Started Over at $3M, Built to $200M

Jerry Schill: Three years ago, if there was a conference and there was a meeting on private equity or M&A, the room would be empty because people were petrified to be seen as possible sellouts of their business. Where today I think people realize that private equity can be an invaluable tool to both succession planning, business continuity, and a way to capitalize the great business that you have built if you're passionate about wanting to grow and scale it. Corey Mitchell : Welcome back to The Turn. I'm Corey Mitchell of Iconic Founders. The Turn is where blue collar founders talk about the businesses they've built, the value they've created, and what comes next after they sell. Corey Mitchell : Imagine what happens when you walk away from 20 years of work and you completely start over. Today on the turn, I sit down with Jerry Schill. He spent 20 years building a profitable business with his brother. He found himself always chasing these shiny objects. So he went out on his own, basically started back at square one. The big difference, focus, and discipline. He found out what others value. Let's get into it. Corey Mitchell : I'm curious, going back to the beginning for you. So you started with your brother, didn't you? Jerry Schill: 34 years ago, last month. I couldn't imagine getting started without him. We both had our unique abilities and gifts that we brought to the formula. He was naturally more of the sales conversational guy. I had always navigated more to what I called GSD, getting shit done, so I was the operational-minded person. It really, really worked well for us. It was about the hustle, making some money, wanting to prove that we can do what we set out to do. And we're not together today. The business evolved and we both had separate passions and both businesses are extremely successful. Jerry Schill: But I look back and I don't know if either one of us would have had the success that we've had if we didn't have really the love, the support and the encouragement that we had in each other. We had somebody that we knew that we could look back and trust. Corey Mitchell : I can relate to that so much. I was always the relationship guy, the sales guy, the more business oriented. Curious, what changed that caused you guys to separate and him leave the business? Jerry Schill: The business evolved over time. When we originally started out roughly the first 20 years, we were largely residential focused, really creative, fun, lifestyle environments, all the fun stuff that you love to do as a landscape contractor. It both satisfied the entrepreneurial itch and the creative itch that we had developed over time. Jerry Schill: As the business continued to evolve, we were working with a bunch of industry consultants. They just kept reminding us, "Hey, you really need to focus on some of this reoccurring revenue. Everything that you're doing has variability in it." And although we weren't really impacted by the events of 2008, we were pretty small still, so pipeline management was not difficult. We began thinking differently and realized that we needed to make some changes in the business. We just started thinking about ways to mitigate some of the risk in the business. Jerry Schill: In 2011, we launched Showgrounds Management. We had developed this reputation of being very high-end residential and we were getting a lot of pushback from some of the local property managers that we were probably going to be too expensive so they didn't want to call us. But what we learned over time was there was a lot of opportunity in our market in terms of being able to grow a commercial maintenance business. We'd seen significant success over the first couple of years. Jerry Schill: And what happened is my brother really wasn't passionate about the maintenance side of the business. And truthfully, I wasn't early on either. I knew it was a necessary step in our journey, but I got to the point where I wasn't all that interested in the design build side of things either. So we made a conscious decision that it was time to take the two businesses. We were functioning in a show landscape development on one side of the P&L and Showgrounds Management on the other, and formerly split those two businesses in half. Jerry Schill: I think we were both humble and honest enough with ourselves that we were going to be better off and our teams were going to be better off if we weren't really competing internally as much as we were at that point. Corey Mitchell : So you really start leaning into this maintenance work. Walk us through the evolution of the business. Jerry Schill: We were probably five or six million bucks in 2010. And by 2012, I think we were about $11 million, and that's when we consciously decided to separate. And the business, the maintenance side of the business rolled back to about $3 million. So we were nervous. Both of us were and scared, quite honestly, if I'm being completely candid about it. Jerry Schill: What we realized was getting laser focused on what we loved was really the catalyst for us to have the success that we had. So from 2012 until 2018 and a half or '19, we had taken the business from a few million dollars and 0% annual reoccurring revenue to a business model that was 93% reoccurring revenue and had grown the business to about 16 and a half a million dollars in a very short amount of time. Jerry Schill: And really what we did is I took a very simple approach. I was a huge Jim Collins guy, still am. The idea of the hedgehog concept was like, "What can we do and be really, really good at it?" And maintenance was the answer for us. That was going to provide the greatest opportunity, the greatest amount of return for our effort. So we got laser focused and really spent the next three or four years building out what we called the business in a box. And it was focused on the right people in the right seats. Jerry Schill: We had to create the culture and hire people that believed in the maintenance side of the business, not the construction side of the business, and really make the decision to part ways with all of our past life in terms of the residential focus. And then really embrace technology and make sure that if we were going to build a business that was scalable and portable, we were going to have to start thinking differently, really focused on professionalizing the business and really bringing people in that complimented what we were really good at, but back filled areas that we were weak in. Corey Mitchell : So when you say, just so I understand, did you move totally away from residential and go towards all commercial? Jerry Schill: In 2012, in one swoop, we eliminated the entire residential division of the business. Corey Mitchell : Did you know when you started that process that the market, the people that might buy your business someday would value that maintenance so much more than say the construction side? Jerry Schill: No, I wanted to build a business that was scalable and portable and was going to focus on the reoccurring revenue piece. I love the construction side. Showing up, blank canvas, leave at the end of the day, you've got this beautiful project. It was really about sustainability. It's hard to become a destination workplace if you're laying people off for two months out of the year. There's this natural evolution. I would love to say that there was some magical moment, but it was really all about focus and discipline for us. Jerry Schill: We knew that if we continued to stay focused on what we had set out to do and were disciplined not to chase shiny objects, which I am the king of chasing shiny objects, which is why culture was so important and surrounding ourself with the right people, that we would build a business that long term was going to create value. Corey Mitchell : When you talk about business in a box, just so we understand what you mean, are you talking about building a model that you can then replicate in cities all over the country? Jerry Schill: That's correct. I was introduced to a group called Vistage, which is International CEO Group, and it really transformed the way I thought about the business. We weren't interested in being the best landscaping firm in the market. We were interested in being the best entrepreneurs in our market. And when you surround yourself with people that are extremely successful, it forces you to level up your game. 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Corey Mitchell : Starting out in Cleveland, he built out four locations, but growth isn't easy. Jerry wasn't afraid to surround himself with partners that knew more than he did. Sometimes you need to find a partner that's willing to back you, that's thinking about growth in the same way you are. So he brought in a private equity sponsor that was willing to back his vision, and he realized doing it together with others actually would make him better. Corey Mitchell : I want to learn more about the acquisition strategy. Tell us how you got started and maybe tell us a little bit about your first deal. Jerry Schill: Well, I quickly realized that acquisitions were extremely complicated and a lot more expensive than I originally had anticipated. We were sitting on a really big pile of cash at the time, and what I realized was I wasn't willing to take a large portion of my personal net worth, personally guarantee it, and go out and do acquisitions. I was willing to bet on myself, but I had to be thoughtful and sensible about what I was embarking on, knowing that we didn't know what we didn't know. Jerry Schill: The bank that we had worked with for 30 years at the time was like, "Yeah, it's a little too risky for us." So I took a pause and decided to go out and find a broker that could help me put a book together, a SIM, that I could go out then and basically pitch the business to investors that would believe in the business and the model that we had built, show them the consistency and the performance that we were delivering and the returns that we were generating in terms of cash flow and get them aligned and bought into the vision and the direction we wanted to take the company. Jerry Schill: And in 2020, I was successful in doing that and partnered with a group called Argonne Capital out of Atlanta, Georgia, and couldn't have asked for a better group to partner with. They were just as bought into our success as we were very people-centric, very blue collar, and they were just a tremendous resource to us, both from a capital perspective and from, I would say, an intellectual perspective, because they taught us a lot. They taught us a lot about our business, things that we didn't even know, and they taught us how to think about things differently. Corey Mitchell : What are some of those things you learned? I remember not knowing anything about anything, whereas my dad would say, "I didn't know nothing about nothing." What are some of those lessons you learned about what's behind the curtain in that private equity world? Jerry Schill: Well, the first thing was the lingo. We played word bingo every single day as a group. We didn't know what arbitrage or leverage or any of these other words were, but I would say they taught us to think differently. The difference between an investment and an expense. When you're an owner-operator, you're smaller, you're entrepreneurial, you look at every dollar that you spend oftentimes as an expense, and they taught us the value of the return on the investment. Jerry Schill: I would say probably one of the best lessons I've got over the last few years is that discussion around leverage. I always took being debt free and having tons of cash as a badge of honor. And when I look back today, I'm going, if I would've maybe bet on myself a little bit more, would've spent a little more of that capital, made a few more strategic investments, who knows where it would've been. Jerry Schill: And I don't look back with any regrets, but they do a really nice job of looking at the business big picture. I still struggle as a leader of a much larger organization. We now cover eight states and have 1,600 employees that we're really, really proud of, but I still get stuck in some of those entrepreneurial traps, deal with some of the imposter syndrome that goes along with it. Jerry Schill: But I think at the end of the day, the one thing that they've taught me is just make a decision. Even if it's wrong, just make a decision, don't overanalyze things, but be thoughtful about the decisions that you have to make, but bet on yourself, be confident, just fail fast, and you surround yourself with great people. So making the necessary investments of the business is critical. Corey Mitchell : I want to dig in a little bit on something you said. I hear a story of a self-made man, built a business from nothing, had a really successful acquisition, brought in an investor, now have 1,600 employees. What the heck do you mean by imposter syndrome? Jerry Schill: I feel bad for people that struggle with it because I do. When you're faced with decisions that are going to impact 1,600 people, not 30 people anymore, it can be an overwhelming experience. So mustering up the courage and allowing yourself to be vulnerable, reaching out for help. Those are the things that when I think about imposter syndrome that I personally struggle with, not every day. Jerry Schill: Some decisions you can make really fast and you just, hopefully, if it's not the right decision, you fail fast. But the old adage, it could be lonely at the top is very, very true. You bear a lot of responsibility as a leader of a much larger organization, and I take that really seriously. Corey Mitchell : Well, look, I appreciate you sharing that because so many people want to act like they've got everything figured out and you have these wildly successful people and they struggle with the same stuff that you and I do, but a lot of people don't want to expose themselves as being weak or they don't know everything. And you know what? When you open yourself up to the possibility of learning from others, it just makes you stronger and a better leader. Jerry Schill: And I think there's more lessons to be learned as an entrepreneur and as a business owner or even a senior level executive and sharing some of the warts that come along with the job. I personally have learned more from our failures than I have from any of the successes. The success doesn't make you work hard. The failures do. Corey Mitchell : That's right. Most founders, they hear private equity, they run the other way. Here's how they think about it. PE comes in, loads up the business with debt, strips out costs, fire all your people. That sound familiar? Corey Mitchell : Well, Jerry found out that PE can actually be a supportive partner. Jerry was early. He bid on recurring revenue when everybody else was chasing shiny objects, and that it turns out, is exactly what buyers are looking for. Corey Mitchell : I want to go back to the private equity comment you made. Most of the time out in the world, when you hear PE or private equity, you hear it in a negative context. I'm curious you said pretty nice things about your PE sponsor that might surprise some people. Jerry Schill: Look, institutional capital didn't really come into our space until about 15 years ago, and I think it's always had a negative connotation. When I think of PE, I think of a bank. PE, they take calculated risks. They bet on people that they believe in. Private equity does not hitch their wagon to businesses or people that they think are going to be problematic. Jerry Schill: Their goal is to make good returns to their investors. And when you're running a good business and you're doing the right things and you're listening and taking feedback the way you're supposed to, businesses tend to be more successful when you have that level of exposure. When you have a good private equity partner, it could be transformational and really truly magical. We went from four locations in Cleveland to 37 locations in four years and Argon has been a big part of that success. Jerry Schill: And look, we did such a great job and I'm really proud of the business we built and we didn't talk about it, but in December, I recapitalized with TruArc partners out of New York City. We've been in conversations for years. You're always preparing your business for sale. I believe you should be if you're not. Whether it's to family or an ESOP or to private equity, whoever it may be or strategic, you should always be thinking that way. It forces you to make better decisions about when and what to do with your business. Jerry Schill: But I think the tone has come down a lot with private equity over the last couple of years, even in our industry. Three years ago, if there was a conference and there was a meeting on private equity or M&A, the room would be empty because people were petrified to be seen as possible sellouts of their business. Jerry Schill: Where today, I think people realize that private equity can be an invaluable tool to both succession planning, business, continuity, and a way to capitalize the great business that you have built. If you're passionate about wanting to grow and scale it, if you're an entrepreneur and you understand business and you believe in what you're building, private equity could be an amazing opportunity for you to grow your business. Corey Mitchell : So going back in time, that three million to 16 million growth trajectory, taking it to that maintenance, commercial maintenance, are there things that you would've done differently now that you know what you know? Jerry Schill: I think I would've invested in the business differently. We had made investments in business development or sales, so to speak, and human resources, because if you're going to grow your business, you got to grow your people. I think I might've accelerated it a little bit faster. Jerry Schill: Again, I believe every business should be built to sell at some point. And my brother and I, from year one when we used to go see the senior council of retired executive score that exists in a lot of these cities, like these stodgy old guys with suits and cigars at the time, that's some of the advice that they gave us early on. Jerry Schill: It would rain, we'd go ask questions and we'd get feedback, but embrace the things, prepare your business. Every day, you should be thinking about exit readiness, again, regardless, whether it's to your family or to your employees or to an investor, you need to be thinking about preparing the business for a future sale. Corey Mitchell : I love it. So now you're, I think you said 37 locations today. Jerry Schill: That's correct. Corey Mitchell : 1600 people. It's a pretty damn big business for a guy that started on your own there at zero and then three million when your brother left the business. How big are you now from a revenue standpoint? Jerry Schill: We're just shy of 200 million. Corey Mitchell : 200 million. That's a really, really serious business. Jerry Schill: The thing that I'm most proud of though, I've never been overly impressed with the top line vanity. It's always the bottom. And we're in the deal business and we talk to a lot of bankers and investors and a lot of other platforms around the country. It's one of the beautiful parts of our industry is everybody's willing to share and help one another level up their game. And what we're being told and the thing that we're most proud of is our margins. We're running best in class EBITDA margins. And that's a testament to remaining discipline and really focused on who we are as an organization. Corey Mitchell : I picked up on this earlier. You talked about some of your customers, you weren't the right fit for them because you might be too expensive. And then I just heard you now talk about best in class margins, which I absolutely love. How do you convince your sales team to make sure they continue to get the value that your business is worth and not lower their price so much just to win a job? Jerry Schill: So we are an incentive-based organization. We believe wholeheartedly in rewarding people for the behaviors that we want. When you align the rewards that people want with the expected outcomes or the behaviors that you need to be successful, I think the outcomes end up where you want them. We are laser focused on making sure that we are having good conversations and we've got good tools and processes around the sales process. Jerry Schill: It's not the Wild West. And truthfully, it creates some tension. I think more creative tension than negative tension, but salespeople want to sell. We're doing a really good job of creating incentives throughout the organization, so it's a win-win type of environment. It's a complicated set of processes. It's actually an area that we are spending a great deal of time on as we've continued to grow. So we're putting a lot of time, energy, and emphasis on that, and really surrounding ourself with smart people that understand how to do that better than I was. Corey Mitchell : Love it. Jerry, it's incredible. From zero to 200 million, 37 locations, 1,600 people, amazing company culture, incredible education along the way. I'm grateful to have heard your story and I hope we can stay in touch because I'd love to learn from you myself. Jerry Schill: Likewise. The things that you're doing to help entrepreneurs and founders is hugely beneficial and should be commended. Corey Mitchell : I love to see people get paid what their business is worth after a lifetime of a lot of challenges, a lot of sacrifices away from their family and friends. And I love to see the good guys win. Corey Mitchell : Most entrepreneurs, look, myself included, we chase shiny objects. We just can't help ourselves. Once Jerry got focused though, he focused on recurring revenue. He surrounded himself with people who were smarter, who kept him accountable. He was able to drive it into a national business. That's the term. It's when your business goes from a good one to a great one. Let's win. Corey Mitchell : I'm Corey Mitchell. Thanks for listening to The Turn, a podcast by Iconic Founders Group. Make sure you follow and subscribe to The Turn wherever you get your podcasts and visit us at iconicfounders.com. We help founders sell the businesses they care about and protect the legacies they've built. Corey Mitchell : The Turn was produced by Nate Tower and Chief of Staff at Iconic, Heidi Heckler. With Executive Producer, Aaron Macindu Sproul, video editing by Jeremiah Flo Flores, sound design and mixing by Ben Crannell at Lower Street Media.