Bob Armbruster: The Business of Clean

Craig Castelli (00:04):

Welcome to The Close M&A Podcast with Caber Hill Advisors. I’m your host, Craig Castelli. Today our guest is Bob Armbruster, founder of Clean Team, a janitorial company based out of Ohio that has really spread its wings across most of the United States. Bob, you found a clean team in 1996. Tell us what was the idea at the time and why’d you think it would work?

Bob Armbruster (00:27):

Okay, so I’m going to be truthful with you. The idea [00:00:30] at the time, I always tell people I was too stupid to know any better, I guess politically correct, I should probably say I was too naive to know any better. I was fresh out of high school, got a job working for a sales company, selling magazines to businesses, and I had called on two gentlemen up in a suburb of Detroit that had just started a cleaning company, and they were telling me they’re cleaning offices at night and they’re making $18.50 an hour to do this. This was back [00:01:00] in ’96, so that was $18.50 an hour was like minimum wage. It was four and a quarter back then. So I’m like, wow, you guys are raking it in. You’re loaded. So I sold ’em the magazines and traded phone numbers with one of the guys, and probably over the course of the next call it 60, 90 days, we pick up the phone and just ask questions.

(01:21):

How do you bid a job? Do you need a license? Do you need to be bonded? By the way, what the heck is bonding? I didn’t know anything about business at the time. [00:01:30] It all started from really humble beginnings. There was really, I had a business plan scratched out on a legal pad just from speaking with these guys. But honestly, Craig, it was a business I could enter into because I had 5,000 bucks to my name and I could afford to go buy a couple of vacuums and did a lot of the work myself as a company was founded. And this is a true story. I kid you not that. So [00:02:00] I formed this company after about 90 days. I had this little plan, went in and I gave my boss my two weeks’ notice, went home, I was still living at my parents’ house at the time, told my parents what I was going to do.

(02:12):

I’m going to start this company. And they’re like, why would you want to do that? And I kind of just said, I’m going to give this a try. They really wanted me to just go get a college degree and my dad’s like, you can live here rent free. You could just go get your degree [00:02:30] and hard offer to pass up. But I thought, no, I want to give this thing a shot. I got an idea. So I got some business cards printed up. Second door I knocked on. I said, Hey, I’m Bob. I got this little cleaning company. Can I give you a quote on cleaning your office? And they said, sure. And they hired me. A week later, I started cleaning the building and I thought, man, this is going to be a piece of cake. That was easy. I knocked on a thousand more doors before I got my next customer. But that’s how it [00:03:00] happened, Craig. It was all kind of dumb luck, hard work. And over the years we did some things to educate ourselves, but that’s the story of how it started. So no big thesis on the industry or the janitorial business.

Craig Castelli (03:18):

That’s amazing though. I mean, that’s how real businesses are built. And at the time you were knocking on doors during the day and then you’re physically cleaning the offices yourself at night.

Bob Armbruster (03:29):

100%. So I would [00:03:30] say probably the first seven years it was just grinding it out six and a half days a week, making cold calls, doing a lot of cleaning, stripping and waxing floors on the weekend to the point I was so busy that customers would, and this is how unprofessional we were then, that customers would call and say, Hey, can you please bill us in a timely manner? Don’t wait four months. But I was still busy just working.

Craig Castelli (03:56):

Yeah, yeah, no, understandable. I mean, it’s always the thing that becomes the afterthoughts. [00:04:00] You’ve obviously taken the business a long way from those early days. What would you say has been most critical to your success up until this point?

Bob Armbruster (04:09):

So there’s probably a few things. I think every, there’s like you go through these stages where you have these moments. The first one I would say was joining an association called Building Service Contractors Association. That was probably the turning point. So my dad worked for a manufacturing company that supports the JanSan [00:04:30] industry, and he came across this flyer for this association and they were putting on a seminar in Bowling Green, Ohio, which is 20 minutes from where I live. So we went on a Saturday to attend the seminar and it was put on by business owners in the janitorial space. So I remember one guy was doing $10 million in revenue, another guy $15, another guy, like $25 million. At that time I think we were like $300,000 in revenue, and it was [00:05:00] drinking through a fire hose. All the information we learned and just hearing, I didn’t even think you could build a $10 million cleaning company back then.

(05:09):

I didn’t understand it. And so to learn from those types of guys, and that was the big one. And after we went to that seminar, I stroked a check and joined the association, and I just started to go on a road show and surround myself around the guys that I saw speak at that seminar and just asked questions. And you [00:05:30] probably realize in our industry, a lot of people start out the same way I did out in necessity or they’re putting themselves through school and they build this company maybe in spite of themselves. So I think everybody was very helpful in our space and very open to teaching and showing a young kid like, Hey, this is how you should bid a job, or maybe you should be thinking about this for your HR. So that was probably the one big thing. The next was joining [00:06:00] a peer group.

(06:02):

We had an industry peer group of about five of us who were all regional players that we didn’t compete with each other, but we would audit each other’s businesses, get on a monthly phone call, really just share our best practices. And when you got audited, it was opening your bedroom door and you share your finances, they interview your key people. I felt that that was very helpful. We learned a lot [00:06:30] visiting these other companies, and that was a turning point. And then I think we joined YPO at a certain point. That was sort of the next thing surrounding myself around higher level CEOs and business owners. So I think it’s just always trying to surround yourself around good people, smart people. Those are a few things that kind of stand out.

Craig Castelli (06:53):

Yeah, I can see that. I joined a peer group a couple of years ago, a bunch of M&A firms non-competitive, similar [00:07:00] in size, and I mean just the collective knowledge in any one of those rooms and the way that you can just gain from, I’ve got their guys who’ve been doing it for 30 years longer than I have run their own firms and have seen a lot more than I have. There’s always something to soak up in those situations. And I mean even BSCAI, we’ve been a member for a long time. I’m not sure if that’s how we first connected or if it was through something else, but I haven’t seen too many trade associations that really [00:07:30] support their members from a business growth perspective the way that that organization does.

Bob Armbruster (07:36):

Yeah, it’s been very good for us. I think we were looking at a landscape company that you guys brought to us probably back in 2013, and that’s how we got connected. And I think we were under LOI on this landscape company, and I’m glad we didn’t do it. I didn’t know what the heck, I didn’t know anything about landscaping. It probably would’ve slowed us down, but I think the owner or the seller backed out last minute, which probably was a [00:08:00] good thing. But then we started to get to know each other and you guys brought us a deal in the janitorial space, and that’s how we got connected. And I told Peter Holton at your firm, I said, you got to join this, or you got to come to this annual convention with BSCAI. So I think I might’ve been the reason you guys got involved.

Craig Castelli (08:19):

You could be, he would know. I wouldn’t be surprised if you were for sure are going to get into a little bit more specific on the growth story, [00:08:30] but just as you talk about the evolution of surrounding yourselves with different people and joining these peer groups and these different associations, at one point you made the decision to form a board of directors. Talk about that a little bit because that’s not something that the average entrepreneur takes the leap to do.

Bob Armbruster (08:50):

So it was a board of advisors. We’re a privately held company. So at the end of the day, I still as a CEO have the last say, right? But [00:09:00] I wanted, again, to build a team that wasn’t just my company that’s around me. So we built a board and we were pretty diligent about going after what we wanted. So I wanted somebody that was from the franchise world because what I was trying to build was sort of this rinse and repeat model of opening these offices throughout the country. And so I wanted somebody that came from that multi-unit franchise background. So we found somebody that owned, I think [00:09:30] 20 McDonald’s franchises. So that was one, we wanted an entrepreneur who had built a business that was another board member. We wanted somebody from the industry, so we found a supplier that we work with and added him to the board.

(09:47):

So that was great. You get a different perspective I think when you’re running the business and you’re grinding, you have blinders on and somebody comes in and says something and it’s [00:10:00] like, oh my gosh, why didn’t we think about that? So it was just that different opinions and connections that they could bring to the table. We had that board of advisors for several years. And you asked about kind of backup to your other question about what were some things that were real turning points. We started on a platform called EOS. I’m not sure if you’re familiar with EOS.

Craig Castelli (10:25):

We’ve done it ourselves.

Bob Armbruster (10:28):

And we’ve been an EOS [00:10:30] company for the last four and a half years that somewhat replaced that advisory board just because there’s a lot of meetings with EOS, as you know, and we felt like, boy we’re, that’s made a huge difference. And I would encourage anybody that doesn’t, any entrepreneur or business owner to just read the book Traction. It’s a simple philosophy of how to run your business. It’s not software or anything, it’s [00:11:00] a philosophy on running your business, which it’s very simple. I could tell somebody how to stay in shape. It’s a very simple concept. You eat healthy and you work out every day, simple. But the problem is nobody does it. Nobody wants to put in the work. So it’s the same thing with EOS. The concept is simple, but the principles are, it’s difficult to put in action, real life stuff. Sorry, that was a, was that

Craig Castelli (11:27):

Accountability aspect?

Bob Armbruster (11:28):

Accountability is [00:11:30] the hardest part. Team. Getting the team to row in the same direction, making sure you got the right team.

Craig Castelli (11:36):

Yeah, yeah, exactly. I mean, I think everybody can set a goal, getting that team and then finding a way to have consistent accountability while also maintaining the culture, keeping everybody on board as a team, avoiding the pointing fingers while maintaining accountability. I feel like I keep saying [00:12:00] that world is, it’s an art, it’s not a science. Following that process, having that outside advisor from EOS help you implement it really can do a lot of great things.

Bob Armbruster (12:13):

We would not have been able to implement it ourselves, I would say. If you’re thinking about it, yeah, get an advisor to help. We now run our own meetings, but we used a great implementer for probably three years before we felt like we could take it on ourselves.

Craig Castelli (12:28):

Sure, yeah, that makes sense. So let’s [00:12:30] talk about the fun stuff. So you’ve grown the company tremendously. We won’t get into numbers, but you’ve come a long way from those days of $300,000 in revenue and cleaning the buildings yourselves. A lot of that has been through. I guess just to set the table, how many offices do you have today?

Bob Armbruster (12:50):

I believe we have 18 offices throughout the country.

Craig Castelli (12:53):

And were any of those started from scratch or were they all acquisitions?

Bob Armbruster (12:57):

I think there was two that were started by scratch.

Craig Castelli (13:00):

[00:13:00] Okay. So M&A has really been the dominant part of the growth story. What has been the most successful acquisition you’ve made thus far?

Bob Armbruster (13:15):

So I would say the last two we just acquired have been really good acquisitions. And I would say what sets them apart? I mean, I think they’ve all been good. I don’t, but these two, we’ve acquired some really, really [00:13:30] talented folks. And I think that’s, as you guys know, I mean finding talent is a challenge. And so when we look at an acquisition, it’s the culture’s got to fit ours, they got to have the same kind of customer mix and same kind of values, but it’s really what we’re buying is the team. And so these last two, we’ve acquired some really dynamite folks that are only going to, they’re going to help us grow our core business. So I think the last two have [00:14:00] been outstanding. Yeah.

Craig Castelli (14:02):

Well that’s great. And I’m sure building on years of learning through other acquisitions up until that point. So we have some business owners who listen to this podcast, some in the janitorial space. So unpack a little bit your acquisition profile. You’ve got to have a good team, you’ve got to have a customer base that matches, but without giving away any real secret sauce that you don’t want out [00:14:30] in the public domain, if I’m a business owner listening to this, how do I know that I’m a good fit for Clean Team?

Bob Armbruster (14:37):

Yeah, no customer concentration issues, got to play in the same sector we do. So we don’t get into residential or retail or restaurants. So manufacturing, general office hospitals, higher education, those types of things we look for. We’re not looking for companies that service [00:15:00] one day, two day a week accounts. We’re looking for companies that are a little bit larger. So probably that $10 million in revenue size company, have a team built out. That’s kind of what we’re looking for.

Craig Castelli (15:15):

Well, especially if you’re going to enter a new market, you need to have some level of scale to justify there’s enough challenges opening up a new market on their own. So you want to have a real business that you’re bolting on, I’m sure.

Bob Armbruster (15:29):

Yeah, [00:15:30] for sure.

Craig Castelli (15:32):

So at this point in your career, are you thinking at all about an eventual exit?

Bob Armbruster (15:38):

I’ve been thinking about an exit probably for the last five years. And I think what that exit is, I’m not sure that I know that yet, but I read a book years ago called Finish Big. And basically the principle is you’re going to leave your business at some point. Whether you die and you leave it to your kids or [00:16:00] the business dissolves or you sell it to your employees or you sell it to private equity or family office, at some point you will have to leave the business. So I would say probably over the last five years I’ve really tried to just study all my options. I’ve read books on the private equity world and I’ve read books on is an ESOP the way to go? Would I want to leave it to my kids? Those are all the things that I’ve been asking myself over the [00:16:30] five years that I’ve been really racking my brain. But I think at the end of the day, I think you have to have a plan. I don’t necessarily want to share my exit plan, but I have one.

(16:43):

But it probably took me five years to get to the point where I felt like I was educated enough. So I feel like we’re in a position now that one of the things I remember, I watched a good friend of mine build a very successful company and sold [00:17:00] to private equity, built a billion dollar business. He’s like the American dream. It’s what you want to see. And I remember sitting down and just kind of picking his brain and I said, Hey, what kind of things should I be doing? And he said, just act like you’re selling to private equity now and build your business out because all the things that you’re going to do with private equity or to get your business ready to sell probably takes about two years [00:17:30] to prep your business to really get ready to go to market. So why not do all that stuff now? And because at the end of the day, you’re going to be running a better company. So that’s how we operate. I always tell our team that we’re sellable, but we’re not for sale. Let’s act like we’re going to sell tomorrow. Let’s have strong KPIs, let’s make our metrics, let’s treat this. We have to report quarterly earnings. And so I think that’s [00:18:00] kind of a long-winded way to answer your question. Yes, I have thought about the exit and I feel like I’ve got a pretty good plan.

Craig Castelli (18:08):

How did the team react to that positioning? Let’s act like we have to report quarterly earnings.

Bob Armbruster (18:17):

I think they like it because what I’ve tried to do is build incentive plans around our KPIs. So the better they do, the better the company does. We both win. So we’ve tried to put [00:18:30] together some comp structures where we’re not capping people out. You make as much money as you want and as long as you’re doing the right things, that’s great. And I’m happy to stroke that commission check.

Craig Castelli (18:43):

I mean, sometimes that’s the best check you’ll ever write. Always say, when we pay somebody a big bonus, we pay somebody a referral fee. It’s likely business we’re not doing without them. And I always love when I have to send that wire. I mean, I think you bring up a really good point, [00:19:00] and this is something that we tell business owners often. At the end of the day, a good exit strategy is really just good business strategy. If you have the business primed to sell and to maximize value to be that attractive to somebody from the outside, it’s probably easier to operate. You’re probably able to grow more quickly. You probably have a really good team that makes your life easier, and people are happy and they’re energized and they’re engaged in their work. And sure, we can go tick off [00:19:30] all these other KPIs around customer concentration and profit margins and the nature of your contracts and different industry specific nuanced metrics. But at the end of the day, some of those core fundamentals that can make you ready to sell are going to just probably give you more joy and help you grow the business faster.

Bob Armbruster (19:52):

100%. Yeah, I would totally agree with that.

Craig Castelli (19:57):

And the notion of, we’re not [00:20:00] for sale, but we’re ready for a sale. An interesting spin on it too, just to drive that point home that you never know what the future is going to bring, and hopefully it’s a long healthy run for you still, but you never know what’s around the next corner.

Bob Armbruster (20:15):

And I think if you have that mindset of improving your company, knowing your options, when the opportunity does come, you’re more educated to make the right decision. And you’ll probably have more options for an exit, but [00:20:30] you want to be prepared. You never know a bad day could happen. And I’ve always tried to build a company that I was saying that’s written on my desk. I wanted to build a company that can run and grow without me. So I put things and people and processes in place that if I got hit by the bus tomorrow, my family wouldn’t have to change their lifestyle. There wouldn’t be a fire sale. The business would continue to run. And I think to your point, it’s made [00:21:00] my life more enjoyable. The business is more fun at this point. It’s funny, my 13-year-old son, he’s had a real interest in business lately, and he wants to sit down and have a talk.

(21:09):

Can we have our business talk tonight? And he asked me the other day, he said, what was the hardest part of building your company? And I looked at him and I said, the middle part. The first stage, it was great. I didn’t know any better. I was excited that first year I’m just grinding [00:21:30] and building, but then the next, call it 24 years, it was hard. And you don’t have the resources. At least I didn’t have the capital to build the teams. But now it’s fun again, because we’ve done all those things that we’ve been talking about. My life is way more fun. The company’s run better. We are more profitable than we’ve ever been. So that’s the exciting part of putting that work in.

Craig Castelli (21:58):

Yeah. Yeah, you got [00:22:00] through that challenging part of building, you got to the other side and you’re having fun again. That’s fantastic. Alright, Bob, last question here. Give me a piece of advice for a business owner. I feel like this is kind of redundant at this point. You’ve just doled out a ton, but anything else you want to share that the average business owner might not hear somewhere else?

Bob Armbruster (22:19):

That’s tough. I mean, there’s a million books written on the subject of business, and I think there’s not one secret thing that’s going to make you successful. I think there’s a lot of [00:22:30] things that you have to do every day, all day. I think some of it’s, it’s dumb luck. Some of it’s timing. But the biggest thing, I think it’s just perseverance and hard work. Being a business owner, I would say it’s like a roller coaster. You have your ups and your downs, you have a good day, things are going great. You land a big contract, the next day, one of your key employees leaves the company. Next day things are good. Next day you have a lawsuit. Next day you [00:23:00] have all these things. So I think it’s perseverance and knowing that it’s not going to be perfect along the journey. I think there’s things like we talked about, you have to have a plan. I would say for younger businesses starting out, pay yourself first. I mean, don’t get into business and lose money. So pay yourself first. Don’t lose money, have a plan, have your KPIs. Those are a few offhand, but I mean there’s [00:23:30] so much more to run in a successful business.

Craig Castelli (23:33):

Sure. Well, there’s a lot in there. I think it’s important for people to understand that there is no silver bullet or magic elixir. You can’t just do one thing and all of a sudden your business is going to take off, do this one thing, gets clicks and sells books. But it is so much more than just doing one thing.

Bob Armbruster (23:55):

Absolutely.

Craig Castelli (23:56):

I think it’s interesting too. You’ve mentioned luck a couple [00:24:00] times, and I love the phrase I’d rather be lucky than good. We all need a little luck along the way, but I’m going to butcher this quote, but there’s a famous quote that luck is really just readiness. When opportunity strikes, right, you still have control over your own luck. What you think is lucky at some point required you to capitalize on an opportunity.

Bob Armbruster (24:23):

Yeah. Yeah, 100%.

Craig Castelli (24:26):

Well, Bob, if there’s anybody out there who wants to get in touch with you, where should they go [00:24:30] to reach out to you or Clean Team?

Bob Armbruster (24:32):

Yeah, so go to our website, cleanteamclean.com, bunch of information on there if you’re interested in looking to exit your janitorial business. There’s a page on there that talks about our acquisition strategy and how we partner with companies. And I would love to talk to any of your listeners, just look us up.

Craig Castelli (24:54):

Great. Well, this has been a lot of fun. Thanks a lot for joining, and thank you all for watching The Close.

Bob Armbruster (25:00):

Thanks, Craig.