Executing on a buy-and-build, hub-and-spoke strategy, Schill Grounds Management Founder and CEO Jerry Schill, having recently brought on an equity partner, has been strategically looking for new opportunities as a buyer in very specific markets.
“(We) go in, find a beach head and then build around that beach head model to gain more and more market share,” Schill said at the 2024 Cleveland Smart Business Dealmakers Conference. “Our opportunities are ranging anywhere from about $500,000 in EBITDA upwards to $4 million in EBITDA, and we've currently been acquisitive and organically growing for about the last three years.”
But through that recent strategic growth period, there are still ripples from the pandemic with which he has to contend. He says there are two post-COVID periods for Schill and the business. There's immediately following COVID with people starting to come back online, and then there’s all the inflationary pressures from aspects such as supply chain issues or interest rates. That’s made it challenging to normalize a target’s business activity, whether it was the seasonal nature of high years and low years, or inflated or deflated margins that can be attributed to the pandemic.
“Going in and being able to have all the data, the resources and really the perspective to go and meet with these sellers and make sure that we truly understand the story, so that coming out of a deal post-close we're able to maintain margin profiles has been a big challenge,” he says.
When it comes to the due diligence process, Schill says he starts with why he’s going to do the acquisition.
“All deals are inherently risky, but really going back, analyzing why you want to make this move or do this deal, is critically important to going back and looking at your playbook and making sure that the playbook reflects all the value drivers and the blind spots that may exist in that particular opportunity,” Schill says. “And then making sure that your team, your deal team, your integration team also drill an inch wide and a mile deep on those specific blind spots that could eventually cause erosion to margins post close. Remaining very disciplined and very strategic in your go-to-market strategy is going to be critically important, especially now with the cost of capital. A couple of years ago, you could make a couple of mistakes and arb those deals down relatively quickly. Today, those opportunities don't exist as much as they used to, especially when you're looking at the margin compression in all businesses, small businesses, across the United States today. Discipline is the primary driver to making sure you have a successful transaction.”
In order to ensure your vision as a seller becomes a reality, he says the best advice he received early on was to start with a plan. That means preparing to sell the business. There are a lot of steps, and exactly how to approach it depends on where the business is in its lifecycle, where the owner is in their personal life, and the goals that the owner has for both personally for the business, post transaction. But, generally, a good first step is to build a team of trusted advisers who can offer honest, constructive feedback to make sure that the business is actually ready to sell.
“The messiest deals that we've seen are the deals where people wake up one day and say, ‘There's some sort of pressure in the business, or friction, and I'm done with this. I just want to sell the business.’ And they're going to take it on the chin in terms of enterprise valuation,” he says. “Making sure that you find mentors or advisers that can help you get alignment in what your personal and professional goals are is going to be critical to maximizing the enterprise value that you're going to get for the business, and is also going to help you prepare for that transaction. Transactions are very disruptive. People say business is business, but they become very emotional. People get very frustrated. Deal fatigue is a real thing. So, making sure that you've got people around you advising you and preparing you for that transaction is critically important.”
