Intentional Growth #183: Growth Consumes Capital: How David Grew from $0 to $50M then Acquired 14 Companies and Sold to a Strategic Buyer
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David Tramontana started a healthcare business (Home Care by Black Stone) back in the ’90s. It grew from 2 employees to nearly 2000 employees and from $0 in revenue to over $50 million in revenue.
Today we’re talking about his challenges in growing and how growth consumes capital, his experiences with bringing on investors, and the dynamics of planning for distributions for the investors while you’re growing. The big question is: do you reinvest your EBITA to grow a valuable business (long term) or do you create your company to create distributions for yourself so you can live your best life (however, at some point, you will be sacrificing value creation for annual distribution)?
Don’t just go grab an investor or a private equity firm because you can’t afford to grow. Instead, sit down and make a plan for your finances and understand your value. Everyone has different motives and you want to make sure that you intentionally get what you want.
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What you will learn:
- How David started the company from 2 employees to $50 Million and 2,000
- What it was like going through two rounds of capital raises in order to fuel growth
- The trials and tribulations involved in growing so quickly and so much
- How 14 acquisitions helped David the business from $20M to $50M
- How strategic planning helped navigate the changing industry and Obamacare
- David’s experiences working with investors
- What it was like shifting focus from an income business to a growth business
- Managing expectations of distributions versus long term value creation
- What it was like trying to sell the business over 12 months and why they took it off the market
- Why David choose to sell for over $40 Million to a strategic buyer (public company)
- What is it like being on the selling side after acquiring so many different businesses How David is able to reconcile the financial from the emotional aspects of business
Quotes:
“Should you reinvest your EBITA to grow a value long term, or do you want to create a business that has good cash flow where you can take the distributions (but at some point, you’re going to be sacrificing value creation for annual distribution)? It’s always give or take because growth consumes capital.” - Ryan Tansom
“Everybody was either going for the private pay (in the personal care side cause it had higher margins) or they had a sales team going after the skilled cause they had good margins. And we took the low margin but steady cash flow, Medicaid business, and then coordinated their care with the skilled care and it was an area where we didn’t have a lot of competition so we were very successful in the [...] market and so we took it to Cincinnati and we just kept going with it.” - David Tramontana
Takeaway:
The big question is, do you reinvest your EBITA to grow a valuable business (long term) or do you create your company to create distributions for yourself so you can live your best life (however, at some point, you will be sacrificing value creation for annual distribution)?
Don’t just go grab an investor or a private equity firm because you can’t afford to grow. Instead, sit down and make a plan for your finances and understand your value. Everyone has different motives and you want to make sure that you intentionally get what you want.
Links and Resources:
David Tramontana, email: DTramontana@focuscfo.com
Reach out to me if you have questions about the boot camp!
You can also reach out to me via email at rtansom@arkona.io or on my LinkedIn
About David:
For the past 20 years, David has successfully led healthcare organizations to record growth and profitability. His success has gained the respect of his teams and accolades across the home healthcare industry. His passion for people and his entrepreneurial spirit has driven him to start a new venture – Strategic Operating Solutions, LLC.
His achievements have earned many awards and much recognition: Association for Corporate Growth – Deal Maker of the Year, E & Y Entrepreneur of the Year Finalist, Business Courier 40 Under 40, 2-Time Business Courier – Fast 55 Award, 2-Time Government Affairs Advocate of the Year, Ohio Council for Home Care and Hospice, Council on Aging of Southwest Ohio – Outstanding Professional in Aging, 3-Time Best Home Health Care Agency, and Venue Magazine’s Healthcare Leadership Award.
David is a graduate of Ball State University. He currently lives in Cincinnati, OH with his wife, son, and daughter. When he isn’t working on new ventures or advising other leadership teams, he enjoys volunteering for his children’s high school athletic teams.