THE THOUGHTFUL ENTREPRENEUR PODCAST
Patrick works with various companies, helping them realize the potential of acquisitions as a growth strategy. He pointed out that many business owners are so focused on organic growth that they overlook the possibility of acquisitions. With the current buyer's market, especially with many baby boomers retiring, much equity is left on the table.
Patrick explained that good acquisitions can be financed, with the average needed amount around 10% of the purchase price. The goal of acquisitions, according to Patrick, is to achieve freedom for entrepreneurs by acquiring companies that already have management in place.
Patrick emphasized the importance of having a clear exit plan and a comprehensive acquisition strategy. The strategy, he explained, depends on the desired exit plan and can involve buying competitors, expanding geographically, or acquiring complementary businesses.
Patrick shared an example of a successful acquisition in the HVAC industry, demonstrating the concept of using acquisitions to grow a company's revenue. He explained how buying a $4 million company can lead to exponential growth. The revenue doubled by acquiring another $4 million company the following year to $8 million.
This pattern continues, with each acquisition increasing the revenue exponentially. As the company's revenue (EBITDA) increases, the multiple used to determine its value increases, attracting more investment and creating value out of thin air.
Key Points from the Episode:
- Patrick's transition into mergers and acquisitions
- Types of companies Patrick works with and the value he brings to their growth plans
- The current buyer's market and opportunities for acquisitions
- The financial aspect of acquisitions and available financing
- The importance of having a clear exit plan and comprehensive acquisition strategy
- Example of a successful acquisition in the HVAC industry
- Using acquisitions to grow a company's revenue exponentially
- Calculating the value of a company using a multiple
- Patrick's association with Sterling Cooper and the importance of branding
About Patrick Rogers:
Patrick Rogers is an accomplished industry expert and business advisor, having consulted numerous organizations to enhance leadership, strategy, and culture. With a focus on acquisitions, Patrick collaborates with business owners to double their enterprises annually, while his certified exit planning expertise ensures maximum value before the sale. He embodies his advice as a business owner of two seven-figure service companies, employing acquisition for their growth.
He co-owns a property management roll-up concept and a private equity firm. Patrick excels in leadership, evidenced by achieving 42% growth as a Sales/Service Representative leader and directing naval teams, fostering his skillset. He's a dedicated father of two, an avid reader, an outdoor enthusiast, and a talented musician. Patrick's multifaceted experience showcases his business, leadership, and personal skills.
About Rogers Holding Group:
Rogers Consulting Group partners directly with CEOs to design and implement comprehensive plans integrating industry-proven methodologies. These encompass sales and marketing strategies, financial planning, strategic roadmaps, servant leadership, operational streamlining, open book management, and fostering organizational culture and morale. The company's key emphasis is perpetually enhancing “Enterprise Value,” not solely in preparation for sales or offers.
The Group's mission revolves around establishing a self-sustaining business model that significantly reduces upper management stress and time investment by up to 80%. Leveraging their tried-and-true processes, they consistently achieve remarkable results, with an average company valuation increase of 4x within 3-5 years. Rogers Consulting Group's expertise lies in orchestrating lasting operational success and financial growth for their clients.
05:52 – “When entrepreneurs get true freedom and get out of the day to day of running their one business by being able to acquire other companies, the financials are such that they're able to get that freedom and entrepreneurs, as you and I both know, do amazing things with freedom. They give back, they impact the world in a whole new way.”
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Josh (00:00:05) - Hey there, thoughtful listener. Would you like consistent and predictable sales activity with no spam and no ads? I'll teach you step by step how to do this, particularly if you're an agency owner, consultant, coach or B2B service provider. What I teach has worked for me for more than 15 years and has helped me create more than $10 million in revenue. Just head to up my influence and watch my free class on how to create endless high ticket sales appointments. You can even chat with me live and I'll see and reply to your messages. Also, don't forget the thoughtful entrepreneur is always looking for guests. Go to up my influence com and click on podcast. We'd love to have you. With us right now, it's Patrick Rogers, a fellow Navy vet and mergers and acquisitions managing director at Sterling Cooper. Patrick, your website is Patrick V rodgers.com. To a friend that's listening just click on the show notes click on the link and follow along. Patrick it's great to have you.
Patrick (00:01:18) - Great to be here.
Patrick (00:01:19) - Josh Thanks for having me, man.
Josh (00:01:20) - Absolutely. I won't. I'm going to ask you about your Navy experience in a moment, but tell us what you do in M&A.
Patrick (00:01:27) - Yeah, you bet. So what we do is we help businesses double their revenue every year through acquisitions. And so our clients, they work with us and through acquisitions, through some of the other strategies that we do with some synergies and with the actual strategy of the acquisition, we're able to really increase the value of someone's company 15 to 20 X in five years.
Josh (00:01:51) - Well, that sounds like a great path forward. I want to get into the dollars and says I want to talk numbers, but before we do, I just want to again kind of lay some groundwork about your background. Of course, any time we have a veteran owned business owner or a veteran owned professional on the show, always wanted to highlight that. So you were an officer in the Navy, a fellow Navy vet. What did you do?
Patrick (00:02:13) - Yeah. So in the Navy, I was a nuclear engineer officer, so I ran two 550 megawatt nuclear reactors on board a carrier.
Patrick (00:02:23) - And at the ripe age of 23 years old, had 60 people that I was responsible for in the safe operations of a reactor underwater.
Josh (00:02:33) - Man, that's that's amazing. What a what incredible experience. How long did you how many years were you in?
Patrick (00:02:38) - So I was in for five years. Yeah. So I did five years in the Navy.
Josh (00:02:43) - Terrific. Terrific. Okay, so. So talk about what types of companies you work with today and kind of where you fit in and and you know, why you've become maybe, I guess, kind of an indispensable resource in that growth plan?
Patrick (00:03:01) - Yeah, for sure. So so a couple of things. One is as business owners were extremely busy, we're two things. One is we're focused on mainly most of the people we're focused with or work with, they're focused on growing their business organically. They haven't even really thought about acquisitions. A lot of times they think it's for the big boys, they think it's for somebody else. Right? And and so that's one type of person we work with and the other type of person that wants to do the acquisitions but doesn't have time for it because they're so busy.
Patrick (00:03:31) - So we come in and we put together a comprehensive strategic approach to how we're going to go after it. And by the way, most most people think they don't have enough money for it, too. And in today's day and age, with baby boomers retiring left and right, they're leaving so much equity on the table, you're able to many times pick up a business without anything out of pocket. Sometimes if if we find one where the owners actually, you know, motivated enough and because there's so many baby boomers retiring Josh and leaving, it's a total buyer's market. It is absolutely a buyer's market.
Josh (00:04:07) - Yeah, I absolutely agree with that. I've got you know, even in my own family, my grandma owns a I mean, and again, this would be kind of a unique circumstance. But she owns a health food store. She's retiring. She might sell it, but she's not going to be running it for much longer. Yeah, My dad also, you know, has a great service based business and totally, you know, there's really no one to take it over in the family.
Josh (00:04:35) - So, you know, so it's, you know, it's, you know, he's kind of in that same situation. You know, I want to talk about kind of the incentive because just because you're doing M&A, I mean, it doesn't mean you need to have cash on hand to, you know, cash out, you know, an acquisition, a business owner. I mean, you can you could pretty easily find financing if we're a good acquisition, right?
Patrick (00:04:59) - Yeah, absolutely. I mean, the average is, is if you're not going to do an owner finance deal, which is or you could bring an investor to. Right. But the average is about 10%. So if you want to purchase a $5 million company, you would need $500,000 just with if you were going to go down the road of lenders. If you're going to do an investor or owner financing, which is what we love to do, then it's all it's all up in the air. And, you know, for me, the we were kind of talking about like why we're doing this.
Patrick (00:05:27) - The reason, you know, that I'm doing this is for freedom. When entrepreneurs get true freedom and get out of the day to day of running their one business by being able to acquire other companies, the financials are such that they're able to get that freedom. And entrepreneurs, as you and I both know, do amazing things with freedom. We give, they give back. They impact the world in a whole new way.
Josh (00:05:52) - Well, Patrick, what if someone is listening to a conversation like, are you kidding me? I'm pulling my hair out running this one company right now? How on earth or why would I do that to myself? Or I'd want to bring on an entirely new company. It doesn't sound like freedom to me.
Patrick (00:06:06) - Yeah, I know, right? Totally. And if I was in their shoes and I was running the business, they were running that that way, I would say the same thing. Here's what I want you to know. You can take your business and by working on internally, you can get that business to run on its own.
Patrick (00:06:24) - As long as you're over $2 million, you should have the resources, you should have the right pricing, the right internal structure to get it so you can have that business run and so on. Hopefully no one takes offense to this, you know, but, but but as a business coach, that's where I've been able to help people go as well. And then once you get to that point, when we purchase a company, we purchase it ideally that already has management in place that knows how to run the business for you. We're not buying each. We do one acquisition a year for each one of our clients. If they were expected to come in and have to run each one of those, it's impossible. So when we're buying the business, it's a total mindshare, it's a paradigm shift, and and our clients have to make that paradigm shift and get the businesses to the point when we buy it, there's somebody else that's already running it. Ideally, they're in their number two in command is going to come up to number one.
Patrick (00:07:13) - Or if we have to, we make sure we have the right margins and then we hire a competitor, you know, a CEO from a competitor or whatever that is. But you are not running that business. And if you are, you're only going to do one acquisition. You're going to die on the vine anyways. Yeah.
Josh (00:07:30) - How do you think that? Like, so say someone you know is running a successful company. They've got access to capital, but they say, Well, Patrick, I don't know who I would buy. I don't know that I necessarily know of anything. What do they do?
Patrick (00:07:48) - Yeah, great question. So going back to the strategy depends. It depends a lot on when you want to exit your company. One of the first things we do is we get clear on what is your exit plan and who is the best type of company that's going to want to purchase you. And then from there, we put together a comprehensive acquisition strategy where we're either going to buy your competitors locally, where you're going to buy people in the same industry, expand geographically, or we're going to look at what are the complementary businesses that, let's say you guys right now, you refer business back and forth that is is complementary that you could buy.
Patrick (00:08:28) - Now you have a synergy, you have a synergy where you're cross-selling or perhaps depending on the industry, maybe somebody that you're looking to be acquired by five years from now likes to have vertical integration, and that's important. So then we start looking. If you're a B2B company, we'll start looking at your suppliers or your or your clients. If you're B2C, you're not going to buy your clients. But, you know, so so it really just depends. And so who we're going after is typically competitors, either local or geographically throughout the United States. And then once you start getting that ball rolling, then we start looking at maybe complementary. So if you're an Hvac company, you know, right now we're doing one that's they're purchasing a commercial plumbing company in the same town. Absolutely phenomenal synergies. The first company is 1.7 million and we're purchasing one for 3 million. And so that's what it's going to be, 4.7. But together, because of the synergies, the plumbing company now gets to bid on all Hvac stuff that they were just doing plumbing for and they have different clients and the Hvac now gets to bid on all the plumbing stuff.
Patrick (00:09:30) - So we're projecting this is going to be, you know, right now it's a 4.7. We're projecting to be 6.5 in 1 year.
Josh (00:09:41) - Wow. So there's a lot of reasons you just mentioned one, a huge one, right, Where that gives you it really expands the market. It's not just a one plus one equals two. What you've just described as one plus one equals 11 kind of situation, at least three.
Patrick (00:09:58) - Well, let me let me tell you about one more. That makes one plus 111. And it's called multiple arbitrage. And this is what we're really after. Josh Okay. So let me let me put this out there. What happens is let's say you're a $4 Billion annual revenue company. You have $1 million of EBITDA coming in. Okay? Your multiple might be like three to maybe four, something like that. When we grow that company, let's say we do one acquisition a year and we get the company up to, let's say we get it up to 50 million after five years, which if we double every year right now we're a, let's say a $4 Million company.
Patrick (00:10:36) - We buy another $4 million company, we go to 8 million. And then in year two, we buy another 8 million company. Now we're at 16 million. And then we keep doing that 16 We buy another one for 16 and then within three years you're at 32 million. Let's say we just do that. What happens, Josh, is it's kind of it's a curve. And as you go up in annual revenue, actually EBITDA, as you go up in EBITDA, the multiple that is the going rate and how you determine the value of your company goes up. So right now, if you're at, let's say, 500,000 to 1 million EBITDA, your multiples, maybe three and a half, well, we get you up to that 30 million in 3 to 4 years. And this this I know some people are listening, so it's like it's not possible. It's very possible. You get up to that 30 million and let's say your EBITDA is, you know, 10 million or maybe it's a 40 million.
Patrick (00:11:26) - Let's just say you're at 10 million EBITDA. The multiple now is like a six. It depends on the industry and all that. So now that that company that you paid, you know, maybe you paid. 30 million for whatever that is. Because the multiple is so high, you take your EBITDA times that multiple you're creating millions out of thin air just by putting them under one roof. People are especially private equity companies are willing to pay a lot more for larger companies under one roof.
Josh (00:11:58) - And I want to ask you about the obviously using the term multiple. Most people know what that is. But for someone it's like, I think I know what that means or how that's how that's figured out, but how do you use that? And again, kind of talking about valuation. Can you give us just a quick one on one on that?
Patrick (00:12:14) - Yeah. So so the question is how you actually calculate the value of a company using a multiple. Yes, Thank you for clarifying. So what you do how you and I'm a certified exit planning advisor.
Patrick (00:12:24) - There's there's a lot more detail to what I'm talking about. But just to give you the 30,000 foot elevation view, you take the EBITDA of a company and you multiply that times some kind of a multiple and that multiple is determined by a number of factors that we look at. And one of them would be how many years of growth does it have in the company? What's the projected growth, How involved is the owner? Is the management team able to run the company without that person? You know, all these different factors and that's what really determines the multiple. And then so you take the EBITDA times the whatever that multiple is. Again, for larger companies, the range of the multiple is going to be larger, let's say 7 to 10 for larger companies and and smaller for smaller companies. You take that multiplication, whatever that is, EBITDA times a multiple plus the assets generally, and that pretty much determines the value of the company. Now once you get into really, really big companies, it's very different.
Patrick (00:13:22) - You're diving into assets, you're looking at balance sheets and a lot of other things, discounted cash flow method, a lot of other things play into it. But for companies under 20 million, that's a pretty good starting point.
Josh (00:13:32) - Wow. Patrick, what is the relationship between so obviously your personal website? Patrick V Rodgers When you work with your clients, they're working with you. But again, I know that you also have your association with the larger Yeah. Acquisition, the Sterling Cooper. Can you maybe explain that?
Patrick (00:13:55) - Oh, sure. So, you know, I started the the podcast and, you know, my coaching, high performance coaching. And so I built up a following there. And and that's something else. As as SEOs, I think it's very important no matter what company you run, it's very important for you to also be a thought leader in your industry and branding. So yeah, so I've aligned with someone who is is my mentor and he's a CEO of his company. Sterling Cooper had been in the business for 40 years and so I'm very fortunate to be with him and be with this company.
Patrick (00:14:30) - That's where I've always wanted to be. And so, yeah, I mean, I funnel the business through there, but, you know, we're doing it as you know. Sterling Cooper Yeah, great question.
Josh (00:14:39) - Yeah. Your website Patrick V Rogers For someone that's been listening to our conversation, what is kind of like, what do they do? Like, what's their kind of their first touch with you? What generally happens in that? Imagine a conversation and, and kind of where do you generally go from there?
Patrick (00:14:57) - Yeah, you bet. Great question. So if you if you are interested, it's Patrick Rogers and there's no in that it's just Rogers and it's Vas and Vincent. So right on the cover page is a big bold letters and it says Ready to double your business every year guaranteed question mark And there's a big button that says Apply now. So if you want to have a conversation, click on Apply Now. It'll ask you a few questions and we have a just a quick discovery call and see if it makes sense to have a follow up call after that.
Josh (00:15:25) - Yeah, awesome. Patrick Rogers again, your website Patrick V Rogers to our friend that's listening to this very simple just go to the website, click on the blue button that says Apply now, grab some time and you know, kind of kind of fill that out and get connected with Patrick. Patrick, it's been great having you. Thank you so much for this conversation. Thank you. Again, you hear this all the time, but one one fellow veteran do another. Thank you for your service.
Patrick (00:15:51) - You bet, man.
Josh (00:15:51) - Always, always great having veteran business leaders on the show. Thank you.
Patrick (00:15:55) - Very good. Thanks a lot.
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