Key Points From the Interview
asey Clark is the co-founder and CEO of Cultivate Advisors, a business advisory firm to over 1,000 small businesses. As an industry-agnostic firm, Cultivate has helped businesses in approximately 140 sub-industries solve common challenges that all small businesses face: scalability and systematization.
From his perch as CEO of Cultivate, Casey is well-positioned to provide guidance to acquisition entrepreneurs looking to buy a business.
He shares 3 industries where he sees lots of growth over the next decade, industries that he recommends acquisition entrepreneurs look at. He also talks about choosing the right industry for you and your personality, versus just considering the numbers and opportunity.
What about having experience in an industry? According to Casey, industry knowledge is only 20% of the battle. It’s core skills like leadership, financials, and marketing that make up 80% of growing a business.
But you do have to be curious. For Casey, interest in the industry is a must when deciding on a business to buy. “You've got to be excited about the industry a little bit,” says Casey, “I think that's actually more important than the skill side of it.”
Later in the interview, Casey explains how to identify growth potential in a business you’re considering buying, as well as pitfalls and problems that he and his team see over and over again — and how to avoid them.
✳️ Episode highlights with timestamps
✳️ Links & mentions
Acquisition Entrepreneur: Casey Clark
💵 What he’s done: Now the co-founder and CEO of Cultivate Advisors, a small business consultancy, Casey got his start in the home service industry, first as a franchisee and later as a partner in the franchisor.
He and a partner co-founded Cultivate based on the insight that there is a set of problems that all small businesses owners face, regardless of industry, that revolve around systemization and scaling.
This insight conflicted with the guidance that his mentors were giving him, that he needed to choose a niche for Cultivate to focus on. Having grown to serve over 1,000 client businesses across 140 industries in the last 6 years, “We proved them wrong,” says Casey.
💡 Key quote: “I really believe that 80% of the skill of scaling a business is now has nothing to do with industry knowledge.”
👋 Where to find him: LinkedIn
Acquisition Tips From the Episode
Top takeaways from this conversation
🧨 Exploding industries: home services, hospitality, and medical distribution
During his interview, Casey identified three hot industries that he expects will only grow: home services, tourism and hospitality, and medical distribution.
In the case of home services, Casey cites the decreasing supply of quality tradespeople coupled with the increase in demand for labor as a great opportunity for revenue growth. For example, when Casey had his home services franchise, the cost of labor was about $30-$35/hour. Now, 10 to 15 years later, these same services are upwards of $120/hour, representing a massive spike in potential revenue.
Hospitality is also a promising industry as the post-pandemic demand for travel is expected to rise over the next decade. Additionally, says Casey, the hospitality industry offers a relatively low barrier to entry for acquisition entrepreneurs.
Cultivate Advisors has seen a shift in the healthcare industry where hospitals and healthcare providers are partnering with smaller suppliers to provide necessary goods. Casey views this as a unique opportunity for smaller medical distribution businesses to team up with local hospitals and generate major profits.
🗣️ How to convince a seller to let you speak to management during due diligence
Taking stock of the leadership team under the seller is a key piece in understanding your potential acquisition, says Casey.
“If I hear that there's a lot of attrition, like they're having a lot of employee turnover … or if I meet a really good leader that I could run the business through and support through, that gets me really excited to take on that acquisition.”
Being able to speak to the management team, however, can be difficult as you go through the sales process. One way to gain access to the team is to request to interview them early on and position it as a way to ensure your vision aligns with the executive team.
🌟 The low-hanging fruit of digital marketing transformation
A simple and surefire way to grow a business is through digital marketing and overall technology enablement. Casey says to look for businesses that have steady profits but lack an online presence. By building a website or simply sprucing up an existing one, acquisition entrepreneurs can easily double or triple revenue growth without making too large of an investment.
Another area of opportunity is digital transformation within the business itself. Many small businesses have not yet taken advantage of automation technology that can greatly increase efficiency, says Casey.
“A lot of these businesses out there are not tech enabled … They still have people managing accounts receivable and not automatic credit card payments that … allow you to remove one or two administrative people and double the bottom line within six to nine months.”
🛑 3 common traps that small business owners should avoid
The most common pitfalls that Cultivate Advisors has seen in its work with thousands of small business owners: financial clarity, sales conversions, and leadership investment.
Oftentimes, “most business owners are not skilled at a level they need to [be] to understand their financials,” says Casey. Many entrepreneurs overfocus on revenue in the beginning rather than actual profit, which can damage the bottom line.
Casey advises listeners to look closely at their sales conversion rates and not accept them at face value. Business owners who don’t question their conversions or benchmark them against their competitors can end up spending much more per sale and hurt their bottom line.
Casey also talks about two ways that investment in leadership can go awry. Either owners keep the business solely under their control for too long, or they go the opposite direction and delegate too many tasks too early. The problems with not enough delegation are obvious. On the other hand, too much delegation can often lead to confusion and “crushed financials” for the company.
Inflection points from the show
[1:44] Casey got his first taste of entrepreneurship from owning a franchise.
[2:52] As a franchisor partner, Casey met many business owners and realized they faced similar problems of scalability and systematization. This inspired him to found Cultivate Advisors in 2013.
[4:02] Casey cautions listeners to consider their strengths when deciding on the type of business to acquire. He asks: What will fit with your personality?
[7:36] Increased demand for labor due to a lower supply of tradespeople is pushing prices — and potential profits — for home service businesses way up.
[9:59] As COVID-19 travel restrictions continue to ease, Casey predicts a massive surge in demand for the travel industry which will stay strong through the next decade.
[12:16] Casey says that the opportunities for digital marketing transformation and tech enablement are surefire ways to quickly grow revenue.
[14:19] Why it’s really important to assess the team of leaders and managers that you’ll inherit with your acquisition.
[17:28] Cultivate Advisors’ principal rule: anyone can propel a business once they deeply understand the roots of the business that are necessary for growth.
[19:26] Obtaining a clear view into your conversions can help gauge how much you’re spending per lead and ensure that you don’t overextend yourself.
[20:20] The best thing an acquisition entrepreneur can do after buying a business is to create clear business goals with timelines attached.
[23:00] More than skills or experience, Casey says to pick an industry that excites you because that interest will keep you motivated to learn and grow in that industry.
[24:30] According to Casey, 80% of growing a business has nothing to do with industry knowledge or experience.
[24:55] Casey chose not to focus on a specific industry when he founded Cultivate Advisors because he believes that there are core skills that every business owner, regardless of industry, must master: financials, sales, marketing, leadership, etc.
[26:56] Casey discusses the “crisis of engagement” and how different types of self doubt can be harmful to an owner who has newly acquired a business.
[28:28] If he wasn’t leading Cultivate, Casey would be a custom house-builder dedicated to bringing his clients’ visions to life.
Links & Mentions
✅ Dan Gramann, Casey's co-founder at Cultivate