00:20:14 · Mikk, Justin Escajeda
[00:20:14] S0: So how has this story unfolded for you? Has it always been, like, a goal to to be, like, concentrated in in one market as it's it's one moment... From one moment, it's become like a competitive advantage, or it's just happened? [00:20:29] S1: It has been a... There... There's been times where it's a competitive advantage. You know? I can make a deal with a general contractor sometimes, hey, if you... You know, look, let's take a construction site, for example. A general contractor has a job I could think of just recently, a Long John Silver's to build, okay? Well, I can I can approach them? You know, Long John Silver's, what are the three things that I know I can do on that job site? And I can do the masonry, the block, any kind of brick on the building, the hardy siding, and and the roof. Right? So I, you know, we to stimulate these relationships with generals because that's less they have to do. You just give me that package of 30% of your job, and now you don't have to worry about it. You only have to deal with one contract as opposed to four, you know? And that's attractive to people. It's definitely attractive to some general contractors and some of our customers too. Same with residential, you know? If they a massive loss from a big storm, have roof, you know, brick, windows, all these things need fixed. They... They'd much rather just pay... Talk to one person as opposed to three or four different contractors because that... I know what that's like. It's tough. [00:21:40] S0: Do you think, Pittsburgh will become too small for your ambition one moment?
00:21:40 · Mikk, Justin Escajeda
[00:21:40] S0: Do you think, Pittsburgh will become too small for your ambition one moment? [00:21:44] S1: I don't think so. I mean, there's a lot of there's a lot of good good companies in Pittsburgh. And and, you know, it's... I don't know. Maybe. I guess. I I guess it could. Anything could happen. But as of right now, like, I'm not, you know... I'm more concerned about, you know, buying things correctly and managing them properly, you know? If I don't have a solid plan for how... You know, I may have a solid plan on how to buy the company, but what's what's the plan for the next twenty, thirty years? How is that gonna be managed? Especially especially if the if the if the if the seller is the guy who's who's running the whole show, which sometimes happens. [00:22:25] S0: The companies you've bought, how often is... Like, the Gieman risk is obviously there. It's always. But how have you... What... What's the best way to solve it? Like, how how have you been thinking of this, and how have you been working on this when when doing those acquisitions?
00:22:25 · Mikk, Justin Escajeda
[00:22:25] S0: The companies you've bought, how often is... Like, the Gieman risk is obviously there. It's always. But how have you... What... What's the best way to solve it? Like, how how have you been thinking of this, and how have you been working on this when when doing those acquisitions? [00:22:39] S1: I think that there is more... I like, you know, key man risk. I like that. And I I think there's more of that than there is companies in the under 10 or $5,000,000 revenue range than there are ones with a decent management system in place. You don't see a lot of absentee owners, grades of absentee. Some are just kind of like consulting, other ones are in the day to day, of all ranges of involvement. But that I most companies in the range that I'm buying companies have a pretty big influence on how the company works. So I always have to either have a person in place for that or possibly bolt if the company's small enough and it works, they could bolt on to one of our other companies and go under their management. But yeah, but having that filling that void of that owner is terribly difficult. I mean, having a person to, you know, you're not asking somebody to just run a company for you as a new job. I mean, aren't, you know, I say it all the time, these aren't guns for hire, these people that you're having run your companies. Like, they're actively making a lifestyle change, you know? And finding those people are, I mean, it's, like I said, it's terribly difficult.
00:22:39 · Justin Escajeda, Mikk
[00:22:39] S1: I think that there is more... I like, you know, key man risk. I like that. And I I think there's more of that than there is companies in the under 10 or $5,000,000 revenue range than there are ones with a decent management system in place. You don't see a lot of absentee owners, grades of absentee. Some are just kind of like consulting, other ones are in the day to day, of all ranges of involvement. But that I most companies in the range that I'm buying companies have a pretty big influence on how the company works. So I always have to either have a person in place for that or possibly bolt if the company's small enough and it works, they could bolt on to one of our other companies and go under their management. But yeah, but having that filling that void of that owner is terribly difficult. I mean, having a person to, you know, you're not asking somebody to just run a company for you as a new job. I mean, aren't, you know, I say it all the time, these aren't guns for hire, these people that you're having run your companies. Like, they're actively making a lifestyle change, you know? And finding those people are, I mean, it's, like I said, it's terribly difficult. [00:24:12] S0: On the pre call, I was taking some notes, and you mentioned something that commercial construction and commercial roofing is basically all relationships, and it's very hard to market that. So when you're doing those acquisitions in those industries, how have you been able to solve this when the previous owner leaves?
00:24:34 · Justin Escajeda
[00:24:34] S1: Well, you're still buying remember, you're still buying the company. And it hasn't been any kind of problem up to this point. Because here's the thing, any certifications they have, material suppliers want you to have those certifications because they still want the sales, right? And the general contractors or these large private construction contracts, they still need the work done, right? The same people are doing the work, the same employees. It's just a different owner, you know? But here, but the problem is you don't want to lose those employees. So that's why it's, you know, that's the important part is keeping the employees, you know, and learning from the previous owner of, hey, how did you do this? How do I massage this relationship? And a big thing too. Six months to a year, I think, is totally acceptable for an owner to stay on to make sure that those relationships stay intact too, you know? Look, people are always going to need construction work done. You know what I mean? Like, is not this, and it's in my opinion, less and less people are doing it. Especially in commercial, because there's barriers to entry. You know, residential roofing, you can start a residential roofing company right now. I could start one down the street from here in North Carolina right now with a pickup truck. But, you know, commercial, I mean, you need bonding, you need a certain level of insurance, you need history. Let's say if you're doing public work, too. And that's why we do a lot of public work, because the competition is less, because of the paperwork aspect and the bonding aspect. Know, anybody can bid on public work, but at the same time too, if they're deemed not capable or their bid's too low or the bid spreads too far away, they won't get their bonding. So there's a lot of stuff that goes into it, which, know, it takes time. Takes time, and that's the only thing that that... That's gonna get it, and you can't buy that. Well, you can buy it. You can buy their company, but, you know, you can't just enter it. You know?
00:26:55 · Mikk
[00:26:55] S0: Or what you mentioned makes the growth harder because there's this moat, as you said. So what has been your view when it comes to growing those portfolio companies? Has it been more organic? Or you've seen this M and A add on, bolt on acquisitions make the whole difference? How has it been overall for you?