Scaling a Company from Zero to Private Equity Exit with Rocco Coniglio

0:01Boom! Shake the room, Fire Nation. JLD here and welcome to Entrepreneurs on Fire. Brought to you by the HubSpot. podcast network, the audio destination for business professionals with great shows like Success Story Podcast. Today, we'll be breaking down how to scale a company from zero to a private equity exit. To drop these value bombs, I brought to Rocco Caniglio in the EO Fire Studios. Rocco is an entrepreneur, founder, CEO, president, and board member that took his company from zero to one plus. He raised growth equity in scale to an eight-figure private equity exit. In today, A4Nation will talk about focusing on growth, scaling your business, monetizing your business, and a private equity exit, how to accomplish that, and so much more.

0:46And a big thank you for sponsoring today's episode goes to Rocco and our sponsors. The Next Wave, your chief AI officer, hosted by Matt Wolf and Nathan Lanz, is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. Matt and Nathan are leading AI creators in your guiding light in the AI and technology frontier. AI technology is transforming the way we do business and the media landscape is fragmented. The Next Wave strives to be the leading podcast on AI technology and how you can apply it to growing your business. Listen to The Next Wave wherever you get your podcasts.

1:20NestSuite by Oracle brings accounting, finance, inventory, and HR into one proven platform, helping you reduce costs everywhere, backed by popular demands. NestSuite has extended its one-of-a-kind flexible financing program for a few more weeks. Head to netsuite.com slash fire. Rocco, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with. What's up, Fire Nation? Glad to be here. Something that most people disagree with, I would say is, you know, when you go and decide to be an entrepreneur and take the challenge on. Many times, at least my experience was that, you know, you use a sounding board and that sounding board could be a number of different people that you trust from friends and family to colleagues.

2:18And I think unfortunately, many times, you know, you have a lot of doubters out there and I don't think they have, a lot of times they don't have bad intentions, but it's just that I think it's hard for other people to see, you know, the vision that you have. And, um, you know, sometimes it's best for you to just block that noise out and focus on the goal that you have set for yourself. And I think that will serve you well. So, um, you know, listening to other people can be good, but I think listening to too many other people that might have opinions that, um, that misguide you or throw you off track or doubt yourself can be detrimental to you achieving what your goals are as an entrepreneur.

3:02So Fire Nation, as we talked about in the intro, we're talking about scaling a company from zero to a private equity exit. Rocco is rocking the mic on this. And Rocco, I said in the intro that you were able to raise growth equity and scale to an eight-figure exit. Give us the aha moment that led to the starting of that business? I'm going to have to give that credit to my wife, Nicole. She was a co-founder in the business with me. She is an acute care nurse practitioner and also a psychiatric mental health nurse practitioner. So she's board certified in both specialties. And she was, this is back in 2013, she went to work in a number of different nursing homes as a primary care provider and was just noticing the lack of mental health care.

3:51in those homes. And she was getting the bulk of the questions. And she, at that time, was an acute care NP and didn't have the board certification and training in psych mental health. And she came home one day, and at the time I was working for Medtronic. And she said, you know, there's really a gap in care in this particular area. And I think we can create a business around it. And, and, and she asked me, she said, would you want to, you know, would you want to do this with me? And I, I said, hell yeah, you know, let's do it. So it, she, she ended up going back to school for two years to get board certified in psych mental health.

4:31And, you know, at the time, and I think this also served us well was, you know, we just took the approach that I'm going to keep my W2. We had a family at the time. So we had, at the time we had two girls. Um, and, and we're also, um, we were a primary caregiver for my dad who, uh, was going through some struggles and had to been diagnosed with dementia. And so we had, you know, we had a lot on our plate at that time. And, um, and we, uh, she got through school and, and we launched the business, um, the month that she got licensed, which was July of 2015, had our first contracts in August. And we really took the approach that let's just put like baby steps in one foot in front of the other to try to see where this can go.

5:20We did look and see if there were other businesses out there that had scaled in that particular sector. And we did find one, the name of the company is Met Options. They're no longer in business anymore. But, um, you know, they had a, they had a scaled platform. So that was good evidence that there was the possibility to scale it. But we said, let's just go get the first contract. You know, let's, let's start small. And if that's where it stays, we were okay with that. If it was just extra income. But, um, as you know, that's not where we ended. Um, you know, we ended in a place where I don't, I don't think we, we really saw that when we first started the company, the potential.

5:59So Fire Nation, I really hope you understand where ideas can come from. So that's why I always say, keep your eyes open, keep your ears open, look around you within your business, within your industry, your passions, your likes, and say, is there an opportunity that I have here to make a change, to become the number one solution to a real problem? But having an idea is one thing and Rocco funding it's quite the other. So how the heck did you fund your business? Funding is definitely a challenge, especially if it's a startup, a new venture. I think there's broadly two approaches to entrepreneurship.

6:38You start something from nothing. So you start from zero. Or you can do entrepreneurship through acquisition. Both have their challenges. We obviously started from zero. In our situation, I kept my W2 job for as long as I could. So, um, it was not easy, but I kept it for as long as I could. I worked in the evenings and on the weekends. Um, when we got a couple of years in, um, there were times where I would work through the night and not sleep and go to work the next day. And obviously that's not sustainable. And I'm not saying that everybody should do that. And I'm not suggesting that it's a good idea, but, you know, it, it, it got to that point.

7:24And, um, part of what we did to, to help fund the business was me continue to work, continue to use our own capital to invest into the company. Um, and then fortunately in 2017, Phillips healthcare bought the company that I was working for. And I had, I had some equity in that, um, you know, nothing life changing, but it was enough to say, okay, we can do this for about a year or so invest into the company, support us, support us and our family personally. Um, but in the background, like I don't take the approach where it's just one, uh, angle with funding. I was always working every single relationship or angle I could from a funding perspective.

8:14So even though we had those economics working for us in 2017, you know, I was contacting banks. I was making sure that we had banking relationships, making sure that I was talking to the SBA lenders and within those banks and getting those things in place, whether I needed it or not. So, you know, we set up an SBA line of credit. That was one of the first things we did. I didn't need it, but I wanted to establish it because I knew I would need it in the future. And that is a long process to go through. So you don't want to wait until you need the money for a lot of different reasons, because when you need it, you might not have the time to get it.

8:52And also when you need it, if you're negotiating with other people, you know, you're not going to be in a position of strength to negotiate that or potentially talk to multiple parties in order to get the best terms. And so I think it's really important to, you know, to take those steps early, even when you may not need the line of credit or the loan or the funding, you know, get yourself very, very close to the finish line. And then when you need to pull the trigger, you know, you're in a position to do so. And then, you know, the second part to that, to answer that question is in 2018, our attorney at the time, who was very good at just connecting.

9:39She's a great connector. Her name is Isabel Babette Kalaniak. And she's a healthcare attorney. And she would always make introductions. And so she introduced us to a group out of Chicago, Physician Growth Partners. They had just started their company. and they were looking to invest into behavioral health. They had a thesis around behavioral health and they at the time already had a deal on the table and it was out west and they were going through due diligence and so they reached out to us through that connection just to have a conversation around, um, gaining some insight into behavioral health.

10:24And so we, um, we started to just, um, have conversations with these, with these guys, um, Michael and Ezra, um, to help them with the due diligence that they were doing on the, on another behavioral health business. And, and as we built that relationship, um, the due diligence ended up, um, not working in their favor. And so they walked away from that deal. And at that time, this was months later, they called us up and said, Hey, you know, we'd like to come out and meet you in Ohio, which is where we were based at the time in Cleveland. And, and so they came out, we met with them, and they ended up funding us with some growth equity.

11:11And, and so we raised about seven figures with them at the end of 2018. And that really was helpful to accelerate the growth and the scaling of the business. Fire Nation, there's a lot of takeaways I hope you're getting from this. I mean, I just love that idea and that concept of, listen, get things set up ahead of time, funding-wise, dollar and cents-wise, because when you need it, you need it. You don't want to start the process then because there's a lot of red tape, especially when you go through things like SBA. There's a lot of time. So have that stuff in place. And there's a lot of other great stuff that Rocco shared and a lot more coming when we get back from thanking our sponsors.

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13:45Okay, quick math. The less your business spends on operations, running multiple systems, and on delivering your product or service, the more margin you have and the more money you keep. Obvious, right? But with higher expenses on materials, employees, distribution, and borrowing, everything costs more. So to reduce costs and headaches, smart businesses are graduating to NetSuite by Oracle. NetSuite is the number one cloud financial system, bringing accounting, financial management, inventory, HR into one platform and one source of truth. With NetSuite, you reduce IT costs because NetSuite lives in the cloud with no hardware required access from anywhere.

14:20You cut the cost of maintaining multiple systems because you've got one unified business management suite and you're improving efficiency by bringing all your major business processes into one platform, slashing manual tasks and errors. Over 37 ,000 companies have already made the move, so do the math. See how you'll profit with NetSuite. Backed by popular demand, NetSuite has extended its one-of-a-kind and flexible financing program for a few more weeks. Head to netsuite.com slash fire, netsuite.com slash fire, netsuite.com slash fire. So Rocco, we're back and I want to talk growth. I want to talk monetization.

14:55How did you focus and achieve those two things? The reason we were confident in this particular type of business was because this was a type of business where we were billing insurance. So it wasn't like a direct-to-consumer type of a model. It wasn't a model where you necessarily were asking for someone to take money out of their pocket and pay you. So it was an insurance coverage. But that comes with its own challenges. We primarily billed Medicare. That was a big payer for us. Medicare Advantage was another huge payer. And so you really had to get your unit level economics right. And so we built out models around the insurance billing, the fee schedule to understand what type of productivity we would need for our providers.

15:48So our nurse practitioners that we were employing. And, um, and that was, that was our primary revenue stream. So winning insurance contracts, and then building a sales model around going into skilled nursing facilities and, um, and winning contracts with them, you still have to, you know, you still have to win a contract with a nursing home in order to provide services to, to those patients. And so those were the two elements that we really focused on from a growth and a revenue standpoint. As far as scaling the business and building a platform, it was investment into technology. It was investment of time and resources into building systematic processes within the company, putting it on paper and making sure that we were able to deploy that to the team so that when new people came on board, there was a system in place and you could replicate that.

16:46And that was really important, especially on the early stages of the business. How did you know when the right time to exit was? Because most people hang on way too long or some people duck out too early before they really can maximize what that exit would look like. How did you know the right time? I think in some respects we got lucky, but I always say luck is when timing and preparation and meet. So I would say that we built our business in a way where we had great systems in place. We had great analytics and reporting in place. So any particular given day, someone could walk into the business and almost at a moment's notice, ask us for what you would need to get through due diligence and we could produce it.

17:38And so that was really important to be prepared. It goes back to that preparation that we talked about around doing things early. You don't want to have a buyer and then scramble to get the data points that they're going to look for in order to solidify what a deal might look like. You want to make sure that you have those things in place well ahead of time. We ran a process, a formal process in 2021. We got some market valuations that we weren't exactly too happy or excited about. And so we, at that point, the group that, that we were partnered with, um, we all decided like, we're going to, we're going to hold onto this and continue to run it.

18:17And if a good opportunity comes our way, um, we'll consider it at that point, but let's just focus on the business. Um, lo and behold, late 2021, um, I met the CEO of the company that acquired us. We formed a relationship. And then over the course of the next few months, that relationship turned into a letter of intent. And, um, and then, um, they, you know, we ended up following through on both sides and getting an acquisition done. And the valuation that we got at that point was, um, very, very good. It was, it was just the numbers told us at that time that, um, we would, we would be foolish to walk away from that particular deal because if we look and project out, um, you know, we would have had to work, let's say another two years, hit our forecast for those two years in order to get the valuation we were getting at that time.

19:12And so we decided to move forward. Now, I've interviewed over 4 ,000 people. And for my first 2 ,000 episodes, I asked the exact same six questions. One of those being, what was your worst entrepreneurial moment? And a surprising number of my guests' worst moment was the day they sold their business. What was it like for you after the sale was final? We were serving nursing homes during COVID. So that was a unique situation to be in. And that was extremely challenging. If we hadn't gone through that, I would say that, yeah, getting acquired is certainly a challenge. I've got friends that have been through it.

19:54And it's like an identity issue, especially if you've been doing it for close to a decade or more. you kind of tie your identity to the company and who you are in that company. And that changes in a day. And so that's a lot to process. And so it's not just about the money side of it and the economics of it. It's definitely a mental challenge. And frankly, the 90 plus days of due diligence that we had to go through was extremely challenging just from the psyche and staying in a positive mindset because there are so many things that can go sideways in due diligence. And you're trying your best to keep things on track and you're spending a lot of money to get through that due diligence period.

20:48So you got a lot on the line when you do that. Rocco, you shared a lot of content with us today. Give us one final takeaway that you want to make sure our listeners get from our conversation today. If there's a way to completely remove yourself from the business and walk away with no rollover, no strings attached, I would say that is probably the best way to sell a business. Of course, you're going to have some type of a short transition period. But I think for an entrepreneur and a founder, if you really want to be in a healthy mind frame after you go through a transaction, I think sticking around too long post transaction or being in a situation that requires you to do that is unlikely to be very healthy for a lot of different reasons.

21:41And so I would say, really think about the terms associated with the deal, the terms associated with how it looks post-acquisition, because it's going to impact you mentally. And I think that a clean break is probably the best. Rocco, if Fire Nation wants to connect with you, wants to learn more about what you have going on, what is your call to action for our listeners today? You can reach me at redrockadvisory.io. Redrockcapital.llc will get you to that same place. And I'm also very responsive on LinkedIn. So if you reach out on LinkedIn, I'm happy to get back to people. Fire Nation, you're the average of the five people you spend the most time with.

22:32You've been hanging out with RC and JLD today, so keep up the heat. For links to everything we talked about, visit eofire.com. Type Rocco, R-O-C-C-O, in the search bar. The show notes page will pop right up. And Rocco, thank you for sharing your truth, your knowledge, your value with Fire Nation today. For that, we salute you and we will catch you on the flip side. Thank you, John. I appreciate it. Hey, Fire Nation, a huge thank you to our sponsors and Rocco for sponsoring today's episode. and Fire Nation, successful entrepreneurs are great at three things. Productivity, discipline, focus, which is why I created the Mastery Journal so that you can master productivity, discipline, and focus in 100 days.

23:12And we're talking step-by-step. Visit themasteryjournal.com. And I will catch you there or on the flip side. The Next Wave, your chief AI officer, hosted by Matt Wolf and Nathan Lands, is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. Matt and Nathan are leading AI creators in your guiding light in the AI and technology frontier. AI technology is transforming the way we do business and the media landscape is fragmented. The Next Wave strives to be the leading podcast on AI technology and how you can apply it to growing your business. Listen to The Next Wave wherever you get your podcasts.

23:50NestSuite by Oracle brings accounting, finance, inventory, and HR into one proven platform, helping you reduce costs everywhere, backed by popular demands. NetSuite has extended its one-of-a-kind flexible financing program for a few more weeks. Head to netsuite.com slash fire.