Beyond Control: John Paolella

TONY HILL

John, welcome to the second installment of Beyond Control, our interview series where we profile current and former founders who have worked with Trivest’s Growth Investment Fund (also known as TGIF) and showcase their experience working with us. Thanks for speaking with us.

I know it’s been almost two years since your acquisition by Incline Equity Partners in Pittsburgh, but congratulations on the sale. It’s hard to believe Jon-Don was TGIF’s first exit. Today TGIF has made non-control, growth investments in a total of 19 companies!

Let’s get started. I’d like to go back to the beginning. Can you tell us a little bit about how Jon-Don got started and how it got to where it is today?

John Paolella

Jon-Don started at our kitchen table in a 900 square-foot home in 1978. It was my Co-founder Nick’s idea. At the time, we were both working together for someone who was obviously the wrong person.

Successful partnerships are rare and frequently end in disaster. Nick and I were cousins and friends before we started Jon-Don, and we didn’t want to mess that up. We figured out what it would take to make ours work. We then decided that we would build our business by using that same philosophy with our employees, customers, and our vendors. We would think of them as partners. Their success would be ours. That and two $3,000 home equity loans were the foundation upon which we built Jon-Don.

TH

Tell me, what was the backdrop leading up to partnering with Trivest in September of 2017? What objectives – both professional and personal – were you trying to accomplish, and why did a non-control, growth investment make sense at the time?

JP

I knew Jon-Don had a LOT of growth potential five to ten years out; however, I wasn’t really sure what role I wanted to play in going after it. I was 60 years old at the time, but I was already looking ahead to 80 and asking myself, if I make it there, what do I want to make sure I’ve accomplished? The answer was always, a lot.

So, on the one hand, I felt that I needed to be a part of Jon-Don to help take it to the next level and capture the additional upside I knew was still there. On the other, I needed to have some type of an exit strategy so I could begin transitioning to the next stage in my personal journey. Trivest’s TGIF fund allowed me to have the best of both worlds.

TH

We hear that all the time. In fact, that’s exactly why we launched TGIF in 2016. There was a clear and present unmet need in the market for business owners who want to (a) take some chips off the table and (b) gain a growth partner, without (c) giving up control of their business.

What specifically about Trivest or TGIF ultimately led you to work with us?

JP

What jumped out at me the most was that Trivest deeply understands founders. That was important to me. I mean, if we’re going to be partners, they need to really know who I am.

I also believed, correctly, that they could take us to the next level. Yes, we had been growing organically for 40 years as a mid-sized company in a sprawling industry, but we also knew there were things we just weren’t great at. For example, acquisitions were something that were super important to me. We had done a couple beforehand, but I felt that, in both cases, we lost focus on the organic growth side. I wanted to be able to do both – organic and inorganic growth – without a negative consequence.

Trivest made this happen. They helped us successfully acquire and integrate two important add-ons and to continue growing organically. They also helped us with our management team. It was very strong, but we knew we would need to add key roles to it as we grew.

In short, it boiled down to two things:  first, Trivest’s ability to relate to – and work with – who I am as a founder and, second, their track record of aggressively growing mid-sized companies like Jon-Don as a partner, not a boss.

TH

Thanks, John. We live and breathe our founder-friendly approach to investing, but it’s always nice to hear someone else say it. What can you tell us about your experience working with the TGIF team specifically?

JP

First off, full disclosure: I love beating the drum for Trivest and the TGIF non-control team, in particular. We were blessed to work with Jamie, Dave, Amir and Arturas. We couldn’t have had a better team at our side.

In terms of our experience, it was like going from growing a business steady-Eddie for 40 years to, from one moment to the next, suddenly being infused with this super bright team with a ton of ideas. And, from there, things just went into overdrive.

Also, I’d point out that we never felt like we were being told what to do. There were really never any disagreements. Like true partners, Trivest was offering advice and helping us make decisions that they thought were in the best interest of the company. There was no feeling of being under anyone’s control or anything like that.

TH

That’s why we named this interview series Beyond Control! Where did the TGIF team add the most value?

JP

Well, to begin with, our mutual goal going into the partnership was to increase the value of our equity by more than three times. We ended doing significantly better than that. So, mission accomplished on that front.

More specifically, a few things come to mind. First, while I knew I wanted to continue working in a more strategic capacity, I also knew I needed to find my replacement on the executive team ASAP. So, that’s probably the first major thing Trivest helped with: finding the future CEO for the company. And we were very successful. Cesar Lanuza was the perfect candidate for the job.

They also brought in a top-notch board member to the team in Jim Minarik. Jim really, really helped us focus on key objectives – which was phenomenal – and elevate other members of the executive team by working with them one-on-one.

Trivest also helped us with sourcing private label products – something that we weren’t doing on an international basis – and expanding geographically. Additionally, as I mentioned earlier, they helped us acquire and integrate two companies that further fueled our growth.

TH

Your partnership with Trivest was relatively short – just a hair over three years. In December of 2020, we exited Jon-Don and you went on to partner with Incline Equity Partners in Pittsburgh. For a lot founders, the prospect of selling their business is daunting. Tell us, what was the sale process like? How did Trivest help?

JP

Great question. With the unknown, there’s always fear, and our sale process was something that we knew very little about. Fortunately, long before we even began speaking with investment bankers, Trivest had already been doing tons of exit preparation with us.

As a result, going into the process with Trivest, there really just wasn’t the fear that you would normally have. Trivest brought us a group of three top-tier investment banks to pitch us – all three of which were great options – and helped us pick the right bank.

On the negotiation side, Trivest was invaluable. You can just tell, they’ve done this hundreds of times.

You know, you work a lifetime building a business and the sale process is inevitably going to be incredibly emotional. Our team at Trivest, when it came time to sell, they just really look at the whole process in a very strategic, level-headed and logical manner. It’s reassuring to have that kind of team on your side helping drive the best outcome.

TH

As you look back on your story arc and, in particular, the story of Jon-Don, what advice might you give business owners contemplating a non-control investment vis a vis other options?

JP

Well, if you believe that there’s still significant opportunity to grow your business, a non-control investment is definitely the way to go, for two reasons:

First, if you partner with the right, growth-oriented firm (in our case, Trivest), they’re going to help you strategically, tactically, and in a host of other manners unlock that growth and get you to the next level. And, when they do, you – the business owner – disproportionately benefit from all that value creation, because you still own the majority of the equity.

Second, and admittedly this is a little more philosophical, but, when you’re operating a business day-to-day, there’s this constant level of stress on you – sort of like a fan running in the background that you get used to – that you may or may not be aware of. In other words, there are stress levels you’re aware of and stress levels you don’t really notice exist.

Anyhow, when you take some chips off the table for the first time, it’s as if that fan noise in the background just turns off and all you feel is… calm.

It’s an awesome experience.

TH

Well, John. We’ve arrived at my favorite part of these interviews. As you know, we always like to end these conversations with a little humor. What’s a funny story (you’re allowed to share) from your days in the cleaning products distribution business? Do your worst!

JOHN PAOLELLA

Ha! I have hundreds of those. Unfortunately, 99% are not for public consumption!

I guess one that’s near and dear to my heart goes all the way back to the 80’s, when it was just my business partner Nick and me. We were moving out of the 3,000 square foot warehouse we had been subletting into our own new building, where we were still building out our new offices. And, when I say “we”, I literally mean it was Nick and me doing the build-out.

Anyway, one day, I’m taking down a fluorescent light fixture while standing on an aluminum ladder (BAD idea by the way)! Nick is nearby. As I went to reach for the light fixture, I hesitated for a moment, looked at Nick and asked, “hey, is the power off?”

“Yes, I turned it off,” responded Nick casually. I wasn’t totally sold, so I asked again, “Are you sure the power is off?” Nick once again confirmed that the power was off.

As I reached for the light fixture again, I looked back at Nick and, for the third time, asked, “Are you absolutely sure?” Nick, visibly frustrated, shot back something along the lines of “Yes, it’s absolutely [expletive] off!”

Ok, so I reached for the fixture and, as soon as I made contact, instantly begin feeling jolts of lightning running down both my arms. I of course start yelling and promptly fell off the ladder badly.

When I came to, Nick was standing there and deadpanned, “Hmmm. Guess that was the wrong fuse…”

On a serious note, I was fortunate to have a business partner for 40+ years that was 20+ years older than me. A partner and friend that would share his wisdom and make laughter a big part of life.

Tony Hill

John, thanks again for your time and insights. It’s a pleasure to catch up after almost two years. I speak for the entire Trivest team when I say that we loved working with you and consider Jon-Don one of our very best investments in all regards.

I look forward to crossing paths again soon. Until then, wishing you health and continued success in the next phase of your, and Jon-Don’s, journey.