The Iferia Techcast
00:03:52 · Ezekiel Iferia
[00:03:52] S0: Okay. Really insightful. So, you know, what... What's one thing, you know, that actually destroys roofing company's value before an exit? You know? What do owners do wrong that they don't even realize?
00:04:06 · Adam Sand
[00:04:06] S1: That list is quite extensive, but it's so that it's hard to pinpoint one thing. But if I had to put them in one category, it would be that they have not they have not transferred the the responsibilities of the owner to the leaders in the business. Because when you're buying a business, and I had to learn all this myself. I didn't know... I I didn't... I wasn't born this way. I had to learn this through going through my own journey. And a a business's value is essentially a discount on the future earnings of a business. So, you know, to make it into something everybody would understand, if you sell cigarettes, right, which is just cheap and sticky, right, it's addicting, and it's got a very proven repeatable cycle. You got placement on shelves inside of stores. So if you're selling cigarettes, right, there is a realistic predictability that people will continue to buy cigarettes and you... And so therefore, you would say, okay, well, this business does a million dollars in profit, if we do nothing, it's gonna continue to make a million dollars in net profit every year for the next thirty years. Right? Because like, let's say the next generation doesn't like smoking. Right? So at least for this generation who's addicted to cigarettes, they're gonna continue buying cigarettes for thirty years. So we would buy this business for ten years of its net profit. So we would pay $10,000,000 for a business that's gonna make a million dollars profit for thirty years because we're buying it for a discount on what realistically it would make. So the level of certainty that you can communicate in your offering that this business will continue to do what it is doing forever or for a long period of time, a buyer is going to offer you to purchase your business for a set number of years of net profit based on the realistic predictability that that net profit will will continue to to happen for an extended period of time. If they think ten years, they'll give you three. If they think twenty years, maybe they give you seven. If they think thirty years, maybe they give you ten. And so one of the most necessary components to selling a roofing company is that it's a people and service based business. You're selling people doing things as a service to others.
00:06:30 · Adam Sand, Ezekiel Iferia
So the people in your business have to completely operate without you, the owner, because the only thing that happens when you buy a business is a change of the owner's shares. So the owner cannot be a necessary component in the business. [00:06:46] S0: Absolutely. Absolutely. So, Adam, I'd like you to walk us through the Foundation Project. You know, you are the co founder of the the Foundation Project. So walk us through it in plain English. What are you actually building?
00:06:59 · Adam Sand
[00:06:59] S1: Yeah. So I've been... Spent the last ten years growing roofing companies, and the most... Like, most of that is kinda centered around providing the tools and the training and the frameworks to make a roofing company successful. So it's like a three legged stool. If you have the tool, right, but you don't have... If you if you have the tool, that's great. But you need the framework in which that tool is meant to be used. So like plain speak, if you have a hammer, but you don't have anybody to hold it and you don't know how to swing it, the the... How... It doesn't matter how good the hammer is. Now, if you have a hammer, right, and you have an operating manual for how to use the hammer, that's great. But then you need to train people to use the hammer in accordance with the operating manual of the hammer. Any one of those legs falls off the stool, the stool tips over. So our business has really been around saying, okay, we will be the complete solution. We have the tools, we have the operating frameworks, and we can provide the training and the change management, right, to get your your team to use the operating frameworks on the provided tools that are good. So in doing that, we didn't own the tools, right? We're building on HubSpot. We're building on Zooper. Right? We're building on CompanyCam. We're building on JustCall. These are all software companies that we don't own. And our roofers that we do this for, they don't own that software either. And we're building roofing companies that we don't own. Right? We don't... We get these companies to go from 3,000,000 to 8,000,000 or from 6,000,000 to 60,000,000 in six years. We don't own the software. We don't own the roofing company. And that's fine. Right? Like, we we we have greatly appreciated the partnerships that we've had with software, and we appreciate the partnerships we've had with roofers. But I realized that that I could have a larger impact because some percentage of my customers don't listen. Some percentage of the tools that I work with end up selling or getting acquired by another software company, and then we're left scrambling. And so I really thought, how could we have the biggest impact? And I also see in roofing, there's this big consolidation effort. So private equity is buying up a lot of roofing companies.
00:09:30 · Adam Sand
So they'll buy 10 companies for three years of their profit, smush them together, and then sell them for ten years of their profit. It's a short term game, but when an industry gets too fragmented, meaning there's too many roofing companies, that attracts finance and capital to consolidate an industry. And eventually, the industries go from having tens of thousands to thousands to hundreds of operators. Look at in The United States, you at one point in time had 2,500 car manufacturers. Now you have three, four, six, depending on how you count them. Right? And so you don't have that many automakers. You used to have thousands of heavy equipment rental companies. Now you have basically two big ones. Used to have thousands of independent mail carriers. Now you have the United States Postal Service, FedEx, UPS, right, and a handful of, like, package delivery companies. So this happens to every industry eventually if it gets too consult... If it gets too fragmented. Now what eventually happens is there's a public company that enters the space. And I thought that there should be an opportunity for roofers to be a part of that publicly traded roofing entity rather than just being the final destination for a bunch of private equity firms. Roofers should have a chance to be a part of it. The other problem that I see is that all of the software that roofing companies run on, a... In their terms of service, they sell your data to insurance companies, which are kinda like the enemy of a roofing company. Like, it's like the adversary of a roofer. A homeowner gets hit by a storm, then the homeowner files an insurance claim, the roofer comes to quote the roof, the insurance company wants to pay as little as possible or not pay at all, and the roofer obviously wants them to pay as much as possible, but at least fix the roof. So that's your adversary in some cases. Or they sell the information to the manufacturers of shingles because there's only like six of them. Or the suppliers of the shingles because there's only like three of them. Those have already been consolidated. So they buy the data. And what that kind of does is means that that the suppliers, manufacturers, and the insurance companies hold all the power because they have all the knowledge. They have all the aggregate with them.
00:12:00 · Adam Sand
And these software companies, like a very recent one, a software called AccuLynx, sold to Verisk, an insurance company, for $2,340,000,000. Now, selling for 17 times revenue, right, so not even profit, 17 times revenue, top line revenue, that you don't do that because you built a great software. You do that because you have great data. Right? And that data is being purchased by an insurance company because it's worth it to the insurance company. It's kinda like your your your worst enemy buying your diary. But instead, it's the diary of a 100,000 roofers. So I thought that the roofers that are on our platform, since we're going public, we should build our own platform similar to how Delta Airlines doesn't use Salesforce. They have their own ticket management system. They have their own website. They have their own mobile app. And the real long term picture. Right? What makes this investable? Because to get all this done sounds great and altruistic, and yeah, roofers should get to own the value of their data, and roofers should be able to be a part of the incitement or the the creation of the publicly traded roofing company. That's all great. But you gotta get investors to pay for it. And investors buy a growth story, not a margin story. They wanna see growth. And the biggest single expense of a roofing company is the labor to install the roof. And if you look out far enough, like if you think in terms of decades, not days, we know that robots are coming. Right? Robots are coming to do work. We know this is coming. The way we saw AI and how it disrupted knowledge work, marketing, creative work, all this kind of stuff. Well, robotics is gonna do the same thing. And we believe that in ten years or less, I believe it to be three to five years, there will be robots working on roofs. They are already working in factories. They're already cleaning houses. Right? Cars are like autonomous cars are just robots with tires. They're already in our daily life. And so investors are interested in the idea of robotics and roofing because what you're seeing is there's two kind of big finance worlds. You have private equity and venture capital. Okay? Private equity buys frothy, fragmented markets, combines businesses, and finds profit. Right? They make economies of scale.