It can feel like the odds are not in your favor when your business is competing against other operations that are private equity-backed, yet this position does offer you some unique advantages.
“Private equity has invested hundreds of millions of dollars in landscape companies,” says Greg Herring, founder and CEO of The Herring Group. “That reality is both a threat and an opportunity.”
Herring will delve into how owner-operated companies are uniquely positioned not only to compete, but to thrive in today’s evolving market during his session, “Competing Against Private Equity-Backed Companies: A Roadmap for Success” on Wednesday, Nov. 11 at 8 a.m. at ELEVATE.
“Most importantly, you will understand how the structure and economics of a private equity deal drive decision-making at a landscape company,” Herring says. “With this understanding, your key competitive advantages will become clear. I will also highlight some practices of PE-backed companies that you may want to consider adopting because they are experts at growing valuable businesses.”
Private Equity Practices to Adopt
Private equity-backed companies are formidable competitors because they are highly disciplined businesses that are changing expectations around scale, performance and profitability.
One leaf Herring recommends owner-operators take out of PE’s playbook is to go enterprise grade in all aspects as you grow the business. While both your company and PE-backed organizations use the same mowers, vehicles and equipment, one common difference is the investment in enterprise-grade solutions for overhead operations.
“They are not enterprise grade in their decision making; they do not use data to make important decisions,” Herring says. “They do not use enterprise-grade software. One of the first hires a PE-backed company makes is a chief financial officer. The company needs that position to be enterprise-grade in its financial leadership.”
Luckily, smaller companies can access many enterprise-grade solutions, like financial leadership, on an outsourced basis.
“When confronted with the cost of enterprise-grade solutions, many owners get stuck,” Herring says. “The cost seems expensive. To be enterprise grade, the owners need to consider not only the cost of these resources, but the value that they will receive and the timing of when they are likely to receive it.”
Competitive Advantages to Tap Into
On the flip side, owner-operators’ distinct advantages come from the fact they are approaching decision-making differently than PE-backed companies.
“Even before a private equity firm makes an investment in a landscape company, they have identified clear paths to sell the company and generate a significant return on their investment,” Herring says. “They want to exit their investment in fewer than five years, which means that they are in a hurry and their decision-making is more short-term oriented.”
Because private equity firms are focused on short-term decisions, independently owned businesses can compete on vision, culture and personality.
“An owner-operator has the vision that is uniquely suited to both the strengths of the owner’s personality and the local market,” Herring says.
Owner-operator businesses can also leverage their relationship-building, as many customers and employees are attracted to companies where they can develop a relationship with the owner.
Want to learn more about how to stand out from PE-backed firms? Register for ELEVATE, and we’ll see you in Tampa, Florida!
