5 minute read
OPINION
OPINION
Smart Growth
The path from startup to the middle market sector can be uneven, and often involves bringing in new partners and processes to reach and exceed profit goals while enhancing employee culture.
BY MICHAEL T. KULKA
Many middle market companies — those that produce annual revenue of between $10 million and $1 billion — are started by one or two entrepreneurs who are laser-focused on growing the business and succeeding.
They never take their hands off the wheel, and their eyes are constantly scanning the horizon and looking for future opportunities, efficiencies, and new ways to introduce or better refine a product or service.
While the middle market is made up of former small business owners who have evolved their operations into a much larger company, many times the principals of such firms have no exit plan or even a solid succession plan. Proper planning, rather than waiting until the last minute, can help preserve their legacy and the value in what they’ve built.
Fortunately, my partner and I planned well, which positioned our company, PM Environmental Inc. in Lansing, for a bright future. We started our journey 30 years ago with two environmental engineers and a pickup truck (PM 1.0).
As time passed, we achieved consistent growth. Twenty years later, we were a lower-middle-market company with two 50/50 owners who weren’t getting any younger. Although in our 40s at the time, we recognized the need to explore the next chapter. We retained industry-specific financial and operational consultants to evaluate and implement the changes necessary to better streamline our operations, add talent where needed, and develop a more sophisticated structure.
We then entered PM 2.0. As we marched forward, we began to prepare for a leadership transition by enhancing our C-suite with the promotion of key professionals who were essential to supporting strong leadership and growth.
What followed was a move to transcend our regional growth into a company with offices from coast to coast. While some of this expansion was profitable, other aspects of our targeted advancement resulted in top-line revenue growth but little bottom-line profit.
Rather than continue down this path, our C-suite team, with assistance from our consultants, conducted a thorough analysis of the financial performance of the company and an assessment of what had made us successful.
What did we learn from this process? We needed to focus on growing our company in the regions that had made us successful and pull back on being a national firm. We were struggling with
organic geographic expansion while excelling at organic growth in our key markets. We had the special sauce to succeed, but experienced limitations in geographic expansion, including acquisitions.
Still, we didn’t drop the goal of becoming PM 3.0, where we could build on our legacy and pursue continued growth and geographic expansion. To get there, we recognized we needed help pursuing financial growth through a partnership. We were seeking a financial partner with seasoned acquisition professionals who had M&A experience in building a human capital technical services platform.
What followed was a partnership with Keystone Capital Management, a private investment firm in Chicago, and Pinchin Ltd. in Ontario. The new direction, announced in February, allows for the expansion of our collective environmental risk management, engineering, and health and safety consulting services to corporate real estate owners, developers, end users, and government agencies in the United States and Canada.
At the time of the deal, PM was a regional market leader serving clients out of 12 offices in Michigan and the southeastern U.S., while Pinchin operated out of 34 offices across Canada. As a result of the partnership, PM can now serve Canada with 34 locations coast to coast, and benefit from access to 1,000 employees among what are now 46 office locations across the continent.
Apart from our circumstances, there are many models of partnering that can lead to growth, ranging from adding financial muscle to pursuing an organic merger, undertaking leveraged debt buyouts, bringing in minority interest partners, and exploring other opportunities that provide much-needed business and financial expertise that companies may lack.
Part of the success of PM 3.0 will rely upon attracting talent from technical universities and trade schools. In addition, we’re working with the Michigan Economic Development Corp., which offers several programs to assist middle market firms, in order to establish an apprentice training program for the many blue-collar, higher-paying jobs that will evolve to support the growing environmental remediation and sustainability focus of the global marketplace.
While our growth trajectory wasn’t a straight path, we found success by gathering and considering multiple options to advance the business for years to come.
organic geographic expansion while excelling at organic growth in our key markets. We had the special sauce to succeed, but experienced limitations in geographic expansion, including acquisitions.
Still, we didn’t drop the goal of becoming PM 3.0, where we could build on our legacy and pursue continued growth and geographic expansion. To get there, we recognized we needed help pursuing financial growth through a partnership. We were seeking a financial partner with seasoned acquisition professionals who had M&A experience in building a human capital technical services platform.
What followed was a partnership with Keystone Capital Management, a private investment firm in Chicago, and Pinchin Ltd. in Ontario. The new direction, announced in February, allows for the expansion of our collective environmental risk management, engineering, and health and safety consulting services to corporate real estate owners, developers, end users, and government agencies in the United
At the time of the deal, PM was a regional market leader serving clients out of 12 offices in Michigan and the southeastern U.S., while Pinchin operated out of 34 offices across Canada. As a result of the partnership, PM can now serve Canada with 34 locations coast to coast, and benefit from access to 1,000 employees among what are now 46 While our growth trajectory wasn’t a straight path, we found success by gathering and considering multiple options to advance the business for years to come.
MICHAEL T. KULKA
Co-founder and CEO of PM Environmental Inc. in Lansing, which is a full-service environmental consulting firm founded in 1992. He’s also a board member of the Detroit chapter of the Association for Corporate Growth.
