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Summary of Podcast on EP18 - ESOPs for General Contractors - real life ESOP transaction experience with Joe Hurt, President of RLH Construction - The Grid Wiki

EP18 - ESOPs for General Contractors - real life ESOP transaction experience with Joe Hurt, President of RLH Construction

Journey to an ESOP & Beyond

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| June 16, 2022

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When should a business owner start succession planning?What advice do business owners who sold to third parties have to offer me?Will all of my employees become owners if I sell the business to them?

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This episode is truly valuable for companies thinking about an ESOP - as it helps to walk out the ESOP process in a real life experience. It is especially helpful for general contractors and to go through a Joe Hurt's journey to an ESOP!

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Hey everyone welcome to the ESOP guy we are on a journey to an ESOP and so excited to be with you today and just wanted to kind of.  As we set this next one up really kind of go into an ESOP interview with somebody that's been through the entire process,  so for those that at that are brand new to the podcast I wanted to say thank you for joining today and please,  if you're interested in Aesop's check out our website at journey to an ESOP calm and you'll find a lot of different episodes that will really help you on going through the process of thinking about whether or not an ESOP is right for you.  So this is always one of my favorite types of episodes because we get to kind of talk about,  with somebody that's gone through the process real life experience and I think that's really helpful for people that are thinking about going through Aesop's because you can kind of put yourself in their shoes and,  and think about what they were doing or why they were doing it and just get some good information so the topic today is going to be contractors going through,  real life experience and what we're going to do is interview Joe hurt Joe hurt is the president of rlh construction out of Florida.  They are a general contractor they have several Niche areas in,  really Joe and I went through this process step by step together and and it'll be really interesting to kind of see what Joe's perspective is on the whole process so so with that Joe thanks for joining us today.    [1:38] No thanks builds great too great to be here and edit you and I spent,  what 9 or 10 months together last year and it's kind of kind of had withdrawals from you from you this year exactly you probably had therapy after we were done working on this thing so.  Definitely took a few weeks off here for sure,  so let's just start with with this Joe just to kind of give everybody a little bit of context tell us a little bit about your background,  with the company and just your history really the kind of the history of rlh as well and you know from from your perspective how you saw you know both just kind of the company's history in this coming together.    [2:20] Well sort of with a company to company's been around 30 years this past January it's just a single owner.  Company started the company back in think it's what.    [2:33] What 30 years was 72 something like there are 80 20 actually be 92 right so something like that but.  You know it's been a single owner since day one and he is pretty much run the company as a family-owned company a lot of long-term employees in place have been here for quite a while,  and he brought me onboard what eight and a half years ago.    [3:03] And becoming on board I was brought on board to really work on processes and procedures and stuff like that and as my background is really not construction it's more.    [3:15] The HR field,  human resources and one of my last companies I work for we did a lot of processes and procedures development of those over my 12 years with that company,  so it seemed logical that came in to do that kind of thing and we've been able to put those processes in place over the last 8 years.  Now that's smart now I know a lot of companies go through different evolutions and Richard who's the owner before we sold it to the ESOP obviously saw the need for the company to have some Professional Management so I think what's interesting about your background,  is a lot of construction companies when they go through the ESOP process is usually the direct founder that you're working directly with to sell the company,  in this case Joe was really the one that we work with directly kind of similar to other things because he kind of took over,  the a lot of the decision-making process so one of the one of the good things about rlh and going through the ESOP process was that they were.  I'm already working through a succession plan where the in the founding owner had already kind of put himself in different,  responsibilities and already kind of started to succeed some of those responsibilities having like someone like Joe they are so I think that was it.  It's an interesting aspect of you guys is history and also a big contributor to I think your success and how you guys are running your company.    [4:43] I agree you know putting putting the ESOP in place was was kind of a,  fun and exciting thing is long process but fortunately we had a lot of things in place and which set in place and motion over the last few years to really make the process a little bit smoother,  they're still.  Yes the road bumps along the way that we could probably could probably have done better but for the most part it made a pretty smooth having those processes in place a lot of checks and balances,  exactly yeah so and you kind of know what I think about the ESOP processes,  those are tested a little bit in the process of doing likes a due diligence or some things that we'll we'll talk about but you know just kind of fast-forwarding into that I mean that,  I think that proved itself out like you guys have done a good job great job of putting those processes together.  So let's start at the beginning like what when we were going back to the very beginning what what made you guys decide to go towards the ESOP,  you know among other Alternatives because I know you did explore you know I write out sale to a third party,  what was going on in your head and maybe Richards head in the in the time that you were thinking he stops my tsop might be a better alternative to other things.    [6:00] Well I thought process was all over the board initially because we had we have a senior management team and we decided.  Yeah probably a year and a half ago that we were going to go into some kind of Phantom stock.    [6:16] For the management team to kind of little ownership goes a long way because they say and so we thought well if we provide this Phantom stock to our key managers you will be able to retain them and hold on to them,  but at the same time we are also looking at,  potential with Equity firms buying this or like I said a third party and other Construction Company acquiring us.  And obviously those two Avenues were very appealing from a couple of standpoints and you know one one company that was pursuing this was a much larger construction company which brought a lot more,  process is a lot more Capital to the table so that was that was intriguing as far as an equity.  Going down the equity buyer route we really didn't feel like stripping the company,  and it's kind of what we thought you know somebody like that would come in and just rip the company down to the Bare Bones take the profits and it's been a sophomore shut our doors at some point,  so we decided to get that route the third party sale that was that was a good direction but,  you know then we like with so we got into the Phantom stock idea and we went we went down that rabbit hole for about 3 months and spend a lot of money on developing.    [7:36] The same Stock Program but at the end we decided,  what do we look at an ESOP and I'm not sure I think you and I had a discussion somewhere along the way and,  so we decided Well maybe this is a good option for us because you know the tenure of our employee.  The employees have been here over one year the average is five and a half years.    [8:01] The tenure that's pretty hefty I mean we got guys that have been here and one guy's 23 years we got a couple of 18 year,  veterans if you call so we really wanted to make it work well for those guys as well and both Richard and I said you know we.  We want an exit strategy at some point you know so this might be a good exit strategy over the next couple of years too.  You know broke the bow out and be able to point our.  New leaders obviously if you go with a different company you know they're going to step in and they're going to point do they want to leave the company,  which may or Mater may or may not have included me,  it stopped so you know we thought this is a viable option and the more we looked into it and kind of got us excited and that's when we made the call to you and we started going down that path.    [9:00] Now I think one of the things I that stuck out to me too and that beginning process is the desire that you guys had to keep the coat the company culture that you've built and you know that you've worked so hard for.  The desire you had to really kind of share in the possible future rewards of what the company was worth,  and I think those are you know you know when you connect the dots it's like you're trying to accomplish with a nice,  because everybody's different you know there might be different motivations in different areas but you know I know those things really checked out for you guys and in the type of Industry that you're in.    [9:37] You know like you know I think most companies are like this but especially the type of Industry you're in the people are so critical to the future of the company and they're critical to the,  situation as well so a strategy of doing an ESOP really does provide an opportunity to retain your,  um give people a reason to stick around and at the same time you can Flex through the process as opposed to having some of what abrupt type of transition or change your control with,  with it with a new larger entity trying,  inner integrate you guys into something else so so that was it was an interesting process we going into the next question really we I know we talked a lot about because your Construction Company.  The difference between a partial ESOP selling a percentage of Richard shares and then him holding back versus doing like 100% ESOP and.  There are a lot of different reasons to think about that for you guys what was kind of motivating you because we ended up doing 100% ESOP so everything was sold at the same time in the benefit of that was,  it was pretty heavy because we became a tax-free entity you know immediately if you know following the transaction.    [10:53] Well I think if I could go back to the previous question for a second when you're one of the things I thought it was the was key with the.  The age of the management team.  Because more we talked about an ESOP you know you really need some runway for the value of the stock to rise so you know people can.  See that value of retirement and you know the age of our management team really lend itself to.  Making this a good candidate to go down the ESOP road so didn't mean to digress there but I thought that would be now that's important because yeah if you have an older management team.  There's not a lot of runway for them now that's a good that's a great point I think sometimes we don't we're all trained not to ask people's ages because when we hire people but age is important element because as you said,  and I'll just kind of like lay out this as a as a kind of a note that people understand this a little bit better the ESOP,  really benefits people from a long-term perspective so if you have a younger Management Group they're going to have a lot more years to build a lot of value in their retirement accounts relative to an ESOP,  if you have an older Management Group it does become more difficult because their Runway is Joad said is not as long so.  But goodbye was a great point so and then kind of coming back to the partial versus the 100% nice out what was going on in your thoughts with that.    [12:21] Well a couple things.    [12:24] You know when I'll just be very blunt you know our owner is and all in or all out kind of guy so going into the 30 40 % Esau.  Didn't make a lot of sense from his perspective it's either I'm selling the whole thing or I'm retaining the whole thing.  And so that was kind of our initial discussion was around a hundred percent versus of the lower percentage and he had no desire to go in a lower percentage now from a.    [12:55] I guess from my perspective the 100% seemed a lot more less cumbersome.  When it came tax time you know all so when it came time to.  Divvy up the prophets you know it or.  Keeping the hands out of the till if you want mmm single owner has had access to bank accounts and the funds and,  you know now is a nice off 100% nice off the kind of that privilege kind of goes away because you breathe the rewards of the sale.    [13:31] And managing a 30% he suffers is 100% he subject sounded a little bit more difficult from my perspective.  Now I agree I think that that's what we played out heavily in our decision-making process and one of the things I'll just throw out to people as your construction companies that you do need to think about,  the impact of the ESOP on your bonding relationship and also your banking relationship and so those are things that we did think about work when we work through and.  But it is it's difficult sometimes if you do 100% ESOP.  Because the bonding company has to really get comfortable with the with the leverage that that can create on the balance sheet so.    [14:12] But you know as we go through the whole process it's it's not going to be you know one of the things I would kind of point out it's not going to be ideal perfect for every scenario you have to really look at pros and cons of each of these options and so having,  having people that help you good advisors that can help you you know step through that not just not just the sell-side advisors or.  People that do what I do but I mean your existing.  Bonding agents or your Bankers or your you know attorneys or whoever you use is visors it's really important to ask those questions to make sure you don't get too deep into it and realize it's not it's not going to be a viable situation so.  Very so kind of looking at it from the big picture now that you have the benefit of hindsight you know in.  When you think back on everything what would you have done differently and.  You know how would you have approached the whole process may be what would you have improved on or changed any in terms of what you guys went through.    [15:17] Um the process of itself was relatively smooth,  you know you did a great job laying out the steps and telling us where we were in the step in the process from Step standpoint I guess my biggest.  Thing is I'm probably spent more time on the bonding side yeah really get a better feel as to how that's going to affect you because you know you might have a beautiful.  Balance sheet.  Today before the sale but after the sale your balance sheet is doesn't want to good and then trying to you know talk to shirt he's punctured he's into bonding you becomes a little bit of a challenge and I think I would spend a little bit more time.    [16:02] Before the close to get a better idea on how that was going to affect us.  Yeah but we're making standpoint I think you know really nothing's changed.  And I really wouldn't have changed anything in that whole process I think we and I know we're probably talk about the bacon making side of it a little bit but.    [16:25] You know some of the insurance requirements I mean you're really you need to get down to the details on some of that stuff prior to.  The closing and I think we could have done a better job me personally done a better job of building into that and having that laid out and not be a little bit of a firefight at the end to get things in place.    [16:49] You know I think some of our processes and the way we process invoices and stuff we could have probably done that a little bit better.  But that's that's sort of you know looking back a couple of years because.  Doing it over one year wasn't going to make a difference it's really you need to have that process in Place several years before so it's a nice clean look and you're not having to piece things together.  Because I becomes a little bit more of a challenge and in my case it was a bigger challenge because most of this was done behind behind the scenes and.  Because as you tell me it's not done until we sign and you know I'd say right up the 11th Hour we're still trying to figure out okay are we really going to go through.  Yeah it's like you don't want it we didn't bring a whole lot of people into the.    [17:43] Into the mix because we didn't want to let down because we'd already let our management team down.  On the Phantom stock which we had laid that out and we kind of gag that back so.  I kind of had a someone had a bad taste in her mouth about that yep talk.  Yeah I mean that can and that can make some anything more stressful because you're trying to make sure that this is the right thing when do you communicate all that is important to your you know how do you communicate to your team in the process and then when you communicate it as you get,  through the process and we'll talk about that in a minute because I think it's a really interesting part of your story.    [18:22] When you when you think about your industry as a whole though as a general contractor.  Do you think there's anything specific that for you guys like just because you have,  long-term contracts you have you know one of the things we always kind of went through in the process of working on yours is you know,  we have this backlog we're trying to do forecasting and figure out like you know and getting comfortable with where's that forecast going to really end up because you have new contracts that are coming on you have other things that,  that are changing what sort of things for your industry would you say would be important for people to be thinking about well.  The one that you hit on is probably the most key and that is the forecast because you know historical data and construction company doesn't tell you.  Anything because you know we live and die by contracts historically if you look at our contracts I mean.    [19:20] You don't say you know when I started hearing half years ago we were 40 million in revenues and we've been over a hundred million,  over the last few years so that's quite a.  That's quite a of a quite an increase but it was over several years and we've had some dip since then so trying to do a forecast.  You know it's kind of like pulling.  You know clouds out of the sky okay I think next year we'll do this number but in the compound our problem you know we started talking about this.    [19:54] Right after covid in covid had killed a lot of I'm sure told a lot of companies including some construction companies,  fortunately for us we plowed right through and continue to grow even during 2020 and 2021.  So we could see contracts contract signing was still pretty strong so doing a forecast the little bit more comfortable with it but you know you and I feeling comfortable with it wasn't the key was the bank.    [20:27] You know think the trustee the valuation guy determining well or they just,  Pie in the Sky numbers or is this legitimate numbers and,  you know we were I think we did a great job you're doing our forecast because we didn't do a straight line for casting or we we have Peaks and valleys and just like we have had in the past so I think.    [20:51] You know that's the biggest challenge was that because that that's what you base your cash flow on from and the cash flow is what you take to the bank and say okay we can pay this loan off,  using our cash flow and if the numbers don't make sense.  You know you're probably not going to get the money you want and when I say that I mean it's the owners not giving it the money wants nor the bank is going to loan enough.    [21:16] You have to make it you know good option to go in somewhere down the chute.  I think it's a great point and I do agree I think we did a good job of doing the forecast on a realistic basis.  With a construction company you do want to really look at the backlog because in the first couple years the backlog is going to be a good indicator but then beyond a couple of years it's hard to know,  but if you have had a history of Peaks and valleys it's going to be realistic to think that there's going to be a future Peaks and valleys just big based on the way you know your kind of business runs,  what was nice about your company is and I'll kind of speak to this as general GCS that you guys had had.  A lot of great things to talk about when it came to some of the niches that you've created and how those types of things relationship-wise with customers,  give you more of an edge when it comes to not relying completely on just like a bit in proposal process which,  in some cases a g c is going to have to because that's just the way their business works so it really understanding the business development process is as a real key,  to feeling confident about what we put down in the forecast I think that was a healthy exercise for us to do that and I know we did that early to prepare for what was going to come later and I think all of that played out pretty well.    [22:39] Well when one of the keys are owner as big and Business Development that's really is his Forte is,  being out with the clients and selling business so that was kind of an easy transition to get him more involved in the business development side said okay,  you know this is our projection.  We got to hit these numbers so help my business development department go find these numbers and I think that was a,  that was a big selling point as well just because he has a big personality and is a great salesperson so you know I always told him that.    [23:17] You know if I wanted the deal closed I really wanted a deal I sent him and the close it yeah that's great it's great to have him yeah for sure and he still part of it so that's great,  I had something real quick as we were talking I thought about it it's like.  One of the things that people when they look at this there and they're asking themselves in their head hey what'd I get it that sounds great what is it going to cost me were you shocked by the cost when you went through the process I know we talked a lot about,  cost as we went through it and I know that there's a lot of questions about you know what is an ESOP actually cost but when you went through kind of the overall,  you know you said your invoices and all that where you would like surprised at what you spent or just in general what were your thoughts with that.    [24:03] I think it came in about,  about what I thought it was going to cost you and I had plenty of discussions about that and and the kind of toot your horn fill its.    [24:15] You know your fee if you don't mind me talking about that no I don't mind was way more realistic than using a third party.  Guy to come in and sell the company and I mean the fees were astronomical on that side I think your fees are very fair at least.  Getting us to that first state and we take a look at you know an hour cost but as far as the legal fees and you know they're always these.  Little fees that you don't take into account for example that he solved.  You know the third party administrator if you would you know those costs you really don't you don't think about that is they're not enormous but it's still another invoice coming to the door,  you got attorneys you got Bank attorneys you have Bank fees and so it's.  I think overall all of those fees combined are still far less than what you would go through.    [25:14] You know if you're used to third-party salesperson yeah I agree.  So one of the things we've alluded to a little bit is this the team that you guys have put together and really building this around,  like you said the age of the management team how in the process did you involve your leadership group and then can can you kind of go into,  how they interpreted the whole process like in terms of accepting this is what we're going to do and getting them how do you how did you get them on board with the whole process of doing the Esau.    [25:49] Well initially we did not bring anyone on board what we were doing so you know the owner of myself and again we didn't want there to be another letdown.  So we decided okay we're going to just stick to the two of us we're going to work through this process and see if it's once we know it's viable and once we know have a pretty good.  Probability that we're going to go through with it then we want to bring everybody else into the fold.    [26:19] You know what was nice is that the way we did it we said everybody down and his group of five and said you know we we're selling the company.    [26:30] And they all you know all the eyes got big and said oh oh geez you know what does that mean is what we're selling it to you yeah and,  which you know sudden now it's a lot more interesting to them but a lot of people didn't understand esops and,  still in the process of learning learning stuff as am I I mean it's a I think it's an ongoing learning process,  and you know once we explain to them what we were doing then and how it affected them.  From standpoint of there's a higher pay people there probably stand to get more shares of stock.  But it also requires you to stick with a company you know in most of the guys like I said earlier but an age where they're going to be here another 10 or 15 years,  so during that time frame and using some examples of other companies that we've learned were esops.  We made a presentation to them sit here talk to these companies that you may or may not know they're very soft but they're doing extremely well and talk to some of their employees and get a feel for you know what their thoughts are and.  So once we laid it out that way you know I would say that was probably.    [27:46] Probably six months before closing and it was.  You know I kind of doing everything behind the scenes it was kind of like okay I got it I can let the cat out of the bag because I'm your little boy yeah Cloak and Dagger.    [28:01] Yeah yeah so see I think it was well received I mean there was skepticism because you know obviously.  Phantom stock didn't work we did have a Deferred Compensation Program in place,  so obviously when the isak came about that was going to go away so he sort of walked on eggshells explain that you know this one's going to go away but you're going to get this other.  Your broader program where you're going to be able to own action stock and I Phantom stock,  exactly yeah when we did that we did that not only with the Deferred Comp but we also suspended your 401k match which is always a question people have to and,  so you're kind of almost it's like hey we're this is where I think you did really well too because it is hard to take something away but you have to explain what they're getting in return for that and,  I think you guys did that really well because they definitely jumped on board well taking the 401K Match away was kind of a.    [29:09] That would probably cause more heartache than anything because people just so that is a nice benefit that's being taken away but you know once you lay it out and explain to them this allows us to put more money into the Stock Program,  you know for the most part again the caveat being the older employees did not see that as a benefit you know.  So you had to kind of get over that and you know I'm in a I'm in that category as well yeah I can't contribute as much to the 401K as I could before so it's a.  Yeah once we get over that hurdle and I think the management team took it pretty well I think they're on board with it now.  Yeah one of the things I've stressed over the last five months is has been the finances of the company.  You know it's my role was running the company now it's kind of the,  Judiciary guy that at least for the first year to make sure we make our bank obligation and to keep the bank happy so you know me stressing that to the management team was a little bit of a.  It was different for them because we've kind of had an open would say an open checkbook but if you needed something you got it now it's like yeah think twice before you buy it.  We really needed this quarter can we wait till next quarter kind of thing.    [30:38] And it required us to get in with a management team and start doing budgeting full-blown budgeting by departments so that was something that was kind of new as well.  Yeah speaking of like your processes you know because you guys already built some that worked really well so this is really help to kind of continue to bring out more processes by need of everybody knowing hey if we do a good job of managing our finances we're going to all win.  From a valuation standpoint so when you when you get to go through the process and 0 financing was a big part of your ESOP process for.  For those that are listening basically you're going to either bank finance and seller finance it or you're going to end up seller financing the whole thing so in this case we were looking to do as much Bank financing as we could.  And we were we were able to work directly with the incumbent bank which I which I always like to do just because they have an existing relationship.  What did you see in that process like as obstacles or things that you guys had to work through,  maybe for you maybe the first time because it was specific to ESOP acquisition financing but what did you see as things that you kind of like wow that's we had to work through all those little questions and stuff.    [31:56] Well I think the biggest obstacle we go back to the projections.    [32:02] You know working those through you know these financial institutions that we know nothing about.  And they're just learning about us and they got information from you about us and then you and I interviewed several.    [32:17] History the school how do you know that that revenue is coming.  I don't know all I can do is forecast it in you know and hope for the best and you know will fight to get those numbers and like you said that made a little bit easier with our,  occur thanks because the bank knows us.  Stacy our bank accounts every day and made it a little bit of easier decision on who to go with but.  You know I would say the cash getting them comfortable with cash flow was probably the biggest.  Fertile of dealing with even with our current bank so you know I think that was one of the bigger hurdles.    [33:04] You know one of the other hurdles that we would had to jump through by switching would be to convert all of our banking to another institution which would have been a whole nother.  Ball of wax to have to deal with when we're trying to deal with getting the second place yeah so that was something that we really did not want to do.  We prefer to work with our local bank and keep it in the community,  yeah and like I'll just say from this this exact story we did have a backup.  Financing proposal from a bank from us from another bank and and we did that very intentionally because in case the incumbent banks that hey we just can't get comfortable with this which they could have always done,  we didn't get like sidelined and say oh we can't do the ESOP now because we're waiting to get a bank a bank deal put together so,  so with that was very prudent and the what the other thing that stood out to me,  on this deal in as opposed to maybe other ESOP deals that people might be exposed to our experience with is we did we did the bank.  Due diligence and negotiations.    [34:11] Before and during the due diligence and the negotiation of the ESOP so one of the questions the bank kept having was hey what are your final terms and what happened was we.    [34:26] Um negotiated for a little bit higher price than what we originally had we're asking the bank for so they had to kind of change,  and they were really good at it I mean to be honest with you they were really good at Ghana going through the the updates but,  some banks get you know like they want to know like what is the actual deal and that kind of pushes some ESOP deals where it will get Bank financing after we negotiate,  and I just kind of point that out the problem with that is that you're you're left with a major large portion of uncertainty related to the the whole transaction so to me the most important part,  of the transaction are what do you negotiate for and the purchase price and all the elements of that you know if you include,  you know loans and War seller notes and warrants and interest rates.    [35:11] And then the other part of it is what is the bank going to come through with so that the the client are the the selling shareholder can really get it comfortable,  feel for what is really truly going to be there liquidity event so I'm always going to want to put banking in the financing as part of the early part of the process,  um but for the banks they have to kind of be able to know hey this this could go this could be higher you know so starting with some conservative amounts probably good,  but you also need to let them know we might negotiate for something and so that's what that's what happened with these guys and it worked out really well in the sense of,  I think they understood it and they were able to adapt towards the process we were going through and in the end it worked out great I think they did a great job.    [35:56] So really talking about the bank and getting them comfortable with how you're going to.    [36:04] Are you going to repay them because I know we didn't talk about warrants or we talk about you know.    [36:14] SARS or anything like that and you know we made a conscious decision to not go with us are in part of it was due to go with the management bonus program which puts really cash in people's pocket.  And I really felt that that was important to our guys and not have to wait five years down the road to see the.    [36:38] The benefits of this are the still not reap the rewards until retirement so that you know convincing the bank this is what we want to do and it's kind of outside of the ESOP itself,  so that was something that you and I worked on and we were able to get the trustee comfortable with it and then you get the bank comfortable as to when those bonuses could be paid out because obviously they want to be paid out before.  You know we start handing out any instead of money exactly yeah I think that worked out perfect for you and that and it just to kind of,  talk about that just for a second one of the things it's got to work for the company and the company every company is a little unique in that who are the people what is important to your key people I think it's going to be a question whether you do,  management incentive plan that has a long-term benefit like a Tsar versus having a ongoing benefit and annual benefit of like more of a profit,  bonus so it really is important to plan accordingly and not one company is the same so you really have to be thinking about who,  who your people are and what really is going to motivate them and I think that we did a great job I'm working through that.    [37:50] So so kind of like to wrap it up a little bit I always like to kind of finish with you know at the end of the day.  The employees are really going to be benefiting from this in the long run and so,  from your perspective you know you look at their leadership and of course that's going to be an important element but your whole employee base is going to benefit I know everybody is fairly new to the ESOP and we're really just in the first year.  So there's it takes time to really motivate or communicate the motivational benefits of an ESOP.  What are some specific ways you guys are looking at incorporating these up to to strengthen your own employee retention I'm how do you motivate people and just enhancing your culture overall.    [38:35] That's kind of that's kind of a hard one because we are so new and we're in the process of getting their first statements.  I'm told it should be out in the next couple of weeks which is,  kind of exciting now obviously they're not going to say a whole lot the first pass but I think a lot of employees sort of sit back and say well,  it's great to be a part of an ESOP and be an owner but what does that mean and I think until somebody sees it on paper.  With their name number of shares even though the value may be very low at this point but at least they can see it in writing to say yeah okay I'm a part of something we've held several meetings,  talk to employees about it,  and we decided that we are not holding another meeting until the statements come out again it's it's kind of like we're making these promises you know we promised your part of this ESOP you're an owner but.  There's nothing that can hold onto so we said well we're not going to do anything until we get our statements as it will make a little bit of a splash then so we can start to talk about going forward the nice thing is.    [39:47] Feeling statements will be coming out hopefully this month you know the end of the year is right around the corner,  and by then we paid off some of the debt and you know be able to get a valuation of the company may look a little bit better for next year and you have another allocation of stock so people see it start compounding I think that'll be,  that'll be the Telltale sign that people say yeah okay I'm really this mean something to me,  one of the things I've done with management teams to keep them really.    [40:17] Focused on the finances you know in a monthly you know in the past we've never really sat down and shared the financial statements.  Now I share Soup To Nuts this is this is where we are guys this is where we need to be just to meet meet our bank Covenants.  So let's just put a plan in place to get there because you know you have to have to report to the bank every quarter and how we're doing and even though their payments are being made they still want to know what the.  Future looks like in the make sure they're going to get the rest of the money so I think you know keeping the management team as well as the other boys involved in the decision-making process from a financial standpoint is key.    [41:05] You know making making decisions on vehicles or making decisions on,  okay we need to have a dead taken out of a truck it's $500 do we really need that been taken out right now right is it really going to matter to spend $500 $500 in the copper,  and put that towards our stock so it's kind of getting everybody that mentality to look at every way to save money,  and again that's that's a little bit of a challenge given the fact that we've been privately owned for 30 years,  and people haven't always thought like that but I think the first statements come out I think it will be a big will be a big push on it going forward.  You know and I think it's and I asked that question it is hard and that's why I was going to be you know a little more.    [41:58] Open to it because people are going to be thinking about that and and I just kind of like would say to everybody it takes time it just takes time but it takes consistency.  And keep doing it and what what I think will be interesting to see over the next couple of years Joe like for your perspective you you were before the Esau.  Thinking about these things that you're already you're still thinking about your thinking about you know how much money do I have in the cat in the bank account what decision should I make when it comes to hiring a new person versus buying swim some equipment or what markets we go into.  I think over time and I think you're already kind of starting to talk talk about it and see it is that most is that people in your company will start to think that way too,  as they start thinking about how those decisions directly impact their own bottom line and that's really that's I think one of the great things about in Aesop's is that goes it does spread that out,  when you're kind of the only one losing sleep at night and you go maybe come in the office eventually people are like hey,  I'm not that you want to lose sleep but hey I'm kind of not sure exactly what we should do but people are a little more accountable that way so it'll be interesting to watch how that all comes together.    [43:10] If I'm excited to get through the first year just to see number one how we end up,  towards our forecast and see how well we did on forecasting and you know we have a stronger than ever backlog which is kind of exciting leading going into the next year and a half two years,  because we have substantial amount of work that's going to push it out,  and willing to the end of 2023 hmm so kind of kind of excited I think it's I think it's going to be it's going to be exciting for everybody in the long run,  for sure well what we'll have to do off to do another one next year and just get the like an update I think that would be really interesting to see second year around it,  people are still tuning in or whatever but you know there it's just always helpful for people to kind of hear people's stories and going through it but I.  I appreciate you sharing your story and stopping you know with all you got going on to help us do that I think it's really giving back to people that are that are kind of maybe where you were a year ago.  And hopefully that was helpful in any last minute things you would kind of say hey be thinking about that we didn't cover.    [44:19] Call the ESOP guy when you need them there you go thanks Joe thanks for the plug I appreciate it I love it.  And I know you're still there as a sounding board for me which is which is awesome,  awesome oh great well thank you thank you jail so for everybody listening thank you so much for joining today we will definitely see you on the next up on this journey to an ESO

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About Journey to an ESOP & Beyond

ESOPs are gaining traction. In the "Journey to an ESOP & Beyond” podcast, Phillip Hayes explains the process of the ESOP transaction and addresses ESOPs from a business owner’s perspective. The "ESOP Guy" illuminates the simplicity of ESOPs as he debunks common misconceptions that ESOPs are immensely costly and complicated.

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