Neighborly is a group that has slowly but surely edged its way into more and more home services as the years have passed by. It’s been able to do this through organic growth that stems from the quality of its offering, and a fairly aggressive acquisition strategy that has seen Neighborly acquire the likes of iconic London-based brand, Pimlico Plumbers.
Neighborly wants to ‘own the home’, and be a household’s one-stop-shop for all things home services; we spoke to CEO and president Mike Bidwell on day two of the International Franchise Association Annual Convention 2022 to get an understanding of the brand’s strategy, and where it plans to go.
RP: Why has acquisition formed such a great part of your overarching strategy?
MB: What we’re setting out to do is build a marketplace for home services. If we back up in our history about that seven, eight years ago, we could see that people were shopping a lot online, and we thought that was going to extend to services.
At the time, I think we had maybe seven brands, we thought, well, ‘we’ve got a number of brands here, but it’s not enough for a marketplace’. If we wanted to be a marketplace, we need to have that fulfillment for the customer. At that point, we got quite a bit of clarity around our strategy, what we wanted it to be, and our sandbox is repair, maintain, and enhance homes and properties.
So that’s what we want our marketplace to look like. And we went on an acquisition binge to get fulfillment within that sandbox. Today, we’ve created that online marketplace and neighbourly.com.
“We don’t want things that are kind of too infrequent, niche or just unusual services. Once in a lifetime purchases are probably not for us, for example roofing replacement. That wouldn’t be us”
In September 2021, we rolled out a consumer app, where people can find lots of things they need for the home and their handy tips in there and that kind of thing, and they can find our services. Acquisitions was really about fulfilment for the customer.
RP: How did your acquisition by KKR allow you to grow at a faster pace? And what benefits do you think that private equity brings to franchising?
MB: I’ll start with the second part of that question, the benefits of private equity to franchising, I would say first, it gives founders a great option for exiting the business and getting a return on their sweat equity.
I think private equity has been great for franchising, and I say that because my observation is that founders risked their capital and put in a tremendous amount of time, maybe a decade or three to build something up. Once they get something of substance, they kind of move to a safety position, they start to protect what they have and push less hard. And the businesses grow slower.
Private equity doesn’t work that way. Private equity has got to keep the pressure on, it’s all about growth, it never gets lazy and never gets comfortable.
If you’re an employee in the company, you want a company that’s growing, because that creates more opportunity within the organization. So for that reason, I think private equity has been very good for franchising.
How does KKR help us to grow faster? I don’t know that it’s necessarily faster, although, we’ve been growing very fast. What I would say is, their connections are amazing being one of the top tier private equity companies in the world. I’ve had some issues, for example, where I’ve asked them, ‘Do you know anybody in the U.K. that might help us with something?’ This has happened a couple times and 24 hours later, they say ‘call this person’, it’s just amazing.
I would say given their size, we can probably do some bigger things. Bigger acquisitions that maybe we couldn’t have done before.
RP: Are there any aspects of home services that you haven’t yet ventured into, but are planning to?
MB: There are more home services that we’d like to get. We don’t really disclose what they are, but I would go back to highlighting our sandbox that’s ‘repair, maintain and enhance’ our homes and property.
We don’t want things that are kind of too infrequent, niche or just unusual services. Once in a lifetime purchases are probably not for us, for example roofing replacement. That wouldn’t be us.
RP: What new international markets do you want to bring Neighborly’s family of brands to, and are there any regions in particular, such as Europe, South-East Asia or others?
MB: We’re not looking for new markets. Internationally, we are currently in Canada, the U.K., Republic of Ireland, Germany and Austria. In all of those markets, we’re direct franchising, we do have three other markets where we have master licences, and we’re not seeking to do any more of those. It’s not that we wouldn’t entertain them, but they generally haven’t been very interesting.
“We’re absolutely focused on making data driven decisions. In fact, we’ve increased our spend in this area, probably by 500 per cent, over the last two or three years”
We’re more focused on direct franchising. What we’re working hard to do, is we’re hunting in the markets we’re already in, trying to go deeper in those markets, following the playbook that we’ve had in the U.S. over the last four years. We want to fill out Neighborly with more brands so we can get to scale and mass, ultimately creating that marketplace and potentially in other markets.
All that said, we would consider entering another market, but it would be opportunistic, it would have to be something that would be very compelling.
RP: I saw Air Serve’s recent collaboration with XOi Technologies, do you plan to connect all of your brands with technology companies to drive more data-driven decision-making?
MB: We’re absolutely focused on making data-driven decisions. That is a big part of our business, even if it feels a little early stage. In fact, we’ve increased our spend in this area, probably by 500 per cent, over the last two or three years.
Technology will allow us to be more efficient, will allow us to do bigger and more things. The insights that data is now providing us are great and we now have a data scientist on onboard, to understand what’s happening out there in our business and make better decisions.
But we intend to do more about that. We do have an ambition to own the home, but we also want to know the home, probably better than the homeowner. We’d like them to know when they need something for the home before they realize they do.