122. Step Up Your Financial Success | Matt Hullander

Figuring out your exit strategy ahead of time. You know, since the press release came out, I've had 2 local heat and air guys call me, hey, how did you do that? I've had somebody call, but I don't know how to value my company. What are they looking for? Can you come help? So I think prepare for it now, even if your exit is— let's say you were never gonna exit. I would still prepare to exit and do these things to run a healthier business. So if it's in a year from now or 5 years from now, or you're gonna give it to your kids, you could still be doing these things.

This is the Wealthy Contractor Podcast brought to you by G4 Marketing. Interviews with today's top home improvement entrepreneurs about marketing, sales, money, mindset, and lifestyle. Now here's your host, Brian Kaskavalciyan. Hey everybody, welcome to another episode of the Wealthy Contractor Podcast. This is Brian Kaskavalciyan with G4 Marketing Group. And I have back again Matt Hollander from Hulko out of Chattanooga, Tennessee. Matt, welcome. Thank you for being here.

Hey, Brian, thanks for having me back as a guest.

So Matt has been on before. If you haven't listened to his episodes, I think you've done two of them. One of them was a regular podcast episode, and I believe one was when the plague came in and we went around and nobody knew what was going on. And Matt was kind enough to come on and, and just share what he was thinking and what he was feeling. And that was, that was a year ago. I can't believe what a year it's been. And if we go back to like this time last year, we were all— I don't know if scared is the right word. We just weren't sure of what the hell was gonna happen. And Sure enough, our worst fears did not happen. It actually went the other way, right?

Yeah, it was a wild year.

It was a wild year. So we're going to talk about— so, Matt, if you guys are on the— anybody that's on the Qualified Remodeler list saw a press release go out last week, last week or the week before. Polco was just acquired by Westshore out of Pennsylvania. So, Matt, congratulations on that. It's a good exit. Look at him, you know, 34 years old and retired.

47.

He looks 34 and quote unquote retired. I don't think any of us would actually retire, but we're going to talk a little bit about the process. We're going to talk a little bit about what leads up to it, what these companies are looking for, how to set your business up and all of that. And then I just think it would be an interesting conversation because there's so much of it going on out there. And, you know, I've said it before, I think Matt is one of the smartest guys I've met in this business and runs an amazing company. It should be no surprise that he was an acquisition target. And so before we get into that, Matt, let's talk a little bit about— so we've had this wild year and we've been busier than ever as an industry, busier than, than most people know what to do with, and a lot of backlog. How are you guys kind of dealing with— before all of this happened, how are you dealing with some of the, the new reality of what's going on here?

Well, it was difficult. You know, the huge increase in sales was exciting, uh, when it happened, and then I think we realized how hard it would be to keep up with that backlog. Our backlog doubled. You know, we got up over $7 million of backlog, and you know, it was just And then supply, I think we could have reduced our backlog had we been able to get products quicker. I hope that that's all going to continue to better over the next couple of months. I've heard, you know, lead times for products are coming down. So it was challenging though, just to buckle up and work hard and do the best you can to get through it and explain to homeowners why they're having to wait.

And you'd shared a video that you did and you got out in front of it. And, you know, the best thing to do is just be transparent and tell the truth, right? What's going on and don't make excuses, but hey, this is what's going on and, and we're going to do our best to get out there.

Yeah, but that video backfired a little bit, but I think for the most part people understood. It was a video I sent to the roughly 500 customers that were in our backlog explaining— I was truthful— look, we had a huge increase in sales, you chose us for a reason, we're the best in town, here's why you should wait, we're having, you know, COVID supply chain issues and appreciate you being patient. And I would say the huge majority of them appreciated getting the video and getting to hear from me and understanding why they had to wait. And then a few of them were like, oh, where's my stuff? You, you've reminded me that I need to call and complain. So we still got through it.

But okay, you said it backfired, but like in a major way, or was it just a few people, or was it a lot?

No, no, because that video was awesome.

I thought it was one of the best ones I've seen.

It was just a few customers. My video prompted them to say, oh, it has been 16 weeks, I'm going to call and complain. And they rightfully had reasons. All of them did, you know, when you get stretched out 3 or 4 months. But I think that'll continue to come down. And hopefully, and it sounds like in the industry everyone's sales are remaining strong, but hopefully everyone's been preparing and adding more labor and crews to reduce the backlog. And and maybe they can make their new sales and, you know, a better backlog reality going forward.

Yeah. What do you think? I know none of us have a crystal ball. It would be amazing if we did. What do you kind of say? I was, I was having lunch yesterday with a client that is going to do about $100 million this year. And we were kind of talking about what does this look like 6 months from now, a year from now? Right now, demand is crazy. I mean, it's just absolutely nuts, but it's not sustainable. At some point it's going to normalize. But is normal going to be just going back to the normal, or do you think that we are leveraging future business today? What's your—

I would say in between. I'm curious what your client had to say, but I remember looking back the last 10 or 20 years, you know, when there's a change in the political environment For example, most people in '07, '08, '09, or when President Obama got elected, they panicked and maybe other industries suffered, but we grew those years. You know, people maybe were not buying new houses, so they were remodeling. So I've never really looked at what some might consider a down economy as a bad thing for our industry. I think it's actually helped us grow over the years. So I don't think it'll just tank and go back to where it was, but I don't think it'll continue to escalate either. I think it'll kind of normalize. And that's a wild guess, but my opinion.

You know, it's interesting, you said something interesting. And what generally happens in these times is that when things do kind of normalize, for the lack of a better word, the weak companies go away. It's the strong companies that are going to survive, the companies with the right people, the right processes, the right profit models. And it doesn't surprise me that Holco grew during those times. You know, one of the things that this guy was saying yesterday was that what they're working on right now is they're just looking at every process. They're looking at their efficiency. They even have efficiency experts in there because they just want to use this time to get better so that if and when— I shouldn't say if— when things do change a little bit, for them it's not going to be so drastic. And so I think that might be a kind of an interesting segue into the whole thing of being acquired by another company. And you were acquired by a pretty sophisticated company. You weren't acquired by just some guy or some family that wanted to be in the home improvement business and paid you a, you know, 3x multiple on EBITDA. You were acquired by a very, very sophisticated company that's out there buying up companies. So Let's talk a little bit about what are those companies kind of looking for? What do you have to do to prepare your business to even be on their radar?

Well, first, before we go into that, you know, folks have to decide. Some people just close the door and that's their exit strategy. Some sell to a family member or they have children in the business. So I think first you have to decide what is your exit strategy. For myself, this is something I'd been working toward. I have a daughter that's only 16. I don't have any other children. I don't have siblings that live in Tennessee. I did not want to wait on my daughter to find some guy that I could teach the business to. I just didn't want to work that long. So this was the best decision for me to go this route. You know, and there's, there's a few of them out there that are buying folks. Some of them you stay on and you have an earnout for a time period. Some of them keep your branding, and in our situation, it's now called Westshore Home in Chattanooga and Knoxville. Holco went away. But some of the things they look for that I've learned were important to them. I was not involved in the day-to-day of the business, and that was important to them. They don't want to acquire a company that's solely dependent on the owner and then the owner leaves. So having a really strong number 2 is really important. And I had a strong number 2 and 3 in Bobby and Curtis, my my managers who have now at Westshore, Bobby's a regional manager over a few cities in the South now, and Curtis has taken over as GM. So there was opportunity for them as well. But having a strong number 2, you know, not being dependent on yourself. I think technology was another one. We had been using iPads in the home in our sales process for a very long time. I think we may have been one of the first. So we were used to using technology. We already used Leap. We already used Engage, and so did Westshore. So that made it easier for them than to totally retrain my sales force. Probably most important would be having really good financials and making money. They do base a lot of their decision on a multiple of EBITDA. So, you know, knowing what to add back, knowing your financials, your financials being clean. And when I tell that to your listeners, and if I had heard that 10 years ago, I would be like, yeah, they're pretty good though. I kind of know I'm looking at them. I'm making money. Well, you're not really. If you dig into them and learn all you can about them, spend a lot of time with your CPA, make sure you have a fantastic bookkeeper that keeps up with all this because, you know, they do what they call a quality of earnings report where you rightfully have to prove to their CPA that I really made this much money. So there's a lot of conversation between your CPA and their CPA to make sure your financials are accurate. So you should go ahead and have them accurate before the time comes. And then I think they wanted my people. They knew what kind of company we were. I remember when BJ came in to visit, we kind of went through our onboarding process with him and he's like, hey, you have core values, number one, and they're pretty similar to ours. So knowing that I've been teaching those values to the 50+ employees for a few years, I think, you know, gave him a chance to see kind of who they were. So I think all those things, and I could go on and on, but those are probably the top 3 or 4 things I think are important when you're looking to get acquired. And then figuring out your exit strategy ahead of time. You know, since the press release came out, I've had 2 local heat and air guys call me, hey, how did you do that? I've had somebody call, but I don't know how to value my company. What are they looking for? Can you come help? So I think prepare for it now, even if your exit is let's say you were never gonna exit, I would still prepare to exit and do these things to run a healthier business. So if it's in a year from now or 5 years from now, or you're gonna give it to your kids, you could still be doing these things.

You know what's interesting is I had a conversation. So it's funny, I had lunch with the guy that's gonna do $100 million this year that is super, super profitable, super sharp, and has been approached by private equity for crazy multiples too, by the way. Like crazy multiple. I couldn't believe it. Then in the afternoon, I had a conversation with somebody else, and I'm trying to help this person become more financially smart. I'm looking for another word, but I'm trying to get them to look at their financials and understand them and not keep, you know, like making excuses for, well, yeah, but we made money, but it's over here. And it's, no, no, no, we need to see it. Where does it go? And the financials aren't clean. And we got on the subject. Of value of the business. They're gonna do— their plan is to do $8 million this year in revenue. And he thought that, well, you know, I think maybe my business is worth, what, half of revenue? I'm like, no, that's not really how it works. So he's thinking, in his mind, he's thinking his business is worth $4 million. And by the way, to the listener, the number doesn't matter. Everybody's number is gonna be different. But the most dangerous thing that I've seen over and over and over, and you have too, is business owners that think their businesses are worth so much more than they really are. And like, this guy actually like was thinking, yeah, my business probably worth $4 million. And I'm, and I'm like, well, look, here's how it really works. So if you're gonna make, let's just say in this, in his case, he's gonna make 5% on that. You got $400,000 of profit? Well, typical multiplier is 3, but right now, you know, if you run really good, you can get 4, 5, 6, somewhere in there, right? So I said, let's just for shits and giggles say it's 4. So you're worth $1.6 million. But back to what you said, you got to have a strong number 2, can't rely on you. You gotta have super clean financials. So already he's got 2 strikes against them, right? And then number 3 is quality of earnings, which I thought that was really interesting. Quality of earnings. The quality earnings aren't great. And so I said to him after we had this discussion, I said, look, the business is only worth what someone's willing to pay for it. You can't go out, it's not like a house that, you know, it's only worth what someone's willing to pay for it. So it's interesting that you brought that up because you got to have tight controls in place, you got to have systems in place. I always say that the easiest way to kind of, I think my opinion is, you got to be able to show somebody that if they buy your business tomorrow that they're the 1, sales are gonna continue and the cash flow is gonna continue on the first day. And 2, that if you leave, that the business doesn't fall apart. And obviously that's important to a buyer.

Well, and hopefully that gentleman, and I'm sure there's what I hope your listeners take from this, if they're in his shoes or similar, they can fix that. Will it take 1 or 2 or 3 years? Yes, depending on how long it takes to, you know, get your number 2 trained and not be there day to day. You can fix your financials probably sooner than later. You can raise your prices and become more profitable. So it's, it's something that can be fixed. And in a, in a matter of time, your business now goes from being worth $1.6 to $4 million if you do all these things.

If you do all those things, that's right. Yeah. Where do you start? I'm okay. Let's create a scenario. I'm sorry to cut you off, but let's create a scenario. I'm busier than I've ever been. And let's say that— here's the thing, I think either you are buying your business or somebody else is. Every day, either you're rebuying your business or somebody else is buying it. So you might as well make it worth the most it's worth, even if you have to buy it again tomorrow morning. So given that, you know, situation like that, which I think is very, very, very common out there, Where do you even start?

Well, you've always alluded to it, and it's in your book, and I've always felt this way. And for me, it was mindset. I decided this is what I'm going to do. Next, I would say focus. A lot of folks don't have focus, and they're pulling too many directions, or they start too many projects. Or, you know, if you want to do this, which you should do whether you sell or not, like you said, these things should happen. So it's focusing on finding the number 2 and having clean financials. And if you're not already trying to be paperless, why not? Why do you still have manila folders and use a checkbook? So, you know, just have the mindset that you're going to start changing those habits that you've had forever.

Yeah, good advice. So let's talk a little bit about— so one of the things, and we talked about this in the last episode of the podcast, and so we won't completely rehash it, but one of the things that you've done very, very successfully, and I've got a lot of other clients that have on the same thing is that when your business was making money, which your business is almost, but probably always would made money, but you very shrewdly took money out of your business and put it into other assets. How important has that been for you or how does that help you in terms of with this exit?

Well, at the time, and it in a way goes against what I just said, which is focus, but I did wanna diversify. So I always enjoyed and had a hobby of messing around with real estate. Back in the '90s when I was selling for my dad, I would flip houses. And probably late '90s or around 2000, I bought 4 acres and developed a 27-lot townhouse development that I built out and made money doing that. And then when I took over the business, I would take my profits and, for example, I built a 25,000-square-foot mixed-use facility next door to my office where I have 10 tenants and I rent commercial space. I built a 4-story building downtown Chattanooga and started putting tenants in it, built it for $4.5 million, sold it for $6.5 million. So I've always enjoyed real estate and I'll probably continue to do that. But if it weren't for my company being successful and generating those profits that I could take out, I wouldn't have been able to do that. And I think a lot of listeners out there feel like it may be healthy for them to keep a ton of money in the bank. I met a gentleman I was in a peer group with one time and we were looking at our financials and we were very similar and our margins were the same, our sales volume, our revenue was the same. And then on our financials it showed owner's compensation. And this is several years ago and mine was probably, I don't know, $400 grand or something and his was $1 million. And I said, hold on, everything's similar. Why are you making a million and I'm making $400 grand? And he said, because I took it. You— how much money you got in the bank? You know, why are you letting it all just sit there? Take it and do something with it. But you still got to be profitable to be able to do that, right?

And profit— so much of profit is getting your price right. And we talk about that a lot here, and I keep seeing it In fact, this guy yesterday, his cost of goods sold was 62%. I'm like, dude, you're never going to make any money on a 62% cost of goods sold with 38% gross margin and the overhead that you have. I said, you have a pricing— he has quite a few problems, but typically that's a pricing problem. And so how does somebody— and I know that we've talked about this so many times here, out of 100 and however many episodes we've done, I'll bet you half of them we've talked about this, but I can't stress it enough because I still am seeing it. So how do you get the right price?

There again, it's mindset. It's just knowing you can do it and do it. And it does drive me crazy too. You hear that all the time. Or if I've ever had a salesman, you know, have that attitude, it typically doesn't work. So actually, in the example you gave, it should be the opposite. You know, he needs to be pushing 60 on the other side. So we did it incrementally over years, and, and luckily I made that decision several years ago, but When I started working for my father selling 20+ years ago, we were installing replacement windows for $250. Now we're $1,200. And it's just knowing that it's possible and having a great sales process and delivering what you promised to the homeowner. And if you're already doing all those things and you're still the low price guy, then you have a huge opportunity. Just go in tomorrow and change it. Uh, just, it's that easy.

Yeah.

And I promise you will not sell less.

Yeah. And, and we've said that here and over and over and over again, but it's so important, mindset. And yeah, but at the end of the day, you have to provide value. And you at Hulco and a lot of my other clients, you got core values. So here's how, here's who we are as a company, and here's how we are going to treat you. So you could go save $1,000 or $4,000 and hire that guy down the street. But can you really trust that they're going to have your back? Can you really trust that they're going to come back and service you if it's required? And so you could— and we could just go down the list of all of the things. And the funny thing is, and I say this to people all the time when we talk about price, is that you have a ton of competitors in your market that sell the same things you do, right? Windows and baths and they think— they're out there thinking, well, I just— I got to be less money, I got to be less money. Whereas if they're going up against you, right, you're going to be significantly more than them for the same product, and you're going to outsell them.

And I think I'll deliver more value too. Exactly. So yeah, it's definitely possible for anybody listening that's— that has that mindset. You have to just change your mindset about the pricing, especially right now because the cost of everything's going up and it's harder to get stuff. So you should be raising prices if for nothing else for that reason.

Right. Cover costs. So I know you have a golf date, and so I don't want to keep you from that, but I do want to talk a little bit about where do you kind of see yourself going next? I know you, you, you have some things in mind. What are you thinking about?

Yeah, I've worked hard to get where I'm at. I'm going to take a little time off and I'm still helping Westshore, you know, kind of on a corporate level with, you know, future acquisitions. I'm helping still with some of the local marketing in the Southeast and I really like helping people. So I think I've created this entity called V2 Strategy because I've had so many people reach out. Okay.

So we had a little bit of a technical problem there, but Matt, you were talking about that you were going to write a book. Of how you went from $3 million to $20 million, and then how you sold for a big chunk of money. And that's kind of where we got cut off.

Yeah, I just want to share my experience with others and talk about what might help other business owners, whether in this industry or HVAC or plumbing or any home services. I think it's all the same, and I've just always wanted to do that and share, you know, where we started, some of— some stories about how we got to where we're at, and then really explain a lot about what we've talked about today and, and how to, you know, build a better and more profitable business that can be sold.

Yeah, awesome. Well, I look forward to reading that. I look forward to interviewing you again when it comes out. I look forward to, you know, whatever you're doing next. I hope maybe in some small way I could be a part of it. I could help promote But thank you for sharing. Thank you for coming on. As I mentioned earlier, Matt is going to go play golf now. Are you going to Macklemore?

No, I'm playing at the Honors Course today in Oodle Wall, Tennessee. Pete Dye course, I think number 27 in the United States. Nice. One of my favorites.

I think I've asked you before, but do you mind sharing what's your handicap right now?

It's a— look at my GN app.

Look at him. He has— he's going to an app on his phone so I can get the right— the exact number.

Yeah. So I'll show it to you. It's trying to open. So it's this app called GIN. G-H-I-N. It has everybody's handicap in it. You can look your friends up too. But right now I'm a 5.2.

What? A 5-point what?

5.2.

Okay. So yeah, when I finally get out there, I'm gonna caddy for you. I'm not gonna play with you. Oh no, caddy with you. All right, I'm gonna caddy for you unless we play best ball.

Then we can have fun. You have to play.

But yeah, at some point we got to get out to— I got to get out to Chattanooga. All right, my friend, well, thank you so much for coming on, for sharing. Uh, Matt will be back again for sure, and thank you so much. And you know, I just want to I didn't plug it at the beginning, but if you don't have a copy of the 7 Secrets book yet, you can still get free copies. I keep buying them. And all I ask you to do is just pay shipping. So just go to thewealthycontractor.com and you'll see a link there to get a copy of the book. Again, I buy the book, you just pay shipping and handling.

I'll give a plug. I'll give a plug for the book while I'm on here. And I've read it 3 times. We just took our daughter to the beach on spring break and I sat there and I read it again. And I think A lot of what we talked about, and we've mentioned it 10 times today, is attitude and mindset, and the book alludes to that. So, uh, if I can leave your listeners with anything, there's someone listening that needs to raise their prices or that needs to plan an exit strategy or needs to start using technology or needs to get rid of those manila folders. So just make your mind up and go in tomorrow and do that.

Oh, I love it. Great advice. Well, thank you, Matt. So until next time, this is Brian Kaskavalciyan with G4 Marketing Group, and this is the Wealthy Contractor Podcast. Thanks for listening to today's episode of the Wealthy Contractor Podcast. Let me ask you, did it help you look at your business in a different way? Did it spark an idea or ideas that you hadn't thought of before? Do you have a list of action items that you can take and implement into your business or your life today? I really hope so. If it did, I'd like to ask you a favor. Would you leave a 5-star review of the podcast? By doing so, you'll help other contractors find the podcast more easily so that we can help them achieve more success, wealth, and freedom. And before you go, make sure you subscribe to the Wealthy Contractor Podcast so you get access to the latest episodes as soon as they're available. We're always striving to provide you with great content, so you don't want to miss what's coming up. In fact, if you haven't already, make sure you go to thewealthycontractor.com and get your free copy of my latest book, The 7 Secrets to Becoming a Wealthy Contractor. Just pay shipping and handling, and I'll take care of the cost of the book. So until next time, this is Brian Kaskavalciyan.