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Summary of Podcast on EP34 - Symbiont Services - with Sandy King, President and Owner sold 100 percent to ESOP - The Grid Wiki

EP34 - Symbiont Services - with Sandy King, President and Owner sold 100 percent to ESOP

Journey to an ESOP & Beyond

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| December 14, 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 interview is with the President and Owner of a family business that sold 100 percent to a newly created ESOP. Sandy King took over the business from her parents and focused on company culture, business processes and a strong level of customer service. She had built an effective leadership group and was ready for transition. After working through a possible sale to third party, she settled on the ESOP as the best option. This podcast will help the listener to go through Sandy’s thought process and selecting ESOP as her best option as well as her insight into her own journey to an ESOP.

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Welcome everyone this is the theesopguy and we are on a journey to an ESOP this podcast is has been designed as a resource to help people think about and also understand better than play stock ownership plan.  The process itself and whether or not it's a good thing for some companies that are thinking about this as a potential transition for their companies.  So with that we like to do a lot of different types of podcasts and.    [0:39] Some of those are really just topical or things that we want to talk about to explore how the ESOP works,  other times we just want to get into experiences that people have had with ESOP so that's what we're going to do today we're going to have a conversation about the ESOP experience itself and we're going to get to interview a company called symbiont service.  This is with the president of the company Sandy King,  and Sandy is was the selling shareholder now she continues to work for the company but it's 100% esab so it's been a great privilege and an honor of mine to work with Sandy through the whole ESOP process from beginning to end.  And you know we always learn everybody learned something along the way I've learned a lot of different things from Sandy is,  we went through her ESOP process but today I think it'll be super helpful for people that are thinking about going through the ESOP process,  I'm to listen to Sandy Story as we as we go through kind of what happened how she came to the conclusion that the ESOP was a good fit for her and her business and her employees.  And you know with that just kind of the excitement of having the this whole thing over with as well because it can be it can be a bit daunting going through the whole step by step process.  So Sandy Welcome to our podcast we're so happy that you could join us this morning thank you happy to be here.    [2:00] So as we start off I just wanted to kind of start off kind of talking a little bit about your background I know that your business itself and just kind of the history of it was kind of very intriguing when we first started going through the whole process,  so give us a little bit of your background as you as we kind of discover what you've done and how you've gone through it all.    [2:20] Okay so originally my parents started the business in the early 70s it was a conventional standard hva see Contracting type company and in the 80s early 80s my father designed a.  Symbiont that's the our main Niche product called symbiont it's a geothermal heating and who heating products that.  It's our it's kind of crazy he my dad was kind of ahead of his time he.  He always was thinking of his employees even back then because as back then it wasn't so busy year round with the HP AC business it was more for summer so he wanted to keep his guys working year-round all his employees year round,  and he also was an inventor type person so he created this Indian,  it was a pool heating system that was great for the winter to sell to our customers and then the employees had a Casey business in the summer so.    [3:19] It was you know he was thinking a symbiotic relationships way back then.  And then I graduated a for from college he got me in the business kind of quickly I had a business on the East Coast,  called hydrothermal systems and I was selling the symbiont geothermal who heater that my father designed and he was manufacturing back then he's doesn't mean you know he stopped manufacturing in the 90s but.  I came to the business.    [3:46] My own doing that doing it on the East Coast but then they wanted me to come back and to the family business so in 96 I came back to the family business  move from the East Coast back to the West Coast of Florida and worked with the family until 2007,  and then I became the sole owner at that time my brother retired my parents have retired before him,  and so then I was just running the company at that time so we became a very energy efficient.  I was still HV AC Contracting Company air conditioning and heating but we're also spoke we specialize in geothermal and then the higher efficiency conventional air conditioning systems so,  it's been quite a journey our company's been growing in 2007 when I took over the recession hit as probably everyone remembers in 2008,  and so we've had some bumps in the road along the way but it's been quite the journey yeah perfect time to take over a business right at the beginning of a major recession,  so one thing that I want to make sure everybody knows we're in Florida both Sandy and I work in Florida so so her business itself.  Does a lot of air conditioning and different things so Florida that's a big that's a big business the symbionts system is very unique right so before we get too deep into the.  Conversation your Symbian system isn't kind of like that's not something everybody every company can sell Right Said.    [5:08] I mean they can if they want to go through all the learning curve that we went through but it's a it's a unique product  it's a geothermal pool heater and not that many people sell it it's manufactured Now by Aqua count in st.petersburg and,  we had the distribution rights for the State of Florida and we're a warranty station and we really created this Niche that's very unique  to our company and honestly I believe that product is what got us through the recession in 2008 because it was so unique so we weren't just any regular company so he had a niche market that  was you know it's an it's amazing product and we do a lot of commercial pools a lot of municipalities,  and we are busy around them yeah that's and so one thing the reason I was bringing that up to is because when you think about your options as far as,  you're at that you were at that point when we first started talking like considering the options that you had you could sell you could have sold the company to a strategic buyer,  but you chose to go with the ESOP can you can we talk about that a little bit in terms of what made you decide to go towards the Esau.    [6:14] Sure well the short answer is the employees,  at the end of the day your company and you can have all the assets you want that are tangible assets but the end of the day if you don't have good solid employees your company doesn't have the value  that I think that's just my opinion as a business owner I've always valued the employees and always felt like.    [6:35] Without them obviously what would we have so but even before that so I don't have I have a lot of family but none of them wanted to take over the business,  so that was one option for my success I needed a succession plan basically so the succession plan no family members so then I hired a business broker,  and I was even under I had a letter of intent from a buyer and but then as we started digging into the specifics and I started realizing what was.  What how is going to what all the conditions were of the transaction it just I wasn't feeling comfortable with,  with the idea of selling to this third party stranger I was going to have to become an employee after 37 years I was going to become an employee of a complete stranger,  because there was going to be this transition period and part of the condition was the growth of the company would be the rest of my payout.  But the broker the fees for the broker they wanted a piece of everything my employment agreement the commission on the sale they wanted a commission on the lease on the building that we read,  and that Lisa's already in place and so they just felt greedy honestly and the numbers were climbing and at the end of the day at what was left on paper because they weren't paying me in full but I had to pay all the fees out and soul.    [7:56] That's a closing I was I was a locking way very much money and no longer a business owner so it was really left a bad taste in my mouth so I had to wait three years,  because of the contract with it that I had with his broker before I could decide my next option for a succession plan,  and it's the best thing that could have happened to me because the three years.  Helped me to grow the business increase Revenue increase sales increase profit it just all these things I really focused on the business for three years and tried to build it up and.    [8:33] And that really it was a it was actually a blessing in disguise at the time but I think the costs of selling to a perfect stranger that was going to,  who knew if they maintain the legacy of the company who knew if they have the philosophy of symbiotic relationships and and taking care of the employees and the customers at the level that,  that our core values are at Simeon.  I just it just wasn't the right move for me so I stopped the put the brakes on it three years went by before I did anything else wow you know I never actually knew that I was you know going through that in my my notes Here.    [9:09] And it's not the first time I've heard this where somebody goes through.  What I would call is like a dead end like they go through this whole process but I think it really actually helps you because you know.  At least going through that you know that what that option looked like for you for some people they never do that and they're always like,  thinking Hey I what if I what if we over the gun this different route so I think that's very a very interesting part of your story and.  One of the things that you didn't say is that three I guess in the three years you also were able to acquire a company,  because when we put all our everything together for your ESOP we were able to kind of look at the I think it was this the year after right you did the acquisition.  And so that really helped your numbers as well as actually then they say you I think I think it was it was in March of 2021 and by the end of the year,  it had shown what increase in value that did for the company so it happened pretty it was very fast  with a small local HP AC company the real motivation for buying the company was I don't know if anybody knows about the trade issues in Florida but finding good technicians to work,  is almost.  Hey just stealing from somebody else basically so we we bought this company we sure we got customers out of it but we got eight very good,  technicians service technicians we love them they're part of the symbionts work family now they just.    [10:38] It took you know there was a transition but it was great to take bring them on  and they're great technicians and it did increase the value of Cindy it by buying them yeah yeah definitely didn't so people ask me that all the time hey should we're in the middle of an acquisition or we think will do one,  during the ESOP you know and I always come back to you know just thinking about your story but others other clients to,  there that's not a problem it's just a matter of how you structure it in your case it was structured you know where you were able to pay for you know right at the front end so it wasn't part of your.  Forecasted cash flow that was coming out so it actually did boom you know bump your numbers up in the forecast which we got credit for in the valuation which was all very good,  so yeah it was a biggest return on investment of anything I've ever done so except the sale is to be answered yeah exactly it was it was a brilliant business move.  So so going into the ESOP a little bit you know you kind of talked about the employees and just.  How much it really kind of what resonated when you were talking about everything was like it really meant more what meant a lot to you is what what it looked like for your employees going forward and,  just that the the business itself the way you guys you know the philosophy how you guys work with your clients,  would you say those are the main drivers of why you chose the Esau.    [12:01] It's definitely the employees so it just so happens aquacolor it manufactures our pool heaters there also an ESOP and of course you know public so we,  I talked to the VP of optical and many many times about the ESOP approach and he gave me the pros and cons along the way and he's told me that there  their employees are finally starting to get it the benefit of it and what a good move it was.    [12:33] So I run my company on cos I don't know a lot of people are all operating systems a lot of people know TOS yeah it's very popular and we have a leadership team and.    [12:45] Not to talk about age but my leadership team isn't getting any younger right but I was afraid,  that a buyer would,  maybe not take care of them properly either so I wanted to make sure that my leadership team was properly taken care of and give them the the younger employees something too.    [13:08] You know take value and so we try to act like owners we share profits based on owners this was before the ISA and we have ownership thinking kind of.  Philosophy and so I really wanted to get them to understand their owners to and.    [13:30] Doing the ESOP I think.  Was that final piece that really got them to get it I think I mean it's not you know we've only been an ESOP a year and a half now and yeah.    [13:41] It takes a tank time it takes time and you're normally people say it's a couple years they got they got to keep seeing the participant statements and.  And see the depth is see the change in their shares and the change in the value so,  but yeah but you're on the right there you're on the right track I will plug EOS for a second I'm I don't work for them but I will tell you that a lot of companies that do EOS are really good candidates for.  And like with Sandy's company it was the nice thing about EOS with Gino Wickham's traction book is that there's business processes that we can really.  Discover and present well to a trustee and then their valuation firm and.    [14:18] It's just better it's a good structure for a company because you can see that it's not up to just Sandy or just her her key people it's actually the business itself has processes that they run through they keep measures of numbers and so.  Just a quick sidebar I think it's just you know those kind of platforms are great for companies to work through the ESOP process.    [14:39] I agree and we've been running on Yo S4 and we still are since I think.  12 I think we started and it does it has scorecards and the whole system's I'm all about systematizing things I don't want to be I don't want this Cindy it.  Name to be connected to only be connected to me like the strength of the company I don't want it to be about me,  I want it to be about the whole company and so I'd like to see the legacy of Cindy at service go on  Beyond me to have my grandchildren know that the company still here and well past my ears and it's still be it you know thriving,  yeah so,  I think Els does help us do that and then the ESOP like I said was the final piece to really drive it home that hey you guys you're actually owners now yeah it's not just me we're all owners together now what you do matters that's for sure.  So going in and I just your your broker story was really fascinating going into the process of selecting and doing the ESOP must have been a challenge for you to so if you go back in time a little bit talk through that a little bit your process your steps have going into the Esau.    [15:49] Okay so my daughter's an attorney and her husband's an attorney and,  she has a friend David he from Shoemaker and she put me in touch with him he's a corporate attorney and he was doing some stuff for me and I was talking things over with him he actually did the transaction for buying that company in.  The AC company in back in March 20 21 and so he put me in touch with John Burgess who also works at Shoemaker who specializes in Aesop's,  and so I started talking to him,  and he recommended to people and Phil you were one of them and I interviewed them both and honestly.  The other company brought in like to other people and I felt like it was it was.  Very industrial it just didn't feel this was this is my baby right Symbian service is my baby practically and I didn't want this like all these hands all these people just kind of reminded me of the  merger company that The Brokerage company so,  my life you made me comfortable I liked your approach you were very honest you said we gotta start with evaluation you know we have to figure out the value of your company and if,  not in the numbers that you want you know keep working so don't try and sell right now it's true yes so it was true and then you had this.    [17:13] Formula approach which to me wasn't very systematize which I like and you had a very clear agreement.  And price and all those things entice me to go with you oh you got a written process.    [17:29] How it was going to happen which I think is extremely helpful,  and so obviously I went with you as you know yep and so it just made sense to go with you and go through the steps so there was a lot to it man was I educated and fast,  yeah it is a lot and I think one of the things about whether it's my process or somebody else's I think you have to prove.  The thing I would say about that is you have to prove out the ESOP not necessarily kind of starting with the conclusion hey you're going to be an ESOP company.  Because I don't think anybody can say that I mean there's there's it's not just about the valuation it's about the a lot of different parts and pieces that have to be discovered as you go through it so.  When we when we start going through that it might it may be hey we're in a different place by the time we get to the end.  But in your case I think it worked out good and there was enough information each time that we worked together to make sure that it was proving out and it was going in the right direction so so going into the the actual.    [18:32] As far as what you do I think there are a lot of a lot of questions about from people about.    [18:39] You know the selling shareholder with your succession plan and then the actual you know potential exit as you start thinking about you know.  You're not just selling your stock in an ESOP you're kind of transitioning into a different role I mean you go from owner to you know employee,  and you kind of wear a lot of hats in the whole process when you go back and forth through you or you're representing the company you know and I know like this for you Sandi is very very true.  You're going to do everything possible to make sure that the company is in a good position.  But at the same time you're also selling your stock to the company right and so your the challenge is you got to wear the two hats which is hey I'm selling my stock to back to the company.  And I want to as a selling shareholder I want to get the best possible deal but the other side of it is I want to run the company really well too and I want to make sure we're not.  That's the company over pays or doesn't you know,  so talk about that a little bit in terms of the the difficulty or the are the complexity of being in both of those roles.    [19:43] Well it's funny that you say that because the stage that was the most anxiety filled for me,  was the negotiation stage that you handled with the trustee yeah and I did have anxiety about,  oh my gosh I want to go out with a bang and get a really good price to impress my family or to make sure I have what I need because I'm only 60 and I have I'm very healthy and so  you know doc of what I hope to live a long healthy life but you know more Beyond even symbiont,  and I wanted a good price and I wanted it to be fair your formulas and your approach is very matter-of-fact and clear and it.  It was helpful to me but you did still negotiate at a level that was like oh that's too much oh that's you know like the interest for the payments and things different things that you did it was like.    [20:35] I had keep switching hats and you were like you know this is the fun part we went back and forth with the trustee and I was like.  Fun I'm losing my mind here yeah that's went over it went extended over weekends and like it wasn't just here's the offer the trustee approves it done  it was a back-and-forth of I think three times  and you said that's part of the drill and I was just like anxiety-filled and I'm yeah you were at the end of the day I felt like,  you negotiated on my behalf in a very great way I was that was one of my biggest.  Impressions are excitement's about it was how well you negotiated on my behalf and you were able to switch hats whenever you needed to to make it flow so you're very skilled at that,  and so anyway I.    [21:31] It was a process that really yeah it was intense yeah and I think after you know after hindsight's everything right so and I appreciate all the good comments but when you,  get down to it your your passion for your company and you're eating your compassion for your people.  You're going to do the right thing you know and I think what when you get down to that issue as far as well you got to be the president of the company.  And you also are the selling shareholder.    [22:00] A good advisor will help you kind of work through both sides because you're going to you want both to win you want the company to win and you want the the selling shareholder want to win.  And I think what I would say about that is as long as you have the options in front of you you can always choose to do.  You know what you think is right at the end of the day and if you don't have those options then it's like okay the company won and you lost that's not going to be a good a good situation,  because now even now you are like did you express to me earlier you're not,  you know maybe paying yourself what you could with with the deal that you got is that correct.    [22:37] Yeah so so we had to do by Bank financing for part of it and so I got a lump sum initially with the bank.    [22:46] Smart me like I think it was like 1/3 maybe I love it yeah the of the possibly even might have been a little less than that.  And we have to pay them back first before I'm allowed to get principal payments for what the company owes me because I also had Equity or retained earnings in there that they owe me and.  So they're supposed to pay me interest and.    [23:12] For the principal but I haven't always taken the interest payments.  Just because I want to make sure there's cash flow and I don't want to I have a new.    [23:23] CEO technically not CEO but my Director of Finance he's new to the company and I don't want to stress him I know it's going to be fine our cash flow is good but I want him to be very comfortable with it all and so,  I'm not taking the payments.  Consistently I've taken some but not consistently and just because I feel like I want to make sure there's plenty of cash for everything that we're trying to do our payroll hi we're at 66 employees so I just want to make sure  that everything is Flowing right so you negotiated a very good interest rate for me at the time it seemed really high and now with the interest rates it's.  Spot on yeah that's go anyway it's I think that's good because you got you have the choice you can choose however you want to do it but at the end of the day at least you have the choice.  So so going from like the whole timeline if you said beginning to beginning of the transaction to the end of the transaction what did you find I think you've already said the most beneficial was like the negotiation part of it is that true,  as far as the definitely yes definitely and the value that you got for me and based on what I thought it was going to be back when I was trying to sell it to a different way.  Which is that's actually an interesting point to because you're saying that the value got from the ESOP was was better than you thought you were going to get with the Strategic buyer.    [24:44] Absolutely yeah because there are so many stipulations with the Strategic buyer that there are so many conditions and I wasn't comfortable with all those unknowns and you are very good at the very beginning at coaching me of.  You know you kept saying continue to grow your company keep running it like you you're trying to hit it out of the park and  and we did and we continue to grow and even through covid that was a tough time but we got through all that  and we you know we did continue to grow and increase profits and we you know I really was paying attention to the details of the company not that I'm not now but I was even Ultra,  focused yeah and but you were you know you were kind of coaching me you're like hey  possess the other surprises the actual amount you sell for isn't determined until the very final books are closed out for the year that you sold it and so,  because I thought there was a certain number it was going to be and then.    [25:42] But then you had to finish the books for the year and so they're so every little detail matter right up until the finish and even after because you had to finish the books right so.  Yeah so that was part of it too,  yeah because you are you are on so kind of this this speak that just a second so you're basically looking at every month your financial performance in,  comparison to what we forecasted for the discounted cash flow so if you're continually you know either on track or exceeding that to get to your forecast,  then that's a really good thing if you're going and it's the opposite and things are not as good,  then it could be a negative thing so in your case things were really working towards you know actually we're going to exceed the goal you showed me that and like it could be less you know it's you got to keep the company rolling  and we did exceed expectations and it was there was no relaxing to the whole process yeah there was no there was no relaxing keep keep doing it.  So then the other side of that coin is you know what was the most difficult or disappointing part of the whole process.    [26:48] I think in hindsight I might have not done Bank financing because.  That was very there was a lot of which I don't like to waste money they sometimes called me the Bean Counter its Indian and I don't like to waste money and I had a perfectly good attorney that was very fair with what he was charging,  and then the bank's attorney,  I was like three times what seemed Fair yeah and it was and they were redoing work that my attorney had already done and it was wasteful money yeah and and so the bank fees were.  Ridiculous during the bank yeah and I was I almost wanted to say forget it we're not going to do the deal,  one point I said that you did you did say that I was like oh yeah and then and then you were like all right we talked through it and you know business,  business minority business decision as opposed to like this is not feeling good,  and what and I think the good and the good thing to understand about that and I think it's good that you bring it up is because when you do select the bank.  You need to really evaluate the best possible scenario with what bank.  Companies going to choose because when you get that deep into it there's really no turning back unless you just don't unless you decide hey I'm not going to do this this I'll just do seller financing.  And I considered that and I think we pushed with this bank because we did get turned down by a few Banks but also.    [28:14] We were trying to close the deal by the 20 by the end of 2020 one that's right yeah and so that and that and that was hard that was a push it it was hard and it made.  Dimino just to be completely like from my perspective it made the closing the bank made the closing really difficult.  And it was you know and it was solely the bank and there and there the way that they've structured they're closing it was just like they could have made it so much more simple and I've I've seen so many other ESOP deals.  Now just before that but after that that are like a breeze much bigger than yours that the bank was like yeah that's fine boom boom and you move through it so easily so.  That I will say that that definitely it was partly because.  The bank we chose a larger bank they have one process for every sub deal whether it's a hundred million dollar sale or you know as much smaller one,  and I just think do your due diligence very early on in the process to make sure but I think that's a good takeaway for people as they start thinking about you know how they're structuring their financing and just making sure that that's.  You know I would say ask questions you know to the bank about their legal counsel and how they're going to go through this and definitely ask about what the costs are going to be way before you accept the term sheet or the commitment letter.    [29:29] Right well believe me I asked I didn't find out about the lawyers fees until deep into the process well I think in this case they misrepresented the fees as well right.    [29:39] Yeah so they knew I was going to cancel they did make an offer at the end to kind of spread the cost yeah so in the end,  there's no hard feelings it just you said what was my big surprise that was my biggest problem that was your big surprise yeah  yeah and there's always something to learn and that's and that's something I learned to during that process just thinking about that.  And that's why we're doing this is to share that it's not it's not to be any you know negative about anybody but it is it there's a truth to this that you know when you get into it you just have to be careful.    [30:14] So so going the next question really is about cost to in general I mean because I can tell you and I'm so surprised at the varied cost for Aesop's all over the country and it did really does.  It really it's really intriguing anyways the hope the whole concept and that's just one of the questions everybody's going to ask me when I talk to a company about an ESOP hey how much is it gonna cost me why wouldn't you ask that question and so from your perspective.  How would you address that question if somebody were to ask you about the cost.    [30:47] Well the initial costs are significantly less than the commission for a broker to sell your business.    [30:57] And so that was an advantage in my opinion.  But that's the thing that people need to be be aware of is there's ongoing costs for running your company as an ESOP,  because you got to pay the trustee every year you gotta pay the trustees valuation company that's independent every year you have to pay a third party administrator,  to do all the,  participants certificates and you know the distributions and all those things are very important you have to have them you,  you have to pay a board an independent board member so there's fees after the fact that the insurance the insurance was,  kind of heavy and you have to do that every year now it's still less I believe than the money I would have drawn to pay my taxes for example because we're an escort.  Um so I still think it's less than that,  you know I'm pretty certain it is significantly less so there's not that that dream would have been me taking the money to pay my taxes versus paying these fees so and the third party administrator you need and the trustee help is helpful  I do like my trusty and you helped me find the trustee of course and.    [32:15] So there's those costs that people need to be aware of because it's not over once the you close there's continuing ongoing costs as a business.  But so then there's a fee with you the theme with the attorney hiring me trustee the trustee hiring their valuation company.  I had a surprising cost with my accountant because I think I paid him to be educated because charge me by the time and he quoted me one fee and then it went way over and he wasn't bending on this feet so.    [32:48] He it cost me you know more to pay him to her to do the end of the year stuff that had to be done oh yeah,  he's very reasonable but for my monthly fees and I adore my accountant so it's not it's not like that but it just ended up being more than we had anticipated sure.  So    [33:09] But some of that's just business you know you those are business costs that you're going to have yeah the cost cost of doing business cost of the transaction and I think it's good to compare it to like a normal deal where you sell your business and,  the business brokers you know it's going to be a commission based type of deal and so one thing that like I will say about cost for esops is that.    [33:30] The first thing is that it matters who your advisor is because most advisors for ESOP transactions are going to operate like a business broker,  they're not going to operate the way we do it the way we do it is just an advisory fee based on the deal and maybe the deals more complex or less complex the way they do it is they'll they're going to take a success fee they're going to take a fee off the financing,  so that's that's even though that's not what you experienced that's the norm and so I think there are other opportunities or you know advisors like me out there but it's like,  definitely my point is ask the question there.  Because out of those fees that the trustees fee the evaluation fee the attorney's fees are going to be you know normally about the same,  in general although in some geographies like Chicago different different parts of the country there going to be a lot more.  Um but so definitely be thinking about when you when you're into this question about cost.  Asking the question of who's doing what what's the role that they're playing and then what are they going to charge for that role,  and sometimes people do fixed fees and other times that won't you know so it's just a or they'll have a fixed fee and if things get really complicated than they may add more to it,  so I think that's a good point transactionally but what Sandy said to is a very good point what are your other advisers you know looking at as well if you have your CPA working on it,  I'm really asking questions proactively before you get too deep into this is is probably the best advice we can give you.    [35:00] Yeah I mean you had us go through the process of interviewing several trustees,  we didn't interview attorneys because John Burgess had brought me to you and these local here and I felt really comfortable with him,  um from the get-go like just in explaining Aesop's and everything and he's great I would highly recommend him but there was quite a range of,  trustee prices remember that they're really really yeah absolutely this kind of shocking yeah and and.  I hate to say that I went with the lowest price because I'm not always like that but I actually liked he was a lower price but I liked him better anyway.  Yeah his approach was good and and some of its price when you get to the trustee but and some of it's a combination of price and service and what people perceive in the personalities of those it's hard it's really hard to hire people.  That you're going to want to have you know with you for the long term right and so the nice thing about the process of the trustee is you can hire them.    [36:04] And then you don't have to go with them so you could always bring somebody else in as trustee but so you're not bound to that but it always helps to have the same trustee because they know everything because they did yeah they did Betty really yeah it's funny though because he represented.  The company during the negotiations and now that it is an ESOP piece,  more willing to work with me you know directly and help me to make the company successful because you know it but it still represents the people right on our June 25th presentation to the employees he came and he,  he I was doing a PowerPoint presentation are planning to and  he said up I do this all the time I think I should do it he stepped right in and did the whole presentation up on my slide presentation and that's what is interesting but he did great and it was it was really for me so.  Yeah so that segues into like the people itself so you know and you said already kind of there they're starting to get it you know what are the issues related to getting your people up to speed on Aesop's because I think that's a big question that people always ask me.    [37:06] We're still working on it so my favorite answer now is when somebody asks me something I look at him and say you're an owner to what would you do,  I don't give them the answers anymore I like that yeah I think that I try not to it's hard for me because yeah you know,  it's almost like so it's almost like raising kids you're like hey just came out he cheered thing what are you gonna do you're an adult so you have to make some decisions.  Yeah it's like what do you think the right answer is so and so and I'm constantly saying that you know this is your company to now.    [37:42] Treat it like your own because it is your oh yeah and so that I'm trying to drill that in and and I think it's I think it's sinking in.    [37:52] For example when the hurricane hit us which it was pretty intense hurricane in yeah you know just in September 28th.  We'll never forget it did some good damage to us it's Indian and the not the day after the storm even though my employees had damage to their own homes.  They came in droves to the office we didn't have power really have internet they came and they started.  Digging in and helping to clean up and move things around and everybody was genuinely concerned and they were,  they were just right there  I really felt like they they own the you know they were owners at that point that wasn't a real true Testament to that them caring I was very proud of my employees that's pretty cool that is pretty cool yeah to actually see that.  You know and I think you guys just to give you credit like you guys had a great culture before we start it right and.  The ESOP is it has only enhanced that culture and so did but yeah I think it's the final piece yeah the final piece.  So as you know so so as a selling shareholder that sold a hundred percent you know and I one thing about that is like.  People are like well my I'm selling 100% now what's my role in the company what you know and the comp the combination of like the planning and everything starts to come together.  With what you've done what is your role now in the company and what in what do you want it to because you are in the middle of the succession plan.    [39:20] Well I used to be the director of sales and marketing and I turned that over to Dave Ballard who's on the leadership team and my.    [39:30] Director of Finance actually left the company before we close the deal on the east side.    [39:36] And that was hard because he had been with the company over seven years and he was very helpful to me.  He was like my right-hand man and it was hard to lose him but I found a replacement and he's doing a great job and he's being groomed to do director Finance  right now is this VP of assets but he's going to be the director of finance and,  I am working with him in the kind of wearing the Hat temporarily for Director of Finance but he's kind of doing it himself,  he doesn't even realize how much of it he's doing himself and,  I have someone that I'm grooming to that's on the leadership team my installation manager my Jakes.  I'm grooming him to become the president of the company awesome and that's that's going to take some time but because he's so busy in his position he has but he's,  he's great he's got all the right philosophies of the company and he's here to stay he's actually the license holder for the electrical now I'm the license holder for the air conditioning so we haven't worked out who's going to take get that license,  but the state you know your BFF contractor's license,  and so I still have the license for air conditioning but he's going to get the pool license and he's starting to work towards getting the different licenses to qualify the company,  and become the present so.    [40:54] It's a process that I'm trying to work through and working towards I happen to live in Sarasota now which is our drive on a good day so I've been working from home four days a week.  And it's kind of forcing my team too.    [41:10] Do without me and do well without me I go in on Thursdays for our leadership team meetings aren't we home the L10 meetings and all the different meetings I need to have that I feel like face-to-face is even better than Zoom.  But I still do a lot of meetings with them during the week.  And so it's a transition that's evolving I think I'm answering your question you are you were absolutely yeah okay it's just it's a process that's going to take time but and I don't want to abandon him I like I have an employment agreement for four years,  with an option to renew annually after that.    [41:46] I hope to renew one more time maybe to get to 65 and then I'll retire officially.  But you know we'll see we'll see how it evolves yeah and that's and that's one thing I love about the ESOP is that you're not forced to quickly to do anything.  In the way you're doing it is really a good example for people only because.    [42:08] You know you have to take some time to make sure you got the right people in the right positions and like use you said with Mike.  You know he's going to be the president and so you're grooming him for that role you're grooming the guy for the Director of Finance position you know and you can see the potential for these people but.  There's one thing about like walking away too soon right and it would it could be a problem for everybody because you know if you do that if you just unplug.  Then it's like the company's going to have problems and you're going to have problems as well because you're all connected to.  Yeah they would buy that be able to make the payments and it's funny that you say that I just want to mention one of the thing I have to add two key employees I think I just mentioned them but that were considering buying the axe oh that's right yeah.  So that was one of the others that was one other step was cell to an employee that we were going to look into them getting their own loans and buy me out but.    [43:02] The one condition if they got an SBA loan was I literally could not stay in the company.  They had to be an official buyout and so I would have to leave much quicker and I wasn't quite ready for that and so.  And then I put a lot of burden on those two to come up with all that cash in and have these debt that they going to have to take on and it was at the end of the day when we did all the math and we talked it over and we had lots of meetings.  We agree that the ISA would be best for them to and so because we did we did I forgot that we had considered that for a little while and I because I offered it to him do you want to buy me out and and I gave him my number and,  it was all you know yeah and that's why when we when I was talking about like we prove out the ESOP sometimes with,  what you're talking about with this was the management buyout portion of our process where we were like hey let's look at that in combination are side by side with the ESOP and in terms of not just.    [44:02] You know your situation but their situation like well this is how much cash you'll have left over.  Because you're paying all this debt back and you're going to be paying on a management buyout you're going to be paying that after tax so,  they have less money in the whole pool of things but in your situation the whole in the whole situation because your tax exempt as an S corporation which,  is the big celebration Point really for all of us when we think about an s-corporation ESOP is we no longer send all that money to the IRS.  And not to be too political but it's like this is such a great opportunity for the company to take that money that was going to taxes and bring it back into the equation.  So that people can have the employees can have a better opportunity to create wealth.  You know when you get down to it that's that's and that was part of the math to and I just one more plug for you.    [44:55] Well we were trying to decide all of this you had to have the missing piece of the valuation of the company because I threw out a gut price to them.  And I said but listen we have to hire a company to find the true value of the company that's fair so that everyone is comfortable with the number yeah and then that's where you did the valuation and,  even if I had none ESOP your valuation the money spent on having you do that was not wasted because,  like you said if it's not right timing to sell now you just have this formula you can plug in the new numbers and you still get a new valuation down the road.  Also too seldom has a third party or to my employees I knew what number was spare that I could walk away at the end of the day not guessing if my price was right.    [45:38] That's a great valuations keep yeah that's a good point because a lot of people think well my my my value is X multiple of ibadah,  and they don't even know why they're saying that they just have this idea and started it yeah they've heard it from somebody so so final final question is we think about it from in this is a big big question to that I get from people from a control perspective and what I mean by that is.  You know do I have the control of the company where I'm I was doing this and now I'm not doing this because the trustees telling them what to do or,  the board is telling me what to do how would you say that any any real changes have happened from that perspective in terms of what you were doing before.  From running the company to now so full transparency we haven't had a board meeting yet.    [46:24] No but see that's fine we're planning it the hurricane really put a damper on us and we're not even doing fourth quarter rocks don't tell my EOS person we are buried with what's going on from the hurricane and so  we people can barely keep their head above water so.  So honestly no one's telling me what to do yet and that's probably a little bit like not comfortable telling me what to do nobody saying,  Hey listen you need to do this or like,  I'll give you a silly example I needed tires and I love the company that does all our Fleet Management and so I need a new tires for my personal vehicle,  and my director Finance didn't realize that I had to pay for that.    [47:12] The city it couldn't pay for my tires and so and it was significant was $1200 so this just was just the other day I'm like no I have to pay for that,  I know I'm just driving to work like any other employee if I use my car for business okay but I'm driving to work like any other employee I have pay for my own tires,  and and so I'm almost the one that's reminding them and keeping it keeping it honest and keeping it real hmm the front what the old way is to be yeah yeah well you're you mean that's who you are you're gonna do the right thing.  Yeah so so it's going to come but I think that's the main one of the main things that people get caught up with this.  You know I'm going to sell my company to an ESOP and now I'm gonna have all these people,  you know in my business and that's just not the way it works you know your it hasn't happened that way i-i'm welcome it when they take over more like I'm going to welcome back yeah and.    [48:06] I'm ready I'm ready for that whenever that happens and I want to walk the talk and I'm an employee like they are and I want them to know that I'm being as Fair as I possibly can be.    [48:17] That's great.  Wonderful that we're basically out of time but it's just been an awesome you know like I said the icky stop experience from beginning to end and I'm so thankful that you,  take the time to do that to help other people.  Due to explore this as an option and so I think you for that and I guess the last thing to say is in any final words about the you know the the ESOP Adventure that you've been on or anything that you would say is you know this is my final comment to the whole thing.    [48:46] I think it's totally worth it but I think it's,  it's the future of businesses is to continue to give back to your employees and you get something out of it too so it's still a symbiotic Exchange,  I benefited from it obviously and will continue to benefit from it and it set me up for my future but yet my company will live on.  As civilian service and the employees own it and I'm excited to see how it grows and continues to evolve and stead of just completely changing by some stranger.    [49:19] That's great well again thank you for your time today and we really appreciate it.  So for everybody else thank you so much for listening today and we'll see you on our next step on this journey to an ESOP.

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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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