Private Equity + Power Digital: The Winning Formula for Growth-Stage Home Services Companies

As the consumer services industry continues to evolve, both CEOs and private equity (PE) investors are increasingly focused on identifying sustainable growth opportunities. The consumer services sector, which includes home improvement, healthcare, personal care, and other essential services, plays a vital role in meeting everyday consumer needs. Despite the challenges these companies face, growth-stage businesses have strong potential for value creation—especially when paired with the right strategic guidance and capital infusion.

In fact, the consumer services space is attracting significant attention from private equity firms. The home services market is expected to grow at a significant rate in the coming years, with the US market share projected to increase to $5.14 trillion by 2026, fueled largely by private equity rollups and consolidation strategies.¹ However, as competition heats up, many businesses in this sector continue to struggle with marketing effectiveness and customer data management, which can hinder their growth potential.

As Adam Herman, VP of Partnerships & Private Equity at Power Digital, explains, “Private equity firms are increasingly getting involved in the home services sector because they see a huge opportunity to consolidate businesses through rollups and achieve an outsized return. But that also means more competition, through the deal sourcing process and a more challenging environment for these companies to execute marketing campaigns that will drive growth.” 

Historically, this sector has lacked sophistication in marketing activation and with the interest and increasing levels of competition it is now more important than ever to find the right value creation partner that can propel growth in a competitive industry. 

In this post, we’ll explore the current state of the consumer services sector, the growing role of private equity, and why Power Digital is a critical partner in helping growth-stage companies unlock their full potential. Through targeted marketing strategies and data-driven insights, Power Digital helps companies increase customer acquisition and retention, ultimately driving profitability and positioning them for long-term success.

Relationship Between White Collar and Blue Collar Services

Historically, consumer services have been divided between “white collar” services (such as personal wellness and financial advisory) and “blue collar” services (such as car washes, landscaping, and home repair). These segments often served different consumer demographics, and the operations of businesses in each category were distinctly different. However, the lines between these two categories are increasingly blurred. Companies that traditionally operated in blue-collar sectors are adopting white-collar strategies like digital platforms, personalized services, and subscription models, making them more attractive to private equity investors seeking growth in a highly fragmented industry.

For example, car washes and home improvement businesses—traditionally seen as blue-collar industries—are increasingly incorporating app-based convenience, loyalty programs, and digital marketing to enhance customer retention and acquisition. This trend not only broadens the customer base but also enables a more sophisticated approach to data analytics and marketing that appeals to private equity firms looking to unlock value. Private equity (PE) firms act as key partners for both white-collar and blue-collar businesses by providing capital, strategic guidance, and operational expertise to drive growth, innovation, and market expansion.

Projections for 2025: Growth Trajectory for Consumer Services

As we look ahead to 2025, consumer services are set to experience significant growth. According to projections, the global consumer services market is expected to grow at a compound annual growth rate (CAGR) of 6% through the next five years.² This growth is driven by several factors, including:

• Rising Disposable Incomes: Consumers’ willingness to spend on services—whether it’s home improvement, wellness, or personal care—is expected to increase as disposable incomes rise and the economy stabilizes post-pandemic.
• Technology Integration: The digitization of consumer services is accelerating, from app-based booking to AI-driven customer service and personalized marketing.
• A Shift Toward Subscription Models: As consumer preferences shift, businesses that offer subscription-based services are seeing increased customer loyalty and predictable cash flows, making them highly attractive to investors.

The Cost of Capital: What Happens When Money Gets Cheaper?

One critical factor influencing consumer spending behavior is the cost of capital. If interest rates decline, businesses could face lower borrowing costs, which can fuel investment in growth. When capital is cheaper, both consumer services companies and consumers have more room to spend. This is especially relevant in sectors like wellness, home improvement, and personal care, where discretionary spending is often tied to interest rates and consumer confidence.

For private equity investors, cheaper money means more favorable terms for acquisitions and growth investments. This trend is poised to benefit consumer service businesses looking to scale but needing the right resources to do so.

Challenges Facing Consumer Service Businesses

While the future of consumer services looks bright, companies in this space face several key challenges that hinder growth and scalability:

• Franchisee Measurement Challenges: Many consumer service businesses operate in franchise models, where franchisees may measure success differently than corporate management. Disparities in how performance is tracked can create inefficiencies, making it difficult for PE firms to fully assess value or potential improvements.
• Limited Resources for Expansion: Even high-performing companies may find themselves constrained by limited capital to fuel the expansion needed to capture more market share. Whether it’s geographic expansion, technology upgrades, or workforce investments, scaling requires resources that many businesses simply don’t have on hand.
• Gaps in Nurture and Cross-Sell Strategies: In many consumer services businesses, there’s a significant opportunity to improve customer retention and lifetime value by optimizing nurture and cross-sell strategies. However, many companies don’t have the right tools, data, or resources to effectively implement these strategies, leading to missed revenue opportunities.
• Outdated Processes and Technology: Many consumer service businesses still rely on legacy systems or inefficient processes, which can significantly limit growth. Outdated scheduling, billing, or customer relationship management (CRM) platforms may hamper efforts to scale effectively and meet growing demand.

Low-Hanging Fruit: Optimizations That Can Yield Big Financial Upsides

For many consumer service businesses, there are low-hanging fruit opportunities in technology and marketing that can deliver immediate financial upside:

• Tech Upgrades: Moving from manual processes to digital systems can greatly improve operational efficiency. Implementing cloud-based CRM systems, for example, can provide real-time insights into customer behavior and enable better decision-making.
• Marketing Optimization: Many consumer services businesses have not fully optimized their marketing strategies. Digital channels like paid search, social media advertising, and email marketing can be incredibly effective at driving customer acquisition and retention. By leveraging data analytics, businesses can tailor marketing campaigns to specific customer segments, leading to higher conversion rates and ROI.
• Improved Customer Experience: Simple enhancements to the customer experience, such as improved booking systems or offering digital payment options, can improve customer satisfaction and increase repeat business.

Where Does Power Digital Come In?

Private equity firms and their portfolio companies rely on strategic growth to drive value, and Power Digital is a key partner in this process. By offering solutions from due diligence and thesis validation to value creation, Power Digital ensures that marketing and growth strategies align with investment goals, unlocking value and accelerating growth.

The nova Appraisal Process: Power Digital’s 3-Step Framework

Power Digital’s nova Appraisal process is a three-step framework designed to maximize the value of private equity investments through marketing optimization.

1. Diligence: Accurate Assessment of Marketing Efficiency

During the diligence phase, private equity firms often overlook marketing and advertising costs due to a lack of in-depth marketing expertise. Power Digital bridges this gap by providing a thorough evaluation of a company’s marketing spend, helping private equity firms identify inefficiencies and uncover hidden value.

As Herman notes, “By using our nova platform and analytics, we can pinpoint areas where companies are overspending on marketing or not spending in the right areas. We help them either save money or reinvest it for greater returns, which directly impacts the bottom line and drives up company valuations—exactly what private equity firms are looking for.”

1. Thesis Validation: Roadmap to Achieve Growth Metrics

Power Digital helps private equity firms validate and refine their investment thesis by creating a detailed, actionable roadmap designed to achieve the growth metrics outlined in the thesis. Your current criteria may be limiting in some ways, potentially overlooking valuable opportunities or failing to expose the full potential of certain businesses. We can help you uncover these hidden opportunities, refine your approach to evaluating companies, and ensure that your marketing strategy is aligned with your investment goals, enabling you to extract more value and drive stronger growth from your investments.

1. Value Creation: Execution to Achieve Growth Goals

With the roadmap in place, Power Digital executes tailored marketing strategies designed to drive rapid growth. This includes optimizing media spend, improving conversion rates, scaling customer acquisition, and fine-tuning marketing tactics based on ongoing data analysis.

Herman further explains, “Ultimately, what we’re offering is a way to accelerate growth, shorten investment timelines, and increase the internal rate of return (IRR) for PE firms. We help businesses exceed their original growth projections, which leads to a more profitable exit and a stronger overall investment.”

Ready to Grow?

Power Digital can help you scale faster and boost returns with data-driven marketing. Contact us today to learn how.

Sources: 

1. Verified Market Research. (2024). Global Home Services Market Size. www.verifiedmarketresearch.com/

 

2. Nielsen Consumer. (2024). Mid-Year Consumer Outlook: Guide to 2025. www.nielseniq.com