[00:00:04] Speaker A: Hello and welcome, everyone. I'm Peter Lerman, and this is Masters in small Business M and A. This show is an ongoing exploration into the vast and undercover world of small business M and A, where we interview both the proven and the emerging owners, operators, investors, and advisors whose strategies and methods for transaction success have been put to the test. The show aims to surface the nuanced intricacies, the key ingredients, and the important factors that can improve your decision making in your own journey in the world of small business M and A. This podcast is produced by Axial, an online platform that makes it easier for business owners and their M and A advisors to find, research, and privately connect with a diverse mix of professional buyers of small businesses. In addition to learning more about Axial, you can find this podcast show notes, edited transcripts, and many other related resources, all for free at axial.
[00:01:02] Speaker B: Peter Lehrman is the CEO of axial. All opinions expressed by Peter and podcast guests do not reflect the views or opinions of axial. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Podcast guests may have ongoing client relationships with Axial. Hey, everybody. Welcome back. This is Peter Lerman. I'm your host of masters in small business M and a back with an episode focused a lot on the family business journey into the family business, and then out of the family business, out on his own, buying companies and then developing companies. I've got a great guest today. I got a chance to meet him through axial, and I'm excited to introduce him. Marshall Lockton. Great to have you on for today's episode.
[00:01:45] Speaker C: Thank you, Peter. I'm really looking forward to this, and I can't say I've done a ton of podcasts, so this is going to be great, and I appreciate you welcoming me onto it.
[00:01:54] Speaker B: I'm happy you're taking the plunge with podcasts. You got a lot of great stuff to share. So, as I just mentioned, in some ways, this journey sort of starts with family business and a discussion around family business. Tell us about the family business experience that you've had and how that, in some ways, is kind of the start of this small business acquisition and growth journey.
[00:02:14] Speaker C: Yeah. So I was fortunate to have an uncle who was a big entrepreneurial personality, Jack. And he started an insurance brokerage in the 1960s, almost 60 years ago. And we've been fortunate to continue to grow consistently throughout the 60 years. And the result is we ended up being the largest family owned insurance brokerage and benefits consultant. And I think we primarily have done that through people, putting people first. My uncle Jack used to talk about that as all we had to sell was the people and we needed to find the right ones and give them the right environment to thrive in. And the clients will feel that and they'll stay with us and we'll add new clients. So it was a pretty simple model that we were able to then, and not so much me as a lot of other people, but go take around the world and replicate and find great leaders for. And so I grew up with that business and it was a big part of my life. My dad joined my uncle in, uh, about ten years into my uncle's journey, and because they have a ten year age gap, and so it was always part of my life. And my, uh, uncle treated my dad a little bit like a little brother. And then he also had three sons. And so we have an interesting kind of ten year age gap between him and his brother, and then ten years between me and three cousins. And, and I also have a sister. So small, relatively small family, but we've been fortunate to get to work together in a family business. I'll pause there, but, you know, my connection to it is I didn't actually grow up thinking I'd be in insurance business. I had a little bit more of a creative mind and was really interested in marketing as a career growing up and read books about advertising agencies and weird stuff like that. When I left school, I went and worked in a marketing firm in Washington DC, and public policy and politics, and then a research firm, and then ended up going to business school with the idea of, hey, I actually am enjoying the business side of what we of those businesses. And I want to learn more about business since I didn't go deep on it in college. And so I went down to UVA and got an MBA and I was there, is locked in and made a great acquisition and a global business. And it was kind of our first acquisition. Seemed like things were getting to be in a place where it was an interesting enough business, about 700 million revenue at the time, that it would be okay for someone like me that was more of a business person, operations person than a salesperson or producer, as we call it, to join the family business. So that's what I did after a couple of years at a consulting firm, but I joined the family business and did that for 14 years.
[00:04:55] Speaker B: Robert, did you have any concerns or hesitations about joining the family business? Any feelings of, like, I'm just, I think it's always interesting to just hear how subsequent generation, whether it's uncle or father or whatever, just how you thought about the opportunity to join that business when it sort of has your last name and stuff like that. Did you have any hesitations around that? I've met entrepreneurs and people in this market that have no hesitation about that. They embrace it. Others may be a bit more anxious about just joining the family business. Where were you at mentally on that, like, tricky topic for the next generation?
[00:05:27] Speaker C: Yeah, no, I think right out of college I wouldn't have, I wasn't mentally, wasn't in my consideration. And it's probably a good thing to just do something different for a number of years by the time that I had done that for a number of years and then gone to business school. But then I think I had enough perspective to be able to do it without too much psychological challenge, I think. But there is always an element of, like, did I earn this? And so my case, I joined what we call the operations group, and it was a smallish group of really the kind of senior executives of the company at the time, sort of a centralized leadership in a decentralized company. And I was really hired to be kind of the junior person within that group to support them as they took on different initiatives and projects. And that wasn't really a position they'd had in the past. And so this little element of the created that position for me, just kind of as a guy who was a family member who had a good educational background. And so I think maybe the hesitancy was like, is that a sort of an earned position or is that a created position? And that truth is probably a little bit of both. And so I think that it is complicated that going into family business, you start to, you get treated in a way thats not really clear. Always, if youre talking as a shareholder owner or youre talking as an employee, are you talking as a colleague and peer? So I think it's just a complicated circumstance.
[00:06:53] Speaker B: Are you up for talking about, like, a little bit more detail in terms of just how you navigated that or just perspectives on if there was somebody who was in your shoes 14, 1516 years ago when you joined the locked in organization, like if somebody was doing something similar to that now, I mean, what would you say to them? What would you share with them if they asked for your advice? They were thinking about continuing an independent career versus having a chapter in the family business. Just how do you take stock of your 15 years there and, and your perspective on some of those challenges?
[00:07:23] Speaker C: Yeah, I mean, I guess the lesson learned, I probably would tell if my kids decided to do that I probably tell them to join a sort of existing role. Like in our case, it would be a go work account executive or account manager role and some part of the business that you enjoy and so, or some specialist position, but something that other people could clearly have a defined role and task for. And you can kind of work your way up and learn the business in the client seat. And so I would suggest that I got a lot of great opportunities to learn an accelerated sort of rate, but I also think that I probably missed out by getting some of that earning your stripes and credibility piece of it. So that's one, like, lesson learned, I think. But I totally think people should enjoy the opportunity to work in a family business. I think some people do get scared away from it because they feel like, oh, well, if I do that, then I'm going to be treated differently and I want to earn my own way. And so I think that if you can kind of get past that mentality, there's tons of, like, I always just found a lot of motivation of doing the work because it was for a family legacy, and I got to work with my dad and my cousins and learn the story of my uncle more. And so I think there's a really positive side to it. And then, like, the ability to have impact, do things that help build culture, that build the organization into what it can be. It's great to be part of that. So it cuts both ways. I think the one other cautionary thing is just like, blind spots. I think that it's easy to have some blind spots that people don't tell you about because they're not. You don't know if people are giving you, like, a full performance review and giving you real feedback, or if they're always feeling the need to make sure that they're sort of phrasing it as being a family, that they're afraid to say the truth because you're a family business member.
[00:09:10] Speaker B: You ended up spending about 15 years there. And we're going to talk about Meraki, your investment organization, and we're going to talk about your first acquisition. It would be great, before we get into that, to just talk a little bit about your observations on business culture in the family business and what you learned there about culture, what stuck with you the most? What, how the family business balanced elements of being a family business with also being a business. I think that's one of the hardest things for family businesses. How do you create cultures of great performance and a lot of merit when they're there are these sort of family cross currents that can kind of cut through the business and make things a little bit more multidimensional. What is your, when you're out of the business now, when you look back on your time in the business, what do you think lockdown has done from a culture perspective that really sticks with you and that you think is a big part of what that company has achieved?
[00:10:07] Speaker C: Yeah, I mean, I do think that culture and empowerment of people is the key to success. It's a fairly simple or common business model, but that we used to say uncommon results in a common business. And I think it is culture, and a lot of that culture for lock and is just like local leadership. And so we have a model where producers are very entrepreneurial and owning their own careers and books of business. And so I think that culture sort of permeates throughout the organization of ownership. And it's not just the producers, it's the client service associates who also feel that ownership and pride in the results and real emphasis on client service. And so that piece is just kind of throughout the organization, and it's about getting the right people in the start and then put them in the right roles and letting them do their jobs. And so I think we've been able to maintain that for 60 plus years. But what I think that we done pretty well over the last few years when we got into Covid time period, we were having really great growth. Interestingly, like 20% plus thousands new people joining. And we wanted, my CEO wanted to look at how do we keep the culture as we get bigger and not let it change over the years. And so I started, I was always interested in the subject, but got more interested in the subject and started reading all the culture books that I could. And I kind of realized that almost all of them talk about purpose and values at the center of culture. And even though we've had philosophies that are up on the wall for 30 plus years, we also probably more than that, we also didn't have, like, a true to find purpose. And so we worked on a purpose statement for Lockton, which really kind of drew from the philosophies, but it's to empower clients, communities and associates to achieve their ultimate potential, and how do we make that come to life? And so I think Lachen's done a good job of really communicating the family story and telling the story of the founder and what he stood for and the other, like, great associates that were part of that story. And I think now we can continue to work on how do we like now paint that into the vision for the future. What's it look like and how is it titled to this purpose? And why is that purpose meaningful in the world? So we'll keep doing that. And then community is a big part of it. So there's always three constituents, clients, associates, community. And having, for me at least, community means people can take pride in, like, what they're doing is making an impact, and they can be part of volunteer organizations and giving. And I think that's a big part of the culture as well.
[00:12:44] Speaker B: Do you feel like the incentive plans and the decentralized sort of like books of business, how important do you feel like that is separate from the cultural traits that you've talked about? Like, is there something in the incentive design that has been part of locked in since early days that is a big part of it as well? Or is the culture really more cult of personality and just continuing to hire people who have a set of sort of character and behavioral traits that just lend themselves to great client service and personal accountability and stuff like that? Or is the incentive plan a big piece of it?
[00:13:19] Speaker C: Yeah, I can't give away the secret sauce, but just think the incentive plan is a big part of it. In our case, the producers are really owners of the company in many ways. And so they have this drive to succeed and the economic incentives to succeed. And I think that does have a cultural impact and that it's a very, it doesn't feel like a bureaucratic organization. It feels like a decentralized organization that can be nimble and respond to client needs at the local or even the individual producer level. And so that's a big part of the culture and also a big part of recruiting the right people is that we had the opportunity to share more of the. Share more of the results with all associates and producers. And I think part of that is a big, major part of is just being private. And the decision that was made all the way back to my uncle's founding times, when the company would just take a fixed profit amount and share the rest. And so that pretty much drives the culture from an economic standpoint and a performance standpoint today. And then to your point, like, that creates the sort of accountability. That's not a caring culture, but it's also a results culture. And so there's competitive spirit and a lot of growth mentality and the parts of it that are about continuing to be a better version or reaching our ultimate potential.
[00:14:39] Speaker B: It's an incredible story in and of itself. I mean, it'd be a ton of fun someday. Is your uncle still running the business, or has there been a transition there? It'd be a ton of fun one of these days to try and track him down for a conversation.
[00:14:51] Speaker C: Well, not to be awkward, he passed away, but my dad ended up, I said that he joined ten years later, and he ended up being the chairman after my uncle passed. And that was, that's got a lot of storytelling to it as well. But the company responded in a great way, and they all rallied behind the new leadership, even though he, my uncle was that bigger than life personality. So that was a, it was a tough time, but my dad stepped in that role. We had a great non family CEO, John, who stepped into a leadership role, and then my uncle Ada, he had his, Paul McCartney was a COo that had been with him from the beginning, Mike, and so he was still in place, and so they led that business, and then we had transitions to other CEO's. And now my, my cousin Jack's son Ron is the executive chairman and CEO and running the business today. And so now we kind of a good mix of people and five cousins in this generation, so a good mix of people working in the business and not working in the business. And I'm fortunate I get to still be involved. A shareholder and someone that still cares about culture and community impact.
[00:15:57] Speaker B: It's obviously locked in, very active in certain parts of private equity. I see them a lot in the reps and warranties portion of sort of private equity transactions. We're going to switch gears and talk about Meraki, which is the investment firm that you decided to start. Did you begin to think about Meraki? I mean, how did investing and acquiring businesses get onto your radar as, and become your next chapter? Did you get visibility into this world through locked in, or was it business school or how did. Tell us about Meraki, and tell us about how you decided to make this chapter two.
[00:16:28] Speaker C: Yeah, I guess I skipped the second half of my operations group career at Locked, and was really kind of working with complementary businesses that were, we used as diversification. And one of them was a sort of build from the bottom up digital insurance brokerage called Milo. And in that case, I got to work on some outside capital deal structuring, and I had done a couple of m and a deals. One of them, towards the end, we ended up selling a small group that I'd been working on and, and then a couple acquisitions that didn't end up closing. And so I'd done some m and a work through locked in and also had to do quite a bit of investing experiences. So, yeah, between the locked in piece and the business school background, I was sure certainly wasn't an expert, but I knew enough to kind of be dangerous. And so I started doing this work with purpose work. And so I started working with a coach when I realized, hey, this wasn't quite, this quite isn't quite the path for me. I don't know that I'm going to find the way to make the impact. I want my career staying here. And so I just started evaluating different options. But the purpose work was really kind of getting clear on what my coach Chet calls. He calls it your core and your opus, but your core is really your identity, your worldview, your values and principles. And then your opus is, I think, his term, but it's the, your symphony or your life's work, your overarching vision. And so with this idea, for me, it was about really trying to figure out a way to blend investing and impact into one thing. And so I probably would have had a chance to do different kinds of investing, but really realized I liked working with entrepreneurs. I like smaller business units that, and I liked helping grow things. And I didn't necessarily want to be like the day to day CEO, but I wanted to have a hands on role operating. And so that was kind of the starting point. As I said, I want to do sort of a majority acquisition of a small business. And then I just started to talk to friends who were in that space and get input and write my own kind of thesis around what I wanted to try to invest in. And it came back to really trying to find something that had a lot of the characteristics of Lockton because that's what I knew. And so I didn't want to try to go into some other industry that I didn't have any familiarity with. I just wanted to focus on services, businesses that had a culture orientation. And that's what I sort of designed. The idea of Meraki investments was the purpose statement. That was to invest, identify and invest in businesses that are changing the world by serving clients communities and associates, their clients communities and people, to live a meaningful life and create purpose and profit in doing so. And so that was the idea. And I just started to, like, write down my thoughts and put it into a sort of a pitch deck.
[00:19:20] Speaker B: I mean, I can't believe where this ends with night agency. In light of your journey, I mean, it seemed like you couldn't have found and bought a more appropriate first business. Marshall, I'm so tempted just to immediately skip to the end of the story and dive into night agency. Before we do that, lets just I guess talk a little bit about just how long were just tell us a little bit about I guess your sort of the deal sourcing period before you found and acquired Knight agency which well have be the final chapter of the podcast today.
[00:19:53] Speaker C: Yeah. Yeah.
[00:19:54] Speaker B: Like how much time did you spend looking at other opportunities before this became your focus?
[00:19:58] Speaker C: Theyve been kind of working on the business plan piece of it as a side hustle for maybe nine months, a year, kind of iterating on this business plan deck and what it would look like. So I felt pretty locked down once I finally made the decision to leave locked and then the timing seemed right and it was, was great. Everyone handled it well. I mean it was a little inglorious kind of leaving the nice office and nice office building and with the pictures and stuff with you. But yeah, I kind of knew what I was going to go try to do. And so at that time, I think I had probably already launched the website, maybe just started to take the business plan and put it into a website. But I just started talking to as many, you know, people as I could about what I was wanting to accomplish. And that was like September of a year and a half ago, and started talking to the local business brokers and investment banks in Kansas City where I am some in sort of wider midwest started, got on axial, which we can talk about later is a big part of, you know, how I ended up finding Knight and started looking at deals and just seeing what know liked and what I didn't like. Started talking to centers of influence and just telling them what I was looking for. And a couple months in then started doing direct outreach into companies that fit my target profile. I guess the target profile was going to be a couple million in EBITDA business that was a service business that would either be a specialized marketing firm. It was like a little bit like health and wellness. And then the third stream was what I call employer to employee solutions. And so that could either, I've done a lot of work around that at locked in advising clients, but it would be either health and wellness training and development or sort of employee engagement. All would fit under that category. So that's kind of the universe of companies I was talking to. And some of the conversations with people went great and some people said, I no idea what you're talking about and don't know how to help you, but just kind of like a sales job, you just keep talking to people and keep trying to sharpen your story and tell it and hopefully something works out.
[00:21:58] Speaker B: Did you get close on any other businesses? Were there any other businesses that you got excited about prior to the eventual acquisition?
[00:22:05] Speaker C: Yeah, I think there's a couple like Lois that or at least indication of interest letters that I had done. I explored a couple in sort of specialized advertising space. So different things were cool and interesting. Businesses had some good business characteristics but ended up passing on them for different reasons. I didn't have any that I was really far down the path on that that fell through, which was lucky. I think that happens a lot. And so I probably, like you said, got really fortunate. I was telling the story. It's definitely a little bit lonely because you're on an island just talking to all these people. And it's not like I have a big team of private equity professionals around me. I had a great virtual team of professionals, but no one that's sort of day to day with me. So I think I end up getting a little bit lucky with being diligent about looking at my axial profiles that were coming up and sifting through them and finding the one that, like you said, was just really a great fit for my interests. And once it, once I saw that was a great fit for my interest, just taking that to the next step.
[00:23:06] Speaker B: So why don't we put night agency on the table now and just talk about it. It's obviously a very specialized form of marketing and consulting agency. Just tell us about, let's hear quickly about it and then I'd love to hear a little bit about the deal story behind it and then we can spend a little bit of time diving into what it does. But yeah, just a quick snippet on Knight and then we'll push reverse and hear a little bit about the deal process and anything that you think was interesting about the way the deal process unfolded.
[00:23:36] Speaker C: Yeah, I mean, like you said, I got fortunate when I talked about specialized marketing and employee solutions and that's really where Knight plays. I mean, so we're a 20 plus year old marketing firm founders Mike and we've, he's done a number of different types of marketing services over the years. But you really, over the last, you know, five to ten is focused on telling the internal story and so it's building culture through purpose and so obviously lines up to how I was thinking about the world and the power of purpose. And so what we get to do is actually help CEO's activate their purpose through marketing, communications and internal branding and then integrate their purpose into their people strategies. And we happen to be able to do custom learning and development solutions through our work with an education client. And so for me, it was kind of a dream come true. So that's great. Obviously, from finding a company that you're passionate about, it's probably where you're going to be the most successful. But you also have to be cautious, right. Because you can fall in love with a deal because of the topic and you still need to make sure that it has the great business fundamentals. And we started exploring that and making sure that it wasn't just something that I loved and that I could help bring culture to other clients and help them solve engagement issues and recruit recruitment and retention issues. But I could also make sure it's a good business investment as well. To be able to do more of these, I need to make sure it's also something that can be successful.
[00:25:08] Speaker B: So tell us about the deal side of it. How long did the process take? Start to finish. Tell us anything related to structuring that you're comfortable sharing and, yeah, we'll get out of the business.
[00:25:19] Speaker C: Yeah. So I think I was. I think I got on. I founded on investment banker Marshall Stevens on your site. Did a post in about January of 2023. So about a year, three months ago and. Or five months ago, and I could tell it was interesting. Got on a call with the founder, Mike, and I think he resonated with. I put in the website about my own purpose and values. And so we had a lot in common to talk about. And I think there's. I was able to share a few things about experiences and services, businesses, and how we could help him take the business to the next level. Mike was Mike's founder entrepreneur, since it's basically his whole career. And so this was obviously his opus and his pride and joy. And he was going to market, I think, for a couple different reasons. One of them was just he wanted to start to plan for what he called a forever business. And so being able to have the business survive beyond his career. Mike's only 54 years old. If I'm not dating you, Mike, but something around there. And he. So he still has tenure left and wanted to work, but he also wanted to start to plan ahead and know that our teammates knew they could keep working for night after he decided to retire. And so that was a big piece of it for him. I think a second piece was like any foundry. He wanted to have take some chips off of the table and kind of provide for his family and make sure that there was some security there. And then I think the third piece was just, like, also making sure it was the right home culturally for his people and that it wasn't going to create a drastic change to how they had grown to love working together. And so we had to kind of line up on all three of those things. And he was able to. Me, I guess, that as a family office, we could take a long term view that I had experiences in services businesses and a great sort of success story locked in and could provide some value there and then. So he saw us as an attractive alternative. But I needed to know, I guess, that he was in it for more than the short term, with a, with the services business or marketing especially. I think that's a lot about his relationships. We've got a great team, and they've got great relationships as well, but, you know, he's selling a lot of the deals and still is sort of the first call position for all the clients. And so I needed him to sign up for a longer engagement. And so we were able to agree that he would do a. That he would roll equity and so take some off the table now and roll equity and take a second bite at the apple that was hopefully bigger than the first. And so he was willing to do that. And then we also added, like, an earn out portion as well, so that we knew that the shorter term results were also there. And so we were able to kind of agree on the alignment on economics piece and then the third piece of the culture that was just, he let me take a process that was pretty non traditional, and we sort of took it out of the auction process, which I appreciate Marshall Stevens allowing him to do. But so I took it out of the auction process and just said, if I want to be convinced this has a great, unique customer and employee experience, then I need to be able to experience it some. And so I got to come down and meet with his executive, our executive committee group and talk through the work that they do. And once we did that, I then asked him to do it again for my wife and my dad and his wife. And so we got to do the meeting and sort of see if they saw what I saw. And I think by then we had gotten into the Loi stage, but I had quite a bit of experience working with them and seeing not just Mike, but his whole executive committee team in action by the time that we had an Loi in place.
[00:28:53] Speaker B: When you say take it out of the auction process, what do you just make sure that's clear to the audience? What do you mean by that? What were you asking for? There from Mike. And what did you need them to get on board with? What was that?
[00:29:06] Speaker C: Yeah, I think that, like any advisor, they were looking at multiple options at the same time. And I think there are some benefits to try to line those up timing wise, so that you can kind of compare them side by side to one another and make a decision. And I think Mike felt good enough about our fit together and our belief systems that he wanted to get a deal done. So I think they were still preserving options with other sort of buyers, and also considering whether employee ownership was a possibility. And so I think they were preserving other options, but at the same time, only dedicating this, like, more in depth discussions and in person visits, I think was reserved for me to be able to do. And so that's why I say, I guess, taking out the auction process, it wasn't just like, hey, here's your bid. I'm going to tell you whether or not you're in the process still. And there's great reason that companies do that. Advisors are smart to do it that way. But I think if you find the right fit like this, then it's okay to take the risk to just to get to know each other better.
[00:30:05] Speaker B: I'm curious how you feel like you were able to get through to Mike. One of the things that I talk a lot about whenever I get asked is just how buyers can sort of put themselves in a position to have the, like, the right to win in a given transaction, and not to have a right to win just because they're the highest bidder of a right to win, because they're just the right. They're the right person, they're the right firm, they have the right angle. In this case, with night agency, just given your own work on yourself, your own reflection on sort of what kind of life and career you wanted to have, how you wanted to bring purpose into your business career. Clearly, night agency was a great potential fit for you. How early in the process with Marshall Stevens, were you able to start to convey some of that personal story and narrative? And is there anything that can be learned from what you've achieved in terms of winning? What was somewhat competitive acquisition process related to that? Because I think that's really important for all types of acquirers. How early on did you get a chance to bring yourself into the storyline and make that connection with Mike?
[00:31:13] Speaker C: Yeah, I mean, early. I mean, like I said, put it on the website. So I had my sort of belief systems, and what we were looking to accomplish was on the website. So I think you probably saw that before he met me and already saw there was a sort of alignment fit there. And yeah, I think like a lot of sellers, there's a, there's an appeal to family office type of investors because we can take that long term view and that's not, doesn't come with the same concerns about trying to maximize margin as a private equity needs to do with investors. And so we saw that right up front and then we, you know, had our first call, which is great. I always ask for a first call before, like I exchange any kind of like deal structure or anything because if the, if that first call doesn't go well, what's the point? So we did that and it was great conversation. And like I said, I think before I did an IOI even I was able to go down there and meet with the seven executive committee members and spend that personal time together and tell them a little bit about me, ask them about themselves and make it a more personal experience. But if I didn't get the story straight, I think the reason this ends up in, like you said, a cool outcome is because the worst that work sort of upfront around Meraki investments story and what we stood for and what impact we wanted to have in the world. Marshall, I think itd be interesting just.
[00:32:33] Speaker B: To hear a little bit about the business itself in terms of just economics. Nothing too sensitive here either. But just tell us about this version of a marketing agency. How do you assess this, leaving aside, leaving aside the uniqueness of the offering, their focus on cultivating identity and purpose inside the organizations they work with and specializing on that, I mean, just how do you assess this business? How do you seek to improve it? What general sort of business economics do you inherit on day one as the new sort of control owner? Just talk to us a little bit about what a specialty marketing agency that has 9th profile. What does it look like and what are you trying to keep the same and what are you going to try and change?
[00:33:14] Speaker C: Yeah, it's, I think service businesses are inherently tough to some buyers because they're, the people are the business and they can walk out the door. So you need to spend a lot of time into aligning incentives like we talked about locked in earlier. That was kind of the lesson to bring into the experience is that this is a lot about incentive alignment and we have that in a couple of different places in the deal. And so I think about that just keeping the people because the clients probably won't stay if they don't. And I also think about marketing services, businesses are, you know, we're pretty simple version of one way. We don't do digital media, we don't do media buy, and some things that make technology that makes marketing more complicated for us, it's pretty simple. Fees and retainers and so the economics is pretty simple. But what I think gets complicated about them is just scaling the business. And so there's a lot of consultative elements of working with our clients, giving them strategic advice, spending time with them, even. Just how do we shape the campaign from a strategy perspective that is tough to scale? It requires more people that can do that kind of work. And sales for sure is part of that. Like, it's a more, it's a longer sales cycle, it's a more consultative conversation. And so we need to. Our, like, business challenge is how do we figure out how to take it to the next level, to go beyond the level that they're at today and be able to get to the next level, which a lot of marketing firms have done. But it usually means the next level of process. Even as a creative profession, you gotta have process in order to be able to scale it. You gotta figure out a marketing strategy and a sales strategy that's gonna be beyond what one person can do with their own network. In our case, we also got to create some repeatable products and services. So we've got great work that we do on purpose and performance, starting with helping shape the purpose and values, to aligning with the leadership and workshopping that to activation through campaigns and personalizing it, to working with HR, to integrate it and build custom curriculum, and then ultimately have that result in culture. Well, I think we think that we could take, we can continue to build up products and services that are more repeatable underneath each of those categories, and that business is a little more scalable to get to the next. To get to the next level and take advantage, I think, of the great team and leadership and clients that we have, but do it more for more of them.
[00:35:43] Speaker B: Robert, what's the typical duration of your current assignments with clients? How long are they working with night agency on these initiatives?
[00:35:50] Speaker C: Yeah, I mean, I guess that's a big part of the diligence. Items that I didn't talk about in the next stage of the diligence was client calls. And we have clients that rave about us because there is a partner and talk about it in terms that we're glowing. And so that was a big part of it. Having clients that go back ten years and more. We're fortunate to have retainers and long term engagements with most of our clients. And so having that longevity of revenue in a marketing business is really important from an acquirer perspective. So you're not starting over every year. So that was really critical. And then people tenure as well. Like, our people are great. I got to meet the next level of them, my management team. And they impressed me in the same way that I kind of grew up accustomed to being thinking about a service business at locked in. And I like them, and they're fun and smart and so, and they stayed with the company a long time. So you have that longevity of people as well. So those were kind of the two big diligence items for me is length of contracts. Even though they need to renew every year there, we tend to keep the clients and do more work and, and then keeping the people consistently.
[00:36:57] Speaker B: So they're twelve month contracts?
[00:36:58] Speaker C: Uh, generally, yeah, generally twelve month contracts.
[00:37:01] Speaker B: You mentioned ten years. Is that the norm in terms of the current customer base, or is that, is that an outlier sort of anchor client? Just what do you, what are you roughly underwriting the future contracts, the business in terms of length?
[00:37:14] Speaker C: Yeah, I mean, in my diligence, I don't think I've found any clients that just left us. They was either an acquisition or we. Variety of reasons that things can happen. The ones that are consistently working with us have been, I'd say that average is like five years, but the range is from some newer clients this year to ten years, and. But the hope is all those ones that are two years old stay with us because it is. What we do is a little bit unique in telling the internal stories, connecting strategy to story. I think that you start to develop a personal relationship with the clients within their people. We become their partners and their friends, and it really makes it really hard to want to stop doing business together because you build those relationships and you understand them and you understand them and can tell their story.
[00:38:03] Speaker B: What's different about the work that gets done in like, year four or year five versus year one, two and three? I mean, I can see how there's a lot of intimacy between the agency and its clients and how that builds up over time. I'd love to just understand what continues to create this duration to the assignment. What is the work that continues to get done in these, in the out years of these contracts. I could see myself hiring a firm like this to work on purpose, clarification of purpose, to activate it and clarify it, to manifest it in a variety of processes. And I could see that being, again, this is not having the benefit of that vantage point that you have. But just as a CEO myself, I could see a one year, maybe a 24 month partnership with an organization who I thought was really good at doing this.
What is extending the timeline out beyond that? It's interesting.
[00:38:56] Speaker A: Trey.
[00:38:56] Speaker C: Yeah, I mean, I think there's obviously the upfront work is around the discovery of purpose and values, and some companies already have it, some don't. That's obviously a shorter kind of consulting project. But once it's activated, where people leave companies, people change roles in companies. And so you need to keep telling the story year after year and in different ways. And so that's part of it, is that we try to help them continue to think of ways to keep this active. And right now we have thing called people stories. We'll keep telling stories about your employees, people in an emotional way that connects people together, but would do it instead. Just a campaign will do it consistently so that people can always, you know, learn about a new person. And so that's projects like that. And then we were, we, our sweet spot is kind of clients that don't necessarily have huge internal marketing groups or HR groups that need the support around communications. And we have some clients that are more external marketing, more a little more traditional where, where just become their in house marketing partner. And so that's part of it is like kind of becoming the outsourced marketing design content production group and continuing to do that on a repeat basis and having partners that would rather, clients that would rather do that in partnership with us than build it internally?
[00:40:12] Speaker B: Well, since we're on a podcast about m and A and transitions and ownership, do you have, when you think about growth channels, when you think about new ways to productize or to extend what the business is currently well designed to be able to offer. Do you think about offering like a post transaction product, offering that like a new owner, a new acquirer of a business would sort of incorporate into a first year plan or something like that? Or does that create too short of a more, is that too much like of a project based line of work to excite you guys?
[00:40:45] Speaker C: Well, for anyone listening, yes, we do that. I do think as I talk to people about culture, you get a lot of acquirers who are acquiring lots of companies and into a platform. And its really hard to comment often is. Its really hard to build culture in that situation because youre bringing together a bunch of smaller businesses. And to the extent those businesses want to have a cohesive identity, we would love to help with that challenge. Just build a plan to reach a disparate group of businesses and weve done that kind of work in the past and I think that would be definitely fun. A sort of the roll up situation. I think were working with businesses that wed love to work with businesses that are preparing for sale because getting your story clear and be able to tell it coherent way and I think it's an important timing to do that. And then, like you said, post close, we often come in and just situations where there are changes. Right. The new CEO comes in and they need to be able to tell their story, talk to the company about what it stands for and the values and behaviors that we're going to be expecting to see and then do. Build a learning and development curriculum that tells that story to every new person that comes in orientation or train them on the values through a digital training. So I do think, I'm not saying that we're great yet at going and pursuing that vast audience of people in the m and a business, but I do think that's the type of situation that we end up getting brought into more than just sort of steady state. And as we sort of do this work around productizing things more, I think there'll be more and more opportunities to do that in different size clients.
[00:42:24] Speaker B: Yeah, I would think that the roll ups in private equity create a pretty interesting channel sale opportunity for you all just constantly buying businesses and developing a repeatable integration playbook that incorporates identity and purpose as they gobble up a whole bunch of independent businesses. Seems like a interesting channel.
[00:42:43] Speaker C: Yeah, I definitely do. Especially if they believe there's power of performance and purpose. Right. Ultimately you got to tie the financial results, especially with investors and private equity. But to the extent that the P firms or the buyers of any kind believe in the power of culture and performance, I think it's a great time to come in and try to support that and support CEO's who want to do that work but need tools to do it our so it's a great.
[00:43:09] Speaker B: Place to leave it. It's been great to hear the story. There's obviously a lot more behind each of the chapters that we covered, but it's just great to cover family business into the investment business and just the intersection between your own purpose and then the identification of night agency, which is a business that's entirely focused around bringing purpose to life in companies. It's a really cool full circle story and it's just been great to hear about it straight from the horse's mouth. What's the right way for people to reach out to you? If the interested in learning more about Rocky or your journey or they're interested in learning more about night?
[00:43:42] Speaker C: Yeah, no, I really appreciate it. I mean, I think, like I said, I feel privileged to even tell a story on with your audience because I'm just beginning and just trying to figure out how to, you know, take the little steps, baby steps, to be closer to it. But it is a cool story how it came around to working for a purpose business. So you can reach me at Marshall Marshal at knight Knigh.com and I'll gladly get on a call and have a conversation and learn more about your business. And happy to talk about Meraki Fortnite or lockdown. So I really appreciate it Peter. It's been a great conversation and I'm glad that you reached out for sure.
[00:44:19] Speaker B: We'll make a note to check back in in a handful of years here and see how how the forever business is coming along. Thanks again, Marshall. This was great.
[00:44:27] Speaker C: I appreciate it. Thank you, Peter.
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