- How the Acquira leadership team helped improve a $3 million+ company by cultivating its existing culture.
- How investing in people culture can improve overall morale and efficiency.
- Why a new buyer should strive for a complete understanding of the business they buy.
- How understanding a company’s culture can reveal growth opportunities.
When a company has been in a family for generations, culture inevitably becomes one of the driving factors of success for the business. This was the case with one home services company that our leadership team recently worked with.
The company was acquired in late 2020 when the then-current owner decided it was time to retire. At the time of the deal, the business was showing total revenues in excess of $10.5 million and a net income of more than $3 million. The company also showed immense potential for growth.
From the outset, it was obvious that the business could be grown through a few key methods:
- Adding digital marketing and creating a website to acquire additional customers through SEO
- Adding a sales team to build relationships with more general contractors, as well as large commercial clients
- Expanding the service vertical: Offering financing for routine repairs and maintenance
- Increasing prices to charge more for high-demand work
- Adding technology to the company in the areas of payroll, job costing, bidding, and ERP.
It was obvious from a first glance that the business’ culture is what helped it succeed, but the buyers needed to ensure that it could grow as well. To that end and following the acquisition, the buyer began building out the company’s capacity for growth and expanded its leadership team.
This sort of growth endeavor always costs money, and the buyer knew that it could cut the business’ EBITDA margin in half in the first year. However, the best way to grow a company is to invest in it, and one of the best ways to do that is by growing the culture that helped it succeed in the first place.
|$10MM+ Revenue||$3MM EBITDA||30% Gross Margin|
When acquiring a business, especially in the home services industry, there are three factors that can quickly help determine whether the potential acquisition is a good investment: its speed of work, its quality of work, and an attractive price. The company needs to have at least two of these qualities before a buyer should consider looking at it. In the case of this particular business, it was an incredibly efficient and effective operation, both in terms of speed and quality of work. Despite being the fastest and producing high-quality work, it somehow also managed to be one of the cheapest options available to their clients.
The business’ weaknesses, however, were apparent: they were bulging at the seams. They were risking losing key people to other opportunities, the offices hadn’t been updated since the company had significantly less staff, and all of its operations were done on paper.
Acquira’s leadership team was intimately involved in the deal from almost the beginning. As Acquira CEO and co-founder Hayden Miyamoto says, “There were systems, but they were all in binders.”
It was obvious that the company was leaving a lot of low-hanging fruit on the tree. Indeed, it was receiving more phone calls than it could effectively handle.
Announcing The Sale
After a deal is closed, announcing the sale of the company is the next crucial step. An effective announcement can help calm any nervousness over the deal and ensure buy-in from all the parties involved.
Under normal circumstances, we recommend that the buyer make the announcement themselves in order to answer any questions or quell any fears that may present themselves. In this particular case, the previous owners insisted on telling their employees themselves.
That created a certain amount of trepidation among the employees, but fortunately, the buyer was able to structure the acquisition deal in such a way that the owners were incentivized to stick around for a year and alleviate most people's concerns. That left time to create a succession plan, hire new workers, promote others from within the organization, and train all of the appropriate people.
Of course, when you experience an influx of new faces and seasoned workers are dealing with new responsibilities, it can be difficult to maintain the culture that helped the company succeed in the first place. Paying close attention to the values and ideals that make a place unique while implementing necessary changes will help mitigate the growing pains that usually accompany rapid adjustment.
Creating A Succession Plan
After the acquisition was closed and the deal announced, the buyer quickly got to work learning as much as they could about how the company was run. They began by visiting a handful of sites in order to understand what the work looked like. By doing that, they were able to identify the distinct tasks that the company did:
- The rough-in, where the technicians go in while the building is being built and install the electrical work, the plumbing, and the ductwork.
- The set-out, when the technicians begin working after construction is complete and install air conditioners, wire the thermostat, and install grills.
- Service diagnosis, a task that involves diagnosing issues with an existing furnace/AC unit and determining how to fix it, or if it should be replaced.
- Change out, where technicians exchange an existing furnace or air conditioner because a replacement makes more sense than a repair.
It quickly became apparent that the previous owners had taken on too much responsibility, wearing a number of hats between the two of them. One was in charge of bidding and estimating, labor allocation, HR, and was the leader and ultimate decision-maker of the company. The second handled ductwork design and managed the service department. They were both in charge of project management, which often entailed going to job sites to answer any questions that the crew might have. They were also both involved with builder communication, which was often last-minute, and required getting together multiple times per day to plan out resources.
At most other companies, each of these responsibilities would be its own position within the company. Other companies would have a position for estimates and another for project management. Ductwork design would also be a specialized, dedicated position.
The big problem was that the majority of the knowledge around these jobs was contained within the owners–the exact people who would be leaving the company in no more than one year. That meant that a succession plan had to be created.
Fortunately, the multi-generational nature of the company meant that some family members would stick around and could divide the duties among them. That led to a cascading effect where the family members’ own vacancies would need to be filled.
Those positions were filled through a combination of external hiring and internal promotion.
It wasn’t just a matter of finding replacements for those who had been promoted, though. In order to handle all of the work that was going undone, the company needed to hire new duct installers, service technicians, and office staff.
Fortunately, thanks to the company’s position in the community, filling those roles wasn’t overly difficult.
The hiring process doubled the company’s service department in the first year from three techs and one changeout crew to six techs and two changeout crews.
For the office positions, the company was able to fill the vacancies through job postings on Indeed.
Filling these positions was important given that the company was sitting on a mountain of unclaimed revenue – around $400,000 in changeout requests that couldn’t be answered because they didn’t have enough people to do the jobs.
Creating an effective succession plan led to the necessity of hiring more people, but an owner should never only rely on hiring to improve its business. Rather, the owner must also seek to grow capabilities within the existing team. It's imperative that during the transition, you optimize for not having a mass exodus from the existing staff. One of the best ways to do this is to invest in the existing staff and place your trust in them and their development. They will almost always reciprocate. This begins by optimizing for culture.
It's imperative that during the transition, you optimize for not having a mass exodus from the existing staff. One of the best ways to do this is to invest in the existing staff and place your trust in them and their development. They will almost always reciprocate.
Building The Leadership Team
A strong leadership team ensures that goals are created and met by all employees. The leadership team consists of managers, directors, and executives and their main role is to set regular quarterly priorities (also known as OKRs) and communicating those priorities to the people they oversee.
Good leaders are always thinking about how, when, and what they are communicating with their team members. It’s important to look for anyone from within the organization who has exhibited leadership qualities. These individuals should be considered an asset and included in any communication with the Leadership Team.
Installing a strong Leadership Team ensures that goals are met and strategies are executed upon, even if the owner can’t be present all of the time.
At this home services business, Acquira’s team began building the leadership team by creating a succession plan and executing on it, but that was just the first step. Once the people were identified and notified of their new responsibilities, they needed to ensure they were on the same page. This came through a careful distillation of cultural values.
What Are Cultural Values?
Strong cultural values are integral to growing a business. By instilling cultural values you are able to create speed and consistency within the business, all while attracting like-minded people. If a company has a culture that emphasizes quality and speed, that can easily be communicated to new hires.
Company culture is more than just creating good vibes at the office. It speaks to the very core of what a business is. It has ramifications in employee retention and performance, and affects nearly every aspect of a business.
Cultural values are also often referred to as core values. The owners at this home services business never bothered to think about what values defined them. Interestingly, everyone on the team agreed with those values within 15 minutes of first hearing them.
Importantly, cultural values are more than just high salaries and great benefits (although you shouldn’t discount those as major motivators either). Indeed, statistics back this up. According to Fast Company, 66 percent of job seekers say a company’s culture and values are the most important factor when considering career opportunities.
Or, as Deloitte points out, companies that spend time actively managing their culture report a 40 percent higher employee retention. Despite this, only 28 percent of executives say they understand their company’s culture and only 13 percent of employees identify as being engaged with their work.
Since the acquisition closed, revenues have grown throughout the company’s operations. This growth was made possible by a reworking of the organization chart (org chart). Certain workers were given new mandates and new roles, concentrating their efforts on a single revenue-generating activity.
It was also important for the company to increase prices on its high-demand work. According to Hayden Miyamoto, the customer didn’t bat an eye at the price increase.
“The customers were waiting for it,” he says. “They were probably the last ones to increase their prices.”
Many of the home services companies that we work with have been family-run businesses for generations. In nearly all cases, this is what has allowed them to grow and become part of their community. The company culture that was created over the decades is what helped them be successful and keeping that culture in place is imperative to their continued success.
The company culture that was created over the decades is what helped them be successful and keeping that culture in place is imperative to their continued success.
As a company expands, its revenue grows along with its fleet size, and new office space is added, one of the hardest things for people to deal with is the influx of new faces. Introducing the existing company culture to new hires immediately will help mitigate some of this discomfort.
It’s also imperative that whatever changes you make are informed by the existing culture. After all, part of helping companies grow means introducing new systems and methodologies to help facilitate that growth. These systems and methodologies are what led this home services company to increase its prices and hire new employees. But introducing new ideas to a company can be intimidating, especially for folks who have been doing things a certain way for a long time.
Acquira’s ACE coaching program is designed to help businesses grow through systematization and goal setting, but the communication of these practices is paramount to their success. To help convey these concepts, we hold workshops at regular intervals throughout the integration process.
In order to help ease this transition, workshops were provided once a quarter. The tone of the workshops was very informal, with people sitting around on couches and chatting. The casual nature of the workshops helped ensure people were comfortable enough to share ideas and speak their minds. Acquira’s workshops are built around specific themes and are designed with specific outcomes and goals to be introduced following the completion of the workshop.
The first outing, dubbed “Preparing For Growth,” walks attendees through the concept of P&L (profit and loss) statements, org charts, and more of our core methods for growing a company.
The first workshop that was held at the new company was effective at giving direction and defining the company vision. It helped ensure that everyone knew their role and how they could help grow the company. Participants agreed that it was time well spent.
This concept of culture–and more importantly maintaining culture–should be at the center of any acquisition. For many people, it can be difficult to understand why prices need to be increased. This first workshop should help assuage people of their fears. After all, when there’s more profit, it can be invested back into the culture and into people.
At Acquira, we’ve seen time and again that a pervasive and positive culture is one of the most important traits that any business has. Any good buyer should start by asking “what can I bring to the company?” before looking at taking things away. By maintaining and fostering culture, it can be a powerful tool for growing the business.
Have you ever worked at a company that had terrible culture? It’s not an experience we recommend, but we’d love to hear your stories. Let us know in the comments below.
We’ve built a lot of our training systems and programs around this concept because we believe in it so strongly. Effective company culture can energize lives and empower people. If you want to buy a company yourself, give us a call and we can explain how to look for culture in your potential acquisition targets and how to use it post-close to grow the business even further.
- Good company culture is reflected in the business’ relationship with its community.
- Even when a company has a strong culture, it can still be improved.
- Sometimes you need to raise prices in order to invest profits in a business.
- Good training goes a long way.
- When you buy a company, if you get culture, do everything you can to maintain it.
Acquira is a business acquisition in a box service. We help entrepreneurs buy businesses and we invest in them and their chosen businesses. We are here to help ensure that each business we work with is posed to make the biggest positive impact possible for its owners, employees, and community.