How To Acquire and Scale Companies Seamlessly With Tim Conkle

John Corcoran: 12:22

You know, I’m curious about this. How did you get good at selling IT services to companies if you were not that technical person?

Tim Conkle: 12:32

Because my mother could sell anything.

John Corcoran: 12:35

What did she say? So what did she sell?

Tim Conkle: 12:37

Real estate. Okay. Real estate. And she was always the best.

John Corcoran: 12:41

But real estate is easier to grasp in a sense, right? So here’s a house. Beautiful house. Does it fit you right? You know, like, how did you manage to sell?

You know. A company comes to you and says, you know, we’re going to bring our entire company of 100 employees. Like, how did you sell that?

Tim Conkle: 12:57

In the beginning? By trial and error. I mean, if you look back in 92, that’s when it was really the IT business. My MSB started her IT company. There was an MSB back then.

It was literally that. It wasn’t like there were 100 people that had gone before me and did it. That was the beginning of all of it. So we had to figure it out. And I don’t like friction with people.

I love people, I love people, I don’t like friction. I don’t like to see people hurt. I don’t like to see people in a bad way. And so everything in my mind works towards making things easier. Even.

I mean, I tell MSPs this all the time when they come to Dallas and they meet with me, not 99%. And it’s not a real number, but it’s probably close. 99% of companies aren’t worth saying yes to. Why? Because the business doesn’t equal the goal of the other.

And I’ll give you a quick example of this. Think about this for a minute. Always ask a potential client what’s your number one goal? And it’s funny. Without fail they say we just want it to work.

So now you have to fashion your IT company with the same principles, right? So you could buy support by the hour. And that means if it breaks, you call me, I come fix it, and that’s I invoice you. Which I think about for a minute. If my goal is for it just to work, what is the goal for an hourly or a break fixed fixed company.

Well, the only way they make money is if it breaks.

John Corcoran: 14:36

Yeah. Yeah, they don’t want it to work.

Tim Conkle: 14:38

Yeah. Obviously. Obviously that goal line was not there. Yeah. And so I shifted the goal alignment to where it’s all about just making it work.

No, you can’t buy an hour of my time or my company’s time. Everything is at a true flat rate period. You cannot buy an hour of our time, which means the better it works. Guess what? The more money I make.

Because you give me a bucket of money and say, for that bucket of money, you. You just make it work. And that’s what we do. And that’s revolutionary. That’s revolutionary in our industry right now because everybody likes something to be by the hour.

Well, if it breaks on the weekend and it fails, how can I not have to lose money? Well, they charge by the hour for that stuff. That’s called out of scope. And so we truly built a company that looks exactly like an internal IT department, in the sense that it runs on a budget. You know exactly what your cost is.

It’s the only model that you truly know what it costs you. All other models, the GAAP. The company cannot take it. I can tell you exactly what it is going to cost you. And so I always gravitate towards okay, what’s the easiest way to sell something.

Give them exactly what they want, not what you think they need but exactly what they want. Number one go. We just want to work. Well, if you just want it to work, there’s things that we do to just. Computers are built to run 24 over seven, 365 and not break.

What breaks users? I mean, you know.

John Corcoran: 16:10

Yeah. At what point did you shift to helping other MSPs and IT services companies help them with improving their business models and implementing some of the things that you had discovered.

Tim Conkle: 16:24

About 12 years ago? And think about the magic. I was just talking to a PE firm in New York, and they asked me this question: how did you see it? How did you see something that literally didn’t exist 12 years ago? And then ten years into your journey, you flip the switch and you start doing what you really planned ten years ago.

John Corcoran: 16:47

And what you’re talking about is that this acquisition strategy is, is all the companies that you’re acquiring are coming out of your community, coming out of you are already working with them, helping them, and some of them you’ve, I guess, acquired then. Right.

Tim Conkle: 17:06

Think about this. Think about a typical PE firm. When they buy an IT company, first they want a platform that’s just a big company that you can bolt others on to. Well, their tool sets are different. Their cultures are different.

Their contracts are different. Everything. So think about what I did 12 years ago. I took a group of people and said, hey, we’re better together. And if we’ll move in the same direction, we’ll all make more money in the long run.

What do I mean by that? What I mean is, let’s not reinvent the wheel. I had a very, very successful MSP, and there was absolutely no reason that people in the industry wouldn’t look at it and say, I wished I had that. So that was the beginning. Hey, I’m going to give you what I have.

Think about this. If you had ten IT companies, they all do the same thing over and over and over. Their tool sets are the same. But you get no economy of scale. You get nothing.

So why would ten IT companies build a help desk? Each one it’s too expensive but together. And I’ve always said this. We’re better together than we are. Then we’ll ever be apart.

Biblical principle is. Well, I grew up very religious. Biblical principle is a house divided against itself will surely fall. You go all the way back to the Tower of Babel, and it says they were building this tower all the way up to the heavens. So if a flood ever came again, they wouldn’t flood.

So God confused their languages and dispersed them, he says, lest they imagine, lest they imagine and be able to do anything they can imagine. See. Together we’re strong, and so a typical firm buys them 30% attrition. They lose 30%. Why do you have to go back and resell every customer?

They have different tool sets. So now they have to go to contract. End of contract. The way I did it was I lined everybody up to look just like me, which means when I acquire them, 80% of transition is already done. All tool sets are the same, all contracts are the same.

All sales processes are the same. The only thing I have to transition is accounting for less than 5% attrition. Why is that? We built one help desk that every single member uses, which means 80% of all call volume comes through the 20. So the end client already knows.

The 20 already know we do 80% of their work. So when we buy that MSP they’re happy. They’re like, oh wow, we’re part of a bigger thing. Think about this. Think about back.

My dad never just handed me money. He always gave me a task tied to it. It’s the same thing in this sense that if we all did things in the same direction, we would fix everything that is contrary. The other thing that you end up with is you end up with a ready made company. So I scaled in in 24 months, I basically scaled from a $30 million enterprise value company to over 300 million.

Wow. 23 months and I haven’t stopped. Instead of me having to hunt for acquisition targets, they’re lined up ready to go.

John Corcoran: 20:28

And you’re keeping them all as separate independent companies or operating as independent companies? Or are they becoming part of the one brand?

Tim Conkle: 20:34

One brand.

John Corcoran: 20:35

One brand?

Tim Conkle: 20:36

Because when it’s separate companies, the problem is it confuses the customer. Example let’s say I sell something in Dallas. They say we have a Boston and a New York office. Well, if Boston and New York have a different company name, that’s very confusing. Yeah.

It is. Yeah. Well, how do you know? So the beginning stages of this was all of these members that came together did everything the same way, which automatically gave us a national footprint. Gave us one big help desk.

So then you consumed what you needed from that help desk versus keeping all this labor on your own. P and L.

John Corcoran: 21:10

And what was the goal to do an acquisition strategy when you set up this idea 12 years ago?

Tim Conkle: 21:16

100%.

John Corcoran: 21:17

It was ten years. Let me ask you this. As you know, you had a company that was operating the MSP. The 20 MSP was operating. Did you worry about killing the golden goose?

Did you worry about, you know, this might divide this community. You know, there’s going to be haves and have nots. There could be some people that we want to acquire. And there’s been other companies like, hey, what about me? Why didn’t you acquire me?

Tim Conkle: 21:43

Well, I always say this. You can’t roll up everybody at one time. Yeah, those that do the right things. And I tell them and I give them the path to the right way. They have to grow.

They have to, they have to. They have to become something that someone can buy. And at that point, they’re immediately in a position they can be acquired by us. Now all you have to do is raise your hand. I’m not going to force you.

I think that we’ll have 20 members that are members running IT companies, for as far as I can see in the future anyway. And then you’ll have this MSP. It’s an exit strategy for an industry that most people are aging out of and they have no exit strategy. So think about a typical PE firm. They want a 5 to $10,000,015 million MSP.

Why? Because you’re going to lose 30% of the value when you buy them. You have to resell every client. So that’s the average. That’s where Earnouts came out.

I have no earnouts in any of my in. None of the companies I buy have an earnout as long as they’re in the group. And so we just kind of fixed everything that breaks in a, in a roll up. The other thing that we did was we didn’t go for any money that took equity away from us. So what does that mean?

I still own about 90% of this company. Typical roll ups. A PE firm comes in and buys an IT company. They take 7,080% of it and then they start buying other companies. So the owner ends up with 20%, 15%, maybe 10%.

Well, I did the opposite. I didn’t want to give up 70% of the company just for one thing, money, because all the real work is done by us. We have our own M&A team inside. We have all that. So I tell PE firms all the time in the early days, what do you bring to the table besides money?

Because I’ve always been, I’ve always been of this thought process. If your company is good enough and great enough, money is the easy part. And so we just went regularly. We fund everything that we buy has been funded by either our own money or it’s funded by just regular commercial banking. The cheapest money you can get.

Give me a loan. I’m going to pay you back. And that’s how you do it. Now think about this for a minute. Aren’t companies typically sitting around if they’re under $1 million of EBITDA, they typically sit between a three and a six multiple.

So let’s say they’re they’re I’m going to buy something that’s worth $1 million or it’s a $1 million company. They got 20%. That’s 200,000. They’re worth A5X multiple. Let’s say that’s $1 million.

The minute the ink is the minute the signature is drawn, I create 2 million on top of that enterprise value out of thin air.

John Corcoran: 24:55

Because it’s part of this larger entity.

Tim Conkle: 24:58

But that’s why P money’s here and all the other stuff. And don’t get me wrong, not everybody is going to be able to walk into a commercial bank and convince them to give them 30, 40, $50 million.

John Corcoran: 25:09

I imagine at this point, you’ve got good relationships with commercial banks based on what you’re doing there.

Tim Conkle: 25:15

They’re lined up.

John Corcoran: 25:16

What about integration? That’s typically a big issue after the acquisition happens, then that can be a real issue. So integrating the new company that you’ve acquired.

Tim Conkle: 25:28

80% of it’s done. Every member of mine lives in one single instance of software that we manage. It’s a flip of a switch culture. We’re not going to buy you if you’re not the right culture. Culture is and everything has been culled, have been cultivated and all of that over a ten-year period.

John Corcoran: 25:49

How long? What’s the minimum amount of time you have already worked with these companies before? You’ll consider acquiring them.

Tim Conkle: 25:55

Six months.

John Corcoran: 25:56

So you’ve gotten to know them.

Tim Conkle: 25:57

Six months is the shortest, and a lot of stuff happens. Has to happen in that six months.

John Corcoran: 26:01

Yeah. Most, yeah. I want to go ahead or.

Tim Conkle: 26:05

Over a year. They’ve been in the group for over a year. How do you do?

John Corcoran: 26:08

Do you, Tim, figure out what is the best use of your time now compared to like two years ago, you’re probably doing something completely different. What do you spend your time on?

Tim Conkle: 26:18

Dreaming.

John Corcoran: 26:19

So dreaming. So a lot.

Tim Conkle: 26:21

Something that we. Something that we haven’t mentioned. Me and my nephew, son of my oldest brother, created a company about ten, ten, maybe 11 years ago as well. My nephew needed it. He needed a dreamer.

He’s a product guy. He needed Tim. So I dreamed up how to take it to market and all that stuff. We took that company in the first eight years. We took it and sold it for 50 x multiple.

It was funded a week and a half before Covid.

John Corcoran: 26:55

What kind of company was this SaaS company?

Tim Conkle: 26:58

Wow. So what does Tim do with his time? Best thing you would do with Tim is let him sit back and dream. I could see literally, I can see ten years in the future where we’re going, what’s going to happen? And I’ve been pretty good at it.

So now you just have to have patience and you have to have the people that execute. And so I spend most of my time on vision. I’m a big proponent of right people and right seats.

John Corcoran: 27:27

How do you know that you have 30 different companies that are part of this new entity? How do you manage? How do you determine management? I’m sure you’ve got a good leadership team in place. But how do these, you know, these individual fiefdoms, these owners that previously had run their own shop, all of a sudden they’re part of this larger operation.

You know, how do you integrate them as a manager into it?

Tim Conkle: 27:50

You have to have an incredible CEO. And I had hunted one away from a $1 billion company. And if you’re going to have a dreamer, you have to have an integrator. It is the way it goes. I know how to make money.

I know how to. I can take any company. Give me 90 days looking at it and I’ll tell you how to. I’ll tell you how to take it to a new place. I can tell you how to double, triple, quadruple what you ever dreamed you could get out of it.

If you’ll just listen. None of it comes without time. It took me ten years to dream. The dream ten-year mark. I stood in front of it.

We have a conference every year called vision. I stood in front of him and said, okay, okay, everybody. It is now time to execute. And everybody was like, execute what? And I laid out the roll-up.

John Corcoran: 28:52

What was that like when you laid that out?

Tim Conkle: 28:55

They inundated me with wanting to be first. I want to be first. I want to be first. I want to be first.

John Corcoran: 29:00

What were you like going into that meeting? Were you feeling confident? Were you feeling a little like, you know, a little nervous? No.

Tim Conkle: 29:08

One of my flaws. Great to know somebody. Flaw. I talk about how great I am at dreaming. I’m not good at a lot of things.

I fly by the seat of my pants, which means I can make decisions. On the flip of a dime, I can. I can change course very quickly. It’s just the way my mind works. Weakness.

I do not know what the risk is.

John Corcoran: 29:38

So since you know that about yourself, how do you manage that risk or how do you manage the downside? And because this is a risky strategy, what you’re doing here.

Tim Conkle: 29:47

You know what I don’t if you’re if you’re if you’re if you’re averse to risk, it creates paralysis, which means you can’t move, you can’t do anything. It’s really cool to have a dreamer at the top of a company. And then you have to have a really good CEO that says, yeah, yeah, I see it. And when I laid out what the 20 was to the gentleman, Ken Pico is his name that runs day to day. The minute I was done, he said, I get it.

He said, if you’ll let me build it, I’m 100% in. And that’s what you have to do if you’re a dreamer, you have to paint the picture for a doer.

John Corcoran: 30:32

You have to surround yourself with people that are going to compliment you. You make up your own weaknesses.

Tim Conkle: 30:38

Well, people. Good people that can see tomorrow where I see ten years ahead. You can have people that can see tomorrow. Because if you’re always in the future, you never start. You know, so you surround yourself with really, really good people that believe the dream.

Never hire someone that doesn’t believe the dream.

John Corcoran: 31:00

So 30 acquisitions in two years. Is that right? Or ten months?

Tim Conkle: 31:05

  1. 35 and 23 months.

John Corcoran: 31:09

  1. In less than two years. Yeah. So it’s an average of three a month? No.

Yes, three a month. Yeah. That seems absolutely absurd.

Tim Conkle: 31:20

Here’s what will blow your mind. From raising their hand to completely buying. Done. Integrated over 60 days.

John Corcoran: 31:32

Wow. 60 days.

Tim Conkle: 31:34

60 days. Within 60 days. They’re they’re they’re done.

John Corcoran: 31:40

Yeah. So you must have an offer and a formula. Like, there’s not that much customization I do.

Tim Conkle: 31:46

Every single member, every single member gets the exact same multiple, which means perfect playing perfect field. In other words, I don’t. So the harder you work, the more you build your company. Your number moves up. But in the.

Now, I let them invest back in a portion of their proceeds if they want to. Why do I do that? Because it’s been my goal for a long time to make 500 people multimillionaires. And that’s what I want to do. I’m well.

I’m well on my way. I don’t have to buy them to make them multimillionaires. There’s a lot of people I’ve just taught how to build an incredible IT company that have gone on. I could tell you about people that had been part of the 20 that got it. They were dreamers.

So once they had all this information, they assimilated it and went and did their own thing. Yeah. Really, really cool companies. Which I think is one of the greatest compliments that people copy you.

John Corcoran: 32:52

Yeah. What has been the biggest surprise through this entire process.

Tim Conkle: 32:58

How easy it was, if I’m honest, if I’m just straight honest.

John Corcoran: 33:04

Well, you also prepared for ten years I.

Tim Conkle: 33:07

I did, but it’s.

John Corcoran: 33:08

But it’s not like you did it overnight.

Tim Conkle: 33:10

But but and the industry is there is no company that exists like this in our space period.

John Corcoran: 33:17

So there are other MSP roll ups. But they approach it differently.

Tim Conkle: 33:21

None. None that did it the way I did it. Yeah. I mean they had the problem in a lot of firms out there that are buying IT companies, they keep their own brand name. Why?

Because integrating everything is a monster. So literally they join the group. They pay. They pay to be in it. They consume things in it.

They’re literally paying me to look like me. They pay me to become integrated. Once they’re integrated, they’re great , they’re great , it’s a great opportunity to buy them. And here’s the thing, right. For every million dollars you buy, you can top side 2 million.

It doesn’t take a genius to figure out how quick money accumulates really, really fast. I, I’m, I’m and obviously it’s because I’m here. If I, if you’d asked me this ten years ago, I would have probably told you a little bit differently. But don’t get me wrong, it’s not that we didn’t have things in there that we had to do building a help desk that could work across multiple MSPs. Hardest thing we ever built?

John Corcoran: 34:35

Yeah, I would think that would be quite complicated. It was.

Tim Conkle: 34:38

A monster. But I’m telling you, as a help desk that members use it is incredible because it is exactly the way it would look inside theirs. But the only difference is about $3 million. MSP. They need a 24 over 724 over seven live answer us based help desk.

This is one facet of what the 20 is. There’s no way they could build that. Literally a couple hundred people. Yeah. Which means their service is better.

It’s quicker. It’s quicker to resolve. We fix little problems in the industry. Like I talk about one thing. Empower the employee because a lot of companies excuse me, they’ll have an office manager.

Somebody thinks they have a virus. They run down the hall to the office manager. I think I have a virus. Office manager runs down the hall, looks, spends 30 minutes or so there and then decides. Yeah, I think you do to call it.

Why do they do that? Because they’re afraid it’s going to cost more money. My model is flat rate, which means why? Why involve the office manager? Let that.

Let that employee call the help desk. Immediate help. We log in. Fix it. We’re done.

Office manager gets to be an office manager. We fix two problems there. One problem is the idea that you need two people looking at a problem that neither one is qualified to look at. Now, on our side, we fix this problem. Guess who the CEO of?

The owner of the company. Ask how it’s going. They all. They ask the office manager, right? Guess what the office manager only gets if you don’t empower the employee.

Only the problems come to her. So she’s like, oh, my shit’s broke all the time because nobody ever runs down the hall and says, man, you’re not gonna believe this. My computer worked perfectly today. So we’re fixing two problems. Really?

Yeah. One is a qualified person looking at a problem. And the second is an office manager that becomes jilted in that she only hears about problems.

John Corcoran: 36:52

Yeah.

Tim Conkle: 36:53

Also, I give a company the productivity of an office manager back to them. Office managers should only deal with the relationship side of the equation. If there’s a real problem that should be dealt with. Office manager to manager at this end. Not the office manager and help desk guy that tried to do the best he could.

But it went sideways.

John Corcoran: 37:17

So you’ve done 30 something acquisitions in a couple of years. Where’s the timeline for this going forward? Do you have a specific timeline?

Tim Conkle: 37:27

I’m definitely 58. This is real gray hair. I didn’t dye it just to look cool on this or look, look wise, right.

John Corcoran: 37:37

Does look cool. Does look cool.

Tim Conkle: 37:38

It does look cool. But but.

John Corcoran: 37:39

I’m 50. Then the accent you can charge extra.

Tim Conkle: 37:42

Yeah I, I will have an exit in the next. The company I sold before I kept 5%. I’ll exit, keep 20% at some point, and then all these guys that I’ve pulled along with me, they’ll do an exit, keep a little bit in and we’ll rinse and repeat. So it’s a way to create wealth for a lot of people, not on just this side, but the other side. Whoever buys this will create wealth for all the investors that come in alongside us and do those things.

I own another company called MSP Solutions Group, where we just own patents, intellectual property that we’ve dreamed up in this journey. You know, think about this. Tell you about one, because I think it’s important for anybody that watches this, especially if it’s business people that watch this show. MGM. MGM got hacked because a guy went to LinkedIn, found a really big name called support and said, hey, I’m with MGM and he knew the name.

Most IT companies, when you call them their help desk. All you have to do is two pieces of information to get help. And a real name. And the company, they go in their ticketing system. Look it up.

Oh, yeah. You’re a legitimate person. How do you know it’s them? MGM cost him $100 million. Caesars?

It cost 30 million. 2.5% of all calls that come into my office are bad actors. Just trying to get into things. Wow. I created a double-blind human verification system.

I own the patent on it. Nobody gets support from. That’s how we know the 2.5%. Nobody gets support from us without them being humanly verified and not with them. You know, you could do this with a piece of software like, say, duo.

You install it on your phone, and when you call support, they tell you to press a button and it says yes.

John Corcoran: 39:39

Yeah.

Tim Conkle: 39:39

Well, what if the phone is brand new and they don’t have dew on it yet. The CEO calls, you’re literally going to walk them through circumventing the system. Yeah. Getting their phone up. Ours is.

Ours is Atlas. There’s no software that needs to be installed on the client end or anything. And so I own about seven patents on that. And then I own some other patents on some other just things that we saw that I looked forward to and I said, oh my God, we need to deal with this.

John Corcoran: 40:10

Yeah, that’s going to be we’re going to need more and more of that in the years ahead, for sure.

Tim Conkle: 40:14

We’ve been using this software for over five years now. You know, so some things were just ahead of us. We just wanted to make things easier. And so there’s plenty for Tim to continue to dream and do even the next phase. Right. Yeah.

Yeah. And so yeah.

John Corcoran: 40:34

We’re I know we’re almost out of time here. Tim, I want to ask you, where did you learn all of this or were there particular books, particular podcasts, particular experts out there that you studied during the ten year run up to actually executing on this idea?

Tim Conkle: 40:49

No, because nobody had ever done it. I’d love to tell you that. So I did tell you I grew up very religious. We didn’t have TVs, so when I was a kid, I read probably more books. I probably read the Bible more than most preachers have.

It’s just a book to read. We had no TV. So when it got dark and you couldn’t be outside, what do you do? You read books. But as an adult, I read so many books as a kid that I’d rather write a book than read one.

And so it’s the same thing that the firm asked me in New York. How did you think all this up? I just did. It’s the culmination of all the things I knew about computers and it. And, you know, you look at our model that didn’t exist in our space.

I dreamed it up because I was trying to fix the friction between me and customers, which we did. How did I dream up to 20? We’re better together. Together then we are apart. Now, did I know that exactly ten years later that p money would flood our industry and that there would be so much money to make by rolling up?

I didn’t know that specifically. I just prepared to be at the right place at the right time. Yeah. And you do that by growing really, really good companies and watching what’s going on.

John Corcoran: 42:14

Well, Tim, I can’t wait to check this out. Check in with you in a couple of years and see where things are at that point. Given the trajectory, it’s going to be pretty exciting a couple of years ahead. So really appreciate your time here today. Where can people go to learn more about you and learn more about the 20?

Tim Conkle: 42:31

They can go to the20.com

John Corcoran: 42:33

the20.com

Tim Conkle: 42:35

Or just it should be THE and then the number two.Com and on the flip side, I really appreciate it. I love doing this. And I love doing this because I think there’s people out there that will pick up a nugget and they’ll start dreaming.

John Corcoran: 42:53

Oh I guarantee you. And I was thinking what happened? I was thinking, you know, this is going to happen in other industries, this exact model, you know. So yeah.

Tim Conkle: 43:01

So I’ve actually been asked to consult in other industries.

John Corcoran: 43:06

Yeah, yeah. For sure. It’s something that we dream about in our industry, which is a narrow field of B2B podcasting, you know, and I’d love to execute on it. So I’m going to be studying your model in the years ahead. So Tim, thank you so much for your time.

Tim Conkle: 43:21

Sounds fun. Thank you.

Outro: 43:25

Thanks for listening to the Smart Business Revolution Podcast. We’ll see you again next time and be sure to click subscribe to get future episodes.