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Acquiring Minds
Building a Blue Collar Empire
01:11:40
After seeing 9-figure businesses built through acquisition, Adrian Pinto bought a landscaping biz to build one himself.
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- [00:11]
Will Smith
Welcome to Acquiring Minds, a podcast about buying businesses. My name is Will Smith. Acquiring an existing business is an awesome opportunity for many entrepreneurs. And on this podcast I talk to the people who do it. My interview today is with Adrian Pinto, who acquired a commercial landscaping business after being inspired by other acquisition entrepreneurs as he saw during his private equity job and deciding to get in the game himself. This is a longish episode at about 70 minutes, but each one of those minutes earned its keep. I tried to find some to cut and couldn't really. It's a dense episode in a good way. A lot of gold, a lot of ground we covered. Here it is with Adrian Pinto. Adrian Pinto, thank you for joining me today on Acquiring Minds.
- [00:57]
Adrian Pinto
Yeah, thank you very much for having me. Happy to be here.
- [01:00]
Will Smith
You are the new owner and now president of Georgiascapes, a commercial landscaping business in Atlanta. You bought the business in July. So it's been about five months. And one of the things that I really like about your story is that you were a finance guy, New York investment banking, private equity. And during that time you saw these eight figure, nine figure blue collar businesses that had been built by blue collar people largely through acquisition. And you said to yourself, that seems fun, that seems possible. I'm going to do that. And here you are five months into doing something similar into this journey of what will hopefully be a blue collar empire. So we are going to hear that story and we're going to hear whatever your first learnings have been in this first half year pursuing this. So start us off with just adding more color to what I just said. Give us your two minutes on your background and what led to this decision to want to go out and buy a business.
- [02:08]
Adrian Pinto
Yeah, sure. So I am from Erie, Pennsylvania, which is a small town in Pennsylvania, really kind of grew up around small businesses. I mean Erie has a couple large manufacturing companies, but that's really it. So I was always kind of interested in the idea of entrepreneurship, seeing friends of family members, friends and family members with small businesses. I from there went to Penn State, so stayed in Pennsylvania and immediately after college went into corporate finance working for ge. After about a year there I realized that corporate finance wasn't necessarily for me and I wanted to see something that was a little bit more transaction oriented. While I was at ge, was happened to be part of a sale of one of the businesses. And so that was kind of my first insight into investment banking. And after that experience realized that that was something I wanted to try myself so was fortunate enough to get an opportunity to go do Industrials mergers and acquisitions at Credit Suisse in New York. And I joined an analytic analyst class there. So I was there for the two year program and then at the end of the two years was given an opportunity to join a private equity firm also in New York called Greenbrier Equity Group. And so Greenbrier, okay. Yep. Greenbrier is a $6 billion industrials focused PE fund. They primarily look at industrial services, I would say, so transportation, logistics, distribution, and then a lot of kind of business services. And so that is a kind of, you know, that's essentially made up of a lot of blue collar businesses like you talked about. We looked at plumbing and H VAC and electrical businesses and precision manufacturing and things of that nature. And, you know, so that gave me kind of more opportunity to see these industrial businesses essentially. And then finally after Greenbrier, I went and joined a European family office. So still doing private equity, still looking at a lot of industrial businesses. But I left Greenbrier to go do that for the family office of a prominent family based out of Sweden.
- [04:09]
Will Smith
So give us, give us an example or two of some of these stories that you observed of these blue collar businesses that had just been grown through acquisition to really astounding values.
- [04:20]
Adrian Pinto
Yeah, so I think what was interesting was I got to see it from both sides. So when I joined Greenbrier as an associate, you get assigned portfolio companies of the existing investments that they have. And then you also spend kind of half your time on new investments. So on the portfolio side, we owned a business there. Greenbrier owns a business called witcraft, which is an aerospace components manufacturer based out of Connecticut. And it happened to be one of my portfolio companies. So I ended up spending quite a bit of time with the founders. And what I came to learn was that wicraft was built by two partners who, both of which had kind of come up with an idea in business school that they wanted to go out on their own and wanted to acquire a business and kind of run it together. And so they found a relatively small components manufacturer based in Connecticut, were able to kind of raise some funds and did that acquisition themselves. And from there they proceeded to do. It was like seven or eight more acquisitions of similar size and ultimately built it up to a size that was pretty prominent player in the space. And that's how Greenbrier got involved and ultimately acquired it. But you know, the stories that I had learned from Colin Cooper, his name was just about, you know, you know, the process first of doing the acquisition, but also just kind of the. The grind associated with the early days and building it up to what it became. I just was always really drawn to that and was always really intrigued. And the thing that also really, I guess you could say, drew me to it as well is that Colin's background was in finance also. So he was an investment banker prior to going to business school. And so he kind of came from it, came at it from a similar perspective as me, which that, to me was a situation where I was able to see that and say, oh, this is actually possible, not just for engineers or operations guys, but someone with a finance background could do this too. And so as I mentioned, that was kind of the portfolio side of things. At the same time, then on the new investment side of things, I looked at a lot of the business service acquisitions at Greenbrier. They don't really Silo Associates, really, so you kind of see everything. But I just so happened to spend quite a bit of time on the business services side. And so there were a number of investments that we looked at ultimately passed on most of these, but they kind of all hit similar themes that we're talking about here. So one that really strikes or stands out to me was an H Vac company. And I remember learning about it and meeting with the management team and basically hearing the story, which was that you had a guy that started a really small H Vac company, and he realized just how fragmented it was and how predominantly the whole market is just mom and pops. And so this guy went all across the United states just acquiring 1 million of EBITDA here, 2 million of EBITDA there, and ultimately built a business that was hundreds of million in revenue.
- [07:12]
Will Smith
Incredible.
- [07:13]
Adrian Pinto
You know, again, a huge player in the space. And so I think at that point, when I saw that, that was towards the kind of back end of my time at Greenbrier. And so that's when I started thinking, you know, this guy's obviously smart, really driven, hard worker, but he's not smarter than I am necessarily. Like, he knows his industry. And so is it, you know, is it possible for me to do this too? Like, certainly I don't know H Vac today the way that this guy did, you know, that was I didn't have a degree or a certification in it. Certification in it, But I felt like these are pretty simple businesses. And so if I could kind of get my head around the underlying work that they're doing, I could probably figure out the other sides of it and then utilize, you know, this kind of private equity playbook of just being aggressive with M&A aggressive pursuing growth opportunities and try to bring that down basically to this kind of SMB level.
- [08:01]
Will Smith
You know, just on H Vac in particular, H Vac in particular, it's a very talked about target acquisition for many acquisition entrepreneurs, a very popular trade. And so it just, it surprises me that with the attention that it gets that it remains as fragmented as it is, I guess there's just always new mom and pops cropping up. And so there's always just kind of a churn in the industry and opportunities for more rolling up and buying up. But I'm just, you know. Yeah, I'm surprised, I'm surprised these very popular industries persist in being so fragmented.
- [08:34]
Adrian Pinto
Yeah, I think that's an interesting point. I mean, we can talk about that a little in the landscaping space because I think it's similar there too. I mean, yeah, I would actually draw a lot of parallels just in terms of the market. Because in the H Vac space there are a couple big private equity backed guys now that are enterprise value of multiple hundreds of millions. But you're right, for as big of a market it is, there isn't a $10 billion public player. And you would think because of how attractive it is, how sticky the revenue is, you would think that that would exist. And it may ultimately at some point, you know, you may see the private equity guys that have invested in these companies, you might start seeing them kind of do some mergers of equals and put them together. But today it hasn't. But you know that it's an interesting business too. And the fragmentation I thought, always thought was interesting because what the company that we looked at, what they would do is they would build partner networks in areas that they didn't serve. So they would say, hey Will, we're not in Florida today, but whenever we get work from our big blue chip customers, if they have stores in Florida that they want to serve, I'm going to send it to you. And what that does is A, it allows them to kind of stay with their customers so the customer doesn't ever have to meet a new provider, which no one ever wants that, and B, it allows this business to build basically a pipeline of M and A opportunities. So it was really interesting because that company, a lot of their M and A that they did were previously just people in their, their partner network. So they just had this like organic pipe M and A pipeline constantly growing while they were, you know, serving their customers. So they had like a pretty unique way of kind of going at M and A. I thought so.
- [10:08]
Will Smith
So they would send the business to this Florida partner and then eventually, having developed a relationship over months and years, go to that Florida partner. Well, you know, one party would go to the other and say, let's transact.
- [10:19]
Adrian Pinto
Right, exactly. Because you know, this to your example, the Florida partner would be a mom and pop that didn't have scale, didn't have the same margins. And so these guys were in a much better position to ultimately acquire them. But as opposed to them having to, you know, build, you know, their own new location in Florida to serve that customer, they. They'd say, no, we'll just funnel it to that mom and pop. We know we're not going to lose the broader business to this mom and pop because they're not a national player. Just the Florida stuff for now. But eventually, now we have a new person that we could acquire, essentially.
- [10:48]
Will Smith
Yeah, yeah. Very cool.
- [10:50]
Adrian Pinto
Yeah.
- [10:50]
Will Smith
Back to you. So you see these stories, you're feeling inspired. I guess. So now take me through the decision to go out and do this.
- [10:59]
Adrian Pinto
Yeah. So I remember after that H Vac instance, I remember that I was basically, I was on my way home one evening from work and I called a friend of mine who was in business school. And I remember kind of saying to him, like, you know, I just want to go out and buy my own blue collar business. Like, as opposed to, you know, doing all this grinding work in the PE space. Like, sure, some of it you do is investing in these companies, learning about them. That's really interesting. There's a lot of other stuff, though that you're doing. And I just was kind of sick of doing some of that. And, you know, I was telling him, like, I just want to try to do this myself. And I remember him saying like, oh, like you're talking about like a search fund or eta. And that was not a concept I happened to know about. But by chance, he was in business school. He was like the president of the ETA club at his business school. And so, you know, he became very well versed on this. And so I remember in that car ride, he kind of explained to me the high level of it and I was like, oh, wow. I didn't even know that was a thing. Like, you know, it was possible, basically. And so as I.
- [11:56]
Will Smith
It's so funny, you're talking to the guy at his business school, like, yeah. And he's like, oh, yeah, we share. We. I know something about this.
- [12:05]
Adrian Pinto
Yeah, yeah. It's funny because clearly he had been looking into it himself, you know, and we were. He's a good friend of mine, but, like, there's just nothing. It's something we never had talked about in the past. Yeah, but so he, you know, he turned me on to some of the very basic materials, you know, the Stanford White paper, the Harvard book on it. And I remember. So I remember kind of learning about the concept, continuing to be intrigued, and then simultaneously learning about some of the funding opportunities. And then that really piqued my interest because then it was no longer just, oh, this is a cool idea. It was, oh, no, this is possible. And financially, like, basically, you don't have to stretch on the finance side to be able to do it. And so were you kind of under.
- [12:46]
Will Smith
The impression, as many people, including me are, and were, that you had to basically come out of pocket to buy the whole thing?
- [12:54]
Adrian Pinto
Well, I'd say I had the wrong view, but I looked at it a little differently. Having just done this stint in pe, Everything you think of is like, oh, four times leverage, five times leverage, six times leverage. So in my mind, I was like, oh, a bank will just look at a company's earnings and say, oh, we'll apply four times leverage to their ebitda. But then you quickly learn, like, A, banks don't lever up, they don't provide traditional debt to cash flow debt to small businesses like that. And B, it's not clean EBITDA like you're used to seeing in sims on the PE space where, you know, you're getting investment bankers that are sending you these booklets and stuff, like, this is much different. And so I quickly learned that my view of it was not going to be possible. But in fact, it actually might be better because in the PE space, right, you know, these days, let's say you buy a company that's for 12 times, like, you'd be pretty happy if you could get six turns of debt on it. So 50%. And so when I came to find out that you could do LTVs of 90% in the SBA space, you know, utilizing the 7 loan, I was blown away. And I mean, that's when I was really like, oh, wait, this might be something that's worth kind of digging into.
- [14:04]
Will Smith
Did you, did you, while you know, that one might salivate it, wow, 90% leverage. Did it also give you pause? Like, wow, that seems like really risky given that kind of 50% was your typical benchmark coming from Pennsylvania.
- [14:19]
Adrian Pinto
Yeah, well, I think what gave me pause was when I first learned about the notion of, like, a personal guarantee. Because also, you know, in the PE space, you. You utilize legal entity structures so that you, you know, the PE firm's never on the hook if a company goes bankrupt. Right. That's kind of the whole point. And so when I quickly found out, like, no, it doesn't really work like that, like, with these type of deals, like, you're guaranteeing it, that I think definitely gave me pause. You know, I'm newly married within the last couple years. And so, you know, we realized, like, at some point we're going to want to buy a house and, you know, all of these things. And so the idea of putting up a personal guarantee was, like, it was something that needed to be talked about more than just like a snap decision. Certainly.
- [14:55]
Will Smith
Yeah. Yeah.
- [14:57]
Adrian Pinto
Okay.
- [14:57]
Will Smith
So you learn what a search fund is, you learn what ETA is, you learn that you can get 90% leverage.
- [15:02]
Adrian Pinto
Yep.
- [15:02]
Will Smith
And so all of this is just good news after good news. So you decide, you make the decision to leave your job. Talk me through the actual decision to go out, start looking for a company and leaving your job.
- [15:14]
Adrian Pinto
So when I was at. So when I was at Greenbrier in my third year, you know, they kind of came to me with the opportunity to potentially stay for a fourth year. You know, they kind of said, are you interested? And I had a pretty good relationship with them. So I like to think that I would have been able to stay. But, you know, I knew what that life and the work required was to be a good associate or senior associate. And it's a lot of hours and things like that. And so once I kind of realized that this is what I want to do, it was also pretty evident that, like, I wouldn't be able to do it at Greenbrier. And so I had pretty candid discussions with them. And we kind of, I think, mutually agreed that it's probably better to part ways. And so they were very flexible in terms of giving me an opportunity to look for another position. And so what my whole plan was, you know, find a job that will be much, you know, much fewer hours and more flexibility in my life so that I can search on the side. I can, you know, on the weekends, you know, whatever during the day if I need to take a call, like, that's all possible. Which, you know, is not the case in traditional private equity or in banking or something like that. It's nearly impossible. And so I was fortunate to land this position with this European family office, great people. And, you know, I had basically, from day one, kind of had this intention of, like, I'm going to be looking for a business while I'm here. And obviously, I'm going to try really hard in my job. And I'd say, based off of my reviews, that, you know, they were happy with my performance, but it was definitely nice to be able to have the flexibility to kind of do this on the side. And then I should also say, like, Covid has been obviously a nightmare for a lot of people, but from a searching perspective, it literally couldn't have been a better thing, because instead of being in an office environment all day where people are walking by your computers or knocking on your door and asking to talk, I was at my home. And it's literally the perfect situation for looking for something on the side, because I can have a call here and there. It's just made it so much better. So basically, I ended up spending all of 2020, you know, working for that company and then searching on the side. And so I kind of. I kind of formally launched my search in end of first quarter 2020. So, like, right when Covid started, basically, and I had some initial hits probably within the first couple of months, and I think some of that probably was, like, enthusiasm associated with just starting it. You know, I was like, oh, my God, this deal is great. In hindsight, like, probably wasn't that great. But neither of those instances when I did submit Lois. But in neither of them were they accepted for various reasons. And, you know, there's some learnings from those experiences. But basically, after kind of summer 2020 through the end of the year, I was getting nothing. It was very slow on the search front. And it was starting, I would say, to get a little bit discouraging, and I should probably preface by saying I was only looking in Atlanta. And the logic from that was that my family, I have family down there now. My wife is from the south, so we wanted to move somewhere further south, but still kind of be in a city. And so Atlanta checked a lot of boxes for us. The downside of that, though, is, like, when you're searching in one city, even a city with like the size of Atlanta, I mean, you are obviously limiting your options. And so, like I said, that whole kind of fall, winter time, I basically was finding nothing, which was pretty discouraging. And then.
- [18:29]
Will Smith
But you were searching from New York, so you were still in New York.
- [18:32]
Adrian Pinto
Yep.
- [18:32]
Will Smith
But you. You and your partner were going to. Had plans to go down to Atlanta.
- [18:35]
Adrian Pinto
Exactly. And I'm sure there's things that. I'm sure if I was on the ground in Atlanta, it would have been a little bit better, you know, to meet people, maybe things Would have gone faster. The flip side is that was also like right in the beginning of the delta variant of COVID Covid. And so no one was really meeting anyway. So again, the dynamic of being remote was also fine because of COVID Like it really worked out for the best, I think. But so around December of last year, so about a year ago, I signed an agreement with a buy side advisor. And the whole idea basically was that he is from Atlanta, lived his whole life, has tons of contacts and he knows people selling businesses and he will kind of get me an early in on some of these businesses, like a proprietary look essentially, and I would pay a success fee. And so to me it was like a no brainer. I was like, okay, now I can have boots on the ground basically without having to do it myself. And I'm happy to pay a 1% success fee, which was the agreement we worked out, especially if it's truly a proprietary deal. I think the downside of that was I didn't do a good enough job of making him aware that I was going to continue to search myself. And so there was a handful of instances where he would send me listings of publicly listed businesses, whether it was on Biz, Buy, Sell or something and say, like, hey, here's an opportunity. You know, this would be basically covered by our search agreement though. And I'd have to say, like, you know, I'm sorry, but no, like I've seen that too. Like, that's not helping me. You know, like I really, I hired you to kind of help me on proprietary things that no one else would have access to. And yeah, that did cause some tension certainly. But ultimately, In February of 2021, he came to me and said, a friend of his is selling a company and before they kind of broadly market it, he wanted to go out to some of the people he knew in the industry to see if any, you know, they happen to have clients that would be interested. So that's how I first came across George Escapes and Adrian.
- [20:27]
Will Smith
Let me, let me jump in with a question. So why would a. I actually don't know really anything about buy side advisors if somebody like him has his, you know, value proposition is that he has access to deals. Why wouldn't he just become a broker? I mean, that's what, that's what brokers claim to do.
- [20:45]
Adrian Pinto
I think that he would be a broker. Like I think he would sell a company if you asked him to. I think I know he, I would say what he would tell you is that he specializes on the buy side of those transactions. So instead of being someone that's good.
- [20:59]
Will Smith
At the brokers work for sellers and he works for you.
- [21:02]
Adrian Pinto
Right, exactly. So I think the brokers, in my opinion, without knowing a ton about the industry, but just those that I've dealt with, brokers are a little bit better at kind of marketing and the sales side of things. You know, they get the materials out there, they're good at handling inflows of questions, stuff like that. I think that the buy side advisors, for the most part, they have a good network of people that they can kind of get you inroads to or again, so they say. And then they are. And I will say that he did do this. He had a pretty good handle on SBA lenders, both in Georgia and even nationally that he had some connections with. So again, in his defense, like, there was a couple banks that I spoke with, some of which weren't even interested in George Escapes. Some were, but then he basically passed me like three or four hot, you know, hot leads basically on the banking side, where he was like, hey, I already prepped these guys. They like the business. You know, go talk to them. So that was truly helpful. And I think that, you know, his relationships on the lending side did, did help.
- [22:05]
Will Smith
Great now. So you see. Okay, so tell us about George Escapes. He sends you this, this deal actually rewinding a second agent. I remember you telling me that what you really wanted were you were really looking at the electrical H vac, plumbing or really kind of.
- [22:19]
Adrian Pinto
Yeah. And that's entirely.
- [22:20]
Will Smith
And so what did you like about those? And then how did you open your mind a little bit?
- [22:25]
Adrian Pinto
Yeah, sure. Sorry. So the reason I looked at those goes back to the greenbrier side of things where like, those are the businesses that we looked at there. And I remember that they had attractive elements. I also just remember that anecdotally private equity firms were interested. And so I was thinking, okay, well, that's always a good sign too, right? Yeah. So that was kind of how I initially approached it. But the overarching reason for those was the market dynamics. So, you know, these are large fragmented markets. They have kind of GDP plus growth. There's a lot of M and A opportunity. There's not a lot of cyclicality. They're pretty stable. So even during COVID you know, most of those businesses are doing well. And I figured, you know, if a business can stay stable during COVID that's obviously a good test of this. So that was the reason ultimately I went after those initially. What I came to find out like almost immediately was that in Georgia at least if you don't have licenses for a lot of those businesses, you just can't own them. Like lenders won't lend to you. And I know that I've heard stories where people get around that by kind of signing long term contracts with like a general manager or something that does have H VAC license, which maybe that's possible, but the lenders I spoke with said it's not worth the risk to them. You know, if that guy leaves, something happens to him like the business shuts down or. Right. Or has at least has to stop. And so I just unfortunately kind of walked away from that pretty quickly.
- [23:51]
Will Smith
And so that probably answers why these, these remain so fragmented.
- [23:56]
Adrian Pinto
It might, I mean, I mean at the same time though, I guess the, the businesses that are a few hundred million of enterprise value, like they would have all the license requirements. So I don't know that there's any reason that they can't kind of scale up a little bit more. But I think it does answer the question why so many of the fragmented businesses haven't been acquired by searchers. Because there are certain requirements out there.
- [24:20]
Will Smith
And so Adrian, one other question or two on your search for somebody who was kind of first introduced to the concept via somebody who was at the, was the president of their ETA program at a business school. I assume it was one of the well known New England business schools. Yeah, you know, they're, what they're often taught is like full time search and national search especially, I mean if it's a traditional search fund. And so you were, you know, you were breaking both of those rules, which is great. You were not full time, you were doing it, you were squeezing it in and you know, your after hours and weekends or you know, in Covid maybe, maybe the occasional call.
- [25:01]
Adrian Pinto
The occasional lunchtime call.
- [25:03]
Will Smith
Yeah. And you were looking in a single geography. Now the whole national search and full time search thing, while the university programs, traditional search funds really preach that. Of course that's probably not what the vast majority of searchers do, but given that that was your introduction to the whole, the whole concept, I'm interested that you, you flouted that norm.
- [25:26]
Adrian Pinto
Yeah, I mean, so for me, I think just the situation that we were in, you know, what my wife does for a living and stuff, we knew we needed to be in a big city. So that kind of narrowed moving to Denver or something to do one of these, you know, do a search out there which, you know, you see people going to some of these kind of emerging cities to do sometimes. So and then, you know, we thought, we thought about the family side of things, which I said, like, kind of led us to the south. And then, like I said, we kind of just centered on picking a city. And I guess part of that was as much as I was drawn to doing search, I think maybe equally as drawn or at least close to the, you know, was the idea that, like, I don't want to just live in the middle of nowhere just to find a business. Like, it's important to me that both my wife and I have, you know, the network and stuff around us that is, you know, that we need and so that, you know, that's kind of why I picked one city. The other reason is, frankly, given that I had a job at the time which was, you know, was getting paid well and it was very stable and I was doing well in it, I didn't have any rush. You know, there was nothing that was really like forcing me to do this by a certain date or I ran out of search funds. Right. And I mean, I can only imagine honestly the stress that that adds because as I was mentioning, like those couple of deals that I did submit Lois for and that died, had I not had an income going on during that, like that deal fatigue would have been a real thing. And I can imagine causing some stress and potentially leading frankly to unwise decisions. Like, I could 100% see someone just kind of settling for a business because they're. They've been doing, they've been searching for two years and it's just really stressful and they just can't wait anymore. I totally get. But I just felt like it's better, you know, while I'm living in New York, it's better to have an income and just kind of do this on the side and it'll help me kind of make the right decision as opposed to maybe a rash one.
- [27:13]
Will Smith
Excellent. Okay, so you see Georgia Scapes.
- [27:17]
Adrian Pinto
Yeah, yeah.
- [27:18]
Will Smith
Back to the search.
- [27:19]
Adrian Pinto
Yeah. So when I first saw Georgia Scapes, I remember thinking, like initially I just remember thinking, oh, I'm not interested in landscaping. And I think that I had preconceived notions that commercial landscaping was probably a lot like residential landscaping, which means there's a lot of pricing, a lot of kind of pricing wars amongst different companies. I probably didn't fully understand the notions of the long term contracts in the landscaping space and probably a variety of other things, frankly. But as I dug into the industry first, I remember immediately kind of thinking like, wow, this checks a lot of the same boxes, right? Like, here's a multi, multibillion dollar industry, but the number one player only has like 1% of it, you know, so it's super fragmented. It's growing at 4% per year. If you look at the kind of long term trends of the industry, there's not a lot of cyclicality or variability in, in performance. And so I remember after seeing that, I was thinking like, okay, this is definitely worth diving into more because the market does look pretty attractive. And so, yeah, I ended up having a couple of different calls with the owner and just, you know, probed on a lot of them. Some market questions, some business questions, some team questions, because that was obviously very important to me. And as I continued to learn more and more, I just remember thinking like, this is still checking a lot of boxes. Like there weren't many times, especially early on where, you know, there was a question mark kind of on my diligence list, like pretty much everything, you know, checked the boxes that I needed it to and then the areas that it didn't, those were to me kind of nice to haves versus need to haves. You know, you're never going to find the perfect SMB business. So you know, this, it, it fit a lot of the profile of what I was looking for.
- [28:57]
Will Smith
So what you learned in kind of taking a harder look at landscaping, does that mean that you would advise, you know, your former self or anybody out there searching now that in fact landscaping is a good candidate? You should, one should be interested in landscaping companies. You like it as a category?
- [29:15]
Adrian Pinto
Yeah, I think definitely. I mean, I think that especially for someone that's interested in services business to begin with, then absolutely. You know, I think it would be hard for me to try to convince someone that's right now searching for like a SaaS business that landscaping is the way to go? Because it obviously is way different. But if you're already interested in services, then 100%, you know, I don't think that any of the long term trends that I now understand five or six months into it would lead me to, you know, feel any differently basically today than I, you know, than I felt a few months ago. Like I'm equally as optimistic and I would say in a lot of ways there's been elements of the business that have been like pleasant surprises. You know, there are obviously there's been a handful of things that I've discovered both about my business and maybe about the industry as a whole where I've thought like that's not ideal versus what I was Hoping, but that those are definitely countered by a number of things where I've kind of been very optimistic and excited about it.
- [30:11]
Will Smith
Well, let's dig into those if you can remember them offhand. What are the pros, these happy pros and these cons that you've discovered?
- [30:19]
Adrian Pinto
Okay, well, I'd say that one of the biggest cons is ability to win new business in some of the more highly sought after areas. So I think in the commercial landscaping space, I would argue one of the kind of sexiest areas to be in if there is a sexy area of commercial landscaping is kind of like apartment maintenance, right? So instances where people are willing to spend high dollars on a monthly basis, but also at properties where you know that they're going to spend high percentages of their monthly maintenance in annual enhancements. So an apartment, let's say that they spend $4,000 a month on their maintenance, they might also spend $50,000 a year upgrading, you know, the pool, courtyard or something like that. And so maintenance in the landscaping space is not the highest margin area, but enhancements historically and typically are quite high margin. And so when you can balance those two things, that's a great, you know, it's a great customer versus, you know, let's just say you had the contract to do the landscaping at like a local small gas station, right? There's probably some grass, some shrubs, and that's it. And so that's not going to be very high margin. And chances are they're not going to spend a lot of money on that, on, you know, upgrades. So anyway, in terms of, you know, your question on the cons, I think what I've found is that, and this is both, I mean, in some ways it's good if you're that existing customer, but the contracts are so sticky. But they're also a little bit of an afterthought to property managers at times that if you, you know, if I were right now to call, you know, an apartment near me and assuming that they answered and I was able to get someone, chances are they would say either they have a long term contract so they're not interested, or B, you know, we're not, we're not unhappy with our current provider, so no need to switch and that that's a tough thing to kind of get around because you have to make your value prop really strong, right? And you can only compete so much on price because margins aren't huge to begin with, and then you're left with quality. But quality, it's a little binary, right? It's either it's good or it's not good. You know, there's not a huge scale within that for landscaping because it is that kind of afterthought. Like, oh, yeah, it looks nice, but that's kind of the end of it. So, yeah. Anyway, that comp, you know, that competition aspect, I think I underappreciated it a little bit. And again, that's probably just my ignorance at the time, you know, on the industry. But I've certainly, you know, come to appreciate it a lot more in the last five months. And I think, you know, we've made some inroads with a lot of these property managers, and I think we'll kind of stay in their ear so that the next time that they are bidding out, you know, properties will, I think, have a good opportunity to be a part of those bids. But definitely a challenge to just kind of give someone a call and expect to get really any traction with. With, you know, winning a sale.
- [33:03]
Will Smith
So how are you going to generate new business? Are you just going to do a lot. A lot of what you just described to just make your funnel wide enough so that, you know, a few shake out at the bottom, a few new. New clients shake out at the bottom?
- [33:16]
Adrian Pinto
I mean, that's definitely part of it, right? It's definitely a numbers game to an extent. I mean, I think for us, one of the things that's kind of a nice aspect is that we had historically not had a ton of different relationships like the Georgia Scapes historically had been a little concentrated in certain places on the landscape maintenance side. That's one area where we had a few really, really good customers, and we're in with a lot of their properties. Some of them were in with all of their properties, which is great. So it's super sticky. You know, I think one way to kind of, you know, one first step, basically, is to kind of broaden that horizon, both in terms of property managers, but also in terms of types of properties. Like, there's things that we had never even looked at in the past that are certainly viable candidates and frankly might be more easily, more easily won than, you know, some of these other things that I've mentioned. So I think that's certainly part of it is just kind of expanding what we look at and making sure that we don't sacrifice quality or anything like that when we're doing so, but just kind of broadening our funnel and then I think the other thing. And this kind of goes, I guess, to the pros, you know, back to the Pros, cons that you mentioned is there's a lot of areas of landscaping where I didn't appreciate how reoccurring the work was. So, like, you know, you have your contractually recurring revenue, right, which is great. Then there's the install kind of very basic, like you call me to do something to your backyard. It's very one time in nature. You're probably not going to spend money the next year once you do it the first time. But between that, there is a huge area which, you know, we used to call it greenbrier kind of reoccurring, which is that, yeah, maybe it's not contractual, but if the same customers are spending nearly the same amount of money on a monthly basis on different things, then, you know, you can pretty much kind of, you know, you can rely on that revenue and that that is very quality revenue. And so there is a number of areas in landscaping where that exists. And so that happens to be, I would say, a side of the business that has been a big pro, basically, is seeing how reoccurring a lot of our revenue streams are and how consistent we work with those customers and how we've been able to kind of maintain those really good relationships.
- [35:21]
Will Smith
Give me an example of a reoccurring engagement. And then also tell me what is the breakdown percentages of recurring in your business. Recurring, reoccurring and one off.
- [35:32]
Adrian Pinto
Yeah. So. Well, an easy example is we do work with building companies so that when a company is building a new neighborhood, let's say. So let's say there's 120 homes in it, they bid out that whole neighborhood. That neighborhood will take a very long time to complete all the landscaping and all the housing development in it. And most large builders are doing several neighborhoods at a time, right? So with some of our companies where customers were doing four or five neighborhoods at once, in those instances, that means that you might have 600 homes with one customer in any given year. And so that means basically every day or multiple days a week, you're out there doing the same work. And so with these neighborhoods, these aren't very customized landscape packages, right? These are very much uniform kind of couple plants, couple trees, 10 pallets of sod. That's it. And so when you have that, you. I mean, it's great because as a business, you know, every day or every couple days, I'm going out to this neighborhood, I'm doing this exact work. It's going to. They're going to. I'm going to. My costs are this. And they're going to pay me this. And so it's easy to track your margins. It's easy to seek areas of margin improvement because you can maybe get some volume based discounts on pricing with, you know, with your suppliers. And it's like I said, it's very easy to rely on as a company. So that has been an area that I've been really happy with, just our relationships with companies there, but also the, I think the opportunity, I mean, if you look at the housing growth in the Southeast, I mean it's unbelievable. You know, in Atlanta it's like I feel like every day I drive to a different, you know, different area kind of on the outskirts of Atlanta, and you just see more and more neighborhoods going up. And every time I talk to a new builder, you know, they talk about the hundreds and hundreds of homes that they have in the budget for the next few years. And so that's a, that's been a very pleasant, pleasantly surprising area for me.
- [37:22]
Will Smith
Tell us about the size of Georgia scapes and the numbers behind the deal.
- [37:27]
Adrian Pinto
Yeah, so we do anywhere between 3 and 5 or so million of revenue at kind of 15 to 20% margins, I would say. Yeah. And so when I initially got into an loi, I thought I was kind of getting in a little south of three times, but in that realm and you know, I've been fortunate because the business has just been growing like crazy, kind of across the board. You know, maintenance, the reoccurring side, the install side, that, you know, that multiple has come down significantly. Probably closer to two times maybe. Yeah, probably right around 2, 2ish times now. So incredible.
- [38:08]
Will Smith
And did the seller not realize did. Were they not seeing similar growth in 20, 20, 2019, 2018, such that, you know, he could have negotiated for a stronger multiple projecting, you know, really strong 2021 and 2022?
- [38:22]
Adrian Pinto
Well, honestly. So I think that there was an element where people were turned off by the lack of purely maintenance revenue. So to answer your initial question, we probably do 35% of the businesses is truly contractual maintenance with an with, you know, but then the, the install side. Right. The truly one time is maybe 10% of the business. So you know, that bulk in between is a lot of this kind of what I would describe maybe being a little bit marketing myself. But you know, that's what I would describe as kind of reoccurring. And so I think that that may have turned some people off, honestly. And I mean I would be lying if I said it didn't turn me off when I first saw it. And purely not knowing what it was.
- [38:58]
Will Smith
But I mean, some lenders, you know, looking at that mix of maintenance versus true maintenance, true recurring versus, you know, so called construction revenue, you know, they might not even lend on it 100%. I mean, that was their standards.
- [39:12]
Adrian Pinto
Right. I definitely, you know, we had that reaction, or I had that reaction by one lender certainly. I think again, I mean, I would argue that if the lender took a chance to understand what that business is, you would feel differently. And I think the proof there is look at our top five customers in what I would describe as the reoccurring space and look at what their performance was over the last five years and you'd be blown away how consistent it is. Right. I mean, it's honestly unbelievable. And so that to me, when I was doing my diligence, I mean, that was really how I kind of got comfortable just simply looking at the performance of these business, these customers over time. So to answer your question, also from, you know, from the owners or the seller's perspective, you know, this business actually, so it had done, it had grown about 5% per year for the past like five or six years. So on a total top line basis. So it had been really consistent growth. You know, I think that I just happened to kind of get in there at the right time where we've seen kind of a big uptick since that, you know, since kind of that kind of consistent growth period.
- [40:16]
Will Smith
I mean, to now be basically have effectively paid a 2x for a 3 or $4 million business doing 20% margins. Congratulations.
- [40:25]
Adrian Pinto
Thank you. Yeah, so I'm pretty excited about it. No, I was just going to say, I mean, I think that, I mean, and this again is like me with my PE hat on. But what this is, one of the elements that always attracted me to the space was the idea that you could potentially get in on a business at two or three times. But once you generate some scale, whether that's organically or through M and A, the multiple expansion and then arb that you get there is incredible. Right? And so that truly is exciting to me just seeing where we're at today, what I got it for and what I think that the business is going to be worth both in six months and in three years or whenever. And so that's really exciting to me.
- [41:02]
Will Smith
Tell the audience what arb means.
- [41:04]
Adrian Pinto
Sorry, like arbitrage. So like I, I would argue, you know, let's say a business is doing 5 million of revenue, you know, maybe that's worth 4 or 5 times purchase multiple. Let's say 4 times 3Z. So if you buy it for 3 times purchase multiple and you sell it for 4 times purchase multiple, embedded within that is a turn of multiple expansion which is, you know, pure kind of profit or you know, cash flow generative to the overall transaction at exit.
- [41:32]
Will Smith
You know, you had said earlier when talking about, I think the first example of the guys who bought the manufacturing business, essentially an engineering business, but they were finance guys and went on to.
- [41:43]
Adrian Pinto
One was a finance guy, the other his partner was an engineer.
- [41:47]
Will Smith
Okay. But it made you feel like, oh, okay, so I might not have to be an engineer myself to do something like that. You know, a finance person could get into a business like this. You know, the flip side of that is like looking at where you are now, what you're embarking on and you know, buying this first business and assuming there's a playbook to buy more and more and more. I see your finance experience and your PE experience as this, this great advantage because you know, M and A and understanding what ARB is and how it works as one example, that's its own skill and a skill that took you, you know, some number of years to, to develop. So the question is like, what say I'm listening to this interview and I'm not somebody with a New York investment banking or PE background. How well situated am I to go out and do what you're doing?
- [42:40]
Adrian Pinto
Yeah, I mean, I definitely think during the acquisition process especially there was benefits of my background, you know, of having my background. Right. I mean, in a lot of ways the process of building, you know, some financial forecast, working with a lender to put together a cash flow model and you know, showing them kind of the payback period and all of that, like that's kind of what you do on a day to day basis anyway. So to me that was the, I mean, in some ways that was the easy part. Whereas I know I've had discussions with people that are maybe in operations and you know, to them running the business, they're like, they're so excited. They're like, that'll be easy. You know, I run crews of 50 people. Like, you know, that'll be no problem. But I'm not really sure how to do the acquisition side of things. So for me it was almost the inverse of that. Whereas I was a little nervous. I was like, oh, I've never run a company before. And so I've witnessed a lot of that on the PE side. And that's kind of what I pitched to the lender in a Lot of ways is like, listen, as an associate, you are kind of the liaison between your portfolio companies and the PE firm. And so I would sit out at the aerospace company, you know, help with, help with the budgeting process, you know, walk the shop floor with the CEO and understand what's going on with the flow lines and, you know, the lean manufacturing, you know, projects that they're working on. But ultimately I never did that. And so that was definitely an area, I would say for me, where I was a little more apprehensive. But I would say, you know, to answer your initial question, I think that learning the acquisition side is frankly probably easier than the, you know, the business side of things. So if you're someone that has experience working with teams, you know, to, or, you know, maybe it's in operations, maybe it's in marketing, whatever that is. But, you know, kind of working with people to kind of achieve a collective goal, like, I think that that frankly is more important than simply knowing how to build a model. Like, I think you could watch a three hour YouTube video and probably figure out some of that stuff. And yeah, I mean they're, you're not going to figure out everything. But I think the lenders, frankly, you know, they do help you along the way. You know, they recognize that the nature of the SBA7 loan is not just to give finance guys loans. Right. So that they want to work with people that have a variety of backgrounds and make it accessible to kind of everyone.
- [44:52]
Will Smith
And speaking of M and A and more M and A. So how do you feel now that you've been in the business? You really are seeing what kind of a blue collar business looks like from the inside, about your original vision of buying one and then another and scaling it out. Is that vision still intact or are there some chips around the edges?
- [45:17]
Adrian Pinto
So I would say in terms of an opportunity standpoint, I feel a thousand times better today than I even felt when I started. Really, it's crazy. I mean, I'll, you know, when I'm, if I'm driving around during the day, I just. So it just so happens that where our business is located is near a couple different highways outside of Atlanta. And so it's like a ton of landscaping businesses around there because you can just quickly jump on the highway and get to where you need to be. And so, you know, if you go to lunch or something out near my office, I mean, you might see four or five different landscaping companies just driving around at any one point in time. And so I literally have like a notes Pad on my phone that when.
- [45:51]
Will Smith
I'm driving around, can I buy him? Can I buy him?
- [45:53]
Adrian Pinto
Can I buy him? I mean, I'll just type their names down because I'm like. And you know, sometimes you find out like, oh, that company was just acquired for $800 million. And you're like, okay, maybe that one I will shy away from. But honestly, I mean, it's the opportunity. I think the opportunity set in the Southeast. But also just in general, it's really incredible just how many kind of mom and pop landscaping opportunities are out there. So I feel great about that. I really do. I would say that from a, you know, like, the ability to actually do it. I mean, I definitely appreciate now more the difficulties of, you know, from a. In from an internal perspective of doing M and A. Right. So, you know, when you're in the PE world, it's really easy to kind of tell your portfolio companies, like, hey, guys, you know, in the budget this year, like, let's put a few deals in there. Like, we should do some add ons. Like, it would be great to kind of jumpstart the growth. It would look good when we're trying to sell the company to say that you guys did M and A. And you know, a lot of times they kind of say, okay, yep, yep, we'll start working on that, or whatever. But I don't think as an associate I had any idea of what that really means in terms of, like, getting it done from a process standpoint internally. I mean, now thinking about that sitting where I am, like, the idea of doing an acquisition immediately, you know, you start kind of going through the steps required in your mind, like, what are you gonna have to do? I'm gonna integrate their QuickBooks. I'm gonna have to set up the combined payroll. I'm gonna have to do all this. And so I'm def. I mean, I'm incredibly bullish on it, both, you know, because of the opportunities, but still just because I'm excited about that opportunity. But I do definitely recognize that it won't be, you know, a plug and play situation. Right. We don't have the. As a small business, especially one that I just recently took over, so the processes are not quite in place yet, I think to easily kind of absorb another company. So it will be a challenge when we first do it. And hopefully before then we can kind of tick some of these boxes in terms of, you know, improving processes that will make it easier to absorb stuff. But, you know, like I said, I am very excited about that. I think that that is a great way to kind of get some growth. And frankly, you know, when you look at an industry that isn't SaaS, right, it's not growing double digits like M and A is, it's the best tool in your tool, in your kind of in your toolbox to accelerate growth. And so if that exists in your market, I mean, I think you should got to take advantage of it, you know, and then it goes back to the whole scale benefits, right? Like doing the M and A fat. I mean if I can buy a couple small ones at two times now, then all of a sudden my combined business is worth a much greater multiple. And so that benefit is pretty impressive as well.
- [48:22]
Will Smith
Yeah, yeah, yeah. I, as somebody relatively recent to this, to this world and to the principles of private equity, learning about multiple arbitrage is kind of, it's, it's, it's a mind blowing phenomenon. I mean, you know, if you're from, it's, it's normal, but it's, it's kind of a weird thing to think that you can just, you know, it's truly the sum is greater than the, the whole is greater than the sum of the parts situation. Just like I add these two companies together and all of a sudden their combined profit was worth more than they were individually. That's kind of counterintuitive, but that's how it works.
- [48:55]
Adrian Pinto
I mean, I completely agree with you and I think when you look at it in that from like a PE lens where you know those businesses are worth 10 to say 10 to 12 times, but they're able to acquire businesses for three to five times, it's unbelievable. It's like you're telling me I'm going to double the value, the transaction value or the enterprise value of the stock company just by me acquiring it. Like how does it, how does that make sense? But that's just the scale benefits that exist out there. So you know, trying to bring that down to the SMB level is something that I definitely am focused on.
- [49:24]
Will Smith
Going back to what you were just saying about kind of getting some stronger processes in place and tightening up, tightening up the existing operation before you can think about doing M and A. Reminds me of your chassis Twitter thread. Talk about this chassis concept.
- [49:40]
Adrian Pinto
Yeah, so actually that was a discussion that I had with Colin, the guy that I mentioned that founded that aerospace business. So him and I have remained in touch a little bit. He's just a terrific guy. And so I had pinged him a couple weeks ago just kind of saying, hey, you know, I hadn't talked to him in probably a year. And I said, you know, look, I ended up doing, following in your footsteps.
- [49:59]
Will Smith
Man, tell me what you got.
- [50:01]
Adrian Pinto
One of the last things I talked to him about, I remember was, hey, like I'm kind of interested in doing something like this. And I remember him saying like, cool, like let's, let's see what you kind of, let's see what you got. Let's see what you got. And so I pinged him a couple weeks ago and I said, you know, hey, I did it. And, but anyway, I was, you know, it was kind of like, what, what advice would you have early on? So as he thought about what I was trying to get at was basically what did, what did he think about in those early days to set the business up for future success both in terms of team structure, maybe its processes, like whatever it is. You know, because I think that one of the challenges I see is like you could kind of go a million different ways with your business, right? I could hire this type of person, I could hire that type of person. I could try to, you know, focus just on sales and bring in a sales director or whatever, or I could try to, you know, perfect the existing team and you know, focus on operations. Like, how do I, you know, how should I think about this? And I just wanted to get his perspective given that in my opinion, like, I mean, he did it perfectly. And so his point was your goal needs to be 100% focused on building a chassis that you can then take other businesses and put on top of. And I know the one thing he always used to talk about is data. So they used an Oracle ERP system. And the reason they did that was because if they can make all of their data perfect today, so they know their costs. Exactly. They know everything required to understand margins, then when they acquire a business, it'll be very easy to integrate them into their systems and they can very quickly figure out where might there be some cost benefits, what can they do to improve that business, but it'll make that integration process very easy. And I actually remember when we did a couple deals with their company the day that the funds flowed and the transaction went through, they had a day long integration of their systems and then they were ready to go and their systems were like combined. I mean they just had remarkable systems on their back end. And so Collins point to me though was like, think about that. I think from an SMB perspective, which is like, you're not going to maybe have Oracle's million dollar ERP system, but like, what can you do to make your business today that chassis that other things can easily go on top of? So I think a perfect example that we're working through right now is we have very archaic payroll processes stemmed from kind of the prior organization and to the point where like literally each one of our employees is filling out a physical timesheet every single day with where they went, what did they do? Took lunch here, finished lunch here, got back to the office here, and they're handing it in. But the silly thing is, first of all, they don't do it until the next day. So the data is not even accurate to begin with. And second of all, we utilize telematics and so we know that information anyway. And so my whole point was like.
- [52:48]
Will Smith
As opposed to telematics is kind of a GPS enabled thing that shows you where everybody is and basically tracks them.
- [52:54]
Adrian Pinto
Yeah, exactly. And so my whole thing was one, if we actually care about where they were, we know that anyway. Right. So we use Samcera. You can run automated reports that come out every Sunday that tell you every property that they were at and how long they spent there. So that benefit of the payroll sheets is gone. And then the other benefit is, you know, when time did they get in, what time did they leave? And I was like, well, let's just put in a time clock. Like they're, you know, we can just put, give them a code, they punch it in when they get, they, they, they leave in the morning, they punch it when they get back, and we'll just assign them an hour for lunch. So as opposed to them like filling out like, oh, I started taking lunch at 12 and I finished at 1. Like, there's no benefit to me to know that information. And so if I know what time they left, know what time they get back, they have to take an hour of lunch, we'll say, which they do anyway, and we already know their location. I was like, we just simplified everything. And so we're, you know, by utilizing the Samcera technology by, you know, a time clock and then pairing that with, we're going to use like ADP or one of the payroll processors, which today we just have our accountant take, you know, these physical timesheets and she processes payroll manually. So it's, I mean, it's an incredibly archaic system and it's not built to scale. So if we went and did an acquisition tomorrow and added 10 more people, it would just be a massive headache to our current process. Right. And so just back to the chassis point is like, we're not set up for that today. But I think there's some pretty simple things like that that we can do that will get us a lot closer to being ready to do that. And so I'm hopeful that, you know, over the next couple of months we'll be able to, you know, kind of cross off all that low hanging fruit and be in a much better position to kind of, you know, you know, go out chassis.
- [54:29]
Will Smith
Yeah, you know, it's interesting. There's this kind of, there's this kind of. There are two modes of thought. One is that like, you know, all these SMBs out there, they're so mom and pop, they're so unsophisticated. You know, if, if you see a fax machine on premises, it's like there's incredible low hanging fruit. Yeah, the kind of, the fax machine test and then, but then you'll hear other people say that that's way overplayed that in fact, you know, these businesses, it's, it's like whatever, moving everybody to G Suite or some tech solution, like just throwing technology at the business doesn't magically make them better, more profitable businesses overnight. But in fact what I'm hearing that is in your case is kind of like. Well, your case is kind of more of the former thinking and it's bearing that out that everything that you just described is basically some tech solution to some archaic process that currently exists.
- [55:28]
Adrian Pinto
Yeah, so I, yeah, I think that's a really interesting point. I think that it's somewhere in between. And what's interesting to me about that is like when you think back to I think the initial private equity model stemming from like the 80s, right. Barbarians @ the gates was the whole idea was go after these bloated corporate companies. You go in, you acquire them, you cut a bunch of costs. Right. This is back when taxes were super high, so people were using like, you know, country club memberships and all these like perks to try to, you know, get people to come work there. Right. And so you look at like KKR and stuff, what they did back then and it was a lot of cutting these bloated overhead costs and that's how they generated their money. The interesting thing about SMBs, it's like the exact opposite. Like at least with Georgia Scapes, I mean the business was so lean both in terms of processes and people that anything we do from a tech perspective is going to be incremental cost. So like there isn't cost savings opportunities in a lot of instances. Like in a lot of instances it's actually costing more, but it's about, like, efficiency and then, like I said, the whole chassis dynamic. So, you know, by going to a new payroll, like, it's going to cost more than it costs today, 100%, but it's not going to be a huge difference. And it'll make it a thousand times more easy. A thousand times easier, rather, on Rachel, who works for me, and she's the bookkeeper. And it'll also make it much easier to kind of scale this up if we take on more people. So a worthwhile cost. You know, the tracking situation I mentioned that was not inexpensive, but there's a lot of benefits to it. And if we're going to have newer vehicles and stuff, we've got to know where that stuff is. And so to me, worth it. But I do think that there is a dynamic in the SMB space where if you accepted every different SaaS solution out there, you'd spend so much money and then you would need another SaaS solution just to aggregate all your SaaS solutions. There's so many things, it's crazy. And we get calls all the time from different people. Oh, like, you know, what if. Let's talk to you about this CRM or this benefits tool or this whatever. And so I think that the one challenge almost in the SMB space is, like, you have to be careful that you don't try too much because it would be really easy to do that. And then you would end up just spending, like, hundreds and hundreds and hundreds of dollars a month. And frankly, I think it would complicate and confuse people. Like, that's been one of my biggest focuses since starting is making sure that as motivated and excited as I am, I'm not overwhelming people with a million ideas. And so, you know, I'm trying to go at this slowly. I'm trying to learn the process before just, you know, suggesting, like, what if we change it to this? Because I don't know all the reasons why we do it today. And so, like, I should learn those first before kind of suggesting changes. So anyway, now that we're five months in, I feel much more comfortable kind of going to the team about different things and saying, like, all right, I have a good understanding of why we do this now, but I think this actually does make sense. And by doing that, I think it's limited the number of things I've tried to change, but it's also, I think, made those things, you know, more important.
- [58:22]
Will Smith
You know, kind of slowing your role and waiting five, five months and really understanding the business, you know, that's an important part of the transition and that's where a lot of acquisition entrepreneurs stumble, is that they're so ambitious, they're so eager, they want quick wins. So they come in day one and they're like, you know, G suite notion CRM. Let's sass this place people. What, what was your experience? I mean, did you, did you do that? And quickly learned that you shouldn't do that. And also just, just a point about the kind of like, you know, here you are, this New York guy moving to Atlanta, buying a blue collar business. You could see how there might be some, some cultural, cultural friction there with it within the company. Was there?
- [59:11]
Adrian Pinto
Yeah. So, I mean, I think it definitely helps that you know, working at a place like Greenbrier with industrial businesses, like I spent a lot of time walking shop floors and you know, being immersed into those kind of experiences where I felt pretty comfortable kind of just going into a blue collar office and saying, like, yeah, you're right, I'm not going to wear a suit anymore. But that's okay. It is funny because I bought a truck and I would say historically, you know, people that worked with me would not think that I'm a truck driving guy. But you know, when in Rome, you kind of do, you know, you got to get a little do what they do. So. But 150, it's a GMC.
- [59:44]
Will Smith
Okay.
- [59:45]
Adrian Pinto
But, you know, so that was definitely, you know, it was a unique experience, but I felt pretty well equipped for it. I would say, you know, to answer your first question, yeah, I mean, I, you know, I watched in the PE space every time we would do a deal, you know, you would kind of develop like a hundred day plan. You know, what are your goals for the, for the company in the first 100 days? And these are things that as the PE firm, you're hoping that they do. So you're kind of giving them some advice, some things that you want them to work on, whatever. And so, I mean, I kind of similarly developed this like hundred day plan where I was like taking notes on things and keeping that in the back of my mind. But at the same time, especially in the first couple of days, I would go have discussions with people that I work with and I would ask questions like, okay, so how do we do this? How do we do that? And they would tell me, and I think I at times did not remember that whole notion of like, like, let's go slow at this, you know. And so I just, as an excited person would be like, oh, that's interesting. Like, have you ever thought. Have you ever thought about doing it this way? Or, oh, like, what about. What about if we tried this? And it was pretty evident pretty quickly that, like, that by doing that, people were a little more apprehensive that I was gonna just, like, blow the place up and start over. And that was never my intention. And I don't, you know, I didn't want to make anyone, like, freaked out or anything like that. And so after a couple of days of that and seeing that, like, that wasn't the best approach, I very much scaled this back to where I took notes on questions, on things that I thought maybe could be improved upon. But I waited. I didn't just go to the person the next day and say, like, hey, can we talk about these items? I waited to see if I could learn the reason we did or didn't do some of these things. And I think that was a much better approach because a sound. Yeah, I ended up learning a lot more about the business that way. And then. So it was actually just a couple weeks ago, we had a discussion where I took all my notes from the first five months. I broke them into kind of like, finance, the two divisions of our company, operations, topics, things like that. And we had a whole team discussion for, like, three hours. And it was so much better because at that point, I'm more informed. So I'm coming from a place of understanding when I'm asking these questions. So now these are not, like, so stupid questions. These are like, no, I know why we're doing this, but let's talk about, you know, X. And I think that that was much better, and I think that the team appreciated it a million times more because it was. It was just much more thoughtful by doing it this way. So I'm actually. I'm really happy with how that turned out. But it was. Yeah, there were some stumbling blocks, certainly immediately, because, like I said, I was just one of these excited, you know, ambitious people, and I, you know, talk a lot. And so, you know, it was just one of those things where I was ready to go kind of day one, but I think that I needed to kind of, you know, pair that back.
- [62:25]
Will Smith
So just to. I mean, that. That sounds awesome. So just to kind of formalize that into a best practice people can learn from. So you basically kind of gathered notes, literal notes, and kind of mental notes over the course of close observation for four or five months and then collected your thoughts and, you know, organize these notes into. Into categories. And I assume you Prioritize them. And you gathered everybody together into a group meeting, and you said, hey, guys, I've been here for. I've been here for five months now. You know, here's some things that look like opportunities to me, but I want to hear how you feel about them. Let's go through this list. And was that kind of the way it went?
- [63:04]
Adrian Pinto
Yeah, 100%. And if you looked at my notes, I mean, it's funny because you would see, like, dozens of things that have been crossed out, because those are things that I maybe wrote down four months ago, but then a month later learned, like, oh, wait, we can't do that because of this. And if I would have asked that question, I would have gotten that answer, but it also maybe would have caused some friction or whatever. And so I wanted to, like, learn some of that. And so basically what I went to them with was a much more refined kind of list of things. And I think so a. I think it was good because it allowed them to kind of chime in, give their perspective on different things. It also generated a discussion, right? Because now you have five people talking together, and maybe someone feels one way about something. And there was an instance where, like, I brought up an idea. One person kind of still wasn't on board with it, but two other people were like, no, that actually is a pretty good idea. And then we had a group discussion, and it was great. And so I think that was a huge benefit of it. The other thing is, like, and this goes, I think, to formalizing processes a little bit in SMBs, but they didn't used to have kind of like an annual budget or goals discussion. And so I also use this meeting as a way to, like, let's formalize some of our plans or goals for next year. So here are some ideas I have. Maybe some of these suck. Maybe some of them are interesting. But as part of this discussion, let's pick out what we want to focus on next year. And sure, part of that's financial, right? So we can set up a little bit of a budget for each of the divisions, again, something that they never did in the past, but now we have a target to, you know, to go after. But also operationally, from a process perspective, we can use some of these ideas, assuming that they like them, as things that we want to now target for this coming year. And so as part of that, there was a number of things, whether it be on the business development front or streamlining processes, but we were able to pick those, I think, out of this list. And not everything we even chose came from my list. I think my list generated a discussion, and part of that discussion ended up resulting in better ideas that came about from the group's, you know, talking. So I think it was like a. It was a good. I think it was a good way to bring about ideas, but not in a way that would ultimately, like, stress people out or, you know, kind of overwhelm people.
- [65:14]
Will Smith
We're wrapping up here, Adrian, but I want to circle back a few minutes to going back to M and A and acquisition in the chassis. You know, one of the things I kept hearing you say about building this chassis, positioning the company to be robust and a kind of a foundation. I mean, that's really what we mean by chassis. Like a. Have. Have this first company be such a strong foundation that it can more easily absorb and integrate future acquisitions. You know, I heard you say a lot. A lot of it was around, like, process and systems and tech. What about culture? Like, if. Like, if you imagine. Because I would imagine that the people thing would be the hardest part of all. So if you imagine yourself buying another commercial landscaping business in Atlanta, do you imagine that all of those people start working together, or do you keep them as, you know, as discrete. As discrete offices, and you don't really have to integrate people or culture? How do you think about that?
- [66:09]
Adrian Pinto
Yes, that's a great question. So I think that the office question has to do with geography. So if, let's say we're on the east side of Atlanta, so let's say we found a business that was on the west side, I would never probably integrate because I think that there's a lot of benefits now. We have a presence on both sides. And if you know anything about Atlanta traffic, driving from east to west is a nightmare. So, like, there would be a ton of benefits there that. I think that if the other office was close to us, maybe you would look to integrate. I think that at the size that we're probably looking at, if there is an office presence, which I'm sure there would be something, but it would be. It would be very limited. Right. And I think similar, you know, kind of as you often see in the SMB space, you know, you kind of have an owner who maybe does some account management, some sales, some estimating. Often you have maybe one other employee that does kind of the bookkeeping side of things, and then you have some crews. I actually think that that structure lends itself really well for acquisitions, because crews can be integrated, I think, pretty easily. You know, certainly every business has a Little bit of a culture, but you know, as long as the quality of the crews work is good, I think that you can kind of, you know, mix crews more easily than maybe you could at a 50 person company where there's all these back office people that now are going to be sitting together. So yeah, you know what I mean? Versus like if you bought, if I bought a couple crews, they're just gonna keep working with their existing customers anyway for the, you know, for the most part. So that actually I think lends itself really well. I do think that there's an element of that, you know, there is still some cultural issues. I think, you know, we're in a unique situation though because we're growing. You know, when I took over, it was really there. So there was, you know, one person kind of doing finance stuff and then we had one person working on estimating and kind of account management. We've since added a number of people kind of on the manager side of things. So we're kind of developing our own culture today anyway. So I think we're in a good position to be amenable to another culture. It's not like we have very rigid guidelines that like it's our way or the hideaway. I think we're in a position where if there's a best practice, we'll take it. And if ours is better than theirs, then great. And so I think that that makes us potentially a more attractive acquirer in some ways because it's not just this big hierarchical business. A lot of people, I think in services companies will shy away from selling or theoretically working for one of these big guys because it's just layer after layer after layer. It takes 10 phone calls to ever get a decision made. It just can be really hard to operate in that environment. And so I think that we're being much more nimble, much more flat. I think we could be actually in a pretty attractive choir for a lot of people.
- [68:48]
Will Smith
Yeah, of course. Victim of your own success. As you successfully acquire all these companies, you inevitably become bigger and then some of that goes away. So are your old colleagues from the private equity world looking at what you're doing now and being like wtf? Or are they jealous?
- [69:08]
Adrian Pinto
Well, it's funny because that guy that I mentioned that was head of the ETA club, he went back to private equity. He's at the biggest of the private equity firms now. And so him and I will text all the time and every once in a while he'll have a tough week or something. He'll be like Man, I am jealous because I think he still has that kind of burning desire a little bit to have done something on his own. But I think that they're all really excited. I think most people in the PE space see the value of it, see that it's what someone in their kind of position could bring to a company. And I think everyone gets a little burnt out, honestly. And so I think that, like, the. The desire of someone in the PE space that's been around of a bunch of, like, CEOs and industrial companies, they. I think that they all, pretty much everyone I've told this to that I used to work with, their first reaction is like, oh, wow, that's cool. Like, you know, I basically none of them knew it was also possible. And it's. It's interesting to, you know, just about everyone. So I think that they're all. They're both excited for me, but definitely, you know, a little bit jealous.
- [70:11]
Will Smith
Very cool. Adrian, I found you on Twitter. What. What is your Twitter handle? And is that the best way for people to reach you if they have questions or want to want to, you know, connect with you directly?
- [70:22]
Adrian Pinto
Yeah. So my Twitter handle. I'm sorry, I was just looking a little new to the Twitter game, I would say. I think it's Adrian underscore Pinto two. The number two, I would say the easiest way to get in touch with me, though, is, you know, LinkedIn, Adrian pintoeorgeescapes.com or my email is adrianorgescapes.com and I'm always happy to have these discussions with anyone that's interested in kind of looking at the ETA space or thinking about making the jump into search. And it's always fun for me to talk about ideas and talk about different businesses. That was probably the thing I liked about PE the most, was just always getting to evaluate another company. So I always enjoy calls with searchers who are saying, hey, I'm looking at this business. Curious what your thoughts are. So, always happy to have those discussions.
- [71:07]
Will Smith
Well, I. I may personally take you up on that. 2022, Adrian.
- [71:11]
Adrian Pinto
Yeah, please.
- [71:12]
Will Smith
This has been great. Thanks. A lot of great thoughts here. A lot. Just, we. We went deep. We went longer than I intended to, but it was. It was because it was just a lot of gold here. So thanks a lot, Adrian.
- [71:22]
Adrian Pinto
Appreciate it. Yeah, thank you very much. I appreciate sa.