EP32 - ESOP Experience with Tactical Rehabilitation Insight from Kevin MacRitchie, CEO and Karen Lyons, CFO On Their Journey To An ESOP

Every company has its own lessons to be learned in the journey of converting to an ESOP. This interview with Kevin MacRitchie, CEO and Karen Lyons, CFO of Tactical Rehab provides key leadership perspective on the transition of this company through the process of becoming an ESOP.  Kevin has a large company background and has brought a level of management that is moving their company to the next level.  As part of his strategic leadership, he has fostered a vital partnership with the employees of Tactical Rehab, Inc. and even a greater level of trust with his CFO - Karen Lyons.  Karen brings an order to the company to provide financial insight with not only important data points, but also to support the well thought out strategic direction of the company.  Both Kevin and Karen speak to the importance of teamwork in the success of building the company.  The ESOP was considered and moved into a reality as an essential tool working through many common objectives that most companies have:  succession, culture, retention, incentive.  They have embraced a full on ESOP communication strategy for their employees on a monthly basis in addition to other key initiatives.  

Transcript

[0:09] Everyone this is the journey to an ESOP and Beyond podcast where we go through all sorts of topics for Employee Stock ownership plans. The podcast is really a resource that helps people better understand how an employee stock ownership plan might work in their business and there's a lot of different, um strategies behind the ESOP and some of them sometimes it's it's purely working through both succession planning and exit planning other times it might be a combination of that with with a growth plan either way it's a great option for a lot of companies and today we're going to get to interview a company that's gone through the entire process from beginning to end and is now a 100% ESOP and this company is called tactical rehab rehabilitation um and today we get to interview both the C CEO and the CFO and so with that I wanted to uh welcome them over to the podcast so Kevin mcritchie and Karen Lyons thank you guys for joining today.

[1:06] Thank you for having us. So as we get started on our on our intros for you guys I wanted to ask you guys what what is your favorite movie and why and and we'll do that and then we'll introduce your backgrounds.

[1:19] And ladies firstladies first so I would say Top Gun and I love the second 1 that I really, and partial to the first 1 because when it came out, that was Tom Cruise and I are about the same age and full of action and a great story and just a lot of fun, Hopkins excellent yeah and I was curious like that's I like the second 1 bitter I think than the first 1 but, it's both of them are really good they did a great job on the the second 1 I think I was surprised that they did such a good job on the second 1 but but cool what about you Kevin.

[1:57] Karen knows I'm approaching 40 times Watson Top Gun but. I'll have to stick with my go-to favorites and that are tombstones definitely my number 1 followed closely by Lonesome Dove.

[2:08] Wow all right Tombstone is with it's the it's when Tombstone came out it was like there was 2 white art movies. And that Tombstone is with Dennis Quaid not or not no no no that's uh umDoc Holliday with Val Kilmer and that's right. The whole the whole game right that's like the most accurate portrayal of the whole Tombstone series and the Cowboys and for what really happened on a ranch that's that's sort of. That's pretty cool that's where I like to be yeah cool well guys thank you for joining today um as we as we talked about the the ESOP let me just kind of frame it out for people that. You know are just tuning into the the podcast really tactical rehab was a privately held company that was owned by uh multiple shareholders, including Kevin and Karen as minority owned shareholders and they went through a process of of saying hey we want to be an employee stock ownership plan, um we work together for at least a good couple of years I believe as we started the process of like you know like evaluating whether this is going to work at the end of the day we ended up closing on the transaction um it was 100% ESOP um you guys are an S corporation so you basically now our tax you know paying taxes so real quick on on your side so you Kevin or the CEO and and Karen you're the CFO um give us a little bit of an intro in terms of your your background and and how you came to Tactical rehab.

[3:34] Karen you were here first I'll let you gookay so I joined tactical rehab in June of 2019 um. It just so happened I was relocating and um. They were looking for a Chief Financial Officer which had been the role I had held in several other organizations both for-profit and 501 C3. Um and so when I came to tie school it was kind of a great mix of both of those it's very Mission the the organization is very mission. The employees are very um supportive of that mission bought into that mission, um it's centered around taking care of our active duty military and their dependents and Veterans and we um, where we hire a lot of veterans or spouses of active duty or veterans so um our employees are totally brought in which gives that feeling of a 51 C3 but then we are a for-profit and um I found it a great journey to be on. Awesome cool thank you Kevin.

[4:45] I come from the high-tech sector actually I spent almost just short of 30 years working for Cisco Systems big internet company. When I joined there we were at 330 people when I left we were somewhere in the neighborhood of 76,000.

[4:59] I got to uh move around often inside the company and in a number of roles including theCIO and CTO and coo roles at different times, I help the company build several different markets to exceed a billion dollars in revenue and then we they'd say go start over because I like to build things. Then way way more fun than sustaining things at least in my book and there's people who love to do the other side of that which is awesomebut during that time I had uh government. And Military for extensive amount of time I had the healthcare industry for an extensive amount of time along with education and a few other um key markets that we helped build up.

[5:37] And so coming here was was a fantastic opportunityto take what I had done in the government Tech sector and in the healthcare sector. Um around technology and then work with Karen and the incredible team that's here at tactical and and look at how do we Implement more technology improve what we have. But also how do we make it a place whereour employees that we call team members. And now we've moved to an ESOP all my emails started out with no pay co-owners or hello co-owners right and awesome yeah that's still interchangeably used teammate. Or team members butuh people resonate with that when you say co-owners right then there's sort of that. How what what is what's the next piece I need to know about that what do I need to do to make my portionbetter and how can I earn more on the other side of that equation so.

[6:30] Yeah fantastic. That's awesome so so kind of like too just so people understand like you're so a lot of times when you do an ESOP you're working with different types of people like in the sense of the roles and responsibilities of the company, and your story was this company was um really you know owned by 3 primary shareholders and then they brought you guys in as part of their strategic plan to to not only build the business but grow the business and and also kind of move towards more professional management it's kind of the way I would explain it and and they did that and it was very successful and at that point you know in the story it's like, where you guys got you know got into it um why was the ESOP even on the table in the first place why did it even come up um as you guys went through the you know your your responsibilities and and building the company why was that like a possibility for the company going forwardI think from my perspective.

[7:28] Karen was the first 1 brought in because they needed to improve the way the financials look and and start to meet some regulatory efforts uh our founder.

[7:37] Brought the other 2 uh members on and and let them buy into the business to help grow the business. All 3 of them being incredible entrepreneurs and 1 of them will tell you the best thing they ever did IS decide when the right time was to bring. Business Acumen to it to the company overall. Right and and they're right and it it that wouldn't necessarily have had to have been us but 3 entrepreneurs great company growing. And at the same time as it was growingas they were getting older and looking what they wanted to do longer term they're also looking for an exit strategy as many entrepreneurs are. Right and that doesn't mean necessarily older by age but entrepreneurs tend to have thatelement of oh I got this kicked off kind of like I said earlier.

[8:23] They want to get to business to grow and they made it happen but now it's this this thing and it takes a lot of. You know going in and dealing with HR things and growing and interviewing and and uh then holding people accountable to numbers and the things that have to happen when you transition from an entrepreneurial ship business, to a now it's a true corporate entity and you have to follow all those things so they brought Karen. And then about 6 months later of January of 2020 I came on board and as a part of that they were also looking for what's my exit strategy out of the company. And as you said earlier I mean the first time we we were working on how do we help them in that exit strategy how do we help continue to grow the business uh the answer was no the first time and and probably rightfully so it's that shocking wait a minute the reality of. Leaving my baby the thing that it's really the culmination of all my years of work and that I we all do we all identify. That's what we were we were technical shirt almost every single day.

[9:22] At work Cisco shirt when I was there I know Karen did at her previous employers right we are Workaholics and we like to see people and and and teams grow together and build something big right so we identify with that you take that off my shirt. And if it doesn't have my Ranch logo on it sometimes you you know I wonder who I am too right and I say that in good fun because they went through that identity crisis that we talked about every, owner of a business goes through when they're the reality of what they're looking for is now hitting them right in the face. And that's the part that was the the biggest sort of transition for us was to help them understand what that meantand get them to a comfortable stage Karen.

[10:05] That's yes, I would agree with that because from the very beginning you know um it when I came in it was setting up all the back office uh processes that that they did not have because again they were entrepreneurs not, um in the details that started from you know HR getting holding people accountable it had you know there were like 10 employees when I came on board but there were no um rules regulations things going on so um we got that set up worked on the financials got those straighten out, and then Rock Kevin on board which totally changed um the growth of the business. And um we as he said it took a lot of time with them you know they they were telling us, um here's here's where I would like the company to be the 4 we talk about anything and so you know our goal was to get it there as fast as we could.

[11:09] Um we were very blessed to have multiple years of double-digit growth even through the pandemic and um so you know the far as Kevin said the first time we took it to them it was like Oh no you're pushing me out of the company and we're like no we're handing you what you asked for and so it took about as you, yeah we did our jobs the forest as you know we were close friends with them too right so it was yeah yeah totally its I mean we were doing everything together with them and we would spend, you know 4 weeks every quarter and and tons of time in between you know just build the business relationship build a strong personal relationship we're always there for each other we still actually are. And they were they are great phenomenal and giving people and. It's just I think as you said we talked countless hours with you this is the hard transition for everybody who has that baby and this is the most successful 1 and. What do you mean.

[12:11] Where your where your Tactical shirt every day you founded it right so yeah totally yeah be proud of it I see I see that a lot honestly the the identity crisis in the sense of like. Um it happens for it happens differently but I I I think I agree completely like it happens every timewith people that are selling their ownership. And they some of them are really like absolutely see it and they're like okay and others don't and you're you kind of have to work through. That process in New York situation I remember going through that first like that first wave of things and they're like no this is not going to work and I'm like okay that makes sense you know and then I was actually surprised when it came back up you know and so so something must have happened between them saying no uh nearest to the internal side right between your conversations and then saying you know what actually let's do this so kind of what was the what was their process of getting through that identity crisis especially kind of with with, dealing with you guys which you're like hey this is what you told us to do and we're doing itso I could have been you know somewhat frustrating you know from your side.

[13:15] Karen you want to try this 1 first. So I think there were some there were multiple factors taking place um we were experiencing an extreme amount of growth and we were bringing in more people. 1 of the um last. End of year get togethers with the whole company you know 1 thing they had been very proud of is they knew every employee they knew their background they knew their family and then they walk in and we've gone from, tail employees, which they had a hard and were very knowledgeable about to this group of 50 employees and they're like we don't know half of these more than half of these people and I think that maybe was an opening experience to I'm not as closely involved as I have been already and then knowing we were working diligently. To give them what they asked for and then you know age health.

[14:21] The ability to have the free time to go do other things or you know grandkids coming along across the country to have the time to go spend with them and so I think all of that. Um played into making a decision and I think they went and did some homework and they listened a little more closely to what we were telling them, I think the the first time there was some misunderstanding about the dollars involved I think they saw it as a number they had to split versus a number to each of them, and when they finally hit that I think they were kind of they were then ready to say oh you really are giving me what I've asked for and I think they made peace with that. Yeah yeah that makes a big part of it yeah so part of this understandingthe details right and.

[15:14] Really they may not even had the ability to even look at that until they got through the like hey I actually am ready move forward right right.

[15:25] So Kevin you have anything more on that are you was that kind of like.

[15:28] No I think that's the the bulk of it honestly I think uh that what I'll add to it though supplemental as opposed to the process is you know I still talk to all of them Karen does too and. And they are literally literally living the best of their best lives. Awesome I think I think for they went through what do I do now right.

[15:51] Uh splitting time between where all their grandkids are around the country andso yeah we're going to go for a month to 3 months and we'll be back. So if you're in the area when I'm back but I'll be in this area visiting the screen kid and then they're very active.

[16:07] Um another 1's you know he and his wife are mountain biking and doing something on their second home and and uh. Uh another 1's like helping every friending every time I talk to him I said I'm going to come down and visit when I used to be able to come down and visit all the time he's like well I'm so busy and I said I thought you were going to be bored he's like well I'm helping this person do this and I'm helping this person build cabinets. Going when you get like an hour let me know and I'll fly down and I'll buy you lunch right so it's literally harder now to see any of themthan it was but I think everybody does that when they think about.

[16:40] Retirement right and what are you going to do um and I do remember the conversation with our our chairman and and and actual founder I. You know should I do this and I said look if you don't want to do this I'll trade places you can do all the workand we'll swap income levels and I'm going to go ride my horse. Every single day and I think that was you know and that's the certainly a short version of the 2-hour conversation we had but. Yeah I said look this is what you ultimately put together and you're not just disappearing the company and it's going away. You're handing the company of the Legacy for you all to hand over. To your employees think about that and the people and Karen can talk maybe to the demographics of the people we hire this is life-changing. For our employees I don't have a single person that wants to leave they want to grow. The Vow I mean they number 1 Thing They want to do is take care of our patients support US military bar bar no exception. But they also seea value in being able to grow what's in their retirement pool.

[17:48] And the training that we sell every single month to help them understand what that looks like has been phenomenal but um between our demographics. And maybe Karen you might even want to mention the change and and what that meant for people that were not and now are even investing in their 401K I mean it because we've done so much training about thinking ahead. Our people are thinking ahead which means they're thinking ahead in the business side too it's it's been a it's been a dynamicit's awesome, yes and and to the 401K side we are now we have a 100% of our employees contributing to their 401K where before that was probably more in the 60 to 70% range so just the educational process as Kevin said of making them aware of.

[18:36] What what they can now build through being owners they're they're now saying oh well this is why would I not go ahead and add what I can to my 401k and then on the other side I think it's becoming um as we have openings, it's becoming a great recruitment um vehicle, which obviously people don't know that's offered until we're in the interview process but um we've been able to fill a couple of positions we had not filled before and I think that's that's kind of that extra push to say oh this is this is great this is where I want to work not only do I believe in what you're doing but as well this is a place I can work for a long period of time have stability and be building something for myself my family for when I retire. No those are good things to to kind of talk about anyways because a lot of times companies on the other side thinking about the ESOP are like I'm not sure how much this is going to resonate with with my people you know because of the. And we'll talk we'll talk about that a little bit in terms of what you guys are doing on the education but before we go there I wanted to kind of like just make sure that.

[19:50] You know we touched on this a little bit but so people always wonder like what industry are you talking about so you guys are selling um medical devices into military bases all over the country and I think you got about, like you said about a 50 person employee company at this point right around that.

[20:08] So yes industrywide how would you guys tag yourself as an industry like it's you know you're a distributor you know you're like I know you guys do a lot of like, you know work with these military bases and build these relationships with them and how would you how would you describe your industry.

[20:26] If we look at on the medical industry there's you know Pharmaceuticals there's surgical there's a super umbrella category. Um and I don't mean like it's fantastic although we find it fantastic but the super umbrella of durable medical equipment or DME so anything that is. Uh in the area of non-pharmaceutical pain relief muscular skeletal biomechanical limb bracing so whether that goes from Orthotics to, uh braces that you might use when you fracture or break your arm leg those sort of things or uh uh also in, um areas like 10 units so electric stimulation to to reduce pain levels those kinds of things so um that's our major category it's the largest area of military need outside of, uh where we don't play in the surgical space right so and we do coveruh we we work hard to cover every base around the globe. It does not mean we're currently doing business on every base around the globe but we are rapidly expanding um both domestically and internationally. And our primary basis you state it is the US Militaryuh active duty veterans and their familiesbut that too is expanding into new markets and new segments as well.

[21:44] Yeah I just want to make sure that people are okay I don't even know what industry they are 1 1 I wanted to say this to because you guys are very unique like sometimes I would say generally speaking shareholders that own companies haven't. Built a solid leadership team and 1 of the 1 of the advantages of an ESOP is really you can Flex into that now in this situation they did build a solid leadership team before we did the ESOP and now they are are able to go split their time with their grandkids and build cabinets for people and all that so so they really have like the best, situation I mean I would say in general when we start thinking about it for you guys's key people in in this transition plan how important was the ESOP for you versus you know if the company would have said hey we're going to sell to private Equity or something like that, what would that have meant for you guys because this gets asked. You know by me from people like thinking about the ESOP versus other opportunities how am I how am I keep people going to look at this as as a you know an option or an opportunity for them so how would how would you guys answer that question.

[22:47] Karen you want to take this 1 first.

[22:50] How important was the ESOP to you in your career staying at tactical it's kind of the the bottom linesure so. It it was something I think um we had kind of thought about and we had discussed you know do we try to take the company public do we do an ESOP do we just stay where we are. Um and as we started investigating the opportunity for an ESOP I think that became for us just very important because not just for us as as the 2 EXE, but also justwe really are like a family and I know people say you're not family you know you have your work it's it's not a family I actually had somebody interview for an HR manager position and told me that and I was like well you wouldn't fit in very good here um because we really do take care of our employees so I think for us it or or speaking for myself uh for me it was an opportunity not only to have um hopefully the last.

[23:58] Position I will have um in my work life but also an opportunity to really have an impact on the people that work with us, and the team that we have and to really be able to show our appreciation for them and how important they are to the job that we do and just seeing that, the opportunities that opens up for them is just very um fulfilling from a personal level.

[24:27] So in the end just being able to say we we grew this company from 10 people to. However many we end up with and um you know being able to, um secure Financial uh stability for a lot of them um again as a is personally rewarding and then obviously front of business perspective you know it it makes it. It's a good feeling to know you've had this to play this big role in the company itself and the growth of the company and and being trusted by not only the former owners that are employees that we are doing what's best for the company and that they're understanding now more that the company is important not just the people but the company. And that people have to be responsible held accountable and do the performance or their peers are going to be, uh not doing as well as they could from a financial perspectiveyeah no perfect great answer what about you Kevin.

[25:33] I would say not much different and to your left comment Karen you know we had aa meeting I think it was 1 we were in Atlanta doing some. Training so what I'll say in parallel to thiswe went to Ritz Carlton school on.

[25:47] How to improve customer satisfaction and be the best that we are. We like to model our patient satisfaction our patient experience is what we call it to the likes of.

[26:00] Uh Ritz Carlton Chick-fil-A Delta you know all those companies Disney they all go to Ritz Carlton school that's where they get their basis and then many of them build their own, universities around that so we did the same actually building up to this for6 months worth of prep work and then took the entire company. 2 Ritz Carlton and of course we looked at should we say shave a few dollars and stay at the hotel across the street and the answer was of course a resounding note we want them to feel that 24-hour a day Ritz Carl experience so that our patients do that and then you know we announced that we're going to we go to Ritz Carlton School in 2 weeks later we announced that we are. Turning into a knee up right and what we said jokingly while there with our uh then Senior managers now several of them on the director's team. Is that look here's what's going to happen this will be the dynamic it won't be you as the leaders. Telling people they need to get on board the rest of the teammate employee base. Now co-owners are going to vote people off the island if they don't work as hard as the rest of them right and so we jokingly said that and I'm not kidding you that's happening like we got people saying this person needs to pick up their Pace because. Uh Olive good no nothing but it's the right kind of behavior that we want and there you know they're bringing it to us hey this is happening.

[27:19] Um and more importantly you know we did that kind of as a joke and we've seen a couple instances of that and certainly you know we all need to improve different times but more importantly um we're starting to see through the training that we've been doing and understanding these opiates and you know what it means to be a co-owner. That the teams are starting to gel better and they're starting to motivate each other better and there will be different people I believe that will rise to the top as a result then may have risen up to. Uh a similar level not in this environment and and those that are rising here. We see could be running the company uh at some point although Karen and I agreed to stay on for quite some time as a part of the program, mostly because we love it alright we absolutely love it and I I will say working with Karen I worked with great people. And learned a lot and 1 of the reasons that Karen and I really were doing this is we just love working together I respect Karen so much and she's just. Equal part of the team on the executive team it's the 2 of us making decisions not 1 of us or the other we bounce things even more so.

[28:28] Then we do our my assistant always says I can't get a meeting with you you and Karen are always working on things right which is good we're always bouncing ideas and then pushing those to the teams. That's awesome I you know I heard I heard you guys say a lot of things and and I think I would boil it down to things like we had a great culture. And that this made it a better culture and you guys because you're in these positions I think of heavy duty influence over the company, um which honestly is a big responsibility but at the same time you're able to do things I think with an ESOP, because you you do have the control of of working through those things where in a lot of cases where you're a part of a bigger organization you just simply don't and and I and I think that that what happens for people thinking about doing ESOP is like they really don't.

[29:15] You know they don't want to lose the reason they want to be an ESOP is don't want to lose the value of a culture that they built. And what I heard you guys say is it's only gotten better like what you guys had before which is it's really a truth of an ESOP it's not like you it's not like it creates a good culture it takes a good culture and it makes it better and I think that's kind of what where you guys were, 1 Thing If we go back in time a little bit in terms of just taking through the process and the process for an ESOP transaction as you go through the analysis. Feasibility figuring out like this how does this numbers how the numbers actually work for everybody, then you go through building the buy side sell side team um and then we go through kind of put into the negotiations together meanwhile, in your case like we had Bank financing as well um and then we go through the closing and and wrap it all up which, you know I mean there's parts of that that are a lot of work and and I know you guys both jumped in you know with with all of those steps that we went through what stands out to you the most as you went to that process like maybe what stands out from a I was surprised by that or um we were challenged by that or or this was like way better than I thought it was going to be in terms of the whole process for both you guys what what stood out and and going from beginning to close.

[30:27] So I'll I'll start from the financial end because um I know you and I spent a lot of time together and um you um, you know it it was a daunting in the beginning for me because I had never, then it's type of project in any of my previous roles um that happily I can say not only did I learn a lot, that it wasn't that bad you know um it was it was veryit's very structured um there's a timeline and you know I think we learned a lot about the company as we dive into uh the financials and things you know maybe seeing some Trends and things that we maybe didn't didn't realize that the beginning, um I thought you know for me it was very interesting to see where the company came in from a value perspective I think I was a little surprised by that.

[31:28] Um again just because I hadn't been through this type of project before so for me yes a lot of work you know a lot of times it was we got to drop this and we have to work this I have an awesome team in the accounting and finance department they were all willing to drop what they're doing even if it's the middle of clothes or the middle of payroll or whatever they dropped what they were doing they got it to me we tried to do the quick turnaround that we had uh promised you we would do and umso.

[32:00] I think don't let the process scare you as you go through thisTheory, don't let the process scare you as you go through it because it is very structured and we had all the information it was just getting it in the format that we needed it in, um so for me I love that it was new I got to experience it and it was much simpler than I thought it would be. Awesome yeah cool what about you she says on this side of the line right I know well there were some moments I'm sure like we have right, and I think they will be for anybody right when it's a long list of things we have to go through um Karen and her team did. You know a plus plus plus job on pulling financials together looking backwards looking forwards pulling the things out that were relevant putting the things in that weren't in there that needed to be relevant.

[32:53] Um and so I think the thing that I believe what helped us mostwas we kind of split that effort. And actually that kind of we did split that effort so there's a lot of work on on what we needed to look out in Futures and so I work with the teams on you know what we thought we could do we analyze markets and, we give Karen and her team numbers they would run those and then I spent more time trying to work with the owners. And helping them understand what that was building up to especially in the segment where the owners are locked out of the process and. You know we didn't want them upset Andor yelling at you we took the brunt and I don't mean yelling in that sense but you know it's an awkward position here's your baby yeah yeah and here's this whatever it was 2 or 3 month window where they're now locked out because. The negotiating for the company side and the Department of Labor side and the trust side all everybody's doing their thing and they're waiting they're like we want to know it's like we'd like to know too right so um.

[33:57] But putting all that together but but I think if everybody's working just on numbers or just on pieces that's not going to help make that successful there's a part of. Of the transition team that's staying on board that really needs to work on the relationship side and comforting. And keeping the owner base understood without sharing the information that you can't and in many cases at that point don't have why those negotiations are going off on right number wrong number 2 I too all that sort of stuff right um and then bringing that back to them. And then the education process which we worked very closely together on, of what does that mean in terms of the financials and longevity of those financials becauseyou know first thing I think and you said this to us and we saw the same Reactions where we'll wait how does that work how am I going to have a paycheck right and. Yeah helping them understand that the difference in the way compensation will come to them.

[34:56] Uh is going to be very different and they need to structure some of those larger payments to then balance out in the end, uh they're all extremely happy right and there's going to be a window I mean the 1. You know covered each other's backs on everything.

[35:16] But um managing that coaching them through helping them look at the bigger picture helping them look at where they want to go and do. And do they want to stay in the business or do they want to have a great you know Financial uh retirement and be able to do the things they want to do helping them through that whole process but also really and truly helping them understand. How that compensation is going to come to them in what time frames based on the different ways things happen really got to spend a lot of time there or or it gets misunderstood so quickly and you were phenomenal in uh helping us when we would. Build up to that so then they could hear that then for me as wellyeah I think too describing that like the 3 of us working through I remember like, their is something that happens in the process between like the advisor and the people that are running the deal and you guys ran the deal um is like there's a there's a point in time.

[36:07] Where and this is what you're look look for right you as an adviser want to feel like I got your trust like I have your trust to know that there's things that you're not going to understand, completely because you haven't done this before this is part of the thing I mean you've done a million things but you haven't done this specific thing and and almost like a sense of Faith too like trust me have faith in the process it's going to work out and like 1 of the 1 of the elements of that is the negotiation process which. An ESOP transaction is a littleweird in the sense that it goes back and forth so many different times you know and and what you guys did as you were able to insulate. The owners from that because it can be like what are you talking about you know we offer something High the trustee comes in at something low I thought our number was you know so you can get you know a little bit like, what's happening with this process so trusting us. Was it was essential and you know point the point of doing that like I think it's hard for some people right you know for us I think you guys um. Did have a lot of trust in the approach that we were taking and you know maybe initially it was building that trust but just from absolutely yeah from your perspective how important was that like because you went through that because you didn't know exactly what was going to happen it was just like Hey we're going to be fine.

[37:22] Right absolutely um you know. From the very beginning and and learning to work with you and going through that process from my side and obviously we both felt, uh very comfortable, with the process I felt that you were very patient when we had a lot of questions you were a patient when the timeline got pissed a little bit because of other things going on. And you know when we got to the end we knew you had everyone's best interests at heart and I don't and never questioned that and so that made it much easier I think for the conversations with the uh with the owners, yeahyeah I think that worked out really wonderfully as as we and I think the importance I'm sorry Phil I think the important. How you could explain to us and you know that's definitely Karen's in in the financial world and to comprehend that very quicklyand helping me understand the process so that that I can go work that with. With the owners.

[38:27] And then again them hearing from us repeatedly on that information this is how it's going to work and us having thatfor some period of time every. I think it was every month for the most part with the owners then they would hear that again from you so we had you know delivered that message 68 10 times during that you know 3 4 week window and then then hearing the same message from you. Created a consistency for them that we weren't out on a limb being hopeful right and I think.

[38:57] The biggest thing I saw in the action from the owners was.

[39:03] Uh okay that'll be nice if it actually happened right because again they had never gonna I mean you heard that several times too right yeah.

[39:12] Yeah and it's not because they were being condescending or not thinking they never been through this process right and and no company. And I think a lot of them would a lot of people in this process would say hey no company I've ever built ever been worth that much right and so I'm literally going to get that okay that's a I don't want to be.

[39:31] So inflated that I it doesn't happen or whatever so they kept themselves down here and we're busy trying to get up here and and be a fair price. So the company's not under any burden or underpaying the owners when that came to fruition and we got past sort of that whole first round.

[39:51] They really felt good not just and not about the money, but about what they had built as a company company and the Legacy that will live on as a result knowing that we had you and and and Oliver and Hopkins behind us and Karen and I and the team that we've built to be able to carry the company forward to then carry that debt and and be able to make those payments long term as well right so, I think it's just a big thing for them to overcome and if you don't spenda lot of time on both sides of that equation, um I would say that the management team will be at fault for not covering off both of those bases to carry that transition into success because I think it's just been great for the company all the way around it's been great for them great for us. Awesome yeah so new 1 1 thing about you guys is you come up came out of the closing like 1 thing that you I saw you guys do early on is really, work on really hard and you still are in terms of communicating the ESOP and I I would say that let me as I think about that with other companies sometimes they're just, and we do try to help them you know there's a lot of handholding through that process because we know it's so important, sometimes companies are so I don't know what the reason is but they just kind of like oh I'll get to it eventually right they're not they're not as committed how important is that for you guys in terms of what you saw through the process of the ESOP and then now going forward because it because you mentioned it several times, in the way you communicate even now with with your people.

[41:21] Let me try to start that 1 Karen you augment if you don't mind so as I said earlier we we had this whole thing this whole Ritz program that we put together in parallel and that ended. With the combination of us going to Ritz Carlton spending 3 days training teams building up what we're going to do about credos and and employee values and uh service values you name it right and the team's been working on that all that comes together here, in about 2 weeks and rolling the final element of that out to everybody so everybody's been on a team. Um sharing some information but bringing it all together um it's going to be very excitingbut we did that and that culminated last night 2 weeks exactly before the ESOP became official right so in our case we had. Um our 3 owners or 3 principal owners including 1 of which is the a founder of our company. Um at the end of dinner that evening they put we put the 5 of us on stageand hewe let him make the announcement. That heand the other board you know the other owners were giving the company.

[42:29] To the all the employees right more impactful for them to say look this is so important you know this is our baby. And we are entrusting the company and you know he ended up getting us in the big circle everybody holding hands you know sort of RA and he said you know you've got to do it and then the 3 of them left and left. Karen and I and the rest of the team.

[42:51] Their to just sort of continue that moment of High 5 and enjoyment and look you've got to carry this on and it's now yours and it's literally it was kind of this big sort of.

[43:01] Wow moment when they left right like we're no longer a part of this you're on you guys have gotten this right and and he they did a great speech on itsubsequent to that. Um we've engaged, training every single month we do a town hall every month and 2 of those sort of April December time frame um we do it more like a fireside chat where we'll cover some some topics we want everybody to be aware of things going on in the company but then we send pizzas to everybody or breakfast if they're on the East Coast um to the offices or to those folks that are working from home and we'll cover up a few topics but then it's a lot of Q&A and we throw some topic areas up to just get people to start it in questions and, and so every single Town Hallhas been at least 50% focused on some element of ESOP training. Since day 1 right so even in April our first 1 was in April and so we've done it in the we'll we'll do a a fireside chat here coming up in December.

[43:58] But they'll still be an element of training what does it mean how do you make the ESOP grow why is teamwork so important how understanding to go understand the mission of the company um, December 1 or I think we actually have an extra 1 at the end of November the statements will actually come out for the first time and so the day after statements come out so that our employees are, co-owners are not lingering on what does this mean to me. The very day after the statements come out we're doing an hour-long session and Diana had that up again as well. On how do you read the statement what does it mean how do you make that number bigger how do you grow right and it's not.

[44:35] The dollar it's all about the customer service the patient experience, you know helping prop each other up supporting each other holding people accountable all those things that will make that grow and that's your net return for that otherwise guess what and by the way this isn't costing you anything except.

[44:54] The extra effort you need to be able to put in to make it be worth X or X Plus right and so without that they would be lingering along going. Okay so Reese up now it would take 3 4 years for people to really understand oh wowthat's making a difference but you know uh as Karen said.

[45:13] Wesaw a 100% now people investing in their 401K which means the esap training, is helping them understand about their future and when they understand about their personal future they understand about the needs of the business to get them there so uh I just think that education process is important Karen thoughts from you.

[45:34] I I would agree with that I think um Diana has done a wonderful job she speaks uh very clearly and understandably to the group, she's always open for questions and I think they're they've made great strides in their understanding of what this means for them, again I think actually seeing their statements will provide a little more of oh it really happened because now they have same thing with their name on it they can see they can log in and look at it any time so um, I don't I don't feel that, obviously we didn't have anybody internally that could have explained it the way Diana has and I think that has been a very good investment on our part for the employees to get that coaching from her uh because it it's made it seem real to them and in a way that they can understand what's going on and they're rolling making things better.

[46:33] And I think um just to kind of. You know add on what you're saying Diana Clark is our is our Berman Hopkins team member who who does Communications for esops and she's really like as they you guys have said that she's really good at it and your commitment to do that I think is is again unique I think a lot I see a lot of companies wait for a year to do something and and I think for us too I've I've spent a lot of time trying to encourage companies, the Duke kind of similar to what you're doing just jump in and and be really in in a sense, um proud of the Employee Stock ownership plan proud of and being able to communicate build it into your culture and I think you guys have created and and talked through. The way you're doing it and it's Unique to you but at the same time I think it's helpful for people that are either existing ESOP companies that maybe are challenged with that like I don't have time for that I'm doing this or whatever but you can tell like from what you're saying. You're putting this as a priority in the way you're going about employee training, in a normal employee communication and and so I I mean hats off because I think that will make a huge difference I agree with you Kevin it would take 3 to 4 years and that's kind of the industry standard I don't know if you guys knew that but within an ESOP people like oh to take 3 years well that's because people are not thinking the way you're thinking and I do believe that your approach is probably going to be more of what should come.

[47:54] But there's there's hindrances and that kind of thing so I'm glad we shared that part because I think it's helpful for for companies either engaging in the ESOP process now or already an existing ESOP to say we could, we could do a monthly fireside chat you know we just have to be a little bit creative you got to be a little bit like in in your case you know having Diana help you is is good because she can come with content um but even if you do it internally right it's just it's a good thing to do as a business practice as being an employee owner, company so well and and as we hire new employees. We try to either every other month or every quarter based on the number of employees come in we take now that sort of. ESOP 101 and either Karen or I will do that for the new employees so that they're sort of got that sure they've got some messaging when we hired them on and so here's what's.

[48:42] It'll happen but here's more about the esap and why so they're not waiting. To understand those pieces we want them on board pushing just as hard as everybody else and positive ways and not stressing everybody out but. You know every day we can all improve and and when there's good reasons why. Um and and that adds into then creating more good reasons why we want them on that same push with us.

[49:06] And something same thing we failed to mention from a communication standpoint that just occurred to me is we have a monthly employee newsletter and we ask Diana to provide a content for an ESOP corner, uh just a little short same thing that puts it out there for them to be thinking about and that way the next time we're together in a town hall if they have questions or what department on that they've had a topic that they could research and and learn a little more about and that's a really easy way to do some Communications, yeah now you guys you guys are you're you're quickly going to become the best practices these up company I believe so. But yeah we're almost kind of out of time but I just wanted to kind of first off say thank you for for sharing your journey to an ESOP I think it was just it really helpful for people to listen um as we kind of go to the clothes anything that you would kind of offer up as just general advice for companies that either are going to think about an ESOP or they're an existing ESOP already things that you already kind of picked up that might be helpfulKaren.

[50:19] So if you're thinking about it I think you should pursue it you should uh at least work through stage 1 and 2 get to the forecasting and the discussion with. With uh feel and work through the process and and maybe you're like us and you say okay we're not there yet but we'll be back and we were back in a short period of time it might take a little longer because kind of a different way to look at your company, and then if you're already there I think the employee education plays a huge role in it that as we said Diana is Awesome with that uh she's very knowledgeable she not only from the ESOP perspective but she did HR so she's very knowledgeable with how employees want to hear things and and the content to put in there so um.

[51:14] I I think getting your employees on boardabsolutely will make a difference because they when they see somebody slacking as Kevin said they're gonna either pointed out to their manager or they're going to go point it out to the employee and then you get the best employees that way and you maintain the best employees that way and then it also helps in your recruitment, I agree so I couple of things so 1 is I would say don't get discouraged in the process if somebody says know right up front we face that and we knew we needed to. Uh be able to supply which we were both hired for an exit strategy for them they didn't have a window necessarily a win but we we were getting closer to them saying hey I just this is.

[51:57] Not what I want to be doing every day anymore right so um we transitioned in that window where.

[52:04] Our ownersuh as Karen ascended to CFO and I ascended to CEO and president. Um we created a board of directorsuh and I think that we couldn't have done. In retrospect I don't know that we know it at the time but we need to be able to create something for them as a transitional spot and we didn't function like a board of directors we functioned like an executive team the 5 of us.

[52:30] So we created a board of directors, and put those 3 on the board of directors so they could sort of transition into that okay quarterly I need to know what's going on monthly will kind of do a smaller summaries quarterly we still got together in person um and that helped them begin that phase of. Not feeling like they had to be in the company every single day looking at something and knowing what Susie was doing or you know what was happening at a particular location and less around particular projects so that helped them in that transition of well geez I'm really not working on things day to day anymore but they had a position it could remain that maintain that um. Um identity so I think that that was very helpful and so we came back at it the second time and of course the company had grown in between and that created a a better valuation for the company I think that that. That that helped in a significant way for them to see how those transitional pieces um would fall fall in place, the other thing that I'll say um it as a supplement to Karen's comments and we both mentioned it earlier but the team holding the team accountable.

[53:32] Um we're not 1 for changing compensation plans much in the middle of the year I don't like saying, hey uh here's your numbers here's your things and now mid year we're going to change them right although, uh we did have a huge event we became an ESOP in April right and that was early in the year what we did tell people is we will be lining our compensation plans more around the ESOP because we go forward so, um as we transition and we run a a calendar and fiscal year both January 1 as the calendar year is always January 1 right so uh I tell everybody guess what January 1 comes the same time every year it's a new fiscal year let's get on it right and some people still look surprised like oh my goodness we've already in the new year but um, all jokes aside, this year our goals are so team oriented there's a plateau for compensation in not yet at our regional goals um there's a plateau for compensation that the teams have met their Regional goals.

[54:27] But there's a there's a uh third compensation point now where the company has met their you've met your Regional goal and the company has met the ESOP goal and then we throw some, some additive elements into the compensation plan for everybody there so, again everybody's thinking about the ESOP everybody's thinking hey I didn't just make my goal wait a minute the company hasn't made theirs so if we can help the other teams outside of our own region. Um by growing ours because we have the capacity to do it we still get to that bigger. Bigger jump because the company made their ESOP go right and on top of that then they're growing the ESOP value, they're growing their long-term value and compensation will payouts in their retirement fund on the ESOP side as a result they're able to contribute more on their 401k and at the end of the day they're able to um have a higher compensation for theirselves individually as well so I would say don't lose sight of the fact that there are other ways to incent the team on on compensation if you have um incentive plans like that, Leverage What the requirements of the esap are in those minimum targets to give them even if it's a small boost people like those kind of boosts right and then we have. Absolutely with Diana and a couple other team members, really focused on non-conference or rewards for the team as well and then and doing our best to tie that somehow to ESOP and you know our latest 1 is I think in 1 of our Paylocity or wherever it is, um badges for everybody.

[55:57] For great work and tying that to our ESOP and our uh customer experience goals and so those are all rolling out as well.

[56:07] Sounds fun sounds great guys thank you so much for for jumping on today I appreciate it it was super helpful and for other people that have listened you know as we go forward on the podcast we are excited about those types of opportunities to come back and look at you know how how this actually does work you know for for real so thank you guys for doing that today.

[56:28] Oh thanks for having usso for everybody else thanks for joining the podcast today check out our website at journey to an ESOP cam um for all kinds of episodes that might be super helpful for you to work through the ESOP process or pre or post ESOP things so from there um check us out on our next um podcast episode as we go forward and thank you guys for listening today.