EP1 - It Takes A - TEAM (Special Message for New Season)

This is the first episode of the new year where we like to cover changes to the podcast.  This kick off message for season 6 focuses on our core value: “It Takes A Team”. This works out well to connect the dots on the old tv show and 2010 movie “The A - Team”.  Some of the changes to the podcast have already been incorporated in our logo change.  This episode covers some of the highlights of 2024.  Looking forward to the new year for 2025 and some of the areas we plan to focus on as well as the open invitation to send your questions to our contact us page on the Journeytoanesop.com website.  Lets get started on our next step on this journey to an ESOP.

Transcript

[0:09] Welcome to the journey to an ESOP and Beyond this podcast is.

[0:16] A resource for those that really want to understand Employee Stock ownership plans and what I wanted to do today as we as we go into this is start with this and then go into like the actual content of what this is going to be about.

[0:32] Music.

[0:57] So long time ago 1986 I used to watch a TV show called The A Team you might have watched it too it was 1 of my favorite shows what's cool about The A Team TV show series is they would always start with this impossible problem and then these these Band of Brothers these group of The A Team which are all kind of different skill sets come together and they solve this impossible problem ultimately you know the theme was for justice to be um. Poured out to people that were oppressed and they were kind of like helping people all over the world uh they were uh military people that found a calling in life to really use their skill sets to help other people. And so there's a there's a sense of of parallel now what I just showed you or lists or we just listened to was an episode or a scene from the 2010 movie that was made by the 18 Starr Liam Nielsen and he was starring as the main role character Hannibal who every single episode for the TV show.

[2:02] He would always come back at the end and be like I love it when a plan comes together I love it when a plan comes together and ultimately planning is always Central to putting together the Employee Stock ownership. Plan employee owned company type of plan when you get down to it and so so and 1 of the things that that I wanted to kind of talk about today is the kickoff of 2025. Is in this new season as we get started um what are the changes what what do we do last year what are the changes this year why are we making some changes there are some things that we're not changing. At all about the podcast and I'll talk about thosebut I think it's important to to, always reorient and and have a um a time where we just think about like where we're going with something I think that that always makes sense and there are there's going to be things on this this episode that I think are helpful there are that are much more topical in a general sense it won't be drilling into those topics like we typically do but it will be kind of an overview of those things and what to what to expect.

[3:09] So 1 of the things that would you might have noticed and let me go kind of through the history of the podcast is we started off in the very first season in 2020.

[3:19] Um with really a brand in a concept behind The Branding which was very Centric around. Um myself which I basically deemed myself the ESOP guy which which um really was more for Branding purposes in the idea of um. How do you help peopleunderstand an employee ownership.

[3:42] Really more from a transactional standpoint how do you help people whether that be the employee or the company or the shareholders or the key people how do you help them understand. The way that employee ownership possibilities exist in how those could apply themselves to their specific company. Because out of the really the very very first episode was coming out of all the. The noise and the traffic of of complexity when it came down to an ESOP and I felt like there was um in the very beginning I felt like there was just so much um misconception and and and in general a lack of Education when it came down to um how does an employee stock ownership plan apply as an employee on company possibility. And so so 1 of the things I really was trying to accomplish is really building around other sources or you know other resources not trying to do anything but provide a little bit more of a of a Clarity when it came down to understanding because the the key is.

[4:46] In the podcast has been If people really understand this as an option. It's not that it's not that an ESOP will be right for everybody right so as you go to the the conferences as an ESOP right for you it's not really that it's it it's not going to be right for everybody but it is right for many many companies and the more that people understand it, the better it is right so as that plan evolved and came together um it really did connect the dots on some things that I thought were really helpful topically and so really what we did and that first couple seasons is really dig deep into pre- ESOP transaction topics that were important and very helpful I think to help people say hey I could do this Now 1 of the things you should know the reason the podcast even got started the first place was was as a adviser I kept getting questions from, a lot of different companies all over, and they were kind of routinely the same question so I'm like all right I'm answering that question why don't I just put it on a podcast so that's really where the podcast came from. And as as I would learn things you know and we're all learning so let's just be honest about that as I would learn things I wanted to bring those to the table as well, in last year's special message what I really talked a lot about was the um, the change that the the change in the podcast to in be kind of inclusive of pre- ESOP Concepts and post-op Concepts.

[6:16] So even in the previous Ops phase you're going to get questions from a client from a shareholder from whoever about what happens after this what happens when you know in 20 years what happens um and I thought wow you know it would be so helpful to dig into those Concepts as well and so. We we added on to journey to an ESOP um the Ambien part.

[6:39] So this year as we go into um the next season. I wanted to kind of first off show in the logo which you might have seen already the logos already been changed that we're moving from the ESOP guy Focus to more of the journey to an ESOP and Beyond Focus which is really kind of fee fine-tuning and and kind of gravitating to what really this podcast is all about it's not about me. It's about obviously about people that really want us to understand Employee Stock ownership plans and 1 of the core values that we function in our firm with and of course we function with as a team is that it takes a team and as much as Idon't mind being kind of at the center of attention but I I also know that I'm I'm limited as well so we've built our team out and just like The A Team we've got people from different walks of life that have different disciplines and we blend that together and we've created a very a a very effective team. To pull the plan together and and really. Just make it happen really and and that and that is true for deals but it's really true as we talk about the podcast for the for the podcast to be better.

[7:54] We need to become more inclusive of the teamso what you're going to see is that you'll you'll have more than just me being the host you'll have other people um being host with these different topics in addition to the normal interview process so that's 1 of the changes you you've already seen in the logo you're going to see more and more of that in the 2025 content and even though we've.

[8:17] Dissected that into pre pre-op and post-op you know of course those are still going to be relative Concepts and we're still going to keep the idea of a couple different things that are that are really important the why behind the podcast has always been it's it's a educational resource that should not be, biased from our opinion but should be just really factual information like what we what we discover here's what you should be able to depend upon um as facts why is that so important in the ESOP World well to answer my own question it is important because there are a lot ofvariations. When it comes to things like what is should an ESOP cost there's a lot of variations in terms of what should um this how should this get structured in certain specific ways how does this actually happen. Even though there's some concrete things that that should be the same each deal there are some variations and I and I believe part of our. Our responsibility of doing the podcast is to is to represent what we believe is the most accurate Viewpoint and and.

[9:26] Some people might say for instance an ESOP is always going to be really really a Nissan transaction is always going to be really really expensive what does that mean, you know in terms of dollars and cents right so we're always going to be um as a as a podcast resource broaching the subjects that need to be talked about in 1 of the reasons we can do that is because we're not affiliated with anybody we're not responsible to any other party and ultimately from a business perspective I'm not relying we're not relying on somebody we have to make these these little um you know deals between third parties where like oh you do this I'll do that right we have we are we are 100% independent and even in the podcast itself. We're not here there's no call to action call us and we'll do your deal if you guys want to call us and we'll do your deal but we're not here to do that specifically we're here to um create an educational resource and that's not changing, and we're just getting getting broader and broader and the and the um, the the scope of who you're you're listening to because you do know it's like in The A Team there's not just Hannibal right there's Barabbas or. Uh baracus and then there's um the face and all these different characters that have different skill sets that do different things and we want to kind of bring all that to the podcast so that's really going to be the main. Focus on what we're trying to accomplish in 2025 now.

[10:53] When we go into the future I'm going to talk a little bit about the history of 2024 and just talk through like what what were we doing what were we talking about what was really kind of, important and some of this has to do with um what we see as as topics or. You know interviews that really were um. Downloaded more than others and just kind of giving you some of the highlights for 2024 that I believe are are important and to kind of really. Help understand where we're going in in 2025 as well.

[11:30] So 1 of 1 of the things that we did just kind of categorically is we went and. Explored and we've done this before in other Seasons but we went and explored other resources because it's really. Again important to come back and say all right well of course we're not the only resource. What are the other resources out there so we did um kind of our annual we have typically an annual interview with nceo which is the national Center of employee ownership. Um the nceo is an organization that really helpsum.

[12:06] Uh I think do some something similar to what we're doing like really helps companies determine like is this really right for you what are the Avenues of of the ESOP um and and really plug you into, um you know resources sometimes Professionals in the ESOP space sometimes um other ESOP companies so you can get your questions answered and so we we did that um and it was really helpful to kind of just hear um again from. From the nce organization that that would be you know Corey as the main Corey Rosen as the main figure there um in addition to that uh we did explore. Um a little deeper with eox Steve um starkin which I think is really helpful um 1 of the 1 of the truths about. Esops is that employee owned companies are geographically concentratedbecause there are more some geographies in the United States that are much more um.

[13:05] Fostering more communication and education um so that people advisor CPAs Insurance People attorneys so that they can be more equipped with it of course companies to go to those events and those different geographies and they're like oh yeah that would be that would work for us or because they they know it's like a snowball so because their friends are doing it then they're seeing more and more of them having that that could work for us so eox is really doing you know doing a great job of that across the country, of trying to educate and build more and more um educational platforms and not to say that they're the only ones doing it but they are specifically mentioned focused on that.

[13:43] In addition we also um, introduced interviewed again for the second time Esa um at right at the end of the year and asked is really there to help um really focus in on the S corporation and much more on a political level than on on other fronts but of course, education is always at the Forefront of everything so so you've got these resources that are available there are others that I'm not really kind of mentioning here but just kind of wrapping up like 2024. Some of the things that we did in 24 that I thought were really kind of helpful is we got really much more in and that was beginning of the the beginning of the year some of our goals were to get much more into the post ESOP. Topics. So things that I think are kind of important that we that we brought out that I think will just continue to be working on is how do you really effectively communicate your ESOP you know to your people.

[14:40] Andwithin our team we do have an expert her name is Diana Clark she does she does, provide a a a c Suite executive level um not from a just a pure HR standpoint but really from a a well-rounded communication strategy of how do you how do you do this better. Then um the average right and let me just say like communication is is so all over the place when it comes down to Employee Stock ownership plans and our employee owned companies it's so all over the place. And it's hard to say anything factually here but just from what my experience is like so I can't say this is a completely true statement across every single employee owned company, I would just say that my experience is. That a lot of times the communication side is not being embraced fully and there's a lack of um. In there's a lack of building a strong return on the investment when it comes down to the communication side there's also some some kind of rules of thumb that people throw out that do I think make this, part of the part of the reason this is the case is that there's like this well it takes 3 years for anybody to really get the ESOP I know that that's certainly true. But there's also that doesn't mean it can't happen sooner right and so some of the things that we talked about.

[16:08] Where the idea of doing some type of monthly training every month and just having that built in whether that's internal or external. Um or an internally provided or externally provided we talked about. Um really digging into what communication might look like with an ESOP committee so we actually invited a. A company on at the very beginning of the year to describe their approach to. Being a a very well-rounded ESOP committee and the role that they play in the company.

[16:40] In in regards to this specific issue 1 of the things I I I noticed and I and I. Kind of looked at in different you know Vantage points even from some of the conferences is that the the truth is that a lot of focus is is put into the transaction.

[17:00] For a lot of reasons I mean of course it costs a lot right and it even even the variation of costs that we talked about but it cost a lot. And it's it's very impactful to the transaction is very impactful to the shareholders and so it's going to get a lot of attention. And it's kind of like I would use the analogy like if I buy a Rolls-Royceyou know or. You know a nice car Mercedes Benz or what whatever a nice car is if I buy a really nice car. Am I not going to put the time and energy afterwards to keep the car up right I'm going to want to make sure that there's everything I need to keep that car operating at its full capacityto get everything I can out of the vehicle that I just bought right so what if for whatever purposes I got the vehicle for so. Fight with was a fast car I wanted to go fast if it's like my um RV that I got last year I wanted to go all kinds of places and not, you know break down right so so the idea of coming out of a transaction that we talked about a lot last year and I want to talk about more this year is this idea that hey we we need to put some some energy and resources into the employee owned company after the fact, and the reality is is simply that.

[18:16] The the employees that become on that go on to the ESOP committee or the people that are actually even doing the deal this they've got a lot to learn when it gets down to it and so it is probably a really good idea if you're planning a transaction is to budget some finances for employee communication. At least for a solid year or 2not to say you're not a great communicator and some people are really really great at it and just to be honest some are not right so we know that, but how are you communicating how often are you communicating do you have the content to communicate right. All of there's there's those things and more so we talked a lot about that last and and some of the different ways of interviewing and talking to different people um that I think is is fundamentally important that will always be important.

[19:05] Some of the other highlights we had that I think are really helpful would be just to digging into again some of the interviews of trustees and and who they are and how they think I think it's always helpful to better understand the transaction side and also what happens on the trustee side afterwards so we did a few of those.

[19:25] Um we talked a lot about like building a sustainable long-term ESOP company or employee owned company from a lot of different managed points but partly it is the planning side at the beginning and then part of it is is the long-term nature so we were um had the opportunity to interview a very, um mature ESOP company that's been around for 24 years and has gone through a purchase liability they've gone through changes in the economy reversing that was in my opinion super helpful um. In order to really understand like what what you might be up against in the future you know terms of of what can change and what and how does that really affect. Um everything.

[20:06] Last year there was a lot of of conversation around how private Equity is jumping in and I think this year we're going to see more and more of this how they're jumping into the employee ownership space, what does that mean for an employee owned company right now what does it mean for them going forward into the future so I thought that was that was a interesting topic there was a 60 minutes program last year and so we'll we'll likely get more and more involved in helping understand the benefit of that and how that will play out when you're looking at your own. Potential deal.

[20:40] Some of the other things that we wanted to um we dug into and explored last year had to do with just specific topics that I felt like were important um, in terms of understanding the the I think every year I want to do this anyways is is understand the valuation better understand the feasibility modeling better understand how the financing stuff works better so keep in mind I as I as I talk about those things I think that they're always so important because they're really critical to making a a decision for anybody in the the time where they start thinking about an ESOP to where they hire the advisor and they work through the whole transaction it's going to be. Um really fundamentalso part of that too and understanding the processes and the transaction for the first time I I did a podcast which was the wrestling 1 with Randy Macho Man Savage which was a um. I wrestler that I watched a lot when I was a kid and. So it's it's called the bring down or take down call and it partly is helping to understand the due diligence process and the final process of of closing an ESOP transaction.

[21:49] Of from that too I did explore a lot of like the conversation around the valuation as it relates to the historical.

[21:57] Cash Flow versus the forecasted cash flow I felt like that was important because you know you have some level of. What happens if my forecast is more like a hockey stick as opposed to you know maybe a real. You know Flatline like there's literally no growth it's just the same thing every right so there's are 2 extremes how does that really translate to valuation I thought that was important. Um and when it comes down to esops I did see a lot of there's been a lot of questions over and over again about. Um what's the inside Note versus the outside note so I did a couple episodes you know using the, um the movie um the new movie The Inside Out movie which I thought was fun um so. Borrowed from that a little bit and just tried to explore outside no is with the the bank and the selling shareholders the inside notes between the company and the trust so you know you can tune in on that a little bit um I I'd like to talk about the negotiation on an ESOP transaction because it's important for people to understand.

[22:58] Where where you're going know the the whole idea of it being an independent arms length transaction how is that actually you know put together if for companies that don't know what the negotiation looks like I think that's a that was a helpful 1. Umunderstanding again more and more about the um what's out there from a conference standpoint I did some work on that, who's you know when you go to a conference who are you going to meet you know how do you kind of put together like. Um who you should be talking to First in terms of looking at your advisors and and I thought that was you know intentional to try to help really build some knowledge base around that. For the first time ever uh we did a podcast on Estate Planning and I think for 2025 more to come on that. When you think about this this event happening where you sell your stock and that some of that stock gets turned into Cash.

[23:53] Um and some gets turned into a promisor now eventually what happens is like what are you doing with your estate how does this affect, your state plan um with different types of trusts that are available so he had 1 of our partners on, um as well as 1 of these opportunities on to discuss that I think that is a is that again that was the first time we ever did that I think that needs to be dug we need to dig deeper into that as well.

[24:16] So other than that I mean I think that that's kind of where we were where we're going this year I think for the most part I want to and I'll just give you these I don't have the roadmap plan and I certainly don't have and I don't live this way I don't have every single episode for 2025 figured out. But in general let me show you let me kind of give you a flair for what I think it's going to look like we're in general I definitely want to explore. Third-party administrators more this year and talking a little bit about 1 of the issues I've seen happen for existing ESOP companies is there they're running into some of the consequences of third-party administrating um companies consolidating. And and I think also having a a bit of a talent uh deficit and so they're seeing some some issues with. That just maybe even service or knowledge base that kind of thing so I I definitely want to explore the third party administrator. Issue a little bit deeper as it relates to Employee Stock ownership plansand only because I think it's going to be important um to better understand. That part of it who you're hiring how do you stay on how what should they be doing that kind of stuff it just it's it'll be I think helpful.

[25:27] Um I always want to interview different professionals so and expand the the net there a little bit and do some more interviews with some different ESOP professionals whether they be trustees attorneys valuation firms, um and I do think having insurance people involved so we've done that before I think that'll be part of the interview it's like so, we always want to do that we always want to do some interviews with existing ESOP companies and sometimes following up with some old ones um sometimes new. And I mentioned all these things because I think some of it it doesn't have to be a ESOP that we created right we've interviewed other people um for existing ESOP companies so if you're 1 of those companies and you'd love to be interviewed go to our website at journey to an ESOP cam.

[26:09] You know and let us know because we'd love to get to know you a little bit better um and what you're doing and how you might help the ESOP Community as well as we think think through this it takes a team team effort that we're all participating in because 1 of the core values and I would just say the common values of the ESOP Community is we all want to help each otheryou know. However that looks that's what I would say is is the intentional um why behind the whole community and we want you to be part of that and that's part of the. Part of what I think is, responsibility of being a good human is just helping others you know get through that so if you are interested please you know let us know the other thing I would say is as I go back in the beginning and each of the years I know that a lot of the content that we do, has to do with questions that people ask us.

[27:00] So there's no reason why and this has happened before so just keep in mind go to journey to an ESOP cam contact us and if you have any kind of question that you want to talk about let me know, and we'd love to or send us an email we'd love to kind of explore that or get deeper into that topic if you feel like it's going to be helpful.

[27:19] To you and that and that again applies to brand new if you're not an ESOP yet or if you're an existing ESOP company or you're you're a mature sub company that applies to all of those, um as we continue to build a a community of of ESOP companies together I think that's part of the vision of of what we want to accomplish so other than that I mean there are obviously will be things that I think are just always important which I talked about already but digging deeper into understanding the valuation part understanding the way companies valued for an ESOP, um is really critical to making a decision understanding how the financing structures work, um what's continually available um from senior debt holders so um senior Banks when it comes down to what they're willing to do what are the changes coming for this year with interest rates coming down a little bit, how's that going to affect so those are those are some things that we're going to, want to explore deeper um more and more advanced ESOP issues as well so we're going to get into more posty so um issues that that companies are dealing with in terms of um how do you pay off a huge warrant payment right what happens when the value of the stock goes up so much umsome of the some of the. Initial consequences or opportunities when it comes to the some fundamental things when it comes down to retention of employees.

[28:41] Incentivizing the employees. Um 1 thing I wanted to explore this next year is digging deeper into the concept of open book management and what are the what are the best platforms. 1 of the resources I didn't mention in the in the 2024 period We did an interview with. The CEO of EOS employee ownership um systems which is traction and.

[29:04] Uh or entrepreneurial ownership systems basically is I'm kind of confusing the 2 things but we did an interview and the idea is that there what I see in our own our own firm which is an EOS run and other companies that are going through ESOP is there's definitely a a Common Thread to the. Practice of of using something like EOS and the value of being EOS company going to ESOP. That I felt it was really important so we explored that with the CEO of EOS worldwide and I think it was really helpful.

[29:38] Some companies don't use anything some companies have something um but I'm saying a lot of companies that we talked to are already in EOS and using traction as a as a good platform for accountability. Um for communication for executing their strategic plan and so all of those are are I think are very very helpful, so so those those are um as we go into the 2025 those are things that we're thinking about um we'd love to hear from you more and part of it as a podcast you know we're always going to ask for radis and review us please give us 5 star rating uh it's always helpful um and then ultimately, the biggest thing is if if you think the podcast is helpful to you and you know your friend has a company is looking at potentially doing ESOP you know please send us send them the link send him or her the link because it's it's kind of helping people sohaving said all that I want to say thank you thank you thank you Happy New Year um as you go into 2025 hopefully you're celebrating and uh great 24 and celebrating what is to come in 2025 um we're celebrating this team structure and what comes next on this next step on this journey to an ESA.