REDESIGNING A PLANT SERVICES COMPANY FOR GROWTH, PART II

SEARCHFUNDER INTERVIEW OF NICK HASCHKA, PART II

We spoke to Nick Haschka of Wright Gardner plant services about 1 year into his operator role about the search, the transition and plans for the future.

What would you do differently if you could do the transition over again?

I honestly don’t know if I would change anything. We erred on the side of caution when it came to decisions and optics around any transition decision we were making. As a result, the financials took a hit at the beginning. We expected that and thought of it as an investment, which is probably the right way to do it. It's possible we came in a little too nice, too lenient and too focused on being liked. I don’t know. I could convince myself either way. Things were good in the business and we wanted to not screw up the good stuff.

Do you mean as far as terminating employees who couldn’t handle making the transition?

We didn’t have any major issues like that. It was more around how tight of a ship we run in terms of policies and procedures, and pursuing operational changes. I deliberately moved slower at changing things because I knew the organization can only handle so much change. I had to be thoughtful about what changes I was going to pursue. We have been rolling out everything we planned early on. We've done that far more slowly than I would have liked. But, I know that I have to throttle myself. I have the ability and capacity to change a lot of things very fast. For me, it's exciting and rewarding to see a rapid pace of progression. Anytime you are dealing with lots of people, they can only absorb so many things at once.

In terms of the new sheriff in town, I wasn’t positioning myself as this hard core new boss who is going to really whip this company into shape. That was by no means the positioning. It was much more lenient, positive and happy.

It seems like a tough balance because you don’t want the employees so concerned that they jump ship. At the same time, you also want the ship to run well.

I’ve been focused on building the capacity of the management and the organization overall to make it run itself well, as opposed to being the operator that runs the ship well. It’s a subtle distinction but an important one. I want to build a good company that wants me but does not need me.

Any other lessons learned?

We did not spend all the capital that we had available out of the gate. We had a bunch of additional capital on the sidelines ready to go that we didn’t deploy for the first acquisition. We have since then been deploying it into the business and into other acquisitions. It has allowed us to add more value than we could have if we had gone for a bigger company. It has allowed us to invest in the growth of the business. It would have really stressed us out to have dug deeper into our pockets to find and acquire the biggest company that we could potentially afford.

Any tips or lessons learned on going through the SBA process?

We had two people who knew the process well. One was the banker we used, who was a personal friend of the seller’s agent. We developed a good relationship with him as well. He clearly had an interest in seeing our loan close. He was able to coach us through the various and myriad hang ups that you can have with the SBA process. We didn’t really get hung up especially when considering we submitted our application for SBA financing 10 days before Christmas and the process stalled entirely for 2 to 3 weeks due to the holiday. By the standards of SBA loans, we had a very speedy process. We avoided some underwriting landmines by having an extra set of eyes on our various applications and forms. We got ahead them. Knowing that any little thing can delay the closing, we got all our ducks in a row and finished everything as early as we could so that we absolutely would not be a reason for a delay in closing.

Our readers are curious about an average day for an operator. What did you do yesterday?

After dropping off my kids at school, I put together a bank deposit, talked to all the managers, and then went out on a job with my Ops team. We installed plants at a marketing firm in the Presidio, which is a cool place. We installed a moss wall that we designed and manufactured in our warehouse.

I also worked on our app for a few hours. I’ve been working on our overall data architecture and app for the better part of the last year. I've put most of the administrative operations associated with that data architecture into a mobile app. It is the core app where all the technicians get their schedules, routes, and customer information, and log the service that they do. All of our employee and customer information are in one place for everyone in the company to use.

The company we used is called AppSheet. They’ve published a use case (https://blog.appsheet.com/appsheet-a-must-have-tool-for-entrepreneurs-1) on us. We used to have half of a full-time employee dedicated to scheduling the technicians: essentially 20 hours a week. We can do the schedule now for more than twice as many people in###-###-#### minutes. We’ve also gained massive efficiencies in our operations. Now, our operations manager knows where everyone is, where they are going next and where they are going to be on each day. The app has become central to the operation.

Do you feel it would be useful for other searchers?

Yes, absolutely. I think AppSheet is a tool where, if you know a little about data architecture, you can walk into any company and turn it into an app. They’ve done all the hard stuff associated with a programming language. Once I had a spreadsheet of all my customers, I could put that into the app within about an hour. Then, I added to our employees to it and automated some of the fields. After I put in the employees, I could link which employee services which clients. If you can think about the business in terms of the information structure you need to manage, AppSheet is an indispensible tool to turning that into something people can actually use.

Tell me about your partnership. What strengths do you bring to it?

There are 3 equity partners in the business including myself. I am the day-to-day person responsible for both the details and the overall execution of the strategy. I seek out their input as appropriate, and for the bigger strategic and capital decisions.

Anu Sharma and I worked together for a little over a year before we went the search fund route. Anu is involved every day, but is not in the day-to-day operations of the business. We talk most days, so he knows what's happening. Intentionally, he is in the background as more of a silent partner (though he talks to me). He brings a great deal of financial discipline and acumen around structuring and finance. He ran project finance at Sunrun from a medium start-up company to IPO. His background is hardcore finance and large, complex deal finance. He is strong on the debt side. His most recent professional experience is as a CFO. I have some CFO, but I am more of an engineer, entrepreneur and general manager. I got an MBA and know basic accounting, but I am stronger on strategy and operations. For example, I’ve done the AppSheet myself. I’ve been the guy translating the operational processes into data and technology.

John Kolacyznski joined the partnership before we bought the Wright Gardner. He helps out mostly on the sales and marketing side. He is a freelance aerospace engineer based in Chicago. He’s an invaluable adviser to me and brings an engineer’s intellectual rigor. He comes to CA from time to time to participate in operations, but that's largely to stay connected to the business and the management. 

You’re about a year into your acquisition. Are you thinking of going for global plant services domination?

I haven’t made up my mind on that. I am mentally pushing myself through scenarios of paths we could take. I like what we are doing. I’ve really enjoyed my last year. I think I am going to enjoy next year as well. Now that we have the core technology and a lot of the process expertise down, there’s tons more M&A to do. There are plenty more owners who would love to sell to us. We can continue to grow like that in our existing market.

We could expand significantly more in contiguous geographies. We already have a small presence in the greater Sacramento area through an acquisition. We could go more into Napa, or north or south of here. We could do a lot within the 150-mile radius.

We could add a market, but I am not super excited about doing it right now. Because I have small kids, I don’t want to be travelling too much to another market. I am pretty happy with the trajectory we are on right now. Also, we would need a financial partner to do it, which raises many more tough questions. That said, we do talk about the possibility of geographic expansion. We feel like we really understand the plant business now, have a very good company, and a good handle on all the processes to run a company like this, and how to scale it. It’s probably not a ‘this year’ thing, but it could be something we talk more seriously about next year or the following year.

In the meantime, we’ll take M&A opportunities as they come, continue to grow what we have and fund it as we need with our own in-house money. The returns are strong. Bringing in an outside investor would change my job a lot, and I would want to think carefully before making that choice.

Sounds like you have a great gig and it can only get better.

We consolidated 5 locations in the three acquisitions into 1 location that happens to be 3 miles from my house. Cutting the commute has been a massive life improver.

Any additional thoughts on having a partner?

As far as having a partner, I’d advise taking as many viewpoints on the opportunity as you can. Look at the company through the lens and think about where it is and where it could be. Look at the scenarios – good and bad – even if the outcome is unlikely. I am very pragmatic, but more optimistic than Anu about what is possible and when it can be done. Knowing that each of us has varying levels of optimism and pragmatism is good for grounding the perspective.

Summary of Insights

Here are our a few of the key takeaways from our discussion with Nick:

• • It’s possible to find good companies through listings.
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• • It’s important to make sure that the acquisition fits both the business model and the personal lifestyle you seek.
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• • Understand the drivers of the bottom-line for the P&L. It’s good to appreciate what can make or break your month.
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• • For the transition, they erred on the side of caution when it came to decisions and optics around any choice that they were making. They viewed the resulting financial hit as an investment.
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• • For the SBA process, they prepared as much in advance as possible, had an extra set of eyes on the application and a banker who coached them on common underwriting hang ups.

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