The Buying Game: Building a Business at Groundmaster

“The key to the deal was Groundmasters’ ability to play at a higher level than my company was able to play at,” noted Hayes. “In addition, as a small business owner I lacked the management depth necessary to be able to walk away from the business and still have it function well.”

The two companies didn’t rush through the integration process.

“We decided not to worry about the deal until we got through the spring rush, so it didn’t formally close until the first week of August, with integration beginning then,” Rorie added.

While that should have minimized the challenging part of the process, Rorie said the problems arose during the integration of Landscape Creations into Groundmasters.

“We made some fundamental mistakes, such as not getting Chris and his administrator into our offices right away,” Rorie recognized. “He passed along his operations, his people and his clients to us, but we should’ve had him here from the start.”

“We really could’ve better integrated the new work into our existing contracts by clearly identifying who and what was coming to Groundmasters in terms of people and customers,” added Jim Bishop, operations manager.

“The most important thing we learned through the integration was the importance of being very focused when you’re merging the people and making sure that you’re aligned as best you can,” Hayes added, noting that the employees of both companies were initially introduced to each other at a picnic. “It’s also important not to overestimate the value of the acquired company’s equipment because we’re selling a bunch of it now where we have duplication.”

Along with that mistake, Rorie and Hayes guaranteed all of the employees from both companies a 30-day trial period before deciding who to keep and who to let go. This turned out to be a costly decision that could’ve been avoided.

“Yes, we can say we gave everyone a chance, but it cost us $25,000 in extra labor wages to do so,” Rorie remarked. “A benefit of this whole acquisition experience for me has been the opportunity to revisit the small company mentality and see why we don’t make some of the mistakes a small company makes, like giving people 30 days to turn into the type of employee that you know they’ll never be.”

In addition to strengthening the company, Rorie said he hoped completing the acquisition sent a message to his employees.

“This move told everyone at Groundmasters that I’m committed to doing what it takes to grow our company,” he said. “And making an acquisition is what I feel had to happen based on what’s going on in the industry.

And while Groundmasters hopes to hold on to as many of Landscape Creation’s customers as possible, it will only do so where those are profitable contracts.

“We’ll have to upsell each of Landscape Creation’s clients about 15 percent in order to meet our margins, and that means price increases,” Rorie affirmed. “But we’re going to market that as added value to the customer because Chris is now with the largest full-service grounds management company in the market, and that should mean better service for them.”

In addition, Groundmasters thinks it can capitalize on more efficient handling of the new contracts to get more profit from them than Landscape Creations was.

“Too much labor was being thrown at some of this work to hit our gross margins,” Bishop observed. “We took a lot of the jobs they were using six or eight people for and cut that down to three or four people,.”

The presence of individuals with both the small and large company mentality means all employees are being exposed to new approaches to their work.

“As a small company we were able to do high quality work all of the time,” noted Hayes. “Being able to get the work done efficiently at a high quality level is something my employees have been talking to the Groundmasters employees a lot about.”

Rorie added that Hayes will handle upselling his old clients, of which he expects to renew 60 to 65 percent, along with the account manager who would manage the contract next year.

“We know we’ll lose some of my old customers because they won’t have faith that we can continue providing the service we’ve been providing,” Hayes noted. “What I’m trying to communicate to these people is that I’m still the person responsible for delivering the quality of work to them, and the only difference is that there are a few more people in between me and them now.”

ACQUIRING EXPERTISE. Most importantly to Rorie, the acquisition of Landscape Creation’s would free him up from many of the operations tasks he felt were taking too much of his time by bringing in Hayes as vice president of operations.

“Gary and I have known Chris for 20 years, and I wanted his company for him,” Rorie commented. “Although I still enjoy overseeing operations, I can’t do that full-time with my other responsibilities. As a result, the consistency of our production has suffered at times. I think having Chris on board dedicated to working that end of the business will enable us to grow much more easily with the consistent ability to perform to our estimates.”

Now, Rorie’s attention will be shifted to setting a clear vision for the organization and positioning it for success amid the changing business climate.

“The acquisitions are just beginning,” he asserted. “The industry is going to take on a new face in the next few years, and being able to compete is going to mean bumping into the big companies more and more.”

Rorie anticipates that while smaller, owner-operator companies will be largely unaffected by such changes, companies between $2 million and $4 million had better be prepared to either continue growing or become part of a larger organization.