Entrepreneur Dave Kohl joins Missing Half to discuss how B2B marketing, strong culture, and financial discipline drive value in manufacturing M&A. Learn how marketing impacts exit multiples and post-acquisition success through the stories of three private equity exits and Dave's journey from running payroll on a shoestring to leading organizations with hundreds of employees.

Dave is the former president of CWM Environmental, which he led for 23 years before selling to a Goldman Sachs portfolio company. He also co-founded 120Water and owned Armstrong Nutrition Management, both of which were successfully acquired. Today, he works through his firm Rimer Hill LLC to advise and invest in businesses focused on operational and strategic growth.

Bill: Thank you for joining the Missing Half podcast, where we're discovering what's missing in manufacturing and B2B marketing. Today, we're continuing our wwners and founders series, and I have a very special guest. Dave Kohl, thank you for joining us today.

Dave: Sure. You're welcome. Thanks for, inviting me.

Bill: Absolutely. And thank you for hosting us here today in this building. And, your people have been just marvelous and, very, warm and hospitable to us.

Dave: Good. Thank you.

Bill: Dave, if it's okay, I would like to go back. You told me a story. You're a serial entrepreneur, right? I'm sorry. We both have the same malady, disease. Take me back to the run in the mailbox. If you would. If you remember, the story told me about going for the run and getting that check in the mailbox.

Dave: Oh, yeah. I left corporate America. I had a pretty good paying job. And and went back to a company I purchased. With four employees. It was May. And I didn't have enough money to cover payroll, and I didn't have a line of credit. I didn't even know what a line of credit was at that time. So I just I kind of got up from the desk. I put a call in to, Jack Doer, who was the headhunter, and then went for a run and, came home. He called me back, said he would, he had a bunch of jobs for me if I wanted them. These were VP of sales and marketing type positions, and, went into work in the morning and, you know, in the mail came a $4,000 check, and it covered payroll and here we are, what, 25 years later?

Bill: Isn't it amazing, though, that most entrepreneurs' stories have that moment? Have that. I mean, white knuckle.

Dave: It was over. I couldn't, I did payroll then too. Like I ran QuickBooks. I did the payroll. I, I knew the numbers, and I'm like, we don't have enough. And, called Jack back and said, hey, I think I'm going to keep trying this and. Yeah.

Bill: What is it about, and this is really just about entrepreneurship and about, you know, starting and founding. What is it, that kept you going at that moment?

Dave: Oh, you just, you want to win. It's a it's a desire to win. It's sort of like, I don't know how to explain it. It's not even the money necessarily. It's just the the adventure. And I like to win. And, I think over the years I surrounded myself with people that were better than me. You know, it was kind of like playing hockey as a kid. You, you got a winger or center that's better than you. You get them the puck. Right. And, that's I learned that a long time ago, and and, you know, my dad told me one time that, you need to know everything everybody did in business, and I said, I. If I do that, I'll never grow. I can't do it. And, over the years, are people I hired were better than me at the job I did. And I think that's how we were successful.

Bill: So when let's fast forward a little bit. So we had that moment, that run that call to the headhunter, that check. And then 20 years later, that business you exit. Maybe talk about that journey, with CWM and how that all played out.

Dave: Oh, it's, you know, Mike Winterhalder, my my mergers and acquisition attorney and friend and hunting buddy, Ken Durret, my CFO. Phil Kentall is my investment advisor. So some pretty sophisticated financial and legal people said it's time to take some money off the table. You know, we had Armstrong Nutrition Management, 130 employees. CWM, 100 employees. I was a co-founder in 120Water Audit, that had a few hundred employees. We had some real estate because, as you know, banks like bricks and mortar. So over the years, we we we did as they required or requested. It was just time to sort of like a farmer, maybe time to cash out some of the assets in the land to, to get a little cash in the bank. So that was probably the short, short, quick answer to how we did that.

Bill: But an amazing, journey from four employees. You running QuickBooks, that white knuckle moment to that first exit. With CWM.

Dave: Yes. That was, September of 22, I believe.

Bill: Excellent. Whenever you think about the other ventures you've been involved with and are still in some of them, you still have, interest in. Maybe talk a little bit about Armstrong and then 120, if you would.

Dave: Well Armstrong, I never thought anybody ever want to buy it. Like, I just it's a sort of a niche business. You know, the neat thing, it was CMS, you know, demanded or CMS regulated. So you had to you had to comply with the center for Medicare and Medicaid Services as a hospital nursing home health care provider. So we did have a niche, but when one of the companies looked at, we sent the QuickBooks, actually it was, was a higher end version of QuickBooks I can't think of than the I can't remember now, anyhow, Empower or something like that. They came back to us and said, hey, what? What's this Armstrong Nutrition dietary company you have? And we told them, they said we would be interested in buying that. And so March, the following March of 23, we sold to DiningRD, owned by Health Technologies Incorporated. Evolution Capital. We gave them a number and they agreed. And, that happened pretty quick.

Bill: That's excellent.

Dave: Yeah, yeah. So that worked. And then the following December 120Water, I was approached by Edison Partners. I was a 20% owner of that company. We sold 56% or 61% of that company. So three, three P.E. exits in about 18 months.

Bill: So you kind of got into this new habit, Dave, right? And then you kept doing that.

Dave: They rolled. It evolved. Yeah.

Bill: When you think about those three companies, my understanding is they are, two are somewhat similar, but 120Water is very, very different in that 120Water was really more of a marketing and demand acquisition company, whereas CWM and Armstrong are more in the compliance and.

Dave: Reservist or business regulatory driven. Yeah they both, it was, it's interesting. You know, they kind of work in reverse. But they both were CWM was, you know, Department of Environmental Protection mandated in PA and EPA in Ohio. And then every state has it, it's all regulatory driven, and permits, drinking water, calendars, monitoring calendars. The same with the dietary was driven by CMS. You you had to comply. So it was interesting. They they sound a lot different, but they a lot of commonalities. 120 is a SaaS or, software as a solution play, to help water authorities solve their lead and copper issues.

Bill: So when you think about those three companies and so the the Missing Half podcast is about marketing and growth. Do you see the different role that marketing may have played in those businesses, and to what degree? Like it feels to me like CWM was you had a very defined market. You have a very mature market. There's not a lot of new players coming in and out.

Dave: No, the average operator’s my age. Yeah.

Bill: So they're again and these are folks who are in those positions for many, many years. So we have that at CWM. And when we think about Armstrong, there weren't a lot of new market entrants, probably a pretty defined mature market. And then they're mandated to deal with the situation and your service provider.

Dave: They had to have us.

Bill: 120Water, though that was a little different, where you had to have a much more aggressive marketing team to go out and activate kind of a more.

Dave: Well your audience is older. To get them to use software was more difficult. They sold a new solution. So yeah. I, I do think that, teaching old dogs new tricks and stuff, a lot of these guys that use that software, you know, that's a that's a big undertaking. And and it worked. I think, I think that company has 14% of the national market. You know, if they were Procter and Gamble, they'd be jumping up in the air, clicking their heels together. Right? I think there's 70,000 roughly water systems in the US. And I think they have nine thousand of them.

Bill: That's excellent. So when you think about there's a there was a more of an educational, a marketing component to 120Water because it was truly new.

Dave: Absolutely. They were they were very strong at sales and marketing. Honestly, a company like yours would have been great to have as we were growing, because you get a person that knows marketing, but they know one facet of it, and there's usually junior, you know, we hire somebody out of college. It's a it's just such a diverse skill set that you need a company to support that. I don't think, I'm not saying you don't have a marketing person. You need somebody as a focal point or a center for, for handling that. But a lot of those are things that companies like yours would. You just, it's invaluable.

Bill: When you think about the, not to get into the specific numbers, but when you think about the differential in the exit multiples, did you see where marketing had, or could have had a better impact on some of the exits?

Dave: Absolutely. Okay. I think they value it more as a as a purchaser or buyer. I think you'd have more rapid growth. You'd be bigger. And and it also shows some sophistication, you know. Well, you know, if they look at you and they see some audited financials that build sophistication, they share some organizational structure, sophistication, marketing, we were probably weak in those areas. Had we had a stronger, we might have valued more. I to your point, probably.

Bill: One of the things I think that when we look at the PE in the M&A space is we have a lot of folks who work at those firms and are putting together those deals, and they're very like, very skilled and very talented at the financial construction of deals. They know how to pull levers. They know how to manage expense. In some ways, they know how to leverage operational efficiencies.

Dave: They're all sharp. Like, I don't think I met one that wasn't pretty on on point. Very smart.

Bill: Very good at what they do. One of the things I found through this podcast and talking to folks in the M&A community is as soon as you move out of that world and you move into the marketing inorganic growth world, it's, it is almost like a foreign language.

Dave: Because they understand the need for it, but they don't know how it works. Right. And they’re done, really. You know, they've sort of got, they’re like a waitress. They got their tip and they move on. Right. So, so now you're standing there going what do we do next? And I think a company like yours for Metiri, DiningRD, 120 not as much because a lot of those folks, that's where they came out of. They had that skill set just innately. But but that's an unusual situation. Most companies don't have that. And again, they have a junior marketing person that knows one facet of marketing when there's, you know, maybe a dozen facets to marketing.

Bill: Well and one of the the theories that we're bringing to market, through one of our companies, one of our subsidiaries at 50 Marketing, is that earnings, EBITDA, and exit multiples can be impacted immediately in deal construction and in execution and in private equity and mergers and acquisitions. And I think that what we've seen over our history in some of the clients we've had, and then certainly just in talking to folks in the market that a lot of the folks who are really sharp put together these amazing deals, and then as soon as they have to turn on that organic growth leader, lever, man, they are just struggling right, they’re in trouble.

Dave: So, well, Schneider Downs did our deals and they were spot on. Good, good group. Very smart, efficient, managed the process. We had we had 43 companies request, I think it was called a CIM. Curriculum or circular for information memorandum or something like that. 17 companies made offers. We've met with five on CWM. As I mentioned, one of those companies came back and paid the price we asked for Nutrition, no questions asked. So so these guys were great. But I think to your point, once once you’re through that process, whoever buys that company, what do they do next? What's their next move? I think there's a need for a a marketing firm that can help them with all facets of marketing.

Bill: Dave when you think back through. So not only, have you exited some businesses, but you've also, in some of the businesses, stayed on for a period of time to help support them in management. What do you see as some of the biggest challenges that these companies face, like post?

Dave: Right. You don't know what every, a lot of these are called roll ups. Right? So you have multiple sites that do varying things. It's all in the same sector or industry, but they all do it differently. And I, one of the biggest challenges is to market that. How do you, you're not necessarily selling, you know, a whopper in all states. You have a whopper in PA, you have a, you know, a Big Mac in, you know, Illinois, you have, whatever, you know, Kentucky Fried Chicken in Michigan. You don't have the same thing. So the challenge is to get all that under one umbrella and figure out how to present that to the marketplace. So I think I think that's a big challenge, is figuring out what every site does and incorporating that into a marketing plan.

Bill: I think that's especially an issue in the mid-market. If you're looking at really, really large companies that are very, very similar. I think in some ways M&A is easier and roll ups are easier because they're very similar in what they do. But when we think about the middle market and you think about companies that do ten, 20, $30 million, nice EBITDA, but, like they're performing well, but they are unique. And unique, not only regionally, service offerings, still within the same vertical, but I think that becomes a challenge, to kind of rectify all that and, and pull it together. What do you see as far as culture? Like one of the things I think you had to have built at CWM, and at Armstrong was an amazing culture.

Dave: Yeah. We had I think we had a strong culture. We had a really solid HR person that, that had moved home to take care of her mother. And, I always forget if she worked for, Bank of America or JP Morgan, but one or the other and, she was a, you know, high end executive, so so she helped us with our culture and actually cared. So you had a, had a, a sense of camaraderie. You know, I think I think I help with that. We we we, we cared about employees. We we showed it, and people would, you know, the guys were on the job site, and they were supposed to go home at three. But they'd be done by six if they stayed. They'd stay til six and get the job done. And you can't. That's invaluable. Just it's it, this drives profit margin. It drives EBITDA, all the things that you need as a company, because the individuals that make a thousand decisions that you can't be a part of are making good ones or ones that you would make, and that's a, that's a real strong cultural advantage.

Bill: How do you see, these roll ups struggling with culture? I mean, it's.

Dave: Right, it's because everybody, every site's a little different. The overall company doesn't have its own brand yet. That's where marketing would help. I mean yeah I think to your point, those are issues that have to be solved as you do roll ups. And that's something that is still not solved or repaired. I'd say in a lot of these companies.

Bill: One of the things we've seen is companies can use a mission and vision and value, and a brand promise to really rally everyone around. So whether it's they're trying to recruit, they're trying to communicate to their current staff, they're trying to communicate to their current customers, potential customers. If there's a consolidated brand, a consolidated identity, and we've been seeing, more movement in the marketing space, certainly that's outward communications. We need to have videos. You need to have, social media, all those touch points.

Dave: Well it’s evolving. Right? Every every day, week, month. It evolves. Yes.

Bill: The the old, I remember in, business school they talked about, I'm going to get the letters wrong. M-B-W-A. Management by walking around. And that was effective whenever you have one plant and you, like, went to that plant every day. Today that is done through social media, that's done through those touchpoints that go out consistently or, a video that's played on the plant floor or in the break room. Those type of –

Dave: The workplace has changed.

Bill: Yes. Yeah, absolutely. So I think when we look at culture, that's another issue. What are any of the other challenges that you've identified that you see in the M&A space? The PE space, that you think, maybe should be addressed?

Dave: Well, I've noticed the sales and marketing components that they struggle with. I think operations is implied, it seems that they bought the company because that works pretty decent. The challenge is how do you sell and market that new entity? I think that's a big thing. You know, there's common things like economies of scale, purchasing, consolidation. Those are things that, that, that I think PEs and, and, and accountants and financial people know how to do the things that they don't understand is, is the, the, the call it soft touch stuff, the HR, sales, the marketing, thing, things that really augment the business.

Bill: Whenever you built CWM and Armstrong, how much did you know the numbers?

Dave: Infinitely. Yeah. Ken Durret came to us in 2017, and, the my biggest take home message from him was gross margin. We weren't charging enough. And I think that's a common mistake for startup businesses and smaller businesses. You really need to, everybody's reluctant to raise price or change price. You know, we had a 5%, price increase every year, year in, year out.

Bill: That's amazing.

Dave: Yeah. You know, I think Pennsylvania fishing licenses went from $22 to 40 bucks one year. People, people were jumping off bridges, you know, going nuts. Had they raised at 5% a year, they'd have been at 60 bucks. And that's what we did, a 5%. Really. It kept you at or above inflation except for a few years ago we were below. But by and large, over 25 years we, and our costs go up right. Chemicals go up, labor goes up, insurance goes up. That that would be my biggest piece of advice would be it's okay to charge a fair price.

Bill: Whenever you were in the numbers, how much time did you spend educating your team on the numbers so that whenever they were making those thousands of decisions a day that you couldn't be involved with?

Dave; Their whole compensation structure was based on those numbers. I mean, besides their base pay, but they knew the numbers as well as I did. They knew gross margins. They were they were they were incented on gross margin, incented on sales. Because even if you’re operations, your work goes up, you're hiring more people. You get busier. So so we had a 50/50 bonus for most of the, you know, the, the managers and above. They would get a bonus on gross margin and a bonus on growth. They didn't necessarily do the growth, but they they did more work for the growth.

Bill: And they supported the growth.

Dave: Yes. You know, the the average person, if they got an additional certification, they did something above and beyond, then they'd get a buck or two, an hour or more. Then there was merit, or not merit… increases and there'd be just annual cost of living adjustments.

Bill: No that's great. I think what we've seen in talking to owners and founders a couple of things, especially those who have grown really, really well and exited. They've known the numbers. They built teams, they built a culture, they incented their employees and made sure that, you know, they had a cohesive unit.

Dave: Yeah, there was no there was no secrets. They knew the, they knew the gross revenue of the company. They knew what their business unit did. They know what we did overall, they know the profit. They'd be involved in the decisions on what we’d purchase, what was the next acquisition? What what what are we going to buy? What do we need? You know, they were very involved.

Bill: A message, maybe, for some of our younger listeners. We have some students, some who are just getting out of college, that type of thing. One of the things I think that is happening with our youth today is they go on the internet, they see social media, these influencers and some of these people who have caught lightning in a bottle. You know, they're 24 years old and they're on the yacht and drive the Lambo and live in Miami.

Dave: Listening to Steely Dan.

Bill: Yeah, you know, doing. Right. And that's most likely not going to happen for ninety-nine.

Dave: Yeah, top one percenters. Or .01. Whatever it is. Yeah.

Bill: Maybe talk about how you know you built this over a long period of time and you were in the literal mud.

Dave: Oh yeah. Like I, I work for Abbott Laboratories and I was a young man and, I, I, I was a number one sales rep in the, in the, in the company, a number one in the region for multiple years. Went to Presidents Club. Everybody wanted to know what I did. I just got up early in the morning. I'd see my customers at seven. I’d take them to breakfast. They never saw a sales rep before 9 or 10. Right. Or they need a kid. I could fix equipment. You know, I'd get on the phone call after a while. I was like the tech. I just, there's no other way. You roll up your sleeves and you go work, and they they recognize that. And, I think that carried over into CWM and Armstrong. I did the work. We'd be at work at 6 or 6:30. I'd work till five. Go grab the soccer next, you know, go coach soccer. Get up the next day and do it again.

Bill: No. That's awesome. Yeah. And whenever, you know, when we see these, success stories online, they're fast forward, right.

Dave: Yeah. Don’t show all the the heavy lifting. Correct.

Bill: And even when you started CWM in the early years, I mean, you were doing the work.

Dave: Oh yeah, I ran, I ran I did the micro. I did, yeah, I did testing, I actually I did, I ran the AA, some. Ryan did it mostly, but I did I did everything. Matter of fact, they didn't have ICP back then, which, that was a bone of contention with the DP. I said, how can I be certified in something that didn't exist when I went through school and learned? But yeah, I did all that stuff. I, I hung off a, stairwell in Homer City getting stack samples. You know, I was down in manholes, I cleaned out digesters. I would be out getting stream samples. I yeah, I mean, I, I mean, I probably was far from the best at it, but I did it, so I know what people do. I know how hard water is to work with, and and you know, November to about March, cold, frozen takes you hours to get stuff working. So I get that part of it, and I know how hard they work.

Bill: I remember, a Christmas Eve, we were, I was helping my father, my uncle and my cousin. We were, managing a, water treatment facility, for, AMD. And the pumps stopped. Florence. And the clarifier stopped spinning, and there was ice everywhere, and it was so cold. And we worked on that thing for ever. But it’s what needed done.

Dave: Somebody had to do it. Right.

Bill: It’s what needed done. And, Yeah. So you got to get dirty. I think for some of the younger the students who might be listening or early in their careers, it's okay to take the job, to get the job, to get the job. You're not going to be the president.

Dave: You’ve got to start somewhere. Just get started.

Bill: And work hard. Yeah. And I think that's a message that is not prevalent today in the market.

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Today's episode of The Missing Half podcast is brought to you by 50 Marketing, a full service agency built for B2B and manufacturing companies. Our team provides tailored strategies and services, from branding and websites to content, social media and video to help you grow with clarity and purpose. Visit 50Marketing.com to schedule a free consultation.

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Bill: So Dave, today, you have a number of businesses, you have another business, you have another business you started Rimer Hill. Maybe tell us a little bit about that.

Dave: Yeah, that's sort of the, it’s an LLC. It's kind of a family office. But we we use that company to, we bought the ranch in Colorado with that, we have some properties we've developed. It's, it's how we manage a lot of the investments. Ken is the CFO. He handles a lot of that stuff. I'm on a couple boards. Yeah, it's it's interesting. We've we've been the become somewhat of investors. Yeah, I don't know. We all we operate a little bit of a real estate company, which I mentioned the bricks and mortar. We probably have 50,000ft² under roof that we we rent out commercially.

Bill: Nice. Have you seen that market soften with Covid and?

Dave: Definitely. Yeah. Yes.

Bill: We used to have about 400,000ft of real estate. And that we exited that portfolio largely, over the past 15 years. And, we are not bullish on that.

Dave: Well, I built this building we’re in, hoping to lease or sell it, and, it has not moved yet, but, we we're getting some interest. It sure would be nice to lease or sell this building.

Bill: Well and I think niche real estate still works, but broad portfolios, you really have to have your finger on the pulse and understand that movement, because there's a lot of, a lot of movement. The other thing is if if you don't have to refinance now, any of those properties, you're in a probably...

Dave: 7% mortgage rates or 6.5%.

Bill: But a couple years ago it was..

Dave: We still have 2.75s. Right. 3%.

Bill: Yeah. You can you can sit on those for a long time. Because inflation will.

Dave: They're making more money in the market. Right.

Bill: So Dave, when you think about next steps, you're running Rimer Hill, you're actively looking at other investments. What's kind of the what do you see as the next several years in your career?

Dave: I don't know yet. I, I think there's a business opportunity out there that we'll find, whether it's SaaS, whether it's operations of some sort. We'll probably do something with Rimer Hill. Down the road. We set that up for a reason. Some of these investments will start to pay out. You know, we have some money in Jacksonville, Florida at a at, a continuing like a, not a retirement community, but but it has, you know, different settings for, for people over 55. Colorado Springs are renovating an apartment building and put some money in that. So we've diversified a little bit. We've got some money in some start ups. A company called Catalyst does, point of sale software for restaurants. Fontus Blue is a software that I, I learned about through, some of my contacts in Pittsburgh water. Ron Schaefer, Sammy Stitt at Westmoreland. It does automated, it takes something was very tedious for us to do optimizing chemical edition. So Pittsburgh water saved $1 million in chemicals in one year using this software.

Bill: Wow.

Dave: Yeah. Because, you know, you mix up your chemicals and you kind of, you know, you lick your thumb and that oughta do. Well, well, you're overdosing or under dosing, usually overdose. And, that's just a, I think for an operator, it just takes a lot of that time because you got as an operator, you got a million things to do. Right? The last thing you want to do is sit down and do a calculation. There's a thing called jar testing. This software has AI, which does the jar test for you. I think I've done a jar test once in my career. You know, I've been licensed for 17 years. You're supposed to do it all the time. No one does it. You know, maybe an engineer does it when they set your plant up, but it optimizes your filters. You know, your clarifier that that froze. It optimizes the the the filtration and, and and the floc that you need to make it work. No one does it. Now, all you do is you plug in your, your, your test parameters and it does it for you.

Bill: Amazing.

Dave: It's it's a to me, it's a no brainer that that thing's going to go like, hotcakes. So those are some of the things that we're doing. But yeah, we're looking for the next, you know, the next adventure.

Bill: That’s great. Dave, if you had, some parting comments or thoughts that you were going to give, maybe, a young entrepreneur, what would those be?

Dave: Well, I think you have to chase your passion. If it's a job, it's no fun, right? If it's a career, if it's something you enjoy doing, you'll you'll do it with all, all your, heart and soul. And, that'd be my biggest first piece of advice.

Bill: Yeah, because if you're not going to enjoy that.

Dave: Why do it? You got to do it. It's the biggest, I don’t care what you do in life, it's your biggest chunk of your day. Yeah.

Bill: Yeah. You're going to spend way more time at work. And especially as an entrepreneur. Than you do at home. The wife, the kids, the whatever your pursuits are.

Dave: It has to be something you enjoy.

Bill: So the ranch, we're thinking about, hay, we're thinking about cattle, right? About getting into that space.

Dave: Yeah, yeah, it's been fun. I think we talked early on about, you know, we touch a lot of things but don't really completely get to do something. You know, walking around, fixing pipe, cleaning out ditches, repairing fence, cutting wood, chopping wood. Those are, those are things that, have been kind of nice.

Bill: Well and I think that's probably maybe a second takeaway for young entrepreneurs is you, especially in this digital world, you have to find something. You have to find a tangible connection to the real world.

Dave: It's therapeutic. Yeah, it really does. It helps you. Plus it helps you, you know, your health. You know, physically, mentally huge. I think it's important. Yeah.

Bill: Yeah. Because as entrepreneurs are only dealing with the problems right. Especially the more you move up into management it's it's either not a big opportunity or a big problem. And either way the stress is involved.

Dave: They're all stressful. Yeah.

Bill: Well Dave this has just been a fascinating conversation. I've always enjoyed sitting down with you, hearing your story.

Dave: Likewise.

Bill: And, just watching, watching that, especially over the past several years, just some amazing opportunities and changes for your business. And, we're excited to watch as the next chapters unfold.

Dave: Thanks. Appreciate it.

Bill: Thank you for joining the Missing Half podcast, where we're discovering what's missing in manufacturing and B2B marketing. Like. Share. Subscribe. Have a great day.