Latest / The Elevator Careers Podcast / Preparing Your Elevator Business for a Successful Exit | Jessica Hellman

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Preparing Your Elevator Business for a Successful Exit | Jessica Hellman · The Elevator Careers Podcast

• 0:00
  SPEAKER_01: We don't necessarily want to think about the end, right?
• 0:02
  SPEAKER_01: But the the reality is that the business will transfer, right?
• 0:06
  SPEAKER_01: We're not we're not gonna be around forever.
• 0:08
  SPEAKER_01: You're not gonna be able to run business forever.
• 0:10
  SPEAKER_01: You know, the business will transfer to someone.
• 0:12
  SPEAKER_01: And if you wait until something happens, like, you know, you're burnt out, there's family issues, whatever else that forces your decision to sell, then you're not necessarily going to get the best outcomes.
• 0:26
  SPEAKER_01: Most times the best outcomes come from years of focusing on improving the scalability and the transferability of the business.
• 0:34
  SPEAKER_00: Hello, and welcome to the Elevator Careers Podcast, sponsored by the Allred Group.
• 0:40
  SPEAKER_00: I am your host, Matt Allred.
• 0:42
  SPEAKER_00: Does your workforce need a lift?
• 0:44
  SPEAKER_00: At the Allred Group, we are committed to connecting your company with top talent that matches your need.
• 0:50
  SPEAKER_00: Give us a call at 404-890-0445.
• 0:55
  SPEAKER_00: Today's guest is Jessica Hellman, a business advisor specializing in mergers and acquisitions with Lyft Advisors Inc.
• 1:02
  SPEAKER_00: With a background in applied mathematics and data analysis, Jessica has helped business owners understand what drives value, growth, and successful transitions.
• 1:10
  SPEAKER_00: In this episode, we discuss private equity, business valuation, trust, and the steps owners can take to build a stronger company.
• 1:17
  SPEAKER_00: Jessica, welcome to the show.
• 1:19
  SPEAKER_01: Thanks, Matt.
• 1:20
  SPEAKER_01: Thanks for having me.
• 1:21
  SPEAKER_00: No, I I appreciate you being here.
• 1:23
  SPEAKER_00: I enjoyed your presentation at the last NAEC conference in Long Beach and talking with you a little bit about what you do and what you were talking about.
• 1:31
  SPEAKER_00: I not only is it fascinating to me, I I was I thought it'd be it'd be fun to have you here.
• 1:36
  SPEAKER_00: Even though I think you'd rather cuddle up with a spreadsheet than do this, I appreciate you being here.
• 1:41
  SPEAKER_01: Yeah, that's right.
• 1:43
  SPEAKER_01: I am um, you know, a hundred percent introvert, right?
• 1:47
  SPEAKER_01: I would I would rather be dealing with spreadsheets than um, you know, uh d doing something like this or even speaking, you know, that was that was very, very difficult for me.
• 1:56
  SPEAKER_01: I stressed out about that for a long time before, but um, you know, ultimately went it went well.
• 2:03
  SPEAKER_01: So I'm hoping to kind of take that confidence into the next one and um and and to this, and to this as well.
• 2:10
  unknown: Yeah.
• 2:10
  SPEAKER_00: Absolutely.
• 2:10
  SPEAKER_00: Well, you're not the only one that that gets nervous, honestly.
• 2:13
  SPEAKER_00: I I get nervous a little bit myself.
• 2:16
  SPEAKER_00: And and honestly, when I was uh interviewed for my own podcast last fall on our our hundredth episode, I realized that, oh, this is a little bit harder than I than I realized, right?
• 2:26
  SPEAKER_00: It's easy to ask the questions, but it's a little harder to be on the hot seat.
• 2:29
  SPEAKER_00: So you're not the only one.
• 2:32
  SPEAKER_00: So um you you told me you didn't really start in the industry.
• 2:35
  SPEAKER_00: You know, you started in applied math and and data analysis, which makes total sense.
• 2:39
  SPEAKER_00: What kind of pulled you into elevators?
• 2:41
  SPEAKER_01: Yeah, so I mean, I you're right.
• 2:43
  SPEAKER_01: I did not start in the elevator industry.
• 2:46
  SPEAKER_01: My background is in math.
• 2:47
  SPEAKER_01: I have a you know a master's in a in applied math.
• 2:50
  SPEAKER_01: And my first job out of college was at a company called Urban Science.
• 2:54
  SPEAKER_01: I won't get into too many details about what they do, but they're they're focused in the automotive sector, a lot of marketing.
• 3:00
  SPEAKER_01: My role there was in supporting some of their expert witnesses, right?
• 3:04
  SPEAKER_01: Building testimony, litigation-related analysis.
• 3:07
  SPEAKER_01: So when I was there, really, really heavy focus on data, data analysis, on, you know, building a story that, you know, the experts could take to court.
• 3:18
  SPEAKER_01: And, you know, overall, just a really um, it was a really great company, really great experience.
• 3:23
  SPEAKER_01: I worked with a lot of really great people there.
• 3:25
  SPEAKER_01: But my brother, right, who is um, you know, an engineering major, he he worked at a few elevator businesses, Otis, Millar, and Schindler, uh, before branching off and and starting his own business along with three other partners, right?
• 3:41
  SPEAKER_01: That was um City Elevator in New York.
• 3:44
  SPEAKER_01: They grew that business to be pretty big, you know, over a thousand units on on maintenance, 750,000 or so in in monthly maintenance revenue.
• 3:52
  SPEAKER_01: So it was a it was a good, a good size business.
• 3:55
  SPEAKER_01: He, along with the the three partners, and and I, you know, if you've got partners, I think you understand this, or even it applies to spouses, right?
• 4:04
  SPEAKER_01: Sometimes things are difficult.
• 4:05
  SPEAKER_01: It doesn't always go sure like you planned, right?
• 4:09
  SPEAKER_01: And so his goal was to, you know, to get an investor in to help buy out some of the partners and to continue on with the business.
• 4:18
  SPEAKER_01: And, you know, he really started building a team.
• 4:21
  SPEAKER_01: He brought in a lot of really good people, a lot of really experienced folks, names that are recognized kind of in the New York market, right?
• 4:30
  SPEAKER_01: But he needed someone kind of on the analysis side, right?
• 4:33
  SPEAKER_01: He wanted to professionalize some things, he wanted to Well, especially if he's gonna sell, right?
• 4:38
  SPEAKER_00: He needed he needed a different set of eyes that would would be really looking at it like your expertise is analysis, right?
• 4:44
  SPEAKER_00: So somebody who's gonna be analytical and not just I guess I guess the uh the other side of that would be kind of emotionally involved to the point, no, no, this is worth X million dollars, and it the analyst is is saying no, you know, look at the numbers.
• 4:58
  SPEAKER_01: Yeah.
• 4:58
  SPEAKER_01: No, that and that that's absolutely true.
• 5:00
  SPEAKER_01: That's definitely something that uh comes up a lot in in MA.
• 5:03
  SPEAKER_01: I'm sure we'll we'll talk about that uh, you know, kind of as as we go along.
• 5:08
  SPEAKER_01: Um, but yeah, I mean, for a while I said, you know, I'm I'm kind of doing my own thing, like I'm not a hundred percent, you know, I don't know about elevators.
• 5:16
  SPEAKER_01: Um, but eventually I um I came over, like you're like you're saying, with the goal of let's put some things in place so that the business sells.
• 5:25
  SPEAKER_00: What motivated you to to go that way?
• 5:27
  SPEAKER_00: Because it sounds like it's very foreign, very different, and depending on how much you like your brother, that can be really risky.
• 5:35
  SPEAKER_01: I think that's the thing, right?
• 5:36
  SPEAKER_01: There's some there's some level of of loyalty there and and trust.
• 5:41
  SPEAKER_01: Sure.
• 5:41
  SPEAKER_01: Right.
• 5:42
  SPEAKER_01: I I trusted him enough in order in order to do it.
• 5:45
  SPEAKER_01: That's that's really what it is.
• 5:47
  SPEAKER_01: So I mean, not you know, not planned for sure.
• 5:49
  SPEAKER_01: I did not think at any point that I wanted to I wanted to get into the elevator industry.
• 5:55
  SPEAKER_01: But I mean, once I got here, I was like, wow, this is this is pretty great.
• 6:00
  SPEAKER_00: What surprised you the most about showing up?
• 6:03
  SPEAKER_00: I mean, obviously you had expectations, you'd heard some things from him, but once you kind of walked in there, what was the biggest surprise for you?
• 6:10
  SPEAKER_01: Yeah, I mean, I think, well, a c a couple of things I I would say, you know, there was more overlap than I would have expected from the automotive industry, if you can believe that.
• 6:20
  SPEAKER_00: Okay.
• 6:20
  SPEAKER_01: Right.
• 6:20
  SPEAKER_01: There were, you know, if you think about like an auto dealer, right?
• 6:25
  SPEAKER_01: Um, and this comes from the my experience at Urban Science, those dealers are not in the market to necessarily sell new vehicles, right?
• 6:33
  SPEAKER_01: They sell new vehicles as a way to get warranty work, to get service work.
• 6:39
  SPEAKER_01: There's a lot of carrying costs on a new on a new car, and they don't make a lot of money.
• 6:43
  SPEAKER_00: So you sell it cost, and then you get the maintenance, is what I'm hearing.
• 6:46
  SPEAKER_01: And then you get the maintenance afterwards, right?
• 6:48
  SPEAKER_01: So it's a very, a very similar thing.
• 6:50
  SPEAKER_01: I and you know, I I really didn't expect that, but it it was um kind of a unique, a unique thing.
• 6:57
  SPEAKER_01: I would say the relationships, the strength of the relationships, the importance of the relationships is also something like kind of the same, but but a little bit a little bit different as well.
• 7:07
  SPEAKER_01: So I mean, coming in coming into the business, you know, as the the sister, right?
• 7:16
  SPEAKER_00: Sure.
• 7:17
  SPEAKER_01: There were um, I think not high expectations of right what what I was gonna bring.
• 7:24
  SPEAKER_01: This is like people thinking, okay, well, somebody else taking up a chair.
• 7:28
  SPEAKER_00: Um Well, and the question, you know, she's not gonna turn wrenches, like what what value is there in in sitting behind a desk and working on a computer, right?
• 7:36
  SPEAKER_00: And and maybe just not understanding what's what's even possible.
• 7:40
  SPEAKER_01: Right, right.
• 7:41
  SPEAKER_01: And I mean, coming in there, you know, as the kind of as the sister with I think low expectations, I really wanted to to to prove those those folks wrong.
• 7:52
  SPEAKER_01: Sure.
• 7:52
  SPEAKER_01: Right.
• 7:52
  SPEAKER_01: And the fact that there was some overlap, you know, when I got there, I was I was thinking like, okay, yeah, there there is value I can add here.
• 8:00
  SPEAKER_01: I can I can immediately start tackling these things.
• 8:03
  SPEAKER_00: Very cool.
• 8:04
  SPEAKER_00: How long did it take just you know for them to start to see, oh, she actually is bringing value?
• 8:09
  SPEAKER_01: Well, I mean, I think for the first few months, I I didn't have a desk, right?
• 8:15
  SPEAKER_01: That's true.
• 8:15
  SPEAKER_01: So um I kind of sat in a corner, right?
• 8:18
  SPEAKER_01: I don't I'm not sure that anybody knew what I was there for, what I was what I was doing.
• 8:22
  SPEAKER_01: So, you know, once I was able to like get out and and meet folks and really start digging into some of the projects I was doing and you know, making suggestions about how we should we should do things, I think um you know, it quickly turned around.
• 8:37
  SPEAKER_01: I mean, at the same time, you know, I was asking people to do things different than what they had normally done, right?
• 8:47
  SPEAKER_01: You know, as a as a part of this this process and implementing the service plan and and trying to make some processes more professional, right?
• 8:56
  SPEAKER_01: It required a certain level of change.
• 8:58
  SPEAKER_01: So I wouldn't necessarily say that I made a ton of friends immediately, right?
• 9:03
  SPEAKER_01: That trust built, you know, that that built over time.
• 9:07
  SPEAKER_00: Yeah, yeah, yeah.
• 9:08
  SPEAKER_00: Well, and and especially if you're trying to operationalize and help create or or better define a maintenance program or billing or margins, or you know, there's some discipline in there that may not be fun if you're used to just kind of, you know, this is just how we do things.
• 9:21
  SPEAKER_00: And and why do I have to log this, you know, why do I have to return my tickets?
• 9:26
  SPEAKER_00: Why do I why do I have to follow this process?
• 9:28
  SPEAKER_00: That can be really uncomfortable for somebody who's just maybe not disciplined enough to to do it or care.
• 9:34
  SPEAKER_01: Yeah.
• 9:34
  SPEAKER_01: Yeah, exactly.
• 9:36
  SPEAKER_01: But I mean, uh the reality, like on the, you know, on the operation side is that everyone really is part of the process and the team, right?
• 9:44
  SPEAKER_01: You know, being able to fix elevators is is the most important part, right?
• 9:49
  SPEAKER_01: But all of it together combined is what makes it successful.
• 9:54
  SPEAKER_01: You know, one of the projects that I worked on at the very beginning was this dedicated service solution.
• 10:00
  SPEAKER_01: The goal was let's get every single maintenance contract up at, you know, 35% gross margin, which is a high target.
• 10:09
  SPEAKER_01: But that, you know, that required not only working with the service department to make sure that task lists are correct, dispatches correct, right?
• 10:18
  SPEAKER_01: But then you're working with sales in order to understand what contracts say, what they should say, uh accounting and I mean that one project touched so many different departments.
• 10:30
  SPEAKER_00: Yeah.
• 10:31
  SPEAKER_01: Everybody in the business that, you know, it it just it it really is amazing, I think, in in our industry, how tight the team needs to be in order for everyone to be successful.
• 10:44
  SPEAKER_01: You know what I mean?
• 10:45
  SPEAKER_00: Absolutely.
• 10:45
  SPEAKER_00: Yeah, well, and you you've kind of hit a couple things there.
• 10:47
  SPEAKER_00: I guess one one question I want to ask is you were bringing some some transferable knowledge and and skills from your other your other job.
• 10:54
  SPEAKER_00: Were there some things that were unique to elevators that actually make them not just run well, but it's one thing to run well, but it's another thing to be able to convey that to a potential investor, right?
• 11:03
  SPEAKER_00: They have to be able to see it.
• 11:04
  SPEAKER_00: So and if you if you can't prove it, then it's it's not there.
• 11:09
  SPEAKER_00: Anyway, that's a convoluted question for you.
• 11:12
  SPEAKER_01: Well, I I mean, I think, you know, we talked a little bit about the relationships.
• 11:15
  SPEAKER_01: You know, definitely one of the things I was working on was like, how do we quantify these things in order to, you know, to position the business correctly, to, to point out all of the important parts, right?
• 11:27
  SPEAKER_01: The recurring revenue, the the contracts, and all of those things.
• 11:31
  SPEAKER_01: A lot of which is what I do now at Lyft Business Advisors, right?
• 11:35
  SPEAKER_01: In in selling, in working through transactions and in valuations, right?
• 11:40
  SPEAKER_01: So there that was a that was a big, a big part of it for sure.
• 11:45
  SPEAKER_01: Yeah.
• 11:46
  SPEAKER_00: Yeah, yeah.
• 11:47
  SPEAKER_00: How much?
• 11:47
  SPEAKER_00: I mean, obviously you saw partner dynamics.
• 11:49
  SPEAKER_00: You mentioned that kind of at the right at the beginning, right?
• 11:52
  SPEAKER_00: So you saw some internal challenges.
• 11:54
  SPEAKER_00: How much would you say people and relationships impact the success or failure of the business?
• 12:00
  SPEAKER_01: I think it's this is key, right?
• 12:02
  SPEAKER_01: Having worked on the operations side, I mean, a lot of businesses are relationship driven.
• 12:07
  SPEAKER_01: Elevators are are no different.
• 12:09
  SPEAKER_01: But I think the difference with elevator, with elevator companies is that there's a ton of pressure all the time, right?
• 12:17
  SPEAKER_01: You've got service issues and callbacks, and then you've got, you know, demanding customers that don't want to pay in a reasonable amount of time, um, you know, making payroll, running around trying to get checks.
• 12:30
  SPEAKER_01: There's there's a a ton of pressure every day.
• 12:33
  SPEAKER_01: And you know, the the relationships then, you know, if they're not strong, kind of the smaller things I think become much, much bigger, right?
• 12:42
  SPEAKER_01: So you've really got to have a a level of trust.
• 12:44
  SPEAKER_01: I think I've I've said trust.
• 12:46
  SPEAKER_01: That might be the theme of of my podcast, right, is is trust, right?
• 12:52
  SPEAKER_01: There's gotta be a strong level of trust between employer and employees in order to handle that level of pressure.
• 12:58
  SPEAKER_01: The same lesson also applies in in MA, right?
• 13:02
  SPEAKER_01: When it comes to trust.
• 13:04
  SPEAKER_01: I think if a deal doesn't happen, if it breaks down for any reason, um, you know, it's often because there's a lack of of trust from you know one side or the other, whether it's buyer and seller or buyer and advisor, trust is the key.
• 13:21
  SPEAKER_00: Yeah, absolutely.
• 13:22
  SPEAKER_00: Well, and especially if you're there kind of on a a long-term project and things are changing and and people aren't liking it, it's like, do I do I trust that that she's trying to move this in the same direction I am or not?
• 13:33
  SPEAKER_00: Or, you know, are the owners trying to take it in a direction that may not work out well for you know somebody else, right?
• 13:39
  SPEAKER_00: Because everybody's kind of got their own interests at heart and want to make sure that they're they're moving in a direction that's gonna work for them.
• 13:45
  SPEAKER_01: Yes.
• 13:46
  SPEAKER_01: Yeah.
• 13:46
  SPEAKER_01: And that can be, you know, very scary around, you know, a transaction.
• 13:50
  SPEAKER_01: A lot of times the circle of trust, right, is very small because you don't necessarily want people deciding that something is good or bad for them.
• 14:00
  SPEAKER_01: Like I have never worked with uh a seller that did not have their employees' best interests in mind.
• 14:07
  SPEAKER_01: Like never.
• 14:08
  SPEAKER_01: It always comes up like I want to make sure my employees are taken care of, right?
• 14:12
  SPEAKER_01: But you know, folks are scared.
• 14:13
  SPEAKER_01: Like this is their that's their livelihood, right?
• 14:16
  SPEAKER_01: And they don't want to necessarily have to, you know, change jobs or or whatever.
• 14:20
  SPEAKER_01: But yeah, it's the sellers that we've worked with have always been focused on good outcomes for the employees and um right.
• 14:30
  SPEAKER_00: Yeah, yeah.
• 14:30
  SPEAKER_00: Thank you.
• 14:31
  SPEAKER_00: Hey there, listeners.
• 14:32
  SPEAKER_00: It's Matt, and I would love to know what you want to hear more of on the podcast.
• 14:36
  SPEAKER_00: If you have a topic in mind or a guest you'd like to hear from, head over to elevatorcareers.net and drop a suggestion in the box, or you can email podcast at elevatorcareers.net.
• 14:47
  SPEAKER_00: The link will also be in the description below.
• 14:49
  SPEAKER_00: Thank you so much for being part of this conversation.
• 14:52
  SPEAKER_00: Now, back to the show.
• 14:54
  SPEAKER_00: Um, so one thing I want to ask you about a little bit.
• 14:56
  SPEAKER_00: I mean, it seems like your brother was was talking about, you know, the the recurring revenue and the structure, maybe even before a lot of others were seeing the importance of that.
• 15:06
  SPEAKER_00: And I'm curious what what you think he saw early that maybe the market just hadn't responded to at the time.
• 15:13
  SPEAKER_01: Yeah, I mean, I think he definitely um, you know, he understood what was attractive about the the elevator business, right?
• 15:22
  SPEAKER_01: Um the things that we hear PE kind of repeat over and over again.
• 15:27
  SPEAKER_01: Sure.
• 15:27
  SPEAKER_00: They've learned the line now.
• 15:29
  SPEAKER_01: They know it.
• 15:30
  SPEAKER_01: The recurring maintenance revenue that's contract-based, it's an essential service, a fragmented market, right?
• 15:37
  SPEAKER_01: He saw, you know, all of all of those things.
• 15:41
  SPEAKER_01: And I don't think that those are necessarily new.
• 15:44
  SPEAKER_01: For him, the the timing just wasn't just wasn't right on the the PE side.
• 15:49
  SPEAKER_00: Do you think it was the market?
• 15:50
  SPEAKER_00: Do you think that maybe the PE uh overall just didn't kind of understand the value?
• 15:55
  SPEAKER_00: What what was it do you think that was kind of off?
• 15:58
  SPEAKER_01: Well, yeah, I mean, I think the timing for them now, just just to say, like PE has been in the elevator industry for a while, right?
• 16:09
  SPEAKER_01: There's been, you know, going back to the early 2000s, there was a um, you know, a company, Jordan Industries, that bought a business long elevator that was then sold to Koney.
• 16:21
  SPEAKER_01: If we think about Oracle's, you know, transition, they were P backed early, early on, and then they sold, I think, to two two subsequent groups.
• 16:30
  SPEAKER_01: So, so PE interest is definitely not new in the industry.
• 16:35
  SPEAKER_01: I think kind of what is different and what wasn't there is I think the changes are more private equity themselves.
• 16:42
  SPEAKER_01: I think there's more money there now, right?
• 16:44
  SPEAKER_01: There's more money and fewer deals, more willingness to look at, you know, different industries.
• 16:51
  SPEAKER_01: And I think those investors are kind of catching up to what we already know about the industry.
• 16:58
  SPEAKER_01: There's also now um a history of successful entries and exits, right?
• 17:08
  SPEAKER_01: So other other PE groups are looking at it like, oh, okay, so this is possible, it happens, and folks are making good money.
• 17:16
  SPEAKER_01: So I, you know, I think that's the difference in in timing.
• 17:20
  SPEAKER_01: That just wasn't it just wasn't there.
• 17:22
  SPEAKER_01: I mean, there will there was some PE, but not like it is.
• 17:25
  SPEAKER_01: And I that's really what I think it is.
• 17:27
  SPEAKER_01: A change in PE more so than a change in the elevator.
• 17:31
  SPEAKER_00: Sure.
• 17:31
  SPEAKER_00: Well, and and depending on what, you know, 20 something years ago, I remember there was a lot of PE in buying houses and buying, you know, so it maybe it's a certain trend, right?
• 17:40
  SPEAKER_00: When the market tanks, well, then that money goes away and it starts looking elsewhere to invest.
• 17:45
  SPEAKER_00: And so maybe it's just a a season, as it were, of where to invest.
• 17:50
  SPEAKER_01: And and you know, a lot of the the P groups that we we hear from, they're all kind of chasing the same investments.
• 17:57
  SPEAKER_01: I I'm not sure why that is necessarily, but you know, it's like a it's roofing or it's landscaping or it's you know, um, or and and elevators.
• 18:06
  SPEAKER_01: I think the one thing that we maybe have going forward or against us, right, is that we're still a small market compared, a small industry compared to a lot of others.
• 18:15
  SPEAKER_01: If you think about roofing and how many houses there are, right, it's a huge market or lawn, right?
• 18:21
  SPEAKER_01: Lots of lawns to mow market, not a whole lot of elevators by comparison, right?
• 18:27
  SPEAKER_01: So the industry is still a little small, a lot, you know, the the fragmentation in the market creates businesses that are are just a little bit smaller than they're they're willing to look at, I think, in a lot of cases.
• 18:40
  SPEAKER_01: But I mean, still there's a ton of P interest sellers are hearing from different groups almost daily.
• 18:48
  SPEAKER_01: We hear from different groups almost daily to the point where, you know, it's hard to take a meeting from everybody because that's kind of all you would be doing.
• 18:55
  SPEAKER_00: Yeah, yeah, yeah.
• 18:56
  SPEAKER_00: One thing that surprised me five, six years ago, you know, I started getting calls as a recruiter, right?
• 19:02
  SPEAKER_00: But but from investment firms.
• 19:03
  SPEAKER_00: And it happened a couple of times, and they were like, hey, you're talking to a lot of these elevator people.
• 19:08
  SPEAKER_00: Do you know any anybody that wants to sell?
• 19:10
  SPEAKER_00: I'm like, yeah, I don't even ask that question, right?
• 19:11
  SPEAKER_00: That's that's just not even my, you know, I wouldn't even think to ask that.
• 19:16
  SPEAKER_00: But but then they would say, well, you know, if you can bring somebody and they want to sell, you know, we'll give you a cut.
• 19:21
  SPEAKER_00: And I'm like, huh, that's interesting.
• 19:23
  SPEAKER_00: Um, so I did, I did make a couple calls and I got some.
• 19:26
  SPEAKER_00: Obviously, people are going to be tight-lipped and they wouldn't have told me anyway, right?
• 19:29
  SPEAKER_00: But it was interesting to kind of see a few of them that I had asked about, right, later sell.
• 19:34
  SPEAKER_00: And I'm sure they had relationships and and kind of to my first impression, I didn't really belong there anyway.
• 19:39
  SPEAKER_00: But it was interesting to me that I would get phone calls like that.
• 19:43
  SPEAKER_00: Hey, you know, help me find somebody to buy.
• 19:45
  SPEAKER_00: I'm like, Yeah, okay.
• 19:47
  SPEAKER_01: Yeah, no, I mean, and um, you know, there's all sorts of like finder firms too that are working on behalf of of these groups.
• 19:55
  SPEAKER_01: And so, you know, we get we see from sellers, you know, in the south, or you know, in the northeast being targeted by businesses that are primarily in the south.
• 20:06
  SPEAKER_01: And, you know, it's it's kind of a blanket, everybody that has elevator in their name, right?
• 20:12
  SPEAKER_01: And let's see what comes out of it.
• 20:14
  SPEAKER_00: Yeah, yeah.
• 20:14
  SPEAKER_00: And it really has has only happened in the last few years.
• 20:17
  SPEAKER_00: I mean, for the first 10 years or so that I worked in this elevator industry, I just didn't hear anything about that.
• 20:23
  SPEAKER_00: And then it seemed like it really kind of hit hard five, six years ago.
• 20:27
  SPEAKER_00: So um I I guess from what your perspective, what actually makes a company attractive to a buyer, whether it's PE or a major OEM, what is it that they're really after?
• 20:37
  SPEAKER_01: Yeah, I mean, just like all investors in all industries, right?
• 20:42
  SPEAKER_01: They are looking for profitable businesses of a reasonable size that are easily transferable and provide limited amounts of risk to them.
• 20:52
  SPEAKER_00: So tell me, what is it about the elevator industry businesses that fit that criteria, the limited risk, the easily transferable, all of that?
• 21:01
  SPEAKER_01: So it's a lot of the things that we talked about.
• 21:03
  SPEAKER_01: It's the recurring revenue for maintenance contracts, and it's you know, additional revenue generated from those maintenance contracts, like repair and billable extras, right?
• 21:14
  SPEAKER_01: It's the fact that those things are tied to long-term contracts, maintenance and those things are that are code mandated.
• 21:21
  SPEAKER_01: Like those are all of the things that create kind of that recurring revenue that decrease risk.
• 21:29
  SPEAKER_01: Some of the other factors that you know a buyer might look at when they're thinking about like, you know, how am I going to, if I'm acquiring this business, how am I going to integrate it?
• 21:39
  SPEAKER_01: Right.
• 21:40
  SPEAKER_01: They're looking at more kind of the operation side, what kind of systems are they using?
• 21:45
  SPEAKER_01: If the owner is, let's say, looking to retire, is there somebody else that's going to step up?
• 21:52
  SPEAKER_01: P might focus more on is this, is this business uh, you know, potential platform versus is it an add-ons, something I can scale, strategics OEMs looking more like on geography, uh unit types, right?
• 22:06
  SPEAKER_01: Is there potential for modernization where they can put their equipment?
• 22:10
  SPEAKER_01: But I think overall the the foundation is the same.
• 22:13
  SPEAKER_01: Is the revenue and profit going to continue?
• 22:16
  SPEAKER_01: Is this a business I can like easily acquire and and integrate?
• 22:19
  SPEAKER_01: Um, and and you know, are there are there strong people there?
• 22:23
  SPEAKER_00: Right, right.
• 22:24
  SPEAKER_00: Yeah.
• 22:24
  SPEAKER_00: If you've got strong people and if you've got you know long-term contracts, then it certainly smooths that, you know, the transition because you've got you've got years perhaps to even even build or upgrade the team before those contracts, you know, so that they're gonna keep keep paying money.
• 22:39
  SPEAKER_00: So yeah.
• 22:40
  SPEAKER_00: I'm I'm curious, I mean, obviously you're involved kind of end to end with acquisitions and you know what does that process look like kind of behind the scenes that most people would never see.
• 22:51
  SPEAKER_01: Right.
• 22:51
  SPEAKER_01: So I mean there's definitely there's a lot more to it than just like find a buyer and and agree on what the price is going to be.
• 22:58
  SPEAKER_00: Right.
• 22:59
  SPEAKER_01: I I think sometimes I'm a little a little surprised when I hear folks kind of going it alone, right?
• 23:07
  SPEAKER_01: Sellers selling without representation because there are so many ways that you can get tripped up that end up end up costing money.
• 23:17
  SPEAKER_00: Well I'm sure you've seen that right I I imagine you've you've kind of come in and the oh hey we've been working on this deal for a while we're about to sign it but we want you to look at it and then you can say oh you know if you were to fix this this this you could sell it for twice as much or something like that.
• 23:32
  SPEAKER_01: Yeah.
• 23:33
  SPEAKER_01: Yeah no I'm definitely we we come across that you know there there is a lot that happens behind the scenes getting the information together due diligence is a a big process in itself.
• 23:45
  SPEAKER_01: You know keeping the momentum going during diligence is is a big thing that you still got to fix elevators is what you're telling me, right?
• 23:53
  SPEAKER_01: You can't just you've got to you've got to run the business and you're responding to all of these data requests right and it's a lot and sometimes it helps to just to have somebody you know there helping keep the the momentum going.
• 24:08
  SPEAKER_01: I think this point also I think it's back to like what we were talking about with trust right you know Jeff Eaton who is the the owner of Lyft Business Advisors he gave a presentation at the spring conference right he did the um the keynote address and he you know he talked a lot about like mutual trust and that really you know trust and honesty that's that's the key to getting deals done because like if you think about it you can't account for every single contingency right if you spent the time trying to build a purchase agreement around everything that could go wrong you know I I don't know that you would ever get done and you probably would spend most of your proceeds on legal right which so you know it's it becomes like a a leap of faith almost right for sure.
• 24:58
  SPEAKER_00: Yeah both sides you know there's there's got to be enough trust there in order to move forward because you you can't document yeah you can't mitigate the rest of the thing once your point right you can do a bunch of due diligence but at the end of the day you have to do your your best guess and say yay or nay you know I I trust this person, this organization, this company I think this is going to be a good thing or this just doesn't feel right and we're gonna have to walk away even though you know it may be hard to do so.
• 25:25
  SPEAKER_00: Yeah.
• 25:26
  SPEAKER_00: Yeah that's a good point.
• 25:27
  SPEAKER_00: So um what what would you say are the biggest drivers?
• 25:29
  SPEAKER_00: What what are the biggest um you know when it comes to valuation and maybe what are the biggest mistakes that owners do that kind of hurts their value?
• 25:38
  SPEAKER_01: Yeah so so just like very generally right the value of the business is some multiple on the profitability.
• 25:46
  SPEAKER_01: You know the the question is what is the multiple that's that's really you know that's that's where the the value lies you know what's the multiple how long does it take the buyer to to pay off the investment so things that influence the multiple generally the size of the business bigger businesses tend to get a a premium and then all of the things that we've talked about the recurring revenue maintenance contracts all of all of those things margins and then certain like buyer factors right they want to be in a market there's good synergy there good management things like that.
• 26:21
  SPEAKER_01: I guess mistakes one business multiple does not apply to another business right so there are stories about oh you know so and so sold for you know 10 times okay well that could have been a huge business somewhere right that doesn't necessarily mean that the 10 times multiple applies to your business I think the second thing is you know focusing solely on monthly maintenance revenue.
• 26:49
  SPEAKER_01: I think historically right we've talked about businesses valuation of businesses as a multiple on on MMR but the the reality is the profitability is the most important part.
• 27:01
  SPEAKER_01: If you think about it like you could have two businesses with you know$100,000 in monthly maintenance revenue but maybe one is um you know focused on oil and grease contracts and they do a lot of extra billing that's more profitable than you know$100,000 in in full maintenance where everything's covered, right?
• 27:21
  SPEAKER_01: So it's the same MMR, but much different businesses, you know, much different outcomes in terms of profitability.
• 27:30
  SPEAKER_01: So focusing solely on on MMR to value the business is um the focus should really be on on the profitability.
• 27:37
  SPEAKER_00: Sure, sure yeah I mean if if you've got costs that are that are eating up your margin, well then you really don't have anything to sell.
• 27:44
  SPEAKER_01: Right.
• 27:45
  SPEAKER_01: If if you've got a hundred thousand in maintenance but you've sold it at you know 5% margin, then that's not as valuable as somebody who is really at you know let's say 35% margin.
• 27:56
  SPEAKER_01: It's just not the same.
• 27:57
  SPEAKER_00: Yeah absolutely yeah so I've got a couple questions for you before we uh wrap up and one is just maybe someone's listening and they're saying you know this is a really interesting career path.
• 28:07
  SPEAKER_00: How would you break down you know actually getting into MA certainly on the elevator stuff, but it's such a small niche, right?
• 28:15
  SPEAKER_00: I I can't see a a person going to college and say, oh I'm gonna do el elevator MAs.
• 28:19
  SPEAKER_00: But what what advice would you give in that regard?
• 28:21
  SPEAKER_01: Yeah I mean I don't I don't think that it would necessarily be that difficult to get into on the elevator side.
• 28:28
  SPEAKER_01: Like feel free to give me a call if you you think that you're right on you'd be good at it, right?
• 28:34
  SPEAKER_01: But I I do think that to be good at it, to be like the best at it for the person selling their business, you've got to have kind of the operational knowledge, right?
• 28:44
  SPEAKER_01: You know, a lot of times we'll get questions from from buyers on you know certain things and just having worked and having done that job right these are questions that I I already know the answers to I don't need to go back and bother a seller with with who's who is trying to run the business at the same time where we have we have the answers.
• 29:06
  SPEAKER_01: It just I think it helps you just assist sellers kind of along the way.
• 29:11
  SPEAKER_01: I mean like we said about my my path was a little bit unconventional but the operational experience I think really really helps in in trying to make life easier for sellers and I mean relationships also matter I think the industry is is small it's good to know to know folks ask questions talk to as many sellers as possible just but really understand the the day-to-day realities of folks yeah yeah no well spoken so last question for you I mean if if there's one message you could get in front of every elevator business owner listening what would it be?
• 29:44
  SPEAKER_01: Okay this one is start preparing earlier than you think you need to we don't necessarily want to think about the end right but the the reality is that the business will transfer right you we're not we're not gonna be around forever you're not gonna be able to run business forever you know it the business will transfer to someone and if you wait until something happens like you know you're burnt out there's family issues whatever else that forces your decision to sell then you're not necessarily going to get the the best outcomes most times the best outcomes come from years of of focusing on you know improving the saleability and the transferability of the business so things like making sure your financials are straight you've got contracts right you've got copies of your contracts right they're all executed uh and valid you're working on diversifying your customer base making sure that you've got a good team the the important part of this is that you know the things that make a business more saleable or transferable are also the things that make the business more profitable in the meantime.
• 30:57
  SPEAKER_01: So it's like it's two for one, right?
• 31:00
  SPEAKER_01: Like you have a better outcome when you sell um and a more profitable business in the meantime.
• 31:05
  SPEAKER_01: And I think you know just planning in advance making sure that you're you're focused on the the saleability um the the elements that make the business more saleable also means that at the end you have more options right for sure which also makes the business more valuable.
• 31:22
  SPEAKER_01: There's PE deals and OE OEM deals, you know, other strategics, um, you know maybe the the employees buy the business or if the business is strong and it's transferable then you've got options and that helps also expand your value.
• 31:38
  SPEAKER_00: Yeah no very well said I mean what I'm hearing is uh I think it was Stephen R.
• 31:42
  SPEAKER_00: Covey that used to say begin with the end in mind, right?
• 31:45
  SPEAKER_00: There is going to be an end whether you pass away or whether you sell it or whether you give it to your kids or sell it to your employees if you if you look to that and kind of focus on having the the healthiest business you can you'll be better off.
• 31:57
  SPEAKER_00: Yep absolutely awesome well Jessica thank you for being with me today I've enjoyed it I uh appreciate your insights and uh wish you the very best as you continue to to build your business.
• 32:07
  SPEAKER_01: Thank you Matt appreciate it.
• 32:09
  SPEAKER_00: Thank you for listening to the Elevator Careers podcast sponsored by the Allred Group, a leader in elevator industry recruiting please visit our YouTube channel at Elevator Careers or check us out online at elevatorcareers.net please like and subscribe and until next time stay safe