Tim Murch: From Inception to Growth to PE Partnership

Craig Castelli (00:04):

Welcome to the Close M&A Podcast with Caber Hill Advisors. I’m your host, Craig Castelli, and today my guest is Tim Murch, President of 4M Building Services. Tim, you and your dad started 4M in 1978. You’re still in college. You fast tracked your senior year to join the business full time. You’ve never worked anywhere else since. Did 20-year-old Tim have any idea what this business would become today?

Tim Murch (00:31):

Yeah, Craig, great question. I had always worked, worked, worked my entire life. My father actually had a company, a janitorial company in the fifties and sixties. He sold it in 1969, and then he refers that as mistake number one because he took it all in stock. The stock was at 24, was supposed to triple, went down to two and an eighth. So that was an absolute disaster, and that had always resonated with me as I grew up and lived it. He also moved on to mistake number two, which is building an ice rink in Columbia, Missouri, which is a financial disaster, was advised file bankruptcy and didn’t. [He was a] Depression child who wasn’t going to leave anybody hanging out to dry. So these are all value sets and core values that I grew up with and knowing that we had the opportunity to get back in the business in 1978 through one of his former customers, he was broke.

(01:36):

He was 50 years old and we had a long chat. I was finishing up college and I said, I don’t see why we can’t do it two or three times better than you did before. So we’ve obviously done it two or three times better than he did before, but it’s an incredible story building it literally from nothing, starting almost 47 years ago. And I had a great mentor and my father had planned on only working 10 years, which he did, and I had to earn the opportunity, number one: to buy it from him and the gain in the leadership position. So quick question, long answer, but I’ve always been very visionary. I’ve always looked at opportunities, been very goal-oriented and just set those plateaus and achieved them. And it’s a blessing that surrounded myself with incredible team members and great resources in and out of the industry, been involved in BSCI, which is probably one of the, by far the biggest reasons for our success with the resources there. And just fortunate it’s a 24-7 job & industry and you better be passionate about it and loving what you do as a janitor. And the sky’s the limit. As I say, you can excel and achieve whatever you want, whatever that is.

Craig Castelli (03:22):

Well, you’re living testament to that. So back to the story a little bit. It’s 1988. Your dad agreed, he’d worked there for 10 years and give you the opportunity to earn your way into a leadership role and the opportunity to buy ’em out. And you do that, you succeed ’em as president, you start the process of buying them out. I think you said the business is doing around $10 or $12 million at that point, which a lot of people would be happy with. I mean, to go from one customer to that size in 10 years is no small feat in and of itself, but a lot of business owners, they get to that point. They don’t really push past that ceiling and they live a great life. You obviously went in a different direction, kept driving this business forward and up into the right. And take me back to ’88. What was your plan at that point and why were you confident that you can make it work?

Tim Murch (04:15):

Oh boy. So the philosophy was going after larger customers with built-in supervision as compared to a whole bunch of smaller route-manage accounts, but then customers want to let you do a good job. We’re willing to give you more of their smaller business accounts. So we adapted on that, but it’s really having that vision and then writing down, as I mentioned previously, the goals and where we want to do and how we’re going to get there. We’ve always done a lot of strategic planning. It is just not me, it’s our team. I’ve utilized an outside board, utilized outside strategic planning consultants, so tried to do it all on my own, wasn’t very effective at it. So again, bring in experts where you can focus on unique abilities and their experts in theirs. And then that’s when we really took off. I will say though, that it’s not all just up and to the right. When we were around the $40 to $50 million range, we were stuck there for several years and we got to 54 and then we went back down to 50, we got to 52, we got to 48. So that was frustrating and that’s where I really had to reassess things from a talent, a competency, capability, expertise. And that’s when we really, really took off when we made some tough decisions and brought in some really, really good leadership.

Craig Castelli (05:55):

Is that that old tried and true saying, what got you here won’t get you there. You had a group that was very capable to get you to that $50 million point, but perhaps weren’t the right folks to double or triple or quadruple that number.

Tim Murch (06:11):

Yeah, it’s unbelievably hard to make those decisions, but it’s business. And we had outgrown a lot of those folks that got us to where we were: hard workers, great people, but they were managing for today and not tomorrow, next week, next quarter, not next year. A long-term vision.

Craig Castelli (06:37):

That makes a lot of sense. So we don’t always talk numbers on this podcast, but you put this on your website, so I feel like it’s a safe place to share. You put on the website that you hit $125 million in 2022, a $125 million in revenue, 10x growth from when you took the business over. You had 6,500 team members at that point. You’ve kind of touched on this, so maybe the answer is obvious and it’s people, but I want to ask really, what was most critical to that growth? And then as a part of that question, because this is an M&A podcast, how much did M&A play a role in all that?

Tim Murch (07:15):

Yeah, so I had done 26 acquisitions growing up. Most of ’em were small. And the reason for that was I just had a little angel whispering in my ear, don’t bet the farm, don’t build an ice rink, don’t sell your company and take it all in stock. So everything that I grew up with that were very challenging situations, and it was just really a voice of reason. And then along with our strategic planning and expertise that we utilize, it really came down to focus and discipline. What are we good at? Okay, we’re not good at retail. So we tried it. We did malls, we did Targets, we did this, we did that. We weren’t good at it. So you learn what you’re good at, you learn what you’re not good at, and then you just continue to refine with systems and processes and best practices.

(08:12):

And that gets back to the BSCAI where we’ve had so many people share with us through the years that we’re always compelled to give back and share with others, which is what the association’s all about. But ending up again with that vision to continue to grow. And yeah, you’ve got, it’s not all great every day, right? We’re in the people business. Things happen and we had an opportunity to have acquisitions come to us in the early eighties and they were small. A couple guys wanted to get out of the business and retire. One guy had to get out, he had tax issues. So we learn on a small scale how to do it, and then it gets back to those systems and processes and best practices standardizing everything that we do, whether it’s acquisitions or operations or everything else throughout the company. So that worked out very well for us.

(09:19):

And then in ’95, I did my first out of town acquisition in central Illinois and really didn’t want to do that prior to then because we didn’t, number one, we didn’t have the human capital or the financial capital to be able to do that three hours up the road from us and learned on that and ended up being a great deal. We still have a lot of business there, and it’s one of our largest regions today. So the acquisition strategy was always there, but it was more opportunistic than it was strategic. And then it became opportunistic and strategic, okay, let’s go to Indy. Let’s go to Kansas City, let’s go to Kentucky. And it was basically growth of acquisitions. I called it concentric circles in the Midwest. Then a friend of mine who I served on the board of directors of the association with, asked me to help ’em out, and they agreed to sell their business and they were losing money, and I agreed to help, as a good friend.

(10:29):

And one thing led to another. This thing was, as I said, pumping red ink. And I asked a lot of questions and it was like a little light bulb went on and it’s like, I think I can get this thing turned around. And one thing led to another, and after about six, eight months, I ended up buying an operation in Florida with four major markets down there. We had to retool it. So each one is completely different. You learn and you grow and you learn and you grow and you continue to build upon that with each acquisition just like we do running our businesses. So it’s been good for us.

(11:14):

And as I said, each one of ’em is different on why the seller wants to get out or has to get out or wants to sell and or stay on and just wash their hands of all the back office responsibilities that drive ’em nuts with the banking, the insurance, the safety and things that they’re not good at. That’s a distraction when they’d rather just be operating or selling. So when I say each one of ’em is different, it really is. So we make a very, very concerted effort from our first initial contact with an acquisition target to find out what’s most important to them and do they want to stay? Do they want to retire? Do they want to transition out? Because the opportunities are out there as you’re well aware of in your business with the aging of the Boomers, I think it’s 10,000 boomers are retiring each day.

(12:16):

And I would say there’s a few of those that have janitorial companies that don’t have family members or a team that’s capable or competent to be able to have the financial wherewithal to be able to buy that from the owner. So when I say I had done 26 acquisitions and I knew I would always sell someday, whatever someday was, but I’ve watched great companies and numerous companies just get annihilated and destroyed in very short order that sold. And I just developed this through this, a mental list and as a physical list through the many years of must-haves and never-haves. And I just told myself and my team whenever someday happens that I’ve got their back. And whoever I’d sell to would not mess with our team, our culture, myself and their livelihoods, because I’ve just seen it time and time again. And we’ve been the ones that have benefited from that getting talent and accounts from others that I guess they’re smarter than us. I don’t know, but

Craig Castelli (13:40):

Just ask them, right? And they’ll tell you,

Tim Murch (13:42):

Well, it, it’s like a broken record. It’s like Groundhog Day and if it works for them, fine, but it wouldn’t work for me because my team, my people and our culture, we worked extremely hard and work at it every day to take care of them and continue to build on that. So that was really what was most important. So I aligned myself. I went through a process and well,

Craig Castelli (14:14):

Let’s just pause on that for a second. I do want to get to that, but I want to stick on I your growth story a little bit longer because we still talk internally at Caber Hill about your scorecard. You talk about how you were both diligent and opportunistic, and I get what you’re saying, and I know that you were, but you were way more focused than most of the companies we’ve helped on the buy side in really being clear, this is what I want, this is what I don’t want, and if it doesn’t reach a certain score on my scorecard, I’m not buying it. Especially at the time when you owned the business and only answered to yourself, you didn’t have a certain EBITDA threshold that you had to hit by a certain date. You wanted to, but you weren’t going to make an acquisition just for the sake of putting money to work.

(15:09):

You weren’t going to make an acquisition just for the sake of adding X number of locations because you had some artificial self-imposed target or deadline on it. And I really came to appreciate that about you. I can’t say it was always easy finding those deals for you, but we definitely came to appreciate about that level of focus. And I really think it went a long way to building what you’ve built today because you didn’t have the bad acquisitions that threw you off. I’m sure there were things you look back on and say, I would’ve done this differently. I would’ve done that differently. But by and large, that discipline and that focus really built the strong foundation to get you where you are today.

Tim Murch (15:51):

No, I appreciate that. And I always tell the team, don’t take things that we do for granted because we are a little bit different and humbly speaking, but everybody gets the letter. You’re a perfect fit from the investment, bankers or consultants and everybody in between. And I threw all those things in a file. I didn’t throw ’em in the trashcan, that spec when snail mail was it. And I ended up responding to one, and it was a gentleman out of Detroit as a matter of fact, and he came down and visited with us, and I have always been one for self-critique and process improvement and what do we need to do to be better and what do we need to do to be best in class? So he went through a very, very extensive scorecard process with us, and it was basically red, yellow, and green, and obviously green are all the metrics and we’re very, very metrics driven and always have been and accountable there.

(17:01):

So obviously the green were the green and the yellow were in process, not quite there. And the red were, buddy, you need some work and you better get on it. So I shared that with my team, we’re a full disclosure, and I said, these are the things we really need to focus on. And it all tied to again, whenever someday was. And that was very, very helpful. And it was one of the beginning things that tied everybody to be aligned on what is most important for a buyer and what creates most value. And along those lines in regards to the value, I had always made up my mind. I was going to share extensively with my key leadership on sale proceeds, and it’s probably one of the best things I’ve ever done. Number one, it’s incredibly gratifying for me because they’re the ones that help drive and create the value. And I’ve always had a mantra share with those that help create and that goes throughout the entire company. So getting everybody aligned was much easier than pulling teeth and trying to crack the whip and getting people to embrace things. So we focused on things and were we all green? We were pretty much all there, but at the same time, it was the right time when I went through a process going on, it’s two and a half years ago now.

Craig Castelli (18:39):

So you go through a process, you end up partnering with O2, it’s a private equity firm out of the Detroit suburbs. How did you choose O2?

Tim Murch (18:50):

So we had a very, very, very extensive process. Ended up having 25 offers, boil that down to 10 management presentations, four hours of pop, grab a sandwich, do another four hours in Chicago and did that and then boiled it down to three. And as I committed to my team when I brought, so there were eight executive leadership team members at that point in time. So at the beginning when I said, It’s go time, this is after they had heard my board tell me a couple times, it’s probably the best time to sell. Well, we were busy growing, we were still having fun, we’re always having fun and didn’t quite hear ’em, but then heard ’em again and decided it was go time. My point is I shared with my entire team that it was go time, so it really wasn’t a surprise to ’em. And I said, listen, we’re going to go through a process. I’ve done it very, very extensive homework and preparation and it’s going to be great for everybody and not good. It’s going to be great for everybody and I’m going to take care of you.

(20:08):

I only had one person on our team that saw deer in the headlights because she had experienced it in her previous life with private equity, and she was a casualty of it. And I said, listen, when I announced it to ’em, I said, I got your back. We don’t find the right buyer. I said, it’s game on. It is business as usual. So in my research, I found out that there are founder-friendly PE out there. It’s not all annihilate and destroy great companies and teams. So there are a few of them out there. They’re not abundant. But I was very, very blessed that O2 was one of those, and they clearly stood out as one of the three finalists. They wanted us as a platform. They wanted to get into the janitorial, they love the reoccurring revenue, they love the people business, and it was just a great bid and the right time.

(21:16):

So I knew that we would be a candidate for PE. I didn’t want to go with a public company. And everything that goes with that, again, reliving my father’s misery that was in the never-haves along with the competitors that we deal with out there. So it was just a great fit. They lived up to everything. And then some in regards to what they committed to, you could ask anybody in the company and the team and they’ll vouch for that. So the credibility and the track record is there, and it’s going to be and is a great thing for all of our leadership.

Craig Castelli (22:02):

There seems like it. I am really impressed by the fact that you were that transparent with the team because it’s not something we find very often. It’s an owner’s biggest fear that if they share anything with their team, they’re all going to run for the exits. The reality is that that doesn’t happen. Some are a little colored by past experiences like the one woman on your team, but for the most part, they want to know that they’re going to be taken care of. They want to know that their job is safe. And in the lower middle market, private equity firms are coming in to back teams. They’re not coming in to slash and burn. They’re coming in to really, they can’t operate these businesses themselves and the businesses. It’s not like you had $200 million of EBITDA where there are a lot of other levelers to pull. You’re still by and large a smallish business at the point. You go through this. And I don’t know how you get that message out to the market, but I mean it is a battle that we’re facing in every single transaction is just getting owners comfortable with bringing some of the team into the fold because ultimately the outcome is better when they’re all aligned going into the process as opposed to finding out at the tail end.

Tim Murch (23:13):

So we’ve done just under 40 acquisitions now in total. So I’ve done several more over the past two and a half years. But as you say, when you’re dealing with a seller, human nature is to protect. And when you’re smaller like that, you do have those concerns about word getting out on the street and your competitors calling on your customers or your team members getting spooked and scared and jumping ship. But I just told everybody, listen, have I ever let you down? Have I ever gone back on my word and I got your back and I stopped and I said it again and I said it in an announcement company-wide. I said, stop right there. I know what you’re thinking. I said, no, it’s business as usual. They’re there to support our success for us to keep doing what we’re doing successfully with greater resources and systems that we don’t have. And I’ve always been an advocate for utilizing resources that are out there, and it’s our own built-in board of advisors with all their resources.

Craig Castelli (24:28):

So has it been all sunshine and rainbows or have there been any challenges in your transition from sole owner to having partners now that ultimately you have accountability to?

Tim Murch (24:42):

Yeah, I can honestly say I’ll uncross my legs right now. No surprises when they say they’re there for support and resources. That’s exactly what it is. And that’s what I’m here for. That’s what all of us are here. One of our corporate values is 360-degree teamwork. So it’s doing whatever it takes whenever it takes to support you. I know you got my back and vice versa. So that’s a big part of our culture. So yes, they’ve been great. I use the terminology, I didn’t want anybody in my kitchen, and they’re not in our kitchen. They’re not in our grill. They’re there when we need ’em. Yeah. Do we need to perform? Do we need to grow? Well, yeah, every company does, regardless, which we did before. We held ourselves to a very high standard of accountability and always will. We’re all very competitive. We love to win.

(25:40):

So it’s been an absolute blast. So as far as the only thing, my eyes were wide open, as I said I am. I’m a planner and a visionary out there, so I anticipated that we would double and that we’ll double again. So what’s involved in doubling? Well, we’ve done it dozens of times when you think about it, right? I mean, just getting to a million bucks, we doubled from 500 and then on and on and on up the line. So it’s really growing in perspective with the right team members, resources, expertise. It’s out there making yourself attractive to attract those resources, wanting to be a part of a winning team. And it’s no different as we’ve continued to grow with headcount and management and leadership, it’s no different from the acquisition side where we’ve become known as the acquirer of choice. And you don’t get that.

(26:50):

It’s not like friendship. It is like friendship or trust or credibility. You got to earn it, and you earn that through experience in a track record. So you go back on your word or you deal trade or you renegotiate or you tell ’em something and pull the carbon out that’s going to bite you in the rear overnight. And your name’s mud. So live up your commitments, which I was taught as a boy along with my siblings, no matter how painful it is or how much it hurts, but your words, your bond, and you live up to it.

Craig Castelli (27:27):

Yep. Yeah, no, that’s great advice. So couple last questions here. You guys are growing. You seem happy, you look happy. It looks like you’re enjoying what you’re doing, but you’re not going to work forever. So do you and the board talk at all about succession?

Tim Murch (27:46):

Yeah, actually I have talked about it forever because I call it there’s good succession or there’s normal succession and there’s unplanned succession, right?

(27:57):

Yep.

(27:57):

Unfortunately, God forbid something happened, people get sick whether they win the lottery or get hit by the old bus. So we want to be prepared for that. And then you’ve got team members that are going to retire someday want to, and deservedly so I’m kind of one of those sick ones because I always say I’d sell someday, whenever, someday was, but what the heck would I do? Because I’ve seen so many people sell and they’ve done well. They’re very happy with the outcome, but six months later, they’re miserable. They’re not in the game. They’re not, don’t have that mission to get up, hunt, kill, win, celebrate, develop teams, build cultures, change lives, and that’s me. So will I work forever? No. Am I going to be around here for a long time? Absolutely. I think fun is a key word there. And seeing people develop and being able to change their lives is incredibly gratifying because the growth opportunities for those that want it are there.

(29:06):

And that’s the beauty of any growing company in any industry. If you’re good. It’s one of the things the board told us, okay, so what happens on the next sale or the next sale and all that. And that question was asked by one of our leadership, and it was great. One of our board members had four bites of the apple and was part of leading the company through four sales. And he said, if you’re good, you really don’t have anything to worry about. He said, if you’re great, you’re in the catbird seat. Well, my team kind of looked around at each other and their eyes got big and they said, let’s go.

Craig Castelli (29:46):

Yeah,

Tim Murch (29:48):

That’s

Craig Castelli (29:48):

Great. You want them to be excited by that

Tim Murch (29:49):

Because absolutely.

Craig Castelli (29:51):

There are stories out there of not just individuals, but entire teams that have gone recap to recap, to recap, and their tremendous business growth stories. And they’re personally rewarding. They’ve created a lot of wealth for all of the individuals who it is easy to acquaint to say, we’re along for the ride, but really we’re the ones flying the plane.

Tim Murch (30:14):

Yeah. I tell the story. We’ve got a gentleman named Dan Klein. I bought him 25 years ago, million and a half dollar contractor in Kansas City. Dan stayed on, and Dan is running $250 million worth of business for us now, and we’ve got, he’s now COO. Michael Fitz came on board eight years ago, and he’s chief commercial officer. So he’s running everything else aside from operations. So those are the really neat things. We’ve got our division vice presidents, we’ve got four divisions geographically. One of the gentlemen came to us from a smaller company two years ago, and he’s running a fourth of the business now. So the beauty of growth is being able to change lives, and they have, as I say, the sky’s the limit upward mobility for those that want it with growing companies. So that’s fun.

Craig Castelli (31:26):

Yeah, that’s a lot of fun. It really is remarkable. So last question here, although I feel like this discussion has been chockfull of advice, I’m going to ask you for one more, give a piece of advice to a business owner who might listen to this that they may not hear somewhere else.

Tim Murch (31:49):

Probably what I open up with, set your goals, write ’em down. You don’t write ’em down. It’s a dream. If you write ’em down, you’re committed to it and visit ’em daily, weekly, take care of your team members. I basically was pennywise and pound foolish for many, many years trying to get the most for the least. That is an inverse relationship that usually doesn’t work out. And again, learn and grow every day. So surround yourself with people that are much stronger than you in all the respective responsibilities, and that will work out, but have fun doing what you’re doing. If you’re not passionate about it not having fun, then you might want to think about something else. There are a lot of owners that are wearing all the hats, and it’s not fun for ’em. I’ve had several over the past couple of years tell me, Tim, I wish I would’ve done this years and years and years ago, and either stayed on with you and working my sweet spot, or checked out and moved to Florida, which a lot of ’em end up doing. So fulfilling their dreams and being a part of that.

Craig Castelli (33:07):

This may be a bit oversimplified, but you should own a business either because you really want to grow and you’re aggressive and you’re hungry and you’re motivated. And the goal is to work hard and build wealth, or you should own a business because it can fund your lifestyle and you don’t have to operate it, and you can just go do whatever it is you’re passionate about and draw on the income from that. But you’re right, too many owners get trapped where they’re doing neither. The business is kind of stuck, but they’re stuck in it running the business, and the joy is gone in one way or another. They have to be able to find their way and fight their way out of that trap. Otherwise, you really have to ask, what’s the point of owning the business in the first place?

Tim Murch (33:54):

And that goes back to question number one, what’s most important to you? It’s no different than a sales call. It’s not about us and how great we are and our systems or process. No, no, no. What’s most important to the customer? Really understanding that to the prospect. And then you go from there, and I share with every single one of our prospects that we talk to. I said, listen, if we’re not a good fit, then you have permission to tell me, and you’re not going to hurt my feelings. We’re not used to losing, but it is what it is. And for whatever reason, if we’re not a good fit, that’s okay, but it’s got to be a mutual fit for it to be a win-win. And if it’s not a win-win, then it’s a short-lived success because that’ll come around in short order, and you usually don’t come out on the winning end of it. So it is got to be a win-win where the seller is very, very comfortable entrusting their baby, their blood, sweat, and tears, their 24-7-365 with somebody else, because a huge emotional aside from getting married, it’s the second largest important decision of one’s life.

Craig Castelli (35:16):

Yeah, no question. And like marriage, if you get it wrong, it becomes way more costly, mentally, physically, financially, then if you just didn’t go through it in the first place. So Tim, this has been a lot of fun. Before we hop here, if someone wants to learn more about 4M or potentially wants to sell to 4M, where should they go?

Tim Murch (35:39):

Okay, so that’s simple. Obviously, you can go to our website at four, the number 4-m.com and go to acquisitions. There’s a little form you can fill out. You can email me at tim-murch@four-m.com, or give me a call at three one four six one five two eight two seven.

Craig Castelli (36:03):

Listen to that. How many CEOs of rapidly growing, PE-backed companies are giving out their personal contact information? Tim, thanks a lot for joining me on The Close.

Tim Murch (36:13):

Alright. Happy to do so and happy to help anybody out there who has questions, whether they’re interested now or years from now.

(36:20):

Great.