The Home Service Expert Podcast - How to Build a Sellable, High-Value Business with Private Equity

Episode Date: December 1, 2020

Adam Coffey is the best-selling author of The Private Equity Playbook. Over the past two decades, he has served as President and CEO of three national private equity-backed service companies, and currently leads CoolSys, a commercial refrigeration and HVAC service company. The Orange County Business Journal named him one of their Most Influential Leaders, and made him part of their prestigious OC Top 50. In this episode, we talked about mergers and acquisitions, strategic planning, operations management...

Yeah, let me tell you something too, because how employees want to be treated is changing generationally. And you're hitting on something that's very important to today's youth. And that is they want to be treated fairly. They want to be connected. They want to have a higher purpose. And what they do for a living, what their title is, isn't what stimulates them. It's the opportunity, how that company thinks about being a good steward to employees, to the community, to the world at large. That's what's driving, call it the next generation that's coming into your company today, who will ultimately wind up being the leaders 20 years, 30 years from now. So I think we're definitely becoming a more people-oriented culture in

business. And so for me, my success in the service business has always been, if I'm going to bend the curve and I'm going to ask people to work hard, I got to take care of my product. My product is people. I take care of them. They take care of business. And that's one of the things that helps me accelerate growth in companies. Welcome to the Home Service Expert, where each week, Tommy chats with world-class entrepreneurs and experts in various fields like marketing, sales, hiring, and leadership to find out what's really behind their success in business. Now, your host, the home service millionaire, Tommy Mello. Welcome back to the Home Service Expert. My name is Tommy Mello and today I have an awesome guest. I'm super excited. I had to

scour the internet and then track this guy down. And then I finally got a hold of him. I read his book on a plane and I was just absolutely impressed and excited. His name's Adam Coffey. And he wrote the book, The Private Equity Playbook. He's an expert in leadership, mergers and acquisitions, private equity, new business development, strategic planning, and operations management. He's based out of Braille, California, and right now he's the CEO and the president of CoolSys Incorporated Refrigeration and HVAC Systems. He's been doing that since 2016. He also was the president and CEO of Wash Multifamily Laundry Systems from 2003 to 2016. He's the master plan incorporated president and CEO or COO from 2001 to 2003. GE Healthcare Engineering Group leader from 91 to 98. Area service manager from 98 to 2000 and zone operations manager from 2000 to 2001. He's also a U.S. Army sergeant training

radar repair technician from 82 to 86. Adam is the best-selling author of the Private Equity Playbook and the acclaimed guest speaker. In the past 20 years, he's served as president and CEO of three national private equity-backed service companies across different industries. As president, he leads CoolSys Incorporated, a commercial refrigeration and HVAC service company. During his three-year tenure, CoolSys has achieved a 100% revenue increase, a 300% increase of EBITDA, and has grown to be more than 2,800 employees. He was named one of the most influential leaders by Orange County Business Journal in 2018, 2019, and in 2020 was named to their prestigious OC Top 50. Adam, it's so awesome that you came on the podcast. We've had a private conversation

already and it's very, very exciting to have you on today. Tommy, I got to tell you, I'm excited to be here. You're quite an individual and I have to give you some kudos. After I wrote my book, I was waiting for that day when I would walk on an airplane and find somebody reading my book. And you're that dude, you're that guy. So I appreciated that picture. In the COVID world, we're not all traveling like we used to, but I appreciated you sending me a picture of you reading my book on an airplane. So thank you for that. I had a blast. I'm going through the book and I'm obsessed. You know, there's great books out there like Built to Sell. And I got these books that I'm reading them on. I'm like, everybody I've talked to and I've learned so much from the HVAC industry is like private equity,

private equity, private equity. And I've been talking to brokers, private equity companies, just everything you could think about of where the next, where the future is. Because there's only a few things you could do with your business. You could give it to someone in your family, like the next of kin, you can sell it, or you could let the government kind of take it away as you die and do what they will with it. So I think most people should have a plan on selling their business. And you've been doing this. This is your third company. And they bring in a guy like you to come in and just freaking dominate and buy out companies and increase that EBITDA in multiple. So I love it if you just shared kind of your history, where have you been, what you're working on and where you're going and how much private equity has meant to your life? Yeah, absolutely. You know, when I

meet people for the first time, I talk about four different experiences in my life that have made me who I am today. The first is service in the military. You know, the military taught me something about leadership, discipline and teamwork teamwork. Great foundational experience that I built my entire professional career on. And I also call myself a blue-collar CEO to this day because I started in the military right out of high school. So I started at the bottom, private E1. There's no lower form of life in the military than that. When I look up, I see bubble gum on the bottom of somebody else's shoe. So that's where I started. So the military than that. When I look up, I see bubble gum on the bottom of somebody else's shoe. So that's where I started. So the military taught me how to play on a team, how to be disciplined,

and then ultimately, as a non-commissioned officer, how to lead others. And it's those basic attributes that was a great foundation for me to start. Secondly, an engineering background. So my experience in the military led me down a path in career, first career towards engineering. And I worked in the medical field. And so engineering made me a meticulous planner. And I never do anything to this day without a very detailed strategic plan in place. Things like COVID happened, great recessions back in 08, 09, stuff like that happens from time to time. And you have to be adaptable. So I try to remain very flexible, but that doesn't mean that

there's not always a strategic plan in place. And if something happens in the broader world around me, then you adjust that plan, but there's always a plan. So I blame engineering for that. Third thing for me was General Electric. So at GE, I was at GE back in the heyday, back in the Jack Welch era, when stock was doubling every two and a half years. GE was America's most admired company and really globally was one of the most admired companies on the planet. And that's where I cut my teeth and learned how to really manage a business. I went to GE Crotonville back in the era when the business leaders were still teaching the classes and really got a world-class education at a world-class facility.

And it was taught by a world-class set of business leaders who really taught me how to run a business. And then fourth is experience. I've been a CEO for 20 years now. And I still look out the eyes of a young guy, but it's an old gomer starting to look back at me. And I know that as I'm getting... My career is getting longer.

The shadows are getting longer and my timeline is probably shorter. The reality is, is after 20 years of experience building three different companies, I've kind of learned what works, what doesn't. And I didn't necessarily learn, you know, without making a whole bunch of mistakes. And so my career is littered with mistakes that I built upon. And so after 20 years of doing that, that's what ultimately led me to write the book about private equity. And it was really because in today's world, very quietly, very methodically, private equity now has over $4 trillion invested. When I started 20 years ago running companies for private equity, you could measure the number of companies. They were measured in the hundreds, and the amount of capital they had was in the hundreds of billions. And in just 20 short years, there's now almost 6,000 private equity firms. There's $4 trillion in capital that has

come in. And now 50% of all deals on the planet touch private equity on one side of the table or the other. But I still felt that it was a big black hole for most small business owners, most entrepreneurs, and most Fortune 500 executives that really just don't have a working understanding of what it is and how it works. So I wrote the book to try to educate and take what I learned in 20 years and put it into something that you could read in under four hours. Yeah. I mean, I read through it really, really quick. I always on the back of the book, I put all the page numbers and I've got 37, 38, 39, 40, 40, 58, 60, 65. And it just keeps going. And I've got a lot of good sections I want to talk about. And I've got these questions lined

up, but I kind of want to go in a different order here. First of all, let's define what private equity is, how they raise money, why they're interested in this. Particularly, this is a home service podcast. Let's talk about multipliers of EBITDA, what EBITDA means. If you could just give us a five-minute overview of what it all means. I know what it means, but the audience, I want to get them very familiar with what we're talking about. Well, let's just start with a basic concept of what the heck is private equity, right? So most people out there listening have a good understanding and a basic

concept of a mutual fund. And a mutual fund, you can hop on your E-Trade account any time of day and you can buy shares in a mutual fund. And there's different kinds of rankings. There's Morningstar. It's a five-star Morningstar fund and all this good stuff. So you go on E-Trade, you buy some shares of a mutual fund, you invest some money, and you get the concept that the mutual fund manager is aggregating money from a lot of different places and then making investments. Maybe it's an S&P 500 fund, so it's an index fund, so it's easy to understand what they're buying. But maybe it's an S&P 500 fund. So it's an index fund. So it's easy to understand what they're buying. But maybe it's an actually managed fund where they have to pick winners,

pick losers. And so what they do is they aggregate all your money and then they go out and they buy shares of stock in specific companies that they're following, that they're tracking in order to try to make a return on investment. It's a publicly traded vehicle. You can buy and sell anytime that you want. No real mystery. Everybody gets that. Think a little bit differently, but along those lines, what private equity is, is in essence, a mutual fund. It's a fund where a firm goes out and raises capital. Typical minimum investment in a private equity firm's fund would be about $5 million. So it's a lot of pension fund money. It's a lot of wealthy family money, college endowment money.

People who've got big chunks of money to invest, they give minimum $5 million into a private equity fund because it's private and not traded on the stock market is where the name private equity fund, because it's private and not traded on the stock market, is where the name private equity comes from. So they're aggregating investments from people. And therefore, because there's no public liquidity available, private equity funds typically have a charter of about 10 years. And it's during that 10-year period where you've committed capital to the fund, and they start in the beginning, once they've closed the fund, it's called. So they have commitments for capital from enough people to raise the billion-dollar fund or the $2 billion fund, whatever the size is.

And then once the fund closes, it's ready to start investing. First three to five years, it's buying companies. During the middle years of the fund, it's improving those companies. It's growing those businesses. It's buying other businesses and combining them. It's doing all the things that it does. And then towards the end of the fund's life, it starts to sell those assets and return the capital back to those investors that pledged it in the very beginning. So it has to be kind of long-term

committed capital that a person doesn't mind not seeing for an extended period of time. And generally speaking, if you think about the stock market, average returns over a 30-year period in the stock market now are around average 7% per year. Private equity typically is double that, so around 14%. So as a result, the reason why private equity firms keep growing and more money keeps pouring in is because those funds generally are returning to the investors at a rate that's higher than the general broader stock market. And so it's worth giving up the liquidity, giving up the ability to buy and sell in that time period. So you take long-term money and you give it to private equity and they go out and they buy companies like the ones I run. So that's kind of an overview,

very briefly, of what private equity is. I'd say for small business owners or for people out there who are used to running their own show, they're focused primarily on minimizing taxes, right? So it's cash-based. Everybody thinks about investments in terms of, well, I want to make sure I'm not paying any taxes. Well, private equity funds, because they also use debt and leverage, typically build up net operating losses or NOLs, and they typically aren't cash taxpayers during the hold period anyway. And so they need, while they're investing and doing all these things, they actually need a different kind of a measurement level to measure the success of a company. So in a public company, you heard of price to earnings ratio, certain industries traded a

certain PE kind of ratio, price to earnings. In the private equity world, all companies are kind of valued at the EBITDA line. And entrepreneurs out there need to think a little bit differently. I've got a whole chapter that describes what EBITDA is, where it is on the income statement, the line, and what's above, what's below, how you should think differently about running your business to maximize EBITDA if your intent is to one day partner with a private equity firm. And so a lot of detail there, but that's kind of the 30,000 foot overview. Yeah, it's great. And this is the kind of stuff I want everybody to hear because chances are, unless you reach $80 million of EBITDA, it doesn't make sense to go public. And when you're going public,

now you're talking about a whole different thing because you look at future earnings versus past earnings. And what I love to hear is the IRR that you describe in your book, the internal rate of return is 14% to 15%. A good fund will give, a great fund will give 20%. Now, my question for you on that is, let's just say for the sake of numbers, I put in a million bucks and I'm getting 20% back and I commit to 10 years. Am I going to make every year, does that money, or is it just 20% each year in that original investment or is it annualized every year? No, it's annualized every year. So when you compare it to the stock market and you say the average return in the stock

market is 7% per year over 30 years, when I'm saying it's 14% per year over the same time period, that's kind of what has been going on in private equity. That's why the private equity firms keep growing. And most people just, anytime you've heard of private equity, generally there's a negative connotation that's attached to it. And that's because maybe some very wealthy guy was very successful at Bain and then he ran for president and people were dogging him out because he destroyed American companies and destroyed jobs and created his own wealth. And one of the reasons I wanted to write the book

simply was that that's not my experience. I've been CEO of three companies. I've built them into national powerhouses. We were adding jobs when the economies were tanking. And my experience within private equity is very different than what the kind of public connotation is. And so I wanted to make sure I educated people on how it all worked. And I think it's something that everybody today, you know, what with 50% of all M&A activity involving private equity, boy, if you ever were building a business and you were thinking someday I'm going to cash out my chips, right now there's a 50% chance it's going to be a private equity firm on the other side of the table. You better know what that is, what it means, how it works, and potentially then how to partner

with a private equity firm. Because most entrepreneurs or people building businesses think about a sale process as being a one-time event. It's one and done. I'm going to cash out my chips right off into the sunset. And then you're sitting around with a pile of cash thinking, now what do I do? And I'm thinking, why leave a company that you've built and have hit a home run with to try to start something new? Why not sell off a majority control to private equity, partner with private equity, ride the coattail of sophisticated investors, blow out your company by continuing to grow it and getting paid twice, two bites of the apple or three bites. My personal record is getting five paydays, running the same company over 13 years,

four months and about five days. Yeah, it's an interesting concept. So they take majority ownership. And this is where it gets interesting because there's a lot of factors. Number one, let's just say it's a $10 million company and it's an eight times multiplier. That's 80 million, 80 million times. It's got to be a platform company. That's what private equities want to buy the platform. They want to buy something that they could tuck in. Can you explain that concept? Sure. So a private equity firm has a fund. That fund is a certain size and it typically is going to buy 10 to 15 companies of a certain size to serve as platforms. Lucky are you who create the business that becomes a platform for a private equity firm. I should point out, though, that you could be a much smaller company

and still be a platform because there are different size private equity firms and different size funds. So the largest funds on the planet, the Apollos, the Carlisles, the KKRs, the Blackstones, those guys buy big companies, but that's because they got huge funds and they got to put the money to work. So if they bought small stuff, they'd have to buy a thousand companies. So they buy really big stuff, but they're small private equity firms that would be interested in buying a company that has a couple million dollars in EBITDA. There's different size firms to match up with different size companies and opportunities. So I think that's first and foremost. But if you become a platform, then one of the tools coming out of the tool chest for private equity is going to be doing something called buy and build.

And so, you know, example, I've been running a company for the last three and a half years. I've bought 16 companies in the last three and a half years and put them together to create the cool sys that I have today. You know, over the next five years, I'm going to buy 50 more. And as I put all of these companies together and build my scalable platform and my North American footprint, the value of that company increases exponentially. And so all of my entrepreneurs who are still here, you could own a small company that sells to a platform company owned by private equity, make a rollover investment from your proceeds, and continue to participate by

building your company as they buy other companies. You become a shareholder in the mother ship, and you're now leveraging the growth of all of these companies that are being added together. And that's how you drive that second bite of the apple that oftentimes is bigger than the first. So you know what I love about that whole concept? And I'm just going to share with the listeners my perspective on it. So you're worth a certain amount. Let's just say worth a million. And you're able to build a nice little nest company that you've got the hiring, you've got the manuals, you've got the process, the standard operating procedures, the checklist, you've got a good CRM. You figure out some stuff. Now, you partner with a private equity company.

They buy 10 more. Now you're doing, let's just say, 10 million. But not only is it worth 10 million, but the multiple goes up. My buddies at the Wrench Group, Ken Haynes, they sold for 850 million after three years for 350 million. They brought on a couple more companies, got a much bigger multiple. And that's what I love about it is it's actually building money out of thin air. It's almost like I compare it. There's a bad analogy, but it's kind of like drug dealing. It's like, I give you a dollar, I take back 10. It's like,

well, let me give you a real life example on how this plays out. So I am in an industry where there are almost 4,500 small companies. I'm the largest in the industry. Therefore, on Wall Street, I garner the highest multiple because of my sure size. I'm rolling through 600 million this year, and I'll be rolling into 3,000 employees. We're in 44 states now. And there's nobody close to me in terms of size and scale in the specialty HVACR business. And so when I buy a company, there's 4,500 small businesses, small guys who started out by driving a truck and they built a business that probably has $10 to $20 million of revenue, maybe has $1 to $2 million of EBITDA, and I pay them five times. So let's just use a hypothetical company that has $10 million in revenue, $2 million in earnings. I pay five

times. I give them $10 million. My multiple that I traded at a year ago was 14. So when I buy $2 million worth of EBITDA, it's worth $28 million to my shareholders because the bigger company trades at a higher multiple and is worth more. These are real numbers. That's arbitrage, right? Yeah, it's the arbitrage. So it's almost like I put a dollar in the pocket of the company I buy, and I put $2 in my own pocket at the same time.

Now, let me also tell you that because Wall Street rates my debt and I have a syndicated set of lenders, my lenders say, hey, Adam, as long as you stay under five times leverage, you can use debt to make your acquisitions. So if I'm buying something for five times, I get credit from the banks for 14 times as far as my value, and I can borrow 100% of the money I need to buy the companies. I call that OPM, using other people's money. So I go three and a half years ago, I paid around $16

million for round numbers. That person rolled $4 million forward and then took 12 million home and took it off the table. Now, if I had given the opportunity to take all 16 home, he would have done it in a second because nobody values rollover or the ability to get a second bite at the apple until they experience it. And so they just went, yeah, I got to do that. I'll do it. If I get anything from it, that's gravy. But taking the $12 million home is what drives me. 27 months later, I sold the business for a four times return on investment, 56% IRR. Got more than the original. And so that entrepreneur who rolled actually 4.4 million actually wound up getting a second check 27 months later that was bigger than the first check

he got when he sold his company. He liked that so much, he bought a winery up in Napa. And then he turned around and he rolled 5 million more forward for the next bite and said, this is fun. I built a company for 30 years. I sold it once. 27 months later, I sold it again. Now I'm going for a third run. This is the way life should be. And that's a real life example too of how a smaller company owner might participate with a platform company owned by private equity like Coolys, to actually generate what I call pure generational wealth. So it's not just the one and done. It's, boy, you keep doing what you do. You get the first bite. You roll enough over to keep life interesting. You get a second bite. You can do it a third time,

potentially. And again, I've done this five times with my last company, but you can do this. And as a small business owner, you're riding the coattails of very sophisticated investors. And obviously, if they keep growing and there's trillions of dollars invested in them, they must be doing something right. And so those are a couple of real life examples of how it works in practice. Oh, man, there's so much I want to talk about. So one of the things that you made very apparent to me when we talked last is there's never a perfect time that you want to sell. It's kind of like having a baby. It's like, I can do better. Some people have just had it though.

They've hit the brick wall, but COVID happened. And a lot of people said, I'm not ready to take chips off. And I know a guy that was, it was a movie theater, I believe, that was doing a huge deal and it fell apart or got paused. And it's amazing how much it screwed up because they were deemed non-essential. And they would have made a small fortune if the deal got done. And then the private equity would have said,

oh man, this is the nature of God. Like it's a pandemic, but the owner would have been fine because they would have taken some chips off the table. So I don't know for a guy like me, if there's ever a perfect time. I know there's owners out there that say, I think I hit my limit of stress and anxiety and they decided to do it. And then there's other people that say, look, let me get a team behind me to do acquisition. And so I wanted to discuss that, but also I want to discuss what you do.

You know what? When you and I first met, we had this conversation, when's the right time to sell? And the way that I've always looked at this, people always think about the hypothetical, there's never downside. Well, I'm going to wait till I get bigger or I get this much or that much. And then something like COVID happens and you just gave a great example. How much do you think a movie theater is worth right now? And not only that, but the multiples for which non-essential businesses will trade at for the next several decades has just been hurt and it will continue to be depressed. So private equity analysts today always wanted to know about how did the company perform during the Great Recession? That gives a kind of an indication of how the next recession is going to look and they value accordingly. Companies that did well in the Great Recession

continue to get higher multiples than those that had a big downturn. They call it peak to trough. What was your peak to trough during the recession? When you think of COVID, now forever, these young private equity analysts are going to not only say, how did you do in the last recession? They're also going to say, and what happened to you in the great pandemic? Were you an essential business or not? If you weren't, boy, your multiples are going down big time. And if you were, and if you're one of those rare businesses that actually held their own or grew during the pandemic, boy, your multiples are going to soar. And so what does

this mean? What it really says is the landscape around us can change on a dime and through no fault of our own, this thing that we've built that has all of this value can go up in smoke or take a huge haircut to value. So the way I like to look at it is it's kind of like you build a rocket. When the rocket's ready to fly, push the damn button. Because if you don't, something changes, the weather changes, the rocket falls over, something else breaks. It's like something could go wrong. So I like to think of it as a stop loss. As I build a business, when it gets big enough and attractive enough to attract a private equity buyer, then that's where my first stop loss is going to be installed. I'm going to sell the company. I'm going to take enough chips off the table to build up my

nest egg in case Armageddon comes. And then I'm going to roll over enough to where my second bite of the apple is bigger than the first. So for me, that's usually 34 cents on a dollar. I'm going to take 66 cents home, pay my taxes, put the money in the bank, do alternate investments. And then I roll $0.34, $0.34. The average private equity return is three times return on investment. So three times MOIC. So to get more than a dollar, I have to invest $0.34 because three times 34 equals $1.02. So that's kind of how I personally have thought of it my whole career. And so then I've put in place a stop loss. I've taken millions off the table. I put it in the bank. I keep on going. And I'll tell you, if you build a spreadsheet and you kind of compare these

two methodologies, and then you consider that with private equity and the extra access to capital, that I can accelerate growth at a much different pace than if I'm just growing it myself organically. If you run those two spreadsheets out over an extended period of time, I think you'll be hard pressed to say, I came out ahead by owning my business and assuming all the risk over a 10-year, 15-year period versus I partnered with somebody and I had multiple paydays along the way. And I really changed the growth trajectory of the company because of the influx and ability to access capital. And by doing the acquisitions and doing these growth strategies, following these growth strategies, that those two spreadsheets,

if you're really honest about it, I think you'll find very quickly that you lose nothing, you give up nothing, but you gain security. Yeah, I agree with that statement. I think that there needs to be something great in a business. I've heard this from a lot of people. You're never going to get the money that you need until you either sell a private equity or sell your company because most people are so busy working in it and sometimes working on it, hopefully working on it. But I'm very fortunate that I was able to take out enough, get the house I've always dreamed of and build enough in my retirement that I've got that Armageddon day already crossed off. And it's amazing. You know, this is something I didn't

plan on talking about, but I think it's important is Adam. I've learned so many things over the last few months, as far as, do you know them, the masters you've heard of the masters tournament in Augusta? Sure. Absolutely. Well, in the seventies, there's a law that they passed that everybody was renting out their house for the masters for two weeks, 14 days to be exact. Yep. And what happened was, is they made a fortune. And so what happened? You've got not far from Georgia over there. You've got Washington, D.C. that made laws against it. And they said, you're making too much money. Well, they went there and they got a lot of influence in D.C. and they got some laws passed to say you could rent your own house,

your own house out to your company for, so you take your square feet and you find a local resort and you say, how much would it cost me to rent 7,200 square feet? And maybe they're going to give you a cost. Maybe it's depending on your house and what city, you get a few examples to prove to the IRS and maybe you get 200 grand. Now your company uses that as a write-off and guess what that is, Adam, to you? I give up. It's tax-free money. It's a tax-free. Absolutely. And it's crazy what happens. I think a lot of the people that are listening, we get really, really good. And you said something really interesting earlier, Adam, is you said, what we've become, the private equity is really good at taxes. You got nulls, net operating losses. You've got all these things

that you use. Well, I think that I was going to talk about the fee structure of some of these agencies that help you sell the brokers. They care a lot about getting you a good multiple, most of them, and then they care about getting as much ad backs as possible, but they miss out on this huge piece. Like if you, when you buy a building cost segregation studies and all these different things. So I think talking to a really, really good CPA and getting the right strategist behind you before you go to a private equity company to say, what is your goal beforehand? And you talked about fee structures. I've seen 5%, 6% pretty common, but you talked about in the book, 5% to 6%. You also talked about 1%. And let me just tell the audience here, when you go to a private equity company, if it's a good valued company, I mean, if it's if it's 500,000, just adding it into their portfolio, that's different. But if they're buying the

platform company, they're doing background checks. They're looking into every single one of your key players, your COO, your CFO, every major player. They're checking to see how many bank accounts they have that they form in the other LLCs. They're doing a quality of earnings. They're doing verified earnings. They're getting different tax. What would you call that? Just appraisals on the quality of everything. I mean, you're going through so much stuff. It's not easy.

You actually told me to buy a book and it came in the mail about a month ago. It was it's everything you would need to sell in private equity and have it ready. And I've been going through it. It was on my desk, but I put it in a house right now. But talk to me a little bit about getting with a brokerage to help you sell, how to be ready for that, and what to expect if you do go that route. Sure. It's funny because I call diligence a proctology exam that never ends. So they literally do turn over every rock. And you know what? Anything you're trying to hide is going to eventually be discovered. So don't even bother trying. Throw your warts out and

lay them on the table for everybody to see. It'll save you time. So let's just first talk about a broker. From a small business perspective, when you sell a house, you hire a realtor. Vast majority of all real estate transactions happen with a realtor, you know, in the residential space. And there's a reason people are comfortable with that. They're not emotional. They don't get paid unless a deal gets done. So they're incentivized to want to get a deal done.

And they do their best, you know, to handle the paperwork, the stresses, and to be the go-between between a buyer and a seller. And oftentimes there's a realtor on both sides. So there's two realtors involved that are working together to get a transaction closed. When you sell a company, there's this thing called an investment banker. And depending on the size of the company,

really small companies are gonna sell using a broker or a very small banker, someone that specializes in selling a company, but they're small. And because the companies are small, the fees are generally high. They're similar to a realtor's fees. They could be 4% to 6%. But as the company gets bigger, and as the transaction size gets bigger, just like there's different size private equity firms, there's different size investment bankers and brokerage houses. And so as your company gets bigger, now you're in the world of investment banking. And the investment banker works like a realtor, and they're marketing

your company. They're helping you find the universe of buyers. They're driving a competitive process to get you the best price for your business and the best terms. And then they also can provide insight into the different types of private equity players, who potentially would be a good partner, a good owner, based on their world of experience doing nothing but representing and buying and selling companies. So I have a section in my book where I talk about the role of the investment banker, who they are, what they do, and why they do it. But in a large transaction, in a company the size of mine, the fees get down very low.

They could be, usually what they'd be is 1% or less. And then there would be some kind of a success fee where there would be a bonus for selling over a certain price or a certain multiple, certain enterprise value. They would get a kicker. And so it can be a very, very lucrative business. They also then help the buyer with financing. So private equity firms come to the table with capital, but they don't pay 100% equity usually for a company. They would use as little cash as is possible. And then they would need to raise the debt side capital in order to round out the purchase price. And so investment bankers help the private equity firms raise the capital that's required to fill in. So an example, if a company sells for 500 million, it might be 300 million as equity and 200 million as debt. And so someone has to raise that 200 million in debt. You can't just

walk into a bank and say, give me 200 million. So a syndication of banks is put together. Separate materials are created to help the private equity firms raise the debt side capital that they need to then complete the purchase. They do this because it allows them to buy more companies with their fund. And using debt is very efficient in terms of owning more businesses, driving more growth. It helps from an IRR perspective. It helps from a multiple of invested capital perspective. You can buy more companies when you can use some leverage in the transactions.

So investment bankers are important. One of your questions was, when's the right time to read my book? If you're building a company and you think there's ever a time when you're going to sell it, then that's the time to start educating yourself on what private equity is, how they exist, how they function, who the players are, how to pick a good firm from a bad firm. And you really need to start just thinking along the lines of, hey, look, I'm building to sell. At some point, I'm going to sell. I'm going to bring in a partner. Now, maybe you'll stay, or maybe you'll stay, or maybe you'll ride off into the sunset. But let me also tell you that about private equity.

If it's a platform company, they want you to stay. These are financial people. They're not operators. They want to partner with an executive that's going places and has a great company. And so they would prefer that you're staying rather than riding off into the sunset. So typically from my perspective, if you own a company today, you need to get educated. Your options in the future remain the same. You could sell the private equity. You could pass it down to the next generation in your family, but you need to start getting educated sooner rather than later. And then I'd really say, if you're two or three years out from potentially doing a deal, that's when you really start focusing on finding a banker, getting educated about how to prepare your financial statements so that when you get into this diligence process, that you're prepared, you're ready. You already have. Typically before I do a

take a company out to market, I'm going to do my own internal quality of earnings. I'm going to have audited financial statements, and I'm going to be able to lay down, here's my last three years of audited financial statements. It's from a big three firm. And yeah, I paid a little bit more for it, but they're not going to question what Deloitte says or PwC or Ernst & Young. And then on top of that, here's my adjusted EBITDA. I've already calculated. I've got a quality of earnings. And so you can be very well prepared to handle diligence. That investment banker's job is to tell you the kind of things to start creating. You can have a data room populated, ready to go. I mean, a prepared seller can get through a private equity

transaction fairly quickly. I'm going to close a company next Friday and I started the process a week ago. My typical is about 60 days. I happen to be buying somebody who's got their act together and I can get through this very quickly when someone has their act together. So I think you're the one that told me selling your business at a premium by Tom McCaskill. Does that ring a bell? Yeah. I did not refer you to that one. Oh, okay. That's a good book to basically, it tells you what you need, like what's going to happen. And it was a hard book for me to find. Your book, I bought four copies of it. I actually, there's a guy coming into town on Monday. I'm going to give one too. I just think it's so

important that people educate themselves on these funds and then you'll have an IOI. I'm learning all these acronyms, indication of interest. When you're going out there and you're getting private equity companies, there's small funds, big funds, medium funds. And what's going to happen is you want to find the ones. First of all, I'd want to talk to companies they've worked with and make sure they're similar and find out, are they a growth or are they more conservative and how much are they going to be investing? So let's take a scenario that you're a window washing company and you're doing $4 million a year and you hit a 20%, which is crazy. You're doing some commercial.

You've got a nice residential department and you're doing $800,000. You go to a company like the brokerage. And by the way, I think what you were talking about earlier is when they trap you in there, you buy 30, 40, in your case, 34%. They give you the golden handcuffs and say, you need to be here for this long. And it's a good thing because you got enough money off the table still. But talk to me a little bit about what the shopping model looks like when I got $800,000. I got some ad backs. I got it to 1.2 million. So I'd like to get a five times because I feel like

I'm one of the bigger guys in here. Maybe a six times. I don't know what's possible. If I'm six times, what is that? 7.2 million. How do I even go out there? What's the process look like? So in general, you need good representation and you need it in really multiple areas.

So if you're going to be selling a company, you want to have excellent tax advice. And so I would say it's not necessarily your good buddy from high school who does your taxes for you. It could be a top flight firm that specializes in mergers and acquisitions and truly has a strong business practice because you're going to want to get excellent tax advice long before a sale so that you structure your assets appropriately and take care of some, call it setting the groundwork before it's too late and you're stuck in a specific structure or methodology. So having good tax advice is important.

Having specialized legal counsel is also very important. Selling a business is considered a specialized practice of law. So think about it in terms of doctors. Would you go to your family doctor to have brain surgery? Probably not. You'd go to a brain surgeon. You might be your family doctor refers you, but you're going to want to find a specialist. Selling companies is a specialty area of practice. You want to make sure you're using a competent lawyer from a competent firm that specializes in doing business transactions. And what you'll find is you'll pay more on a per hour basis, but because this is what they do for a living, they'll actually do it in a more efficient amount of time. And the ending contracts or the ending agreements will be much better tailored

to protect you and to also get you the maximum potential. And so a business, having competent legal counsel is very important. So that's a component. And then the third component is that investment banker. And you need to find, it's not just about the highest price. And I talk a lot about that in my book. Selling a company, if all you're going to do is ride off into the sunset, you're retiring, you're 75, you're not rolling over, Jack, I'm just leaving, then highest price is probably good. However, if you care about your employees, you want to make sure that the buyer is going to be a good steward to your employees and that they think like you did and they're going to take care of people. So that might be important to you. That could influence. If you're going to stick around and you're going

to make a rollover investment, well, guess what? You're becoming an investor and now you need to ask the right questions. And most people have no idea what the right questions are to ask. They sit in a meeting, they find an investment banker. And how to find investment bankers, boy, if you're a sizable company, you can go start with that competent lawyer. They might be able to help you

start with that competent accountant. They may be able to help direct you. But if you do some Googling on your own, you know, geez, I'm 25 million in revenue and I'm $5 million of EBITDA. Here's the five typical investment banks that deal in that size. Or I'm $100 million in revenue and $10 million of EBITDA.

Boy, here's a different universe, et cetera. So there's specialties at all sizes and shapes. But you can seek advice of these competent resources to help you find the investment banker. And that's the third person that's important. And if you're staying, then you can leverage the advice of all three and learn about different types of private equity firms and who has good reputations, who performs better than others, who works better with management teams. We all have different styles.

Some of us are A-type personalities where it's my way or the highway. And you know what? If you're going to go work with a private equity firm that's very hands-on and you're an A personality, it ain't going to go very well. You're butting heads all the time. You're going to be looking for someone who's more of a hands-off style. And maybe you're a Fortune 500 executive who started a business and you're used to working with people closely and collaborating. Maybe you need a hands-on private equity firm to push you, to drive you, and a hands-off firm wouldn't motivate you enough to achieve success. So I look at private equity, there's many different kinds, there's many different sizes

and flavors and specialties. And it's not just about selling your company for the highest price. You really need to understand nuances in order to make sure your partnerships work. When I talk to people, if you at random, have you ever worked with private equity? Yes or no. And did you have good experience or bad experience? A lot of it's a crapshoot because people just don't know. They don't know. It was dumb luck. Dumb luck, I had a great experience or dumb luck, I had a bad experience. But if they knew the right questions to ask up front, they could have eliminated the bad outcome. Yeah. Well, here's some cool stuff that you put in your book on page 67,

asking the right questions. How have your previous funds performed? How has your typical IRR been at the fund level? So you got all these, there's 20 more. Then you ask questions. Here's some questions you should ask about those references. And then you should ask, I mean, you've got all these things and all these takeaways in your book about evaluating private equity firms and just the playbook is definitely what it is. I want to get selfish here for a minute because I want to know, you go out and you start piling on companies. Your job is really finding these companies to get deals done for the five or six times, whatever that might be. Now, what does that look like because in my experience they've got a bunch of crap they

bring with them you got to change the crm you got to fire some of the people you got to get rid of grandpa because he's should have been retired 20 years ago they've got shit sitting around they should have sold 15 years ago but that bolt might come in handy if we find this unit from 1967 and i'm not saying they built something nice and you got to respect it and you got to cherish it and you got to love them and you got to smile and say how good they did. But as far as the integration goes, you know, they've got accounts receivable. They got all this stuff.

Do you have a whole team that just goes in and they got a 10-step process or how does that look? Is it different every time or what have you noticed when you've done that? When I first started at this company three and a half years ago, we did not have a deal team in-house. There was nobody. So I was really leveraging the private equity firm and all of their analysts to help me. And at the same time, I was building a deal team inside the company. And since it was a platform, and this is going to be a buy and build for a decade or more and multiple owners, it was like, yeah, absolutely. This is something we need to get

really good at. We can't outsource this. We need it to become muscle memory. So I started building a deal team. I hired counsel. I hired co-counsel. I hired two deal professionals. Then I hired two more. So I now have a team of six people and I'll expand beyond that. I'll probably add another four over the next 12 months. We need to be really good at this. So I have a front end to my process, which is how am I going to shake the tree when there's 4,500 companies out there that do what I do? I'm finding new companies every day I didn't know existed in different markets. So I really have to have a concentrated effort at locating where these companies are,

who they are, who owns them. I'll do all the legwork. And you know what? That's a team of people. It can be outsourced. It could be insourced. And there's a lot of internet searches and phone calls being made to develop a funnel. You can use Salesforce. There's a number of different tools that you could use to track a funnel, or it could be a spreadsheet. But I build an army around the front end, which is deal sourcing. How am I going to find them? And then I have a team of deal people who work those that are interested. We have a bunch of filters. We run the companies through what's the earnings level? What's union, non-union, plus 10% EBITDA margin, less than 10% EBITDA margin. They're more construction, less service,

more service, less construction. We have a bunch of filters we run a company through. Good reputation is important to me because the entrepreneurs are going to stay in my industry and they're going to become rollover investors. I want people that think like we do and can make that leap without becoming problems. So we do a lot of work on the front end. And then as we kind of get these funnels put together, you just mentioned it, indication of interest usually is first. And then if I've got enough information, I'll go right to a letter of intent and I'll lay

out the salient deal points. It's an asset deal. It's a stock deal. Here are the different parameters, etc. And then, you know, part of my deal team also includes integration specialists who, you know, as we're getting close to the IOI or LOI, you know, they immediately kind of take out my playbook, which, you know, call it the thousand line item Gantt chart spreadsheet that covers everything from HR to finance, to banking, to legal, to benefits, all the different things. And then they start to tailor my generic playbook for the target. And by the time I get to

closing, we've laid it out in a timeline. Here's the things that have to be in place day one, insurances and bank accounts. And I've got to be able to pay the employees. It was an asset deal. I'm not buying a company, you know, so I have to have them set up on my benefits plan and here's their bank account, you know, and checkbook on day one, you know, so we break it up by time. What are we going to accomplish day one, 30 days, 60 days, 90 days, you know, you're talking about a spreadsheet that has, you know, a thousand line items. And then someone owns the integration. They kind of embed in the companies that we buy and they help, they help the company. And we talk about grandpa before we close. And we, we talk about, you know, you can't keep paying for the private jet in the lake house

when it's on my dime, you know, that, that becomes a personal expense. And we talk about, you can't keep paying for the private jet in the lake house when it's on my dime. That becomes a personal expense. And you get an earnings adjustment for those expenses. And I'm paying for that times five. So I can't pay for your jet times five and then let you keep the jet on my dime. So there's all of these conversations that take place. And so if you're a sophisticated buyer, you're really working with your sellers before you ever get to a closing table so that it's very clear what's going to happen in a post-close environment. And then it's all about execution. So very detailed. Remember, it goes back to the beginning when I talked about the four things about me and I said, I'm an engineer, so I'm a meticulous planner. When you're doing M&A, it's a meticulous event with a lot of details

that need to be orchestrated. And so a lot of time and effort goes into integration planning on every deal. I wanted to ask you, what are some nuggets of wisdom that you can lay on us as far as accelerating a company's growth? And a few that I say is, first of all, control your labor, control your marketing dollars, decide when it's time to grow and when it's time to grow a little bit less. I've always understand tax law. I bought new vehicles and I did accelerated depreciation because of the laws. And I've bought more vehicles year on year on year and paid it forward. And I'm not going to say I haven't paid Uncle Sam because he's made a fortune off of me, but in relative to other companies that don't know tax law and don't hire the right people because they're trying to

save a penny and they don't see a good CPA as an investment, they see it as an expense. But as far as you're concerned, as far as acceleration and turning a business into a leader in the industry, what are some of the things we need to think about? So first thing I'll tell you is there is no shortcut to success. You need to put in the work. When I go and embed myself in a company for the first time, like I did here three years ago, I wasn't working in this industry. I didn't know HVAC or refrigeration service from a hole in the ground. I know that I go to my thermostat, turn it down and damn well better get cold because it's hot outside. But aside from that, I mean, I wasn't running one of these businesses. So when I immerse, I assume I know nothing. Even though I've been running service companies for 20, 30 years, I'm going to jump in. I'm going

to ride with people. I look at job classes. Boy, I got a lot of service techs. I got a lot of installation people. I've got salespeople. I've got people that work in offices and cubicles and do billing. I'm going to hang out with these folks. I'm going to ride in a truck for a couple days. I'm going to put on the old t-shirt and I'm going to help them install some HVAC systems. And I'm going to just observe and make sure that when I'm looking at spreadsheets at my level, that I'm not seeing numbers and people. I'm seeing jobs. I'm seeing what people do for a living. So I make no assumptions coming into a company. I focus a lot of attention on making sure I understand what's going on so that as I'm planning to bend the curve or what's my

flywheel going to be, to quote a Jim Collins novel or book, it's like, I'm going to really immerse myself and do the work and understand how this company works. Now, if you've built the company, you might say to yourself, well, I already know everything because I built the damn thing from scratch. Okay, great. You know your company. Then for that person, I would say, you need to be open. You need to be open to new ideas and you need to be open to truly partnering with someone. And one of the great things that private equity brings to the table is a lot of relationships and expertise that can really help you think differently. And a lot of entrepreneurs are like, hey, it's my way or the highway. Nobody can tell me how to run my business better than me.

And so this is all crap. You know, consultants are a bunch of crap. And of course, as I said in my book, that's how I used to think when I was a young buck too. But what I learned was, while I know my business better than anyone, there are things that I can really learn by taking advantage of working with some consulting groups

who can share best practices, who can help me rethink my own operations and help me bend the curve. So I'm always talking about bending the curve. So I took over a company that was growing at about 8% a year, compound annual growth rate, 8% a year for 20 years. I'm now growing at 30 plus percent per year. That doesn't happen by accident. And so there's a set of initiatives that we focused on that we put in place. I made sure people owned them. There were measuring systems in place to track progress. And I talked to those people regularly. We talked earlier, how do I spend my day? There are about 19 people in my company who are going to be responsible over the next five years for $2 billion in shareholder profit that will be

created. I spend my time with those 19 people. And I hire world-class people and cut them loose and articulate the vision and talk to the troops and pump up the culture and try to get people engaged. I mean, that's my responsibility too. But where am I really spending my time? I'm spending my time with 19 people who are focused on six different initiatives that will add $2 billion in shareholder value over about a four or five-year period. And I'm going to make sure that we get those things right. M&A is one piece of that. So that's one thing that I focus heavily on. And so I think if you're coming into a business, Fortune 500 person transitioning to come to a senior position in your company,

you hire someone to run operations, they better immerse themselves, they better understand what everybody does for a living, and they better assume they know nothing before they ever sit down to put pencil to paper on creating a plan. And if you're the entrepreneur, then be open to outside help, be open to creative ideas, look for who's the best in class provider of the same product or service that you're doing. Who do you look up to? What can you learn from them? And what can you do better? And how do you challenge yourself? Because all of us, if we are open to new ideas, we can always... I've never found that company that I can't grow. I've never found that company that I can't create a strategic pivot and bend the curve. I can do that in any business on the planet. And it's because I have a process in place and it helps me analyze opportunities and think differently. So entrepreneurs, be open

and be curious. Look at other companies, look at competitors. What do they do? What do you admire? Your competitors are not all bad. What do they do right? And what can you steal? I call it swipe. Steal with enthusiasm, pride, and integrity. And it's the process of best practice sharing, learning from others. What can you do? And I always tell people, you better be disrupting yourself lest you be disrupted by others. And so you constantly have to be reinventing. Something that you did successfully 20 years ago probably works, but it's probably inefficient as hell in today's world. So you constantly have to be reinventing

yourself. You have to ask a basic question. Why? Why do I do the things I do? And have circumstances changed? There may have been a valid reason to do something 20 years ago, but the world changed and doing that is now adding cost and adding no value. And therefore, it could be ended. You could increase profit. You could increase your available time to do something else. So you constantly have to challenge yourself, ask yourself why you do the things you do, be open to other ideas, look for best practices, not just in your same industry, but in others. And, you know, people who do that can bend the curve. You know, one of the things I thought of is what got you here won't get you to that next level. Number one, number two is,

I said this twice today in some of my team meetings. I'm the best. We are the best we've ever been, but we are the worst we'll ever be because of our continued growth and learning. And I'm sending people all the time in my company to other businesses. And typically, I learned a lot from Jim Abraham. Basically, he taught me to find other stuff from other industries. I've got a guy named Jim, another guy. And he basically, he went on one of those cruises in Cancun one time. And he took his employees and he goes, wait a minute. He owned all the largest printers across the United States. He had a huge printing company.

And he goes, what? He goes, you pay one fee and you get to eat and drink everything you want? They're like, yeah, it's called inclusive. Everything's inclusive here. So he said, maybe I'll just give people the printers, maintain them and charge them per print and do an inclusive deal where I'll cover the toner and the things and as much as they use it up. So he made a lot of money by taking something from another industry. And I think that's kind of the honey hole is to study. I study HVAC plumbing electrical businesses to a fault. I go check them out. I learned how they, a lot of them don't hold

inventory. They make their suppliers hold it. They've got Home Depot's rented out a section. The mother company of Home Depot rents out a section of their business and their building, and they do all the inventory. They focus on the ball. We do garage stores and we do them really, really well. And I think there's something to be said about sometimes the small-minded entrepreneur, and I've been there a million times, is we get so, the bright eye syndrome. We look at these other things and we're like, maybe we should do real estate. Maybe we shouldn't invest in this. But if you focus hard, core at that one big thing, Gary Keller, the one thing,

it's amazing what we can accomplish. And I think you said a lot of great things is I started investing a lot more in employees and A players, and I do performance pay to make sure they make great money. And I celebrate when they win. And I used to look at as employees as an expense. I mean, 80,000, 90,000, 100,000, are you kidding me? For a garage door company? Now I'm like, man, if I bring this person on and I talk about what they're going to need to get done and how I could portion that into a $40,000 salary and make it a $60,000 performance pay and they buy into it and we both think we could win. You should see the sparks are flying

in here. The energy, the air smells differently. The people are moving differently. We're walking faster. We're smiling more. It's just fun to be around a growth machine and still be able to maintain a 19% net. They say people process, right? People in process. Well, the process dictates the people you get realistically. So the process is everything, but how would you recommend someone just going up and, and top creating and creating a stronger culture? You're hitting on something that I could spend another hour on. You know, I am, I am all about culture. Let's just take your business. You sell garage doors, you install garage doors, you repair garage doors. You know, you're a garage door company, by the way, I love your business. I love simple businesses where everybody needs them. You can

put your arms around them and it's your execution that differentiates you and creates that premium place in the market. You're going to have a good private equity exit one day, my friend. I'm going to read about it and smile when it happens. But culture is everything. So I've run service companies. I've worked in service companies. I've held every job you can hold in a service company. I started by driving a truck. And what I learned as I worked my way up through service businesses is I learned that if you cannot store your product in a box and put it on a shelf, then your product is people. And it doesn't matter what the hell your company does. You take any company I ran. I ran a medical service company that fixed stuff in hospitals, CAT scanners, MRIs, CAT labs. I ran a commercial

laundry company which fixed washers and dryers in 70,000 apartment complexes and laundromats across North America. And now I run an HVAC, our service company that services 45,000 customer locations in 44 states for like Target, Walmart. We keep grocery stores cold. That's an easy way to know what we do. Well, you know what? You can't store a box of service and put it on a shelf. You could inventory garage doors, but they don't install themselves. And most homeowners aren't equipped to install their own doors. So they can't come pick them up from you and take it from there. So although you sell a product, your product is still service. And so when you run a service business, culture is everything. I don't focus on revenue at all, much to the chagrin of my

shareholders, but I have a long track record. I have to start at the basic DNA of a service company. I start with people and culture. If I build a strong culture where people are appreciated, they're rewarded. I have one goal and objective for all my employees. I want to build a place where you can spend your entire career in one place, and that's my company. To do that, I only have to do four things. I have to pay a fair wage, have good benefits, have good retirement, and I have to give you opportunity to advance. And if I do those four things right, and I have a strong culture, I get an engaged workforce. That engaged workforce takes care of customers. Customers love that. They write good reviews. If it's residential,

if it's commercial, they give me more stuff. And then revenue just rains from the sky. So I don't manage revenue. I manage people, culture, get engaged workforce. They take care of customers. Customers give me more stuff to do and money takes care of itself. So you've hit on the secret sauce of any services type business is culture. But I would even argue that even if you are a manufacturer that just manufactures widgets and sells them in a store, you know, culture still matters. And building the best and most efficient widget at the best price gives you strength and power in a marketplace.

And by God, unless you're 100% automated, you're going to be doing that with people. So at the common level, all businesses are people businesses. The more you invest in your people, the more you inspire and can articulate a vision that they can buy into, the better your business will be. There's probably a thousand garage door companies in the United States, but I'm guessing the energy level at your company is probably so much higher than all of your competitors combined that when someone needs to go the extra mile, they don't even think twice. They just do it. And eventually that translates to customer service, to high marks and to

additional sales. It's the key to everything is culture and people. So top grading talent. It's interesting. I could tell you a little story. I was talking to a very well-known executive in private equity who's just the absolute king of culture and the king of people. And he was telling me, what's typical? You take a company like the soap company, like Unilever Soap. You take a business like that. Who do you put in your biggest product category to manage it and handle everything? You put your best people, right? It's kind of a size to size thing. Well, the reality is that segment isn't growing. It's as big as it's ever going to be. If you're smart, you'd probably put

a junior marketing team over that vertical and you'd take your best dog and you would take them to a new product that today isn't adding any value to your business and you would make sure you nail it and get it right with your best team. And so sometimes you need to just upend your own thinking. Like you were talking, if it only is a $40,000 job to run around and install garage doors, give a guy a chance to make 60 or 80. See if he runs for it. Create that opportunity and you'd be surprised at what you get differently. So I think you need to really think about people as being your product in any business. And you need to find creative ways to connect with those people and to articulate that vision that they can buy into. And then you need to lead by example. I've been a CEO for 20 years. No employee has ever heard me give an ass chewing

to anyone because I haven't done it. It's not productive. It just runs counter. I can assassinate a person politely. I don't need to do it by being a jerk. Jerks climb the corporate ladder pretty fast and eventually they fall off. And when they fall off, there's no one there to catch them. The ground hits hard because they burn so many people on the way up the ladder, climbing up their back that people enjoy watching them fall. When you take care of people, those people take care of you. You build a sustainable, best-in-class business that's worth a premium. It's interesting because if you took

a CSR, everybody says, yeah, they answer phones. You can find anybody. I mean, if you think about it, my mom was one of the first CSRs I had answering my calls. She's the only CSR that walked out on me too, by the way, but I love her. But you got a CSR at 60%, another one at 90% booking rate. Your average ticket is $500 for your company and they're taking 20 calls a day. They work 300 days out of the year. They work quite a bit. That one CSR with 90% made you right about a million dollars more. Now, when that's being said, the reason why you have CSRs that make 25, 30 bucks, sometimes even more per hour, is because it's easier to find A players.

And 1A equals 3B is what I've always said. But they make you a million dollars more revenue. And that's a basic job. And it's amazing when you look at A players and what they do and what they care about and how well they do for your company and the morale and the recruitment and the vision. It's just, I don't know what I would do without my team. I mean, I'm everything. I'm lost without them. I try to tell them sometimes I get teary-eyed because how much I appreciate them, how much I care and love them. So I think it's so important.

I really feel like some of these guys would, I don't want to say take a bullet, but definitely they do a lot. I didn't have a lot of any fallout during COVID. They all stuck behind me. They all respected the decisions we made as an executive team. It just means a lot that we're coming out of this thing just so strong with several dozen per month of new employees coming in.

I mean, we are- Yeah, let me tell you something too, because how employees want to be treated is changing generationally. And you're hitting on something that's very important to today's youth. And that is they want to be treated fairly. They want to be connected. They want to have a higher purpose and what they do for a living, what their title is, isn't what stimulates them. It's the opportunity, how that company thinks about being a good steward to employees, to the community, to the world at large. That's what's driving, call it the next generation that's

coming into your company today, who will ultimately wind up being the leaders 20 years, 30 years from now. So I think we're definitely becoming a more people-oriented culture in business. And so for me, my success in the service business has always been, if I'm going to bend the curve and I'm going to ask people to work hard, I got to take care of my product. My product is people. I take care of them. They take care of business. And that's one of the things that helps me accelerate growth in companies. You know, I got 35 guys tomorrow that are training. They're going to feed the hungry. They're setting up these packages and that's what they're going to be doing all day, the whole entire workday from early morning to the end of the day. That's every new group that comes in one day out of the month when they're here training.

That's what they do in Phoenix is they go, we feed the hungry. We're doing a blood drive on October and the beginning of October. I mean, here's the thing. I'm having fun. You know what the sad thing is, Adam, is I feel like I work a lot, but I don't feel like I work. I'm on the phone. I'm having podcasts. I'm enjoying myself. We're having productive meetings. I'm smiling all the time. We just got a brand new coffee machine with eight different types of coffee. And I'm like, everybody's like, oh my gosh, this is amazing. And I'm like, well, you guys, this is your coffee machine. This is your guys' workout room. This is your guys' basketball hoop. This is your guys' ping pong table, big buck hunter. All that stuff is because they're so amazing and it's so fun. And I got to tell you, I would tell

you the size I am, if I would have told myself 10 years ago, I would have said, man, anxiety and stress must be through the roof. And the problem is I'm in the fetal stages. I'm tiny. We're nothing. We're going to do darn close to 50 million this year. And I think we're in the tiniest stages. And I meet a lot of people that are at two, three million. And they're like, it's a nightmare. I can't sleep. I can't go on vacation.

I'm going through a divorce. And I feel bad. That's why I started the podcast is hopefully there's light at the end of the tunnel. When you work on the business, when you start to build checklists and standard operating procedures and build something that's scalable, that doesn't take you as the owner doing everything. So I just got to tell you, this private equity playbook, I couldn't put it down when I picked it up. And I mean, there's a lot of stuff in here that might go over people's heads if you're not, if you don't listen to this podcast first, but's pretty simple you didn't go too hard on people but it's it's crazy that if you

don't read this book if you don't have a plan to sell one day i can understand giving this to your kids but man there's that you can take three four or five you're not the first guy adam to tell me you take took five bites out of the apple and i've heard that over and over again. So it's fun to learn this things. And I know guys that are actually doing it right now. And it's fun to hear, oh, I wish I would have done this differently, or I wish I would have gone and did this, or I got out at the right time because of COVID. So I've got a few things I want to ask you that I ask every podcast. And first and foremost is, how do we get the book, the Private Equity Playbook? So Amazon, just type in Private Equity Playbook or Adam Coffey, C-O-F-F-E-Y, either way. You can find it on Amazon, Audible. It's available on Kindle. The ebook readers, you can buy it at

Apple, Amazon. You can get the audio book. You can get a paperback. You can get a hardcover. I'll send smoke signals if you want to do it that way. It's like, I'm on LinkedIn, feel free to reach out. And that's been the funnest part for me is after writing the book, I've had people been reaching out to me all over the world. And it's been fun connecting with the readers and hearing their experiences. It is a primer. It was made to teach a broad amount of data without going down too many rabbit holes. Because in private equity, once you start going down rabbit holes, every rabbit hole is a different book. So it's broad. It's an overview. You'll come away and you'll be very intelligent in conversations about private equity. More importantly, it really stimulates you to ask the right questions and to think differently and you'll continue to grow as a business owner.

And eventually it'll pay dividends just when it's time to think about what does the future look like. So you can buy it anywhere books are sold. I looked yesterday. So the book's been out for 18 months. It was number one on Kindle. I think the Audible version was number 16. The paperback was like number 25 and the hardcover was number 37. I'm like, you know, all four versions of this are still in a bestseller status on Amazon. So it's readily available, easy to find. You know, I think the reason is because as a home service industry, you're talking about they say 500 billion to a trillion. It's hard to tell

because market caps are changing so fast. Is everybody, Google, Amazon, Facebook, everybody's entering the sector of home service. I think a lot of the people that are looking are realizing I'm probably going to sell a private equity. They want to understand it more. So this has been the world to me. In fact, you're a busy guy.

And I told you after this COVID comes, I'd pay you probably not what you're worth. I don't know what an hour costs, probably I'm guessing thousands of thousand dollars an hour, but just to shadow you for a day and live, live the life of Adam Coffey, because that to me is how I grow exponentially is by being around success leaves clues, I think. So I got to tell you, this has been amazing. So LinkedIn is the best way to find you. That was another question. What are three books that you'd recommend

other than the private equity playbook, obviously? Is there three books that stand out to you? I did mention better to, you know, what is it? Built to last. Yeah, built to last. I mean, you know, that's always been a classic from my perspective, because I believe real strongly

that you can bend the curve. You can create the flywheel with any business. Even if you've been there running it for 20 years, you can reinvent yourself. You know, there's a guy out there named Sandy Og, O-G-G is how you spell his last name. He's got two books on Amazon right now. They're a little pricey if you get the... Yeah, they are. They're called Move and Grow. I own both of them. I'm looking at them. But I got to tell you, if I'm Luke Skywalker, he's Obi-Wan Kenobi. He's the godfather of this thing I call talent to value. And remember I told you I spend my time with 19 people. How do I know who those 19 people are? It's because I'm a disciple of Sandy Ogg's methodology. He is that guy I was talking about from Unilever, and I'm sure I botched that story.

But he taught Blackstone how to maximize potential in a business. When private equity started getting crowded and returns weren't as easy to get as they used to be and the prices of companies were going up, Sandy really pioneered this concept of defining what is the work to be done and how do I get the right people to do the work? How do I interview? How do I assemble the right team? And so I would say his work is something that I've been a big fan of and I'm a practicer of that. So Sandy Yogg's would be a second. And then I would tell you, I'm going to go old school on you rather than new school. I'm going to say if there's's anybody of your listeners, who's running a small business or

building a small business, and they've never read the millionaire next door or the millionaire mind, you know, those might be good background books to just kind of calibrate, you know, what does success look like in America? Cause I think it will probably surprise a lot of people and, you know, a lot of research done by the team that wrote the book. So it's hard to become successful if you don't know what success looks like. So I mean, they can give you some background if you're just starting out. My book, Sandy, can teach you about how to accelerate growth in a company. I can teach

you about what private equity is. Jim Collins can teach you the concept of bending the curve and the flywheel and how to really blow out a business and reinvent it. You know, so a combination of those would probably be the ones I'd recommend to people. Awesome. This has been great. And the last thing, this is the final thing I always do on every podcast, Adam, is I want to give you five minutes or three minutes or seven minutes, whatever you need to talk about. Anything that you care about that's going to give the listeners the best thing to do today or just something that means a lot in the near future to them. Just anything on your mind, anything that's happened recently, anything that's just life lessons, be whatever you want to be about, but I'm going to allow you to kind of close us out.

Well, I appreciate that. I don't want to get all crazy because the world is just crazy enough as it is. God, you know, the world's changing so fast. Not just COVID, but the civil unrest, you know, all the things that are going on around the world. You know, what a strange place. I hope we find normalcy somewhere in the future. So I'll stay out of politics, but I'll just tell you that from my perspective, I've spent 20 years working in private equity. I've created what I'll call generational wealth for my family and future

relatives, grandkids and their kids. And I dumped into it. 20 years ago, I didn't know what the heck private equity was. I was chasing money and title. Someone offered me a job to leave GE and be president. It happened to be a private equity-backed company. And so I just dumb luck walked into an industry that still was kind of early on in its stages. And as a CEO, the first time in my mid-30s, I made a lot of mistakes, had a lot of success early, and was going places fast. And so I'm a lot more of a mature person today than I certainly was when I first started out on this journey. But boy, what a lucrative journey it's been. I've built multiple companies. I've employed thousands of people over the years. I've created a lot of millionaires

in my wake, people who've worked for me over the years that became shareholders of companies and got incentive stock from private equity and got multiple bites of the apple. And I've always prided myself on, I've got this one strange thing about me. And that is, if you talk to anybody I've ever had to let go in a company, they're still my friends and they still speak highly of me. And they'll like something I did on LinkedIn and I'm thinking, geez, here's a guy I fired 10 years ago, and he's still following and still liking. You know, there's a way to treat people in this world that transcends the title. You know, titles are how we organize efforts. But at a human level, we're all equal. And so I've always treated, because I started at the bottom and worked my way up, I've always been very respectful of the people around me.

And, you know, private equity has created a great deal of wealth for my family. And it's been such a lucrative adventure, but I've been able to touch thousands of people's lives. I've been able to give back to society. And so I would tell everybody out there, you're building a business, you're running a business. Ask yourself why, where are you going? What are you trying to do? When I'm mentoring MBA candidates at UCLA, I'll tell people, hey, let's start with writing your obituary. What did you accomplish in life? What are you proud of? Did anybody show up at your funeral? How did you give back to society? Why are you here? What is it you're trying to accomplish? The better you can define who you are, where you're going, and how you can be helpful to

society rather than just someone who sucks the life out, and how you can be helpful to society rather than just someone who sucks the life out of it, you'd be surprised. You can do both. You can create wealth. You can take care of people. You can have fun like Tommy's having fun with his company. And you can make a difference in the world. And if more people were focused on that, then how they could burn and blow shit up, the world would be a whole lot better place. So I guess that's it. I'll get off my soapbox. Thanks for inviting me on. I wish nothing but success to everybody who's out there. If you want to follow up, feel free to reach out on LinkedIn. I'll be happy to talk to you. Adam, listen, there's a lot of great podcasts.

I had Michael Gerber on here not so long ago. I had some powerful, amazing people. I've had Gino Wickman. But you're right up there, right at the top. I just love the fact that we're able to teach the listeners a whole new concept. This is the first time we've really deep, deep, dirty talk about private equity. It has been great. So really, really, really appreciate you coming on today. Great.

Thank you for having me. Good luck to you. Hey, guys, I just wanted to thank you real quick for listening to the podcast. From the bottom of my heart, it means a lot to me. And I hope you're getting as much as I am out of this podcast. Our goal is to enrich your lives and enrich your businesses and your internal customers, which is your staff. And if you get a chance, please, please, please subscribe.

You're going to find out all the new podcasts. You're going to be able to ask me questions to ask the next guest coming on. And do me a quick favor. Leave a quick review. It really helps us out when you like the podcast and you leave a review. Make it four or five sentences. Tell us how we're doing. And I just wanted to mention real quick,

we started a membership. It's homeservicemillionaire.com forward slash club. You get a ton of inside look at what we're gonna do to become a billion dollar company. And we're telling everybody our secrets basically. And people say, why do you give your secrets away all the time? And I'm like, you know,

the hardest part about giving away my secrets is actually trying to get people to do them. So we also create a lot of accountability within this program. So check it out. It's homeservicemillionaire.com forward slash club. It's cheap. It's a monthly payment.

I'm not making any money on it to be completely frank with you guys, but I think it will enrich your lives even further. So thank you once again for listening to the podcast. I really appreciate you