Money Rehab with Nicole Lapin
Why Boring Businesses Are Skyrocketing— And How You Can Benefit
22 Nov 2024
PE is obsessed with this one sector right now: boring businesses. We're talking plumbing, pest control, cleaning companies— you know the ones. But this isn't just a move for PE investors; you can do it too. Nicole explains.
Full Episode
I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. There's a hot investment opportunity that private equity has been all over lately. But unlike most private equity ops, this moneymaker isn't just for ultra high net worth people.
For once, the investment market favors the people who like to get their hands dirty and who can see beauty where other people might not. And this big opportunity is boring businesses. I'll start by giving you one cuckoo bananas example that really paints a picture of how red hot this industry is right now. And this example is plumbing.
To really let this sink in, I'm going to give you a little backstory. All of the geniuses from the big MBA programs, we're talking Wharton, Stanford, Harvard Business School, have been gunning for one job, Alpine Investors CEO in Training Program. The acceptance rate is itty bitty. It is 1.6%. And to put that into perspective, Harvard accepts 3.6%, which sounds like a breeze compared to Alpine.
But the CEO in Training Program is considered an elite fast track to becoming a CEO. At least 55% of graduates go on to helm companies. So what secret sauce does Alpine have to cultivate the leaders that will take over the most important businesses in our world today? Are they telling CEOs in training to go hit the books? To debate founder mode versus manager mode? To pull all-nighters?
No, they're not. According to Alpine's chief talent officer, Tal Lee Anderman, these baby CEOs are learning by doing. As she puts it, quote, you're moving from Yale Law School and Harvard Business School to Jackson, Mississippi to run a plumbing company. So you know how some people say getting an MBA is like throwing money down the drain? It might literally be true.
Alpine didn't create this program out of the goodness of their hearts or because of a passion for plumbing. They had a problem to solve. After snapping up smaller, investment-worthy, boring businesses like plumbing companies, they needed leaders to actually run them. Enter the CEO in Training Program.
While they've turned it into an employment pipeline, Alpine isn't alone in snapping up plumbing companies. According to data from PitchBook, private equity investors have bought over 800 plumbing, electrical and HVAC companies since 2022. These so-called boring businesses have boomed in popularity because they are gold mines.
You may have seen plumbers are being called the new millionaires next door, which is why I'm really leaning into this case study in this episode. But it's not just plumbing companies. Of course, revenue depends on scale, location, and a bunch of different factors. But on average, cleaning companies make $585,000 in annual revenue. Pest control companies make $402,000 in revenue.
Laundromats generate around $150,000 in revenue. And nail salons can also make in the six figures. These boring businesses are ripe to be scooped up by P.E. because many of these types of businesses are local mom and pop types. There's not an Uber for pest control or an Amazon for cleaning services.
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