Buying Businesses for $30M+ w/ Tommy Mello

Hey, everyone, it's Mike Andes. Welcome to the Mike Andes show. Today we're doing a podcast with Tommy Mello from A One Garage Door.

I had a chef too. His name was Chef Boyardee.

He has over $200 million in annual revenue across 20 states, has hundreds of employees, a pioneer in the home service industry. I'm going to be interviewing him on topics such as leadership.

The company will only grow as fast as the founder and owner grow.

Finding executives.

If you're micromanaging your direct reports, it's the wrong people.

Even private equity in the home service industry and how you can increase the valuation of your business.

Just plan on taking a big haircut if you don't understand those stuff and you're not prepared.

There's a lot of golden nuggets in this one. So let's go ahead, interview Tommy Mello from A1 garage door right now.

It's been a minute. How have you been?

Good, man, good. You've been busy.

Yeah, I was just talking. Do you know who Cameron Herold is? Yeah, yeah, just on the phone. We were, we hired him as a coach for, for myself and my coo. So we had an intro call. But I've known him for a long time. He's a great guy. And yeah, you know, I'm always thinking about who are my next few coaches going to be?

Yeah. Did you, did you put your COO in his like second in command, mastermind type?

So that's kind of. We decided to go above that and just pay for the one on one coaching. Yeah, I just jumped right ahead of it because I knew Luke needed more hands on training.

And this is our job is to develop leaders. I mean, basically, you know, get them more connections, get them better leadership, get them to be able to delegate stronger, interview stronger. If we could do those things, the business should run itself. I don't have to work anymore. My job is to just help people.

Know that they're, you know, create this culture. And obviously I'm very motivated on lead gen and attracting the right people to come work for us. But other than that, you know, people are like, man, you must work your ass off every day. I'm like, no, not really. I mean, I'm in a lot of meetings, but it's not really that hard. It's not like it used to be when I had to do everything.

We'll just roll it right into it. I don't want to take too much of your time. I did have several questions. I wanted to kind of pick your brain on stuff that you might not have covered elsewhere. And. But on that topic of kind of nurturing your current team as you've scaled up, and I'll do an intro in terms of, you know, how big a one is and the scale of it, but as you've done that and you have had a core team of leadership, did you have to upgrade that talent and change who they were, or was it simply a matter of investing in those people to gain the skills required to lead it at a higher level?

Yeah, that's a great question. You know, there's this thing called the law of the lid. And the company will only grow as fast as the founder and owner grow. But then there's everyone else needs to be growing too. They need to be listening to podcasts, they need to be reading books, they need to be educating themselves, doing shop tours, going to seminars. And it wasn't always like that. So unfortunately a lot of people got shuffled around different seats on the bus. And I feel like the C suite is so important. A lot of people don't believe in this trickle down type environment, but it's, it's. What we've done is I've built a new org chart with the technicians at the top because we all work for them, the technicians and the installers. But regardless.

You can only take the company so far based on how much you've learned. And I always say you need to work on yourself more than you work on a one garage door service. You gotta be working on yourself. So you gotta be able to put in a 50 hour workweek certain weeks and 30. You go 30 hours, you could go 80 hours, I don't care. You could go 10 hours if you're getting your stuff done. But still, I need you to put 15 to 20 hours into yourself each week too. Outside of work, Completely outside of work. Some of that's working out and getting in physical shape and feeling healthy and getting your mindset right. Some of that might be meditation, some of that's reading, some of that's just going out and meeting people and showing up to seminars and just being vulnerable with people. But throughout the years, there's been an amazing amount of top creating. And that's my number one word going into next year. Top grade. I mean, it's two words, but top grading, 100%. That's. I've got every leader in the company thinking, is this a 10 out of 10? And then I'm asking them, how do I know everybody on your team's doing good? Andy or Mike? I'm sorry, Mike. I said, how do I make sure that every single person.

How do I know their. Their performance? Like, if I'm going to call them up, am I just going on a feeling that they're doing good or do. I said, how do you know that they're kicking ass? It's easy to see a technician, CSR dispatcher. There's very clear KPIs. But in our marketing department, there's a lot of people working on different things. What about our warehouse department? You know, there's all these roles. How do we say this person, If I was to grade them 1 out of 10, what are we grading on? What are the metrics? Do they know the metrics? How do they move up in the company? And if we don't have that, we need to figure that out. And I need to be able. And here's what I tell people. It's not to find them doing something wrong. It's to praise them and tell them they're doing something right.

And as you've scaled up and you've had leaders and you might have seen the deficit of skill, how have you handled that with them to address? Like, hey, either you, you have to improve your skills and gain and acquire these, or I'm going to bring. Have to bring someone in to basically replace this position as we continue to grow the business, because the business is outgrowing your skills.

Yeah. I had a difficult conversation a few months ago with my coo. I said.

You'Re the bottleneck in the company. I said, but you're one of the most talented. So I got a question. I'll give you two weeks to come up with a plan, or I'd like to move you into a chief revenue officer because you're very, very good at generating revenue. And he said, I'd really like to stay the coo. So I said, okay, if that's the case, and let's do this, let's look at every one of your direct reports, and I want to know where you're spending your time. Because if you're micromanaging your direct reports, it's the wrong people. If you're the one in the meetings doing all the talking, coming up with all the ideas, doing everything, then you got the wrong people. So we wrote it down on a whiteboard. He circled two of them. I said, there's your problem. You get rid of this. How much more time do you get? Can you focus on these other things? Can you work in my timelines, which my timelines are not like, let's, let's Take a few months to look at this and make an educated decision. No, no, we got 30 minutes. Let's look at everything and run. Everybody is a lot of people. They wait for things to get perfect. They want to make these perfect. Well, what if this, this, this, this. I'm like, dude, let's make a mistake. Let's fail a couple times. We just don't make the same mistake twice. Like, what, you think we're going to go into this flawlessly and spend months and months and months discovering all this data? Like, we're working on an acquisition. It's going to cost us $30 million. That one. I can't just do overnight. I mean, obviously we don't want to screw this up, but I've got some people that want to overanalyze the piss out of it. And I'm like, well, we know this and we know this, so as long as we fix this, it's, it's all well worth it. Plus, we got five other ways to generate revenue from it and mostly profit. So, yeah, I do think that.

I've had situations with a lot of leaders that they kind of knew they weren't ready. They knew they couldn't run this size company. You know, the best thing when you're looking for somebody in your sweet suite, C suite is to find somebody that just comes in and says, I've been here. I know exactly what to do. I know exactly what you guys are going through. Now the, the hard part is, are they a culture fit? Because right now our team has got a such a great culture, the communication. You know, there's a good book by Patrick Lecione, the five dysfunctions of a Team. And it explains, I feel like right now in the business, we're all focused on the main core business instead of our own departments, which is very rare. It hasn't happened at the company in a decade and now we're back aligned. So I think this next year, based on a lot of factors, is ready for an explosive year.

And how do you, how do you deliver that feedback to somebody that you, you might see early indications that they have a skill deficit to be able to stay up with the team. You kind of alluded to that meeting with your CEO. Let's put this on the whiteboard. Has that ever been taken wrong? Has someone said, oh, you don't think I'm doing a good job and been taken wrong? And how have you handled giving that kind of very, in a way, blunt feedback to many times a very, very highly skilled individual such as your coo.

So the C Suite scorecard is basically the financial statements. I mean, by the way, my report card is the financial statements. I mean, we have a partner now, a sponsor. But people say, how are, you know, as the founder, owner, CEO, I'm on performance pay. I mean, and I, you know, I didn't take a lot of draws and I didn't take a bunch of money out of the company. I left a lot of it in for a long time. But. And that's how it compounded. But if you're going to get rated, you need to understand, like, for me.

Most of my C Suite's bonus is on gross profit and ebitda. Because we have one mission to grow ebitda. That's the one main mission. Now look, everyone knows we're willing to take a few steps back on a percentage of profit of revenue to grow the business, to make sure the infrastructure is keeping up. So their whole bonus structures are reliant on growth of ebitda. I mean, listen, I have unrealistic goals, so I gotta have a few key players pull me down and say, that's not realistic. And sometimes I overestimate what we could do in a year. And that's a mistake. I mean, I just know we can, and I just know when people have a goal. So what we did is we give 100% of your salary as a bonus. But I said, hey, I feel like we could hit this goal, this big hairy, audacious Tommy goal. So I said, well, if we hit this goal, we'll give you 200% of your salary. So if you're making 250 grand, you can make a $500,000 bonus and it's well worth it. You can do the math. I've done this really in detail on like a pivot table. And if we hit my big Hairy auditions goal.

The enterprise value of hitting that is several hundreds of millions of dollars. So I can afford to give somebody, you know, 10 people, and I can afford to pay a few million dollars.

A month when it comes to kind of putting those incentives out for someone. Let's assume now that this individual comes back and says, well, money's not my motivating factor. I'm trying to have work, life balance or other aspects of life, I'm trying to optimize for work. When do you actually have to then say, okay, you have to step aside or I'm going to replace you with an outside hire that might not be culturally as congruent with the current team, but I have to have these skills as we grow the company.

Yeah. You know, first and foremost, what I would say is the leadership team has to be like. For my cfo, first thing he wanted to do was get a really good controller. Next thing he knew is to bring on an FP&A financial planning and analysis. Now, there's three people in FP&A. So once you hit a certain level of the caliber of person that knows how to bring on the help, you're saying they're working too hard. And Most of my CFOs that I've worked with in the past would have to work 10 times harder. This guy knew how to build the team underneath him, and he knew how to build the AR specialist and the payroll specialist. He knew exactly what to do to where it didn't rely on.