When Frank Fradella tried financing Home Solutions of America Inc.’s second acquisition, the deal nearly fell through.
After knocking on more than 60 doors on Wall Street and with only 48 hours left to get a deal done, nobody wanted in. Finally, in the 11th hour, one investment bank took a chance on his dream. He closed the deal, and it proved to be one of the most successful for the company, which primarily provides restoration and rebuilding for commercial and residential buildings prone to damage from natural disasters.
“You have to experience failure to experience success,” says Fradella, chairman and CEO. “When you get hit with that baseball bat over the head, you don’t like that feeling, so you don’t do that anymore.”
Now the 483-person company has successfully completed five acquisitions and grew its revenue to $68 million last year, a 119 percent jump over 2004.
Smart Business spoke with Fradella about how he grows his company with the right acquisitions and the right people.
How do you decide which companies to acquire?
In the initial phases of how you execute your model, you can’t make a mistake because if you make a mistake, it’s like setting a foundation on weak pillars.
We weren’t in the market for fixer-up businesses. We focused on well-managed companies that had a lot of structure so we could build on that management team.
They had to have enough vision to match the vision that we had. Anyone can go buy a company and buy revenue. The real challenge of a successful business is your ability to grow internally, so we needed those managers to have the same growth objectives we had.
When we bought the five companies that we bought in the last three years, those business owners had to stay with the business because they, essentially, were the foundation of the company. Today, all the original sellers of the businesses are still active members of our management team.
How important are people?
You’ve got to first have the right people so it’s the right foundation. Find yourself a good management team and build yourself.
You’re going to get beat up a lot. You’ve got to get yourself a lot of human resources and surround yourself with the right folk. If you think it’s a one-horse battle, you’re going to lose because they have too many other people fighting against you.
The clear success of Home Solutions of America has been its people. I’m the lucky person that got to bring them on. I’ve been a good judge of people.
How do you do that?
It depends on the nature of what you want that person to do. If it’s finance, we look for some very professional people whose background, both educationally and experientially, exemplify that quality.
We have a lot of blood-and-guts operators that are street smart. They’re not book smart. You have to make sure the round pegs are the round-peg people and the square pegs are the square-peg people. It’s when you put the wrong pegs in the wrong hole that gets you into trouble.
How do you communicate your vision to the people at acquired companies?
We spend a lot of time together. We are a company that believes in low corporate overhead but at the same time, putting the appropriate controls in place. We manage the checkbook, for a lack of a better term.
We pass a lot of the management of those businesses to those operators. If you didn’t like the way they manage the business, you made a mistake in the first place — why would you buy them?
We spend time talking and meeting amongst ourselves so everyone is clear on the strategy. While the company is focused, we don’t want anybody to stray outside the boundaries. If we stay within the guidelines of what we do well, we will do well.
How do you do that and continue to grow?
What happens to companies is when they step into some business they don’t know anything about, then all of a sudden they’re trying to figure it out, and it costs a lot of human resources. We spend a lot of time together communicating what’s going on in the business and what we want to be when we grow up.You need to possess some type of vision about what you want to be when you grow up.
Have the stick-to-itiveness of saying, ‘We’re going to stay within the confines of what we do well.’ Grow in something you know or that might be adjunctive, meaning it’s just another tool in the toolbox.
Our company is a provider of restoration, recovery and rebuilding services for commercial and residential customers. Probably wouldn’t make any sense if we went out and started building fences or selling vacuum cleaners tomorrow.
Getting outside the box is where you get yourself into trouble. If you stick to the basics of your program and execute your business model, you’ll do well.
How to reach: Home Solutions of America Inc., www.homcorp.com