I Helped 3 Home Service Companies Exit to Private Equity — Here’s What I Learned

Today we work with three private equity companies who buy home service businesses. Plug us in and help them scale. Over the past couple years, we've worked with three home service businesses that have grown to $5 million plus in revenue and had a successful exit to private equity companies. Just last week I spoke with a private equity company that's looking to buy five to 10 home service businesses this year. By the end of this video, you'll know exactly how to market your business as if it was a private equity backed company to build enterprise value, not just top line sales. We're going to cover the three main strategies that PE firms look for when they're acquiring companies or plugging into. And the first one is the 3X framework, the second one is the acquisition funnel, and the third one is the core six. Okay, so private equity companies, they're not the holy grail of business people. They're not going to come in and magically 10x your business. Magical unicorns, that's going to grow them. We had a H Vac contractor, we helped them go 3 million, 6 million, 8 million, and then sell to private equity. And literally within two years they were out of business. They were pushing close to 10 million in revenue and in two years private equity took them to $0. So I'm not saying that they do everything right. However, when they look at marketing perspective particular, they have a really good lens on what works for marketing. And that's why I like to dial in and talk about exactly what they do. And the first piece of that is number one, which is what exactly do private equity companies look for when acquiring businesses? And even if you don't want to sell your company ever, it's important to build a company that would be attractive to private equity companies. So the first thing that they're looking for is a predictable channel of leads. They want to make sure that when they buy the company and the business owner leaves customers and revenue, that's going to continue to come through the door. This is called key man risk. There's not just one person that holds the keys to the castle. So, so what can you do as a business? Well, obviously if you want to take vacation or step away, you need to build a business that relies without you. And the number one way that you do that, and private equity companies drive this point home is through data. They know that good data drives good decisions. And imagine if you're on a island, sitting there with your family and your business is running without you, and every single day a little pigeon brought in five numbers and that's the only way that you could run your business. That's the information that you need to run your business off of. And you would know what those numbers are based off of your business. But that's what private equity is looking at, is how good is the data and how good of decisions can we make off of this data? Which leads us directly to number two, which is the marketing data that they need to know. And this is the acquisition funnel piece to this equation. Anytime that you're running ads marketing for your business, you want to have that data dialed into return on ad spend. If you're spending money on Google Ads, Yelp, Meta, Nextdoor, TikTok, whatever it is, you need to make sure that every single month you have your data so that you know, I spent $1,000, I made $10,000. So that's a 10x return. I should do more of that. This is what private equity companies want to see. They want to see and most importantly, they want to know it before they buy the company. And if they don't know it, that's exactly what they're going to be plugging into the business. On top of this, companies that are going to be 10x ing their growth are going to have this data dialed in because they're going to double down on what's working and fix or stop doing what's not working. We had a company that we were working with, they were spending 3, $4,000 on Google Ads and for whatever reason in their market, this was not a fruitful way of using that money. They were generating 1, 2, 3x returns sometimes on that money. And we knew if we were to double down and use a different plat platform, then they're going to generate more money because this is not producing a 10x5x or 10x return on their ad spend. So what do we do? We took the data, we made a decision, and ultimately they ended up tripling the revenue of their company just by pivoting from one ad channel to another. So moral of the story is good data, good decisions. You have to get all your data dialed in so that way you can grow your business. The third thing that they look at is how private equity firms standardize marketing across their companies. Like I mentioned at the top, I talked with a guy last week. He, he wants to buy 5 to 10 home service businesses in this year. And what he's looking at is how do I come up with a standardized marketing procedure so I can implement that in every single business? And this is that 3x framework that I mentioned. Before. So here's what it is. There's three parts. There's how am I going to get new customers coming in, which is your visibility and we're going to talk through this in a sec. Number two, how am I going to turn visibility into actual leads and sales? So my conversion funnel and then number three, how am I going to market to my past prospects and customers? That's retargeting. That's the 3x framework that every single private equity company wants to know when they're coming in to talk with businesses about buying or coming in and buying businesses and implementing this framework. So let's start with visibility. This goes back to that clean data section. Visibility is all about you're going to spend money on ads, you're going to create content, you're going to build B2B partnerships, you're going to do some good old fashioned prospecting. Those four things is how you get new customers to come in the door. Whatever you're doing from a new customer perspective, you want to have the return on ad spend and just the data in general dialed in so you know what's working and what's not and what you need to fix. Private equity companies want to know that data and more importantly they want to know it before they buy the company. The second thing is the conversion funnel. This is the part that most private equity companies miss and that is that it's not like an e commerce website where you just run more traffic to a landing page and then people are going to buy your lamp or something like that. This is leads come in the door. A customer service representative has to reach out to these people or answer the phone and book them into a job. Then you actually have to go out and do the job. Then you have to create estimates while you're on the job. Then you have to sell on top of that and you have to make sure that it's a profitable job and time spent out there is making you money. This is why that conversion funnel is so hard for private equity. And really what they want is automated sales funnel. They want leads to come in, go through automations. They want jobs to be scheduled automations, they want estimates to be generated automations, they want sales to be done automations. All inside of this, they want the data pulled out and automations to be run in the sales funnel. And then the last piece is retargeting which is most companies, specifically private equity, they're going to be buying companies that have a large database, hopefully thousand, 10,000, 20,000 plus prospects and customers sitting in their database. And nine times out of 10, they've never been re engaged, never had an email newsletter go out to them monthly. They've never been called or cross sold different services. And it's a honey hole for private equity. And they know this when they're buying these companies. They're like, these companies are not doing this correctly. So here's what companies need to do in retargeting. Every single month, you should have an email that goes out to all your past prospects and customers. Cross selling services, our recommendation is you have a content calendar every single month. And in your business, you know what you should be talking about in spring, you should be talking about this fall, summer, winter, and then that's what you're going to be cross selling and talking about. Then two times per year you want to send out a text message to your customers and this could be some straight offer. We're going to be in your area. Reply back, yes, and we'll get you set up, whatever that looks like. Because you already paid for these prospects and customers, they're just sitting there and you think, oh, they're just going to call us when they need us. That's not how it works. Especially because people don't know all the services that you offer. And this is the 3x framework. This is what people want implemented in their business. What I found was when I implemented this in a $3 million home service business, they ended up going to 4 million, then to 5 million. Then on the calls with private equity companies, I was sitting there talking to them, explaining this framework and they were like, wow, this is amazing. They ended up selling for 7x multiple of their. So what I'm telling you is this framework works. And most private equity companies want to implement this in the businesses that they buy. And most home service businesses want this in their business. And good news for you, we do this at Flash Consulting. We take this Flash customer journey and we implement a professional marketing system in home service businesses to help them grow. If you want to learn more about this and see if it could help you with your business, you can go to flash consulting.com and set up a meeting. Okay, number four, private equity is betting on AI and specifically they need your marketing data to make decisions. Most private equity companies are building AI knowledge bases. What this allows them to do is to funnel data into these AI knowledge bases and then get information out of it. And when they have marketing data, sales funnel data that can run into knowledge bases, it allows them to make decisions. On the call that I had last week I was explaining to him that we do this exact same thing. Every company that we work with gets a my GPT. They have a ChatGPT custom GPT that's built on their business that gets trained. So then when we want to do things with the business, we want to create content, we want to ask it a question about data. We can leverage the knowledge base of this business on that data to make decisions. This is exactly what private equity firms want to do with all their different businesses. They want knowledge bases, AI funneling. Whether it's their marketing data, whether it's their profit and loss statements, whether it's their accounts receivables, accounts payables. They are going to be running it through AI models that they've already built to spit out reports and give them recommendations on how to grow the business. For home service businesses. Most companies are way behind the eight ball on this. How can you leverage this in your process? You set up these my GPT, then you just plug in your piano. Hey, what would you recommend that I do with my business? And it's going to tell you exactly what to do. Then if you want to create content, you say, hey, based off of what you know about me, what should I talk about in my newsletter? Or you run a sales call and you record the sales call and you plug it in, you say, turn this into an estimate for me. There's a million different ways that you can use GPTs, but private equity firms, they're using AI in all the different processes, not just marketing. Okay? And number five, you don't need to market to private equity to sell like one or even act like one. Imagine you own stock in your business, but you couldn't operate on a day to day basis. This is the core six that I recommend that you have knowledge of. The first one is leads year over year. You want to know how many leads you got last year versus this year. That's going to be a very simple way to grow your business. Number two is booking rate. What was my booking rate? I got 100 calls and I booked 80 of them. That's 80% booking rate. If you don't know this number, you don't know. If I drive more calls, am I going to book a good number for this is around 40, 50%. But if you're in a demand driven like H Vac, I don't have any AC 70, 80% is very realistic. Number three, estimate count year over year. Just because you run jobs, just because you get leads and book them, you need to generate estimates. This is why? You need to track your estimate count. If you did 80 estimates last year and you did 100 this year, you grew your estimate count 20%, which is going to give you more opportunities to grow your business. Number four, sold estimates. Okay, great, we made a bunch of estimates, but we actually have to sell these estimates. We had a company that we helped them go from 50 estimates last year to 120 estimates this year. So literally more than double. But they didn't close any more estimates last year. They closed 40 this year they closed 40. So what does that mean? Their sales process is broken. They don't have an estimate follow up process. They can't sell anything, and they need to fix that process. Number five is average ticket. Just because you sell everything doesn't mean that you're actually making money. This is why you need to make sure your average ticket is good and it's profitable. And number six, this is your turn on ad spend by campaign. So if you got a report that says, okay, Phil, you spent $1,000 on Google Ads and you made 10,000, well, doesn't take a genius to know we need to spend more money on that. And this is why those return on ad spend by campaign are so important. Okay, so at this point, as you can see, implementing a predictable growth strategy in your business as if you were a private equity company or investor in your business is the way to go. It's the only way to grow your business. Especially if you've gotten to a million dollars as a hustler. The hustler has to die, and the leader has to be born and create predictable growth in your business and start running it as if you're an investor. Investor mindset. One of the biggest missing pieces in most of these businesses, specifically private equity, as I mentioned, is in the conversion funnel. We helped a company fix that in four months and generate $1.2 million in revenue. And I break down that exact process in this video here. And if that one's not out yet, you can check this one out.