Collin Hathaway, founder of Skylight Capital and Flint Group, has been involved with the world of M&A and the home services industry for many years. He’s had the ups and downs that give him unique insight into what it takes to invest and grow businesses, and joins To The Point to discuss what you need to understand about M&A and more.
In the early 2000s, Collin was flirting with law school, but was a bit too busy with fraternity life to pay enough attention to academics. A friend referred him to a PE firm in San Francisco, where his job was to source deals and find companies worth purchasing, usually $3,000,000 and up. This was when Collin first started learning about how to find opportunities to invest in. While Collin had some sales experience, he got the job pretty much on his charisma alone. He was almost fired in his first week on the job, making a big mistake on a financial analysis and almost blowing a $20,000,000 investment for the firm. Still, he tucked in and learned the financial part and was able to forge ahead.
Collin returned to Stanford for business school, and while he was there decided to try to purchase some smaller companies. Most of the businesses in our sector make less than $3,000,000 in profit per year, and only 35% make a million dollars or more in revenue. These smaller companies often need the most help and have the most room to grow, but the PE groups tend to ignore them. PE groups tend to look for larger investments with smaller returns simply because it’s less risky and less work, but Collin saw the opportunity and found his niche in the market.
Right after graduating from business school in 2007, Collin would start Skylight Capital. The timing wasn’t great, as this was right at the beginning of the Great Recession. Collin was smart, however, and recognized that toilets would still break and drains would still clog during a recession. He bought a plumbing company close to him despite his friends calling him stupid for doing so. The financial crash happened, but that plumbing company still grew about 3% in 2008-09 and got Collin into the home services space.
Collin would go on to help found the Wrench Group in 2011, purchasing Burkey’s in Dallas and then in 2012, Abacus in Houston. He was learning what worked in the home services industry, and had great partners such as Alan O’ Neil. He helped grow several of these companies from under $10,000,000 to over $30,000,000. Before long, the group was over $100,000,000, and Cool Ray joined the group. Collin’s investors were ready to sell, but Collin wasn’t. Still, Wrench Group sold in 2016. Collin was living in Seattle with a wife and child, a bit of money in the bank, and a rental house. He had about 5 months in rent left, and was looking for his next move.
A few years later, Collin would raise $30,000,000 to start the Flint Group. Now, they have 5 businesses and are looking to close in on $100,000,000 in revenue. That includes a roofing company in 2016, which he continued to grow from $10,000,000 to over $20,000,000 today. Collin continues to lead Flint Group, helping the businesses under their roof grow and succeed in any way possible.
Collin has started multiple organizations and grown them exponentially. While not every path he took panned out the way he planned, he certainly has a knack for figuring out how to take a business from humble earnings to major money-making machines. In the beginning, however, Collin didn’t exactly have a playbook. The way he learned was simply by asking a lot of questions. In partnering with a company, he would often interview the top technicians, for example. He spent the time learning about the industry, websites, and everything else. Over time, he started to come into his own and develop a repeatable playbook for growth. From hiring a new controller and recruiter to shaping up the financials to match other companies in the organization for simple comparison, everything Collin does revolves around being the best partner possible for his customers.
Collin is well aware and quick to point out that there is always risk when it comes to investing. That’s true not just for the investor, but also for the owner and the company. Still, most of this risk can be mitigated by ensuring a few simple things are accounted for. First and perhaps most importantly, it has to be a good fit. That extends to not simply a personality match, but also aligning values, goals, and vision with both parties. Next, the owner should know what they want. It’s not always simple, but knowing what your exit strategy and expectations are can be the difference between a world of success and a frustrating future.
Flint Group makes things as simple as possible on their end. They focus on smaller companies (sub-$5m in EBITDA), pay cash, and keep structures simple. Collin and the Flint Group also work hard to protect the legacy and culture of their companies, an important part of what most owners want out of a partnership.
If you’re an owner, the current landscape is filled with opportunities. Many PE firms are chomping at the bit to get into the space, and that means lots of great offers on the table. It also means that people are using a lot of debt. Collin is reminded of the recession, seeing some similarities that are cause for pause. When interest rates eventually rise, this debt can put a lot of strain on companies. As the fastest way to relieve debt pressure is to cut costs, it’s important to pay attention and heed the wisdom of the past. With plenty of experience navigating ups and downs, Collin is always looking ahead to protect what he is building. Businesses of all kinds should be doing the same.
If you’re thinking about selling your company—whether as a complete exit or as a partnership—keep in mind a few things. There are a lot of PE groups trying to get into the space that don’t quite understand the industry. That isn’t necessarily bad, but you need to ensure your partner understands how to grow a company in this space in a healthy way. Also, while prices might be great right now, be careful with some of the deals being thrown around. Is it good for the short-term, or is safe for the long-term? Will it protect your company and the culture you’ve built? Will it preserve your legacy? Collin advises to look past just the number of an offer, and make sure your deal does more than just check the “biggest payday” box.
If you’d like to get in touch with Collin for questions or to learn more about a partnership, visit the Flint Group website where you can find his email and LinkedIn.