What are the real drivers behind a successful, win-win deal between private equity and home services companies? 

Andrew Allred, Vice President of FourBridges, sat down with a private equity insider to talk about what makes a business more attractive, common concerns among business owners, and what entrepreneurs can start working on now to drive value for a future sale. 

Watch the full interview, or read our recap below. 

Meet TJ Gaul, Partner at North Branch Capital

TJ Gaul is a partner at North Branch Capital, a Chicago-based private equity firm. After starting his career in investment banking at Baird and spending six years at a larger PE firm, TJ joined North Branch’s founders, Bill Huber and Dan Bauman, as the firm transitioned from an independent sponsor to a fully committed fund.

Today, North Branch splits its focus between manufacturing and distribution businesses on one side and service-based businesses on the other. It’s that second category where TJ spends much of his time, and where the firm has built a strong track record with investments in tree care, roofing, and other residential and commercial services.

How to Make Your Business More Attractive to Private Equity Buyers

The team at North Branch has developed a framework to evaluate the value of any service business. It starts with the market, specifically size and fragmentation. From there, the checklist includes depth of the management team, quality of operating systems, diversity and repeatability of revenue, gross margins (40% or better is the target), and cash-flow dynamics. Each of these factors feeds into the overall risk profile of the business, and ultimately the multiple a buyer is willing to pay.

Team and Leadership 

Of everything on that list, TJ kept coming back to one thing: the team. Not just whether a business has employees, but whether the owner has built a real leadership infrastructure around them.

“We ask questions around what your team looks like,” said TJ. “Who’s really leading the sales approach? Is there a CFO? A director of HR? Do you have a sales manager in place?” 

Owner dependency is a real risk. When a single owner is wearing every hat, the business’s value is essentially tied to one person, putting the entire business in peril if something were to happen to the owner. Investors price that risk accordingly.

TJ described a recent LOI they signed with a services business, which turned out to be a PE investor’s dream deal. What made it stand out wasn’t just the numbers, but that the owners had completely stepped out of day-to-day operations. They had a call center manager, a head of recruiting, regional managers, and GMs at each location. The owners were focused entirely on strategic growth: new markets, add-on acquisitions, and long-term vision. For TJ, this is the ideal profile.

For owners who are still doing everything themselves, don’t panic. There’s still a deal to be made, but expect a lower valuation and a longer runway before the business is truly sale-ready.

Recurring vs. Repeatable Revenue

TJ also highlighted a key distinction for valuations: the difference between a great year and a great business. In the residential services industry, a big storm can lead to a record quarter, but that’s not the same as having reliable customers who return year after year. 

 North Branch looks at revenue through two lenses: is it diverse (no single customer makes up an outsized share), and is it repeatable (customers return without being re-acquired)?

Andrew and TJ worked together on a recent deal with Tree Worx, which serves as a perfect illustration of a real “great business.” Tree Worx served 2,500 customers a year with an average ticket of around $2,000, and roughly 40 to 50% of the business came from repeat customers. In any economic cycle, that kind of diversified, returning customer base creates a floor of demand and stability translates directly into valuation.

TJ also distinguishes discretionary and non-discretionary services. Is your service something that is a want or a need? “If my HVAC breaks, my wife’s not gonna let me wait even 2 hours,” joked Andrew. “I’m calling somebody that day.”

That non-discretionary nature makes tree care, HVAC, and similar categories especially attractive to investors.

>> Learn more about a FourBridges HVAC deal

Increasing Revenue Touchpoints

One of the most actionable pieces of the conversation centered on how businesses can shift their revenue mix to be more repeatable, even if their core service is project-based.

In tree care, TJ pointed to the model built by Boutte Tree, North Branch’s original platform investment. Rather than relying solely on removal jobs, Boute diversified by getting customers onto pruning plans (spring and fall) and plant healthcare programs, which put a technician in front of the homeowner two to three times a year. And with each visit, they have the natural opportunity to spot additional work.

“Getting to the customer’s home as much as you can during the year is important to maintain the stickiness of that customer, and it allows the business to have more opportunities,” said TJ.

More touchpoints mean more revenue opportunities and a stickier customer relationship, which will ultimately drive up the value of a business. 

Red Flags for Private Equity

When asked what makes an investor pause or pass, TJ pointed to a few consistent warning signs:

• Customer concentration: A single customer representing 40% or more of revenue is a red flag. Even at 15 to 20%, North Branch wants to understand the relationship deeply. Above 20 to 25%, expect it to affect your valuation.
• Gross margins: Anything below 30% raises questions about the fundamental economics of the business and the value it delivers to customers. North Branch targets 40% or better and even has one portfolio company running at 80%.
• High ticket dependency: If five to ten jobs make or break your year, the business doesn’t have the volume or diversity to absorb a bad quarter.
• Owner dependency: If a business can’t function without its founder present, that signals risk that investors will factor into any offer.

Differentiating Your Business Before a Sale 

So what separates a good service business from a great one, and what can an owner do about it over the next two to three years?

TJ’s answer: team, systems, and sales approach.

Josh Sparks, the founder of North Branch’s roofing platform, is the gold standard for developing systems. Josh had built an operating infrastructure that let him manage the entire business from his phone. Sales performance, production output, and marketing results are all visible in real time. That data-driven foundation is what allowed him to step back from day-to-day management and focus on growth, and it’s what made the business scalable when North Branch came in.

On the sales approach, TJ pushes back against the high-volume, one-call-close model that’s common in home services. The businesses North Branch finds most attractive are the ones that operate as trusted advisors, companies whose customers feel that they’re being looked out for rather than sold to. That approach shows up in the numbers: close rates above 50% are achievable, and customer retention is significantly higher.

For owners thinking about what to work on now, TJ recommends getting plugged into peer communities like Vistage, which hosts monthly roundtables with other successful business owners who’ve been through sale processes and can share real-world experience. Understanding your growth levers, building toward repeatable revenue, and investing in the right people all take time, so it’s never too early to start preparing for a future sale. 

Common PE Fears: What happens after the sale? 

Andrew closed with a point that comes up constantly in his work with business owners: the fear that private equity will come in, fire the team, and gut everything that made the business successful in the first place.

But in actuality, the entire investment depends on the people already in place. You can’t deliver great service without great people. You can’t scale a home services business by replacing the team that built it.

“That’s the opposite of everything you just said. You cannot do these jobs without the right people,” Andrew noted.

The reality is that private equity needs the team as much as the owner does. The systems, the culture, and the customer relationships are what’s being acquired, so protecting and scaling them is a key ingredient for success and growth.

To learn more about private equity and home services businesses, reach out to the FourBridges team.