In Conversation with Convergence, Episode 43: George Evans and Jerry Arteaga of Valor Exterior Partners Discuss Veterans in Business

Who is Jerry Arteaga, and why this conversation now?

George Evans welcomes listeners to the 43rd episode of In Conversation with Convergence, a monthly podcast featuring clients and special guests, and says this episode is timed for Veterans Day. He says the conversation highlights the often overlooked potential of veterans in the civilian workforce, especially in blue-collar businesses that are critical to America's infrastructure. He introduces Jerry Arteaga as the current CEO of Valor Exterior Partners and a former operating partner of Cold Bore Capital, which he describes as a veteran-led private equity firm that partners with business owners to transition leadership to elite military veterans.

Arteaga says he grew up in South Texas, in the Rio Grande Valley, and joined the military a few days after graduating high school at 17, signing a three-year infantry contract that turned into 23 years. After two years in Hawaii, he says, a close friend suggested they attend Special Forces assessment and selection together, and at 20 he went. He says he spent 17 years in the 7th Special Forces Group and deployed 23 times, including to Afghanistan, Iraq, and, most often, Latin America and the Caribbean.

Arteaga says he retired in January 2021 and joined Chicago-based Cold Bore Capital, a lower middle market private equity firm focused on service businesses, as an operating partner, using his military leadership experience. He says he also attended Northwestern's Kellogg School of Management to add business acumen, and that Cold Bore's founder believes that combination makes an optimal operating partner. He speaks of the Cold Bore role in the present tense and as CEO of Valor Exterior Partners, a private equity-backed exterior home services company.

What mistakes does Arteaga say veterans make in transition?

Evans asks about the challenges of leaving the military. Arteaga says he talks with many veterans, many looking to get into private equity and other parts of business, and sees a few recurring mistakes. In Special Operations, he says, people are brought up to be secretive, with no personal brand, and the green beret mantra is the quiet professional. As a result, he says, the biggest mistake is not starting the transition early enough, and a veteran's military network is different from the one needed to break into a business role.

Mistake number one, he says, is not networking soon enough and with the right people. Mistake number two is believing a job will fall into your lap because of what you did in the military. He says that may happen for general officers and admirals, but he retired as an E9 sergeant major, and outside the military people want to know what you can do for them and how you can make them more profitable. He says veterans overestimate the doors their military role will open, and he recalls a statistic, about which he says he is a little fuzzy, that something like 70% of veterans leave their first job after the military within the first year, because many do not research the role they are taking. He says he was fortunate that Cold Bore was a great fit.

What organizations help veterans become business owners?

Evans asks about organizations that help with networking so the burden is not only on the individual. Arteaga says he sits on the board of Owners in Honor, a nonprofit founded by retired Green Beret Lieutenant Colonel Patrick Flood, whose mission is to help veterans become entrepreneurs through acquisition. He says it follows an entrepreneurship through acquisition (ETA) model: it assesses whether a veteran is ready, forms a cohort of fellows, gives basic business training while the fellow decides where to live, where to buy, and in what industry, and assigns advisers who mentor and guide the fellow.

Arteaga says Owners in Honor helps fellows apply for SBA loans and find bridge financing if they cannot put money down up front, and partners with strategic partners such as Cold Bore Capital, which can help with operational and financial due diligence, guide the purchase, and help set the veteran up with best practices afterward. He says it differs from many veteran nonprofits because it stays with the veteran throughout the life of the business, a 10-year plan, and if all goes well the veteran eventually sells to another veteran in the Owners in Honor pipeline.

Evans notes that Arteaga also works with organizations including the Navy SEAL Foundation and Disabled American Veterans. Arteaga says Cold Bore has entered partnerships with the Disabled American Veterans and the Navy SEAL Foundation, which he says are in the early stages, to widen the network, because many nonprofits are siloed and opening doors across several organizations tends to produce the best outcome.

What skills do veterans bring to business?

Evans asks for the top skills veterans bring. Arteaga says military skills translate directly. As a noncommissioned officer, he says, he was responsible for people, processes, and resources, and his measure was combat readiness and lethality: whether his team was ready for combat and could be lethal when it got there. He says that is the same job he does as an operating partner and as CEO of a private equity-backed company, except that his measure is profitability.

He names three skills that translate. First, distilling complex ideas into a message understood across socioeconomic lines, which he says matters at an exterior home services company whose people range from college graduates to day laborers. Second, leadership under pressure: he says he has led Special Forces operators in combat, so when a business has a bad quarter or a costly mistake, his standard is whether anyone is at risk of losing life, limb, or eyesight, and everything else will buff out. Third, a focus on execution. He says consultants, however smart, often drop a plan on the table and leave, so execution falls to the owner, while veterans are used to getting a task, limits, and resources and getting it done.

Arteaga says Cold Bore founder Sergio Zepeda has hired Special Operations veterans as operating partners since 2017 on the principle of hiring for traits and training the skill. He says it is easier to teach someone to read a P&L and pull financial and operational levers than to teach them to be a leader, and that, especially with Special Operations veterans, businesses gain trust that they will make the right decision, ethically, even when nobody is looking.

Why does Cold Bore focus on the lower middle market?

Evans asks why the lower middle market, and why now. Arteaga says there is a lot of value to create by pulling operational levers. He says he is talking about companies with between $500,000 and $5 million in EBITDA, most of them owner-founded and operated, and many in service industries that started with a truck and a trailer and grew to $10 million or $20 million in revenue without formal business training. He says such businesses have a lot of low-hanging fruit that can be harvested through professionalized systems and processes, such as CRM, financial reporting systems, and sales processes, which help turbocharge growth and add capacity.

Arteaga says the lower middle market is also highly fragmented. In residential roofing, he says, there are over 100,000 residential roofers in the United States, and fewer than 3% have been aggregated by private equity or large firms. He says firms like Cold Bore use operating partners with an execution mindset and an operational playbook to drive value quickly. Evans says it is a brilliant model: the segment is underserved, and the veteran component adds a one-two punch that he thinks raises the probability of success.

How do baby-boomer retirements create opportunity?

Evans raises the baby boomer opportunity. Arteaga says that, depending on the statistic, there are roughly 12 million baby-boomer business owners set to retire over the next decade, many without succession plans because they have no one to leave the business to or no one who wants it. He says that creates an opportunity for a private equity firm, or for a veteran working with Owners in Honor, to acquire a cash-flowing business, and that many of these businesses fall into the lower middle market, with anywhere from $200,000 to a few million dollars in EBITDA or discretionary income.

Arteaga says buying a cash-flowing business is not risk-free but mitigates risk, because the buyer is not trying to create revenue from zero but to maintain and grow it, and can plan for paying the note, the buyer, and the employees. He says retiring baby boomers present a great opportunity for those willing to put in the work. Evans adds that the issue is succession planning: a business may not be handed down to a son or daughter, or may lack a strong team of lieutenants to run it after the founder retires.

What did Arteaga leave business leaders with?

Asked for a closing thought, Arteaga says he would ask business leaders and professionals to consider hiring veterans. He says veterans' backgrounds may not come from the business world, but if employers follow Cold Bore's model of hiring for traits and training the skill, and invest in the veteran, he guarantees it will pay dividends. He says veterans have often been loyal to one organization for 20 years and are looking for the next organization to serve, that his own leadership style is servant leadership, with the organization's needs before his personal needs, and that he believes most veterans share that.

Which figures did Evans and Arteaga cite?

Figures stated in Episode 43, November 2024

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