 25 feedback platforms doing it.
Speaker 1But Jordan, let me push back on that, what you call the industrial logic of what? What was it? Of consolidation? Yeah. The industrial logic of consolidation where the centralizing procurement is the classic example. Buy more stuff for a larger enterprise and you get better pricing. That doesn't seem. You're saying that as if in other roll-ups, that doesn't seem. You're saying that as if in other roll-ups, that doesn't happen. I thought that was one of the reasons to do a roll-up anytime, anywhere, any category. You'd be surprised. You'd be surprised.
Speaker 2And I think, yes, all of them to an extent have some aspect of this, but it comes down to the quantum. How much of your cost can you really reduce when you have scale? How powerful are the economies of scale? So the example, i'll give and i can't speak to this industry intelligently at all but you think about some of these like doggy overnight boarding roll-ups that you see everywhere you know if i own 20 of those where am i really cutting cost like maybe i can buy more food in bulk maybe i can buy more shampoo in bulk if i'm shampooing the dogs but like is that a needle mover no because like the shampoo and the food is not a real cost line item in my pnl go to the garage door category you know the doors what you're buying from the manufacturers the motors like the lift masters of the world what you're buying to operate those doors i mean we're talking we're talking hundreds of thousands of dollars per company in savings and so i think you're right that there's some flavor of it and most roll-ups it's just a question of how powerful is it and and can you extract those savings great
Speaker 1illustration thank you okay and um okay are there are there more criteria i mean there's one i remember from the pre-call that i really want you to talk about do you recall uh lack of a platform size oh yeah
Speaker 2so so the other thing so as we learn more about it um you know we we asked a ton of people in the private equity space you know why has nobody rolled up garage doors we built the spreadsheet it checks every box it's it seems perfect why are we missing are we walking in to you know a dumpster fire and you know what people said was uh yes a ton of private equity firms have been circling the category very closely since the a1 deal got announced but the issue is there's no platform of scale out there there's no single digestible asset not even at a platform scale at 20 million dollar plus EBITDA uh scale but an asset that had five six seven eight million dollars of EBITDA that could serve as the base of the platform uh and so we really really needed to go in and start it from scratch and I think the other factoid I mentioned to you will on our previous call which I should have mentioned when I was setting the scene and getting everyone excited about the garage door category was that uh of the 15 000 garage door repair companies in the U.S only a hundred have greater than two million of EBITDA 100. and of those a hundred less than 20 have less than 10 to 15 new construction exposure so when you think about your Target Universe it's tiny tiny and so I'm sure this this will be your next question so I'll just start talking about it the thesis how how we evolved our thesis was okay this is a great story but we have to move fast and we have to move now because there are 10 to 15 prime candidates out there and only 10 to 15. and we have to get as many off the board as possible before anyone else can take them but if you do take 10 of those 15 8 of those 15 you create not just a lead versus potential future institutional capital competitors trying to come in and build a business that's going to build a business that's going to open up a business that's going to build a platform you create a moat because now you've created a digestible asset but there are no other digestible assets out there and so we got started and we basically said okay um we need as many of those 10 to 15 companies as possible now how are we going to do that
Speaker 1you know that one of the most common levers to pull in a Target acquisition is technology updating the systems of a business that may still be running off a spreadsheet or even pen and paper but tech is complicated with tons of solutions out there so choosing the right cloud platform CRM telephony compliance and cyber security not to mention implementing all that is a job in itself acquiring mine's guest Nick acres knows this firsthand as a former searcher who now owns Inzo Technologies Nick has seen the tech challenges searchers face when acquiring businesses his team at Inzo regularly works with searchers and their acquisitions offering a complimentary IT audit of the Target company Nick takes a personal interest in all their searcher clients drawing from his own experience in the search phase Inzo dates back to 1989 so this is a company that has managed the tech for hundreds of small businesses over decades and one last thing no long-term contracts with Inzo a big differentiator check out inzotechnologies.com inzo or email Nick directly at Nick at inzotechnologies.com and don't forget to tell them you're a searcher this isn't really an interesting criterion or characteristic of an industry that people should think about that there's no at least these big categories like the home services category that there are no platforms of size in the category not not a one so there's no there's nowhere for a would-be uh Consolidator to get a toehold um doesn't that but doesn't that say something about the industry like that these businesses can't be big um unless you can make some do some new sort of national play because otherwise they would be right there would be somebody who's done has a 10 million dollar and and how is there how is there not how are there none if Tommy Mello built to a hundred million he was just so out there and everybody else was languishing at five million EBITDA at best and below sort of thing not even like two
Speaker 2million but time below um that there was there was one seven million dollar one who's actually a part of guild now um plus garage doors but um no I you're asking all the right questions so so first I'll answer the last question which was yes Tommy was just so far ahead of everyone um historically that he was the one who was able to achieve this scale I think two um growth in a category where there is no scale is almost exponential where he was able to realize so much better pricing from the manufacturers from the different people in the ecosystem that it was almost like a one on rocket fuel and everyone else was on vegetable oil so I think that answers your question about Tommy I think your question about hey if there are no players of scale isn't the writing on the wall that scale shouldn't exist here and I think it's it's a it's the correct question to ask and I think what I really want people to understand is when we had all these amazing facts about the garage door category um we were still very skeptical uh you know we asked ourselves constantly what are we missing what are we missing like we are not smarter than private equity we we did not just discover fire you know what are we missing and I'll talk about them a lot more later but I think one of the reasons my partnership works so well with Joe and Sean is is I'm kind of the eternal optimist Joe is kind of the eternal pessimist and so Joe would challenge me always like no there has to be something the category is too small that you know the price that everyone took in 2021 doesn't stand and and I would push back and Sean would be kind of the middle one weighing both sides um but I think um And why we got comfort, Will, was A1 proved you can get scale. And two, the total addressable market of the category was large enough to where you could create multiple $100 million plus revenue companies and still not have 20% of the market, 10% of the market. I think where you get concerned with, hey, could there be a scaled player here is if you're looking at a billion dollar total addressable market where it's like, hey, if we get to 100 million revenue, we'll have 10% of the market share in the U.S. Do I really think I can create a platform that has 10% market share in the U.S.? Probably not. So I think the answer is twofold. Just to summarize, one, A1 could do it. Why can't we do it? And two, the total addressable market was large enough. That it had the proof point that you could easily create a $100 plus million revenue business.
Speaker 1Well, those are very compelling points. That's a great analysis. And the thought about what percentage of a total addressable market, an entire market, do I really think we can get to? And you basically said that 10% is too aggressive, too optimistic. Somebody shouldn't go into an industry expecting to get 10%. What should a good target be? 2%, 5%? I don't know
Speaker 2if I even think about it that way. I think more so of like the outlandish examples, like 10%. I have supreme confidence in myself and my partners. But I do not think I can go and get 10% market share in an industry in a year. And it's also, you know, actually, this is a good point to bring up. It's not just about what you can achieve. It's about what are you going to sell to the next guy? Assuming you're reverse engineering this thing where, hey, we want to sell to a private equity firm. They're going to look at your business and say, great, you're at $100 million of revenue, $20 million of EBITDA, but you're 10% of the market. What am I going to do? I'm going to make a 25% market share player. You've left no meat on the bone for me. And so I think what you have to be very intentional about is thinking not only about the growth that you have, but also about the growth that you have. You can realize, but putting yourself in the shoes and the mind of the next guy, the next buyer, and deciding what are his value creation levers going to be? How is he going to grow this? And if you're at 10% market share and he has to underwrite 25% to 30% market share, you have an issue. Yeah. Because he's going to do the same thing. He's going to say, when I sell this to KKR, they have to have 70% market share.
Speaker 1It's not going to happen. That's such a great point, Jordan. And not just in the context of the scale at which you're operating. For any ETA, person in ETA, considering buying a business, even for those of you who are thinking you'll never sell the business and you're buying it for your career, it's definitely wise to at least consider the exit strategies. You never know. And so always be – one of your matrices of your analysis should be. What does this look like to the – when I'm the seller to a future buyer? Such an important exercise. Great reminder. Yeah.
Speaker 2I think that you don't want to be too hyper-focused on this, but I think there's certainly an element of reverse engineering that needs to be consistently present in the mind of everyone as they build and scale a business. Because if your ultimate goal is to sell the business, whether it be a single company via ETA or – You're trying to do a similar roll-up to Guild, you can really change the trajectory of the exit with two or three small decisions. And so for us, we kind of – we almost made like a fake sheet, a fake one-pager of the eventual future sim of Guild and said, what do we want this to look like? And so we said, okay, size, we want it to be – at the time, we wanted it to be 20 million of EBITDA. So we said 20 million. 20 million of EBITDA with 20% margin, so 100 million of revenue. We want new construction to be sub-10%. We want all the employees to be W-2 employees, no 1099 subcontracted labor, no union labor. We want everyone to be on the same CRM, everyone to use the same financial ERP system. So we want everyone to be on Service Titan, everyone to use Sage for accounting, everyone to have ADP for HR. And when you have the little box on the right that says – Yeah. – as future growth levers, here's how you grow the business when the bankers pull together these sims. We want the growth levers to be – continue to push organic growth, launch a greenfield strategy, which is instead of acquiring a business in a new market, just start from scratch. And three, take the proof points we will have developed around token acquisitions and really supercharge that. So take these B-charts. Each had partners that we brought together and do three to four small-scale acquisitions per year per partner. And I think that exercise is really helpful for anybody. It was certainly very helpful for us. But again, I think there's a balance where you want to be flexible and you want to continue to evolve, but you want to remind yourself of what the true north is and what are the things that you can't compromise on. And so for us, honestly, the biggest thing – Yeah. – is the new construction percentage. As the platform has scaled, obviously, the goal no longer is $20 million of EBITDA, but we will not go above 10% new construction. That's just a non-negotiable for us. And so having that on the page from day zero has really served as a reminder. So I think it's a good exercise.
Speaker 1Great exercise. That's so fascinating. I'd love to get my hands on that one pager. Can we? Yeah, of course. I'll send it to you. Yeah. Great. Please do. It says $20 million of EBITDA,
Speaker 2though, so you'll laugh when you see it. So that's my question.
Speaker 1So this was your imagined sim for when you guys go to market with the business that you've built. $20 million of EBITDA. You're going to hit $30 million by the end of this year, or you're on track to. So you were imagining getting to $20 million in EBITDA when? 2028. You're kidding.
Speaker 2No, I'm not kidding. And I distinctly remember Joe. By the way, I love Joe. Joe's the greatest partner. I distinctly remember Joe saying, that will never happen. That's not realistic, Jordan.
Speaker 1So just to make sure if people are only half listening or listening to us on 2X, listen, Jordan and his two partners were aiming to get to $20 million in EBITDA in five years, from 2024 through 2028. And one of the three partners said, never going to happen. They're on track to hit $30 million. $30 million EBITDA at the end of the first year. That is crazy. We're going to hear why. And I got to really keep my eye on time because we're just winding up here. We haven't even done acquisition number one. But this is really rich, Jordan. But before we get into what your strategy was going to be, you know everybody wants to hear what are the categories that you liked but didn't make the cut. Of course. You want to tell us?
Speaker 2Yeah, yeah. I'll tell you guys. Great. Great. Well, we narrowed it down to two, garage and tree servicing. And tree servicing right now is a really hot category for lower middle market private equity. It's a smaller total addressable market than garage. I think it's like $5 or $6 billion, maybe $7 billion max. But it's a really attractive category. And at the time, there was a. There was only one private equity firm executing a roll up. Fast forward to today, I think there's like 10 or 11. And so I think it's a testament to how quickly the windows of opportunity open and close in these categories. And I think that certainly there's a line between being relentless but not reckless, but speed if you're trying to create. Scale in these super niche hot categories is paramount because the windows just close. And I've always kind of had a fear of being in a category that doesn't have a $10 billion plus total addressable market and duking it out with 15 private equity firms just because I know what we're capable of. I know where we're strong. And that is not a situation I think we can be strong. And that is not a situation I ever want to be in. But yeah, tree servicing. Why do you like tree if it's
Speaker 1already getting a lot of activity? It's. I don't like it anymore. I would never.
Speaker 2You liked it a year ago or two years ago. I liked it a year ago. Yeah, yeah. When there was one private equity firm, I liked it a lot. I would never go into tree servicing today. Okay. Timing. Timing is a big part too. But I would distinguish between the strategy we do, which is large-scale roll-ups, and if you are kind of an ETA, ETA-er, is that the word, the noun? I've heard that one. Yeah. ETA-er. Yeah. ETA-er. If you're an ETA, ETA-er. I'm an ETA-er. I'm an ETA-er. Okay. ETA-er, you could argue tree servicing is the perfect category to go into because you'll always be able to find one or two or three great targets that have very reasonable valuation expectations that private equity has missed or just botched the pitch where they came off as arrogant or rushed them. And you have all these platforms around you that are so desperate for growth and scale that if you can create scale with one asset, you will command a super premium multiple. So I am not an ETA-er, but if I was an ETA-er, I would target categories exactly like tree servicing where there are five to 10 private equity platforms duking it out for a finite amount of scaled assets. You'll find one or two. It might take you a year, it might take you two years, you will find one. And then grow that business and you will be the most coveted asset in the market.
Speaker 1Yeah. It's so interesting. And it's just one of the patterns that I had no idea about, but that becomes really clear after doing my job as a podcaster here in this world for a while, which is that there's just this daisy chain. There's tiny little companies. And then if you can consolidate a few of those, then there's maybe some small, maybe there's somebody who, an ETA person who wants to buy a slightly bigger business who will buy it from you because they're trying to assemble slightly bigger businesses to sell it to a small private equity shop who they are. And it's just, I had no idea that that phenomenon existed in the market, but it's almost formulaic. Now it does seem like you can't just assume there's always going to be buyers. It has to be a category with some, this isn't exactly what you were saying before, but related to this idea of a precedent transaction, there has to be some private equity activity. You can have to envision who a buyer might be because I guess in some categories, there just aren't buyers probably, and probably a lot of categories.
Speaker 2Yeah. No, totally. Totally. And I think it's basic, but you want to be in a category that you think will be larger and better and more sophisticated in three years than it is today. You don't want to enter a dying industry. You don't want to. You don't want to enter an industry that's in the midst of change for the worst. Change for the better would be great. I mean, look at garage as an example of that. But you want to ensure that you have tailwinds and you don't have headwinds. So yeah, I think you do have to be intentional.
Speaker 1And one last, to your point about how fast things can happen. I mean, your point of tree services is the best example that a year ago there was one and now there's 10 or whatever. Yeah. But just to use the HVAC, going back to. HVAC. I've been doing this now for about three years. And HVAC, for my time doing acquiring mines, HVAC has been pointed to as the hot roll-up category. And so I just naively assumed that it kind of was always thus. Well, no. I mean, I now know, including my business partner in Mines Capital, Nicholas James, and others who bought in the mid-late teens, and it was a completely unappealing, nobody there category. So I was wrong. I mean, I only came into it, it was already hot. But sure enough, just a couple of years before I started doing acquiring mines, nobody was talking about HVAC. It's just so. So it really does move faster than I realized.
Speaker 2Well, we'll look at the broader example too right now of residential services roll-ups were kind of all anyone talked about for the last three to four years, and everyone was trying to do it. And that's what every banker pitched a private equity firm on. That's what every private equity firm was looking for. Now, all of a sudden, in the last six months, partially as a result of kind of the advent and sophistication of AI, is everyone wants to pile into white collar services categories now, accounting, legal firms, IT services. Why? Because you have similar industrial logic that supports consolidation, especially when you have the potential of AI removing 50% of the workforce and costs improving 50%. So we're not 50% because there's some flow through, but you get my point. And so you can look at categories, but it's also just like broader sectors, broader themes, broader investment styles. It just. When things get hot, they explode. And I think it's like a follower's world where if you have kind of one person show success in a category, one person show success with a business, you're going to very quickly see 10 other people mimicking it.
Speaker 1Fascinating. Okay, Jordan. So you've decided on the category. Here we are at an hour. You decided on the category. What is your strategy going to be? And we are going to have to pick up the pace a little bit. Forgive my constant questioning. What is the strategy? How do you start?
Speaker 2It's very simple at first, which is get a single owner to answer my phone calls, which was very challenging. It took two to three months to get a single person to answer my phone call. And what we did was. How I thought about it was I was like, "Okay, what is every ETA or what is every private equity firm going to do?" They're going to sit behind their computer and they're going to pay for a $15,000 a year Grada subscription or a Zoom Info subscription. And they're going to send emails, 50% of which will go to spam, 50% of which will be opened by the owner, and they won't respond. I wanted to do things differently, even if it was harder, even if it required way more sweat equity. So we sourced in two ways. We would call people until they picked up, and we would write handwritten letters in large craft envelopes. And the envelopes had to be craft because if they were white or yellow, they could be mistaken for like, "Hey, this is the IRS. I'm getting subpoenaed." But if they were craft and you hand wrote the name and the address on the front, an owner would pick it up and be like, "Oh, this is my niece or nephew sending me their art project from preschool." Then they'd open it and it would be a presentation from the guild guys and a handwritten letter. What do you mean craft? Like construction paper?
Speaker 1What's a craft envelope?
Speaker 2If you just Google craft envelopes, it's kind of like a brownish can. I mean, you definitely know what I'm talking about. You just have never thought, "Okay, it's craft." It's kind of like this color, almost like a manila folder. Yeah. Yeah. Yeah. Got them. And I mean, we probably sent 700 or 800 of those letters. Wow. I think the response rate was like 10 to 15%. But when you think about it, I mean, that's 50 plus people, 50 plus targets getting on the phone with you and being willing to talk. And two of our first five deals came that way from handwritten letters. Three of our first five deals came from handwritten letters. And when you get the owner on the phone, again, I was like, "Okay, what would a private equity firm do?" They would sit there and they'd be like, "Okay, let's schedule a Zoom in two weeks. And then let's do a second Zoom and a third Zoom." I would always make up this excuse where I'd get on the phone with the owner and I'd be like, "Oh, that's so funny that you're based out of Georgia, because I'm going to be there tomorrow visiting my great aunt Susie. Do you want to get to the phone?" I'd be like, "I want to get dinner." And they'd be like, "Yeah, sure. If you're in town, that's fine." And I just booked the first flight to Georgia. And why I did that was. I've always had that. I'm young, but I'm old school in the way I approach things. One dinner over a couple beers with an owner is the equivalent, in my opinion, of six to eight Zooms, both in the location you can extract, but more importantly, the trust you build and the trust you develop. For sure. And I think over those dinners, what I would do is. I think people kind of. And I don't mean to generalize, but I think most people approach it one of two ways where they either try to come in and act overly sophisticated and come in and be like, "Hey, we're this large, private equity firm. We have all these resources. We've done this a million times. Trust us." And then you have kind of the other side of the spectrum. And again, not trying to generalize, where someone buys a pair of cowboy boots to try to relate to the owner in Texas and makes up some story about their father or mother working in the trades their whole life, when in reality, they were a lawyer.
Speaker 1That's what we call the presidential candidate method.
Speaker 2Yeah. And so for
Speaker 1me, I was like,
Speaker 2"I'm not going to do either of those things. I am going to be so authentic, so transparent that it's borderline jeopardizing to the pitch. And so I would go in there and be like, I'm Jordan Dubin. I'm from New York City. And if you think a Jew from New York City can come in and run your garage door business in Georgia, you're crazy. If I took over your business, if I fired you and took over your business, it would go to zero. And so how you know this is going to be a true partnership is you may think you're reliant on me. I assure you, I'm 10 times more reliant on you. With that being said, I will give you everything I have. You tell me how I can be value-added, and I will give you every last ounce of attention and effort and care that you need. And let's build this thing. And so that was the approach I took. And it was really successful. And just for the sake of speeding this up, deals beget other deals.
Speaker 1Wait, but Jordan, two follow-ups to that. First of all, is that what you heard? Remind me of their names, the Burger King guys, Alex and. Matt and Alex. Matt and Alex. Is that based on what they would say?
Speaker 2You know, honestly, it's very similar. They were very authentic. And I think, without even thinking, what would Matt and Alex do? It just kind of naturally. Now that you say that, the pitch is probably very similar. If you were to do side-by-side cam, it'd probably be pretty similar, which makes me feel very good about myself that I've kind of become like my mentors.
Speaker 1Yeah. And the other thing, Jordan, is what was the pitch? So you've told us very clearly and compellingly how you demonstrate that. Yeah. How you demonstrate that. Yeah. Yeah. Yeah. your transparency, your authenticity. But what were you selling? Come with me. We're going to build a giant freaking organization. So what was the value-add pitch there? I think, Will, the
Speaker 2cool thing was my pitch to owners, our pitch to owners was the same pitch to investors. How we viewed it was share with them all the information. So they have the information at their disposal and they can analyze it themselves of, here's how big the industry is. Here's how fragmented it is. Here's what a private equity firm likes and dislikes in a platform if you create it. We have this unbelievable opportunity to create a first of its kind M&A platform in an industry that has not had one built. To do that, though, we need awesome partners like yourself. Are you interested? And so I think we never want to. I wanted to dumb down the pitch because one, all these owners are smarter than we are. And two, I think helping people understand this isn't about buying your business. You're a part of this journey. This is a startup. We're all marching towards that same goal. It's hypercritical because you really align your motivations with your partners who, again, you're hyper-reliant on. And so I think it was really just not sugarcoating, not being around the bush, but treating it like you were pitching an investor who's going to give you $5 million of equity to start a platform. The same pitch to the owner whose business is going to be the base of the platform. And so that was the approach we took. Now, more specifically, what we said was, look, we're not going to do any type of rebranding. We're going to have uniformity in systems and processes across the board. It's important you know that. And there's going to be no sweetheart deals here where you don't have to go to Service Titan or you don't have to do your payroll this way. But we're still going to maintain the localized brand, the localized culture, the localized leadership. And so it's a way to create a national platform with localized expertise. And so as you can probably tell, there are a lot of aspects of the pitch. A lot of it would be questions. But that was kind of. I would say the overarching message of the pitch was, you're not a seller. You are a buyer. And you are buying into this vision. And you are buying into being shoulder to shoulder with myself, Joe, and Sean in creating a first-of-its-kind platform in an awesome industry.
Speaker 1Great. And so obviously, then, unlike many searchers who will be listening, where their pitch to a seller is, I want to carry on your legacy and be the owner of your business for the next generation, you're explicit about the fact that we are building something here. It's going to be a sprint, maybe a long sprint, maybe a five or seven-year sprint. We're going to go fast and hard for a number of years. And then there will be another exit event where there will be another buyer. Everybody gets that.
Speaker 2Yeah. Everyone gets it. But I think what's. I think it's important to be transparent about everything. Because it's not about getting to a yes. How you really have these platforms go off the rails is you just say and lie through your teeth to get people to say yes. And then week one, when it's not the reality they were promised, that's when you have things go off the rails. And so for us, it was be, again, overly honest, just to make sure there was alignment. But I think in doing that, it also created so much more trust off the bat because they're like, wow, these people aren't being shady with their responses to the questions of what's going to happen to how we do payroll. They're just being blatantly honest and very detailed in their responses. And so yeah. But I think also what I've told every owner, which is 100% true is, when we do. Yeah. sell a product, eventually sell Guild, I'm going to roll as much equity as I can. Because I want a portion of my personal net worth tied to Guild for the rest of my life. Because I fully believe in this category and what we're building more than anything. And so I hope for every single owner, they get to do the same thing, which is don't cash out all your chips in 2 to 3 years, 3 to 4 years, whatever it is. But continue to take chips off the table and roll equity. And have this be a vehicle to create generational wealth for you and your family the same way I hope it will be for mine if I have a family one day.
Speaker 1And Jordan, we are not going to get too much into the mechanics because of time around the industrial logic and the economies of scale. But I have heard you say a couple of times, broad strokes, your strategy is not unifying the brand. All these owners, all these acquisitions get to retain their local brands. Behind the scenes, the thing that you were insistent about were these. You keep bringing up these three tools, everybody on Sage, the accounting, everybody on ADP for payroll, and everybody on. What was the. And Service Titan. Service Titan. So why were. How did you decide on the line there of what you were going to insist on that be unified and what wasn't going to be insisted upon? Well, integration is hypercritical
Speaker 2for these platforms, especially when you get to the scale that we're headed towards. And the reason integration is so important is that's how you really tap into the economies of scale. That's how you really realize the industrial logic that supports consolidation. And without it, you basically have 20 disparate units. And that is. A massive headache because you're running 20 different businesses versus running one business with 20 locations. And so how I think. How we think about the level of integration, the level of uniformity is when it comes to the enterprise-facing nature of the businesses, when it comes to the back office, you want uniformity, you want consistent systems, processes that allows our executive team, our 20-person executive team to be able to monitor and help every underlying brand. Now, when it comes to the consumer-facing nature of the business, whether that be the literal brand on the truck, the way the technicians greet the consumer, the ways they upsell, cross-sell, the way they perform the service even, we allow the owners and the businesses to continue doing what they've been doing. Because put simply, there's a reason they're a part of Guild. They're best in class. What they do is amazing. And why reinvent the wheel? Why change something that doesn't need to be fixed? And I think one of the things that I've come to realize is this country is so diverse and the underlying markets in this country are so different from each other that to assume what would work in Phoenix would work in Minneapolis is crazy. I mean, if you think not just in terms of the end consumer, but if you think about it in terms of the topography, the style of homes, it's all different. And so I think actually where some of the platforms have actually shot themselves in the foot is trying to create this very uniform, homogeneous structure with one brand, one price book, one way to sell and trying to do that nationally. I think you can do that in a regional sense, you know, if you do a Southwest platform with San Diego, Phoenix, New Mexico, parts of New Mexico, but to assume that you can kind of paint the country one color on the consumer facing side, I think is naive.
Speaker 1Yeah. Well, the other, at least in terms of the brand, you're also, you're also forfeiting all of this accumulated brand equity. And it's real.
Speaker 2Brand equity is real. And so it's not just, you know, hey, we're not. I changed the brand because the owner has, you know, an emotional attachment to this logo he created on Microsoft Paint five years ago. It's no, there's real brand equity. There's real brand recognition. And that is so important in a direct to consumer residential services business.
Speaker 1Fascinating, Jordan. Okay. Let's see here. Oh, we didn't get into. Can you share what you were? You touched on your pitch to investors. Can you share what? That looked like how much you raised to go do this.
Speaker 2Yeah, we raised about $35 million up front and then put it all to work very quickly and then have since taken on an additional $5 million of equity. So $40 million of equity total and just put in place an institutional debt facility with a private credit firm based out in New York that gives us roughly an additional $85 million. Yeah, we raised about $30 million of dry powder to use. And will you
Speaker 1then so you don't need to raise any more equity likely? That's the plan. Yeah, that's the plan.
Speaker 2But you went you went through your 40 or your 35? Went through the 35. Yeah, pretty quickly. Very quickly. Okay.
Speaker 1And we're gonna get to the that that quickness here is probably where we'll how we'll end. What are you gonna say? No, I'm ready for the next question. Great. And so and and when you can you share with us what it looks like the the structure of an acquisition. So when you're pitching an owner, what you're kind of what you offer, you give them a valuation of their business. And then and then what does the structure of the acquisition look like or the partnering with you look like?
Speaker 2Yeah, sure. So there are two types of, I guess, acquisitions. We do transactions, we do, you know, we have our partnership beachhead transactions and then we also have the tuck ins. Tuck. Tuck ins being, hey, you know, oftentimes we'll buy a business that has two employees or even one employee and they're retiring, but you're buying it for the customer list, the sticker base. And so we'll buy 100% of those businesses and just roll them into one of our larger beachhead companies, like, for example, right way garage doors run by quite literally one of my closest friends in the world, Jake Wald, you know, part of our strategy there is, hey, let's go. Consolidate and rationalize this hyper fragmented market in northern California where we'll buy businesses for $50,000 cash that spit out. Well, you don't really know what the net profit is because it's, you know, it's not a real profit margin because there's one or two employees, but 400 grand worth of revenue annually and in the right way with their sophisticated systems and processes can take that and immediately realize 20% margins on it. And with no additional marketing spend, and so it's so goddamn accretive to do the tuck in strategy, but you need, like, I couldn't go buy that two man company on my own, even if it only cost $50,000 because it would go to zero. And so you need your beachhead partners like Jake and right way to support those tuck in. So that's so that's tuck ins now for our actual beachhead partners again, like right way, like Jake Wald. And so you need your beachhead partners like Jake and right way to support those tuck ins.
Speaker 1And tell us the beachhead strategy first. We didn't get it. We didn't. It's kind of implied, but give it to us clearly and then tell us how you the structure. Yeah, so so our
Speaker 2strategy is twofold. It's two part two phases. We call it our land and expand strategy. So landing is partner with 15 to 20 uniquely scaled, uniquely sophisticated partners all across the US. And then phase two expand is help. partner to go partner with to execute the land and expand strategy. So yes, part of it was kind of outside in, but more of it was like, let's go find those large players and build around them and their markets. Because naturally, their markets have to be at least somewhat attractive
Speaker 1if they've gotten to this scale. And so going back to the overall thesis that there aren't platform companies for larger private equity to buy into, of course, you have your own floor that you won't go below. So you have what you, your beachheads are your own platforms. You're, you're kind of using those, those terms interchangeably. Yeah. So, so, so somebody listening to this, who's, who's, who, who is willing to stack pennies, an opportunity for them would be to go buy a few small garage door businesses in Omaha, consolidate them and then call you and sell to us kidding not kidding
Speaker 2oh yeah i'm not kidding either if you want to do that i will be the happiest person ever okay
Speaker 1join the family um okay and so with the thank you for the beachhead strategy uh so basically those 15 to 20 years going down the list of size where the biggest players are and going after the biggest players the highest quality players in the industry um and okay so what the rush more the mount rush more categories how great how i so how do you then what is your offer to them the
Speaker 2structure the offer is the offer is hey uh we're not here to buy you out uh we're here to hat we're here to take a majority stake in your business so i'll use numbers i'll say hey well you have a great business um we want to partner with you We want to take a majority stake in the business, anywhere between, call it 70% to 80%. And then we want you to roll, we want you to retain 20% to 30%. Now, you'll get the upfront liquidity of that initial buyout at a mid-single digits multiple, because that's what a $1 to $2 million EBITDA business commands. And then we're going to become partners. and over the next three to four years, you're going to grow your business and you're going to have our help. You're going to continue to realize cashflow from distributions every quarter. You're pro-rata share. So let's say, well, you own 30%. In addition to your W-2 salary, you continue to get 30% of the excess cashflow hitting your pocket, hitting your wallet every quarter. And then in four years, when we go to sell this thing, you will get a quote unquote second bite of the apple. Now you may say, yeah, but I only own 30% at that point. However, not only has your EBITDA grown, your company has grown, but also this is where each of the underlying owners get to realize the massive multiple arbitrage because they're selling off of their EBITDA. So let's say you went from one to three, you're selling three, not off the six to eight times that you sold for in the beginning, but now you're selling off of a mid to high teens multiple, because that is what the second largest garage door repair business in the US would trade for. I mean, A1 traded for 21 times. So come along for this ride. We'll work with you. We'll help you grow the business, but also we'll help you unlock a valuation range in terms of an exit multiple that previously was just completely unfathomable for a standalone mom and pop business, even if you did reach five to seven million of EBITDA. And in this category, that doesn't exist except for one.
Speaker 1And even they didn't get a mid-teens multiple. I can't do the math in my head, but that 30%, the second bite. You end up making two to three times as much, even though it's 30%. Wow. That's quite a deal. Now, and that structure feels like, I'm no expert, but feels like it's a typical structure for a roll-up where you want the owners to continue to roll their equity and structure it that way? Yeah. For the
Speaker 2most part, a lot of private equity firms will just say, hey, we're buying 100% of the business. Either you're in or you're out just because they have the resources to deploy their own regional GMs. They don't need to rely on the existing executive team. And I think that partnership is hypercritical to everything we do. And when we do our next platform and our next platform and our next platform, we will always use the same model just because we think it works better than anything. But I guess if you were poking holes in it and you're trying to play devil's advocate, what you could say is, hey, you're doing all this work, but you only get 70% of the proceeds at the end of the tunnel. Why not just buy 100% of the business and put in a little extra work because you don't have the owner rolling and you get 100% of the proceeds at exit? But again, what I would say is, I can't do what the owner does as well as he does, and nobody I can hire would do it as well as he does. That's why we find uniquely scaled, uniquely sophisticated businesses, best-in-class owners, because nobody does it better than they do. And let's come together and create a situation where 2 plus 2 equals 5 and not 2 plus 2 equals 4. And let's all benefit.
Speaker 1Well, and I suspect that making an offer, the more appealing the offer to the owners, the faster you can acquire because the owners are pretty receptive to what you're offering them. So there has to be part of this. Totally. The offer that you're making, it being compelling to the owners, has to be a contributor to how fast you moved. Let's go. Yeah. But honestly, Will, I think this is
Speaker 2important to call out. Before I did this, I just assumed. Everyone is transactional. Capitalism is capitalism. No one cares about the relationship side. No one cares about the connection. It's I'm being offered seven times by you, six times by the other guy. Yeah, I'm going to take seven times. That is so not the case. At least I can only speak to the garage door industry, but that is so not the case in this industry. And I appreciate that so much because it shows how thoughtful. Each of the owners are, and they're not just looking at the upfront cash, but they're thinking about the long-term proceeds and the long-term journey. And so we're obviously in a very fortunate position today where we have assets who will join Guild over the three or four other private equity firms trying to do the same thing as us. And those private equity firms will offer two to three turns higher than we're offering. And these owners will still join. They'll still join Guild because they believe in the vision. And again, they're putting themselves in the shoes of a buyer, not a seller. And they're saying, which platform do I want to be a co-owner of? Which platform do I think will be more successful in the next three to four years when the dust settles? And I think we've created such a lead and built such a behemoth that we've just kind of run away from all the other platforms that are trying to do something similar. And the owners get that. And so, yes, you can say, you guys offer a better deal. But it's not like we're offering higher prices. If anything, it's the latter. It's the opposite. It's just what we have to offer. And that's not easy to create. We certainly didn't have that from day zero. But we're in a fortunate position now where we really benefit from it.
Speaker 1Jordan, let's close by hearing what you attribute moving so fast to. Faster even than your own boldest goals of $20 million in EBITDA after five years, and you're going to be $30 million after your first year. You've said. Well, please, what do you attribute all of that to? That's just breathtaking, really.
Speaker 2Sure. Two things. It's very simple. 50% of the equation is luck. And 50% of the equation is I have the best partners in the world. And when I say partners, it starts with Joe and Sean. They are the two best partners I could ever ask for. And I'm so thankful every day that we're on this journey together. And then the other side of the partnership equation is all the owners in Guild. You know, I've grown so close to all of them. And I care so deeply about all of them from Jake to Jeff, to Carrie, to Travis, to Dan. I mean, all of them. And they're the reason we've been able to move so fast. Not just because they've reached out to their network and reached out to their friends to join Guild, but also because of their 110% commitment to growing this platform as a team. And it's really a beautiful thing, man. I really think Guild has outgrown me pretty substantially. And now, as it continues to grow. And by the way, I have no doubt that this time next year, Guild is going to be close to $50 million of EBITDA. But it's no longer me pushing this thing. It's our great executive team. Robert Leonard : But more importantly, it's the owners. It's Jake, it's Jeff, it's Carrie, it's Travis. I'm just in such awe of all of them every day because they do such an incredible job. And they're the ones redefining this industry, not me, Joe, and Sean. We're just. Me, Joe, and Sean are simply the stewards that connected the dots and brought this vision together. The backbone of Guild are the owners. And they are what make Guild so special. And they're the reason we've been able to grow so quickly and become so goddamn big. Robert Leonard :
Speaker 1But Jordan, is that to say that because a lot of that growth has been organic growth from your beachheads? Jordan Leonard : Oh, yeah.
Speaker 2Organically, we are up, I think, 14% year over year. And that obviously does not factor in any acquisitions. So think about that. We're adding on 10 to 15 million of revenue in acquisitions, basically a month at this point, but also growing 14% organically. So very powerful
Speaker 1combination. But that still doesn't explain how you've done so many acquisitions. How have you been able to do so many acquisitions in such a short amount of time? Let's leave aside. I'm sure you're. I believe you that your beachhead owners are amazing. But still, there's pieces to this that. Jordan Leonard : It is to the credit of the three of you. How are you just. That pace of acquisition, how are you
Speaker 2executing? Jordan Leonard : So that goes back to the first part, Joe and Sean. They're two of the sharpest individuals I've ever met in my life. And we all have poured everything into this for the last year. And we all play such different roles. And that's why the partnership works out so well. I'm on the road probably four to five days a week without fail. They are not, but they are in the office most days past midnight, closing all these deals, simultaneously managing three different legal diligence streams, four different financial diligence streams. And we outsource a lot of the work. We have these great QV providers, and we have this great law firm that we've worked with for every deal. So it's not like Joe is sitting there or Sean's sitting there, crafting the legal doc. Jordan Leonard : Yeah, it's not like Joe is sitting there or Sean's sitting there, crafting the legal doc. And it's not like Joe is sitting there or Sean's sitting there, crafting the legal doc. But it's not like Joe is sitting there or Sean's sitting there, crafting the legal doc. Jordan Leonard : But to your point, it's still a ton. And to do sizable transactions simultaneously is not easy. But again, that's why I have the two greatest partners. Jordan Leonard : They've made the impossible, not look possible, be possible. And I think there's no one person you can point to as, "The reason Guild has been so successful is because of that individual." Jordan Leonard : It's truly a group effort, and everyone is exceptional in their own respective lane. And that's what's made Guild so successful and will continue to make Guild so successful. Jordan Leonard : Jordan Leonard : Jordan Leonard : Jordan Leonard : So what I remind people all the time is, "Yeah, we're going to surpass 200 million of revenue and 30 million of EBITDA by the end of this year. But we're also literally less than a year in from the close of our first acquisition. I think we're nine months in, eight months in." Jordan Leonard : you know where are we going to be two years in where are we going to be three years in um and so i i have very high expectations for what guild can and will become um whereas once i thought about it as hey let's build something that will play a role in the food chain um you know i think that i think our ultimate goal is to create the single largest garage door company in the united states uh and and frankly one of the largest residential services platforms in the entire country well
Speaker 1at this rate that doesn't seem fanciful um but but jordan and then let me ask you you attribute 50 to luck i don't know if you're being humble not serious i suspect you are but but we heard you speak for an hour about this carefully crafted very strategic thesis industry thesis um and it sure doesn't feel lucky it feels like a an intelligent thesis come to life what where's the luck uh you know the
Speaker 2luck's in timing the luck is in uh the luck is in the timing the luck is in you know other parties who probably had a similar thesis to us not ultimately deciding to act on it six months before us um you know i think one of the super frustrating parts of what we do is so much is out of your control and there are so many factors that can derail what you're doing and so yes i think everything we try to do is intentional and i appreciate you saying the thesis was well thought out um but you know there's all the stuff that goes on outside of what we can control uh that either breaks your way or doesn't and you know we're lucky to have a good amount of stuff yeah break
Speaker 1our way well fair enough um those of us who experience good things there's just a lot of good fortune there but just to distinguish that from yeah it's not like you fell into some crazy opportunity that's luck i'm being a little semantic but but you know really this is you're getting there's good fortune going on here that you're able to do this but um but there wasn't something unforeseen that dramatically changed this for the better really good that's correct that's correct well jordan you're busy so uh maybe you don't want people reaching out but indulge me if people want to or if that person wants to go buy buy up uh buy up garage door repair businesses in omaha i'm serious if
Speaker 2if we get three or four people to start building small platforms that would be the greatest outcome of this of this podcast ever but no i mean i it sounds crazy to think that myself at 27 could give advice to other people far older and wiser than myself but people want to reach out if they want to ask about my experience i'm always happy to talk um i'm pretty damn active on linkedin so just i guess follow me on linkedin message me on linkedin um and uh you know our offices are in new york city so um if you find yourself there and you want to get coffee um as i alluded to earlier uh an in-person interaction is better than zoom interaction
Speaker 1well uh that's very generous of you jordan uh i know you are extremely busy because i am going to end our interview and go trick-or-treating with my daughter and you are going to go back to work so on on that on that note sir thank you very much fascinating congratulations to you and the partners on what you built so far really inspiring really um and and really an education this is real we i think we learned all learned a whole lot about how to approach and choose and then approach an industry so wonderful interview thank you sir thank you for having me on you
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