EP11 - Titanic - Avoiding The Icebergs On Your ESOP

This podcast is all about designing your ESOP so the company can be successful and avoid any potential pitfalls. Through the episode, we get to celebrate the movie: “Titanic” (Spoiler alert - the ship sinks at the end). One of the aspects of ESOP design is understanding the ESOP process and the importance of cash flow and balancing leverage for the company with the respective tax benefits. As a whole, the ESOP industry often has diverse opinions on what creates a sustainable ESOP deal. This is partly due to the myriad of conflicts of interest often found in deal teams. The goal of this episode is to help you ask the right questions and ensure your company has the correct ESOP design. 

Transcript

 [0:10] 

Hello everybody this is the ESOP guy and we are on a journey to an ESOP and Beyond welcome to season 5 we're jumping in right away.

 [0:20] 

Music.

 [0:46] 

All right everybody just stopped for a second that obviously gives me chills that movie is phenomenal Selene Dion you're great that's something as we talk about today I'm going to kick off this conversation about.

 [1:02] 

Not blowing it right and this is going to be how to make your ESOP ship not sync.

 [1:10] 

And it's a little bit like a bit about the avoiding the pitfalls that can come.

When you're creating your ESOP and I've got just today I got so many things in the last like month or 2 and just 1 of the things I love about doing podcasting is.

 [1:28] 

To be honest I get an outlet to talk about things that I just deal with you know in terms of client conversations and actual real things that happen and I'm still under the uh impression that these types of things

as I as I experienced them

are things that you're going to experience whether you're before your ESOP and thinking about an ESOP or you're already in an ESOP or things have kind of trans transition to past ESOP.

So I I think that these kind of topics honestly are very helpful because they're just from real life experiences.

And what I mean by avoiding pitfalls is there's so many different things and I think I think we know like the overall idea is that we do not want.

 [2:12] 

Um and we're really focusing on the ship being the metaphor of the company itself we don't want the company.

To go down right in the future the whole point maybe not the whole point but a big Point here.

Is that we build we build this company for a long term Legacy in the ESOP world and that is.

Honestly 1 of the the passions that I have when I go think about like why am I even doing this like every day of my life right now why am I even doing this because I want these companies to succeed in the future

and I want the shareholders to to look back and say wow that was the best decision I ever made I want the company

the employees the customers of the company I want everybody to look back and say wow that was the best thing we could have done and this is the beginning of something really really good,

so does this this topic is important to me and hopefully it will be important to you as you as you go through the process of thinking about potential pitfalls.

 [3:11] 

So with all that I wanted to remind everybody if you have the ability technically please rate and review the podcast if you think we're wonderful give us a 5-star rating,

um if you don't think you're were wonderful then please give us a 5-star rating I'm just kidding,

um that's really there for people to as they look at this as a resource to help them,

on their own journey to an ESOP if you have a friend I think that's great and and if they if you know they're thinking about doing an ESOP please share this with them.

Um and I think it's just a matter of of understanding more and more and and educating people more and more which is really what we are all about go to our website at journey to an ESOP cam.

And find out more about some of the other episodes if you're new to the podcast.

 [3:56] 

It's been 84 years it's okay just try to remember anything anything at all you want to hear this or not Mr love it.

 [4:09] 

Has been 84 years I can still smell the fresh paint.

 [4:19] 

In China had never been used the sheets had never been slept.

 [4:26] 

Titanic was called the ship of Dreams the ship of Dreams listen and I love the starting of this,

for us as we as we talk about this because there's an excitement when you when you look at the process of doing an ESOP and you go through the whole process of doing a transaction.

The first thing I would say is it's almost like this like this ship is leaving and there's an excitement everything's brand new it's a new beginning um nobody's thinking that this ship is going to sink

everybody knows the story of the Titanic like nobody thinks that's even possible and there's an over sense there's a there's an over um.

Confidence when it comes to as we think about

this type of thing and this is really where I wanted to start with is is why the you know when we start thinking about the pitfalls I do think this is a very healthy way to think about the ESOP because.

 [5:24] 

If you are as you go through the process 1 of the things that I would I would identify here with is is we got to to get beyond the transaction,

and and similar to this like we have to start thinking about the actual

you know we're we're taking off from the port we're moving our ship out into the ocean and all the things are going to come at the ship itself,

and potentially sink the ship right so so keeping that in mind hopefully that's that's,

helpful um I'm not saying we shouldn't celebrate the transaction I mean of course you know I'm all I'm all into celebrating but we have to be.

 [6:03] 

Mindful

of things that are there and so so as we think about that I think the 1 first point I wanted to make is that as we do look at the the potential to do a comp uh a transaction so this is for people that are haven't done a ESOP transaction yet

you want to be sober in the process of going through the ESOP and.

I think sober in the sense that the transaction itself um I think sometimes can be um.

It could feel like that's the endgame and it's not it's not the endgame it's only the beginning of the whole new Journey for the people that are going to be continuing on this ship.

And.

 [6:46] 

You know when I when I look at an ESOP compared to say a a deal where the owners are stepping out and they're getting a buyer coming in and and let's just say,

in the in the spectrum of deals they're getting like all their cash up front and they walk away and they're like they're not looking behind them who cares what happens to the ship right but that's not an ESOP,

because Nissan the shareholders that are selling their stock are going to be connected to this ship on a long on a longer-term basis and

and if they're not.

And if they're able to get all their cash in some way out of the deal and the transaction I'm going to say that could be a pitfall that we need to talk about because if they're so burdening the company with debt and hoping on,

the potential for this this wonderful forecast coming in the future.

Then I think the very first Pitfall I want to talk about is transaction myopia or being myopic about like this is all exist is the transaction.

 [7:44] 

And that is a major major issue and a major problem now there are reasons why I think this Pitfall is is in this.

Space of ESOP industry it's like part of

I think it's just part of it out there is because there are really really good people at um selling this concept of an ESOP

and they're not selling the holistic measure of the ESOP

like they're only selling that hey this for you shareholder you're going to get this this and this you're going to get the 1042 you're going to have all this we're going to do all this crazy Capital raising for you and we're going to have all this money coming in at the front end and we're going to do you know and and I'm being a little bit

um snarky about that because honestly I just feel like it's so wrong.

 [8:32] 

And I've seen it happen like and you've seen these deals just blow up and and then the the company can't afford what was put on their the burden of the debt that's related to

and leveraged buyout and what what happens is that the shareholders,

are really the decision makers about you know going towards the ESOP and I think that's fine I mean they should be as their company

and they need to look at that in comparison you know in their analysis and their planning of you know how they're going to sell their company they need to look at that in comparison to other avenues

and I think that the main thing is um.

As you think about the topic here is avoiding the pitfalls like we we avoid these pitfalls.

In the v in the planning stage and understanding where we're going I mean we're going to talk a little bit about post post ESOP pitfalls and things that can come about that we know nobody planned for like that's that's 100% like that can happen.

 [9:31] 

Um

You know as I look at the day today even the day I've had with with clients like something that stands out to me is just talking through

you know analysis that I'm doing and then other advisors are doing kind of with 1 client and so I'm looking at what their advising and I'm like you know

have they thought.

As the other adviser thought about this first off the difference in in the way I'm approaching the deal and the way they're approaching the deal is is they're approaching it with hey we we're going to get you more more funding upfront.

Which can sound great to a shareholder hey we're going to you're going to get more liquidity up front and.

 [10:12] 

You know and my deal I'm looking at it trying to design a very good balance between the amount of senior debt and the amount of seller note.

Um and making sure and now it's it's not hugely off disproportionately but it's you know the other the other part of the structure is more and I'm like I'm thinking to myself in my head.

Hey has the other advisor thought first about the ability that company to you know finance and pay the company the company pay off that cash requirement of The Debt Service.

In in a sense if if there is a a potential downturn have they tested the cash flow.

 [10:52] 

You know and and the answer to these questions is is is no they haven't and secondly and I think really for the specific situation have.

Has has the other advisor even considered.

That the third party evaluation of the of this structure is it going to work for them in this situation there's a Bonding Company.

That the company relies on for future work and if the bonding company is uncomfortable with with that.

Bat amount of debt at the front end I mean that creates a a serious issue and putting this whole thing together um

and the worst thing that can happen and this happens okay this this happens for and as far as pitfalls go as it gets done and then they start telling all the third parties hey this is what we did and then the bonding companies like well we're not

gonna be bonding you guys anymore I'm sorry and now what do you do right and so now what's in Jeopardy even though they got more money at that the front end what's in Jeopardy now is.

 [11:48] 

The company has um less and less opportunity to meet the requirements that they just set out to meet in the forecast.

 [11:56] 

And so when we think about this understand like the cash flows that we are looking at to pay off a leveraged buyout.

 [12:06] 

Are of course like enhanced by the tax benefits of being an ESOP so the fact is if it's an S corporation we don't have.

Income taxes so we get we do get to pick up some some cash there to help obviously pay off the debt,

but it's not going to be enough if you've overburdened the company at the front end

right and so this is similar to the the Titanic example it's like they could not handle the amount of water that came in because of the way that they structured and designed this vehicle like this this boat the ship.

I'm not a marine person so I'm kind of slaughtering that but you see my point so part of the pitfalls is initially understanding that the way that the structure of the of the deal itself.

If it's only 1 sided in the sense that we you know that really.

Peaks the interest of the of the shareholder and not and doesn't test out well for the other elements of building a holistic plan then in in inadvertently you've created a problem,

down now we might not know the problems there but just like that Titanic you will know at some point in the future and that's very dangerous.

 [13:15] 

Music.

 [13:31] 

Feel the energy of this moment.

 [13:36] 

And and I would just kind of like capture that with 1 Word Elation it's Elation like he's just like whoa this is the greatest thing ever and and I.

Wanted to go into that because it there is a a real thing about that right and and where I want to go with this next is this this Pitfall of of wanting to over as a shareholder wanting to overvalue.

The business.

Now I know that's not every shareholder and I know there are a lot of people considering an ESOP and they understand like this is something that they want to be careful of right.

And I and I want to talk about this from a you know again just the perspective of of the building the ESOP plan for a long Legacy for the company.

1 of the things about overvaluation itself as a pitfall is something that's real.

You know it's real I know it's real because as we look at Department of Labor investigations where there is a a major issue with an ESOP down the road a couple things happen the Department of Labor looks at it they go back through the records and they determine,

that the valuation was overvalued and what did what did they do they come back and the Department of Labor is going to try to correct.

The wrong that was done at that point in time um because it's affecting directly the employees of the company and.

 [15:02] 

There that's what they do and that's part of if you look at every single Department of Labor case it's going to be around overvaluing and

now Theory theoretically like why does this happen I mean it really when you think about the Department of Labor process agreement that kind of says look you need you have to do an arms length negotiation.

With a transaction trustee that is in a fiduciary position with their you know no negotiating with their team with the sell side team how does this happen if that if that's really the case well.

First off I think it happens and again keep in mind this is a pitfall like this is the reason I'm talking about this is because we want to avoid these things but,

my theory is it happens primarily because the sell side team is is really invested in the

with the shareholder right to maximize the valuation and.

 [15:56] 

I'm going to careful with my words because I I mean we want to maximize.

The FAA the fair market valuation as a sell-side advisor we want that but what we don't want to do is put everybody in Jeopardy by doing that and that includes the company the employees and even the shareholders themselves.

Now the reason I believe that this happens in the ESOP world is because the ESOP is an m&a transaction.

And Investment Banking firms do success fees on esops and there's a conflict of interest in my opinion on approaching it that way because what they're doing.

Is they're trying to maximize the purchase price to maximize their fee.

 [16:36] 

And that can make everybody a little less responsible when it comes to balancing out all the elements of the ESOP.

And so I think that is a real issue um what happens like why is this a pitfall if it over it gets overvalued and the Department of Labor says hey you guys are got a problem that's 1 area right if it's overvalued.

 [16:59] 

In truly the company cannot meet.

The forecast so when you think about the valuation side list think about like if I submitted a hockey stick forecast in the in the company um and the the trustee and their valuation team buys off on it

um the valuation itself is really is really the present value of that future forecast that's what a discounted cash flow is if the company

cannot hit that forecast what's going to happen.

Right now first off we know what will happen because as they as the company gets valued every year by the independent valuation firm we're going to start to see that valuation come down.

 [17:39] 

So

What would be as an employee not a good feeling if you got 1 year participate participants statement in the next year your value is going down so first off

where what's going to happen in your mind well you as an employer are going to start to think well I don't really know if I trust the csop anymore I don't know if I trust what the company has done here so your morale is going to go down your culture is going to go down so that's another element of the pitfall of of having

the company be overvalued.

 [18:07] 

If the company doesn't have the cash flow right and then when you think about a leveraged buyout as we talked about the financing part here if the forecast is is really jacked up.

 [18:17] 

To the point where the company can't really even meet these up the cash flow obligations there's first off going to be a ton of pressure on your key people to manage through and hit that forecast

secondly as a as if they don't hit it there's going to be a ton of pressure on the debt amount so um this connects back for not only an overvaluing the company but also and how um the structure of,

the ESOP was was created with with the.

The amount of money that was raised to pay out the owners so so this is going to create a possible Pitfall where the company isn't going to meet those those requirements and.

Let's talk about a little bit about the the financing again with the overvaluing the company well.

If the if there's a tremendous amount if there's a if there's an amount of senior debt number 1 let's just say there's going to be within the senior debt financing that's when the bank finances the the first portion of the of the leveraged buyout

the remaining portion is financed by the seller note.

And so let's just isolate the senior note for a second and that agreement with the bank there are going to be financing loan Covenants.

And what are loan covenants so I mean this might be so obvious to a lot of people that are listening a loan Covenant is when the bank puts within their agreement.

 [19:38] 

A certain triggers that they're monitoring that are key metrics and a very common 1 for for most ESOP deals.

Um is a fixed charge for really a lot of lending but but specific to the term term term loans that we're talking about is going to be a quarterly fixed charge Covenant.

Which basically says that we're monitoring the ability of the cash flow of the company on a quarterly basis to meet the debt service requirements if we fall below that Debt Service requirement we have now triggered a loan Covenant violation,

now loan Covenant violation

most banks are going to say hey technically what that means is it's a flag hey we're we're just going to flag him hey we need to have a conversation like what's happening what happened this quarter we had projections that showed you were able to hit these you know these types of payments and

you know we want to know kind of what's going on so now we got to stop everything and talk to the bank.

 [20:37] 

Now in your agreement you know the Covenant violation.

Could lead to some changes in the deal right so it could lead to if we're below a certain coverage now instead of the sellers getting interest only.

They're picking that interest which means it's going to be acred and eventually so the bank's going to be looking at every possible way they can stay on top of this.

Again.

 [21:03] 

Like all of us don't want the sink the the the ship to sink right because if it does then everybody everybody kind of loses especially you know all their capital is going to go down.

So what they're and in in this Covenant these covenants and there's multiple covenants by the way these covenants are really designed because the the bank financing is is is typically um non-recourse which just means that there's no personal guarantee.

And so without a personal guarantee what we're trying to do if the bank side is is we want to be on top of monitoring a cash flow loan,

as obviously as frequent as quarterly so.

As we as we think about that we first off we don't want to be in a pitfall situation with the bank right and this is still pre- ESOP plan design but as I talked about the posty sub there is also,

something that we have to now figure out how in the future can we navigate with the bank in a in a real difficult situation.

 [22:01] 

And I'm going to go in that a little bit later but I want to I want to kind of tee this up as we go we we designed the ESOP plan with the bank to keep in mind that we need some flexibility.

How do you do that.

 [22:15] 

Well you go back to your cash flow models and you say hey if the bank lent us this much money on a 5 year amortization or a 7-year amount and whatever interest rate and we have this much cash flow every year how.

 [22:29] 

How much how how much percentage of my forecast can go down before I start to kind of hemorrhage or bring on water on the ship like how much can I go down.

Um and then and be okay right so if you test out your cash flow at the front end.

And it and it keeps coming back that it's very very tight and that can be you know partly you got to test the forecast a little bit in this model because sometimes the the company's forecast is pretty conservative I mean they hit the same numbers every year growth wise and,

they're just predict you know they have a very predictable forecast other times,

when you look at that forecast and you're like wow they're really pushing the envelope they want to move up so it really does matter when you're stress testing to understand what kind of forecast you're looking at so but in general

just keep in mind I mean this is um a a conversation and and it said planning um it's a business planning,

Workshop I think with the advisor and the client to determine what they're comfortable with what what and the advisor honestly needs to be really conscious that the company to not put the company In Harm's Way

and so avoiding the pitfall kind of I believe with the Covenant violations really happens at the front end of the design.

Now some banks are going to be more conservative too right and some are going to be less conservative so there is a bit of like the bank's going to be you know watching this as well and and really wanting to understand so there's I think there's a little bit of um.

 [23:59] 

Assumption though that the bank has done all this underwriting and they're all you know their experts at cash flow so they said it was okay so it's kind of like the whole.

You know if we go back to the subprime mortgage issue that we had back in 0809 I mean it's kind of like all the banks that I could have this much money well I should be able to have this much money because they're the experts right so you cannot assume that right,

and let me fast forward to like the when we think about this this this ship sinking in the future if that happens right.

 [24:30] 

You know obviously the bank is going to have to deal with this directly

the shareholders are not out of the water right they might have some money from the bank but they're not going to get the rest of their money so they're going to be fully fully um on the hook for a while,

the company obviously the employees are obviously on the hook the trustees probably on the hook so this is a very you know what I'm talking about is is important because I you don't want to be looking over your shoulder

um 1 of the truths of the ESOP world is is who's not on the hook.

 [25:02] 

When everything kind of falls apart and the sick and the ship sinks it's the Southside advisor because they're they don't have any any liability here,

there's no liability for them so they can tell you and and give you all this different analysis get you all pumped up about this but that's why I'm saying like it's really important to understand what is this is there a conflict of interest in how they're building your plan,

if it's so favorable to the shareholder and not balanced out between the company then that's in in my opinion that's pre- ESOP.

Planning issue and that can create a bad situation for those people I just mentioned.

 [25:43] 

Music.

 [25:59] 

Okay I hate doing this to you guys this was um the final scene in the Titanic and it's like uh you know.

Um the reason I played that part too is just that I feel like we think about the future um you want to you want to be like oh my gosh this

this could happen so as we think about this this is now avoiding the pitfalls as they come post ESOP like as we start thinking about the company working through these potential issues and I think um it's similar to the conversation around like.

Thinking through a company getting into you know some cash flow troubles right the the economy I don't think there's a lot of difference here with um an ESOP versus a non- ESOP company in that the economy can.

Can change on us and let's just say that you're in a situation right now where the companies really not.

You know had it had every best intention to to hit the forecast and you know just they're not hitting the the year that they thought they were going to have

and I think the main thing is is that there has to be a turnaround Focus like what is happening like what's the reason um the first part I wanted to address is just the idea that as you as you start blowing a loan Covenant

and where the bank would go with that and I think part of that really kind of depends on the bank that you chose as your institution and.

 [27:23] 

There are a billion different probably ways this can go.

And so be be I don't want to be careful about like being like oh you know this is the exactly the way it's going to happen for you my experience is a larger Banks

you know if you choose a larger bank institution to do your ESOP financing they're probably going to be a little bit less likely they're going to have a very strong special assets department when you're when your deal when your bank loan goes into special assets.

You're going to know they're you're going to get the workout person and they're going to be looking at every possible way to.

 [28:00] 

Mitigate and minimize the the loss that they're going to potentially have especially with this this non-recourse type financing

so first off is um

you know whether it's the bank it's the trustee the valuation firm or the board or whoever's involved I think that that anything that happens in the company that's material that needs to be disclosed.

And it needs to be run through open communication and so everybody knows what's happening and you need to.

Try not to hide any kind of potential issue kind of similar to the Titanic right nobody wanted to talk about it there's definitely a um

you know if if if they really kind of all knew what was happening you know it was like oh my gosh let's we got a big problem a lot earlier

then what they how they reacted to it right so fully disclose what's happening in the company now honestly as a as a former Banker I think Financial loan covenants are really.

Helpful to the client,

what's not helpful is that the client really doesn't understand how they're calculated and they should write at the so part of the part of the training exercise for for some companies and the reason I say this is because.

Some companies that go to the esops you know they do their leverage buyout they haven't had debt for a long time I mean there are a lot of companies you look at their balance sheets like it is super squeaky clean with when it comes to debt now suddenly there's a bunch of debt on the balance sheet.

 [29:28] 

And they're not used to dealing with like the the bankers saying hey we this is what this is how we're doing things so what I usually do is like I'll have at the beginning as we go through the banking process I'll have the bank show us how they've calculated the.

Covenants so that the clients like say CFO and the clients um.

You know looking at their accounting department they have the ability to to to basically come up with the same numbers the bank is coming up with so that they can be on track on you know tracking those I think it's a perfect opportunity as we think about like coming out of it like to have those,

covenants be part of their kpis or key performance indicators,

so let's just say that they do and they and everybody does that and they and now you start blowing you know loan covenants I mean first off you got to understand why you know and and if you think if you go backwards up from cash flow into the income statement.

 [30:23] 

You know you know cash flow or fixed charge coverage ratio is really just a a partial you know element of how much debt service you have

our our formula of how much debt surface you have and how much cash flow the company is spinning off so if we just deal with like The Debt Service is done right if you just deal with the cash flow like let's just go bottom up you have net income

right and then you have G&A expenses and then you have cost of goods sold and gross margin and then you have your Revenue right so let's peel apart,

the story just like we did when we put it all together to figure out what is happening why are we what what's happening have we lost a big customer.

Or you know it's probably sometimes very obvious to companies like if they're getting into this,

this situation but sometimes it's not so you just have to really get into like the the meat of like what's going on and what can we change.

 [31:09] 

Um as soon as possible this is why when some of the times when we go through the esap process with companies I love when they have very good data,

I love when they have their data connected to you know it's not just a forecast but they have it all connected into

you know monitoring dashboards where they can really look at their data which is a big um a big Topic in an area of of

EOS as we talk about EOS and how that's a very valuable tool but they can look at their data and they can dial into certain things so they can predict oh no we're on the you know instead of reacting on a quarterly basis or a semi annual basis they're reacting on a weekly basis to saying all right we have a big problem here let's go ahead and make adjustments that need to be made

um you know real early in the process so I think part of the part of dealing with the Financial loan Covenant is you got to know your business and you got to have really good

dashboards and data to to support your conversations with the bank as this as this could potentially happen um go back to the analysis that you went through

and look at the justification behind the you know what you were trying to accomplish in your in your forecast and look at what really kind of what was the business plan,

going into it and where are you at on that business plan.

And I think that can kind of highlight some things because we got to figure out and address the problem and start plugging that as soon as possible.

 [32:33] 

In addition to that I think you got to start adjusting towards like what can we do with other choices so if we're if we are hemorrhaging and we do have a covenant violation in.

The post ESOP roam we want to communicate really well to the bank and we want to come up with a game plan and we need to monitor that game plan on a turnaround basis to,

make sure that we're getting towards you know yeah we can recover this is how we're going to recover some of the some of the levers you can pull in is is the interest on the seller note.

 [33:05] 

Which um might not feel good to the shareholders because they've sold but is important because we need to keep this ship going right.

Um that's why when I look at the combination of senior debt versus seller notes and the and again going back to the beginning part of the planning side if the senior debt so large.

Um there's not a lot of flexibility on senior debt financing by the way if it's a bigger bigger chunk um

then we have you might have a big problem in trying to flex into a recovery um so if you can do that you know you you would suspend interest payments

um you might obviously go through cost reduction go through the normal like how who do we have that we honestly don't need so you have to prepare for that

um I don't think honestly sometimes we we consider other elements you know I'm not I know we beat up the forecast pretty heavily but anything can change the economy can change on a dime we have you know another election year you have

International consideration so anything can change so really was a as I talk about this post ESOP pitfalls,

and trying to navigate you know again metaphorically around the icebergs and saying all right you got to know that they're there and you got to be able to predict that's going forward.

That's the job of the board of directors that's the job of your of your leadership team and there has to be you know these solid business processes that.

That give you the data that you need to to work through that.

 [34:31] 

I think the worst thing that can happen if the bank is going to start just pulling the plug is now what do you do in in really just trying to kind of reevaluate everything,

um it you don't want to get to this point but it happens where now the company.

Um is running out they don't even have cash flow the bank won't provide any more financing because it's so leveraged um.

So you know I think there are there are places where you get closer and closer to the the sick is the the the the ship can possibly sink and.

I don't want to be a negative person when it comes to this but I do think that needs to be.

 [35:13] 

In the Forefront of the minds of the people that are are there and that are kind of Designing the plan and moving forward so.

There are a lot of other pitfalls and there are things that we need to be thinking about but I think these are the main ones that I think are important to you know keep in mind as you start building your.

Your ESOP plan and and if you're in it right now then I think you need to really get people that can be experts at helping you you know do the turnaround,

um and take some take some advice from people that have gone through this process and some of the best companies that we've done esops for have gone through

you know big big um downturns you know coid was was 1 of those opportunities for some companies that didn't have a what we call coid bump um.

I I like that that when you see some companies that have gone through that big trough and they've come out of it they know how to deal with with these kind of things when you have a company that has only seen Good Times um.

 [36:08] 

For me I would I would definitely.

Be real careful with a company like that and help them to maybe look at than any potential and again not to be a naysayer or a negative Nelly but,

you have to plan for the future anything can happen and it's important that you you are keeping if you think about this again keeping it

into the example the employees um are really counting on it.

The company being able to continue what it's doing and they're on the ship right so you really are as you do that you're you're responsible I think to build something that really does work for for everybody involved so.

Hopefully that was helpful to you today and thank you guys for listening again please check out our website at journey to an ESOP calm and we will see you on our next step on this journey to Visa.