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In 2020 I did an experiment. I started a ground up, truck based home service company in Damage Remediation.
Normally, I prefer to buy things but I have started 2 concepts to date.
Here is how it went:
Normally, I prefer to buy things but I have started 2 concepts to date.
Here is how it went:
I brought on a few minority partners. This is unusual for me. I brought them on because they offered strategic value for leadflow and one of them was meant to be the founder/operator (henceforth Founder). I own supermajority and the OPagreement was written for my control.
We funded the company with 100k. Well, actually 87,5. The Founder couldn't come up with the rest so it became sweat equity.
I hired an excellent Ops manager (henceforth OPMg) in July once we had enough cash in bank to begin. I worked closely with OPMg over about 45 days.
I hired an excellent Ops manager (henceforth OPMg) in July once we had enough cash in bank to begin. I worked closely with OPMg over about 45 days.
We ground up started the company in about 3 weeks. Took care of all necessary admin stuff payroll, hiring techs, marketing and set up for successful launch. I worked about 10 hours/week on it to assist.
This was my 2nd concept, during the 1st concept I learned I needed help.
This was my 2nd concept, during the 1st concept I learned I needed help.
It was an awesome experience to be able to just hand the reins over during startup time and let them execute the vision while offering some guidance. Saved me a lot of time that went into other portcos.
We started up 8/1 and Founder came over.
We started up 8/1 and Founder came over.
Founder's role was bizdev and sales. Important position in the industry.
We started off strong right out of the gate.
Month 1: 35k
Month 2: 40k
Month 3: 38k
Month 4: 37k
Super exciting, glad to see the concept working. We were profitable month 3.
We started off strong right out of the gate.
Month 1: 35k
Month 2: 40k
Month 3: 38k
Month 4: 37k
Super exciting, glad to see the concept working. We were profitable month 3.
Month 1: I started to notice strange behavior from Founder. She would sort of disappear for a while at a time but I assumed she was "hitting the pavement" as was her job. Her vehicle was GPSd and showed her making client visits.
Lots of tech turnover, 5 hires to keep 2.
Lots of tech turnover, 5 hires to keep 2.
Month 2: Got a strong lead tech. Added some temp labor.
Founder began to miss meetings, claiming she was prospecting.
OPMg doing great. Held techs accountable. Got her work done. On top of cash and cashflow. Achievement driven and margin focused. (She's great)
Founder began to miss meetings, claiming she was prospecting.
OPMg doing great. Held techs accountable. Got her work done. On top of cash and cashflow. Achievement driven and margin focused. (She's great)
Month 3: Founder situation got stranger. I heard a ridiculous rumor she was working for a competitor, former workplace of hers. Thought someone was just being petty because of disagreement.
Techs stabilized with good team.
First profitable month, 8% net.
Techs stabilized with good team.
First profitable month, 8% net.
Month 4: Find out that she was in fact working for a competitor and syphoning our leads to them. Extremely confused. Still did decent revenue despite the theft.
Techs doing well. Leadflow seeing peaks and valleys. Cashflow is weird but its all insurance checks.
Techs doing well. Leadflow seeing peaks and valleys. Cashflow is weird but its all insurance checks.
Month 5: Concluded exit negotiations with Founder. OPAgreement did have clauses for noncompete and we used to create a smooth exit. Despite how smooth, it wasted months of effort and the deception created a significant culture issue.
Revenue came in strong after founder left.
Revenue came in strong after founder left.
Month 6: Actively in it! The mood is much higher. No longer have someone syphoning pay and benefits from the company that is working another job and stealing our leads.
OPMg really stepped up and into that role. She is closing wonderfully and has really adapted and overcome.
OPMg really stepped up and into that role. She is closing wonderfully and has really adapted and overcome.
Lessons learned:
Should have done far more DD on Founder prior to launch. I trusted them but I think I trust too easily.
Should have created a different equity class like Phantom or something. Would have made easier exit.
Should have investigated the "crazy" claim sooner.
Should have done far more DD on Founder prior to launch. I trusted them but I think I trust too easily.
Should have created a different equity class like Phantom or something. Would have made easier exit.
Should have investigated the "crazy" claim sooner.
Lessons:
Despite this insanity the company has been doing well financially, has no debts, the tech team is strong, the OPMg was an awesome hire who is really driving results!
Glad the OPagreement was as thorough as it was, worth the dollars. Thanks Attorney
Despite this insanity the company has been doing well financially, has no debts, the tech team is strong, the OPMg was an awesome hire who is really driving results!
Glad the OPagreement was as thorough as it was, worth the dollars. Thanks Attorney
Thoughts on Industry:
Cashflow sucks
Cash conversion is long
Tech hires are tough
Tough as a standalone
We get most leads from Plumbing co, good bolt on
Seems like best size is between 500k-1M. Low payroll needs. High net. Flexible labor instead of perm.
Easier than I thought
Cashflow sucks
Cash conversion is long
Tech hires are tough
Tough as a standalone
We get most leads from Plumbing co, good bolt on
Seems like best size is between 500k-1M. Low payroll needs. High net. Flexible labor instead of perm.
Easier than I thought
And strong average ticket comparably:
3500 is just remediation
8-10k if rebuild too
3500 is just remediation
8-10k if rebuild too
