EP39 - ESOP board of directors - interview with Richard Cope "how the board can support your ESOP company going to the next level"

Welcome. I'm the ESOP guy. We are on a journey to an ESOP. Now, if you're just tuning in for the first time, this podcast is for those that are thinking they might want to turn their business into an employee stock ownership plan. And really this is a resource to kind of go through the steps and it's called Journey to an ESOP. It's, it's because it's the steps that it might take for you, whether you have just started this process of thinking about an ESOP or you're going in deeper. And so if you have any interest in the other episodes, please go to our website at journey to an ESOP.com. Um, today, we have the honor of interviewing uh Rick Cope. He's uh with KGM Technologies, but he's an active ESOP board member. And um not only for running his own company, but really he is an active board member for companies that are, that are existing ESOP companies are thinking that they might want to go towards an ESOP. And so we're going to talk about today, about what is a board of directors look like, um, from, from Rick's experience and really when you get down to that, once you sell your company to an ESOP, if there's a controlling interest. Which means the ESOP Trust has purchased more than 51% of your company, then there's normally gonna be a requirement that the company has an independent board member. And so what Rick does is he is that independent board member and so I thought it'd be really interesting to have a conversation with, with Rick and just go through. His experience is. So really this, I would say this whole session, this whole episode is going to be really about the governance of an ESOP company, but primarily from the, from the lens of looking at the board of directors, and then specifically looking at an independent um board of director. So with all of that, Rick, I want to say welcome to our podcast. Thank you so much for joining us today. Thank you for having me. Great. So, so one of the things I wanted to start with just is, you know, give us your background, give us a little bit about like how you got into the ESOP world and um, you know, even with your own company, what you have there, you know, and, and just kind of your thought or your background with all that. Well, thank you. So I spent 20 years in the Marine Corps and then I've been running technology companies around the world ever since, generally high tech, high growth where we either sell or go public, but along the way sat on many boards for my own companies and other companies have seen financial transactions from the hundreds into the billions. And then started this current company about 2 years ago. Um, along the way, uh, met a lot of folks that were entrepreneurs that didn't have a board of directors and helped them by bringing other successful business people on to help them continue to grow their company. As you all know, there is one skill set that can get you from 10 to 0 to 10 or 10 to 20, but it may be a different skill set when you start going above that number. Two years ago, I was contacted by a group wanting an independent board member for a company down in Florida called Boston Retail Solutions. Great company, then an EOP majority control transferred to. Funders and to the employees looking for an independent board member. I had some experience in the area, so I joined them and became now over the last two years fairly involved in ESOPs and what they do and how do you manage them and how do you run them. And being an independent board member, I'm not the one there for the debt. I'm not, I'm representing the shareholders and now. Once the stop sale happens, the shareholders are the employees and the debt holders. He's no longer the owner who used to be, although he might be a shareholder still going forward. And my goal there is to help grow that company up to go to the next phase of his life, which either is a sale or generating enough Eend free cash to pay down the debt and become independent. Awesome. Great. So let me go backwards a little bit. Um, what did you do in the Marine Corps? So, uh, started off flying and got into research and development. Have you ever seen a movie called uh Charlie Wilson's War, Tom Hanks? I haven't seen. And so there is a stinger missile in it, and um I've got one hanging here in my wall. OK. So we developed that and then uh became head of special ops for Schwarzkopf in the first Gulf War and then finished at DARPA running a billion dollar fund around hybrid electric combat vehicles. So you're like Tony Stark. Well, I wish. I'm just kidding. I did a, I did a podcast about Iron Man a long time ago, but you know, um, I love movies, but that's really cool. I didn't know that that's something that you and I hadn't talked about yet. So that's really cool. So, um, so that moving from flying to doing R&D, you obviously have picked up some pretty good business acumen, you know, through the history of your career, right? I've always been interested in business, even when I was in the military, I read business books, take the Wall Street Journal, and try. It's always intrigued me how do you take a concept, turn it into a product that other people are willing to part with their money for, and the psychology of that and how do you can take to either your product or your service and make it centric to someone willing. To buy and then run an operation and that's what the Marines are really good at is how do you run an efficient operation to be able to deliver that goods or service. So the Marine Corps only gets 5% of the defense budget provides 15% of the defense. Wow, that's good. I do commercial company that's pretty good. I did not know that. Yeah, that's pretty cool. I think that's really I've seen. And worked with a lot of military, ex-military people in business, and they are very sharp, very dedicated, and mostly like just disciplined and, and, you know, the cultures are unique in that sense where, not that that's the only place you can find discipline, but I've just noticed that, you know, they're great business people. And I would hire a person out of the military just because I, I do have a lot of respect, you know, from, from that background. Um, but you coming in having varied backgrounds, that's pretty, that's a pretty impressive resume. Well, the military is willing to spend money on training up leaders, and civilian companies don't do it very well. And why my company, we offer everybody a free Dave Ramsey course so they can become financially independent and then leadership training to take their skills to the next level so we can grow them up to the future. Yeah, I'd say like in 2021 years of being a partner at this firm or roughly around that, but being the managing part for 10 years, my biggest issue is leadership. If I had to boil down like anything that we got into issue wise, it was the, the leadership side. So I think that's really pretty fascinating. I think once you have a good leader in a department, you can kind of work on some other stuff and let them run their business and um things work out really well. And a board is really that national level level of leadership. It's not there just to hold you accountable. It's to help look for ways to grow the company, increase revenue and increase profits, and continue to make it successful. Yeah, which is great. It's a good segue. So let's talk about, and I've done episodes about this, but the value of a board of directors and, and I want to kind of tee this up correctly because there's a lot of companies that, that are really well run. And they've been very successful and, and we can define success by a lot of ways, you know, they've grown their business revenue, they've been very profitable, they've, um, they've built a good culture and there's a lot of ways to define success. Um, but they don't have a board of directors. And so the transition that I get into talking to them a lot about is, hey, let's prepare for your board of directors because it's coming. And so in some cases, I will tell you that there's a, there's a hesitancy. And a, and a reluctance on their part because I think it's partly the idea that somebody else is gonna control the company. And you know, as the advisor, my job is to try to help them understand, first off, you're not gonna have much of a choice. You're gonna have to have a board and you're likely going to have an independent board member. So, let's take that and say, what are the value aspects of having a board? And so, from your perspective and, and, and really just kind of highlighting the ideas behind it, where do you feel like a board of directors really does add value to a company, you know, whether you have an independent board member or not. Well, I think as an owner, when you make this transaction, whether you sell the company outright, you sell it to an ESOP, you're selling your ability to solely lead the company. That's true and you prepare yourself for that. There's there's going to be new people with new voices that have a say. That's true. Question is, as an, as that person, you can either look at it as I got new bosses, they're gonna hold me accountable and ask me to do things, or Here's an opportunity to get maybe 3 or 4 smart people helping me run the company who can look into other areas and have different connections that I don't have so that I, as I continue to run this ESOP company can grow it up and or potentially find a buyer for it. So if you're a smart CEO with some practice and many haven't had the chance to practice, you want to make the board work for you as well as be accountable to the board. No, I think that's true. Now, finding the smart people could always be difficult, you know. Because you, well, let me say this too about the, the board of directors. One thing I would, I have experience with is a board of directors that um had uh maybe uh just a lack of checks and balances in, in place, you know, so that it wasn't really adding any value because when you get down to it, if everybody's like, gonna say yes, like the whole yes guy type of problem, then it's just gonna be your one guy who has one or um one person has too much influence over the board. So, how would you talk, how would you address that issue when you get down to the, the checks and balances and, and really truly finding people, not only they're smart, but also that round each other out with with personalities, skill sets, you know, different disciplines and you blend those into becoming a stronger board. I think the key is to have an independent board director that's not beholden to either the lenders or the employees or the former management. So they really are independent and they can speak up, and the worst that can happen is they get fired off the board, which is they probably have. Other things to do in life is not the end of the world. So that gives that person the ability to speak up and say, I don't think it's a good idea. We're going down the wrong road, and he can get voted off, but still you've got the ability of someone to stand up and say, hey, stop for a minute, let's think. Yeah. Um, let, let me ask you a question on, so we, we created this board and all that, but let me bring it back to you personally. One of, one of the things that was intriguing when we first met is like this idea of like, why the why question always comes up with me too, like, why do I do ESOPs, you know, because I love ESOPs, but why do you want to be a board member for ESOP companies? Like ESOPs are a great thing for employees. So in being a former Marine, the first thing you do is you accomplish a mission, you take care of your people. Well, here in private enterprise, you want to accomplish your mission and be profitable, but you want to take care of your people. And many times companies grow and the owner walks away with everything and the employees only get what they earned on an hourly basis. And so I do profit sharing with my employees and that's good, and I try and, and give them as much opportunity as I can, but an ESOP really is a way for an owner like me to transfer a lot of the wealth they helped create. On to them in the later in their life or the next generation, and that's where it's unique and as I've come to understand it better, I think it's something that I'll probably do with this company and that I'm encouraging now people here in the greater Atlanta area to consider as opposed to an outright sale. Many folks on an outright sale are worried about what's going to happen to the legacy that they've created and the culture they've created. With an ESOP, there's an opportunity to maintain that and have some guidance over going forward. And simply not hand the keys to somebody else and walk away. Yeah, no, I think that's one, and that's, that's a good why because that's kind of like what I see to the value. I mean my part of my career where it's like, I could pretty much do, not to be arrogant, I could do whatever I want, honestly, because I've done all the hard stuff. And when I started to kind of think about what I wanted to do, I just turned 51, like, what do I want to do in the next 10 years of my life because I'll probably work till 60. I'm like, this is what I like. This is what I like because of what you said. I like that it creates an option for somebody. It's not, it's not for every company, but you can really give back to your employees. And then I really like the idea behind it to the wealth transfer idea that, you know, if people are, they get it and they stay with these companies, they're going to do well. And the whole, the whole communities do better, because those companies stay there, those jobs get, you know, sustainable, they stay there. Um, the company was built with, with, you know, this founding members, ideas behind it, those can can stay and also grow. And so it just creates this, this better situation than, um, than what I also see in my career is, you know, in a CPA firm is the company builds up a great multiple, they sell off and then the company is wiped from the face of the earth, you know, so, so I like, I like your why, um. When you get into the specifics of the board, this, this question gets thrown at me a lot when people are thinking about the board. It's like, how many people should I have on a board of directors? Well, obviously always an odd number. So 3 is probably too few. It's too easy to agree with each other. 5 is probably a good number. Because you've got obviously the CEO, if that's still the owner, still on board, and you need a couple of guys from finance and an independent board member. And so that's we have where I am now, and it gives enough give and take. And so when you, one of the things I suggest for an owner of an ESOP is that the board meeting ought to be divided into two halves. One is accountability of where you are and what's happened, and are you meeting all your uh current requirements for the bank. And the second ought to be the future. And they had to make the board members work about I need this introduction or I want to go over here or I need this advice on this or I need a better way to do this thing or simply have a board meeting where you look at all the charts of past expenditures and go, good day. Figure out the next 369, 12 months and make your board members go out and find you opportunities and get you deals. Nice, that in if you're trying to close a big deal, bring in a board member. Yeah. I work for. That's what they're there for. Part of the reasons I do this is I want to help, and people that have me help, and I'll call somebody I know in New York or San Francisco or someplace else and say, Hey, I got this great company I'm working with. Don't you want to help them? Don't you want to work? Don't you want to buy their services? Going from an East where the owner is in one pair of binoculars looking out across the world. If you bring on good board members, you've now got 5 or 6 people looking around the world to help you grow your business. Yeah, like, you take that centers of concept and whatever influences you have or whoever the board members have. Um, and that's why I get so excited about the board because I do see that as the as the as a main value add. is in your own little circle, in your own little company, everybody there like finance people are great, you know, and I'm a finance person. But you know, you're, they're only gonna be internal, like, right, they're not thinking as externally as somebody that might have connections or even open up the strategic vision of saying, hey, what, what if we did something just totally different. So, so going into that, I think that's a really cool idea as far as the agenda goes, um, and let me add to that we just happened, so the company I'm on the board of needed a particular piece of equipment. One of the board members happened to have banked a company that made that equipment. So instead of getting around the outside, there go direct and create a significantly benefit significantly faster than they otherwise would have. Yeah, wow, that's pretty cool. And I think that that is a, you know, just to kind of share that a little bit, that, that really helps people to think like maybe it's good that you lost a little control of your company, to be honest with you, and you're still gonna have influence when you think about a, let's just say it's a 5-person board, the original selling shareholders, probably the chairman of the board. You've got 3 other, you know, 3 other internal people. So that's 4, and then you have an outside person, right? So guess what? 4 to 1 is you're always gonna have control when you get down to it. Well, you probably want to have a couple of guys from the bank on there or the lender. So you've got the owner, you've got the lenders, and you've got an outside. And in this case, I'm the chairman of the board as opposed to the owner. Right, OK, I see. OK, got it. Well, not, not to give any more power as chairman other than a fancy name, but Yeah what kind of corporate structure. So, so going into the uh the, to the agenda which you kind of shared the first part of the meeting is accountability, the second part is future. Within the realm of accountability, what should they, what should a typical board be reviewing? I mean, obviously financial statements from last period or whatever. What other things do you guys get into when it comes to accountability? Um, people, OK. So our years, do you have a succession plan in place? Are you grooming leaders to grow up and assume ever increasing responsibilities? And it's never one, you know, it's going to take over next, but who are the pool of 23 or 4 potential replacements for the CEO if they got hit by a bus tomorrow. So one of the things you do in the Marine Corps is you practice combat assuming your leader got shot, and you still need for your group, your mission, your unit to be successful in what they're doing. Right? Well, many companies are afraid to have this conversation about when you or something happens. So if you simply say if a bus hits you tomorrow, what do we do? I said you need to bring up succession planning and let's, let's deliberately plan it with a deliberate basis on a, let's say 5-year time scale, whether it happens or not. No, I love that. I think that's great. And, and to kind of talk a little bit about that. I mean, there's a lot of in the journey to an ESOP, you know, I use that phrase, there's a lot of planning that I'm doing with before we even get into um. The site presentation, because when you get, when you go through the, the, the actual steps of selling your company to an ESOP, one of the, one of the steps is going to be, hey, we're going to have the trustee and the evaluation firm show up at your office, and we're going to present the company, but one of the things we're going to present is your succession plan. And we're gonna go through the resumes, we're gonna go through who's, who's on first and how that whole thing works right now. But then propose now, if the guy's leaving or the, or the lady's leaving her company, then the next steps are gonna be, this is the person we've identified. And so we've already kind of mapped that out. So I think that works really well and then give that to the board of directors as an agenda item and saying where are we at with, with holding the guys accountable to get through that cause that's a huge issue. And what are the, and what do you, how are you training them up to be the next leader? It's not just they figure it out along the way. You need to have deliberate training, the conferences, expose them to things, rig, grow them up to become the next potential leader. And as you know, one or two of them will fall out along the way, so you need a pool of bigger than 1 or 2 potential succession leaders to be able to make it work. Yeah, you know, and ultimately one of the biggest things that is, is if you have a CEO or or, you know, an individual who has You know, that, that personality, the charisma, the leader, the, the, you know, the person, you know what I'm talking about, like, he, he or she is the person that could be the most difficult. And um I've seen that go a lot of different ways, um, but it is really hard, and they're not always gonna be the, the same person that you were, you know, and, and me, you know, me being the managing partner, I did this right before I, I left, you know, I'm still at the firm, but I left my post as managing partner, but You know, I had, I had one person and his, his name is Chris, and we spent 3 years together. And he'd go to every meeting I went to, every time I had an issue or a thought, I got him involved in the meeting and the issue. And, and when I did the the handoff, it's like, honestly, stress-free. I, I didn't worry about it. He was completely prepared. So that's a really, that, that one part of the whole succession plan, I think is, is such a critical aspect because it's not just skill set. His personality and what you learn is that at least is what I learned, he's not gonna be me. He's never gonna be me. He can be himself and do it the way he wants. It's just you want him to have that, that, that confidence that, you know, just do things, try things and, and, you know, it may or may not work, but you're the one, you know, you have to come up with that, so. And have those potential candidates come present at the board so you can get a feel for them, be able to do some Q and A, see how they do on their feet with some impromptu questions, and then how deep is their knowledge. The only you to do really well is ask questions 3D. Did someone brief you up when you come in, or do you really know your area and what you're talking about? I love that. So is 3D like a marine concept? Uh, it's just what it's what we try and do all the time. I want to know how well do you know what you know. And I was really good at doing it because a lot of folks want to come in and get FaceTime. You're trying to sort out whether they're there for Facetime or do they really know what's going on. Yeah, that's good because you, I think you pick up on that. Most people have pretty good radar detectors, right? You pick up on whether or not they know their stuff, probably immediately. Um, but I love the idea of them coming to presenting to the board because it is ultimately, I think from you, from what you're saying, it's the board's decision to really approve the, the, you know, the promotions that are kind of built out of that succession plan. It's not just the individual CEO or whatever who said, hey, this is who I'm gonna promote. Or potentially take that person and say, I really think they benefit from some training of this kind or some public speaking training or some leadership training. Let's invest money in that person to give them those skills. Yeah, yeah. Yeah, that's so the leadership training side, I think is, is something that people um do a lot of different ways. What would you say like in your experience, is it best to send them off site? Is it best to have them, you know, bring leadership training into the company, or what, what's your, what's been your experience on the leadership training side? I've done both and both work fairly well. Um, I think there's in every city there's a group of people that do leadership training. You want to interview interview half a dozen and then figure out which ones are a good fit. The ones I think work best is where you do a little training, get back to your job. Do some training, get back to your job so you have a chance to apply what you've learned in increments as opposed to sitting someplace for a couple of weeks and getting all the theory and then coming back and try and put it to practice. That's good. Rick, that's really good. Yeah, I've, I've dealt with that in my career too, and it's like I've always struggled with that, you know, do we send people away and, and I've had varied success on leadership training, but I do fundamentally believe the um that it needs to happen more and I think people um either they cheap out and they don't want to spend the money. Or they're, they just don't see the value because they never needed it, so why should somebody else need it, but, you know, why take chances on that. So on the accountability side, would there be anything else that you think would be part, part of what you would want to cover in terms of your agenda goes? be transparent with the board, give them the good and the bad. Anytime someone gives me all good news, I mean, we're all, we're all pretty good, but no one's that good. So lead with the bad and then ask for help. Here's a it didn't go right. What can I have done better? What can we do better? How can you help me make this not happen again? Exactly, yeah. The ability for a leader in front of a board is a big thing, and if you come in and you say, I've got some challenges, I've got a problem, and let the board know ahead of time, don't save it up. Bad news doesn't get better with time. Yeah, that's the truth and say, hey, I've got a problem here. What can you do to help me? Yeah, that's good. I want to help me help you. Anyway, I'm just throwing out the Jerry Maguire thing. Um, so kind of thinking about your agenda too, so we shift over to the future. 11 of the things about ESOPs that, you know, I like is, and I do evaluation work, is the, is the primary value driver of the, of the company at the time of sale is gonna be, is gonna be built around what we call the discounted cash flow model. The discounted cash flow model is really uh uh built around the forecast. And the forecast you use on a discounted cash flow is usually like a 5-year forecast, which I will tell you, it's hard for a lot of companies to go and do a 5-year forecast because a lot of companies never do that. They think, well, they think out 1 year increments, which is fine, but um, so when we leave the, uh, when we begin the process and as we go through the process, we have this fully functioning 5-year forecast. So in, in thinking about that for you guys, um, it would make sense to help you in the 3 to 6 month time frame, but, but also, um, what I thought would be interesting and it's kind of a question and a comment, is how much do you review that forecast in your board meetings, um, to vet out like, hey, that makes sense. You guys are, you know, a 25% growth rate or you're, you know, you're more than that or you're less than that. Um, and then, and then some of the other parts of the forecast are just What are we doing about gross margin? You know, is it, is our gross profit slipping and why? Can we get that up? And if we can, I mean, we're, we're gonna just bring money to the bottom line. And then, of course, the GNA side because GNA expenses can, can creep in and, and we want to be realistic about that in the forecast too. So just thinking through that a little bit for you got for a board of directors, how much do you get involved in that? So we want to be fairly involved in it. So a 5 year plan is, you know, a guesstimate. You're either wrong or you're lucky. So know that going in, but it's a guide and then creating 3 levels a baseline, a mid, and an optimistic. OK. Have those out there and then say what drives you towards one or the other. If there's a risk, are we being conservative, or can we by doing something move ourselves more toward a midline projection going forward? And then every time you have a board meeting, kind of look out the next 12 months because that's what you really have control over and figure out if you want to change that's going to bear fruit in the next 12 months, and what do you want to change that might bear fruit beyond those 12 months. Right now I think that's good. Um, it's hard. It is 5 years is like people, and it isn't, it is never going to be exactly right, right? It's just a like you said, it's a good guide. Um, it also helps to set the tone, set the tone. I mean, what are we going to be in 5 years, you know, especially if you're gonna like do what you're talking about a $20 million or $30 million company, and we want to be $100 million you know, we set the tone at a certain level and say, Eric, you know, and it probably. You know, from a forecasting standpoint, financially, it's one thing, but another, another aspect of this is it probably needs to stretch people outside of their comfort zone. Absolutely. If you don't have a target anywhere you shoot it will be fine. Yeah, a target that collectively you think is reasonably achievable, and then plan out how do you move towards that in steps, break the steps down, and then act on the steps to move towards your plan and then reassess, is the target still correct or do you need to move it up or down? Exactly, yeah. Um, so another, another aspect of the meeting itself, and maybe just in general, the responsibilities of board of directors that I think get people a little nervous is, you know, the guy, let's just give you a kind of a 30 year company, the guy's responsible for building the whole the whole business. He's a sole shareholder. Then he get, he walks in the board of directors and suddenly they fire him. You know, I'm throwing that out as like a, I, it never would happen, but if he was, you know, doing his job, but um it's a fear factor. And so, what are your comments related to that fear that people have, you know, in terms of, hey, I'm gonna get fired by the board of directors. Well, I think it's, it's, it's highly unlikely because he's generally the persona that's driven the company to where it is in the culture that pulls together. So by creating a succession plan, what you need to convince the owner who has just sold is there is a 5-year off-ramp, and he needs to slowly back out of the picture, not at once, because that's too sudden, but slow. They back out of the picture and let other people pick up the cases or the operations or the tempo or the sales so that in 5 years he could still be chairman emeritus. He still has all the things he's sold. He could have an influence, but doesn't need to be there on a daily basis. Exactly, yeah. I will do that, then that's a harder conversation because sooner or later all of us have to go. It's a good point, Rick. Everybody's gonna have to go eventually, you know, and if you don't think that, then you're unrealistic, you know. Um, it's, but I, I think I've seen it, and I think it's, it's one of those things that you have. It's not a business conversation, it's more of a personal conversation like, what do you want? You don't want your whole life to be about your business. And if it is, you know, eventually that's gonna come to an end, no matter what you want. And then what is your life about? And but some people get stuck in that is their life, their business is their life, and a ward will try to guide them down the path of making the business less of their entire life and only a portion of their life and then suggest some things they can do with either giving away or the National Christian Foundation or donor advised funds to do with your wealth that goes. Spend your talent someplace else helping other people who are less fortunate, and I find that helps own or make that transition from all of my focus on this to I can spend some of my resources and focus on focusing that same business set on helping other people where I couldn't before. I like that. I like that a lot because it don't go sit in a chair, you know, just don't go do nothing. You know, have something to do, but, but, you know, and it's, and it's very good for you, but it's also good for your team too. You got to get out of the way so your team can get the skill set they need to, um, to grow, you know, and, and if you stymie that growth, it's not good for anybody. And then you won't keep high achievers. So the high achiever says you're never gonna leave, they're gonna go somewhere else. That is the truth. How many, how many meetings would you say a year are advisable for a board of directors? We have 4 meetings, um, every other one's in person, but then we have a couple of phone calls in between as opportunities arise or critical events are hit or we close the contract. OK, that makes sense. I mean, because, you know, you can have, I mean, it sounds like you're very advis you know, involved is, you know, as well. Um, if a company only had like one board of director meeting a year, what would, what would your thoughts be around that? They're not serious. Yeah. Checking the box and doing a minimal, they're not looking at the board as a tool to grow. They're looking at it as an accountability check that got us survive. Exactly, yeah. I, I, I just, I see that as, um, you know, then there could be the other opposite question of how many would be too many meetings, you know. Unless something, unless something's happening remarkable once every 90 days is as much future leeway as you can see anyway, right? Otherwise you're, and otherwise you're going to be in the day to day business. And and our and the board job is not to not to micromanage the company is to help them take the tools and equipment and training they have and grow it up right now, I, I totally agree with that. Um, so in your experience with, you know, maybe your own company or other, you know, the boards, what do you find are some negative issues that you've run into that are, that are, you know, things that people should be thinking about as pitfalls? Dominant personalities. Someone will get up and become the one that speaks the most. Um, and so as you review board members, you've got to, you know, take them out to dinner, watch them and figure out, are they going to try and is this their chance to be grandiose? Sometimes the lenders are like that, so you've got to watch for dominant personnel is driving the whole situation. You're an independent board member, you got to make sure that that person has the ability and the leadership and the maturity to stand up against a lender or somebody else and say, no, I don't think that's right. Yeah, totally. Um, yeah, so personalities are a big, a big part of creating the right type of board, and, um, events are a big part of finding out what they go to dinner with them. Great bread. That's how you find out more about what a person's really like. Yeah, and simply in a um a meeting. Yeah, I agree with you. When you, when you have a time to not just be like interviewing them or whatever, you're out there just talking about life, they'll share, they show, they'll share their life with you. Um, well, cool. And then, um, just thinking about some of the technical things just as far as the, the structure of a board of directors. 11 thing I always point out to people because maybe some don't, they don't understand this. It's not a board of advisors where you might have a board of, of people that have no zero voting power in your company. And they're really just advising you about certain things. A board of directors is legally a responsibility and then the board has a fiduciary responsibility as well. So it's, it's, there's risk related to it. There's a responsibility related to it because of that, there's a, there's, there's bylaws and there's voting power. So kind of talking about that a little bit, um, what would you say, you know, from a structure of the bylaws and how would that be different for an ESOP company versus a non-ESOP company? I think they're, they're quite similar, but many people don't realize as a, as an official board member, you are liable to many extents for lawsuits and other things. And so you need to have good DNO insurance. You need to make sure that that you understand that this person joining your board is, is not just a perfunctory thing. They're putting themselves at risk by doing so for actions they have no control over. And so the bylaws need to take that into account, especially when it's an ESOP and you got some banks involved and some debt. I mean, that's a highly leveraged company. On high leveraged companies, you generally have really smart guys on Wall Street figuring it out, and here we are, you know, a bunch of schmucks and. Trying to do it on our own with the help of somebody like you. Well, yeah, I mean, people, you know, and again, they, like you said, highly leveraged company, there's risk that those, you know, what I tell people is the first step, step into the mindset of, of, of managing the debt. Get cash, it's cash flow, it's debt payments, it's making sure that I think that's what you want to think about. I know repurchase liability is an issue down the road. Um, but the primary focus is pay the debt down as soon as you possibly can to to create some freedom if they haven't been on the bad side of the, don't understand, but they will quickly kick you to the curb to the restructuring doesn't like what you're doing, they will close the debt on you in a heartbeat and put you out of business. There is no happiness. There's no mercy. There's no coing your way out of it. There's no handing, none of that good stuff that worked all the rest of your life that will crush you in heart. Yeah, and they're numbers people, so do, you know, make sure the numbers are right, but follow the path of, you know, how are we gonna get our numbers this year. Again, you know, managing out all those things. So I think that's, that's very helpful. And, and, you know, not to scare people because it is, if you've done the planning correctly, you know, what do I do, what I do is I do a lot of feasibility stress testing to the models to make sure, you know, there's some, there's some wiggle room if you've created the right structure. If you've, if it's so tight that you can't have a 10%. Issue and still be OK, then you probably didn't plan correctly with your, with your ESOP advisor. And many of the sole owners are great salespeople and leaders, but not necessarily great operators. That's true. I see a lot of help can be bringing good operations people in to execute, close the deals, generate the sale, deliver their product or service, and collect the cash to generate the IEA that you need to pay the bet. Right. Yeah. Um, I guess the, the final question on this, and this is always, I should have led off with this, but I didn't think about it until just now. But I always get asked, everybody gets asked this question, how much does this cost? Because, you know, so on a board of director fee, and I, and I, I kind of would probably say to you, probably it's very going to be dependent on the size of the company. Um, so, based, based on that, how would you answer that question as far as, hey, how much am I going to spend for an independent board member? 5 to $10,000 a meeting, OK. And you get what you pay for. Exactly. OK. So, um, is there for, for a, um, a small company that is like, uh, let's just say they're a $20 million a year revenue company. Do you think it's still in the same ballpark or is it more or less? Well, that's where they are now. That's not where they want to be. Exactly. OK, got it. All right. You can spend less, but you, in my opinion and from knowing a lot of people on boards, then you don't, you get what you pay for. It's like going to a concert, right? You can hear it from the back rows. Or you can be up front where you get to interact to you. Yeah, are you serious about your business or are you just, you know, checking the box off? Got it. Yeah. Well, good. I think that's super helpful. Any, so as we, as we kind of finalize any comments, final comments about, hey, you're a company that's going towards an ESOP, anything you would want to offer them as advice for creating, helping them create their board. That's part of what you said was a session plan when the CEO is put that in their mind. And then put together a plan and then every board meeting act on the plan. Number 2 is the board is a tool to expand your capability and help you simply, not someone to hold you accountable. But your job as CEO is to make them work for you. That's true. They have expectations of what they can do to help grow the company simply not show up at meetings and pick the numbers. Yeah, or not be prepared. I mean, that would be, you know, if you're not prepared for that, you're not doing your job. So I think that's very helpful. CFO. Yeah, that's a, I mean, that's a good point too. I mean, I think sometimes people Don't think about all the, you know, the main characters that you have in a story here. It's like the CFO has a, has a direct role in all of this. If your skill set is not finance and you're not watching that side of things, you definitely want somebody that's, that's good on the numbers. Um, I see too, the COO job is very important too. I see that as a, um, you know, uh, where again, like you said, I think the, the, the owners are really good usually on the sales side of the uh of the BD side. Um, but sometimes they're really good on the CEO side too. So it's really a matter of, of the gaps and filling in the gaps. But, but as a board, you need to have an audit committee, and the audit committee needs to be able to talk to the CFO independent of the CEO. That's right. So we can assure that everything is being trans. Right. That makes sense? Well, great. Well, Rick, thank you so much for your time. It was very, I think it's very helpful to for people to think about this in the detail that we covered. I think it was really helpful. So appreciate your time today. Well, thank you very much for having me and ESOPs are a great thing. I would encourage everyone that can do one to do one. Excellent. So with all of that, I want to say thank you guys for listening today and um we'll see you in the next step on this journey to.