Transcription complète de Ep. 62 - Most Construction Companies Aren't Businesses. They're Jobs.

somebody says, 00:02:12.366 --> 00:02:16.546 look, I made my money and I'm just going to let it go, shrink the business down. 00:02:16.546 --> 00:02:17.822 And at some point I'll shut it down. 00:02:18.509 --> 00:02:22.596 And I look at it, you know, that's just not fair for people who help you build 00:02:22.596 --> 00:02:26.409 this business. Also, you may have all the money in your pocket now, 00:02:26.653 --> 00:02:30.101 but you build this business with other people's support. 00:02:30.872 --> 00:02:32.503 Right. What about those people out there? 00:02:33.933 --> 00:02:37.126 And you are also the same node leaving so much money on the table. 00:02:37.329 --> 00:02:40.596 You may not care about that money. Maybe you've done well for the business, 00:02:40.596 --> 00:02:41.983 but you may not care about the money. 00:02:42.512 --> 00:02:45.146 Give it to some charity, give it to a church, give it to whoever, 00:02:45.146 --> 00:02:47.826 or, or, you know, just hand it over to your employees somehow. 00:02:48.286 --> 00:02:50.627 Why let the business go through the slow death? 00:02:51.401 --> 00:02:55.653 Yeah, I think that what that speaks to is like some level of intentionality 00:02:55.653 --> 00:02:59.673 needs to go into your kind of plan for your business, right? 00:02:59.673 --> 00:03:03.853 And I think, you know, you and I talked about, I had a local HVAC contractor 00:03:03.853 --> 00:03:07.313 that I was working with, and I just asked him, you know, what was his succession 00:03:07.313 --> 00:03:10.363 plan? Because he had such expertise, he was able to come in, 00:03:10.363 --> 00:03:13.590 fix our AC unit, a couple other people didn't really know what was happening. 00:03:14.048 --> 00:03:18.493 And and we all know that that kind of expertise is kind of leaving quietly the 00:03:18.493 --> 00:03:20.022 market and leaving our industry, 00:03:20.538 --> 00:03:24.973 and you know he kind of mentioned that he he had plans for his son to take over 00:03:24.973 --> 00:03:28.683 but that kind of fell through and so his plan was just to kind of let it go, 00:03:29.194 --> 00:03:33.328 and and you know i had that conversation with him about maybe some alternatives but, 00:03:33.793 --> 00:03:38.219 you're saying that that is also happening elsewhere with maybe even larger businesses 00:03:38.625 --> 00:03:43.484 lars obviously you've you've kind of gone through some cycles relative to this 00:03:43.803 --> 00:03:45.213 category of the conversation. 00:03:45.553 --> 00:03:50.543 What is, when you think about like intentionality and succession planning. 00:03:51.141 --> 00:03:55.793 Did you always have the plan for an acquisition to sell the business? 00:03:56.293 --> 00:04:00.513 How intentional were you as you built Hermann Construction? I appreciate the question. 00:04:00.833 --> 00:04:05.023 I'll share a couple things. First and foremost, you know, in my prior life, 00:04:05.023 --> 00:04:06.103 I was in the military, right? 00:04:06.248

--> 00:04:10.133 And, you know, when people are in the military, it's all this conversation about, 00:04:10.133 --> 00:04:13.253 well, like, well, are you going to stay 20 years and then, and then you're going 00:04:13.253 --> 00:04:18.476 to retire and get your pension. Right. And so there's this sort of like finality to a career. 00:04:18.615 --> 00:04:21.313 And then it's like, well, then now what I'm going to do. Right. 00:04:21.313 --> 00:04:27.053 And I think, you know, for me, when I was transitioning out of the military, 00:04:27.053 --> 00:04:28.838 it was just a chapter, just a chapter. 00:04:29.314 --> 00:04:33.086 And so I saw business construction as just, Hey, this is the next chapter. 00:04:33.828 --> 00:04:38.172 And then as I'm, you know, early on in entrepreneurial days, 00:04:38.631 --> 00:04:41.782 I'm doing all the things, right? Going to the dinner parties in the tuxedo and 00:04:41.782 --> 00:04:44.452 taking out the trash at 6 a.m. right on the job site, right? 00:04:44.452 --> 00:04:46.189 In the next morning, right? Like all the things. 00:04:46.758 --> 00:04:48.784 And I was like, man, I want a vacation. 00:04:49.741 --> 00:04:54.182 How do I go on a vacation, right? So the key there was like, 00:04:54.182 --> 00:04:55.761 well, I got to hire people. 00:04:56.202 --> 00:05:01.433 I got to put structure in place in my business so that it can allow me to do other things. 00:05:02.071 --> 00:05:09.522 And I'll never forget I went to I was in EO like a YPO sort of organization and, 00:05:11.202 --> 00:05:15.762 it was Tim Ferriss wrote the 40 hour work year and you know it's like the 15 00:05:15.762 --> 00:05:20.205 minute abs and then the next guy writes the 12 minute ab book and this guy was the 4, 00:05:21.522 --> 00:05:28.462 hour work year or something ridiculous work week I read that one didn't work 00:05:28.462 --> 00:05:34.880 for me yeah right me too But the concept, the concept, the key takeaway from that, 00:05:35.512 --> 00:05:38.909 which was build it to sell it. 00:05:39.702 --> 00:05:45.712 And whether you ever sell it or not, by doing that motion, you are intrinsically 00:05:45.712 --> 00:05:49.456 injecting value into the organization. 00:05:50.374 --> 00:05:55.640 And it was at that moment, honestly, I think it was like 2014 that I was like. 00:05:56.447 --> 00:05:59.518 I figured it out. I'm making this business about me. 00:06:00.058 --> 00:06:05.779 I need to not make it about me and build value into the company so that I can 00:06:05.779 --> 00:06:07.075 go do other things in life. 00:06:07.557 --> 00:06:14.709 And I think in that, and I shared the Navy story because it was like, oh, it's just a chapter. 00:06:14.999 --> 00:06:19.701 I should treat this just like a chapter in a book. right and so to me it was, 00:06:20.252 --> 00:06:22.952 build value into the company whether we sell it or not. 00:06:23.646 --> 00:06:28.669 Great but in the process of building value i can now go on a vacation i can 00:06:28.669 --> 00:06:30.436 do all these other things in life right, 00:06:30.988 --> 00:06:34.989 yeah well and that kind of echoes in what you were saying which is is run it 00:06:34.989 --> 00:06:38.599 as if it could be sold tomorrow all right spots break loris real quick when 00:06:38.599 --> 00:06:43.089 was the last time you got a new set of drawings from an architect and they didn't 00:06:43.089 --> 00:06:45.449 cloud anything well the one that cost me a 00:06:45.869 --> 00:06:49.230 couple hundred brand was back I think in 2017 so, 00:06:49.832 --> 00:06:54.009 yeah lesson learned there yeah so you know what I like about what Trunk Tools 00:06:54.009 --> 00:06:57.029 is building is they're looking at tools to, 00:06:57.629 --> 00:07:02.521 help kind of remove the mundane from the job site and you know I same as you 00:07:02.730 --> 00:07:04.029 every time there was a bulletin 00:07:04.349 --> 00:07:08.332 or an addendum I would go back to designers and ask them to at least highlight 00:07:08.495 --> 00:07:11.889 or give me a cover letter on the changes and and that was always like pulling 00:07:11.889 --> 00:07:15.596 like teeth but but Trunk Tools is now automating that so So you get a bulletin come in, 00:07:16.032 --> 00:07:19.219 it automatically highlights the changes. You don't have to do a thing. 00:07:19.712 --> 00:07:22.949 Well, it's also hitting RFIs, right? It's also hitting submittals. 00:07:23.429 --> 00:07:27.536 And when we think about standardizing ops, right, and providing that, 00:07:28.058 --> 00:07:34.129 you know, sort of resource to those field operators, what I see it as, you know, 00:07:34.794 --> 00:07:40.245 it's sort of like this, like mentor within the company that structure standardizes, 00:07:40.408 --> 00:07:43.349 keeps it moving in the right direction, looks out for risk. 00:07:44.389 --> 00:07:49.218 And just this last week, you know, I had a QC manager just pass along the submittal to an owner. 00:07:49.855 --> 00:07:52.947 Without doing a review because he was too busy and it was wrong and, 00:07:53.727 --> 00:07:58.000 and you know the classic owner statement is did you even review this right, 00:07:58.599 --> 00:08:04.017 so this to me is carte blanche we absolutely did and think about getting that 00:08:04.017 --> 00:08:06.347 first pass before your your, 00:08:06.827 --> 00:08:11.007 your your your field manager ever even actually has to do the first pass someone's 00:08:11.007 --> 00:08:15.887 doing it for so to me it's about speed it increases accuracy and help standardize 00:08:15.887 --> 00:08:17.140 ops out in the field, right? 00:08:17.592 --> 00:08:20.927 Yeah. And this is the kind of AI that we've talked about on the podcast, 00:08:20.927 --> 00:08:24.867 really appreciating, right? Which is looking at ways to elevate the craftsman 00:08:25.227 --> 00:08:26.407 at the heart of project delivery. 00:08:26.747 --> 00:08:32.068 Give me time back so I can be out in the field managing risk,

right? Yeah, 100%. 00:08:32.480 --> 00:08:37.633 So, all right. If you're a little curious, check it out, trunktools.com forward slash podcast. 00:08:38.226 --> 00:08:40.925 And if you mentioned construction conversations, you get a discount. 00:08:41.406 --> 00:08:45.673 Discount. Demos are free and you guys get a discount. So let's go. 00:08:45.841 --> 00:08:50.032 As you have these conversations with contractors, what does that look like? 00:08:50.172 --> 00:08:55.317 For someone to go from, you know, have no sense of that principle to starting 00:08:55.317 --> 00:08:59.148 to think through, okay, I need to position this for a sale, even if I don't 00:08:59.327 --> 00:09:04.767 want to, because that will improve the operational efficiencies of the business. How. 00:09:07.047 --> 00:09:11.030 Does that look? Yeah. You know, Stephen, that's exactly what Lars just said. 00:09:11.188 --> 00:09:16.288 You know, when you start building a business which can run without you, 00:09:16.796 --> 00:09:20.257 you know, you don't have to sell it. You don't have to do all those things to 00:09:20.257 --> 00:09:24.041 sell the business, right? You just simply improve the quality of your life. 00:09:24.436 --> 00:09:27.832 You know, the analogy I always use is I tell people you buy a house, 00:09:28.186 --> 00:09:30.949 you keep it neat and clean, not because you have to sell it, 00:09:31.332 --> 00:09:32.481 because you want to enjoy your home. 00:09:33.257 --> 00:09:36.347 Why don't we do that the same thing with the business? But if someone knocks 00:09:36.347 --> 00:09:40.246 on your door and says, you have the most beautiful house on the block. 00:09:40.743 --> 00:09:43.715 Here's a blank check. Write the number. What are you going to do? 00:09:44.574 --> 00:09:49.473 And it happens large, right? People will be surprised when you have that beautiful 00:09:49.473 --> 00:09:54.872 home, there will be not one person. There could be multiple people knocking on your door. Yeah. 00:09:55.935 --> 00:09:57.483 Suddenly, all of a sudden, right? Yeah. 00:09:59.772 --> 00:10:04.943 Yeah. And I think maybe it would be interesting just to understand how you kind 00:10:04.943 --> 00:10:10.933 of came into this place of having a perspective on how to help folks in this 00:10:10.933 --> 00:10:13.223 industry kind of think through this process. 00:10:13.223 --> 00:10:17.513 Obviously, you know, you are coming at some of this from a financial background, 00:10:17.513 --> 00:10:22.015 but it seems like you've kind of embraced this niche of construction. 00:10:22.514 --> 00:10:25.503 Maybe a little bit about your background would be great. So, 00:10:25.823 --> 00:10:28.656 Stephen, my story is I come from an entrepreneurial background. 00:10:29.027 --> 00:10:31.783 I come from a small business family, my parents, mom's side, 00:10:31.783 --> 00:10:34.403 dad's side, everybody with small business owners. 00:10:34.854 --> 00:10:38.783 You know, I was having a conversation with

somebody and it made me recall what 00:10:38.783 --> 00:10:41.257 was my first business gig. 00:10:41.792 --> 00:10:47.573 I was somewhere around 10, 11 years old, I remember. So I went to my school 00:10:47.573 --> 00:10:50.024 and my teacher was wearing this pashmina shawl. 00:10:50.540 --> 00:10:54.143 And I heard her saying how much she bought it for. And my uncle had a factory 00:10:54.143 --> 00:10:55.433 who used to manufacture those. 00:10:56.237 --> 00:11:00.851 I just asked him how much he sells it for. And I bought it from my uncle. 00:11:00.851 --> 00:11:04.005 I gave it to my teacher and I made the markup. Made money. 00:11:04.248 --> 00:11:09.141 I didn't realize that was my first business collection. I had no idea. 00:11:09.141 --> 00:11:10.841 That was just natural to me, right? 00:11:11.281 --> 00:11:15.101 So anyways, moving fast forward, I did that. I started my first company, 00:11:15.101 --> 00:11:18.359 which was an IT company. It was when I was 15 years old. 00:11:18.998 --> 00:11:24.261 I immigrated to Canada in 2001, moved into corporate world. And my first job 00:11:24.261 --> 00:11:25.755 was in the construction world. 00:11:26.132 --> 00:11:29.021 So I worked with some of the largest companies, Carilion Construction. 00:11:29.361 --> 00:11:31.380 Unfortunately, that company has gone belly up now. 00:11:31.867 --> 00:11:34.941 Worked with Acorn Construction, which is a household name here in Canada. 00:11:34.941 --> 00:11:36.686 It's a publicly traded company. 00:11:37.180 --> 00:11:40.671 So I worked with them. I was exposed to a lot of subcontractors. 00:11:40.671 --> 00:11:43.612 And I quickly realized, you know, there is a huge gap in there. 00:11:44.216 --> 00:11:46.721 These large companies, they have systems, they have processes, 00:11:46.721 --> 00:11:50.613 they are run like businesses, but they have resources to hire the consultants and so on. 00:11:50.996 --> 00:11:55.611 But then there are small mom and pop shops out there, which are started by a 00:11:55.611 --> 00:11:59.631 technician who has built a good, successful plumbing business doing four or 00:11:59.631 --> 00:12:04.051 five million dollars in revenue. But one thing they don't realize is they don't 00:12:04.051 --> 00:12:05.183 have a business. They have a job. 00:12:05.777 --> 00:12:07.321 So I realized there's a huge gap. Right. 00:12:08.121 --> 00:12:09.903 And somewhere deep down in me. 00:12:10.553 --> 00:12:14.733 I come from a small business family or small business background. 00:12:14.866 --> 00:12:18.773 I connect with those folks a lot more than I could connect with the large billion 00:12:18.773 --> 00:12:20.184 dollar companies out there. 00:12:20.817 --> 00:12:25.493 So, you know, part of me, I saw the gap, a part of me, I was in the construction 00:12:25.493 --> 00:12:30.279 industry, a part of me, that's where I, that's what I enjoy most. 00:12:30.644 --> 00:12:35.323 Having, I connect most with these small companies. So that's what

I started 00:12:35.323 --> 00:12:40.840 back in 2001, sorry, 2010. And I said, let's just go out and help those folks out there. Hmm. 00:12:41.428 --> 00:12:44.973 Sponsor break. If you spend any time running a project, you know the answer 00:12:44.973 --> 00:12:47.703 is almost always sitting in the contract document somewhere. 00:12:48.261 --> 00:12:53.863 Catch is that it's almost never in one document. It's split across the contract, 00:12:53.863 --> 00:12:57.463 the specs, and some flow down clause three layers deep that nobody connects 00:12:57.463 --> 00:12:59.250 until it's already cost money. 00:12:59.418 --> 00:13:03.323 That's the whole premise behind Document Crunch. That risk doesn't live inside 00:13:03.323 --> 00:13:06.058 any single document. It lives in the gaps between them. 00:13:06.261 --> 00:13:10.771 And most teams never look at all of them together until they're standing in a dispute. 00:13:11.462 --> 00:13:16.031 The average construction dispute in the U.S. now runs about $60 million, 00:13:16.716 --> 00:13:19.084 according to Arcadis. It's a lot of money. 00:13:19.490 --> 00:13:23.461 And the root cause they point to isn't fraud or bad intent. It's people not 00:13:23.461 --> 00:13:25.086 fully understanding what they agreed to. 00:13:25.295 --> 00:13:28.169 So Document Crunch built a platform around closing that gap. 00:13:28.372 --> 00:13:33.991 Crunch AI reads the documents, surfaces the risks, and it cites the exact page and clause that's big. 00:13:34.339 --> 00:13:38.171 So you're not just taking its word for it. Project Assist lets your team act 00:13:38.171 --> 00:13:41.421 on it, ask questions across the entire project document set, 00:13:41.421 --> 00:13:45.793 hand draft your submitals, notices, and RFIs right from the chat window. 00:13:46.013 --> 00:13:50.411 And the whole thing runs on your own company standards. The office and the field 00:13:50.411 --> 00:13:53.780 are working off the same playbook for bid through closeout. 00:13:54.105 --> 00:13:59.071 No disconnects. It's live now across the U.S. and Canada. Go to documentcrunch.com 00:13:59.071 --> 00:14:02.439 forward slash construction conversations and book a demo. 00:14:02.846 --> 00:14:07.881 And, you know, as we kind of set up this maybe juxtaposition of you either build 00:14:07.881 --> 00:14:10.211 a business that is positioned to, 00:14:10.731 --> 00:14:15.581 sell or, you know, it's going to have operational efficiencies that will provide 00:14:15.581 --> 00:14:19.451 benefits to your day-to-day versus not doing that. 00:14:20.371 --> 00:14:26.254 What happens for the contractors the businesses that aren't doing that, 00:14:26.951 --> 00:14:30.891 in your experience that aren't aren't kind of positioning themselves intentionally 00:14:30.891 --> 00:14:34.155 thinking through how to add value to the business what do they, 00:14:34.648 --> 00:14:38.441 i mean i'm sure they're able to limp along a little bit but maybe they don't 00:14:38.441 -->

00:14:43.371 last and obviously this the industry kind of eats and and chews people up and 00:14:43.371 --> 00:14:45.675 kind of sits companies up and spits them out, 00:14:46.471 --> 00:14:49.303 is that what you're seeing as as kind of an alternative, 00:14:50.266 --> 00:14:53.082 sorry well Lars no no Nitin. 00:14:55.518 --> 00:15:00.621 Yeah, no worries. So I think the question is, if we're looking at the folks 00:15:00.621 --> 00:15:03.101 that are living maybe like Lars has, 00:15:03.561 --> 00:15:08.101 with his business before he sold it, which was kind of positioning it intentionally, 00:15:08.101 --> 00:15:13.421 adding value to the business, having some kind of idea to sell it versus the 00:15:13.421 --> 00:15:15.681 other end of the spectrum of, 00:15:16.504 --> 00:15:20.707 you know, you're really just operating in the business at all times. 00:15:20.910 --> 00:15:25.531 What happens to those businesses when they don't do what we just talked about? 00:15:26.463 --> 00:15:30.660 You know, in most cases, as I said, they go through a slow debt. 00:15:31.481 --> 00:15:35.425 They shut it down. You know, I have a tagline in my email. 00:15:35.838 --> 00:15:40.280 I always say, every owner exits if you do it well. 00:15:41.595 --> 00:15:43.901 And if you allow me to expand on that, what I mean is, you know, 00:15:44.281 --> 00:15:48.171 typically there is five options every owner has. And every owner is going to 00:15:48.171 --> 00:15:50.921 exit the business at some point. I'm not saying every owner is going to sell 00:15:50.921 --> 00:15:54.889 the business. Every owner is going to exit the business. And, 00:15:56.090 --> 00:16:00.110 The first option people have is what they're hopeful of all the time is that 00:16:00.110 --> 00:16:02.725 sometime, at some point, their kids will take over the business, 00:16:03.337 --> 00:16:06.820 which we see 95% of the cases, it's not happening out there, right? 00:16:07.029 --> 00:16:09.440 We can talk about it in more detail, but that's not happening. 00:16:09.440 --> 00:16:11.174 Kids are not taking over the businesses. 00:16:11.342 --> 00:16:15.232 I personally didn't take over my dad's business. I don't see my kids taking over my business. 00:16:15.835 --> 00:16:19.270 The second option is you give it over to the kids. As Lars mentioned, 00:16:19.270 --> 00:16:25.289 ESOP, you know, the business can be transferred over to the employees. 00:16:25.829 --> 00:16:30.160 The third option could be you sell it to the third party, right? 00:16:30.160 --> 00:16:34.150 Which is where we come in, we can help you find the buyer, locate the right 00:16:34.150 --> 00:16:37.219 buyer, and assist you with the transaction there. 00:16:37.736 --> 00:16:42.351 The fourth option could be you simply shut the business down, right? 00:16:42.473 --> 00:16:45.820 You say, look, I've done it, made my money, or whatever happens, 00:16:45.820 --> 00:16:50.140 and I'm just closing the doors, which is what we are seeing is happening a lot 00:16:50.140 --> 00:16:51.765 more than what it should be happening. 00:16:52.084 --> 00:16:54.610 And the fifth option, which could be very unfortunate, is, you know, 00:16:55.010 --> 00:16:56.734 somebody goes belly up, right? 00:16:57.094 --> 00:17:00.350 And we see that as well, because people lose the passion or something happens, 00:17:00.350 --> 00:17:02.516 a recession comes or whatever could happen. 00:17:02.859 --> 00:17:08.077 And then, you know, there is the, it goes under bankruptcy filing and so on. 00:17:09.520 --> 00:17:14.230 Right well and i think when you're the opposite end of the maybe intentionality 00:17:14.230 --> 00:17:20.630 spectrum is is reactive right and and you're having to react to the market you're having to react to 00:17:21.030 --> 00:17:30.170 customer variables and and maybe you get into a forced sale situation where maybe you know the the a. 00:17:34.007 --> 00:17:39.367 Have you seen that? And maybe what's the result of what happens to that business 00:17:39.367 --> 00:17:44.047 when maybe there's an acquisition that really doesn't fit maybe the culture 00:17:44.347 --> 00:17:46.862 or kind of ongoing elements of that business? 00:17:47.927 --> 00:17:54.356 It happens quite a bit, right? We have, you know, when we sit on the deal table, 00:17:54.989 --> 00:17:59.677 my first thing always is I ask both the buyers and the sellers on both sides. 00:17:59.677 --> 00:18:04.277 I'm like, do you think the person on the opposite side is the right fit for 00:18:04.277 --> 00:18:06.367 your business? Forget about the money for a second. 00:18:06.936 --> 00:18:10.094 Money is important. I get it. For all of them, everything is important. 00:18:10.934 --> 00:18:14.911 I've always had this approach. I would just, once we have an offer come through, 00:18:15.340 --> 00:18:19.677 and sometimes there's multiple offers come through, I would have a session with my client. 00:18:20.287 --> 00:18:24.328 If it's a seller, I would say, okay, I'm not going to tell you what the headline number is. 00:18:24.786 --> 00:18:27.653 First, you tell me, who do you think is the right fit for your business? 00:18:27.951 --> 00:18:30.927 You build this business, which is a legacy. Who do you want to hand it over? 00:18:32.407 --> 00:18:36.067 I want to hear that answer from people. Who do you think your employees are 00:18:36.067 --> 00:18:36.943 going to like? down with. 00:18:37.468 --> 00:18:41.107 You, in most cases, if you're selling a business, you want to leave a legacy, 00:18:41.447 --> 00:18:44.487 you want perhaps your grandkids to come one day and say, look, 00:18:44.487 --> 00:18:48.109 my grandfather started this business or my grandmother started this business. 00:18:49.096 --> 00:18:52.339 Who do you think has a chance that in 10 years from now, 20 years from now, 00:18:52.339 --> 00:18:54.634 the business will be even bigger than where you're going to leave it? 00:18:55.719 --> 00:18:57.989 Once I hear that

answer, then I give them the headline numbers. 00:18:57.989 --> 00:19:00.599 I'm like, okay, here's the two offers. Now you decide who you want to go with. 00:19:02.659 --> 00:19:07.609 On the opposite side, if it's a buyer we are working with, I tell them the same 00:19:07.609 --> 00:19:13.639 thing. I'm like, who do you think which seller you can trust is not going to cheat around? 00:19:13.939 --> 00:19:18.606 Which seller do you think is going to hand over the business to you in a most efficient manner? 00:19:19.274 --> 00:19:22.749 Or that seller is going to say, give me my money and I'm out of it. 00:19:22.749 --> 00:19:23.941 I'm not going to see you over again. 00:19:24.642 --> 00:19:29.889 Right? Because the transitions are very tricky too. It's not about when you 00:19:29.889 --> 00:19:32.367 buy or sell a house, you give the money, you take the money and you're done. 00:19:32.623 --> 00:19:39.689 When you sell a business, you put it on paper or not, there is that soft partnership 00:19:39.689 --> 00:19:42.299 which happens for a period of time. There's people. 00:19:42.879 --> 00:19:45.865 It could be six months. Yeah, there's people. People. 00:19:46.494 --> 00:19:49.219 It's a relationship. So it could be six months. It could be one year. 00:19:49.219 --> 00:19:52.102 It could be two years. That's a relationship which gets transitioned. 00:19:52.660 --> 00:19:56.079 If I'm buying a business from somebody and the person, the seller has, 00:19:56.079 --> 00:20:00.142 okay, one year contract to stick around. But what happens after a year and a half? 00:20:00.607 --> 00:20:04.299 If a client calls the previous owner, is he going to say, look, 00:20:04.299 --> 00:20:07.197 here is my successor. Talk to him. Or he's going to say, okay, don't talk to him. 00:20:08.161 --> 00:20:11.919 So as a buyer, you need to keep an eye out on those things. Who do you trust? 00:20:11.919 --> 00:20:16.218 Can you look into their eyes? Can you shake their hands without the lawyers getting involved? 00:20:16.863 --> 00:20:21.011 If the answers are yes, I think then we move to the next steps. 00:20:21.272 --> 00:20:24.509 That's an ideal way. But, you know, some people do it, some don't. 00:20:25.613 --> 00:20:29.512 Yeah, I mean, I'm kind of going through this process with I'm selling my house. 00:20:29.512 --> 00:20:35.742 We just moved in our new house and, you know, we had a couple offers and it 00:20:35.742 --> 00:20:39.512 ended up with one offer and we went through the situation where it was like, 00:20:39.512 --> 00:20:43.022 man, do we want, because we're also living by these people. 00:20:43.022 --> 00:20:47.429 So we're moving into the next door house. So we would be living by the assumed buyer. 00:20:48.114 --> 00:20:53.132 And so that kind of question of a fit really matters more than it maybe typically does. 00:20:53.132 --> 00:20:57.872 And so we ultimately kind of ended negotiations with, because of that reason. 00:20:57.872 --> 00:21:02.852

So I can imagine even more so when you're giving over your life's work and kind 00:21:02.852 --> 00:21:04.634 of working through that, that dynamic. 00:21:05.087 --> 00:21:08.849 Lars, how much of that was, was applicable to your experience? 00:21:09.329 --> 00:21:12.812 Well, I think what Nitin just described is. 00:21:15.160 --> 00:21:20.392 The lens by which every transaction should be looked at and weighed and measured. 00:21:21.692 --> 00:21:24.504 But it's also no different than, I think, when you hire someone. 00:21:25.186 --> 00:21:29.292 It's like, is this person going to fit into my family? 00:21:29.494 --> 00:21:33.672 You're the gatekeeper. Is this the right move? Can I see myself. 00:21:35.085 --> 00:21:39.652 Taking bullets, bleeding, you know, eating at the same table with this person 00:21:39.652 --> 00:21:41.772 for the next however long, you 00:21:41.772 --> 00:21:49.441 know, and as many times as I've heard that little voice and ignored it, 00:21:49.977 --> 00:21:54.998 that little voice is right every single time, you know, it's just right every single time. 00:21:56.041 --> 00:21:58.899 Yeah. So I think it's spot on. 00:22:00.020 --> 00:22:03.930 And I'll say, and you've probably got a lot to share about this, 00:22:03.930 --> 00:22:07.559 it's like, well, if you're a deal hunter, right, if you're looking for a deal, 00:22:08.532 --> 00:22:16.849 how much are you willing to put up with for a lower multiple or a lower valuation versus, 00:22:17.588 --> 00:22:22.697 well, I'm going to pay above market to get the right existing team, 00:22:23.045 --> 00:22:25.291 supposedly, right, based off the feel. 00:22:25.971 --> 00:22:30.820 That i believe there's better continuity you know or better culture fit for 00:22:30.820 --> 00:22:32.400 some of these things so they're there, 00:22:32.900 --> 00:22:37.300 you know you use the word soft whether you call them intangibles you know whatever 00:22:37.300 --> 00:22:41.440 it is it's it's it's 100 real and the other piece is like, 00:22:42.158 --> 00:22:43.940 it's like the loyalties, 00:22:44.668 --> 00:22:47.971 you know well i've worked for chuck for 20 years so 00:22:48.366 --> 00:22:52.830 i'm gonna do it whatever chuck says it's like well chuck's not even here anymore 00:22:52.830 --> 00:22:56.300 he left when he sold the business after a year yeah but i still talk to him 00:22:56.300 --> 00:22:59.754 in the afternoon on my way home every day like i used to what the hell 00:23:00.162 --> 00:23:05.014 it's like chuck's like a puppet master outside the organization coming in you're like, 00:23:05.537 --> 00:23:07.905 this how do i how do i deal with this. 00:23:09.083 --> 00:23:13.370 Yeah yeah and that's that's large that's a transferability issue right that's 00:23:13.370 --> 00:23:17.830 where the businesses are not transferable you know buyers think they're buying 00:23:17.830 --> 00:23:20.780 a business and very quickly they realize they bought the relationships they think. 00:23:21.883 --> 00:23:25.870 And and i'd love to i'd love to poke around a little bit about your experience 00:23:25.870 --> 00:23:26.766 and what you've seen, but, 00:23:27.586 --> 00:23:33.042 I would expect there's a certain level of sophistication within businesses that 00:23:33.042 --> 00:23:37.552 make them a good fit for acquisition. 00:23:38.291 --> 00:23:42.732 Because what was the statistic? You know, 85% of businesses don't sell. 00:23:42.732 --> 00:23:47.012 They just, you know, well, were they ever the right fit? 00:23:47.012 --> 00:23:50.172 Were they built to be sold? Were they built to inject value? 00:23:50.172 --> 00:23:55.322 Or the owner just did it as a lifestyle business. He, you know, 00:23:55.322 --> 00:23:58.448 made some money and it is what it is. It's good. 00:23:58.877 --> 00:24:01.006 I personally think that's okay, right? 00:24:01.642 --> 00:24:05.441 That is okay. And the market needs that, right? The market needs that. 00:24:06.059 --> 00:24:15.562 But, you know, I think really it's, you know, what does that mix within your experience look like? 00:24:15.562 --> 00:24:21.826 And have you seen any patterns specifically around GCs versus specialty trade 00:24:22.227 --> 00:24:29.119 and how those sort of various components of the construction realm. 00:24:30.100 --> 00:24:32.999 But really nuanced, right? Right. 00:24:33.469 --> 00:24:38.052 And what what you see, because, again, if you're if you're an owner of a plaster 00:24:38.052 --> 00:24:39.582 company, you know, doing two million 00:24:39.582 --> 00:24:44.000 a year, if you're owner of mechanical HVAC doing 20 million a year, 00:24:44.562 --> 00:24:49.992 what what in your experience have you seen and any any stories you could sort 00:24:49.992 --> 00:24:53.732 of share or or or sort of for the listeners? 00:24:53.732 --> 00:24:56.535 Just if you're interested in doing this, this is what I would focus on. 00:24:57.592 --> 00:25:02.024 So I got a two-part answer for you, Lars, here. So I would actually take those 00:25:02.024 --> 00:25:05.382 statistics back, and I would rather put some more light on it. 00:25:05.794 --> 00:25:09.914 When we say 85% of the businesses don't sell, I would rather correct myself 00:25:09.914 --> 00:25:16.168 by saying, you know, 85% of those don't sell, they're actually not even businesses. 00:25:17.034 --> 00:25:21.219 100% of that, that 85% we're talking about, they were actually jobs. 00:25:22.052 --> 00:25:26.444 So we can call them fancy word it's a business but that's that's the reason 00:25:26.444 --> 00:25:29.053 they're not selling because they're not businesses they're jobs, 00:25:29.930 --> 00:25:35.594 and the ones which 15 we're talking about i would say most of them are structured 00:25:35.594 --> 00:25:39.003 as a business that's why they end up selling all of them, 00:25:39.711 --> 00:25:44.767 so if we were to say okay literally what is a business 100 of those could sell, 00:25:45.453 --> 00:25:50.194 for the

right reasons but 85 of those which are not selling they're actually 00:25:50.194 --> 00:25:52.145 not even business Right. 00:25:52.452 --> 00:25:57.703 So coming back to what I'm seeing in the marketplace, I can tell you definitely 00:25:57.947 --> 00:26:03.964 there is more of a demand from the buyer's lens for contracting businesses for 00:26:03.964 --> 00:26:06.589 the trades out there versus GCs. 00:26:07.158 --> 00:26:11.434 And I believe the reason underneath is because if you think about the nature 00:26:11.434 --> 00:26:13.851 of a GC business, it's very project based. 00:26:15.085 --> 00:26:18.745 You build a home, it's done, you move on to the next. You are unemployed, 00:26:18.745 --> 00:26:23.691 you find next project, you deliver on it and so on. So there is lack of recurring revenue in there. 00:26:24.218 --> 00:26:29.025 So that could be one underlying reason that there is lower demand or a lower 00:26:29.025 --> 00:26:31.636 valuation multiples which happen in those cases. 00:26:31.990 --> 00:26:38.935 Now, compare that to HVAC company, which has recurring revenue and which has 00:26:38.935 --> 00:26:42.565 contracts in place, long-term contracts. So there is a very, 00:26:42.565 --> 00:26:45.765 very high demand for those kind of businesses. 00:26:46.405 --> 00:26:51.705 So you're basically saying HVAC, if they have the right amount of diversification, 00:26:51.705 --> 00:26:54.164 is project and service-based, correct? 00:26:54.932 --> 00:26:58.148 That would be correct, yes. Yeah. Yeah. 00:26:59.255 --> 00:27:03.045 Are you seeing the profile of the buyer change? I mean, I think there's kind 00:27:03.045 --> 00:27:06.525 of a meme going around of like finance bros buying, you know, 00:27:06.525 --> 00:27:07.935 little specialty contractors. 00:27:08.375 --> 00:27:14.725 And I think, you know, in this current age of maybe AI and where we see white 00:27:14.725 --> 00:27:18.291 collar work somewhat threatened by some of these models coming out. 00:27:18.784 --> 00:27:22.625 And so well-capitalized non-domain 00:27:22.625 --> 00:27:26.305 experts kind of coming into the space thinking they can buy things. 00:27:26.805 --> 00:27:30.429 Is that kind of trickling into maybe some of the buyer activity that you're seeing? 00:27:31.044 --> 00:27:37.255 Absolutely. Absolutely. But I would say one thing. The buyer profile does not 00:27:37.255 --> 00:27:41.015 change based on the industry. It's changing based on the way business is set 00:27:41.015 --> 00:27:43.144 up and the size of the business. 00:27:43.394 --> 00:27:49.153 That changes the buyer profile more than the vertical of the industry, I would say. 00:27:49.866 --> 00:27:53.668 Right. So definitely we all know what's going on with AI right now. 00:27:53.958 --> 00:27:56.765 But on the other side, if you think about it, what do you need for AI? 00:27:56.765 --> 00:27:57.830 You need the data centers. 00:27:58.126 --> 00:28:00.228 What do you need for data centers? You need the

electricians. 00:28:01.327 --> 00:28:06.158 So there is a huge demand for electrical companies, which has come up as of 00:28:06.158 --> 00:28:10.737 late, right? HVAC, they have been going on. The consolidation, 00:28:10.923 --> 00:28:13.639 the roll-ups in the HVAC space, they have been going on for a while. 00:28:14.328 --> 00:28:17.128 Landscaping, it has started as well. It's been going on. 00:28:17.128 --> 00:28:20.218 But now the electrical is also coming under the radar just because of, 00:28:20.218 --> 00:28:23.040 primarily because of the data centers, right? 00:28:23.040 --> 00:28:26.628 Now, when we talk about the profile of the buyer, that changes depending on 00:28:26.628 --> 00:28:28.908 the size and how the business is structured also. 00:28:28.908 --> 00:28:35.588 How do you, if I may, how do you feel about the roll-up and your experience 00:28:35.588 --> 00:28:40.678 growing up, small business versus we'll call it roll-up? 00:28:41.107 --> 00:28:44.115 What are your thoughts around, you know? 00:28:44.958 --> 00:28:50.949 Maybe define roll-up before, Lawrence. What do you see as, how are you defining roll-up? 00:28:52.223 --> 00:28:59.884 Larger money coming in and bolting together multiple businesses into platforms. And... 00:29:00.824 --> 00:29:04.082 Yeah. So just gobbling. Yeah. 00:29:04.210 --> 00:29:08.702 So I'll add a little bit more context, if I may, to that. So what happens is 00:29:08.702 --> 00:29:12.436 a private equity player comes in, they buy a larger company. 00:29:12.709 --> 00:29:14.839 Let's just throw some numbers, hypothetical numbers. 00:29:15.182 --> 00:29:18.218 They buy, say, 20 million revenue HVAC company. 00:29:18.950 --> 00:29:22.522 Right. Now they say, OK, how do we go from 20 to 50? 00:29:23.247 --> 00:29:27.622 They would start acquiring another smaller company, say 5 million revenue companies, 00:29:27.622 --> 00:29:31.602 and they would tag them along into the $20 million company to make it a $50 million. 00:29:32.433 --> 00:29:36.802 And the way the mathematics work over there is it's not about what we are servicing 00:29:36.802 --> 00:29:42.775 and all that stuff. It's all about at a $20 million, the multiple is, say, X. 00:29:43.586 --> 00:29:46.768 On a $5 million, the multiple is X minus 3. 00:29:47.432 --> 00:29:50.537 On a $50 million, it's going to be X plus 3. 00:29:51.126 --> 00:29:54.372 So all they have done is they have added value by buying something at X, 00:29:54.372 --> 00:29:59.652 then buying a few things below X, putting them together, and then at a larger 00:29:59.652 --> 00:30:01.552 scale, selling it for X plus three. 00:30:02.327 --> 00:30:06.523 So it's just basically the way they generate the alpha and the value add. 00:30:06.738 --> 00:30:11.962 That's typically at a high level, that's a definition of a rollup or what private 00:30:11.962 --> 00:30:13.646 equity firms are doing out there. 00:30:14.264 --> 00:30:18.762 You can almost imagine the collection of Patagonia vests having this conversation 00:30:18.762 --> 00:30:20.602 about how attractive this would be. 00:30:20.602 --> 00:30:28.162 What's funny is when I sold my company, not to get into nuanced finance, 00:30:28.162 --> 00:30:30.763 but it was like, wait a minute, asset, stock. 00:30:31.013 --> 00:30:35.682 Well, these are some interesting benefits to a buyer or seller. 00:30:35.682 --> 00:30:40.614 And then to your point, X par, minus plus. 00:30:40.881 --> 00:30:42.996 Wait a minute. That's what these guys do. 00:30:43.658 --> 00:30:49.722 They buy And because they're They buy it at minus three And then Then overnight 00:30:50.162 --> 00:30:54.322 The next thing becomes Immediately becomes x Right? And then all we gotta do 00:30:54.322 --> 00:30:57.456 Is get a little bit more And then it's x plus three Like That's it. 00:30:58.731 --> 00:31:06.484 My concern, my concern is I don't know how much the market can handle around 00:31:06.484 --> 00:31:10.652 rolling it all up together when 85%, 00:31:11.414 --> 00:31:14.175 of the businesses aren't even businesses. 00:31:14.326 --> 00:31:18.434 And I think, you know, at the end of the day, sure, the big hospital organizations, 00:31:18.434 --> 00:31:21.864 you know, or universities, they're going to have mechanical companies servicing 00:31:21.864 --> 00:31:24.728 and they're, you know, all that's as needed. Got it. Great. 00:31:25.483 --> 00:31:32.424 But I just it's there's I think it just sort of comes to a point where it significantly 00:31:32.424 --> 00:31:40.395 changes the trades and it's just about more more more more more rather than. 00:31:41.264 --> 00:31:46.767 Culture and protecting, whether you call them small businesses or just family 00:31:46.767 --> 00:31:50.453 businesses, just family run businesses. 00:31:50.807 --> 00:31:55.735 And I think the amount of family run businesses in construction, 00:31:56.107 --> 00:32:00.757 you know, specialty and GC, there's a lot, there's a lot, right? 00:32:00.757 --> 00:32:04.217 I wouldn't expect a family run business to go and be producing iPhones, 00:32:04.217 --> 00:32:08.907 right? That is, that's a totally different ballgame. But when it comes to regional 00:32:08.907 --> 00:32:13.918 or local electrical drywall painting, yeah, I don't know. 00:32:14.259 --> 00:32:17.367 It's kind of crazy to me that succession isn't happening more. 00:32:17.367 --> 00:32:22.627 Maybe it's trending up again, but that should be, that's the youth's main path 00:32:22.627 --> 00:32:26.847 to employment at this point. You know, if I may, I think the past 40 years in 00:32:26.847 --> 00:32:29.421 construction have been hard. 00:32:29.787 --> 00:32:34.437 And the reason is is because the amount of technological call it advances and 00:32:34.437 --> 00:32:38.111 then stuff thrown at us to supposedly make our life easier, 00:32:38.882 --> 00:32:43.057 i am starting to see that actually come to fruition like i actually see it getting 00:32:43.057 -->

00:32:48.277 a little bit better and what i've heard from kids who's i can share my story 00:32:48.277 --> 00:32:49.598 here specifically around, 00:32:50.187 --> 00:32:55.307 we'll call it my kids but why are you why are you no no no well i was, 00:32:56.127 --> 00:32:57.967 i don't know because. 00:32:59.727 --> 00:33:04.067 It's my projection my projection just like many business owners like yeah well 00:33:04.067 --> 00:33:07.807 i'm doing this for my kids right and then your kids like no i don't want this right, 00:33:08.347 --> 00:33:10.547 and you said it's like i don't take over my dad's business i don't want that 00:33:10.547 --> 00:33:15.747 thing and i think there's there's a lot of baggage that kids can carry with 00:33:15.747 --> 00:33:22.198 them from the observation of what mom or their dad went through as a business owner, 00:33:22.853 --> 00:33:25.779 and just because you're the kid you, 00:33:27.042 --> 00:33:30.792 of a business owner, what makes you qualified to go take over the business? 00:33:31.461 --> 00:33:35.973 And are you going to level it up or are you going to drive it into the ground? 00:33:35.973 --> 00:33:41.243 We've all seen companies that next generation take it over, just drive it into 00:33:41.243 --> 00:33:44.540 the ground. You're like, what the heck were they thinking? Or guess what? 00:33:44.754 --> 00:33:48.057 How about an ESOP where they just drive it into the ground? 00:33:48.487 --> 00:33:52.487 Because, well, I just thought they could do it. No, not at all. 00:33:53.032 --> 00:33:56.922 But in my kid's scenario, and I think I've mentioned to this other pod before, 00:33:57.380 --> 00:34:01.247 which was, I don't want my kids to do construction. I want to help them do whatever they want. 00:34:02.041 --> 00:34:07.400 And then it was, wait a minute, there's maybe not the best leaders out there. 00:34:08.073 --> 00:34:10.075 If I can give my kids a good environment. 00:34:12.503 --> 00:34:15.442 To be around good leadership, good structure, good management, 00:34:16.098 --> 00:34:18.821 and or friends, and inspire them to do whatever they want. 00:34:19.390 --> 00:34:22.100 Maybe it's construction, maybe it's real estate, maybe something else. I don't know. 00:34:22.799 --> 00:34:27.583 But what I don't want them to do is we'll call it go work for evil corp out 00:34:27.583 --> 00:34:30.467 there and then just like lose all motivation, 00:34:31.275 --> 00:34:36.731 I want kids to be motivated and youth to be motivated rather than demotivated on their first job. 00:34:37.414 --> 00:34:40.217 Well, and I think we've talked about this too. 00:34:40.557 --> 00:34:45.537 I think AI is creating a bifurcated society, which is renters versus owners. 00:34:46.197 --> 00:34:53.127 And so I think the idea of having equity in anything positions you obviously 00:34:53.127 --> 00:34:54.817 better than the opposite. 00:34:55.157 --> 00:34:59.060 And I do think with where these frontier models are heading, 00:34:59.977 --> 00:35:07.217 the need for you to be this really dynamic CEO slash CFO changes, right? 00:35:07.597 --> 00:35:12.177 And the need for you to add value into the business, that angle can change. 00:35:12.177 --> 00:35:19.067 But I think it would be interesting to understand from your perspective with 00:35:19.067 --> 00:35:23.747 that dynamic at play, which is, hey, maybe succession planning, 00:35:23.747 --> 00:35:26.025 you know, participation in trade schools is up. 00:35:26.333 --> 00:35:31.017 And so maybe the trend is going back to succession planning or some element 00:35:31.017 --> 00:35:38.937 of assuming the kids will take over as this kind of buyer persona profile is also adjusting. Yeah. 00:35:40.564 --> 00:35:46.894 How are you maybe advising owners right now around. 00:35:48.704 --> 00:35:51.644 Whether or not they should go with the PE planning the roll-up, 00:35:51.964 --> 00:35:56.124 or should they wait and try to convince their kids to take over the business? 00:35:56.124 --> 00:35:58.565 Like, how do you navigate that conversation? Yeah. 00:35:59.564 --> 00:36:03.524 I agree with what Lars just said. You know, kids not taking over, 00:36:04.024 --> 00:36:08.484 and with the cultural issue about the roll-ups and all that stuff, he's 110% correct. 00:36:08.484 --> 00:36:10.924 You know with the with the roll-ups i'm just going to come back to your question 00:36:10.924 --> 00:36:14.824 but with the roll-ups what he just said it's absolutely correct you know there is, 00:36:15.504 --> 00:36:19.854 so much money being poured into private equity these days that everybody thinks 00:36:19.854 --> 00:36:25.514 they can be the next roll-up company and team and so on and people just don't 00:36:25.514 --> 00:36:28.100 realize how important the culture, 00:36:28.546 --> 00:36:31.480 of a business is to the business right, 00:36:32.031 --> 00:36:36.694 and to me when i am as an intermediary i'm looking at a buyer we are qualifying 00:36:36.694 --> 00:36:42.381 screening the buyer, the first thing I want to see is what value add they bring to the business. 00:36:42.497 --> 00:36:46.240 And when the conversation starts with, okay, I want to see the financial statements, 00:36:46.958 --> 00:36:50.194 to me, that is the biggest red flag. When the first thing they're asking for 00:36:50.194 --> 00:36:54.104 is the financial statements, because all I see right now is that all they're 00:36:54.104 --> 00:36:55.433 concerned about is the numbers. 00:36:55.938 --> 00:36:59.462 They have zero plan to add a value to the business. 00:36:59.851 --> 00:37:03.544 They are not concerned about the culture. They got no idea what's going to happen 00:37:03.544 --> 00:37:05.818 tomorrow. If a recession happens, how are they going to handle it? 00:37:06.474 --> 00:37:09.754 You know, there's, with due respect to all the professions, there's a lot of 00:37:09.754 --> 00:37:11.530 MBA books written and this and that. 00:37:12.091 --> 00:37:16.314

But, you know, coming from a billion-dollar company and being in a shoe of a 00:37:16.314 --> 00:37:21.398 small business owner, two different skill sets altogether. And I've been in both. 00:37:22.233 --> 00:37:27.839 You know, you as a person working in a billion-dollar company, 00:37:27.839 --> 00:37:31.472 you get to see the financial statements and analyze them. 00:37:32.065 --> 00:37:36.609 As a business owner, you take the ownership of those. You don't analyze them. 00:37:36.609 --> 00:37:39.542 You become responsible for those. You manage those. 00:37:40.294 --> 00:37:45.889 Right? So coming back to your question, who should be buying or what should 00:37:45.889 --> 00:37:47.199 we advise people? Should they go 00:37:47.199 --> 00:37:52.398 with the PE or should they go with the selling it to the kids and so on? 00:37:53.822 --> 00:37:59.004 On Kate's point, I would say, you know, Stephen, not everybody is an entrepreneur. 00:38:00.379 --> 00:38:04.659 It's hard. It's difficult to be a business owner. It has to come from inside. 00:38:07.086 --> 00:38:12.119 It's a hustle. You by nature, I just, this morning, I interviewed somebody we're 00:38:12.119 --> 00:38:13.454 looking to bring on our team. 00:38:13.740 --> 00:38:15.615 It's a middle-aged professional. 00:38:15.933 --> 00:38:18.649 And I'm like, why you want to join? Because I'm an entrepreneur. 00:38:18.649 --> 00:38:21.183 I said, okay, tell me your laminate story. 00:38:22.113 --> 00:38:26.799 I don't have one. So you tell me you really want to be an entrepreneur and in 00:38:26.799 --> 00:38:30.599 40 years of your life, you've never tried being an entrepreneur? 00:38:30.599 --> 00:38:32.283 Have you ever done any hustle? 00:38:32.921 --> 00:38:37.532 No, I come from a large company. I know how to manage. Well, 00:38:38.014 --> 00:38:39.899 there's nothing to manage. You're buying a small business. 00:38:40.999 --> 00:38:45.944 Yeah, you create. Yeah, you create. You got to go. Do you know how to sell? Yeah. 00:38:46.580 --> 00:38:50.618 Right. Do you know if tomorrow a technician is not there how to fix a toilet? 00:38:51.420 --> 00:38:54.709 As a small business owner, you've got to be ready to do anything and everything. 00:38:54.709 --> 00:38:57.599 And that's where the problem with the roll ups come in. And that's where the 00:38:57.599 --> 00:39:00.689 problem with the next generation of kids come in because not all the kids want 00:39:00.689 --> 00:39:04.180 to do that because they've seen their parents do this. 00:39:04.903 --> 00:39:07.922 They've seen their parents paying everybody before they get paid. 00:39:09.128 --> 00:39:15.722 Well, I think part of, part of my hope with this conversation is to kind of 00:39:15.722 --> 00:39:22.312 inspire more field ops folks to think through how they might become owners. Right. 00:39:22.491 --> 00:39:25.692 And, and whether or not they can create a collective, right? 00:39:25.692 --> 00:39:28.552 Like Lars, if you and I were on a

project team, we both had a, 00:39:28.952 --> 00:39:32.207 you know, fairly well capitalized and we had this idea. 00:39:32.509 --> 00:39:36.822 I think for so long it was in the back of my head, but I never acted on it. 00:39:36.822 --> 00:39:42.432 And I do think we need more domain experts that are taking over the next gens 00:39:42.812 --> 00:39:45.532 of these, you know, companies because they need that kind of leadership. 00:39:45.872 --> 00:39:49.672 Again, Stephen, I think I've mentioned this. It's never been easier just to 00:39:49.672 --> 00:39:50.692 start a business like this. 00:39:52.072 --> 00:39:55.442 And, you know, there was a point where I was even trying to buy businesses. 00:39:55.442 --> 00:40:00.042 I was like, ah, there's a lot of baggage with these people and there's just 00:40:00.042 --> 00:40:03.612 baggage with their software systems. 00:40:03.612 --> 00:40:06.852 And I'll just, and then if I try to change it now, I'm the bad guy, 00:40:06.852 --> 00:40:09.489 right? But really, I'm just trying to make everyone's life easier and more than 00:40:09.709 --> 00:40:11.347 stuff more accurate, right? And, 00:40:12.132 --> 00:40:16.630 oh and i was just like just screw it just go start this is start it right and 00:40:16.630 --> 00:40:22.050 and i think like that's a little bit of like where we are in in time with especially 00:40:22.050 --> 00:40:26.244 with ai and you know and and just, 00:40:26.910 --> 00:40:31.640 there's a transition occurring and and i believe for the first time in a long 00:40:31.640 --> 00:40:36.767 time i actually see things getting easier like 100 things are getting easier. 00:40:37.630 --> 00:40:41.630 But but i want to go back and And so, Stephen, 00:40:42.370 --> 00:40:45.400 I do want specifically for the listeners, because I do think there's a number 00:40:45.400 --> 00:40:50.340 of people, to your point, who are like, well, why would I want to go on this journey? 00:40:50.340 --> 00:40:55.155 It's really hard, right? I saw my parents do it, or I thought, but I don't know. 00:40:55.654 --> 00:40:59.179 Listen, I don't know, but I think I'd like to is one thing. 00:40:59.822 --> 00:41:04.170 The way I see it right now is, and I think it would be really awesome if you 00:41:04.170 --> 00:41:07.285 shared what you're seeing in the market. 00:41:07.715 --> 00:41:11.750 I can tell you right now, my buddy over at Morgan Stanley, who does M&A stuff, 00:41:11.750 --> 00:41:16.521 he's like, HVAC companies are trading 12 to 15 times EBITDA. 00:41:17.120 --> 00:41:20.340 And, you know, if you don't know what EBITDA is, earnings before, 00:41:20.340 --> 00:41:26.518 interest taxes, appreciation, amortization, and whatever the D stands for, now I forget. 00:41:26.941 --> 00:41:29.560 Point is, is like sort of net. And you're like, wait a minute. 00:41:30.163 --> 00:41:32.720 I'm making a couple million dollars a year. And then next thing you know, 00:41:32.720 --> 00:41:35.206 times that by 12. Yep. That's pretty much it. 00:41:35.752 --> 00:41:39.420 You know that's that's that's what you do and there's different ways to value 00:41:39.420 --> 00:41:41.905 different different this different that but i think well. 00:41:42.696 --> 00:41:45.994 If you're a stucco company, are stucco companies trading at 12 times? 00:41:46.619 --> 00:41:52.623 Probably not. There's no service component. Yeah. So if you were trying to inspire 00:41:52.623 --> 00:41:58.037 that next group of, call it entrepreneurs or existing entrepreneurs to say, listen, 00:41:58.560 --> 00:42:03.419 you've got 10 years to tool up their business before, say, you're 55 and you want to retire by 55. 00:42:03.900 --> 00:42:07.871 You want to maximize value as you exit, right? Build it to sell it. 00:42:08.472 --> 00:42:13.403 What would you share with them on this transition journey? I know certainly 00:42:13.403 --> 00:42:15.813 a number of resources, but you're sort of like tip of the spear, 00:42:15.813 --> 00:42:17.331 boots on ground. What would you tell them? 00:42:18.983 --> 00:42:23.353 So I'm going to answer that question. And I'll also add to my previous thoughts 00:42:23.353 --> 00:42:25.477 here. It's not all doom and gloom. 00:42:26.181 --> 00:42:29.283 It's hard. I said that multiple times. It's hard putting on your shoes in the 00:42:29.283 --> 00:42:31.400 morning sometimes, right? Yeah. 00:42:33.385 --> 00:42:37.533 But Lars, it's a beautiful thing. I can tell you, I have done it. 00:42:37.533 --> 00:42:41.633 Hands down, I would do it over and over and over and over again. 00:42:41.993 --> 00:42:47.853 It is, I cannot even dream of going back into corporate world or working for, 00:42:48.653 --> 00:42:51.102 a job. I would do this over and over again. 00:42:51.392 --> 00:42:55.421 And I tell you, it's the monetary results which drive you to build something. 00:42:55.845 --> 00:43:00.843 But once you have built it, the satisfaction, the happiness you get out of it. 00:43:01.046 --> 00:43:03.333 And I'm not talking just in the monetary terms. 00:43:03.658 --> 00:43:07.217 The happiness of doing something. Think of building a bridge. 00:43:08.228 --> 00:43:10.972 A river, nothing else, and then you're going to build a bridge. 00:43:11.639 --> 00:43:13.636 Is it going to be easy? Absolutely not. 00:43:14.114 --> 00:43:18.805 But once you've built it, the happiness, you're going to see, 00:43:18.805 --> 00:43:22.575 you're going to feel that, you know, I was part of it. Every time you're going 00:43:22.575 --> 00:43:25.946 to pass by, you're going to say, I was part of it. I contributed. 00:43:26.614 --> 00:43:31.915 You know, I today, I feel if I've helped a client who built a bridge and I help 00:43:31.915 --> 00:43:34.393 them transition that company to a new owner, 00:43:34.840 --> 00:43:39.315 Even I feel a part of it that, you know, I somewhere played touch somebody's 00:43:39.315 --> 00:43:42.155 life to do that. It's unbelievable. 00:43:42.675 --> 00:43:44.442

The satisfaction, the happiness. 00:43:45.449 --> 00:43:50.061 It's absolutely worth every, every, every effort. It's interesting that there 00:43:50.061 --> 00:43:55.797 was an admiral who said, you know, often the hard choices are the right choices. 00:43:56.441 --> 00:44:00.671 And I think about, you know, I don't think you'll ever regret going through 00:44:00.671 --> 00:44:01.802 hard times and learning, 00:44:02.518 --> 00:44:07.761 but being soft and sitting there and not get better and not going through those 00:44:07.761 --> 00:44:13.587 crucible moments to learn and really also build an organization that impacts other families, right? 00:44:13.871 --> 00:44:16.921 To your point the bridge how many families are crossing this bridge now with 00:44:16.921 --> 00:44:19.554 you that's what it's all about absolutely and. 00:44:20.741 --> 00:44:26.151 I believe we're designed to work so it's work yeah yeah so so to answer to your 00:44:26.151 --> 00:44:27.741 question large if i was to, 00:44:28.441 --> 00:44:34.251 guide somebody and they've 10 years 12 years or five years or three years i 00:44:34.251 --> 00:44:38.348 always start with this thing visit your business backwards yeah, 00:44:39.116 --> 00:44:45.511 go backwards go design this start with the end in mind first right you as a 00:44:45.511 --> 00:44:49.637 construction company owner do you ever build a hotel without a blueprint, 00:44:50.537 --> 00:44:54.151 without knowing how many rooms i want to be in that hotel i want to have where 00:44:54.151 --> 00:44:58.251 the lobby is going to be is it a five star is it a limited service you design 00:44:58.251 --> 00:45:00.081 you design first and then but, 00:45:00.701 --> 00:45:03.381 why don't you do it for your own business i don't i don't know what i don't 00:45:03.381 --> 00:45:07.201 know what it's going to look like i don't know i don't know so So yeah, 00:45:07.561 --> 00:45:10.271 so getting into that, because I think that is helpful, is that like, 00:45:10.271 --> 00:45:12.271 hey, we want to have this kind of customer reach. 00:45:12.271 --> 00:45:15.821 We want to focus on this kind of like revenue. This is many employees. 00:45:15.821 --> 00:45:17.201 This is what I want to pay myself. 00:45:17.961 --> 00:45:20.574 How nuanced does that blueprint get? Yeah. 00:45:21.581 --> 00:45:26.593 So first thing, start with how much money you want to make and when, right? 00:45:26.860 --> 00:45:30.851 And if I have to dip deep into it, when I am actually literally having a conversation, 00:45:30.851 --> 00:45:32.590 I'm going to ask that question, why? 00:45:33.354 --> 00:45:38.230 You want to make a million dollars a year, but why? Yeah. That's where people struggle the most. 00:45:38.549 --> 00:45:41.501 It's not about even I want to make a million dollars. Everybody throws me a 00:45:41.501 --> 00:45:43.941 number. I'm like, why? What are you going to do with that million dollars? 00:45:44.469 --> 00:45:49.744 People don't have an answer. You know, Stephen, what's interesting is also... 00:45:51.561 --> 00:45:57.000 Sort of lost my train of thought there, but it's building it with the end in 00:45:57.000 --> 00:46:04.474 mind, but not focusing on, this is what it is, getting too spread out. 00:46:04.706 --> 00:46:12.357 I see too many people try to start too spread out versus how do I go make the quickest dollar? 00:46:13.078 --> 00:46:17.760 Like, how can I focus on getting money into my company as quickly as possible? 00:46:17.760 --> 00:46:20.604 Because that's the only thing that's going to keep this dream alive, period. 00:46:21.085 --> 00:46:24.487 And when a lot of people are like, yes, yes, yes, yes, yes. 00:46:25.056 --> 00:46:30.913 And before you know it, whatever that plan was, it is gone. 00:46:31.331 --> 00:46:34.651 And I did, in my journey, I did experience some of this. 00:46:35.145 --> 00:46:38.754 I thought I was going to get work from a specific customer. Didn't. 00:46:39.648 --> 00:46:42.683 But I pivoted with the same skill set to different customers. 00:46:43.009 --> 00:46:50.050 So I think it was extreme focus around a targeted skill set or an existing skill 00:46:50.050 --> 00:46:54.164 set and then ultimately changing targets based on that skill set. 00:46:55.620 --> 00:47:01.520 And once that focus occurs, then you have a compelling story. 00:47:01.520 --> 00:47:05.620 But if you go to a sophisticated buyer and you tell them, you know, I can do this. 00:47:06.200 --> 00:47:09.600 Oh, I can do HVAC service. I'm also doing industrial construction. 00:47:09.600 --> 00:47:13.050 And I'm also, I'm actually renovating my neighbor's kitchen right now. 00:47:13.050 --> 00:47:14.380 I'm building a deck for you. 00:47:15.040 --> 00:47:18.400 Like, I'm actually going to stay away from you. Yeah. 00:47:19.287 --> 00:47:23.480 Yeah. Well, and to that point, Lars, I mean, even this podcast, 00:47:24.060 --> 00:47:28.630 I remember talking to a buddy and I was telling him I was enjoying the podcast, 00:47:28.630 --> 00:47:31.615 but I was hating the production kind of post production side. 00:47:32.762 --> 00:47:35.700 And he was like, well, have you made any money doing it? I was like, 00:47:35.700 --> 00:47:39.120 no. He's like, well, like, go make a dollar. 00:47:39.500 --> 00:47:44.550 Like sell a sponsorship and and so i made three calls and we were able to cover 00:47:44.550 --> 00:47:48.610 at least production expenses and so i think there is like we over complicate 00:47:48.610 --> 00:47:51.507 business at times and ultimately it's about cash flow 00:47:51.931 --> 00:47:55.800 and so can you bring in five customers do what you say you're going to do when 00:47:55.800 --> 00:47:56.713 you say you're going to do it, 00:47:57.369 --> 00:48:01.137 so my entrepreneur when he started mowing neighbor's lawns, 00:48:01.843 --> 00:48:06.210 wait i can make 25 bucks by mowing your lawn on saturday morning well i can 00:48:06.210 --> 00:48:07.790 do that i'm

mowing my parents' lawn. 00:48:07.790 --> 00:48:11.560 They're not paying me. I'm going to go over there. Mower's out. Let's go, baby. 00:48:13.216 --> 00:48:17.400 Yeah. You know, funny you said that. My neighbor's house, his lawn is never 00:48:17.400 --> 00:48:20.460 mowed, but his son mows everybody else. Yeah. 00:48:21.000 --> 00:48:23.747 There you go. You can go where the money is. 00:48:25.538 --> 00:48:26.141 That's good. 00:48:28.877 --> 00:48:31.594 I think this is going to be appreciated. I think, you know, 00:48:32.114 --> 00:48:35.434 Lars and I talked about this, like this is a conversation I wish I would have 00:48:35.434 --> 00:48:41.354 been exposed to as a PM because I think it would have changed which skills I 00:48:41.354 --> 00:48:46.974 want to acquire to position me for different entrepreneurial kind of opportunities. 00:48:47.434 --> 00:48:52.067 And I think you can think of your career as like this skill set acquisition 00:48:52.230 --> 00:48:53.983 kind of continuous phase. 00:48:54.389 --> 00:48:58.764 And, and I think as you, as you acquire these skill sets, it positions you for 00:48:58.764 --> 00:49:00.067 these different opportunities. 00:49:00.386 --> 00:49:03.619 So maybe, you know, with, with a few minutes left here at Nitin, 00:49:04.482 --> 00:49:09.684 as an entrepreneur, as an experienced entrepreneur, what's the advice you would 00:49:09.794 --> 00:49:13.515 give your earlier self kind of walking into your first endeavor? 00:49:14.823 --> 00:49:20.963 Think big. Think big. Dreams come true. Vision come true. 00:49:21.841 --> 00:49:28.817 You may not know how it will happen. Today also, I don't know what I built, how it all happened. 00:49:29.183 --> 00:49:31.975 I didn't have all the answers when I was building this. 00:49:32.793 --> 00:49:34.965 But the regret I have, I should have thought bigger. 00:49:36.143 --> 00:49:39.101 I can tell you if I thought bigger, I could have built a bigger company. 00:49:39.101 --> 00:49:42.424 But today, I have realized I need to think bigger. 00:49:43.158 --> 00:49:48.774 Right things happen stay stay focused work hard have a plan work things backward, 00:49:49.372 --> 00:49:54.869 and things will work out lars what's on your vision board right now. 00:49:56.799 --> 00:50:00.261 I imagine being a good husband being a good father, 00:50:01.192 --> 00:50:06.161 i think um you know appreciate that and little drop there's a book from the 00:50:06.161 --> 00:50:10.131 about the amazon early days called working backwards it really talks about how 00:50:10.131 --> 00:50:11.581 to reverse engineer into something 00:50:11.581 --> 00:50:15.803 so starting with the end in mind highly recommend it and i do believe, 00:50:16.602 --> 00:50:20.961 it helps with that sort of big lofty goal and there's all sorts of other you 00:50:20.961 --> 00:50:25.356 know the resources scaling up eos all those things all those are really good and, 00:50:25.989 --> 00:50:29.821 and if you're a project

manager that wants to take an entrepreneurial journey 00:50:29.821 --> 00:50:35.159 go read those books there's so many resources out there but i think if i may, 00:50:36.066 --> 00:50:39.543 you know my big might be different and then someone else is big. 00:50:40.307 --> 00:50:43.154 And all of that is okay. All of that is okay. 00:50:44.326 --> 00:50:50.049 And, but I think there's these, call them more important things in life. 00:50:50.049 --> 00:50:55.129 Again, you know, family, you know, faith, friends, all those things in balance 00:50:55.129 --> 00:51:00.265 with whatever entrepreneurial journey you're going on. Don't be afraid to talk to people about it. 00:51:00.817 --> 00:51:05.009 Don't be afraid to share that. And you'd be surprised how many people are going 00:51:05.009 --> 00:51:07.319 to say, I like you. I want to help you. 00:51:07.946 --> 00:51:12.309 And especially, especially if we'll call it, you're young thinking, 00:51:12.309 --> 00:51:14.959 hey, I think I want to do this. or it doesn't matter if you're young, 00:51:14.959 --> 00:51:16.264 but hey, I think I want to do this. 00:51:17.125 --> 00:51:26.676 But I'd also say to those existing companies, find ways to inject value into your organizations. 00:51:27.194 --> 00:51:33.458 And the easiest way to do that is to try to find ways to get out of your business. 00:51:34.145 --> 00:51:36.688 And by doing that doesn't mean you have to sell you business. 00:51:37.417 --> 00:51:42.659 Listen, that business probably cash flows greatly. It's convenient for life. It works. 00:51:43.414 --> 00:51:48.749 But find ways to get you out of the business. So when someone comes and knocks on your door. 00:51:51.136 --> 00:51:54.480 It's ready to go. It's just there. It operates. 00:51:54.979 --> 00:51:58.314 And what's interesting, and we haven't said it, but it's like working on your 00:51:58.634 --> 00:52:02.542 business rather than working in it. And that's really what we're talking about. 00:52:03.802 --> 00:52:09.814 And I think, again, with AI, the rate of change, there are so many resources 00:52:09.814 --> 00:52:14.522 out there that didn't exist 10 years ago, 15 years ago when I first started. 00:52:15.157 --> 00:52:20.004 And, you know, building everything from scratch, right? 00:52:20.335 --> 00:52:24.334 It is, it's crazy how quickly things can get built now. Granted, 00:52:24.334 --> 00:52:28.424 I haven't gone through it, but I guess probably to wrap it up, 00:52:28.424 --> 00:52:29.774 you know, what's on my vision board? 00:52:30.134 --> 00:52:34.274 I'm chasing relationships, not projects. 00:52:34.694 --> 00:52:39.124 Chasing, you know, building with the right people, both on the tech side and 00:52:39.124 --> 00:52:41.144 then also on the construction side. 00:52:42.114 --> 00:52:45.846 And you know and then who can i take with me, 00:52:46.521 --> 00:52:51.794 who are the right people to bring along to go far not necessarily go fast but 00:52:51.794 --> 00:52:56.244 go far i i think my first journey was a sprint it was fun it was exciting and 00:52:56.244 --> 00:52:59.487 then it was sort of like oh no now what am i gonna do, 00:53:00.452 --> 00:53:06.783 I'm kind of bored and I need to get out of the house. This isn't healthy for my wife and me. 00:53:07.263 --> 00:53:12.443 But, you know, to me, it's, you know, what does retirement look like? 00:53:12.443 --> 00:53:14.700 I'm going to be doing stuff the rest of my life. Let's go. 00:53:14.827 --> 00:53:19.453 Let's go do big things. So there you go. That's what we're made for. 00:53:20.016 --> 00:53:23.473 But Lars, now you can do what you want to do. Brother, that is such, 00:53:23.473 --> 00:53:24.933 I'm so glad you said that. 00:53:24.933 --> 00:53:29.413 So, you know, round one was like, how am I going to put food on the table? 00:53:29.413 --> 00:53:33.683 Listen, been there, done that. That is a real thing. But I'll tell you, 00:53:33.683 --> 00:53:37.768 that's what makes you get up early and work late and do everything you need to do. 00:53:38.267 --> 00:53:43.410 But this time, it's sort of like, everything's going to be just fine. 00:53:43.689 --> 00:53:47.313 It's okay. And it's not because it's like, oh, well, I can, this will fail. 00:53:47.313 --> 00:53:51.206 It's like, no, no, no. There's a natural course. There's a natural speed to things. 00:53:51.856 --> 00:53:56.936 You can't push too hard. You can't break the machine, you know, you can't break people. 00:53:57.562 --> 00:54:05.630 But but it is nice knowing like i'll be a little bit more patient i'll say no thanks right so. 00:54:07.378 --> 00:54:11.833 Well nitin this has been a fun conversation where can people reach you if they 00:54:11.833 --> 00:54:17.490 maybe want to have some conversations about maybe this kind of spectrum of of potential, 00:54:18.517 --> 00:54:23.013 so it's i really enjoyed it as well so the best way to reach me would be just 00:54:23.013 --> 00:54:26.841 go on linkedin just type my name and And hopefully I'll show up on page one. 00:54:28.143 --> 00:54:33.673 So it's just, yeah, just look for me on LinkedIn or you can send me a message 00:54:33.673 --> 00:54:38.785 via email through my business address, business email. It's Nitin at N3business.com. 00:54:39.603 --> 00:54:41.589 That's easy. Fantastic. 00:54:42.445 --> 00:54:44.024 Well, thank you. Appreciate it. Coming on.