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Chris Williams – Running a Search and Acquiring and Operating a Small Business

Chris and I have talked monthly about his search, thoughts on running a small company, the podcast, and all things work and life.

Episode Description

My guest on this episode is Chris Williams. I was introduced to Chris via Justin Vogt about a year ago. And since then, Chris and I have talked monthly about his search, thoughts on running a small company, the podcast, and all things work and life. I’ve really enjoyed getting to know him, and I’m thrilled to have him on the podcast finally. Chris recently bought a bookkeeping and accounting outsourcing business in California called System Six, which had 24 employees and around a million dollars in EBITDA at the time of acquisition. As Chris has spent more time in the CEO seat, it’s been fun hearing about his ideas, challenges, and new growth plans for the company, and I’m excited to share them on the podcast.

Over the course of this episode, Chris and I talk about why he chose to buy a small company versus continuing in private equity, the daily life of being a CEO, building a team around flexibility, and growth opportunities ahead. Also, Chris is looking to build a specialty in searcher owned companies for bookkeeping and accounting. If this is an area you need help in, definitely reach out to Chris at [email protected] and tell him you heard him on Think Like an Owner.

Clips From This Episode

What value have you changed your mind about?

What's the best business you've seen?

What college class would you teach?


Building teams

Investor relations

Live Oak Bank — Live Oak Bank is a seasoned SMB lender providing SBA and conventional financing for search funds, independent sponsors, private equity firms, and individuals looking to acquire lower middle-market companies. Live Oak has closed billions of dollars in SBA financing and is actively looking to help more small company investors across the country. If you are in the process of acquiring a company or thinking about starting a search, contact Lisa Forrest or Heather Endresen directly to start a conversation or go to

Hood & Strong, LLP — Hood & Strong is a CPA firm with a long history of working with search funds and private equity firms on diligence, assurance, tax services, and more. Hood & Strong is highly skilled in working with search funds, providing quality of earnings and due diligence services during the search, along with assurance and tax services post-acquisition. They offer a unique way to approach acquisition diligence and manage costs effectively. To learn more about how Hood & Strong can help your search, acquisition, and beyond, please email one of their partners Jerry Zhou at [email protected]

Oberle Risk Strategies– Oberle is the leading specialty insurance brokerage catering to search funds and the broader ETA community, providing complimentary due diligence assessments of the target company’s commercial insurance and employee benefits programs. Over the past decade, August Felker and his team have engaged with hundreds of searchers to provide due diligence and ultimately place the most competitive insurance program at closing. Given August’s experience as a searcher himself, he and his team understand all that goes into buying a business and pride themselves on making the insurance portion of closing seamless and hassle-free.

If you are under LOI, please reach out to August to learn more about how Oberle can help with insurance due diligence at Or reach out to August directly at [email protected].

(5:27) – Chris’ background and career

(7:15) – Was there a specific moment where you realized that you wanted to run a business yourself?

(8:28) – Did you find PE to be focused less on People?

(10:36) – Were there any opportunities for PE firms to recruit you to work directly within portfolio companies?

(12:32) – Chris’s search and the emotional journey

(17:13) – Are there any high-level takeaways you would share with other searchers?

(19:30) – What is the business you bought?

(21:29) – How much interaction did you have with the owner during the process?

(24:43) – What kind of questions did the owner’s wife ask you?

(26:23) – How has the team received you?

(28:20) – What are the biggest differences in your day to day compared to your time spent in PE?

(31:24) – Is there a specific moment or memory you’ve had since operating that has made it all worthwhile?

(33:44) – What’s an operating rabbit hole you’re going down right now?

(36:12) – Profit Sharing

(39:28) – SystemSix’s interesting flexibility offerings

(42:50) – What are you most excited for over the next 6 months?

(44:34) – What college class would you teach if it could be anything?

(48:00) – What’s a strongly held belief you’ve changed your mind on?

(49:36) – Have you found any interesting or reliable ways to experiment with different paths?

(51:02) – What’s the best business you’ve ever seen?

(52:51) – Is there a reason you didn’t focus more on software businesses during your search?

Alex Bridgeman: Good to talk to you, Chris, and have you on the podcast. We’ve actually talked extensively over the last I want to say year, year and a half on a monthly basis. So, it’s been fun to keep in touch as you’re search has progressed and you’ve gotten LOI on different businesses and they fell through, and then this one succeeded, and you finally got in the seat, and now you’ve been talking about running your business. It’s been fun to see like the full evolution as you go. I’ve really enjoyed that, so thanks for sharing that journey. But also, I’ll be excited to hear about or at least have you share that journey more publicly on the podcast here and explain a little bit about what you do and why you decided to search and all this other stuff.

Chris Williams: Yeah, well, thanks for having me, Alex. It’s exciting to be here. Likewise, right back at you. It’s been fun just talking to you, and kudos to Justin, my good friend from school, for introducing us and seeing the stuff you’ve launched, Operator’s Handbook a couple months ago. And yeah, I’m excited to be here. Thank you a lot for this podcast and what you’ve done. It’s been great for me to continue to get different exposure with different people in the small business world. So, I’m excited to be here.

Alex Bridgeman: Yeah, it’s great to have you. It’s been definitely fun to keep chatting. Definitely one of my favorite parts of this past year has been getting to know folks on a more regular basis, especially you and Justin, you guys are both great examples of that.

Chris Williams: Yeah. He’s a good friend and like great to have him bouncing ideas around. And I think it’s a cool community we’ve ended up in. So, thanks again for everything you’re doing for it. So, look, I have not a super unique background to the small business acquisition world. I graduated school, went straight into investment banking, did a couple of years of that in New York. And then I’d grown up with family in California, so I’d actually spent a lot of time on the West Coast in my summers and got a job opportunity to move out in 2015 to San Francisco for a private equity job. So, I moved out and did three years in private equity at TPG in San Francisco. I was on the real estate team, so a little bit different, but at the end of the day, we were buying real estate backed businesses, so businesses that owned a significant portfolio of real estate. So, it was very much a real estate transaction environment, but also kind of middle market private equity because the businesses we were buying had management teams and regional and local staff that was involved in transactions as well. So, it wasn’t just single assets. I had a great three years there. I thought long and hard about staying on, but ultimately felt like I was 25 or 26 at the time, didn’t exactly know what I wanted to do long term, spent some time inside one of our portfolio companies towards the end of my time there and really loved it, and that sparked some of my interest in getting more inside business, not just investing in them, but really felt like a lot of people coming out of firms like that are going to business school. So, it was something in front of me. And ultimately, it was really two reasons, one, continuing to explore a career path and, two, felt like I’d learn a lot personally. And that’s what ultimately pushed me to apply to business school and then was super lucky to get into Stanford, be able to stay and keep my life in California going. And four years later, I’m still in California, still in the Bay Area. I love it. My life is now here. And I’m really excited to now be operating and trying to grow a small business.

Alex Bridgeman: Was there a moment when you worked at the portfolio company that you remember distinctly or more clearly as the moment where you became a lot more excited about the idea of running a business yourself?

Chris Williams: Yeah. I mean, I haven’t thought about it, but just as soon as you said that there’s a woman named Melissa, and I just remember she was sort of like mid-level on the finance and operations team. This was a hundred-person business in terms of the headcount across regional and sort of corporate. And we were helping put in place institutional reporting, lender reporting for the first time. But I just remember like talking with her for 20 minutes about her kids applying to college, and a lot of that was based on like college football and which schools he wanted to go root for their teams. And just like that really stuck out as when people talk about what does it mean to get outside of the corporate environment that I came from and institutional investing and get inside of a small, medium size business, it is really just like getting to know people on a personal level, that’s how you build rapport and trust. And I just remember that conversation as being really fun and invigorating that that’s the type of stuff you spend time on in a small business. It’s like not everything is about executing, it’s just about getting to know your team.

Alex Bridgeman: Was that a different environment that you had at the private equity level, where it was less focused on the people or the part of the business that that person is running and where the ins and outs of the business and maybe more focused on maybe too high a level where you don’t really get exposure to that at the firm level?

Chris Williams: Yeah, I think, I mean, that’s- if you’re not in the business, and that’s ultimately, I think what I came to the conclusion of is as much as PE firms will say, hey, like we’re super operationally focused, yes, that’s the case, and some firms are better than others, but even the teams that have operational teams that deploy into portfolio companies, it’s usually one or two days a month or maybe a little bit more than that. But if you’re not like literally employed and working at the business or a consultant there four or five days a week, you’re just never going to be building the relationships with the team as deep as you might be from afar. And you’re not ultimately responsible for getting things done. And I think that’s what was exciting to me was when you’re on a board or kind of at the associate level in a PE firm, you’re working with maybe the CFO and supporting, but you’re not ultimately like making hiring decisions or making talent acquisition and talent allocation decisions, like who’s going to work on this project or how can I elevate this person if they’re really doing really well, or how can I design the role that they want and is going to leave them fulfilled and excited and want to be with the company long-term. And I think ultimately the PE firms have to leave those decisions to the portfolio companies. That’s just like the way everything’s structured, and it’s the PE firm’s job to motivate and incentivize their management teams, but also get out of the way and let management teams make the management portfolio level decisions. And so, when it comes down to if that’s what you want to be doing, you have to work inside of the business. Like as much as some PE firms will tell you we’re super operationally focused, it’s pretty binary in my mind. It’s like you’re either at the business or you’re advising and motivating it. And for me, I think ultimately, I felt like I want to be at a business.

Alex Bridgeman: During your time at Stanford when you were considering search fund versus PE or other opportunities, were there a few opportunities at PE firms that would actually hire you as part of the team at the portfolio company level? Did those opportunities come up? Or did you still only see really the operationally focused firms recruit you or see those opportunities?

Chris Williams: Yeah, there’s certainly- I think, look, some of those jobs are really good. I think  where who is paying your salary actually can matter, because if you’re on PE salary, sometimes there can be tension between the CFO and the management team at the portfolio company where they feel like if you’re getting reimbursed, they feel like they’re eating costs that they don’t necessarily want to eat. But I think that there are good jobs where PE firms are hiring kids out of business school a little bit more and more to deploy into portfolio companies for like a year or two at a time. I think if it’s, hey, you’re going to manage three or four companies and sort of be an internal consultant, I think that isn’t as appealing because again, you’re not there. But there are PE firms where it’s now like, hey, go take this job at this company for two or three years, and then we’ll move you to the next firm, and we’ll move you to the next firm. I think those roles are pretty interesting. I think ultimately for me, it felt still kind of like not all the way there; you don’t have full ownership. For me, it was sort of like go back to the firm I had been at, great experience, loved the team, like lots of opportunity for growth there, obviously super high paying jobs, or kind of go all the way and like go try and acquire and lead a business myself. And with a group of investors, I didn’t feel like the programs that we’re trying to thread the needle for me were as appealing because I think I knew that I have enough of the grass is always greener mentality or like looking around that if I sort of did it halfway, I would wish I had gone all in.

Alex Bridgeman: So, tell us about your search. How did it go? How’d you feel in the middle of it, getting started, and then getting into a few deals and LOIs, and just can you walk us through like the emotional journey of your search?

Chris Williams: Yeah. And I took a little bit of a different path through search. So, coming out of school, and our class was 2020, so there was a bit of like decisions deferred for me in May in April as the world was changing pretty quickly and pretty drastically. But ultimately, I decided not to go back to investing and to go into search. And when I graduated, I just kind of had a sense that I wanted to do something a little more personal. A lot of people are raising from a bunch of investors, all of whom are great, many of whom I know, but I felt like I wanted to create a smaller group around me in hopes that that would create more sort of partnership. And I think with the idea that, hey, if I have two or three people backing me out of the gate, they’ll really push stuff down to me. We can figure stuff out together. We can get on a weekly or twice a month cadence that really gets deeper versus having like 10 or 15 people. So basically, what I did was I approached two investors that I had gotten to know that I liked and admired and had good reputations and basically said, hey, I don’t know exactly what my search is going to look like. I think I want to do something smaller, and can you guys support me in that and really just like become mentors and advisors and let’s, to some extent, co-create. I think, candidly, I got a lot of great advice and perspective, but all investors in the search fund community are super busy, they’ve got investments across a ton of different paths. And so, it’s on you ultimately to prosecute ideas. They’ll throw ideas out, but you got to run stuff down. And I think that’s a good experience. Investors shouldn’t be spoon-feeding people they’re backing during searches because, ultimately, as an operator, you’ve got to be able to make decisions and do things for yourself. But yeah, so I started searching in like August of 2020, and the idea was spent a couple of months working with two or three individual investors. And then by the end of the year, form a larger group and probably raise some capital to go after the industry that I was most excited about. I just wanted time out of the gate to explore and define what I wanted to do. And that’s why I didn’t raise money out of the gate. It was sort of, hey, let’s wait a few months. And ultimately, as I got into that, we were looking at industries, we were starting to source, and I just kind of realized it’s really hard to find a deal. And for me, structuring, choosing your investors, I had been and thinking about doing a permanent equity vehicle because I think there’s a lot of benefits to be said around owning for the long-term. That level of commitment from investors, that level of structuring upfront, to me, started to feel cart before the horse. And I was lucky enough to still have enough money, not by any means to buy a business, but like to keep my lights on during the search. I wasn’t traveling much, it was COVID, I wasn’t spending a lot of money. So ultimately what I ended up doing was continuing to work and talk with my investors on a every week, every other week basis, but basically said, hey, I’m not going to raise search capital, I’m going to keep searching on my own, and we’ll put together a capital when we find the deal. And for me, that ended up being a fortunate decision because it allowed me to look at smaller businesses. I was very much open and happy to have acquired $2, 3, 4, 5 million EBITDA businesses, like a lot of my traditionally funded search friends are doing, but I also had a bit more of a geographic focus, and look, it’s hard to find a deal. And so if you can look at something smaller that can- Whatever you can do to be able to look at more deals, if it’s a smaller deal and you can use SBA structure because you haven’t raised capital and locked yourself into traditional mandate, it ended up working out for me because ultimately the deal I bought was smaller, plus or minus a million dollars of EBITDA, and was able to do it with an SBA structure, and had I raised traditional search capital upfront, that would have been too small. So yeah, I would say my search evolved in that I thought the capital structure I was going to put in place was one, and ultimately, I ended up using a different capital structure to acquire the business. And I think honestly, looking back, the thing I feel happiest about and best about is not necessarily what type of deal I ended up buying – more control, less control, self-funded, not – that I, by deferring raising capital because I was lucky to have enough savings to do so, I was just able to look at more businesses in a hard acquisition environment. And being able to look at more businesses I think is beneficial to increasing your odds of finding a deal that you can get done.

Alex Bridgeman: And going through the whole process of running a search and buying a company, are there any kind of high-level takeaways you’ve had from that experience that you would share with other searchers?

Chris Williams: Yeah. I think that, and this comes up in a lot of aspects for me in life is like, look, so there are several defined search fund paths and there are an emerging number of a little bit less structured, less defined search fund paths. And the reality is there are pros and cons to all of them. And I just think it’s really important that searchers consider all of them at some level of depth before deciding which path you want to go down. Depending on the community you’re coming from, whether it’s Twitter or Stanford, like certain paths are kind of the chosen path or the path that’s most popular. And I think there’s like tons of merits of that. I mean, there’s a reason that search fund model hasn’t evolved a ton in 30 years at Stanford because it works, and a lot of people are incredibly successful even today doing it. But that doesn’t mean that like each individual shouldn’t think a little bit about the other paths and ultimately determine what’s best for them. And then I think related to that, like, okay well, you can go read and how do you actually determine what the best path for you is? I think it is important, as much as you can, to dip your toes in the water. Like whether that means you actually start sourcing and are kind of like playing brokers and owners by saying that you’re looking to buy a business when you’re still in school and maybe you’re not, or maybe you’re still at your full-time job, maybe don’t do that. But you can find ways to get your hands on deals in different size ranges, in different industries, some of which lend themselves more towards traditional or self-funded or permanent equity structures. And just I think giving yourself more of a flavor in reality of what stuff is, is really beneficial. I think it’s easy to read cases and go to panels and stuff like that. I think if you can get a deeper dive on a couple of opportunities that are maybe more representative of the types of businesses that get bought and the different structures, you’ll get a better idea of like what type of business you want to run, and what does your CEO role look like? Or what does your ideal CEO role look like? And as you start to inform the answers to that question, that’s going to drive what type of structure ultimately might be right for you.

Alex Bridgeman: So, tell us about the business you bought.

Chris Williams: Yeah. So, I bought a business called System Six. We are outsourced accounting, payroll, bookkeeping, HR, bill pay services for small and medium sized businesses. So, our core service offering is bookkeeping and accounting, so on an ongoing basis, we’re not filing taxes at year end. We do do sales and use state and local taxes throughout the year on a monthly or quarterly basis, depending on the jurisdiction you’re in. But the core service is we are going to maintain your books for you on an ongoing basis. That means recording transactions. It means reconciling. It means closing the books on a monthly basis. So, at the end every month, you know what your revenue and your net income and EBITDA or whatever type of business you’re in, you know what your metrics are that you’re paying attention to. And then basically anything else that falls into the traditional finance department that a small or medium sized business owner honestly doesn’t want to do – process payroll, pay bills, send invoices – we’ll take that on and end up becoming a remote outsourced finance department really for the businesses that we’re serving. So, from a size perspective, we’re just over a million dollars of EBITDA, we’re 24 people and growing, about 160 clients and growing. And like I said, in the tax accounting world, there’s a distinction around are you a CPA firm, meaning are you filing taxes? We don’t do that. We don’t do audit attestation work. We’re just doing the ongoing accounting needs for small and medium sized businesses. And our clients range between like mid high six figures of revenue to $5 million I would say is our traditional sweet spot. We have a couple of businesses that are $10, 15 million of revenue, some venture backed businesses, a private equity backed business, but the bread and butter is sort of small to medium size businesses in that $1 to 5, 6, 7 million range.

Alex Bridgeman: And so, I know you did a lot of your search remote, how much interaction with the owner and then the eventual team did you have at each stage of your deal process?

Chris Williams: Yeah, I mean, it ended up being an important part of the process, and I was lucky that the time I was going through the process was 2021 – things were starting to slow down where I was able to travel, and people were comfortable with that and everything. So, yeah, the owner that I worked with is a pretty classic search fund story, built this business from zero over 13 years, cares a ton, cared and still cares a ton for his team, was evaluating other offers for more like regional accounting firms that are trying to get into the outsourced accounting space and was nervous to sell to entities like that because he was worried about what would happen to his team and culture. So, yeah, I mean, it ended up becoming definitely a two-way interview process. Let’s see, we signed an LOI and then right after signing the LOI, I went out and spent like two or three days with him in Michigan where he lives, and that was going on hikes, going out to some nice meals. His wife had like an awesome laundry list of questions to ask me and like kind of grilled me. And that often happens in the search fund world because in a lot of ways, they built the business together and they really care for their team and wanted to make sure I had the right intentions around my plans for the business. So, I spent several days with them. And then there are three great leaders inside our business, people who’ve risen over time and have different sets of responsibilities from a management position inside System Six. And the owner got all of us together and wanted us to spend a day or two together before the deal progressed too far beyond LOI. And he wanted them to get a chance to get to know me, and he kind of gave them the opportunity to ask questions and said, look, if they don’t like you and they don’t want to work with you, Chris, then we won’t move forward. So, I give him, Jeremy, a great guy, a lot of credit for focusing on the people, because at the end of the day, look, we’re a service business, so people is everything. If our team’s not happy and excited, we’re not going to deliver a great service to our clients. So, I think it was good of him to make sure. I don’t think anybody was like, oh yes, absolutely, Chris is the best thing since sliced bread, but I think he wanted them to have the opportunity to say a hard no, and then if it wasn’t a hard no, know that I was going to have to come in and prove myself and earn trust, which I’m still very much working on today. But there was some serious team time before we got the deal done. And then the last thing I’ll say is just sometimes timing is fortunate. System Six does a once-a-year team in-person gathering, and that was right around when we were closing, and we were close enough that I was able to come and meet 60, 70% of the team. And I think that did a lot to just put some humanity behind what’s an intimidating process for me and also for the team. People were nervous. I was nervous. And when you’ve actually met someone, spent some time on a boat with them, had a beer, it makes it a lot easier on day one to like jump on a Zoom call and start learning when you know them a little bit as a person.

Alex Bridgeman: Yeah, that would help a lot I can imagine. What kinds of questions did his wife ask you?

Chris Williams: It was mainly around the team and what were my plans the first six months, like are you trying to make changes to the team? And how do you think about like team evolution? Like we are 24 people today. We’ve hired three people since I’ve been here – four people, one’s starting in a couple of weeks. We hope to be 30, 40, 50. Like they knew that I had growth ambitions and that the size of the team would change, but I think they wanted to understand how I thought about the existing team and how can you grow while continuing to have the team that you have and make sure there’s still a place for them no matter how the business is evolving. I also remember getting asked, hey, if someone shows up in two or three years with a big fancy purchase price, are you going to flip the business? Rachel asked me that. I have a very serious girlfriend. They asked me about her, what I saw in her, and why we were dating, and yeah, just like wanting to get to know me as a person. Because these euphemisms you hear, like for a lot of business, they are parting ways with their child in a lot of ways. So of course, they’ve got serious questions, and I’m glad they were asking those because it showed they were serious about selling and showed they cared.

Alex Bridgeman: Yeah, definitely showed they cared. That’s pretty clear based on those questions.

Chris Williams: That’s a good one for the case study one day, like sitting around with two people that you didn’t really know, after a couple glasses of whiskey, getting grilled and answering personal questions, definitely something I think the three of us, even now, would look back and chuckle on.

Alex Bridgeman: Yeah, I love everything about that. That’s fantastic. How has the team received you over the last few months?

Chris Williams: So once a quarter, the leadership team, so it’s me and three others, get together in person for a couple of days. And that’s a tradition that I’m stepping into. I mean, everything here for the most part that I’m describing was already in place. So, credit or criticism, whatever, is not necessarily due my way. But yeah, so we had a team summit last week and we actually did a bit of a like, hey, let’s review Chris, and the business System Six has been doing quarterly reviews based off of traction for a couple of years now. So, it was really just like scoring me and then providing feedback on those scores. I think the feedback so far has been like Chris has done a great job of carrying on a lot of what System Six did before, showing kindness to the team, caring for the team. Some of the constructive feedback is like, hey, it’s been an energy shift in that I’ve been spending more time on the business, pushing sales more than I think the business in the last couple of years. And so, like not going too fast is something I’m cognizant of and got feedback on. But I think for the most part, I’ve just been trying to be really friendly and nice and learn, and we haven’t really made any big changes yet. So, for the most part, I think the team has been happy and relieved that there weren’t any big drastic changes made. I’ve gotten some really nice feedback. It feels good. Like it’s good to hear constructive stuff, but also, it’s been nice to get- we do things like Christmas bonuses and profit share, and some of the feedback I’ve gotten around that has been fun. That’s why you do this, right? Like you’re in small business ownership to work with team members and ultimately provide an awesome place for people to work and build a career and find balance in their life.

Alex Bridgeman: Yeah, I love that. And I remember talking about comparing- We talked a lot about comparing your private equity work to what you- at the time you were searching, you were kind of guessing what your life in running a small business would look like. Can you just describe how different your day is versus your time in private equity versus now actually running a company, like the types of problems you wake up thinking about or challenges and how does  your day look, how do you feel at the end of the day? How do the two worlds compare?

Chris Williams: Yeah, I think, and look, this is something that I think I need to get better at and is probably a perpetual challenge for every small business owner, but I think the biggest difference, like at the age I’m at and the age I was at in private equity before, is control over how you’re spending your day and what you want to spend time on. And in PE, for the most part, you’re working on deals, especially as a junior mid-level person, and those are on timelines. And those mean that there’s not necessarily like a ton of optionality on what you’re going to work on today. It’s like this is the thing I need to get done because we’re going to investment committee next week, or we’re putting in a bid or whatever. And so, you kind of know what to work on and then it’s just go do it a lot. Versus now I’m working maybe not exactly the same hours I was working, but I’m still working a lot. But look, there’s some stuff that comes up every day. There’re things I need to respond to in Microsoft teams, internal emails I need to get back on, client emails, sales calls, but you do have- that’s probably 30, 40% of my day, but then there’s a big chunk of like what are the projects we’re working on that I want to spend time on and learning how to prioritize that, like important, not urgent, how do you get into that category, the classic matrix. So that I would say is probably the biggest difference, that you have control over how you’re spending your day. I mean, other differences, like I’m talking to customers a lot. I’m the salesperson. I was not necessarily doing a ton of that in my investing jobs. So, talking to prospects, learning about their business, learning about their problems and what we can hopefully solve for them, and personnel decisions. I mean, I wasn’t doing any personnel work at a junior mid-level investing, and now it’s hiring decisions, like we’ve put someone through a process, do we want to hire this person, compensation stuff that we’re starting to look at now that it’s year end, like what’s the right level of bonuses that are going out. So yeah, like real decisions that have implications immediately I think you get a lot more of. Versus investing, it’s like, hey, you’re working on a deal, you’re building a model, you’re talking about growth assumptions, you’re talking about legal nuances and risk mitigation, and you don’t necessarily know the impact of those for a period of time, versus some of the decisions I’m making now are hiring decisions or compensation decisions or do we want to take on that prospect? Like we’re either going to feel the pain from that if that prospect ends up not being fun or that team member doesn’t work out, like we’re going to know the impact of that a lot more quickly. And yeah, that’s exciting. That’s operating.

Alex Bridgeman: Is there like a specific moment or memory from the last few months of operating where this happened to you or happened to your team and you’re like, oh my gosh, this is cool, like this is what I signed up for, this is what makes this exciting, and it’s like the aha moment for you?

Chris Williams: Honestly, I would say the best thing, last year, we did an NPS score, team client survey, you’re asking the question on a scale of zero to ten, how likely would you be to recommend our business to others? We did that again this year in August. I, of course, would love our response rate to be higher, but we got a bunch of great feedback and passing that on to team members. And then, I do a check-in with new clients 30 and 75 days after they sign with us – hey, how are we serving? What could we be doing to serve you better? And for me, it’s great to get both constructive feedback, but also really good feedback, and then passing that on to team members and just knowing I think how much people love to hear that they’re doing a great job and hearing that from clients, those moments stand out. When we get our close rates when it comes to new prospects are much higher from referrals, as is the case in all professional services. But when we get an existing client who sends us someone with an email of like, “Hey, please meet System Six. They’re fantastic. They’ve really helped my business digitize over the last couple of years,” and then seeing that come through, those are fun moments because it both reaffirms to me that we’re doing a good job, and I like to see that as the business owner, but then I also know that’s going to make the team happy when they see someone affirming their work.

Alex Bridgeman: Yeah, absolutely.

Chris Williams: I’m trying to think if I can give you any one thing that’s like super concrete. I would say one thing is, candidly, I think there’s an exciting opportunity for us at System Six to serve the search fund community. And we’ve brought on a couple of search fund clients or firm researchers who ended up doing a startup and got some really good feedback a couple of weeks ago from one self-funded searcher who bought a very traditional self-funded style business, blue collar services, a lot of pen and paper, we’re helping them digitize. And seeing that that’s working, for me, is super exciting because I think that’s a great ecosystem for us to grow into over time.

Alex Bridgeman: Yeah, it certainly can be. What’s like an operating rabbit hole you’re going down now?

Chris Williams: For us, the deepest thing for me to think about over the next six months is, I mean, it relates a little bit to what I just said, but it’s like who do we want to serve? What’s our ideal customer profile? And there’s so many different angles to that. There’s like all the economic stuff that I can run in Excel around churn rates and profitability and size of that potential market. Like we serve probably 10 to 15 industries, depending on how you group it, between 5-6% of revenue, our biggest industries are probably like 10% of revenue. So, we don’t have a very defined target customer. And it’s really interesting, like you want to have some focus, you want to have somewhat of a niche so that you can tailor sales and marketing as we start to build out those functions so that we can build internally consistency in service delivery so that we can build expertise within industries so that we can deliver more value to our clients. Like if we serve a ton of people in this industry, then we’re going to be really good at setting up and maintaining your charter accounts and telling you about your margins and your KPIs. But there’s so many nuances to that. Everything I just talked about was very much like MBA business school analytics, but then there’s like, okay, well, who do we like to serve? Like who makes the team happy? Who doesn’t make the team happy? In a professional services business, no matter how profitable your clients are, if your team doesn’t enjoy serving clients in a certain industry, that’s not long term sustainable. So, spending time talking to prospects, spending time talking to existing customers, there’s like so much work to do here to define who we really want to go after. And it’s not cut and dry. It’s probably not going to be just one industry, but that’s probably the rabbit hole I’ve started to go down the farthest. I would say that and compensation. We have a profit share model, which I love that we do, and I’m excited to carry it on. It sometimes gets pretty complicated. And anytime you have some sort of profit share model, there’s like 80,000 different scenarios and nuances and incentives and perverse incentives. And so, thinking about how to potentially simplify that is exciting, but also any change comes with potential like incentives and stuff like that. So those are two areas I’m starting to dig in on and kind of have endless paths. And ultimately, sometimes you just have to make a decision and go.

Alex Bridgeman: Do you want to share a little more about profit sharing? Because there’s probably an angle where I don’t know how you can like drill- Ideally, it filters down to the employee. Like it’s some piece of the profit that that employee is impacting. Like if it’s just broad profit, the employee may not be able to impact their bonus at the end of the year, but ideally, they could or in some way or some multiple or some method within profit sharing that they could affect that leads to their bonus. I don’t know. How do you figure that stuff out?

Chris Williams: Yeah, so I think the first decision you have to make when it comes to profit share, and this is just again the way it’s been here historically, is are you going to pay out profit share in terms of a percentage at an employee level, like something around gross profit from whether it’s accounting or HVAC services, like gross profit from the work that that employee is doing. And so, it kind of starts at the employee level in their book of business. However, if it’s some other type of business, maybe it has to relate to the customer service happiness of the revenue that they’re covering as an account manager or something. Like does it start at the employee level? Or in our case, what we do is we set a fixed number of company profit. So, we have a percentage of EBITDA that at the end of the quarter, here’s our gross EBITDA, and then we’re going to pay out X percent as profit share, and then that sets a pool. And then that’s where our incentives start to kick in. So, okay, the profit share for this quarter is X thousands of dollars, and that gets divvied up based on how much your book of business generates from a gross profit perspective. We have metrics, like we do KRAs. So, people are doing quarterly reviews of each other, and based on your score, your percentage of that profit share of that pool can swing up and down. How much did your margins improve from last quarter? It’s like we basically set the fixed pool, and then based on the size of your book of business, dollars get allocated. And then there’s like all these kickers that go up and down based on incentives I just talked about, like improving metrics, scores from team members, scores of your clients when it comes to NPS surveys. So that’s high level how I would think about it. It is like does it kind of start with employee performance or does it start with company performance, and then it’s kind of back allocated. So, I like the idea for us that it starts with company performance because I think it minimizes some of the danger you can have when it’s truly employee level. Because you can get people being competitive, and it can create an eat what you kill mentality. Versus for us, it starts with company profitability and then it gets allocated from there. But this stuff always has a lot of angles and there’s nuances, and candidly, I’m still figuring it out and figuring out all the implications and seeing where we have some perverse incentives that may need to get tweaked, but also no model’s ever perfect. And I think most importantly, we’re sharing our profits with our team and our team loves that. And that’s something I want to keep doing because it’s, I think, how you have employees that have long tenure when they feel like they participate in the business.

Alex Bridgeman: Your team is also set up in a unique way where there’s not many people who are full time, and they enjoy that. They enjoy that it’s not the full 40 hours. And you, meaning System Six, has offered a lot of flexibility to employees over the last few years. Can you talk a little bit about some of those flexibilities that you’re preserving or maybe are going to add on to?

Chris Williams: Yeah, I think, I mean, that is probably when you think about our culture, that’s probably like the core of the culture, which is System Six, like within reason, and you can talk about this stuff, but at its core, we’re here to facilitate the career and the work-life balance that you want. Accounting as a whole is known to be an industry where people get burned out. I mean, we’re about to go into it. For me, that means slow down on the sales side, but like there is definitionally a busy season in accounting. Right after the year ends, most of our clients are calendar year from a fiscal perspective. So, for us, January and February, we’re sprinting to get all the books closed so that we can get everything over to tax preparing CPAs to hit tax deadlines come March and April. But the point is our culture is very much, like I said, sort of facilitate what you want. So, we have a lot of team members who were working 50, 60 hours at other companies, and that was like too much for them. So, they’re in a season of life now where they only want 30 hours. And we have margin thresholds, and we have utilization metrics that play into that profit share I was describing. And so, we monitor our team, but if you want 30 hours or you want 25 hours, like we’re absolutely happy to provide that for you. And if that means you don’t want to take on another client right now because you feel like you’re at max, like as long as your margins and your utilization and the things that we monitor are great, then we’re happy to say, yeah, like we’re not going to send another client your way. Because I think especially in a business where there’s client relationships, keeping the team happy and keeping them engaged in the way that they want to be is just good for maximizing tenure of your employees, which creates stability of the client relationships. So, we’ve got somebody on our team right now who’s great, her husband’s business is taking off, so she’s spending- wants to step away in terms of how many hours she’s spending with System Six. And that means we’re taking some of her clients and putting them on to other teams so that she can have the workload that she wants for both businesses now. And we’re happy to provide that because for the clients that she’ll still have, we’re going to do really well with those clients. And that’s better than saying no and then having her probably leave and potentially lose some of those clients.

Alex Bridgeman: Yeah, certainly that’s a worthy trade off.

Chris Williams: Yeah, I was going to say, it’s something I didn’t fully, I think, appreciate during diligence. And so, what it means is like, yeah, we just got to- I really now appreciate how powerful that is. And so, I don’t want to try and change that. And that just means we’ve got to build an awesome hiring capability and onboarding and training and ultimately retention because for us to grow the way I’d love to see us grow, which is like healthily, not insane, clearly we need to continue to expand our team because I don’t want to push more work on the existing team because that would really be antithetical to the way that we like to run our business.

Alex Bridgeman: Certainly. What are you most excited for over the next six months or a year or so?

Chris Williams: I mean, some of it is what I just described because the way we’ve hired historically has been a bit more like, hey, let’s post and let’s see what we get. And we’ll tailor our client intake to how much capacity we’re able to add. And I want to build a more proactive recruiting effort. And I think that means thinking a bit about where are we posting jobs and where can we start proactively reaching out to people? So, I’ll be spending a bunch of my time in the next six months on hiring and building out our people processes for attracting and then training and onboarding talent. So, I’m excited about that. We already have some stuff in place on training, and I think it does a pretty good job in onboarding. So, it’s more attracting and finding talent. So that’s exciting. And then I think, we used to write proposals in Microsoft Word and send them out manually, and we’re transitioning to more modern sales proposal software, and as someone who does all the sales work, that’s really exciting. It’s just making my life a lot easier. We don’t have a CRM. We’ll be getting that in place over the next few months. So, some of the very basic tech streamlining I’m excited for because that’ll simplify things. But on a bigger picture, I think the hiring stuff and also starting to be more proactive with sales and marketing. We haven’t had a sales and marketing budget in the past. We’ve still been growing 20ish percent the last couple of years. So, we’re fortunate to be able to grow without that, but it’ll be fun to think about how do we want to go target customers, too, to try and maintain and accelerate our growth.

Alex Bridgeman: Yeah, certainly. Moving to some closing questions, what college class would you teach if it could be about any subject you wanted?

Chris Williams: A shortened, college appropriate version of, for me, what was the best class for me in business school, it’s called Managing Growing Enterprises. And the version I took was taught by Graham Weaver who’s one of the most well-known professors at Stanford. He runs and has built Alpine, which is a pretty successful middle-market private equity business that does a lot of work around hiring and attracting and motivating sort of younger talent than most PE operators and putting them into seats of small and medium size PE owned businesses. I would teach that class, and there were three reasons in preparing for today that I wrote down. I think the first is it was really good, like a lot of business school classes, there’s guest lecturers in every class, and so, it was really good to see just real life examples. And he did a good job of bringing in both diversity but also diversity of age. Like he tried to bring in a lot of people who are closer to school. And so, I think for a college, it would be bringing people who are in their mid-twenties to talk about all the different paths they’ve taken and just seeing, for me, experiences from people who were younger and closer to where you are was very powerful. So that was one reason. The second reason was we spent the first five minutes of every class doing what I thought at the time was cheesy like Tony Robbins sort of like personal growth exercises – if you had a genie and you could accomplish anything you want, what would it be? Go write it down and then talk about it with your neighbor. That stuff feels like really intimidating and cheesy when you see it on Twitter, but to actually just be forced to do it was incredibly powerful for me. So, I think bringing that, you tailor it a little bit to the 21-year-old in college, but again, like bringing examples of people who you can really relate to because they’re 25, not 50 and already incredibly successful. And then also breaking down what seems very intimidating with some of the like personal growth thinking exercises, I think for me, was really powerful. What sticks out the most is he said the most important journey in your life is really like in your brain, the way you’re thinking and how can you improve the way you think and improve the way you think about yourself. And I just think bringing some of that to me when I was 21, like I would’ve really benefited from that.

Alex Bridgeman: That sounds like it was an awesome class. Yeah, there’s an interesting piece to the age diversity because if you get folks who are in that 25 to 35 range, they’re a little closer to the students, they’re also probably dealing with problems that that student is going to encounter more quickly than the person who’s 50 is now dealing with a whole different set of problems now that their business is successful. If you go to the 50-year-old person, the 25 or 21-year-old student is going to think that they didn’t encounter those problems that they’re about to encounter. And that when they hit that problem at 25 or 26, they’re like, well, this person, this guest speaker, they didn’t encounter this problem, even though they did but just didn’t talk about it because it wasn’t as like immediately on their mind.

Chris Williams: Yeah. I mean, that’s what oftentimes I would think of in some of the other classes where you have the 60-year-old baron talking about- it’s like, well, yeah, you started your company in 1980, and it was a very different world then, and so of course, getting into cable in the 1980s was like super successful. It doesn’t like discredit all the things they accomplished, but it was a lot more relatable when the person’s a lot closer to you. So, that was really helpful for me.

Alex Bridgeman:  Absolutely. What’s a strongly held belief you’ve changed your mind on?

Chris Williams: Yeah, I think, this somewhat ties to stuff that we explored in that class, but it was really around is there a better or a best path for me? I think when I was in my twenties out of school, it was like there’s one way to be successful. And I didn’t know what that was, and I was still exploring it. And I didn’t necessarily think the path that I was on was that, but I found myself sort of expecting that like, hey, there’s one way to live this life and I’m going to figure out what that is for me. And I think ultimately, what I’ve changed my mind on is like, look, one, there’s no best path. It’s about what’s the best path for you. But I think even more importantly than that, it’s like there’s honestly probably several paths that are the best for you. And this is me speaking to myself, like don’t beat yourself up forever thinking about trying to find the absolute right and best path. At some point, you just make a decision, and you jump in and then you’re on a path and you’re like go do the absolute best that you can with that path. And then if at some point, it’s really not working out, it might be really painful to change, but change does happen. People do shift their lives, and whether that’s personal decisions or professional decisions, you can make changes if what you ultimately decided isn’t working out. So, I’ve put a lot of stress on myself trying to figure out like what’s the perfect design for me to put in place for my life. And I think the reality is there’s a lot of careers you can choose that you’ll ultimately be happy in, and you make a decision when you need to make a decision and then go proceed from there.

Alex Bridgeman: Have you found any interesting or reliable way to experiment with different paths where maybe there’s like three paths that you think are most interesting, have you thought about ways that you could almost use process of elimination to cross paths off or experiment and try something for two to three months to find out if that might in fact work for you or might not?

Chris Williams: I think for me, what it really was, you need to get really deep relationships with people on different paths so that you can get beyond the like once a quarter mentorship call and really ask the deep questions that you’re thinking about with certain paths and get someone who’s willing to be vulnerable with you. And anybody you talk to, I don’t think anybody thinks that what they did was the absolute perfect thing. And a lot of this happens in business school where you get close to people who are on different paths, and then you can get people to open up and be like tell me about what you really like about what you did or are doing and what you really don’t like. So, for me, it was more about like getting close to resources that would allow you to like ask really deep questions because in three or four months, you’re not going to learn as much as you are from someone who’s been in it for 10 years. And you just have to get that person to be open enough with you to get real insights from them, not just the stuff they talk about at a recruiting session. Like how can you get deeper with people?

Alex Bridgeman: That’s a good one. I like that. What’s the best business you’ve ever seen?

Chris Williams: I think it’s easy to say business you look at from afar is the best business you’ve ever seen. So, I tried to think about stuff that I’ve actually seen from the inside and spent some time on. So, I’m going to go with a business called Emporos Systems, E M P O R O S. And it was a search fund business that I worked at during my internship, acquired through the traditional search fund model. Eric Christianson is an awesome CEO that I got to work with for a couple of months. And it was a niche vertical SaaS business, which is becoming very popular in search and lots of other investing ecosystems. And like all the attributes of those types of businesses I really saw play out. So, they did point of sale software to pharmacies inside of hospitals. So, the pharmacy inside the hospital, or maybe the hospital has an outpatient pharmacy and there’s a pharmacy there, and they were the point of sale there. And they had a lot of product challenges. I was there, they were aware of them, they were working on them, trying to move from on-prem to the cloud. But the reality was it was a very small cost to the client is absolutely mission critical, point of sale inside a pharmacy hospital. And they’re riding great tailwinds of more outpatient pharmacies were being deployed by hospital systems. They had a pretty good distribution partnership with some of the large hospital ERP systems. So, it was just one of those situations where your software, once you’re deployed, it’s really hard to switch out for another piece of software, even if the product isn’t perfect. I think the product has gotten a lot better since I was there because they’ve been working on it. But I just saw up close and personal how sort of small cost vertical software can be really compelling from a business opportunity because there’s a lot of growth and there’s not a lot of churn.

Alex Bridgeman: With that as your best business, is there a reason you didn’t focus more on software businesses? Or did you find out that perhaps the business you acquired has some similar subscription recurring revenue type dynamics at play?

Chris Williams: No, I mean, it’s a fair question and something I think about. I do still think that software is a brilliant business model, and there’s a reason a million people are looking to invest in it. Valuations to that business was bought in like 2016, 2017. So, valuation dynamics for those businesses have changed dramatically, and that changes the ball game a little bit just from investing, and if you’re trying to operate and create wealth, like it can be harder to do if you have to pay more upfront. It doesn’t mean that it’s- like there’s still fantastic outcomes happening inside smaller software businesses. I did target some. And for me, I was also trying to stay in the Bay Area. And so that meant a lot of the businesses that I was looking at that were local to the Bay Area can be harder if you’re trying to buy sort of a search fund style software business because you’re competing with big tech from a recruiting perspective. I mean, all that is changing with remote now, but it is a little bit harder if you’re trying to buy a business in the Bay Area and software to be in the search fund ecosystem. It becomes a lot more like venture investing, and that’s obviously not the game I was playing. We do some custom- like more like data science work than hard software work internally. But I think over time, as low code, I love reading some of the stuff we see in our ecosystem about that, whether it’s Nick Haschka and others, like as low code just deploys more through the ecosystem, we’re going to use things like Air Table and Zapier for our clients. We do a lot of point of sale data, download it, scrape it, transport it into QuickBooks, and we can start doing some of that through SaaS products. And that can start to get us to look a little bit more like a software business. We’re paid on a weekly basis by our clients, so we have recurring revenue in that structure, and we use as many automations as we can inside QuickBooks between the bank feed and QuickBooks or Xero. But we’re ultimately a service business, but we do have some tech enablement capabilities that I think give us a little bit of the software dynamics. But look, we’re not scalable the way software is. We’ve got to hire people. And yeah, like software is a great business. There’s a reason for it. There’s a reason a lot of people want to invest in it. So, yeah, it was a great business that I saw.

Alex Bridgeman: Yeah, absolutely. Thanks, Chris, for coming on the podcast. It’s been fun to chat with you again. This is probably our 20th chat or something like that, but it’s been fun to record one and get to hear your thoughts a little more publicly. So, I’m excited for you to keep growing your business and keep chatting about it.

Chris Williams: Yeah, look, it was awesome to chat with you. I hope it’s helpful for your listeners. And I look forward to staying in touch with you, on and off the podcast.

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