Our guest today is Steve Grimshaw, the Chief Executive Officer for Caliber Collision. Steve has built an incredible business through both organic and inorganic growth. He’s here today to demonstrate how a CEO orchestrates the right level of inorganic growth to maximize the valuation of their company.
Steve answers the question, “How did you think about the internal resourcing of your team?”:
“There’s a couple of things. One of the biggest mistakes I see CEOs and companies make is neglecting to build the foundation for growth in advance. You hear this a lot from financial sponsors who basically say, ‘Show it to me and then I’ll let you do this.’ With all due respect, that’s a backwards approach.
First, we’ve had great owners so we were able to spend a lot of time and invest a tremendous amount of money. Which allowed us to build an operating platform that we knew was scalable and effective. Then, we built an IT platform that we knew we could integrate all the systems and processes into, making sure it was scalable as well. And, at the same time, we were investing a tremendous amount of time and money in the people, especially on the leadership side.
People underestimate how important it is to have these inspirational leaders, who are bought into your culture, go into these new territories and these new areas, in order to really lead and drive change. With those pieces and foundations what we started to build upon, we now have a very deep bench. We’ve got an acquisition team, we’ve got an integration team, we’ve got an FP&A team, we have a facilities team, we have many resources that are dedicated to acquisitions, and we have third-party developers we use as well.
Over time you’ll figure it out, up to and including legal, and others that you need to bring in. But, you’ve got to have the internal, intellectual capacity to be able to manage and scale these things, and that’s the balancing act. The more you leave to a third party, the more you’re neglecting the creation of those core competencies internally, which means you’re actually limiting your growth to some extent.”
Steve gives advice on making your inorganic growth investments payoff. He elaborates on his approach to identifying potential candidate companies to acquire, evaluating acquisition investments, and measuring the success of an investment.
Matt and Steve discuss how to onboard new, inorganic acquisitions into your company and how to identify a goal for acquisitions.
Steve answers the question, “If you were to advise a peer CEO who is traditionally focused on organic growth and is now getting more engaged in growing through inorganic growth, what advice would you have for he or she?”:
“A couple of things, and don’t get me wrong. There were some painful conversations during that time frame. Number one, get your internal team bought in. That’s the number one priority, you have to have them on board and bought in, because if they’re not 100% on board with the direction you’re taking the company, when you go through those tough times, you’re going to have ugly conversations. Number two, top-line revenue covers up a lot of sins. There’s things that you can do and that’s just a fact.
In 2010 our margins were flat. Even though we grew revenue by about $40 million, margins were flat, EBIDTA was flat. EBITDA is the measure of all private equity. I could have taken $5 million in 2010 and easily thrown it to the bottom line, but that was the piece that I was using to hire you guys. I mean, that was probably the majority of it.
What was vital was building that foundation for the company to grow, and the ability to start turning it into the company that we wanted it to be. You have to have some short-term strategies to juice the revenue engine, but starting with an adaptable foundation is necessary for future growth.”