← Owned and Operated - A Plumbing, Electrical, and HVAC Business Growth Podcast
Owned and Operated - A Plumbing, Electrical, and HVAC Business Growth Podcast
#186 Turning Tow Trucks Into Business Success
00:50:03
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- [00:00]
Matt Saskins
This business is not rocket science. We spend about $750,000 a year on our fleet on repair and maintenance mechanics, a 1% of budget. Big picture. This is a 50% gross margin business and these are 20% EBITDA margin businesses when properly run.
- [00:25]
Tyson
We're about eight months into using Avoca and Evoca has been an awesome partner for us in our call center. So what Evoca does for us is, is they do two different things. One, they have their Coach product and Coach has been helping us do what it says, Coach our CSRS every single day. It listens to every call and uses AI technology to basically pick apart that call and tell us where we can improve. And for the last eight months, we've been consistently improving our scores, which has been awesome. The other product they have is just conventional booking. And it's an AI tool that books over the phone, customer calls in and it either handles overflow and as in our phones are full, or it does nights and weekends for us. And a customer will call in and actually deal with an AI agent all the way through booking. And the savings inside call center has allowed us to ramp up our marketing to continue to grow even more. Thank you, Evoca, and thank you, Tyson, for your partnership.
- [01:15]
Jack Carr
Welcome back to owned and operated today. Jack Carr, me. I'm hosting this thing and we have the one, the only, Matt Saskins with East Coast Towing. Matt, what's going on, man?
- [01:28]
Matt Saskins
How is it going? I'm. I'm currently in Fort Lauderdale, Florida. I was down here for a. For a towing conference. My family's flying down this afternoon. Then we get on a cruise tomorrow. So all good.
- [01:38]
Jack Carr
You know when. How exciting was the towing conference for you?
- [01:42]
Matt Saskins
So. No, I've got to say, actually, there were a bunch. Right. So there's like, there are three or four around the country that are your sort of big trade shows, right? Like, one is. The big one is in Baltimore. Every year it takes over the entire Baltimore convention center. Like, super cool to go shiny objects. Like all the truck manufacturers there, lots of stuff to look at. Like that is super cool. But from a practical standpoint, you don't learn a ton there because like I think, as I said elsewhere, like, this is a fairly unprofessional industry. So you don't have a lot of people that are actually paying attention to their business. The. The thing I just went to, which is the towing and recovery summit, was like highly recommended by a bunch of folks that I trust a lot. Small, like probably 80 people. But, you know, those might be the only 80 companies in the country where the owners are actually paying attention to like how to actively make their business better. Like some of the largest companies in the country are represented. So it was actually super, super valuable. So yeah, like total opposite from what the other towing conferences are.
- [02:44]
Jack Carr
Yeah, no, I enjoy it because we joke. My wife is specifically jokes at me when I'm saying, hey, I'm going to the ACA or like one of these, these confere, like get all excited and get like jittery about it. And she's like, you're such a nerd. And I posted on Twitter the other day, she calls all of us like these, these groups of Twitter, ex Twitter people. Like business buying nerds. Like you guys are weird Internet friends. Yeah, weird Internet friends is very accurate. But like that's, this is what we love doing is talking about business and doing that. And the cool part, like I actually looked at a lot of towing businesses in my personal search of like trying to buy a business. So much so that I was comfortable talking about it. Like on one of the first podcasts I think John and I at like episode 102 or something where I had just came on and we're business breakdowns. Like towing was one of the first ones we did. I know this industry. It was more so from like the standpoint of they did like local residential towing for not like recovery like hey police, like someone's parked illegally or hoa. So kind of fun. I'm really excited to dig in. So can we start with your history? Like what were you before you bought the towing business and then why towing and then like first six months of towing?
- [04:03]
Matt Saskins
Yeah, absolutely. So background is in the technology space in kind of everything from technical sales and sales leadership. I've had general management and executive roles, been at global enterprises and service providers, worked at, you know, VC backed startups and some PE software turnarounds. So done kind of a lot of things in the tech tech space. Was fortunate enough to be able to spend some time doing, doing M and A in, in my corporate life, albeit at a very different scale. Like we're talking, you know, 50 million to $500 million deals but, but still like had that exposure and then you know, spent a bunch of time again with PE backed companies which was sort of a super helpful experience. So that that had been. Has been my career. We get to Covid and like my wife and I over, you know, the years had built up a fairly reasonable real estate portfolio. Took the opportunity to sell everything over Covid because essentially got an unsolicited offer on one building we owned went, oh wow, that's more than I would buy this for. So okay, cool, let's go. Actively marketed the rest, sold the whole portfolio. And then we were at this place of okay cool, what's next? Like where, where, where we put some of that money. Um, had talked through the idea of buying an operating business and then you know, started kind of started kind of looking and that would be mid-22, like late spring, early summer. Um, the, the, the search was effectively.
- [05:34]
Jack Carr
Let me ask you real quick. So, so you were, you, were you industry agnostic? Like hey, I don't care what it is, as long as it's like a cash flowing, boring industry. But I want to stay in, in Raleigh specifically. Was that your M.O.
- [05:47]
Matt Saskins
Not quite so needed to stay in Raleigh. Like we were going to pick up and move. Needed to be of, you know, large enough. Right. We were broadly looking for something that was kind of in the million dollar EBIT or larger range because, you know, it's a combination of being big enough to be meaningful, but also something I could take down myself. Like, I don't have investors, it's just us. Yeah. And then the third was, I wouldn't call it industry agnostic so much as there are certain industries that I did not want to invest in. So like. Right. I think everybody's right, like hospitality and retail and all that is just off the table because I just, I don't, I don't have what it takes to do that. Home services in our market, I think it was not going to be the play simply because like, if you think about the value creation playbook in home services, at least as I understand it, in our market, companies have been doing that for the past decade. So I think there's really like in, in the Raleigh area, there's, there wasn't any space to, to breathe there. And from my vantage point it's a, it's a.
- [06:44]
Jack Carr
Definitely a. The Raleigh region in greater Raleigh is definitely a market where it's the same. It's actually the issue that I ran into when I bought my business. It's you are a small fish. Even at a million dollars in ebay, you're a small fish in a really big pond with a lot of big players in private equity and really smart individuals who've been running playbooks for five, 10 years.
- [07:05]
Matt Saskins
Right. I can think of when we've been in the area now 13, 14 years, but when we first moved down like right there, the electrician showed up like with an iPad, doing, doing all the things like doing, doing all the stuff. Right.
- [07:18]
Jack Carr
So.
- [07:18]
Matt Saskins
Yeah, so. So industries that didn't want to invest in but was fairly open beyond that, like looked at some small manufacturers, looked at, looked at some construction businesses and then as it happened, there were two towing businesses on the market in Raleigh at the same time. Looked at both of them. I'll, I'll share more about them because they kind of explained the two sides of the towing industry. But kind of one of them fit from a sort of size and all that perspective. Like the owners. From my perspective, part of it had been de. Risked in that it had already gone through an inadvertent ownership change seven or eight years prior when the founder passed away unexpectedly and his wife took over the business. So it had been through that transfer once. And also the current owner, the founder's wife and her father in law who she brought in to help run it, neither of them drove a truck. Right. They weren't tow truck drivers by background. All those things combined. I really like that business. And then you know, spent a bunch of months going fairly deep on the industry. Went up to the, the big tow show in Baltimore about a month before close as the final sanity check of like okay, does this, you know, is everything I think about this industry actually accurate and you know, kind of the water held. So here we are. I mean the broad thesis such as it is, is like cars and trucks are going to stop breaking down, cars and trucks are going to stop getting in accidents. So let's go.
- [08:40]
Jack Carr
Very good thesis. And there's going to be more and more cars and trucks in America. I mean we, we don't look like we're going the other way in terms of trend. Very interesting. And so you looked at these two businesses, you bought one of them or bought both.
- [08:52]
Matt Saskins
About one bought one, another searcher bought the other. I know him. We talk regularly because. Because of the differences between these two businesses. We're actually not, not competitors.
- [09:02]
Jack Carr
Competitors. Yeah. So talk about the two different routes that, that towing can go.
- [09:06]
Matt Saskins
Yeah.
- [09:07]
Jack Carr
And why they don't cross over.
- [09:08]
Matt Saskins
Right. So broadly the way we, the way we described in the industry is there is, there's consensual towing and there is non consensual towing. Non consensual towing is kind of what everyone.
- [09:17]
Jack Carr
It's a great way to put it to.
- [09:18]
Matt Saskins
It is private property impound or repo of vehicles. Right. So that's the snatching cars at a parking lot, illegal parking, that kind of thing. And then consensual towing is, is the opposite. Right. Is customers, people, your individual consumers, businesses, etc. Calling us to come and do a thing, move a broken down vehicle, relocate equipment from A to B, deal with accident recovery, etc. And those two tend to not overlap for a bunch of reasons. One is that the business models are fundamentally different. Like one is a One your customer is the person whose vehicle you're towing. The other your customer is fundamentally like property managers and, and things like that. The second is that the, the profile of the drivers is very different. Like to be blunt, the guys that want to run PPI like they, they want permission to go steal cars.
- [10:06]
Jack Carr
Yeah.
- [10:07]
Matt Saskins
And those drivers like they don't want to work for us and vice versa, our guys don't want to go work at a PPI or repo shop. And there's all sorts of follow up from that. Right. The insurance is very, very different. Like the, the, the other business in town, like I said. I know, I know Connor really well. We get together all the time. The only similarity between our businesses is we own tow trucks.
- [10:27]
Jack Carr
What's the, the difference in. Because I would imagine that, don't get me wrong, right. The non consensual towing, definitely a part of it is, is emergency service. It is, I wouldn't say it's 24 7, but there is an after hours aspect. But I imagine that consensual towing has to be a 247 kind of gig. Is that, is that accurate?
- [10:48]
Matt Saskins
Yeah, I mean so they're actually, they're both 247 and in fact the PPI businesses run like a true. You know, you might be running 8, 10, 12 trucks on a 3 shift 247 basis because you're really getting busiest second and third shift. Right. You know, you think like people are at bars and restaurants and parties.
- [11:04]
Jack Carr
That makes sense.
- [11:05]
Matt Saskins
Whereas like we run 24 7, we've got, we've got folks in trucks 247 plus an on call schedule over the top of it, but at a much lower volume. Right. So during the day, on a given day I may have 20 drivers in trucks, 25 drivers in trucks overnight. I've got, you know, two ready to go and then more that we can call in if something goes crazy just because the, the sort of ebbs and flows throughout the day.
- [11:29]
Jack Carr
Yeah, I imagine that's awesome. So, so you bought this business. You get inundated into the consensual to. I love that by the way. Consensual. It's an easy way to describe it. Like that actually makes a lot of sense. The content consensual tow and you start, you close on this business and now you're running it. What does that first couple months look like?
- [11:52]
Matt Saskins
Like, so the one thing I'd say is this is actually not, this business is not rocket science. Like, this is not a particularly complicated business. Right. Like our, our largest costs are all things that are fairly straightforward to understand.
- [12:04]
Jack Carr
I'm stopping you, Matt, on that one. I think it is, I think this business is not for you. But there's a reason that it stayed fragmented for so long. Like it is insanely for sure. Yeah, I definitely want to.
- [12:15]
Matt Saskins
There are challenges there, there, but they are, they are not challenges in understanding how to operate the business. They are challenges in like as we faced, in how you grow it and how things maneuver. Right. So, okay, like not to, just not to distract from what the guys do. Like our operators are really well paid, highly skilled, tons of experience, especially the guys doing heavy towing. They have CDLs, they have a ton of mechanical experience.
- [12:37]
Jack Carr
I want to get into that too because I've seen some awesome pictures that you have on Twitter. I'm like, oh my gosh, that looks like a technical nightmare to try and.
- [12:44]
Matt Saskins
Get that truck for sure.
- [12:46]
Jack Carr
No.
- [12:46]
Matt Saskins
Yeah. The running of the business fairly straightforward. Like the big moving piece is right. We have a lot of assets. Right. There's a lot of trucks moving around and like we spend a ton of money on insurance, fuel, people and maintenance of the trucks. Beyond that, it's all fairly straightforward stuff. And even there, what you get is at a certain point at the size of our business. Right. So it was 38 people at the time of acquisition, something like that, 35. There was no management layers because the prior ownership just, it was pure top down command and control and that's it. But you know, we've since promoted some folks into supervisor roles, but there were enough people there that, you know, I told everyone day one and I, I'll still tell new, new folks this. Like, I'm not driving a tow truck. Right. I've driven our trucks, I know how to operate them. But the day that I have to go and sort of use a tow truck in anger, there's like 10 things, 12 things that have all had to go wrong along the way.
- [13:38]
Jack Carr
Yeah.
- [13:38]
Matt Saskins
And it's going to be a super bad day for everybody involved. Right. There are better things for me to be doing with my time to make sure that our drivers and the operators and everybody else have the work for them to do. Right. So. So my focus is growing the business in a scalable way, making sure everybody has an opportunity to earn money, making sure that we can, you know, that we can continue to add to the benefits package we offer to the team every, every year. And you know, I got to focus on, on that piece of the puzzle. I happen to like, I am mechanically handy. I've built a bunch of cars, I know how to work on vehicles. So I think like I was able to sort of jump in there and, and inherently understand what's going on from a truck standpoint. Again, like I've got mechanics. We, there are people to do all of those things. Yeah, there would not be at a much smaller business. Right. I know people.
- [14:24]
Jack Carr
I was gonna say. Yeah, and that makes sense. That's a great point though because we talk about that especially in like SMB, Twitter and that a lot is like the size of the business you buy is extremely important to your skill set because if you bought a 12 person trucking company like you would have to jump into TR inevitably or, or you're.
- [14:41]
Matt Saskins
Behold, you're, you're much more beholden to, to, to everybody. More cost involved in certain things. For sure.
- [14:46]
Jack Carr
Interesting. Okay, so you, you buy this, this large trucking business. You're, you're not driving trucks, but you're growing it. And so what, what does, what does scale? I like, I'm actually fascinated because as I'm trying to like draw linear, like linear congruencies between our businesses, I'm even thinking like from a scale perspective, marketing. Like how do you do marketing? Because it' in the way that we look at Legion. Like you wouldn't, you wouldn't post on Facebook unless it's branding, branding plays and then like even like lead gen from Google which has to be your number one I would imagine because somebody's on the side of the road and they Google real quick towing company near me. So it becomes like in a, like all you're focused on is. And correct me if I'm wrong, but mostly of what you're focused on is going to be Google SEO, Google Optimization and then like some branding on the back end to try and keep.
- [15:42]
Matt Saskins
So I think it's important to think about the who our customers are. And kind of fundamentally we think about it as being three things, right. We've got individual consumers who are customers. So that would be like someone broke down on the side of the road and they don't have AAA or don't have motor club or whatever and they're just Googling, you know, tow truck near me. The second is commercial customers, right. B2B type accounts and those Range from a lot of searcher type businesses, right. A lot of small midsize home services businesses all the way up through the large national fleets who had, you know, 20,000 trucks around the country and they, they call us if they break down in our market. And then the third would be municipalities, right? Police departments, highway control, accident recovery type stuff. So if you look at those three like police departments, municipal stuff is fundamentally a location based game, right. In order to, to be on more government contracts, we need to be in those physical areas. So if I wanted to expand into a different county and join their rotations, their police and highway patrol, I'd have to physically be in that county. Right. I have to go and open up a storage yard, add some trucks in that county and physically expand. And that's why, right. For a relatively small business, right. We've got six physical locations because they all have to be sort of proximate to certain towns. So that's one piece of the puzzle. The second, the commercial side of things is one where frankly we've still not cracked the code on organic growth there yet. Like we, we had a sales rep out in the market for about 12 months now, in fairness, he's having fairly mediocre results. So we're probably going to make some changes there. And a recent acquisition we made, I think we'll change the direction we approach organic growth for commercial customers.
- [17:22]
Jack Carr
And that looks like just typical B2B. Like hey, go out, pound pavement, meet people. Okay.
- [17:28]
Matt Saskins
Yep, yep. And it's a market, I imagine it's like others, right. Where the amount that a fleet spends on towing is small. Right. Like 1% of the fleet budget. Right, right, right. So, so it's, it's hard to get people to switch because if they're a big fleet, right. Like put it in perspective, we after some acquisitions were 50 trucks. Ish. We spend about 750000 a year on our fleet on repair and maintenance, mechanics, all that sort of stuff.
- [17:53]
Jack Carr
Yeah.
- [17:54]
Matt Saskins
And if, if we were to like, if one of my things breaks down, we tow it ourselves. But if I put a dollar value on that, we'd spend, yeah, 7, 500 bucks a year maybe on token. So 1% of budget. Hard to get someone to change where they're spending 1% of budget unless the other company just egregiously screws up.
- [18:10]
Jack Carr
Yeah, it's not, it can't be a money play because right. If you come in at hey, we can do 5% better than, it's like 5% of 1%. It's like right, right. Yeah, yeah, yeah.
- [18:20]
Matt Saskins
And then on the the cash call side of things, individual customers and to be clear that is not just like you with a broken down car. That also is a lot of like owner operators that have a, have one tractor trailer and they happen to break down in market. So that is a combination of SEO local. Right. Google my business stuff. We've, we've experimented with paid and paid works really well for heavy towing because the ticket size is larger and it's easier to convert. Paid for us works extraordinarily poorly for light duty that is like passenger vehicle towing because we said too much competition. Right. There's too many like guys in a truck who will charge 70 bucks for something we charge 150 bucks for. So we basically like we get those coming in via mostly organic because paid didn't work for us. Like basically we had. Right. So big picture, this is a 50% gross margin business and we had kind of a 2x ROAS on light duty paid. So we were effectively not making money.
- [19:17]
Jack Carr
Yeah, yeah, you need it closer like what 6 to make it even more.
- [19:22]
Matt Saskins
Towing we run between 7 and 9 x roas. And the problem there is we run at a volume before we run out of budget. Right. I would, I would throw as much money as I could at 9x roas. But yeah, we, you know we, we run out of budget or we run out of volume at like 700 and spend a month, something like that. It's not much.
- [19:41]
Jack Carr
And so walk me through percentage. Right. You, you kind of put it into three big buckets. Walk me through percentage like I would. And I'm going to say what I Im first. I would imagine that you're probably 60% working on that residential or, or direct to consumer type. Then maybe 20% on commercial contracts and another, what is that? 60, 70, another 20% on the municipality, maybe higher municipality and lower residential.
- [20:07]
Matt Saskins
Yeah. So we're indexed the other way. We're about. And it's also important to think about it in terms of volume versus revenue because light duty. Right. A passenger vehicle tow, our average across the board is like 180 bucks, give or take.
- [20:21]
Jack Carr
Oh yeah.
- [20:22]
Matt Saskins
Whereas heavy duty tow, our average is like $612, something like that. So much lower volume, much higher proportion of revenue. Yeah. So when I look at it from a revenue standpoint, we're 35% give or take, passenger vehicle, cash call that sort of individual consumer. We are 45, 50% commercial accounts. And then the remaining, what is that? The remaining 20ish percent or so are police police rotations, accident recoveries, etc. And again those numbers waver depending on whether you're looking at volume or revenue. But yeah, like we index towards the heavy side of things that I didn't.
- [21:06]
Jack Carr
That'S a big surprise to me. I thought you were, were indexing more towards the residential side. But I mean it makes sense, right? Because the commercial customers generally have bigger vehicles. It's going to be more towards heavy towing, which has the bigger average tickets. Okay. And I, I bet it's more niche, right, in the sense that there's, there's fewer competitors.
- [21:24]
Matt Saskins
Yeah, like we're in a dense market, there's still a lot of competition but, but substantially less on the heavy towing than there is on light duty. Because again, light duty, like you could go tomorrow, buy a used auto loader, which is the thing, if you close your eyes and picture a tow truck, what you're going to picture, you go buy a used auto loader for 40 or 50 grand and like go to work.
- [21:42]
Jack Carr
No, I picture the big one, the big boys that are pulling tractor trailers. That's what I want.
- [21:46]
Matt Saskins
I love your 50 grand, but you could still get one and go to work.
- [21:50]
Jack Carr
Yeah, no, those are, those are really cool. I love, I love seeing those go. Sweet. And so, so okay, so you buy this first one and then you get the wild hair, like hey, I'm going to grow this thing which every small owner does and imagines. And so the way that you are, one of the ways that you, you've identified and you kind of mentioned already is acquisitions. So what, what was the, what did you optimize for there? What did that look like?
- [22:13]
Matt Saskins
Spent the first six to 12 months just kind of like letting dust settle, getting a sense of what's going on. Made, made a handful of changes. Nothing like nothing mission critical, nothing hugely impactful. The employees, aside from, you know, we put a ton of time and energy into safety, process and procedure, things like that. And those were just non negotiable changes. Right. Like people that weren't on board with that can have a nice day working somewhere else, simultaneous to that. Right. Started experimenting with marketing spend and doing a lot of tracking and attribution to where phone calls are coming from. Because fundamentally we only do things via phone call. Like customers don't text us, there's no chatting, there's no email, they call us. So, right. We use CallRail, spend a ton of time and energy on identifying all the different sources of phone calls and what's valuable and what's not. So that, that helped Get a sense of things. Started experimenting with paid, spent, you know, three, four months on, you know, can we make paid work? Discovered okay, yes, for heaven duty, no for light duty, you know, throughout this through the side of that also. Then, you know, brought on an outside sales rep and kind of watched, watched those motions and you know, that was an investment I was prepared to make. From there I sort of. There was a different. There was another business out there in an adjacent industry, sort of oversized transport. So I think, right. Those things you could see going down the road with like, you know, oversized load, whatever construction equipment, stuff like that that I looked at originally and it was just, it was too small as a standalone, like it would not have made sen. It was only 10 people, 500,000 in Ste. Owner was driving a truck, new owner would have had to be driving a truck. So like looked at it, liked it, but threw it off, threw it into the pile. And like a year in after buying East Coast Towing went and looked and saw that was still on the market. So reached out to the broker, reached out to the seller and just like started talking to them. Because it actually, for a bunch of reasons makes a ton of sense as an adjacency to us.
- [23:58]
Jack Carr
And when you say adjacency, you mean like a secondary vertical. So like actually like transportation.
- [24:02]
Matt Saskins
Yeah, like we view it, it's fully in a short, you know, fast forward, we closed on. But. But like we view it as a different service line. So yeah, like sort of looking at that and we were at the 18 month mark when, you know, I sat down and like was talking to GM and talking to some other folks and I think we all realized like, okay, things are actually running. Things are running well, like the supervisors, the folks that we promoted into roles. The way I sort of describe it is at the three month mark when we put, you know, we put someone into a driver manager role and if you presented him with a, with a challenge, just like something to deal with, it would get solved 100% of the time, but 90% of the time it would get solved in the. What is the most expedient thing that eliminates this pain from in front of me? Whereas 10% of the time it's like, what's the right way to solve this for the future? Knowing that however I handle this, I have to handle it the same way for 20 other drivers. And by about month 18, kind of what I realized is, okay, cool, when we present that person with a challenge, now 80% of the time it's getting solved in the way that is forward thinking. That is planning for like, okay, how does this set a precedent and how do we do this in the right way? And that was a pretty good indicator that like, okay, cool. The team has started to mature. Some of the lessons are settling in and we probably have the bandwidth and availability to really, really contemplate some add ons.
- [25:25]
Tyson
One of the benefits of working with Wilson is that we are basically a same day, next day company. So what that means is if I sell a job today, I'm going to aim to get it in today, tomorrow or the next day. Like we aim for a really fast turnaround and because of that we have pretty high expectations of our suppliers. Getting parts in time has been a real challenge and supplyhouse.com has been a really awesome partner for us because of that. They've got like a quarter of a million SKUs. They've got it at across plumbing, H vac and electrical. So they cover all our different lines and they can get stuff to you fast and they have a ton of it. Plus on top of that they have best in class pricing. And their new Trademaster program gives you free shipping, free returns and a bunch of discounts over retail on top of it. And the Trademaster program is free to join. So check out supplyhouse.com make sure to check out their Trademaster program.
- [26:10]
Jack Carr
That's an interesting way. That's a really interesting perspective. I think really mature in terms of business ownership is like you focus on like, hey, okay, now we can grow because the maturity of our managers are getting to a point where they can handle more.
- [26:22]
Matt Saskins
The thing's not going to fall down, right? Like before I go sign on the dotted line for a couple of million dollars in additional debt, like I'd like to have a level of comfort that, that the team is prepared for it.
- [26:30]
Jack Carr
Yeah, I don't think that's a normal like, honestly I don't think that's a normal thing that people like talking with a lot of business owners, they're just like, you know, like, I think we maxed out the market so we're just going to go build it, you know, go expand in another market. And like they still have all, including myself, you know, I did go down this road at one point. I was looking at a business two and a half hours away and ended up not doing it because it wasn't a smart move. But like point being is like I still like this isn't ready but I'm still like over here looking for expansion opportunities. And so even like moving into plumbing, I don't think we were ready from a H Vac point of view. Like our H VAC wasn't like running super smooth and we're like okay, let's start up plumbing. It was like we still have issues here but this is a great growth opportunity.
- [27:12]
Matt Saskins
Let's just figure it out. It does weakness.
- [27:15]
Jack Carr
It definitely does.
- [27:16]
Matt Saskins
The cracks, the cracks start to hurt after a while.
- [27:19]
Jack Carr
They definitely do. So I mean that's a really awesome way to look at is like hey.
- [27:24]
Matt Saskins
That'S where having a long horizon and no particular mandate for growth I think is helpful. Right. Like I don't know because I don't, I don't have that pressure out there. But like I don't write, I don't have investors, I don't have anybody to answer to but my family and our team and just making sure we're doing the right thing for everybody. So yeah, I mean I'm in no rush to do things and I'd much rather do it in a scalable manner than see things blow up and cause pain because like yeah, I don't want the headaches and pain. Right. I have enough stuff I have to deal with. Are you sure I don't need more. So yeah, like we felt we were ready started pursuing that one. It took a long ass time to close for a variety of reasons. That's a whole different discussion. But so I say got got that done. We closed that deal in October of 24October last year and in rapid fire succession right around that time in like September had another very small deal pop up in the market. Fully, fully brokered like tiny, like 200,000 in SDE. Another adjacent service line. It's a mobile fleet service business. So again like a lot of our customers in that service line are our searcher businesses. Right. 10 to 50 vehicle home services businesses, delivery, that kind of thing. But that business like we, we show up on site, it operates 24 7, we do all the pre scheduled maintenance of vehicles. So if you're a. Right, if you're an H Vac fleet of 20 transits like we can show up at 7pm or 10pm on a Tuesday and do all your oil changes, brakes, ship, tire changes. We work with all the fleet management companies so we can do all the billing for that. So that one popped up, price was extraordinarily reasonable. So we, we moved super quick on that as well. Yeah. And closed on that in early December and now here we are kind of letting, letting the dust settle and figuring out what.
- [29:10]
Jack Carr
Yeah, figuring out what to do now that's awesome. We, I mean we utilize one. We know, I know almost everyone that, that I know who owns a home service business utilizes one because it's just so inefficient to have to take individual vehicles out into like Jiffy Lube. Like we have, we're having a meeting downstairs, like a sales meeting and we have the guys outside right now doing like three oil changes. So.
- [29:29]
Matt Saskins
Yeah, I know that's exactly because everyone's car's here. That's why I love it. And you know, when I think about how we sell, right. It's. That is both an easy pitch because the, the market or the potential targets are so there's so many of them that the sales process really becomes right. If someone is locked into the fact that oh, we just send our text out to Jiffy Lube, then like, okay, cool, no problem. Well we'll come back in a month and talk to you. But if you hit someone right when they have that pain point, they're like, oh, this makes a ton of sense. We can go from a first cold meeting to a closed deal for service in two weeks and do.
- [30:01]
Jack Carr
Is there a. I mean I would imagine there's a synergy in this business where if you're doing fleet, like the fleet maintenance for a 50 person fleet and you let them know, hey, by the way, if something does break down, we also have this towing company and we'll give you a 10% deal like.
- [30:16]
Matt Saskins
There, there you go. Hundred percent billing. We give you the little cards and little stickers you can put ins your trucks to remind your text if they get in an accident, call this number. You don't have to wait for the. Whoever the police are going to call. So we're early days in that cross sell but we're already, we are starting to see that have positive impact and we think we can really step on the right. Like to your point, it's easier if you're spending 30 or 40% of your fleet budget with me a year. Hell of a lot easier to get you to spend that 1% on towing with me as well. Just because it's easier.
- [30:43]
Jack Carr
Yeah. I was talking to someone about this the other day. It was like junk removal or something. And the point was like in, in home services the goal is to always to stay top of mind. And so we do maintenances and memberships and yeah, we have branding plays and like there's, there's this really top of mind thing but with these singular services. Oh, it was with John because it was with roofing.
- [31:02]
Matt Saskins
Okay.
- [31:02]
Jack Carr
Like there's there's no top of mind for roofing because you get one roof every 20 years and like you don't want to think about your roof for the next 20 years. And so you go on to Google, you find the, you know, the first person and that's who you go, you call, you get some extra views. And I would imagine something similar with towing is like we've towed two vehicles. I don't even remember the name of the tow company we used, but I know the name of the, the, the maintenance, the fleet maintenance company that we use. So it's like if, if those could be the same easy trans. So easy transition even for me as the, the business owner, I would love that.
- [31:38]
Matt Saskins
Yeah. Because if you're a well maintained fleet of 50 vans, let's say you might only need a tow two, three, four times a year, if that. Right. So it is such an infrequent occurrence that. But yeah, if I'm, if I'm in your face or my trucks are in your face twice a month, oil doing oil changes, changing tires, all that. Yes, absolutely.
- [31:57]
Jack Carr
100%. Sweet. So, so you now you own these three verticals. You've expanded to six locations. Is that including those other two companies?
- [32:06]
Matt Saskins
So those both had a couple, added some facilities for us.
- [32:10]
Jack Carr
Does that also, does that also drive like can you utilize your, your fleet maintenance facility as a tow yard to grab an extra municipality?
- [32:19]
Matt Saskins
Yeah. So the, the fleet maintenance one we is, is not in a different enough market so we're not leveraging over there. But the, the, the heavy hall yard, the one we use for the oversized transport business is about an hour west of us in a more rural market. We actually are just this week I think relocated three tow trucks out there and are going to start it sort of expanding the towing footprint into. Based out of there as well. So yeah, we're early days there, but I'd expect we have that, that county sort of fully running from a towing standpoint in the next 60 to 90 days.
- [32:49]
Jack Carr
That's so awesome.
- [32:50]
Matt Saskins
Yeah, that one I'm excited about because like it's, it's a rural market right there. We have one or two competitors versus like 20.
- [32:57]
Jack Carr
And so speaking of that like expansion and growth and next steps, like what do the next steps look like for you?
- [33:03]
Matt Saskins
Yeah. So I would like to say that the plan is let the dust settle and kind of see how this year shakes out. And I think we can stick to that like unless something super cool comes along. And I like, I look at deals all the time. I have A couple local owners who reached out to me because they're interested in selling. And there's one deal locally that I, that I really like, but the broker and seller are out to lunch in terms of value. So something super cool comes along, we figure out a way to do it. But otherwise the goal is like, all right, let's get the, let's let the dust settle. Let's get through this year and see where we land. I would like to at some point probably recap the debt only because we probably save a percent or two. But more importantly, I've got three different SBA loans and two SBA lines of credit. It would just be really nice to like group that all together into one wire transfer. I have to send a month.
- [33:55]
Jack Carr
Yeah. And because, I mean, I wasn't going to touch on it just because I imagine like this you could do an entire hour episode on just like the way you have to think about financing and debt and assets. Just because you have so many assets and like one, one vehicle expansion, especially in the heavy, like you're saying is 100, 200, maybe more. Thousand, more than 200,000. And so like the debt on the business has to be crazy. Especially if. Right. Your average ticket is $600. Like I'm just doing math in my head and you know, some of those numbers.
- [34:32]
Matt Saskins
There's a lot of moving pieces.
- [34:34]
Jack Carr
Yeah.
- [34:34]
Matt Saskins
But the flip side of that is these assets, especially on the heavy side, last a long time. And right. When you think about heavy towing, right. The average ticket is, you know, 612 bucks, something like that. But Right. Like you were mentioning if you, if you follow me on Twitter, like I post a bunch of stuff of very cool heavy recoveries. We do like those are 20, 30, 40, $50,000 build jobs. Okay. Now they don't happen all that frequently in our market again because of density and kind of where we are from a truck throw, fair standpoint and similar like a heavy hall business, the oversized transport. Like when you see me post a picture of like a bunch of our trucks moving a crawler crane for a customer. Right. That is a job that takes six or seven trucks for three days. Like we had a crew this week out like moving a crawler crane from Charlotte down to Augusta and then immediately going to like Charleston to move something back up somewhere into North Carolina. So they moved two cranes last week. They'll jump immediately to two more cranes next week. So those are, and those are big ticket. Right? Those were. We're talking 20, 30, $40,000 to move to move a Crawler, crane.
- [35:40]
Jack Carr
Still. Still though, like, I mean from a standpoint of like just the financing is just so different from home services. We have for sure nothing, you know, like we had a truck, we had maybe a couple more thousand dollars in monthly debt on a maverick. Like 2,000 bucks a month. And then we have to go through training and some hiring and like there is cost but nothing compared to like.
- [35:58]
Matt Saskins
Yeah, we're having a million dollar truck at a clip.
- [36:01]
Jack Carr
Yeah. So it's, it's just a different world. Like we hire, fire, upgrade, layoff, like anything like that is a much quicker movement versus like if people grow.
- [36:10]
Matt Saskins
Like people are straightforward to do. All the rest of the dynamics are fine for us. The biggest moving object there is really just like the trucks are extraordinarily expensive. Right.
- [36:18]
Jack Carr
Yeah. No, that, that totally makes sense. And also it makes sense on the growth trajectory. Like hey, I'm gonna let it settle just because. Right. You're technically running three. Even if some of them have similarities and synergies. Like it still is three separate businesses that you have to market and manage in different ways.
- [36:35]
Matt Saskins
Yeah. There's enough difference between them. Like we still, we're now getting through sharing resources. So like our, as an example, our fleet service techs are starting to spend some time in the towing shop just to learn how to work on bigger trucks. Because fleet service is fundamentally smaller. Right. It's smaller scale vehicles, box trucks, transit vans, things like that. So they're getting training on the big trucks on our fleet. A bunch of our drive. Right. A bunch of the tow operators have CDLs so they can drive the head haul trucks and they have that background. So we can sort of cross pollinate there as we. As we need to fill in or have additional work. But, but they are still fundamentally kind of.
- [37:08]
Jack Carr
Yeah.
- [37:09]
Matt Saskins
Similar customer base but. But different businesses.
- [37:12]
Jack Carr
Yeah. The way I try to look at it at the end of the day because we, it's the same thing. Like we're still in the same homes. You could run a pest control roofing, an H Vac plumbing, but at the end of the day, like if I want to drive pest control leads for my plumbing company, like or H Vac leads for my plumbing company like I might have to do right now at the end of the day, like it's still completely separate marketing budget. It's. It's its own beast of like offers and, and like it's just different. Even though a lot of the similarities and like technically. Right. And they even have from mechanical and licensing standpoint, like mechanical can do gas Pipe plumbing. Can do gas pipes.
- [37:50]
Matt Saskins
Okay.
- [37:50]
Jack Carr
So much similarity, but so different at the same time. So interesting. I want to do a segment here called is this business a piece of. So, no, I'm just kidding. Sorry. To the broker who we're gonna show this business. So Everybody jump on YouTube. I'm gonna pull up a plumbing or. Excuse me, a towing business in my.
- [38:09]
Matt Saskins
Mind on a market business.
- [38:10]
Jack Carr
But we have not. We have not pre rehearsed this. So let's take a look. All right, I want to see if I should buy this towing business in my market.
- [38:21]
Matt Saskins
Cool. Let's do it.
- [38:22]
Jack Carr
So, boom, I'm gonna open it up. Tennessee, Hamilton County. We are looking at a. I've not.
- [38:28]
Matt Saskins
Seen this one yet.
- [38:30]
Jack Carr
Well, maybe you need to move. Start diversifying statewide.
- [38:34]
Matt Saskins
Where's Hamilton County? Just so I know.
- [38:36]
Jack Carr
So it's south. South. Well, this actually says that it operates in Nashville, Chattanooga and Atlanta. So it's looking like the i65 all the way down.
- [38:46]
Matt Saskins
Got it. Okay.
- [38:47]
Jack Carr
Pretty much from Nashville to Atlanta is. Look, it looks like its ownership. Basically 24 tow trucks, 14 vendor codes across 60 zip codes and 30 in Nashville and 100 in Atlanta. I don't know what that means either. Okay, I was hoping you did.
- [39:03]
Matt Saskins
No, I don't know what the vendor code is.
- [39:06]
Jack Carr
So 25 employees has a 4,000 square foot building, 2 acre lot. It doesn't say what. What kind of towing it does. Yeah, but I'm sure you could guesstimate based on.
- [39:17]
Matt Saskins
All right, so let's see. They're asking 2.4 on 400,000 in cash flow. 2 point I doing this super high speed. 2.8 million in revenue. I don't care about the real estate if it's not included. And they're calling it 1.8 million in trucks. So the things that come to mind immediately are so number one, that the, the number of people kind of jives with the revenue. In fact, it's actually a little on the heavy side. I would, I would expect to see maybe a few fewer than 20. I think I said 24 employees, right?
- [39:44]
Jack Carr
25. Yeah.
- [39:45]
Matt Saskins
Okay. Yeah, I'd expect to actually see fewer than that for kind of two and a half, 2.8 in revenue. And that's actually a, A, that's a positive thing in that it might mean that unlike most towing companies this size, these guys actually kind of have some structure in place. Right. Dispatch. Might be some dedicated dispatchers. Not just the owner taking the phone calls on his cell phone in his truck and someone at the front office, probably his partner taking phone calls as well. So. And that would also lead to the second point. This is producing quite a fair bit less cash flow and. Oh right. It's always hard to say because who knows what they're actually calling cash flow.
- [40:24]
Jack Carr
But like yeah, is that sde, is that ebitda?
- [40:27]
Matt Saskins
Right.
- [40:28]
Jack Carr
What are they doing there for consensual.
- [40:30]
Matt Saskins
Towing businesses which I would imagine these guys are because otherwise they'd probably say it. These are 20% EBITDA margin businesses when kind of when properly run. Right. So at 2.8 million in revenue, I expect this to be in the $550,000 range, something like that. So you know that could them not properly doing ad backs or it could be they're kind of over staff which is. Is fine. It's not a terrible place to build.
- [40:54]
Jack Carr
Which I mean based on what you said to start it kind of sounds like 24 tow trucks. But 25 employees means maybe they're not including the owner. There's two employees in the office, 24 tow trucks on the road, but is running heavy. So either.
- [41:06]
Matt Saskins
One more interesting point which is these businesses are generally all over trucked. Right. Everyone has far too many assets and the primary reason for that is the owners drive the trucks. The owners like buying shiny new trucks. A lot of the owners are under the impression that the only way you can attract and retain driver talent is by having shiny new trucks. And what you end up with then is a, is a company with a disproportionately high chunk of assets. And that then leads us to this thing that's producing. Let's assume, let's be generous and say it's actually doing what it should be and it's producing $550,000 in, in EBITDA. It's still not worth. What is that? That's 4.2x off the top of my head. Something like that.
- [41:55]
Jack Carr
Like yeah, it's Almost, it's almost 5x if it was 2.5. Right. Five times. Right, yeah, it's almost five.
- [42:01]
Matt Saskins
Taxes don't sell for that just to be. To be very clear. So like interestingly enough there's one major consolidator in the towing industry right now called Guardian Fleet Services. They're based out of Florida. They're about 200 million in their CEO presented at the conference I was just at and he made abundantly clear their buy box. They are right now buying companies at between 3 and a half and 4 and a half x and they are only doing deals larger than 10 million EV. So if the single Consolidator, right. The guy that's got $100 million on his balance sheet is saying he only paying 4 and a half x for $10 million EV deal. So 2 million plus in EBITDA. Your your 400,500 thousand dollar cash flow towing business is not worth 4 to 5x. It's worth 3x. Basically it's worth asset value maybe a little bit for the goodwill in there. That makes fundamentally a problem with all these things. I look at like they all, they all look and feel like that people. Because owners want. They, they probably have some debt on the trucks. Like they want to get paid for the trucks and then they want some value for the business over the top and then they also want some more to you know, put in their pocket or retire off of that.
- [43:06]
Jack Carr
John and I actually talked about this around the air Air pros. So in our industry we had a giant.
- [43:14]
Matt Saskins
Bankruptcy from just unwound, right?
- [43:17]
Jack Carr
Yeah. $250 million bankruptcy. Like huge company, 15 locations in nine states. And we were talking about like what the impact on the market is. And, and this exact topic came up if the biggest companies because on. On the other hand, right. Sila, which is another big consolidator, it just sold for 20x to JP Morgan. I think it was JP Morgan or sold from to Morgan Stanley one one of the Morgans. But point being is like us in the lower markets are looking at the higher market to ensure that. That they're trading at a higher rate which keeps our rate up. But if they, if we have too many bankruptcies, what ends up happening is hey, bankruptcy, bankruptcy, bankruptcy multiples come down to, to account for that. So interesting. So like you said, if, if the top tier guys are trading at 4x5x then you're not as a, as a $300,000 going to trade for the same as an industry.
- [44:10]
Matt Saskins
Right. That's the indicator we, we have not hit a point of multiple expansion because fundamentally we have no institutional buyer group. So there's there's a couple. But yeah. You know again when the biggest in the industry is only doing 200 mil only is doing 200 million in revenue. Right. That's indicative that there's just like there's another, another roll up I know of that just started like I know the owners of the business that that recapped and they're doing 40 million in revenue some somewhere in that universe. So early early days for that yet. But to the point everyone wants too much for their businesses. I have this discussion with brokers in my market on A monthly basis.
- [44:44]
Jack Carr
Yeah. Right. The fragmentation of the market though is super interesting because it really leads to kind of a prime, prime example for a time where it can roll up even though assets are a little bit higher. It's a very interesting market. I've always loved the toy market, so I think, I think it has big things ahead of it. And so obviously not buying that business. That's a no go. Where do you think that that one should actually come in at? I mean, obviously, right. We're looking at a shell of a CIF here.
- [45:11]
Matt Saskins
I mean, yeah, the problem. So the problem with that is also like, realistically Call it 3X, right? Call it a million and a half dollars, something like that. And the problem you have to get over there is convincing an owner that the business is worth less than that owner's feels the assets are worth. Now I'd also bet the assets are not worth 1.8 billion. And it's.
- [45:30]
Jack Carr
I was going to ask you about that because that, that comes out knowing.
- [45:33]
Matt Saskins
What those trucks are, right? Like say 24 trucks. If you have 24 beat down auto loaders, you've got, I don't know, $500,000 of equipment. If you've got 24 heavy tow trucks, even if they are 15 or 20 years old and then on their last whims, they're still worth $100,000 each on the open market. It. Yeah, right. So like there's just such a range in fair market value. You need the asset list to really make sense of it.
- [46:00]
Jack Carr
The other part that, that gets to me, that I don't like about that business is right, it's only doing 2.8 only it's only doing 2.8 million across 24 trucks. But technically it's in three markets, right? It's in Nashville, it's in Chattanooga and it's down in Atlanta. That feels, I don't know the towing industry as well as you do, but that feels like a very large stretch. Yeah, it's like four hours of driving.
- [46:21]
Matt Saskins
Five hours of driving. I bet that that is a bit of hand waving to really say, like I can credibly say we do business throughout the southeastern United States on any given day. I have trucks in Virginia, South Carolina, Georgia, Tennessee, but I'm still based in Raleigh and my location is in Raleigh. So you know, I might read into that that they're not really in those markets. Rather they do business into those markets because.
- [46:47]
Jack Carr
Which would make sense, like if I'm in Chattanooga and the business shop is in Chattanooga, like I would imagine that there's a high number of tows, consensual tows from chat up to Nashville two hours and down two hours into Atlanta. That would make sense.
- [47:01]
Matt Saskins
What you end up with heavy towing is a lot of swap outs. Right. So it's the. I have a fleet that is based out of Raleigh and one of my trucks is in Charleston and broke down. So me as the towing company in Raleigh, I'm going to go to the yard, pick up a working truck, tow it down to Charleston, give it to the driver, take the broken truck from Charleston back up to Raleigh and drop it off to the customer's yard.
- [47:26]
Jack Carr
Completely makes sense.
- [47:26]
Matt Saskins
So that's a, that's a fairly common occurrence with both owned assets as well as leased or rented assets. Right. If you, if you lease your trucks through Penske or Ryer or whatnot. If it's the full wet lease then like they're, they're covering all that stuff for you. Right. They're covering getting you a working truck when the one you have breaks down now.
- [47:43]
Jack Carr
Very cool. So no go on that one. Keep an eye on it. Wait for it to drop to lower than its assets because like I did the math, it's like 75k a truck.
- [47:53]
Matt Saskins
1.8 and see like you know, maybe the answer is it's there's actually a lot there that, that is not coming out in that teaser of course. Or the answer is they're just, they're out to lunch and the only way you really figure that out is you go and have that first discussion.
- [48:06]
Jack Carr
Exactly. And. And a broker in on biz by sell being out to lunch. No, that doesn't happen very often. I appreciate it Matt. So Matt, where, if people want to learn more about towing industry or you in general, where is the best place to just get in contact with you or follow you?
- [48:24]
Matt Saskins
Yeah, like you can track me down on. Track me down on Twitter folks can also email me it's first initial Last name@eastcoasttowing.com Always happy to hop on the phone and talk, talk to folks about the industry. I don't even know how many deals I've reviewed with folks over the past year and a half. Like always happy to do. So I've done and you know done some consulting work with, with some, some groups that have looked at buying towing businesses. So like always happy to look at deals, always happy to engage deeper and you know I, I learned something selfishly out of all those as well because it gets me a view of stuff well outside of my market. Like I'M not going to go buy a towing business in Missouri, but I've looked at a couple out there and it's all super helpful too.
- [49:01]
Jack Carr
Cool. Very. Yeah. And for everyone listening, Saskins Twitter page, like very fun. Lots of pictures. Very fun. For me as a, as a nerd for this kind of stuff is, you know, tow, tow trucks pulling giant semis off the side of the road.
- [49:17]
Matt Saskins
Yeah.
- [49:17]
Jack Carr
Just quote unquote. Like the one at last I saw was like just backed up over the curb and like crazy thing is hanging out over the curb or like around a corner on a bend and it's down in the ditch and you guys are like craning it up. It's really cool stuff. Go ahead and jump on over Twitter. Follow him. Awesome. Thank you. Today we learned a lot about the towing industry and we learned a lot about the, the acquisitions in the towing industry. Sweet. Thank you for listening. Leave us a five star review wherever you listen to your podcasts. Head on over to owned and operated.com for all of our owned and operated goodies. And thank you all for listening. See you next time.