Paul invites Patrick and Seth to discuss FRAXN. Yes, you’ll hear a lot of “Buzz” words, but with Fat Pat as a Co-Founder, what else would you expect?
Patrick and Seth have built not only a management tool but also a great team at FRAXN. With FRAXN, pest control owners gain insights into their business and identify areas for improvement.
Register for The Moneyball Series at fraxn.com/events
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Paul Giannamore: If a business owner comes to me and all that stuff is worked out and it's clean and I can read a report very quickly, now the value of the conversation with me is exponentially higher.
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Patrick Baldwin: Paul, last episode I learned in your absence. Not to say sorry but I am sorry for bringing you in to record a Boardroom Buzz without air conditioning.
Paul Giannamore: I appreciate that, Patrick. Apology accepted. Fat Pat and Seth, I remember distinctly we were down here in Puerto Rico, we were producing Bubble Trouble, and we had about a dozen people in the industry down here, even more. We had a ton of folks down here and I remember a lot of discussion. I have often bemoaned the fact that every time a new client comes to us, whether it's a small firm or a large firm, I've even seen firms doing hundreds of millions of dollars with financial systems issues, oftentimes, the CFO happens to be the brother. For example, look at Modern Pest.
In the case of modern, up in New England, that ultimately sold to Anticimex. They were all very fortunate because Doug Stevenson was a CFO. This guy was a system scientist and he had extensive financial and accounting training so for them, it worked out and he was phenomenal. We had him on The Buzz, episode 32. I find myself in a fortunate situation when I get a client that has somebody like Doug Stevenson. That's the exception, not the rule.
Over dinner, I remember you sitting there and Jim McHale bemoaning the fact that even when they look at small potential acquisition targets, the financial statements tend to be train wrecks and difficult to understand what the business is doing. I remember you left Puerto Rico and said, “Paul, having exited 855Bugs, Project Black Bear, it's time for me to start an accounting firm.” I said, “Fat Pat, you are the mirror opposite of an accountant. How are you going to pull this off?” Here we are, now you've got fricking fracking FRAXN. What is it that you've done here?
Patrick Baldwin: It sure was a culmination, Bubble Trouble. It's what we lacked for years. I don't know, Paul. This might have been years probably after we met. You might remember this. Do you remember we hired an office manager that was doing our books because she had QuickBooks experience?
Paul Giannamore: I remember there was an entertaining story about her. I don't remember exactly what happened but there were threats of physical violence with deadly weapons. Is that her?
Patrick Baldwin: Yeah. A hatchet can be used as a weapon apparently to go after the said boyfriend. He's okay but it was time that we decided we should probably not trust our office manager with this. I had to learn QuickBooks on my own. I paid to learn QuickBooks. Fast forward, over time, as Bugs grew, we couldn't find anyone to do it for us, at the end of the day. There was a personal need that we had.
The things that I've learned doing the Boardroom Buzz and interviewing people like Doug and Tony DiLucente, we've talked about chartered accounts, KPIs, benchmarking, and all these financial things that are the foundation of this business. Pest control or take out pest control, lawn care, take that out, whatever that is, all sit on top of understanding what your financials are doing for you.
With a quick phone call to Seth, knowing where he is in the industry, running Pest Daily, doing all the consulting he does, and how the two of us have been friends but also we're different. “Seth, what do you think about this idea? We can start with bookkeeping. It's not sexy but there's an opportunity here to help others.” Seth, what did you say?
Seth Garber: I immediately said, “Yes, I'm in,” in about a minute. The fact is, Patrick, the same things that you're describing and the same feelings, it sounds like we're communicated down to you guys in Bubble Trouble, we're the exact same things that companies are seeing across the country, just a huge lack of a consistent way to handle bookkeeping that stops companies from attaining their biggest potential. We have the heads of these organizations who are talking to their bookkeepers and they are getting advice. It doesn't make logical sense in some instances.
They're waiting constantly on their numbers. They're waiting constantly on the reporting. Every time I was having discussions, they were saying, “Our books aren't ready yet.” The reality is if you're worrying about your books not getting ready, how in the heck are you supposed to focus on the harder things in business, which is getting your company to grow and expand and go to the next level? That's what it was. I was excited.
Patrick Baldwin: That was a quick answer. I remember that a year ago, like, “Seth, but we're not CPAs.” That was problem number one and we had to solve it quickly. I hit a home run with Cameron Smith, our director of finance, and great character but he's got a gift for explaining things. We all know that Paul has to dumb things down for me to understand on the Boardroom Buzz. We've heard that for the last few years. Cameron's got that same gift to explain things in a way that I can understand and lead people. His background, KPMG, Alvarez & Marsal, which I didn't know the impact that was until I said, “Paul, what's Alvarez & Marsal?” This guy has transaction services experience at A&M. Mm-hmm. What did you say, Paul?
Paul Giannamore: I said, “Those are the guys that do all of Aniticimex’s buy-side DD here in the United States.” I remember you sending me a CV and I said, “You got to get this guy.”
Patrick Baldwin: You said, “How the heck did you get this guy?”
Paul Giannamore: Perhaps I said that.
Patrick Baldwin: No one leaves A&M, that's what they're known for. We've got ten people now on our service side plus Cameron that are CPAs and senior bookkeepers that are doing a phenomenal job and the results have been out of the ballpark.
Paul Giannamore: Right now, FRAXN is doing bookkeeping. You guys are not doing tax work, is that correct?
Patrick Baldwin: That is correct. Focused on doing bookkeeping well right now.
Paul Giannamore: Do you have plans to bring on tax advisors?
Patrick Baldwin: We do, it's coming.
Paul Giannamore: It's a good thing to start this way and separate corporate finance and accounting functions from tax reporting, those are different beasts. When I think about accounting for most business owners, personally, it's two things, and one is management accounting, I want to be able to use this as a management tool. Subsequently, I want to mitigate my taxes. The overarching most important thing is finance and accounting as a management tool.
We have two transaction services folks on our team here at Potomac and those are buy-side DD folks. It's almost like we have to go through people's financials in a forensic matter to even think about how we're going to position this business in the market. To have those delivered to me in a clear and easy-to-understand way is why I have endorsed this joint effort between the two of you.
Patrick Baldwin: Thanks, Paul. It's interesting, we do have clients that are both FRAXN and Potomac clients, and they've shared their reports with you.
Paul Giannamore: We do have a handful of mutual clients. There's one who listens to The Buzz and I know he's going to know who I'm talking about when I mention his company. He's doing north of $5 million in revenue. It's a $5 million to $10 million in business. His financial statements were an absolute cluster. We had a difficult time deciphering what the heck was going on and he would be the first to admit that. I finally now have seen financial statements that I can make heads or tails of. He started on FRAXN at the beginning of the year.
Patrick Baldwin: That's right.
Paul Giannamore: The reality of this whole situation, when you and Seth came to me last summer and said, “We've talked about this in Bubble Trouble. This is what we're going to want to do.” I provided you effectively my wishlist, which was all of the things that I do not see from any other service provider providing bookkeeping accounting services in the pest control space. You guys hit on every single one of them. It certainly is making my life easier for those clients with whom we share.
Seth Garber: That's awesome. I can tell you even the clients that may not understand what the future looks like for themselves may not be exiting is that they're getting the same impact now. If you circle back to the point related to managerial versus tax accounting, people now can have incredible clarity into their business. A lot of the CPAs that we've seen that are doing the tax side as well as the managerial side do the managerial and then tax is a secondary thing.
I can speak to our consulting clients that are using FRAXN but then have somebody else doing their personal taxes. It's made a huge impact because now the people who are good at their tax accounting can save them in taxes and are focused on that versus trying to focus on how to get their bookkeeping done in a timely manner. We're able to deliver incredible good books to these CPAs who can now make the right decisions for their clients on their personal taxes, which is fantastic. It's been a huge win across the board.
Paul Giannamore: As you know, you can't turn on the news now without hearing about the new AI narrative that's effectively driving the stock market here for the next week or so before the treasury has to buy a trillion dollars in government paper and effectively suck all the liquidity outta the market again. Right now, it's the AI days.
You guys are doing something a little bit different than what I've seen. It appears that you're trying to incorporate business intelligence platforms into the accounting process so that you can view this data in real-time in a way that's meaningful as well as clear and concise for a client to understand. I want to talk a little bit about what you've done here because I've looked at the reports and they're extremely easy to decipher, and that's not always the case. Sometimes I struggle with these because they're convoluted.
Patrick Baldwin: It's easy to understand. If I can understand them, anyone can understand them. It's not just for people that are selling, it's not just for “Potomac clients” that are looking at an exit, it's like, “I'm 10 or 20 years out or even a succession plan.” There are certain indicators that you keep in front of you every month and know how you're performing. Paul, you'd be the first one to say, ”You don't want to benchmark against the average.” We probably had an episode about that.
Paul Giannamore: We did.
Patrick Baldwin: It's not benchmarking against the average. It’s benchmarking against your past self. It's benchmarking, if you will, against your future self, setting targets and things in the future. Everything's done in a clean visual way to get that data out and know, “I can't focus on a hundred different things at once.” It's probably more than just one thing. It's more than just top-line revenue.
If it’s this handful of indicators and knowing I can set targets and then perform against those targets, am I getting better over time? Yes. Even if you're not exiting, your business is getting better. You're helping yourself, helping your family, helping your employees, and creating more opportunities. At the end of the day, to me, thinking about this, episode 11 was proximate objectives, building that business like you are going to sell it one day, but not necessarily going to. Thinking about it right now, it's educate and perform.
When I think about FRAXN, the three of us feel like we have this duty to give back to this industry that we love and educate. When I think about it, I think about Pest Daily, in a nutshell, and I think about The Boardroom Buzz. If you're performing, you want to be better. If you want to listen to The Buzz or subscribe to Pest Daily, if you didn't want to perform better, you would just rest on your laurels and do nothing. We're all about getting better and helping each other. To me, I think about that, that's FRAXN. I'm not going to get emotional though. I've only cried on two episodes.
Paul Giannamore: The two of you started operating this at some point in 2022. When did you take on your first client?
Patrick Baldwin: August 2022.
Paul Giannamore: Thus far, what does your typical pest control client look like? You've clearly grown it rapidly given the fact that you've got ten CPAs and bookkeepers working under Cameron. What does a typical client look like?
Seth Garber: The thing that probably surprised me was who our actual first customers that adopted were. Originally, when we started FRAXN, my assumption was it was going to be a lot of couple hundred thousand dollars growing businesses. The reality is that it started with larger companies and now we're starting to see the growing companies fall in there. The part that surprised me was the fact that outside of these larger multimillion-dollar companies who are using us, we have companies who are headed up by CPAs who have come to us now.
We have CPAs who are heading up organizations who are coming to FRAXN and they're working right alongside us. The feedback has been incredible. They're saying things like, “I'm a CPA, I've been a CPA, and I'm learning every single day working with your organization on how I can improve my business.” I was not expecting that but that feedback has been incredible and it's due to the talent level that we have.
We're not coming out here, me and Patrick, who aren't CPAs saying, “Here's how we do it.” We've got the best of the best making it happen. That's probably the part that surprised me. The current client profile across the board is we've got a lot of companies that are sub-million if we talk about revenue. We've got quite a few companies that are between $1 million and $5 million. We've got a handful of companies that are between $5 million and $10 million at this point.
There may be a couple of others in there too that I'm not thinking about but there are quite a few in there and every day, there are more and more and more. The part that made me go, “Wow, we're onto something big,” is when the clients who are CPAs are saying that we're improving their business and improving the way that they're thinking about their own company. That's the part that blows my mind as I take a look back at the last year.
Patrick Baldwin: It was a surprise. We do have two clients that are run by. I don't know if it's once a CPA is always a CPA, but former CPAs. Those are the clients that it's impressive to think when they get done with their monthly review call, how much more do they understand their business? Those are words I heard from one of our clients that's a CP and is like, “I know my business better because I got done.” It was like, “I'm forced to know my business better.” It's almost like some accountability and he's getting it and he has to sit there and ask questions and know his business better. Another client, not a CP, goes, “I see my business in a different…” He stopped himself and he goes, “I now know my business.” It was very clean and simple, “I now know my business.” It's like, “Good.”
Seth Garber: As you're talking, Patrick, I thought about a couple of other interesting things that we've experienced. One of the other things that I've noticed is on the client side, and I can only speak to the ones that we work with directly who are mutual clients of our consulting practice plus FRAXN. One of the things that I hear a lot, which I never heard before, was comments like, “I can now look and understand my business a lot better. This is going to make my life a lot easier. My goals are my goals. My goals aren't compared to whatever an average person's goals would be.” That is super powerful.
We can look at reporting now and, in seconds or minutes, we can determine where we need to focus our time in helping a company get to the next level. That looks different for every single organization. I looked at one of these accounts receivable reports and I was super mad. I looked at it and I go, “We're at 38 days accounts receivable right now. Why would we be averaging 38 days? This is crazy but it was in the green. Why would it be in the green?” It's because something as simple as understanding the business, we knew that this company is primarily a commercial business and that they don't receive their money in 30 days.
However, if we benchmarked against other industry averages or other reporting, it's going to say, “You should receive within 30 days.” The fact was this client doesn't receive their money until 45 to 47 days and that's why it was still reporting green. It was something we need to focus on. That's a tiny little thing. I could go on and on with these stories.
Patrick Baldwin: Paul, we went way back to the chart of accounts, episode 26. You see revenue come in, someone decides to engage Potomac, and they say, “This is how much top-line revenue I'm doing.” I've had the benefit of being on some of these calls in the past. What's the first question you're asking after you talk through top-line revenue?
Paul Giannamore: I'd like to understand top-line revenue and the growth rate but then the component. I have coined the term revenue quality. I'd like to understand the components of the revenue stream, what's recurring and what's non-recurring. When you look at a typical $5 million pest control business, they might have a commercial operation or might be tightly integrated with residential but they've got resi, they've got commercial, they've got termite, or they might have mosquito. Depending on where they're in the country, maybe they're doing mold remediation and there's a variety of other things.
Understanding the breakdown of that revenue, the revenue analysis, and then looking at gross margin, understanding exactly what the gross margin is, more or less on a gap basis. When you look at the publicly traded companies, Rollins doesn't report to the SEC in the same way that Rentokil would. Rollins has always been relatively opaque, although they would argue otherwise. They've always been relatively opaque as to how they report because they tend to lump direct and indirect labor together, a lot of that resides in their cost structure so it's somewhat hard to benchmark against a Rollins. There are industry levels of gross profit. I tend to look at that.
I want to understand how profitable they are on the field. We've talked about this on The Buzz a lot because depending on gross margins, it can tell me a variety of different things. It can point me in different directions. Gross margin is low, why is that? Is it because pricing is low? Now we look at pricing and we say, “What are the prevailing market rates in those particular markets? Where are we pricing?” If I'm at the market median or better, then I can say pricing is not the issue. What's the next question? Is it routing efficiency? Is it a density issue? Are we in an urban market?
If you benchmark an urban company versus a suburban or a rural company, it’s different. I do a lot of stuff in Singapore, I got back from over there. Singapore is a tiny city-state that's immensely dense. You've got thousands of people living on top of each other. You do one building in Singapore, some of those buildings are large enough to support an entire pest control company doing one building when you've got 15,000 units. Somebody can park a truck and spend two days in one building and do tens and tens of thousands of dollars in revenue in a couple of days. You've got very high revenue per technician.
That's not the case when we look at the United States due to its diverse geography. We've talked about this on The Buzz a lot. I'm going to look at a P&L or income statement that is as close as possible not departing from gap where I can say, “This company has effectively allocated direct costs and given me a proper gross margin line and allocated indirect costs into the SG&A cost structure.” Now I can quickly look for aberrations on the big lines, prior to getting into the smaller lines on the P&L. The other thing I always looked to and I'd be lying if I said I didn't is my eye always jumps down to pretax net income.
Quickly, I can determine a business's cashflow by looking at the P&L. The simple rule of thumb is you look at that pre-tax net income, you try to determine what maintenance CapEx is, you subtract that, you add back the non-cash charges, amortization, interest, depreciation, and so on and so forth. I can get to an EBITDA less CapEx number quickly. I like to see that in the twenties. I like to see an adjusted EBITDA number somewhere starting with a two. Businesses that grow at a rapid clip on the top line are going to have lower margins than ones that tend to grow at 2% or 3%. You asked me a brief question, Patrick, and that was a long answer. That's how I tend to size these things up.
Patrick Baldwin: Paul, I know that was a long answer. I thought you were going to say portfolio. What do you call it? Revenue quality or quality revenue? Even above the cost of goods sold or direct cost, we've got a lot of recurring in one-time initial revenue items in there. That is a big question, what is your percentage of recurring? We had an episode about recurring versus reoccurring. All that being said, one thing that our clients love is the opportunity to have you, if they choose to, look at their FRAXN financials and review it and do a free preliminary evaluation.
Paul Giannamore: We've certainly agreed to do that over here at Potomac. Here's why we're doing far less standalone valuation work than we ever have. We've talked about this on The Buzz as well, it's been busy on the transaction side. We've got finite resources and we have to allocate them and I'm allocating them to getting transactions done. We've been doing less of that. I can think of a conversation I had. I came back from overseas and had a conversation with a client who engaged us at Pest World in 2022.
They've got a business that does $15 million to $20 million in revenue and they're starting to eye up an exit. They came to us and said, “We want to go through this preliminary evaluation process to understand where we are and what we might be able to do.” It's a great case study and I'm hoping we will have this company on The Buzz when we ultimately exit the business because they do all of their own in-house work, all of their own in-house bookkeeping. They've got an in-house bookkeeper. They're at the size where it made sense for them to start to do that.
A good chunk of our valuation work is looking at a company's financials, which is the core of the work, and doing the same things that I told you guys that FRAXN must do, starting with the chart of accounts and saying, “Wait a second here. What is your gross margin? The way that you have set up your financial system, it's hard for me to understand what gap gross margin is.” There isn't a gap gross margin but there are some rules around it. I'm not an accountant so I'm not going to go into all that right now.
It’s understanding, “How can I compare this particular business to Anticimex, Rollins, and Rentokil?” Those are what I care about, I care about the publicly traded companies right off the bat. A lot of the upfront hard work is rearranging the financial system. Once we get that taken care of, the next part of it is understanding whether they use WorkWave or Pest Routes. I know all these companies and they all have different names now. It's not Pest Routes, it's Field Routes. It's not PestPac. The ever-name-changing group of financial software that focuses on our industry, its understanding, “What is the portfolio? What is recurring?”
Once we do all of those things, that's half the battle trying to get an outsider finally coming into a company saying, “This is the way it should be done.” From there, in this particular case, we help them. They had a pricing issue. We're in an environment of rising prices. It was taking a step back and saying, “What do we need to do with pricing? Your pricing appears to be low.” As opposed to making assumptions, we did a little benchmark study and said, “Let's demonstrate to you what Orkin and Terminix and everyone else in your market is charging.”
We went out and did a quick study. You can export all the clients from the software and you can run an analysis on it to understand, “What's the duration of each customer?” Whether a new customer or an old customer, where would you likely have the best opportunity to exert pricing pressure? There's a variety of schools of thought around that. Some of these companies have had residential customers for ten years and they are like, “I don't know if I want to raise the price.”
When you get into the meat of it, you start to realize that, at some point, you're losing money whether costing you to service a customer or you also have what a lot of folks don't think about as opportunity cost. In my valuation process, every single business owner on the planet has to use opportunity costs as an actual expense, which people don't often do. You can only do so many things in life, everything is a trade-off, and the cost of doing one thing, what's the cost of not being able to do something else that might be more profitable?
We go through all this, everything from the org chart to understanding whether or not the business is bloated. A lot of times, a lot of companies tend to be overstaffed and management doesn't realize it or doesn't want to admit it. When you start looking at the numbers, it becomes apparent. It's about reallocating internal resources. Do we need that 80-year-old that's in the office right now that your father keeps around because he is been here since 1962? We probably don't. We do a lot of that on the valuation side.
When you guys asked me, “If we can take a company and clean up all of that, the financial statements are pristine, they're exactly how you and every acquired want to look at them. The recurring revenue is organized. We've done all of that front-end work. How difficult is it for your team to do a preliminary evaluation once per year for FRAXN clients that want you to do that?” That now becomes extremely easy because 90% of the work was the cleanup.
Long answer and short question but that's why we agreed to do it. We're happy to do that because if all that stuff is cleaned up, I can focus on the things that move the needle, which is the hardcore strategy around, “You're 12 months out from selling, you're 24 months, or 36, I can talk about the important needle-moving things that you can do between now and then.” I can talk about the myriad of different tax strategies that I've seen. I've connected folks to different advisors that'll do all sorts of crazy stuff.
To me, that's fun and that's interesting work, and it provides extremely high value for the client. Telling the client, “Vehicle expenses should be here and they should be bifurcated there.” That's an extremely low value for the types of things that we could otherwise provide. For me, if a business owner comes to me and all that stuff has worked out and it's clean and I can read a report quickly, now the value of the conversation with me is exponentially higher.
Patrick Baldwin: It was important to us, Project Black Bear, to keeping that number in front of us, and having those updated conversations. Our books were a mess. Years ago, at least having the right direction and knowing what that format was, we did a lot of the heavy lifting at a lot smaller revenue line. Knowing that number and keeping that in front of us and keeping that dialogue with you, Paul, we ultimately sold at the peak of the market.
Paul Giannamore: You sold 93 days in advance of the Nasdaq hitting its all-time high.
Patrick Baldwin: We were pretty close.
Paul Giannamore: It's better to sell a little bit earlier. Q3 of ‘21 was of course the all-time high in asset markets across the board. Yes, you guys nailed it. If you look at Q3/Q4 of ‘21, we've probably executed 25 transactions in that period. The timing of course is not always the what, a lot of it comes down to the when, and we tried hard through Supernova, Aftermath Supernova, and all of that stuff to make sure folks are understanding the timing and dynamics of this market.
Patrick Baldwin: It was personalized to our business and us having conversations over the years.
Paul Giannamore: You're right because if I go back now and if I take a stroll down memory lane here with Project Black Bear, you've got macro-level issues. You've got asset prices, you've got credit spreads, and you've got all these things going on in the macro market. Pest control, of course, is a local business. You're in Waco, Texas, you're in the armpit of the South.
Patrick Baldwin: Thank you. It's true.
Paul Giannamore: You are definitely in the definition of a tertiary market. You're in a market that, other than Rentokil to through Presto-X, was not particularly strong. You had no Anticimex presence. You had, of course, Terminix. Kim Scott had left Terminix so there was more managerial turmoil there. You had Orkin that had some franchise territories throughout that state. Once you navigate the macro level, it's ultimately navigating the micro level.
You guys were probably on the cusp of being too small for a financial sponsor. When do you pull the trigger and you go out to the market? That was a conversation that we updated the financials. I remember we did the valuation once again at the end of the core of COVID in 2020. We came back in the spring from the fall of 2020 till the spring of ‘21. All of us had a lot of conversations about timing. I'm trying to think when we ultimately made the decision. Was it around March or April?
Patrick Baldwin: I think April or May.
Paul Giannamore: You guys finally made the decision, everything lined up, and you ended up getting offers from all of them. When you sell, that's the one time in your life you deserve to be selfish and you need to go out and get the best price and terms, what you guys did.
Patrick Baldwin: Taking that to FRAXN, our clients go through the process of getting all their books in order. We provide the structure, we do the heavy lifting. Paul, you would call it white glove service. We're doing that, providing the service, gathering all their data, and getting in order, things that they don't want to do. We talk about highest and best use of time here on The Buzz all the time. We’re taking off on their plate. It is like management and accounting.
They're there making decisions and that decision is not, “Where should I put this expense?” They don't need to do that. That's what we're here for. Fast forward to what that means to the business owner to knowing, “High-level strategy. When they have that call and that review with you, if they choose to and share their data with you, they can move the needle and at a high level about their business on what direction they need to take in.”
Paul Giannamore: Absolutely. If you're going to get into a conversation with me talking about how P&L should be organized and what should be allocated here, it's a total waste of everyone's time. If I can look at something that has been fully vetted and we've got guys who are buy-side DD experts there at FRAXN who can provide me with something with a high level of certainty and a high level of organization, it makes the conversation far more productive.
It also makes it easier for our team to put together a full financial model. Now somebody can come in and say, “I believe I'm big enough for a financial sponsor or a private equity firm.” Can you, Potomac, run an LBO model and tell me if I were to run a private equity process, how would this deal be structured in this particular market? Here at Potomac, now we can take the financials that are super clean and we can put them in our financial model. We take a look at the credit markets, we've got the credit spreads, and debt markets understand.
What sort of financing a private equity firm could potentially put on it? What sort of roles would like to be required? When I say role, I'm talking about equity co-invest. We can look at all those things that are pertinent to a private equity transaction and quickly say, “On a fair market value basis, the business is worth X. This is what it's worth to you and your shareholder partners. On a standalone basis, you guys own this and this is what it's worth,” which is a hypothetical contract of fair market value.
I can look at a range of investment values and say, “Here's what the football field looks like. If you were to take this to process based on what we see right now today in this current market with the strategic acquirers, here's what you're likely to sell it for Orkin, Rentokil, Anticimex, and those folks.” Here, your business does fit, the profile of a private equity firm, or it doesn't.
If it does, here's what the LPO model looks like. Here's how Thompson Street Capital Partners, the PestCo guys. Here's how every financial sponsor is likely to look at this from an acquisition perspective and come up with a tight and realistic range of values based on fact and not fiction. It’s not somebody sitting down there at a desk in Florida saying, “The multiples are something times revenue.” None of that stuff. This is the real deal. Let's run some financial models and let's see how sophisticated partners are going to look at this deal.
Patrick Baldwin: Is that how Floridians talk, Paul? I thought you were making fun of Waco, Texas.
Seth Garber: I was honestly feeling bad for Paul being so hot in Puerto Rico until he made the Florida comment. I no longer feel bad about the air conditioner being out in your office, Paul.
Paul Giannamore: That's what I have to say on that topic.
Patrick Baldwin: Having sold the business, we've developed the tool that I wish I had between the three of us. Look at the toolset that provides your consulting clients if they choose to get on FRAXN. Paul, look at the value provides if they're also a Potomac client. It can only help them. It's going to put them in a better position.
Seth Garber: If I took a look at the reporting, I know where to focus time. If I'm a CEO looking at my reporting in FRAXN, I know where to focus my time. If somebody decides they're going to take an exit and they want to talk with Paul, Paul knows where to focus his time. The fact is if they go to Paul and they look at a number and that's not the number they're ready for, Paul quickly could say, “This is where you need to go focus your time and make your company better to get the number that you want.” It can literally be done in minutes and minutes versus weeks and weeks now. That's the real driver behind the way the reporting works.
The biggest attraction to me, Patrick, when you came to me with this whole idea is that I realized that a lot of bookkeeping companies are not truly done-for-you services. They're like, “Provide us a lot of feedback and then we're going to do the best we can to hopefully maybe give you what we think is best for you.” In this model, it's a true done-for-you. It's, “Here's the type of business we are. Here's the format that it needs to fit in and that format is going to allow you to spend a lot less time on your numbers so you can drive results.” That's what it does. I hate to say it but that's simply what it does and it makes things a lot easier.
Patrick Baldwin: Paul, you don't have any more tough questions for us.
Paul Giannamore: I got a lot of tough questions for you, Mr. PB, but I'm in this hot box over here and I got to get the heck out of here. You've been spared. It's probably why you did this on a Sunday.
Patrick Baldwin: I'll make sure all future Buzz episodes are on the weekend. Seth and I have a little bit of a roadshow going on. Seth, I'm going to see you in about 2 or 3 weeks here in Texas, north of the armpit. We will be in Fort Worth at the Texas Pest Expo. That's going to be awesome to catch up there. You'll also have a Pest Daily booth. Who says Texas isn't hot enough in the summer? You and I sat there going to Phoenix on July 28th, 2023 because that was a good idea for the Metro Institute. That'll be awesome with our buddy Chris Moreschi of Gorilla Desk. Hang out there and do some speaking.
Last but not least, we do have a virtual event when this episode goes out on June 15th at 3:00 PM Eastern, the Moneyball Series, Is Your Current Chart of Accounts Working Against You? It's educational at the end of the day. As simple as it is, basic blocking and tackling chart of accounts, it's going all the way back to episode 26 when people said, “Tell me what a chart of accounts is. Tell me more about this.” We're going to do this and Cameron is going to be there with us.
Paul, I'm going to give you a pass on this one but I do want you to come join us for another one of our Moneyball events in the future. If you want to register for the Moneyball Series, Is Your Current Chart of Accounts Working Against You? register at FRAXN.com/events. I know it's hot there. I appreciate your time. Happy Sunday. Guess that's it for this episode.
Paul Giannamore: Fat Pat and Seth, see you guys soon.
Seth Garber: Take care, guys.
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Dylan Seals: Thank you so much as always for supporting us at The Boardroom Buzz. We know your time is valuable and the fact that you spend 45 minutes or an hour with us means the world. All the media that we put out from Potomac is meant to honor and celebrate you, the service industry owner. As Paul would say, “Yee who toil in the pest control vineyards.”
As part of giving back, we have this podcast, but more than that, Paul and I have been working our tails off over at POTOMAC TV. We've spent a tremendous amount of time, energy, and resources to build out that platform to bring you market updates, to bring you visual breakdowns of the merger acquisition process, and to tell stories and present information in ways that, frankly, it's not possible for us to do on The Boardroom Buzz.
Adding the visual element takes it to the next level. I want to invite you to go to YouTube and find us, it's POTOMAC TV. Potomac.tv will get you there. Go there and subscribe. Check out some videos and leave some comments. Let us know what you like and let us know what you don't like. Let us know what you want to see more of and we'll see you over there.
