I’M A MAN with a plan. When my business partner and I launched our company in 2009, we had an exit target of 2025. To hit that goal, we reverse engineered the steps necessary to become large enough to attract a national buyer. The formula we settled on is a mix of organic growth and acquisitions in Tier 1 cities executed every two years or so. With three acquisitions completed and a presence now in three states, we’re learning and refining as we grow.
My exit planning started with a confluence of events. When I had decided to turn my solo venture into a full-time managed services business, I obtained a business partner, purchased ConnectWise PSA software, and hired my first employee. My business partner and I also attended ConnectWise’s IT Nation event, and were inspired by keynote speaker, business coach, and author Verne Harnish. After reading his book, Mastering the Rockefeller Habits, we adopted his system of management and developed our own “big hairy audacious goal” that included everything we wanted from an exit standpoint.
Shortly thereafter, I joined HTG Peer Groups, which helped me refine my plan and hone my leadership skills. I knew my strategy would require me to change my role from main technician to a leadership role. I used to get asked all the time why I was spending so much time planning. My response was, “I’m going to be 10x in a few years, so I have to be ready.”
Part of the strategy for realizing that goal is getting to know my peers and becoming good friends with vendors. I became a ConnectWise user group facilitator in the Southwest, and today I’m on multiple advisory councils. It helps keep us top of mind with vendors and other channel partners.
Another part of my strategy is to only acquire businesses that use the ConnectWise platform. Because we know that product well, we are very adept at migrating ConnectWise data to our system. We migrated all systems from our first acquisition, IBNS in Sacramento, Calif., inside a month.
We also learned a few valuable lessons from that purchase. First, we discovered that in addition to performing due diligence on an acquisition target itself, we must research its customers and existing deals for cultural fit. We inherited some terrible deals, unfortunately. Second, we blurred the lines of the deal by starting to work on the business before the purchase was complete. When we began making changes, the owner had second thoughts about selling.
By the time we did our next acquisition, SynerTel in San Francisco, we had learned to dig into the customer base and how each deal was sold, so we had a better idea about which customers wouldn’t be a long-term fit.
We had also learned the importance of enlisting outside experts to help us optimize our tax and legal strategy. Starting with the SynerTel deal, we use the earnout method of purchase, which protects us even if the acquisition fails. We pay a down payment to the owner, who then receives monthly payments over a set amount of years based on client performance. In this model, if the acquisition goes well they earn more, and so do we. It’s a win-win. The SynerTel acquisition was a net win for us from the start because of the tax advantages.
However, we did make a classic mistake. We had convinced ourselves that keeping the former owner onboard would work, but didn’t think through the culture fit. His presence was disruptive and we waited too long to exit him.
By the time we acquired Snap Technology in Georgia last year, it was much smoother. To our surprise, one of the new partners was not onboard, but this time we exited him early. We did retain the other partner, which we’re excited about. He is a great cultural fit. It’s all about understanding who these people are, what they want out of the deal, and if we’re aligned culturally.
I’ve also spent a lot of time working in the channel and becoming known, so that companies will reach out to me when they’re ready to be acquired. At the most recent IT Nation, in fact, two companies pitched us pretty hard, but they didn’t fit with our time frame or geographic targets.
We’ll soon start prepping for our fourth acquisition. It’s an aggressive strategy, and having offices in multiple states adds to our overhead and communications challenges, but I thought those challenges through in advance. It’s all in the plan.
Photography by Scott Foust