How Buyers Earn the Trust of a Retiring Business Owner

What We Need to Grow, Episode 052: Can I Trust This Person?. A Founder Talk conversation with Shawn Heeren, founder and CEO of Crestline Cleaning Group. Cleaned for readability; the words are the speakers' own.

Caleb Pedosiuk: All right, Shawn, let's do it. What you've created helps Ontario cleaning business owners consider succession. I've heard the topic of the grey tsunami, the silver tsunami, probably three different times in three different conversations in about the last week. And there's this idea that the baby boomers, if you think of it like a garden hose, have changed every industry they've hit. When they were children, it revolutionized children's toys. When they became teenagers, it moved through innovation and production. So many things have been impacted by this blip in the generational timeline that the baby boomers have gone through. And now they're in their later years. A lot of them are in retirement or wanting to be, and some are holding on and not quite in retirement yet, and a lot of them are looking at that and wondering about succession planning. So I would love to hear a bit about what it is that you guys have going on and what you're building.

Shawn Heeren: Yeah, happily. And to your point, you're 100% right. I always heard the news about this, obviously, but until you're feet into it, you don't really see it, until you're talking to people on a daily basis. Every single day. And we obviously want to take advantage of that and give them a path to succession, because a lot of these owners don't have a second generation that wants to take this business. So they're sitting on a business doing millions of dollars a year, and the kids want to go into banking, or they want to go be a lawyer, or go into AI or something totally different. Which is their right, but it obviously makes the parents' lives a little harder when it comes to retirement. Do I sell the business? Do I just close it down? And frankly, I've come across quite a few where we're a little bit late to the conversation. They closed it down, whether that's a year ago, six months ago, whatever it might be. And they wish we'd called sooner. But there's nothing left.

So we want to, A, give them a path out that actually suits them, not necessarily a cookie-cutter way of buying the business. We try to be flexible based on what they're looking for. For example, some folks want to be clean out, go live in Florida, go travel Europe, whatever it might be, and don't necessarily want a heavy burden on the transition. We try to see if there's a path forward for that, whether it's finding a way to scope down the transition period or de-risk the investment somehow, or being able to hire a GM in their place, and they transition to them in a certain time period with a certain checklist.

I even came across one where there is a second generation. They have a few kids, but only one might be interested. So what they want to do is potentially have the child have some level of ownership stake. He's in his early twenties, and he'd be able to have something to carry forward. So being able to navigate that kind of a pathway, where we can keep that kid in the business, give the parents the retirement, and everyone kind of wins.

Now, what we're hoping to do as well is bring together the cleaning industry on the commercial side, not necessarily residential, at least not yet. Because if you go and you Google commercial cleaning in your area, you will probably see hundreds of results, even thousands depending where you are. Being here in the Greater Toronto Area, there's thousands. The competition can be fierce, as you can expect with so many of them. But the interesting thing is there's no unified underlying efficiency, whether that's with suppliers, service coverage, whatever it might be. So if you're talking to Colliers, let's just say, and they have a whole bunch of buildings all over the Greater Toronto Area, rather than using one business to cover their entire region, they might have to use twenty. And the problem with that is service differentiates itself, because quality is different between providers, standards are different, communication is different. The relationship is completely different. So what you end up having is these building managers, whether that's hospitals, real estate, offices, warehouses, constantly having to fluctuate between their cleaners until they find the good cleaner. And then they stick with them, obviously, for years.

We're trying to bridge that gap. We want to consolidate so that these places can come to one unified provider that can cover an entire region with a high set standard across the board of communication, customer service, cleaning, and reliability on the labour. That's also unfortunately a pretty big thing here with the labour force the way that it is. It's very common to hear that you have your scheduled cleaning and no one showed up last night, but you're an office building. You have clients coming in today. So naturally, you're a little bit peeved, which is fair. So we're trying to break those problems by bringing everything together, and then naturally from there, as we prove the model, scaling it out nationally.

Caleb: What was the path for you to see that this problem was an important one to solve?

Shawn: I think the first thing is I come from a sales background. And the first thing that drew me to the industry, among others, was almost a complete absence of sales acumen. Almost across the board, all the way up to businesses doing tens of millions of dollars a year in this industry, they had quite literally zero sales. The way that they grew was through referral almost exclusively, which is actually a phenomenal way of growth. Don't get me wrong, it's the most compounding form. But if you don't pair it with some level of sales and marketing, the growth of the business is kind of at the whim of your last best clean. Because if you think about referrals, you only get referred to someone when you do a good job. So if you mess up, you ain't getting that referral.

So all of a sudden you're talking to some of these owners where they've been in a decline for the last 18 months, and they just can't figure it out. They can't figure out how to make that margin back, how to keep growing, because the whole business for the last 30 years was based on word of mouth. Right now there's so much competition that they just don't know how to compete. That was the first thing that I noticed that drew me here.

And then the problem that needed to be solved, bringing everything together, came frankly through my initial conversations with people in the industry. Asking them, why did you choose cleaning? Why are you still in it? Would you ever consider leaving it? All these almost survey questions that helped me and my team assess the market and decide if this was the one. That's essentially how we approached it. It was really just a research phase, and then realizing that we were well suited to solve the problem.

Caleb: It's interesting. You have this perspective where you're helping others look further out on the horizon and consider what's coming, to help people who have been heads down working on the business that they're in, that they know, serving clients the best they can, leading their teams. And part of your business is helping them. When you lift your head up and see the change that's happening with AI and robotics, and what some of these new innovations are doing as it relates to cleaning, what do you see coming down the line?

Shawn: I think the most obvious one, which I would argue most people in this industry are seeing because it's physical, is robotics. There was literally an acquisition a month ago that hit the news where a cleaning company bought a robotics company in order to start developing cleaning robots. We're starting to see robots when you go to big train stations, when you go to Grand Central in New York. You see little robotic cleaners. Not like your house cleaner that goes on the floor, but these big industrial-sized ones. I think that's the most glaring and obvious example of how AI and robotics are shifting the industry.

But what I'm consistently noticing is that when you go to the software world, AI is everywhere. It's all over the news. They're implementing it in literally everything. They're laying people off because AI is apparently this whole new productivity hack, across the board, whether it's sales, marketing, product design, website design, all this stuff. What's interesting is that in this world, the adoption of AI seems to be abysmal. It's almost nonexistent. They're not even using AI for basic things, like just analyzing your CRM, seeing where inefficiencies might live. When was the last time you contacted people, or followed up with that last relationship and had a round of golf? Because that's also quite common. It's a very relational game in this world.

They don't even know how to do it. And fair enough. With an aging owner base, they don't see the point. They have a business that's been successful for three decades, four decades, five decades. Fine, why do I need AI? And it goes back to that sales conversation I was mentioning, where I bring a sales acumen to a world where there really doesn't seem to be active participation in sales yet. But when you layer in AI, what I think is going to happen is the companies that do end up adopting AI, whether that's really tech-savvy older generations, or the businesses that pass on to private equity folks like myself, or maybe even a second generation that is more tech-enabled, are going to outpace these companies by such a wide margin. And because they don't have the ability to use AI to pick up the phone and make cold calls all day, they're going to watch their margins shrink ever more rapidly as these other businesses win business a hundred times faster.

I have a friend who started a company called iGTM, and it's basically a sales research tool using AI, but it also has a parallel dialer attached to it. So just imagine a cleaning company has access to this for $100 a month. All of a sudden they're sweeping the market. And now the 65-year-old owner that's doing $2 million a year, in 18 months, a lot of that business is going to be swept up because of an owner like myself who is able to produce at high volume, with high efficiency, with high standards. And they just don't know what's going on. They don't know how to even come close to competing, because I think gaining the knowledge required to compete also takes time. Now you have to catch up on learning the skill, learning how to learn the skill, and then implementing the skill. You've started businesses. It's not enough to have an idea. What sounds amazing in your head, you go and hit the market and try running, and you end up tripping every five seconds. That's what I see happening. It's maybe not the most obvious thing yet, but it'll come, and it'll come so fast that I think people will scramble and they won't know what to do.

Caleb: So are you using a dialing strategy for initial contact? I'm assuming there's some pipeline of locating prospective individuals, like you said, before it's too late, before they may have already passed that window of being able to sell. Is it a strategy where you would be using something like, was it IGM that you mentioned?

Shawn: Yeah, iGTM. I do. But frankly, the power of it comes because in this world, it's not just owners that I need to be in contact with. I need to think about who has access to these owners aside from the owners themselves. So I need to be in contact with brokers. I need to get in contact with accountants, lawyers, things like this. And the problem is there's just so many of them in a given region. So if I'm looking at cleaning businesses in, let's just say, the Golden Horseshoe, there's thousands of them. Not only do I have to touch them, I have to reach out to the, what, 150 brokers? I have to reach out to the 2,000, 3,000 accounting firms. I have to reach out to the 2,000, 3,000 law firms. And I have to pitch them on what we're doing, how we're doing it, why. I need to have those conversations. So I've got a book of thousands of people, coming up on probably 10,000 people, that I have to actually touch over the course of a time frame in a region.

Now, if I'm going on Google and scraping a lead manually, I type it into my CRM, I add all the details, then I pick up the phone, then I add the notes, then I move on to the next one. You can imagine that in an 8-hour period, maybe I touch 50 if I'm going hard. Well, if I'm using AI, I can build myself a scraping tool to do exactly what I just said in, call it, three hours. I now have the gist of the market segmented out directly into my CRM, fully enriched with all the data online. And I take that, I put it into iGTM, and I literally sit there and call back to back to back. Now instead of hitting 50 and only adding 50 into the CRM, maybe I touch 1,000 in an 8-hour period. The impact you can make in the same task, without dropping quality, I might add.

For anyone that's ever cold called before, a lot of the time you're getting voicemails, you get no answers, no one's even picking up the phone. You're looking at maybe a 5 to, on the high end, maybe a 20% pickup rate. Eighty percent of the time that you call, no one's picking up the phone. So imagine if you had a way of just skirting through those calls, and now every time the phone beeps, I'm actually having a conversation. So if I'm making 1,000 calls a day, maybe I'm having 150 conversations. Now don't get me wrong, a lot of them will probably say no, naturally, but all of a sudden my output is just bananas. I'm compressing two, three weeks of work into a single day. So that's how I'm doing it.

But that's also, I think, a broader example of the shift. Imagine coming across an owner that did have my abilities in sales, but not the AI piece. Well, good on them. They're still doing 50 calls a day, adding 50 people a day. That still compounds, but it doesn't even come close to competing.

Caleb: So that leads up to, call it, top of funnel. You then move them through. Have you found effective ways to take someone who, from that initial call, has heard you out and said, this is interesting, tell me more? The analog version of that is you verbally telling them more, or saying, let's get on, let me visually go through and show you some charts, a deck or whatnot. Have you found an effective way to leverage technology, whether it's a VSL, or saying, before we schedule a live call, watch this piece? Is there some tool you've created to open up the bandwidth coming off of that really firehose of top-of-funnel activity?

Shawn: It's a great question. I'll be honest, I actually have not thought of that. I'd have to test it, but I'd be hesitant to yet. And the only reason is because I went into this thinking from a sales perspective. When you call someone and try to make a sale, and they get a little upset and say, no, stop calling, I get it. It's a sales call. On the flip side, I thought that coming from that world and going, hey, I want to buy your business, I want to buy something, I thought I'd have a lineup. I thought I'd have people saying, hell yeah, let's look at that, let's look at how much money I can make. You'd be surprised the trust that is involved in this. It's honestly something I have not come across before, maybe in enterprise sales. But even still, and the reason is because, rightfully so, they've built this business for decades. They aren't tech savvy. And they're getting reached out to by someone on the phone that says they want to buy their business for millions of dollars.

And the problem is they want to know, can I trust this person to take what I've built and grow it and take care of my people and the client relationships that I've built over the last few decades? Can they do that? So the thing that I'm noticing is, rather than sending something like a VSL, I aim for something in person as fast as I can, where it still feels natural. Obviously, I'm not trying to push people into that. I'm going, hey, this is some information, but why don't we grab a coffee? Super light touch. I'll come to you, and we can chat for however long you're curious. No expectation.

And the reason I do that, rather than almost a harder sell, or I guess in my case a harder buy, is because people almost put their back up against the wall instinctively in this market, because they're so wary of who the buyer could be. They don't want to sell to private equity. They also don't want to sell to someone that has no experience. They don't want to sell to someone with a bit of a baby face. All these things. So I'm constantly having to find ways to overcome this, and naturally that's through the way I speak, the way I dress, and the team that I've built around me, who have a myriad of experience past me, one of which is even in this industry, or was. So I can lean on them a lot to get past that. But with the VSL, I'd be wary of it breaking trust with an older owner, seeing a video recording of me explaining something versus a conversation.

Caleb: You know, another thing that comes to mind that you might want to consider, much like the way that you dress: the kind of shirt, the kind of jacket, your presentation. Those things don't say words, and yet they speak volumes. You might want to consider showcasing at a documentary level of production quality, with really strong crafting of the story, strong video, strong audio, in a short format. This could be five minutes, seven minutes, twelve minutes, telling the story of a successful instance of what you've done. And I would say, shoot it where it makes sense, where it's meaningful for that person. If they're in Florida now, it could be that you shoot part of it in Florida, and part of it back home, where you walk those grounds and chat with some of the staff. And that one tool on its own could be something where you say, hey, look, here's a 90-second teaser. This is a business in Mississauga that we helped transition four years ago. They just see that, 30 seconds, 90 seconds, and if they want to, they can watch the full video, seven or twelve minutes. Then you're using that to move the needle on the trust factor, and they look and go, wow, okay.

My reason for that is it's different than giving them an Amazon gift card and asking them to record a handheld testimonial. That has its merit, but it's different. Someone is actually wanting to know, like you said, how are you going to be able to handle my business? How are you going to treat my employees? Well, if the caliber at which you do this one thing is any reflection of how you do these other things, it's going to show. There's probably many things I haven't even considered that you've already thought through and would probably handle with white gloves.

Shawn: Yeah, I actually like that idea, with the production quality. But I also think what you were hinting at, filming in areas that they might recognize, I like that. That's an interesting idea. Okay, I'll think about that.

Caleb: Do you have targets, numbers you've done so far successfully versus what you want to hit? Do you find that that helps drive what you're doing?

Shawn: In what way?

Caleb: Well, you mentioned numbers. There are thousands of these companies in a region, and it can be intimidating to look at something when there are so many of them. Is there a pace that you feel like you're at? Like, we want to successfully help the succession plan of one new business per month, or a couple per year?

Shawn: Yeah, great question. I think the pace for us at this point is one business per year, in terms of successfully helping them make an entrance into transition. So effectively buying one business per year, at least at the current rate. As we grow, that pace will likely increase, only because the true bottleneck in a roll-up, in what we're doing, will come down to integration capacity. So how many businesses can we buy and absorb efficiently without breaking anything in our current stack? Because that's a challenge, naturally. Bringing over everyone's different data, formatting it the same way, sales processes, marketing, operations, all this stuff. Quality assurance will sometimes be different. So being able to bring everything over into the same stack is the challenge. It is the hardest thing in a roll-up.

So at the beginning stages, you want to go slow, because at least in our case, we're not financing with 100% equity, so we're not paying 100% cash. We're leveraging, and so the risk with that is you don't want to break anything by accident if you don't have to, because you owe a debt service, you know what I mean? So that's our current goal, number one per year closed, and I'm expecting the run rate of that to jump in a few years as we get more and more.

Caleb: Very cool. Well, Shawn, there are different responses to it, but the one closing question that I have been asking in these conversations is: if you had to put your finger on one thing, what is the one thing that you need most to grow right now? For some it's that they're raising money, a seed round. It could be an open door. It could be awareness in general. You mentioned trust as being this really big factor. What do you think that one thing would be?

Shawn: The one thing to grow. I would say in our case it would be qualified deal flow. We have a set buy box, or type of business almost, I guess you would say, certain checkboxes that they have to hit, and naturally not many hit those. So I would say qualified deal flow is, at our stage, kind of the biggest game changer to speed of growth to scale. In time, I'm sure that'll change, but that's probably the biggest thing.

Caleb: Well, Shawn, thank you so much. I appreciate getting to chat. And I think it's so beautiful when a couple of businesses can work well together, in this case where you can help someone fulfill the next chapter of the dream in their life by successfully succeeding that company, in a positive way.

Shawn: Cool. Well, thanks so much, man. I appreciate the time.

Caleb: Wonderful, wonderful.