He Built an Industry Leader and Walked Away from Selling It - Eric Whitley, GridSME

In this episode we speak with Eric Whitley, co-founder of GridSME and GridSec, one of the leading providers of grid compliance, engineering, and cybersecurity services for renewable energy operators in the Western United States. After decades working inside the power grid, Eric and team built a highly specialized business that became essential to the rapid growth of solar and other inverter-based resources.

But what makes Eric’s story especially compelling isn’t just the business he built, it’s the decision he and his team made not to sell it.

After going through a full sale process, meeting with buyers, and receiving multiple offers, they ultimately walked away. Instead of optimizing for an exit, he and his partner and top leadership chose to structure the company for long-term independence, internal ownership, and what he calls a “forever company.” And since Eric stepped aside from leading the company, they chose to fund his buyout of GridSME through the company rather than outside investors, thus creating a succession ownership model for each of the remaining owners when their time is right. 

Along the way, Eric shares the frameworks that shaped his thinking, from The Pumpkin Plan to Another Way: Building Companies That Last…and Last…and Last, and how they translated those ideas into real decisions: focusing on A-level clients, building almost entirely through referrals, and sharing 50% of profits with employees.

More than anything, this conversation is a reminder that behind every acquisition opportunity is a real person who has spent decades building something meaningful. 

Find us on Apple, Spotify, Amazon, and YouTube. 

Transcript

SPEAKER_00 0:00

Welcome to Search Funded, the Entrepreneurship to Acquisition podcast. I'm your host, Nick Lull, and today I have an episode I've really been looking forward to a lot. A lot of our recent episodes have been a bit more about how the search fund ecosystem is growing, challenges people are having, what they're seeing as the ecosystem grows, but this conversation really uh brings me back to why I originally got into the space, but driving me to entrepreneurship and why I left the tech world because Eric Whitley is a business owner who has built his business not to be bought, he structured it in a way where it will continue to be successful for the long term and there will be no exit. He's actually a guy that I reached out to because I wanted to buy his business. He told me that it wasn't for sale, but we still ended up having a phone conversation and everything instead really resonated with me a lot and reminded me why I got into the space. And so the reasons for that is that he's made a company that is really a reflection of his own values. He's created a business that is the type that I think a lot of us would really love to run. And what's even more interesting than that is that he actually did bring the company to sale about five years ago, went through the process, talked to a bunch of buyers, and ultimately decided that he didn't want to sell to any of them. So, Eric, it's a real pleasure to have you in on the podcast. I think a good place to start would be why don't we just talk a little bit about your backstory, who you were before you started your business and what led you to becoming a a second-time entrepreneur, actually.

SPEAKER_01 1:31

Yes. Yeah, well, thank you. So yeah, uh my story of entrepreneurship actually was around 14 years old. My dad was adamant that um you have to have an experience of going and talking to people and that type of stuff. So it was a lawnmower kind of uh uh gig at first, and it became taking care of people's houses when they left for vacations. And it seemed like from then on I always had my foot in something that was a little not necessarily traditional. And uh that kind of culminated after I graduated from high school. I um started with a local community college, and it just wasn't fitting. I, you know, I wanted to start a business somehow, and it just it seemed like English 1A and algebra and all these things were not that, right? But surprisingly, um, two classes, human relations classes, uh really resonating with me and got me to read a book called How to Win Friends and Influence People. And that I still had that same book, and it's hard to open because the pages keep pulling out. But I read it or a copy of it once a year, and that sort of grounded me as far as you had to approach, you know, uh this idea that you can do something different. So I started a business in 1975, uh Silversmith business with two of my friends and partners, and we kept that for about seven years. And during that time, uh the Western craze took off. We were doing uh Western belt buckles and saddle silver for parades and rodeos and all that. We sold a lot of buckles to uh guys that one couldn't see the buckle because of their belly overhang, or two, we're never in a rodeo, but we have they wanted to see the rodeo butt. So there's a lot of ego in a lot of that. And then we ended up um the other keynote thing was to do the buckles for the Hells Angels, which took a little bit of uh responsibility on us to make sure we weren't uh pissing them off and that was it. Always good adventures when you're you're doing something hanging in a shingle lab. Uh I left that in um 1983 because by that time I was uh married, had two kids, my partners didn't. And the business being small and crafty wasn't going to ever scale to the front working support three partners uh completely. So it was amicable. We we parted um with a small payout for me, but then what was I to do? And you know, I didn't have a college education at all. I was uh I worked in silversmithing, so it wasn't very transferable. I applied and got a job with Southern California Edison as an apprentice uh operator at a steam plant. So that became my entry into the um uh energy sector. And I I was just flabbergasted. You got paid every hour you worked, you had uh this thing called overtime, you had all these uh benefits of you know advancement as long as you paid attention and worked hard and all these things, and I was just kind of wired to do that. So it was an interesting kind of progression of my skills and everything, too, because I landed not in operations but in technology where we were automating these very old power plants to digital controls. I got very involved in that, ended up managing the group of technicians that supported and maintained those systems, and that was really an eye-opener, too. And basically that got me into this notion of managing critical systems. So in 1996, California went through uh electric industry deregulation. And Southern Cal Edison was like a lot of them that decided they were going to sell their generation assets. And by that time, I was like a de facto manager of the plant I was at. And I got to welcome in the new actual plant manager from the new company that bought it. And uh, you know, it's like when the music stops, you don't have a chair, you you gotta go find some plant. So I I uh I helped in that transition, and then I got a job with uh the entity that had just formed as a result of deregulation to run the markets, the electrical wholesale market and operations of uh generation and uh transmission in California, California ISO, it's called Interpin System Operator. So that launched me into a whole new, you know, from a power plant and running around and all that stuff into a control room setting. Nice and quiet environment, there's loud noises or any of those things I was used to. But the criticality was increased with the systems that I would I was helping manage. Um and that's where I hovered over the actual um operations application that ran the grid. I got to be manager of that group in 2006. I had left that organization, went through a similar organization in in the Midwest in Indiana, and uh that was for a huge swath of the country. And then I got pulled out of there to start uh start up to do reliability control in the West as a single organization rather than the fragmented way it's been done before. And that was a very fast-paced project. I love projects, you know, that starting into it for that. It got me um to realize and rely on people, uh, especially teams. So I look back on my career and all the things I so-called accomplished, including this business. And uh the success of that isn't, you know, I can't really say I had any single-handed stroke of genius that launched or that uh ran it or anything else. It's really by utilizing people, but people in a teamwork environment that that really benefits everybody. So that was sort of the background. I did have a small stand at a consulting company that was trying to grow at all speed, and they had uh a venture capitalist group funding them, and I hated it. Every bit of that was just get in and bill, you know, don't care what you're working on, just bill extra. Just all these things about numbers and all that. Um so that left a pretty bad taste in my mouth. So bad that I just up and quit. And uh I was grouseing about it to uh a good friend of mine that also had left California ISO who got together often. And he said, Well, what what what makes you so mad? I said, Well, I could do it better. The basic better, but all right, smart ass. What's popping you? Well, I got a mortgage, I got you know, my wife, my kids are grown, they got jobs, but you know, we have some responsibility back there. He said, Well, I'll underwrite that if you want to start a business. And he said, Okay, and that's how uh Red's subject matter experts was uh initiated, and that became uh lesson right off the bat of cash flow, of marketing, of all these things that I was sort of uh separated from. So it didn't really apply to people uh looking at their uh contracts for uh energy. But uh I was billable right off the bat. My partner never was, he's just been the business guy and the cheerleader keep me from running the organization off the cliff, and all that kind of thing was very valuable. But um, I learned that uh instead of doing what I had most of my career in, and that was these critical systems, what was really of need was these hydro organizations up and down the Sierra Nevada uh range here in California, they were coming off 50-year contracts with the utility, and they didn't know what they're getting into. They had to become Asian's called a generator owner and generator operator that has regulatory compliance requirements behind it, that has infrastructure behind it, all these things that they weren't just not aware of. And so they had to take over these hydro plants from the utility, and they weren't given much of a handle. So I became sort of their consultant to help them start the architecture of the compliance uh of all these things, what have a look at the markets, you know, and all that. So that was our lifeline. So what I thought it was gonna do isn't anything what we uh end up starting and doing, and what I hired people to help me do. Completely different what the plans were and the business plans, quote unquote, for starting the business. And that was probably one of the most significant lessons we learned is that we have to look at opportunities in a certain way that allow you to take advantage of them for one, and also not hang on to something that you think uh you ought to be doing or your necessary skill sets up.

SPEAKER_00 9:55

Sure.

SPEAKER_01 9:56

So yeah, that's how I got where I'm at today.

SPEAKER_00 10:00

I mean, it it seems like you definitely have structured your company in a way that's very intentional. You have three values or rules, I guess, that the company lives by. And then you've also talked to me about some of the other things that you've done. So it's wondering if it is it all through experiences like that that you you know you learned that you needed to pivot in some way, and then that's how you realized that you needed to build the company the way that you did, or where do those inspirations come from? Because I know you've also like read a lot of books. So I'm just curious about your thinking in terms of how um you uh chose to build a company the way that you did.

SPEAKER_01 10:33

Sure. And I and as everybody know every entrepreneur knows there's a million books about how to do this, right? Sure. Um yeah, I was spoon-fed the books that my business partner thought I could handle for one, and that I it would make the most impact uh on me. And uh yeah, I think the the first lesson of pivoting was just necessity. You know, I wasn't getting these large energy management system contracts that go, you know, RFPs, and it was basically me and some rented uh resources to be able to service them, and they, you know, the very savvy people saw through that. So I don't blame them. But I got called by a hydro company that was in deep doo-doo, just thinking, what are we going to do? And they they had like about six-month runway to prepare. And so I was like their consultant for that entire time, which was a great revenue source, it was a great networking source. We still have three of those companies uh today that are clients of ours. It was just okay, how do I get a group of subject matter expertise together to handle what clients need? And that became that. And then the other planting thing was this book that's called The Pumpkin Plan by Mike Melkowski. I'm bothered butchering that name. But uh, I recommend anybody read that book. Basically, what it is if you want to be the farmer with the 2,000-pound pumpkin that shows up at the county fair to win the blue ribbon, how do you start? You have to start with a good seed, you have to nurture it, you have to plot the mumpkin that one pumpkin, and you have to stay true to growing the thing that you think is most valuable. So you you basically sort of pivot around to find the value, and then you find the people that are working in in that value chain, where do they congregate? What do they need? And you just start there. And we've launched many of our practices based off of that book. Uh, the book also has this ranking of clients and and people. Uh, and so an A-list client, it's all of our attention. We drop everything for that type of stuff. A D or E or F uh client. We'll get to you when we get to you. We definitely play favorites and we definitely uh choose uh who we let into to our company. And that goes back to what you call the three rules or actually laws. So these three laws is what I started the company with. I borrowed the first one, and that was no dicks, right? We don't allow people to be uh or have dickish behavior either as an employee, a contractor, or a client. And we fired all three of those species of engagement uh because of just not being able to work with them in a reasonable way. Uh, I was 56 when I started this, I was pretty well fed up with bureaucracy and dickish people, right? That you had to put, well, it it became you know a necessary thing. The other law was that you have to add value. This came from my experience with a consulting company. Uh, if you find yourself playing a therapist or something besides what your intent was, you're not adding value, uh, you have to disengage. So add value to the second law. The third law was every transaction has to be a win-win-win. So it has to be a win for our company. We're a profitable company, we have to make sure that that lines up. It has to be a win for our client. They have to realize and appreciate they're getting value, and it has to be a win for the person doing the work in a form of interesting work, teamwork, support, as well as our bonus program. So if we meet all three of those and we go forward with an engagement, if we missing one, we either have to fix it or we back out. That discipline is tough. As everybody knows, if somebody calls you up and asks you if you do something, you your answer is yes when you start a company, right? Of course we do. And you figure out how to do it. Um, for us, uh, after time, we started getting more and more involved in the uh renewable space. It became very important to us to appreciate the people who are doing our work. And that goes into the culture that we'll probably talk about here in a minute, too. So uh from your listeners' perspective, yeah, it's it's kind of like can a dummy do this. You know, an uneducated uh power plant worker or even lawnmower, if you want to go all the way back. Uh, how do you get to where you're managing a team of people much smarter than you, being able to handle very complex problems that the grid represents? And how do you uh ensure that you stay flexible in that environment so that if you if things change on your horizon, how do you take advantage of that? And and that happened to us in 2014. In the grid, you have different uh generation resources for bio the electricity that we know in the grid. And for well, Eonsk in the big thermal uh power plants, if they're nuclear, steam, then the hydro plants, other ways of generating electricity, but mostly you know, things that go around, right? Turbines that go around, water that falls and gives you pressure, all these things. So you have you have what we knew back in the day, and and we call ourselves Doug's, right? Dumb old utility guy. That's uh so I'm a Doug when it comes to the history I have with how the grid was ran. So in 2014, we were uh working at and competing with others to get uh contracts with utilities and then my hydro clients and things like things like that. And we're slowly growing, and our our staff is uh cementing, we're just adding uh employees and independent contractors as you know things came up. And I was invited to give a talk on the compliance piece of generation as well as uh wholesale electric market at a uh solar conference in San Francisco. And I'm not a natural speaker, but that's pretty a subject I knew pretty well. So I was up in front of maybe about 50 people. I'm guessing they represented about 30 of these new companies that were just formed to uh run after the purchase power agreements with utilities, with uh solar resources. And uh I laid out all the requirements that they would have to have for regulatory compliance and then the fundamentals and the different market segments that they might apply to should they be outside of a purchase power agreement. And uh literally, Nick, I stopped the talk, I went to go sit down, I looked up, and there's people coming down the hallway. Well, and then after the panel talk finished, then I just I was core myself and uh uh one of the young men that eventually became one of our CEOs. Uh, we're just trapped. And and these people are just like, what is this shit? You know, I won't understand any of it. I'm from I got a financial background, I don't know anything about operations. You know, what do you mean by a good citizen on the grid and all these things? So we found a kind of a pumpkin, right? And we fed that pumpkin as far as free information, understanding what their needs were and that type of stuff. And we uh got responded to uh our their requests to have us on as their consultant as they built these things, and then as they went live, how to become compliant. That transformed into uh interconnection needs. So they had to understand all the rules and regulations connecting with the U.S. They they needed engineering, so we started hiring engineers to help them with studies and things like that. They needed a lot of modeling of their units, so we wound up um developing that resource, and they kept asking us for cybersecurity because they kept getting handed by their insurance carriers, how are you protecting the site? You know, but what's your footprint look like and all these signs? And we we grew a practice for that. So all these pumpkin vines started with that one talk we gave. So you never know where the the seed gets planted, you know, and you're not always in control of it. But we are probably about 90 percent uh involved with renewables, whether they're wind, solar, uh, and now with the um bulk electric system storage systems, basically batteries, and we're now becoming very important with a few geothermal uh plants that are out there now. And and from 2014 until today, we've had an amazing growth spurt, you know, just uh very people intensive when it comes to consulting, that type of stuff, but also very in need of services. So instead of just um consultants, which your brain's by the hour, and you know, we've got a scope and we need you to help us help with this, to we don't have any do this. Helps. And we started services. So we have annual services now in four or five different areas, most notably in cybersecurity, and that became its own company. We decided to split it off. It has a different risk profile than our consulting company, and so we engineered that to exist on its own and placed the young man that was with me in 2014 as its CEO, very young uh CEO. And then the the main company is separate, but they're connected with a lot of resources, and and people just want to call us OneGrid now. They've decided our name needs to be OneGrid because they just want to go to one place to get either service or both services at the same time.

SPEAKER_00 19:50

Sure. Yeah, it's it's certainly a story of being disciplined, but then also responding correctly to the market. And I believe that you're the leader in the Western US when it comes to uh the sort of service you offer. So it's uh certainly been a a rewarding path, and uh you've clearly done really well. I think it also speaks to being a later career CEO, because I think you know coming in you already knew what your laws would be, but you knew what makes a good company because you've worked in a lot of different types of companies already in life, and so I think that's something that is often underrated, is after getting you know many years of experience before starting a business. I guess maybe zeroing in on the The Fumpkin plan a little bit more, because that book clearly had a large influence and the the lessons that you've learned from it led to a party business's success. What was it about that book versus other ones that resonated with you so much? Why did you choose that one to follow versus others and then a lot of people read books but they never really implement or execute the ideas that they read in the book. So curious how you've been able to do that well as well. It seems that you're, you know, the pumpkin plan we're probably gonna talk about another way later, but you've read a few books and those books uh really seem to have affected the way that you led your business.

SPEAKER_01 21:04

Yeah, I I think I can keep poking back to the pumpkin plan as being fundamental, right? And it really validated the first experience we had of pivoting to something that I wasn't comfortable with, or I didn't know that much at all about pumpkin plants. I was used to steam plants and much, much different. But it turns out we could relate over this uh this one theme. The pumpkin plant is all about that. It's how to look for a niche within uh an industry or a vignette, a business, and really to weigh that against what you're currently doing when it comes to sort of spinning wheels, or you're not going anywhere. Or, you know, you most people get frustrated when their businesses get to a certain point, and you're for many reasons it becomes unwieldy, like the way too high a cost of service. You have uh a lot of factors up beyond your control, such as contracting, business cycles of your clients, things like. That they're really tough to uh to crap. In every one of those cases, you can find a vine that is underserved and needs help. And you'd be well positioned to look for that as far as taking a step. Yvonne Sher Sherard, I think his name is, Patagonia's leader. He called that taking one step. And when you have an opportunity, you take one step to see, okay, what is this? And you take another step if it feels good. And if it continues to feel good, you take another step, and then you might provide some investment and might provide this and that. And that's how grid security was born. So our two companies, grid SME, which is shorthand for subject matter experts, and grid sec for security. It was exactly that method. So John came to us with this idea, all these clients were asking for this service, and he wanted to build it. Well, that was going to take investment. And from a privately held company, you're asking for the owners to fund it, essentially, right? So out of our reserves, we started funding that effort and we definitely slowed him down. You know, okay, take a step, take two steps, take three steps, and just sort of had this sort of uh pace to it that might have made him a little anxious. But uh it was really the right way to approach, okay, is there something there or what is it about it that uh is different than what we're doing now? So it's it wasn't just willy-nilly try things, you know, you're you're you're uh trying to pitches outside of uh strike zone necessarily, but you are trying to find where that sweet spot is that you might want to go into. But there's a lot of analogies at work, but uh but if anybody reads the pumpkin book and uh kind of an entertaining reading, uh Mike is kind of a goof when it comes to writing. But uh it takes you on a little uh some of his experiences and his musings on companies that uh that do that. But there's two aspects of that book that were really important. One was again, make sure you are on a vine that is going to give you the best value for your efforts of fertilizing and growing and all that. And the second one is this concept of clients and clients that get you, clients that you know, you guys agree on your payment terms, you agree on your price, you have to understand, you know, the three concepts of price, cost, and value. Okay, how you manage those three vectors. But you definitely need to understand what it is that makes your client tick. Yeah, I a lot of people are uh, you know, and you may be in a business that just has many, you know, so many clients you don't know their names. You're not never gonna know the names of, but they still follow trends. So you can still apply the same thing. And I think uh the client focus is really important when it comes to who you want to work with, but also who you want to grow with. Our solar clients were on this tremendous growth path. Most of them had VCs behind them, and they had all this dumb money being uh dumped in. And so money wasn't an option to them, but the the resources and the needs to do this, so there's a lot of attempts to buy the business from strategics, we call them, right? So that those that are in the industry that wanted just to cob us onto their growing portfolio. So you have clients that are growing is a really good attribute, and you grow within that. But if they're A-list clients, you keep them, and to the extent of you're further down the alphabet of as far as client ranking goes, that you dump them off. So things that rank clients are typically like pay cycles. If you're a small company, cash flow is gang. You have to have cash flow to exip. And if you have somebody on a 30-day net is paying you 60 days out, is not helpful, right? Then you have ease of working with. In other words, do they dispute every invoice? Do they call you on the carpet over trivial things? Do they, you know, all these things? Third is really being candid with us. So if something isn't working out, that they let us know. That moves a client up the alphabet because they want to work with us, and you know, here you guys are screwing up. Uh, here's what we need that to resolve that. That you get back on good graces. That's golden. If you get a client that does that for you, that's great. So this focus on clients, this focus on how to take advantage of opportunities, and that book, I think, was it it's all encapsulated there. Uh, easy reading and just very fundamental. I insisted we follow this, almost to the extent where the guy, the my business partner, Lonnie, who gave it to me, was like, okay, that's just a concept book, right? No, we need to do this. So we now have a champion, our vice president of business development, uh, Sarah, is championing this inside both organizations. And um, she doesn't miss a B. She is she's more of a disciple than I was. So, yeah, so if you allow a book, I don't care what book it is, but if you bring that home into your organization, because it really speaks to you and you think it's going to give you what it has, test it, do the same thing, take a couple steps. And if it does resonate, just adopt it. Just really go into it. I I've sent letters to the author thanking him. He's written back. And so it's it's been one of these things about letting something influence you that's positive and you can see results in.

SPEAKER_00 27:24

Yeah, absolutely. I I think two of the things you mentioned on our previous call that uh stood out to me was that you've built the business almost entirely through referrals and then also that you share about 50 percent of profits with employees. So I was wondering how you came to those two uh policies. Was it also the two books you read, or what was the thinking behind that that led to uh those choices?

SPEAKER_01 27:48

Well, my the fundamental thinking was two parts, one for me and one for my business partner. So my part was the sort of realization and the sort of humbleness of realizing you didn't do any of this yourself. There's nothing about these companies or even my uh career successes that, you know, I was like the guy who did it. It was just always with a team of people. So that really not only kept me humble, but also just made me realize the importance of taking care of people. And so we we went all over with that. One of the ways that we early on that we did to make people feel included was to share everything. So we are 100% transparent. We go every month at the uh month in, and this we did this for uh early on, we go over the financials with everybody that cares to join in. Let's get and then we uh email out the the results, and we even go over their utilization. So as the consultants, you know, they utilize to 40, 50, 100, whatever. And we do that for making people realize here's somebody killing themselves, you know, so help them out. And here's the other one that you know, you are uh you might be doing a lot of activity, but here's your billable uh utilization. So you have to come that in. So it's a two-way thing. Yeah, they can hold us accountable for the month uh uh results, the performance of the company, uh as well as the way we are conducting ourselves. There's another aspect that I I started a company with that I just was adamant about, no performance appraisals. I was done with those. I as a supervisor throughout the year, decades, it was like, okay, on sometime between Christmas and New Year's, I had to write the 20 or so performance appraisals. It depends on where I was in the bottle of wine, on what kind of appraisal you got. So it was just like you just sort of you creatively uh come up with your year of evaluation of somebody based on probably what he did the last two weeks. And they recognize that too when they get, then I was just done. I you know, I didn't want to have anything to do with that. So we start out with none. And then the employees kind of held an intervention and said, We'd like to know where we're at, like some feedback. So we have a performance appraisal that starts out with, how do you think you're doing? How do you think we're doing? And those two questions really kind of start any kind of discussion they want to have. We have uh guardrails, we have people that we have to talk to about working too much. That's a typical thing. Then we have people that are underperforming and they are put on a typical PIP or a performance improvement plan, and they have so long to be able to get off of that. Our bonus program is interesting because that evolved as well. We started out thinking, okay, you know, we're paying people a high salary compared to our what we think is the mean average, and we have to be very careful adding employees because they they do quite well in salary, but you know, that is a cost, so they you know, we we can't afford a long, lengthy time. That allowed us to develop an onboarding process, and the onboarding process was really geared towards you know, getting them as efficient as we can to get them ready, and they've we got the most kudos out of that. You know, before it was like, okay, oh, you showed up. All right, here's your laptop. I'm not sure where your phone is, somebody else has that, or go down the horizon one and get one. And you know, it's just velter skelter and then became processed, and it got a whole lot better. We got a lot of kudos from employees back on that. The other thing we got uh very early on was a need to help them in their retirement. So my business partner ran the energy industry, he ran an um investment uh company for 401k old reasons again, just very typical. And he was tired of having people somebody come to him with$50,000 in the bank asking if they could retire. So, what we did is we took the majority of our profits at the end of the year, we stuffed all their 401ks to the maximum uh and allowed them to see the benefit of having uh retirement of them. They're very appreciative, and then two months later they forgot. It's like for human nature, it doesn't work that way. And Lonnie got uh advised by a very interesting gentleman running what I'll call a forever company as well, a very successful millionaire CEO, but uh the importance of a profit program that rewards people monthly for the profits at a very healthy clip of the profits. So he and I got together, he was adamant he wanted to do 50%. I was a little more reluctant, thinking, okay, wait a minute, you know, where's our where's the amount we're gonna have for investment or any of those types of things? He said, Well, then I just have to get worked out, but the people are the most important, so let's do it, let's degree, let's just do this. It's all right. So it became 50% on a day, you know, just click your fingers and all of a sudden uh we didn't do the investment dump at the end of the year anymore. We do do a residual uh amount for them. Not only that uh we do 6% matching, but we you know do still do it some residual, but most of it is this monthly extra paycheck they get based on their efforts. And they again, everything's transparent, everybody knows what their practice is. Uh we took an iteration where we boiled it down by practice, and that's where the bonus came from. And then that wasn't fair if we were developing our group, you know, because those good efforts weren't going realized, but profits weren't there yet. So we ended up doing it across the employee base. It's never hurt us more iota financially. It has made people feel like they have ownership because they can see the results. Uh, again, with and then with the trans coupled with the transparency, you know, there's no games being played. This is what it is. Uh, and that's just uh allowed us to uh really thrive when it comes to employee satisfaction or NPS scores are off the chart, uh, all these things. It's not just about the money, it's really what that says. We want you to share in owner's profits, if you will, or even uh the company's profits, regardless if we could grow something faster or do whatever. We don't need the money, we need the engagement. And then one more point about that. We change from finding staff to hire from headhunters or application kind of venues, things like that, to about 95% referral. So maternal uh employees refer people that they want to work with into the company. I get a little speech for them too, because I have a fishing trip I go on every year. Every once in a while, somebody brings somebody that just doesn't fit, right? Yeah, nobody wants to fish with that asshole, nobody wants to talk to them. Uh he tells off-color jokes or whatever is not gonna work out. So we want them to be very cautious about who they bring in. Uh, and still has to go through interview processes and all that type of stuff. But if they get through that and their employee is there a year, they get, I think, five or six thousand dollars as far as the bombs, yeah, referral bombs.

SPEAKER_00 34:57

Yeah, I think it's a good analogy. I had a mentor of mine that said if you're ever gonna start a company with someone, you should take a camping trip with them first just to see how you guys get along first. And so yeah, I think it could apply to employees, clients even maybe as well. I know that you also mostly get clients do referrals as well. And um that was gonna be my next question. Maybe it's it it it seems that you know it's it's great to be one of your clients, it's great to be one of your employees. You clearly take both care of both of them um really well as I guess the pumpkin plan has sort of uh laid out, but I would also guess that you need to really pick the right ones with the right clients, the right employees. What's your process uh for before you start working with them, deciding whether an employee or a client would be one of the ones that's gonna make it into the A list or that top tier that you really take care of?

SPEAKER_01 35:48

Great question. Uh at this point, we're taking on very few new clients and pretty selective. Membership is a privilege kind of a thing, which sounds arrogant as hell, but it it's where you get to when you have 25, 30 percent growth year over year, and you're harming your people by taking on more work or new client. So you become very, very selective. And it not only does it have to work for a practice that's bringing the client on, it has to work for the whole company. So EP levels have to agree. And then basically a trial period, we have sort of a shakeout to see if it works. We have a lot of company companies that take a look at that and just say, you know what? Yeah, but you got competitors, I'll I'll just go with it. Okay, please go. Let me say a word about competition too. From the early days, probably when I could at least afford it, I chose to not pay attention to any of my competitors. Period. If we didn't get an RFP, I don't want staff or myself trying to figure out why. I don't ask the client why they didn't choose us or anything else. I take a look at our own thing. Was it reasonable? Was it, you know, uh wasn't sexy enough or whatever. You know, I just you know, we could we could kind of figure out what uh where we came up short. But uh I see so many companies focus on competition and uh protection, so much defense being plagued. We put every employee that joins our organizations on our website, and they get hit with head hunters. They get hit all the time, and we want them to. If they got something better to do that, you know, we can't provide, then go for it. But uh, we have extremely low turnover. Usually it's for an awesome reason that we champion, somebody starts their own business. One gal decide to become an airline steward or something she dreamed about as a little girl. Uh, all these things, right? So if we have enabled that or helped along the way, or if we can help, we we certainly do. So we and it's not like we're polling in. I don't want, I don't want Pete Fisher that we're a bunch of hippies and we don't uh take care of the bottom line or anything like that. It's it's all about business, it's all about ensuring that we're well grounded. My CEO of Ridge Smee, subject matter experts, uh, the consulting engineering company side of the company is just a dogma on numbers. He is like a spreadsheet Nazi when it comes to making sure things balance out and less clear pictures and all that stuff. Anyway, so back to your original premise here. We have over our 15 years, be 15 years in a few days here, April 1st. Uh, once we started on Fool's Day just because it was fun. But uh we've probably changed the most out of any organization I would have recognized when I started. So it's just completely different. And it's without me. I'm I'm on a ranch here in Northern California. I I like to say my leadership put me out the pasture. And uh we'll get into that, the the succession planning and and what ultimately uh came of my interest of taking a value statement out of the companies, right? Or um you know, selling or whatever I was gonna do.

SPEAKER_00 38:49

Yeah, I think that would be a good next place to go. And I mean, I just want to say that if you are doing things the right way, which you guys clearly are, it's easy to be transparent. I think a lot of the more competitive people are more interested in value capture rather than value creation. Uh may lead them to be less transparent. And it just depends what type of organization you want to be part of, but you guys are clearly doing it the way that I would prefer. Uh but uh I guess the uh the next question would be you decided to go to market in 2021. What were you expecting at the time? What was the process like? Why did you ultimately decide not to go ahead with it?

SPEAKER_01 39:23

So I mentioned my young CEO that started the grid security company. He came to us with this idea of looking for an outside investor so he could capture what he felt was the opportunity today. And we're all about look, let leaders lead, you know, and understand that his motivation is something if he comes, if he's sitting blinding eye down to have a serious conversation at a young age, he he means it to the extent where he might just go do this himself or something, you know. So definitely wanted to hear him out on what he wanted. And one of the thoughts were well, you know, grids to me was my crown jewel of career, right? It had my mark on it, all that type of stuff. I was very equited to that. Grid security did not, it was full of nerdy tech guys that uh ran after uh threats and firewall hits and all these things, and I just loved that stuff. And again, my background was taking care of critical systems 24-7. And to see this develop again, I would just wasn't much interested in what that would look like like long term. So I asked him, would he be open to going out in the market and selling this? And he said, certainly, let's do it. So we talked about it, we had a couple meetings on it, had him over here to the ranch for a prime rib dinner, and uh everybody nodded their heads as this is what they wanted to do. Okay, well done. Prime rib wins. So he's gonna uh put his company up for sale. Well, we did not naive as hell at how that would happen. So we got an investment banking group, got a couple principals in there to kind of guide us through and build things like a data room and all the 15 ways you can show Evida to spreadsheet galores and just drove. Yeah, I think actually Matt was in his happy place for a while. Yeah, yeah, lots and lots of spreadsheets. Burned him out. Yeah, I did. I think this he enjoyed the first part of it. And we did we instantly had a whole bunch of LOIs come in and uh suitors and things like that. It was very wow, this might work. And I got pretty heavy because you're talking very big multiples and everything else. So about that time, 21 to 22, there was a sag in the BC funding. And so some of those guys backed out, but then the scrutiny came to where it it really showed well, one, they didn't just want one company, they wanted both. And two, what that would have meant to sell to them. And I'll go through a specific on that, but just really uh all about um a dimmant didn't occasionally lost the ability to say that word apparently. Uh, but you know, all the all the things that could come back on the owner's own, right? And Money and I originally were both going to sell shares out of all their shares out of rent security, just led John go and do that. Uh, but then when it became both companies and it got really weird with you know, Mine's uh role in the company, my role in the company, and it can it kind of created some fissures that never existed before. And these uh investment bankers kind of fed off that and understood, okay, well, here's how you do this, and just kind of do it blindly and everything else. And that started not sitting well with me. We we entertained a few more serious offers. We've heard this now for the third time. Uh I got came to understand the process as kissing frogs and trying to find a princess, and was just too many frogs. Every one of them, I mean, would have changed each company for both companies fundamentally from where we had gotten to get into in uh 2021. So that didn't leave a good taste in my mouth or he doesn't do things for monetary reasons, he does things because this is where where his belief system is. I'm a little more materialistic than that, but uh it didn't uh it didn't sit with me too well either. Well that got into uh a particular uh person that was interested. I came from a very wealthy oil shipping magnet uh family, and uh they were starting this uh private fund to buy businesses. So it seemed like the right guy. The everybody got along. They had a Warren Buffett kind of mindset, they thought, you know, and going down. So on a Monday when we were supposed to close, I had been working with an 80-page agreement document that was full of a New York lawyer. Sorry for that, a New York lawyer's twists and turns on all the ways I could lose, right? All the ways if this happened, you do, if this happened, you know, but 85 pages of it. And uh my lawyer just said this is way overkill, you know, all that. So it just got to be all right, I'm gonna do this. Yeah, I'm gonna just set money aside because I know they're gonna find a way to start bleeding you know on anything happened with a company. So anyway, I wasn't feeling too good about it, but I was gonna go through, and that was on a Monday. They called me on that Friday before and said this is not the guy we thought it was. It it just turned out to be a nightmare when it comes to how they were wanting to run the company and all that, and what how they're going to position things. So very much uh not. So we just called it off. We had a meeting and said, look, I need to feel good about me leaving the company. So one of the basic things that really cemented it for me was I was not personally, I was not adding value to the company. I served on the board, uh, on both boards of both companies, but it wasn't really the value of the amount of dividend I was getting or salary or things like that. It just didn't sit right. So I wanted to be let have the company, well, companies buy me out. And they thought about that and realized that their shares would increase if you know my shares went away. And uh and from that aspect, as well as being able to, they wanted me to stick around and stay on the board and uh be part of the company, the old guy that can wheel out to you know show how the company was founded and all that. Uh, it just worked for everybody. It became a win-win-win. And so that's what we end up doing. We agreed on the price, and now uh to date, we're a year into the buyout of grid SME, and grid security will follow when they're ready. You know, I have to get uh some financial maturity underneath them, and then they'll get the same thing. Whereas a way to succeed business and not be what I would think of as a burden, realize that these companies are going to continue to grow and grow and increase in value and that type of stuff. Smart money will probably be stay invested in it, but to be able to allow them to benefit, allow me to have more resources than I was ever used to. It just became a no-brainer. So the size the companies are and uh where they're headed, I think it's no risk on their part. Money won't it won't even it'll be budget-dust by the time they get to the end of the buyout. So yeah.

SPEAKER_00 46:12

Definitely. Yeah, it seems like it was a much better solution than selling to buyers who weren't necessarily aligned or didn't understand what had made the business successful originally. I think a lot of the people listening here, I mean, they are people who are looking to buy a business, but I think there is a growing trend of buying and holding for the long term. There are a lot of people who don't want to necessarily flip a company. Certainly that probably is some of our listeners, but there are probably a lot of people who also have the idea of turning it into a cash-flowing asset, turning it into something that you know maybe they even buy a few companies, but just you know, hold on to them for the long term and don't sell them. And so I was wondering if you could talk a little bit more about what a forever company means. Uh you know, you already talked about how you basically arrived at the situation you're in now, but maybe a little bit more about your thinking that went into it and what that could mean for others who are looking to do similar things.

SPEAKER_01 47:07

Yeah, if anything, but the searchers are your listeners predominantly on this. Uh, I think that's a a great perspective to give as far as my experience with selling a company and not appreciating the way they were coming at it, what they would do with the company. And you know, everybody that starts a business has an ego about their business. So you don't care who they are. And it it's not that cashing them out is gonna create that satisfaction for them. It's not about the money necessary at the end of the day. So I think that that's an important thing to keep in mind. The other thing I think is this forever company concept is really about why would you ever sell a good company to go find another company? You know, if you go to Vegas and you love that, maybe that's maybe that's your unique gig. But if you like more sure things, take a Lauren Buffett more approach about investing in holding and realizing that if the company is ran in the right way, they're gonna have their run, whether that's forever or you know, external influences, or you're making buggy webs and there's no more buggies or whatever it might be. So there's a lot of analogies at work, but I think a forever company is really one that is exhibits flexibility. They're able to pump and plan and adapt, and things change on them. COVID was a great one. You know, we had just moved into a 6,000 square foot building to staff up into and everything. COVID hits, and we're remote in a day, probably about a two months after we moved into the building. And we've been remote ever since. We hire people wherever they're at. We have staff in India, Spain, a big contingent in Canada, Mexico, all throughout US. So it pivoted into a different kind of a company about how you keep teamwork together and all that. The other side of that is growth. So every BC we talk to, what's your intention with the company? Well, to grow it. Okay, grow it, grow it, grow. What does that mean? Okay, what am I growing? Am I growing revenue at the expense of what? Am I growing clients at the expense of what? Am I growing staffing at the expense of what? So you have this notion of, and there's no single action, there's always a reaction or an impact of that action. Last year we grew too much in both companies, and we overran our skis in terms of employee workloads, things like that. And we've now have a new target of growth to limit it to a 30% growth rather than what we were on before. You have decisions like that to make for a forever company instead of, oh yeah, let's just get more money and we can hire more people and we can grow. So if you're growing for a sellout, that's sort of um like um a flipper in a house, right? You're going to dress it up and everything else, but you're not going to put in real quality finishes and make sure that it's uh somebody that can live in that house for the rest of their lives. We want our people we hire, we tell them we want this to be the place you retire from. And we mean we want people to understand that if they join us as a client, uh one, it's not everybody gets to do that, but uh the other side of it is as long as you treat us the way we would uh want us to treat you, you'll be a forever client. We'll we'll take care of whatever needs. And if you come up with some new things you need, we will likely create a service around that if other people need it. So we have we have these experiences and sort of this ability to absorb and take on knowledge now. That's just part of the way the leadership is running the company, the way the staff are running their work. And it's it's very interesting to watch uh all sides of that development.

SPEAKER_00 50:47

Definitely.

SPEAKER_01 50:49

Back to searchers, though. I I understand it if you're buying a company and you're looking for an out, then you could represent the longer-term holding, but you're still looking for the out. If you're buying a company more like you said, to put into a portfolio of revenue for you and you want to have some impact on the company and all that type of stuff, I think there's a lot of companies to be open to that. More open to it than maybe selling a really uh be honest with you, you guys are all smart, guys and gals. You're gonna find companies that are gonna interest you because they're being ran well or whatever. So how did they get there? And how do I not screw that up? Ought to be your first move, you know.

SPEAKER_00 51:30

Yeah, definitely. And I think also going back to the point you made in the beginning about how you guys transitioned to remote um after COVID and have stuck that way. One thing the ultimate Shannara pre-call is that I guess you have two separate weeks in the year where you bring everyone together for sort of a team on site or a retreat. And I think again, that just shows the benefit of working in person is you build connections with the people. And I think if you know you do that a couple times a year, but then you allow people the autonomy to work remotely and and as long as they're getting their job done, keep doing that. I uh I think it's it's one of the more successful versions of that I've heard of. I think some companies have done remote better than others. And so I think that's that that on itself is really cool that you were able to do that. I guess maybe a couple final questions, but before I get to what you're doing next, you already touched on this a little bit, but a lot of the uh buyers that came, they left a really bad taste in your mouth. And you know, they they clearly just had different ideas of what they wanted to do with the company. Since a lot of people who are listening to this are in that phase right now or they're looking to buy a company, what advice would you give to them in terms of how to better deal with company sellers, how to better uh present themselves, and also just uh give them an idea of what a seller is actually thinking in terms of what's going through their head when someone approaches them and wants to buy their company?

SPEAKER_01 52:49

Well, I think kind of maybe it's the age thing for me. I I'm 70 now, so I I get really candid, so apologize anything out there. I would say don't be a dick. Don't come in, guns blazing, and think that you're the best thing that's ever happened to that this poor that uh started his company. Have the humility to understand what they went through to get there and then see how they're running the company. You might want to improve it that or stop doing something that they're doing or whatever, especially if there's a negative side to it. But for the things that are very important to the owner, and you can agree with, you might I I I I guess I'm just getting to some kind of capitulation to say, you know, yeah, we're of course we're gonna preserve this. Of course we're gonna do this and this, you know, that type of thing. Buy the company wholesale uh, you know, look lock stock and barrel and cash out the owner, yeah. It's yours to do what you you want to if he's wanted to get that. And again, you guys are smart guys, you've been in the business of buying his own companies. I'm not saying you've personally ruined any company on your own or anything like that. But I I we would look at that as ruining the company. If uh you know all of a sudden the bonus went away or came down to some meager amount, the um connection with the the staff is more well, we had a bigger percentage of them to be in office and just anything like that, anything uh that they represent a change. And because when you hire really, really talented people, they got a choice. You know, they don't have to stay with you. There's other companies there that love to have an employee like that, regardless of the you know, uh climate of uh hiring that's out there. So I would I would say the humility side and and those types of things are important and make it make sense. I'll tell you what, but follow three laws. Don't be a dick. Add value. You're gonna add value to that organization, and you're gonna create the deal that's a win-win-win on your side, their side, the employee side. Make sure everybody feels like it's a positive.

SPEAKER_00 54:53

Yeah, I think that that's great advice. And yeah, um clearly you're approaching someone who's spent a good portion of their life on something, and that thing is probably a reflection of who that person is. So if you're just thinking financials, it's probably not gonna resonate well. But if you actually listen and act based on what the person cares about, and hopefully you care about the same thing, then um it probably will resonate more.

SPEAKER_01 55:15

You're gonna make a deal, don't send them an 85-page indemnity list. The lawyer can caution for you. Make a reasonable something that you know uh even a high school educated guy can.

SPEAKER_00 55:32

Right. I I think that's also something that gets missed a lot is the if you view it too much as a financial transaction and you just come in with a hundred questions in the very beginning before you really know the guy, he's probably not gonna enjoy that either, or too much legal language, stuff like that. So again, just something to think about. Um yeah, I guess just the last question is what are you excited about most next in life or with the next phase of the company?

SPEAKER_01 55:58

Yeah, I I both companies are doing extremely, extremely well. There's challenges, you know, that they get. We every once in a while we'll have a major client leave. And so we're all asking ourselves why, that type of stuff. And but they're like any other organization, they're gonna go try something cheaper and that type of stuff. We've had a good percentage of clients that have left have come back. Uh, we also grow by uh somebody leaving a company and going to another company and saying, hey, let's get these guys in. But some shakeup is good for us. So I'm excited about that. I'm very excited for the staff because they're growing the company based on their voice, their input, their needs, and especially uh in the the limiting growth, I think they're having a great uh amount of input on. And we're trying to take care of them in every obviously every shape way we can. So that's good. Me personally, uh I saw a video on regenerative agriculture. I'm basically a hippie environmentalist at heart, and uh, this guy's claim was that you can sequester more carbon in grasslands using animals in a certain way. And so, as a major contributor, polluter, power plant operator, you know, spewing tons of oil, burnt fuel, and gas and all kinds of things out in the environment, I felt I had a debt to pay. And I thought that was kind of paid when I we got so far into solar and you know facilitating that part of the transition, and that was all great until I saw that video. So, what do you do with the carbon that's still there? So, regenerative agriculture bit me, and I now tend cows, sheep, chickens, pigs in a regenerative fashion, and I'm growing grasslands where bare ground was before.

SPEAKER_00 57:45

It's amazing.

SPEAKER_01 57:46

That is amazing, you might say. My wife is very concerned with me, and you know, we're um mentally going with this, but uh it's it's been a fun adventure. Five or six years at this, I think now, and just something completely different, knowing nothing about it, needed a whole lot of uh YouTube mentors to to know how to not kill the livestock I've got. It's just been been very interesting. So, yeah, I'm not a golfer, I can only fish at home so much. So yeah, I'm I needed a purpose, so I found it.

SPEAKER_00 58:16

Yeah, sounds like you've definitely found it. And this is really inspirational in so many different ways. So really appreciate you joining the podcast, Eric, and look forward to keeping in touch.

SPEAKER_01 58:24

Well, Nick, thanks for having me on. Thanks for asking me to do this. It's unique to me. So hopefully uh it provided you some advice.

SPEAKER_00 58:31

Yeah, I think it should be super helpful for me and for a lot of listeners as well.

SPEAKER_01 58:35

Good.