Dave Thrasher – Leading a 9-Figure Family Enterprise – Ep.189

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(00:03:57) The timeline of the Thrasher family businesses and how they interact with each other

(00:10:05) Thrasher’s acquisition strategy & mindset changes to fast track growth

(00:13:41) Ongoing evolutions to Dave’s role to become more effective

(00:18:04) Transition points in Dave’s role as the business has grown

(00:20:34) Self-evaluation strategies

(00:22:07)Lessons from being an effective CEO

(00:23:58) Becoming more comfortable with giving and receiving feedback

(00:27:41) Finding the balance between growth and profitability

(00:33:02) Becoming an effective user of debt

(00:34:58) Developing a 100-year plan for a business

(00:39:03) Headcount driving revenue vs. revenue driving headcount

(00:41:28) What to look for in hiring

(00:46:00) How core values from Thrasher are aligned with acquired companies

(00:48:14) Questions to ask when determining if a potential acquisition will be a good fit

(00:52:32) M&A rabbit holes

(00:55:40) Overcoming deal fatigue

(00:57:32) What’s a strongly held belief you’ve changed your mind on?

(00:59:28) What’s the best business you’ve ever seen?

Alex Bridgeman:  Well, thank you for coming on the podcast. I’m glad to get to record here. The business that you and your brother and family have assembled over the last couple decades here is really impressive. I’d love to hear the timeline from your perspective and what your role looks like today as a result of all that change and growth.

Dave Thrasher:  Yeah, so my parents started our original company back in 1975, so we’re approaching our 50-year anniversary. And for really my entire upbringing and the first 25 or so years we were in business, it was really an owner operator business. My dad pretty much did every job with his own hands. My mom kind of handled the back office while she was taking care of us kids. And really a small- I’ve joked, you might call it a lifestyle business, my parents, if you told them they had a lifestyle business, they would say, well, it wasn’t a very good lifestyle; we were barely making ends meet for a long time. And then in the late 90s, early 2000s, we started to see some traction. The first 25 years, they kind of maybe grew it to $1 or 2 million in total revenue. So again, just kind of enough to live off of. And then we started to see some traction, started to scale a little bit through the early 2000s. And then we started in 2008, a new company called Support Works, which, at the time, it was really out of necessity that we felt like the suppliers, the manufacturers in our industry that made the products that we installed, there wasn’t very many- there wasn’t any good ones. All the products were very similar, there was not a lot of innovation, and in particular, there was no support for teaching contractors how to run the business. Like it was just purely a product supply model. And so, we thought there’s an opportunity here to not only make and sell the products, but to provide contractors with value adds around how to teach them how to run the business, how to run marketing departments, how to run a call center, how to teach people how to onboard and train salespeople. And so, we started Support Works. And that business really grew quickly. We scaled from 2 million in the mid 90s up to about 150 million over that decade there through the 2000s. And at that point, our industry started, I would say a combination of our industry started to become more sophisticated. We had more scale. The companies in our industry were more investable in general because they were no longer mom and pops and they had gotten to some level of size. But also, it coincided with the time in life where there’s never been more cheap capital, in particular than with COVID with the stimulus and all the extra cash in the system. And so really, in the last five to seven years, we’ve seen a shift where private equity started buying a lot of the companies, and for us to stay relevant really required us to start thinking about acquisitions as a part of our strategy. And so, I’d say the last five to seven years, the shift in our focus has really been on acquisition and growth through geographic expansion of our foundation repair businesses. And so, we’ve really continued to scale probably by triple in the last five or seven years mainly through acquisition.

Alex Bridgeman:  Yeah. And all your different businesses interact with each other in kind of unique ways. So, from our earlier meeting, you have three core businesses, Support Works being the one you just talked about with selling parts and offering support to your customers there, you have Thrasher Foundation Repair, that’s your owned and operated foundation repair business, and then you are acquiring others that retain their own brand name and their own independence but are owned underneath Thrasher. How do all those interact with each other? There’s lots of different kind of small flywheels that get created between those.

Dave Thrasher:  Yeah, absolutely. They’re all independently, I would say, operated. Our Thrasher Group companies has about ten of the businesses that we’ve either organically opened offices in different cities or a handful of our acquisitions are all run under the same brand. We share. We consolidated some of the departments, so we share marketing departments, customer care, HR, accounting, some of those back-office functions. And we’re kind of running that model, and that’s going well. At the same time, we were getting approached by business owners who wanted to sell, they were maybe at that retirement age, didn’t have a succession plan, and we thought they were good opportunities, but they weren’t really geographically even close to Omaha. We’re talking California, Florida, Washington, DC, all over the place. And so, we’re like, I don’t know if it makes sense to try to consolidate those into our Thrasher brand. And most of these companies were well established, profitable, good businesses with good teams, and we thought, man, if we do buy these and we consolidate, there’s a lot of good people that are going to be out of jobs if we roll those departments into Omaha. And so, we decided just to kind of start running what I call like a Berkshire Hathaway autonomous model where we don’t have corporate management necessarily over those businesses. We let them run autonomously. They kept all their original people, and they run all of their own departments locally. And so, we’ve got about ten businesses under our Thrasher Foundation Repair brand and another ten or so that have their own brands but are just commonly owned by the Thrasher family, and then we’ve got our Support Works business, which supplies products and provides training and consulting services to all of those entities and other customers that we sell product to. And so we are kind of running two test kitchens right now, one with the consolidated model for Thrasher Group and then the autonomous model with Thrasher Partners. And they’re both going well. It’ll be interesting to see, as we’re kind of gleaning learnings along the way of kind of the pros and cons to fully autonomous and partially autonomous. And it’ll be interesting to see what direction we go long term with that. But it’s working for us now. And we’ll kind of just keep it rolling as acquisitions kind of usually fit into one bucket or the other. We’re working on two right now, one that I’m sure will be a Thrasher Partner that will keep its own brand and one that will probably roll into the Thrasher brand. And so it kind of really just depends on their geographic location, what their team looks like, and that sort of thing.

Alex Bridgeman:  And you mentioned that private equity activity has, of course, increased a lot and that was part of the impetus for thinking about being more forward with acquisitions. What did you start to notice and pick up on that made this strategy make sense to you?

Dave Thrasher:  Yeah, so private equity, in particular, really started targeting our customer base because we were the only foundation repair group of companies that were really teaching- we’re really gaining scale because we were working so much on the business fundamentals versus just being an owner operated construction company. And so, a big part of the reason that we started needing to think about it was because if we didn’t buy some of these companies, they would be sold to somebody else that was usually our competitor. And that usually meant that we would lose the supply business on our Support Work side. And so, it was somewhat out of kind of necessity that we thought, well shoot, if we don’t give our customers an alternative to who to sell to, the private equity guys are just going to run away with this industry. And we’ve put 40 years of blood, sweat, and tears into it. We think we’re pioneers in it. We think we’re pretty good at running these companies. And so, we certainly- none of us have MBAs in my family. We’re not M&A gurus by any means. But we know how to run these businesses. And so, we thought, let’s start with one or two at a time. Let’s see how it goes. And I think as we’ve continued to do it, we’ve realized this is scalable, this is something we can do well. I would say the biggest thing for us is thinking about not every acquisition is right for us and figuring out which ones are right, which ones can we afford without needing to raise outside capital. And that’s a big factor for us because we think there’s lots of benefits to staying privately owned. And so when you do that, you really have to finance everything with cash or bank debt and thinking about how to do that while still being conservative enough to be able to withstand industry cycles and economic cycles and that sort of thing has been a real focus for us as we’ve kind of navigated these new waters in the last handful of years.

Alex Bridgeman:  Yeah, I know that’s been a big focus of yours is staying lean while growing and remaining a profitable business. It definitely felt like, from our earlier conversation, that a lot of things started to change that accelerated that kind of growth trajectory of the business. Are there a few changes in mindset or decisions in the last two decades or so that it sounds like most of the growth has occurred, like what do you feel like changed in the way you ran the business that led such a change in the growth curve?

Dave Thrasher:  I don’t know that from a kind of blocking and tackling standpoint of how we run the Xs and Os of the business has changed fundamentally. I think it’s more been figuring out how to do that across multiple locations with, well, you basically empowering local leaders to run local offices and realizing that we don’t have to, as the business owners, do everything ourselves. And so, I think there’s been a learning curve probably around that more than anything, just figuring out what does it look like to be a CEO of a company with 20 locations instead of one location. You just can’t be at all the places all at once. And so you have to have, from kind of an organizational structure, you have to figure out where you can push autonomy down through the organization, let smart people make good decisions, and then just apply enough strategy and direction at a high level that they know what their North star is and kind of what the goals are and what we’re trying to accomplish and then let them run with it.

Alex Bridgeman:  Going from being able to see everybody and see all the decisions being made to now having to let a whole bunch of different folks across the country and make their own decisions using a framework you gave them, was that a hard transition to make? And what are some ongoing evolutions to your role and skill sets you’re trying to build to be more effective in that role?

Dave Thrasher:  Yeah, I think the first handful of businesses that we acquired or offices that we opened organically, I was still visiting those locations pretty frequently, attending monthly meetings, reviewing financials. And I remember there came a time a few years ago where I was like, man, if I just went to these monthly financial reviews, I would just sit in meetings looking at financials every day of the week for the entire month, I’d never get any real work done. And so there started to be some like just necessity to say, hey, I can’t keep coming to these things. And there was kind of an emotional, I think, challenge there just because I had this fear of, hey, one of the main selling points that we have as a family-owned business who’s trying to acquire businesses as an alternative to private equity is the personal touch, the family feel, the personal care from ownership. And so there was kind of some concern, I think, for me there. I think a big, I guess, thing that helped with that and empowering the local leaders is similar timeframe but kind of our initial scale is we came across the EOS kind of concept of the Traction model of managing. And so, we’ve really got good alignment as it relates to our purpose, mission, values across the organization and a really good cadence for setting annual and quarterly goals and then having kind of weekly check ins. And I think that whole process really, from the business standpoint, made things much, much smoother. I can’t quite frankly imagine if we would not have found EOS at the time that we started doing this, how dysfunctional we might be from a strategy standpoint. But I think from an emotional standpoint, it’s really just that we used to have a personal connection with a hundred employees, and now we have a couple thousand employees, and it’s just not practical to have a personal relationship with all of them. And that was just kind of, I’d say, an internal emotional processing that our whole family’s had to go through.

Alex Bridgeman:  It sounds like that may have also helped retain not just the family feel of maybe a smaller business but the speed of decision making and action by fully delegating to managers who are closer to those businesses. They can make decisions quicker without needing to run every decision up a chain of folks to you or your family. Has that been helpful to keep decision making quick? And what other things have you done to try to keep decision making fast and efficient?

Dave Thrasher:  Yeah, I think that having what we call a GM or in the EOS world they call an integrator, but having the person with boots on the ground at a local office who’s in charge of the operation, my role is to let them put together a plan. I’ll give them feedback if I don’t think their plan is good, but usually it’s pretty darn close. And once we have, again, that kind of North Star, this is what good looks like, this is what we’re striving for, then giving them the autonomy to make the local decisions, run the business. I think a big thing with that, too, is early on, when we started expanding into multiple locations, there was this fear of we have a lot of pride around our culture, we’ve been a best place to work many years here in Omaha, and it was just like how do we maintain the Thrasher culture in all these different locations when there’s not any Thrashers that live there. And I think having alignment in core values and those kinds of things is obviously critical, but I think letting go a little bit and saying the culture in Appleton, Wisconsin, or the culture in Wichita, Kansas, might be a little different than the culture in Omaha, Nebraska. But we’re aligned on what gets us out of bed in the morning and our purpose as an organization, we have core values of the type of people who fit in here. And as long as those things are aligned, like the types of parties they might have for their holiday party might be different from one location to another, and that’s actually a good thing because then they have their own kind of local tribe and their local family that makes it a fun place for them to work. And so, I think coming to the conclusion that we don’t need the culture to be the same across the organization as long as the key pieces are aligned, there’s kind of a good thing about that autonomy and that uniqueness of each location.

Alex Bridgeman:  Can you identify like various phases of your role as CEO and transition points where you had to switch some tasks or things you’re focusing on to kind of a new phase within that role as your overall business has grown?

Dave Thrasher:  Most CEOs in most companies started out,  especially if you really kind of started the company or you’re with the company for a really long time, as you’ve always had your hands in everything. And that is just not possible as time goes on. And so, you have to kind of figure out where you fit in and where you bring value. I think for me, figuring out this balance of focusing, I think the natural inclination is to say, well, you focus on the big picture, and you hire people to do the local work or whatever. And I think that’s somewhat true, but I think there’s this fine balance of focusing on the really big things and the really little things. And so, for me, having an eye on the horizon, thinking about what’s next, what’s our kind of big picture strategy is certainly an area that I spend a lot of time. But I would say, for me, a lot of that kind of big picture stuff would be handling the M&A, managing key relationships in the organization, helping think about the strategy and the budget. But the little things would be, when I visit a location, I’m looking at like does it need a fresh coat of paint, like what’s our pride of ownership for this location? What do the people look like? Are they tucking their shirt in or what’s the kind of- do people have humility in this location? So, I’m just like looking at all the little things and gleaning insights that then I can share with the local GM to say, okay, we need a fresh coat of paint because we’ve got to be proud of the place we work and take good care of our things. Or maybe more practically, looking at our marketing, if I see a Facebook post from one of our offices in Tennessee or something and I think, man, marketers sometimes can get really cute with their graphics and their messaging, and it can be a really kind of sexy campaign or whatever, but I don’t know that our customers even know what we’re talking about sometimes. Or it’s like noticing these little things like around our marketing strategy, to say like, hey, who designed that truck rap and why did they make it like that, instead of just telling customers what we do to help generate more leads. And so just little things like that that I would say I focus on to make sure that we’re staying sharp in little ways. But again, I mean, the amount of time and effort put into M&A, maintaining key relationships, thinking about the big picture, it’s hard to quantify in time, but that’s certainly where most of my mental bandwidth is spent.

Alex Bridgeman:  How do you self-evaluate and improve? Do you have an executive coach or peers that you work with through Tugboat or any other group? What are some ways that you self-evaluate and see what you need to work on?

Dave Thrasher:  Yeah, I would say, externally, the Tugboat Institute has been a game changer for me. Meeting with other CEOs through that organization has provided a ton of insight for me. YPO forum, probably on a personal level where people really shoot straight, and they really know the intricacies of your challenges, both personally and professionally, so I get some feedback I think that’s really helped from that. But I mean, having a really tight relationship with the presidents of the two main companies that I’m focused on where they can give me 360 feedback every quarter is probably the most impactful, where I get like the kind of feedback that kind of stings a little bit but is the thing I needed to hear. And then the last thing I would say is probably not feedback that I’ve gotten, but just internal reflection comes through a handful of authors that I have just like inhaled their books over the years. I think Pat Lencioni, Jim Collins, a couple of key authors that as I’ve read those books at different phases throughout my career, I’ve learned different things that kind of stuck out to me. And so, I think that has probably shaped me more than, from kind of like a business leadership and an education standpoint, it’s really been through a handful of authors and key business books that I’ve read.

Alex Bridgeman:  What are maybe two or three lessons about being an effective CEO that you’ve learned over the last five or so years?

Dave Thrasher:  Yeah, since I referenced a couple books, I’ll say Pat Lencioni talks about over communicating clarity and a lot about just different people management and transparency and how we communicate. I think that’s been huge for me. Jim Collins has a whole bunch of different books, but I’d say the one I probably lean on the most is Great by Choice, and there’s concepts within the Great by Choice book where it talks about the 20 mile march, which is really about paced growth. There’s concepts about firing bullets before cannon balls, which is really kind of shooting inexpensive innovations first and calibrating those bullets before you fire an expensive cannon ball into a new innovation. Some of those kinds of things, I would say, have really shaped our strategy. And then the last one, an author named Henry Cloud wrote a book where he talks about the four corners of relationships and that we can have a tendency to live in these kind of unhealthy corners or corners of relationships where it’s basically superficial. And in our workplace, a lot of times we can think we have like these friends at work, but we’re never really truly authentic and like point out when they have something stuck in their teeth or whatever. And so I think having a corner for, as he defines it, a corner for relationships where you’re willing to tell people the hard truth from a standpoint of because you care about them and you love them, that you’re willing to kind of dive into the danger zone and tell them the hard truth about maybe how they’re behaving or an area that they need to improve. And so, I think learning how to do that and practicing that which is very difficult and is something I’m still constantly trying to get better at have probably been the things that have made the biggest difference in our business today.

Alex Bridgeman:  Yeah. How have you worked to get more comfortable with giving and receiving feedback?

Dave Thrasher:  Well, I think practice. It gets a lot easier the longer you do it. I would say, sometimes we get so comfortable here, especially in our Omaha office, with corner four, that new people, when they come in, are like kind of shell shocked by how straightforward we are and just call it like it is. And so, in some ways, I have to remember sometimes that like a new person isn’t going to be as comfortable with me giving them really straight feedback, even from a place of love. It’s not like we’re hammering people over the head, but just to give somebody direct feedback when they grew up in some corporate environment where nobody ever told them any hard truths is probably where I see the biggest challenges and where I sometimes have to soften my approach early on in just shooting people straight right out of the gate. But yeah, I don’t know. It’s one of those things I think everybody understands in concept. And it sounds like, oh, yeah, of course, you should try to shoot people straight. But when you have to give somebody really hard feedback, and you really like the person, and they generally do a good job, but they’re doing something that’s not working for you, it’s a lot harder than it sounds. And so, I think the more times you do it and the more times you receive it, the easier it gets.

Alex Bridgeman:  How would you deliver that kind of feedback today? Like, how would you prepare that piece of feedback for somebody?

Dave Thrasher:  Well, I think my employees that would listen to this would laugh, and they’d say, well, he delegates it to us. I make them have the tough conversations. But no, really, I think most of these tough conversations, when I say tough, I mean they’re not catastrophically important, or these aren’t like termination discussions, but just giving people feedback. Honestly, I think most of it happens just naturally in meetings and in interactions where you’re just diving a little bit deeper and maybe when- and just getting to the core of how you feel and sharing that. But I think when it’s really hard, I’ll plan it out in my office, and I’ll probably even roleplay it with one of my key people who know what’s going on and kind of get their feedback on how I can deliver a message. If it’s a really hard message, you do want to honor that person’s dignity and have them walk out feeling good about the feedback the best they can. And so, I really do think about role playing and how is this going to come across and how can I say it in a way that they’re going to hear it best? Probably through roleplay.

Alex Bridgeman:  Yeah, some of that, the point of that feedback too, good feedback, is I care about how you are- I care about your work here, I care about you, and I want you improve and be able do your best work, and that’s why I’m giving you this feedback. And some of that can take time to get new folks comfortable with that understanding.

Dave Thrasher:  Yeah, absolutely. We talk here in our office about this concept of giving people the gift of high expectations, and high expectations is when you have to have a tough conversation about how somebody can get better. But if you do it and you do it well, you’re really giving them a gift because helping someone to maybe achieve something that they didn’t know they were capable of or maybe they just didn’t know they weren’t doing right and helping give that feedback to help them get better is going to make them have a more fulfilled career, it’s going to have them go home and have a more fulfilled life at home. And so, giving that direct feedback from a place of love is truly giving someone the gift of high expectations.

Alex Bridgeman:  Switching gears a little bit to the kind of lean growth that we talked about a little bit earlier or touched on, you’ve grown the business while remaining profitable and keeping that constraint and also remaining as lean as possible. How do you find that balance between growth and remaining profitable and wise spending and smart investments? How do you build that strategy and build a company around that?

Dave Thrasher:  Yeah, I think if you want to be a company that is privately owned, doesn’t take on outside capital, and wants to be around for a long time, paced growth is pretty critical. And so for us, we really think about we need growth, we just want it to be paced. And so, we need to grow because if we want to attract and retain the best and the brightest, we need to continue to grow so that it creates opportunities for our employees to learn new skills and be promoted and make more money for their families and all those kinds of things. But we also don’t want to grow, it’s definitely not a grow at all cost mentality. We don’t want to grow so fast that our culture suffers. And so, figuring out kind of what that balance is. For us, 15 to 20% growth has been sort of our kind of 20 mile march target. And as we get bigger, that percentage gets harder because those dollars start to compound pretty quickly. And so, I’d say if anything, we would downshift growth as we continue to scale. But being able to do that, I listened to another one of your podcasts where there was this analogy of every time you open a new office and you start to produce profitable growth, it’s like a spring that turns into a stream that eventually goes into a river and eventually goes into a lake. And you start to build this pool of resources, and I thought that was a really cool analogy that’s been true for us. If we grow slow enough that we can invest, reinvest our own profits into growth, not use much debt, the more we do that, the more velocity in that river that we get as these different streams start to push more dollars into the system, and then it gives us a bigger pool to pull from when it comes time for that next acquisition or that next investment in growth. And so that’s really been our approach. We’re pretty debt averse. I kind of grew up, I always tell people we grew up in a Dave Ramsey family. We were like you can’t afford it if you can’t pay cash for it kind of people. And as we’ve scaled through acquisition, we’ve had to figure out what is our comfort level with debt and what’s our strategy for debt to make sure that we’re being productively paranoid and that we’re being cautious, in the event of a downturn, would we be able to cashflow these payments and that sort of thing. And so that’s definitely been kind of a more recent learning for us.

Alex Bridgeman:  Yeah. Can you dive into that little bit more, that shift in mindset around debt? That can definitely be a big one to get over, coming from Dave Ramsey to let’s use debt, not necessarily like a PE buyer, but using debt at all for growth, that’s a big change.

Dave Thrasher:  Yeah. And it’s funny now, it’s so funny how your mentality can shift. I think we forgot how cheap capital was the last decade. And now that we have some fixed rate really inexpensive debt that’s sitting out there, and with interest rates going up now, it’s like we should have gotten more of that debt while we could. But our philosophy just from a kind of conservative standpoint has always been we don’t want to put any or very little debt on operating businesses that we acquire. If there’s a big downturn and people don’t want to get their foundations repaired, we don’t want to have to not only figure out how to cashflow the business, as it maybe has a decrease in sales, and then also be burdened with these big debt payments. And I think that’s where we’d be at risk. And so, our philosophy on debt, we’ve been fortunate that we’ve been in business a long time, we’ve been pretty conservative for the first 30 or 40 years we were in business. And so, we have quite a bit of real estate, commercial real estate that we rent from ourselves for our operating companies. And our stance has always been we’re always going to have more equity than we do debt. And so, we want all of our debt to be backed by our own real estate. And in a worst-case scenario, first of all, as long as we can break even, even in a downturn, we can make our loan payments because we’re going to be paying rent to ourselves. And so, if you’re playing a 100 year game, you’re going to get those buildings paid off eventually, as long as you can cashflow the business. But in a worst-case scenario and something catastrophic that we know we would kind of have the ability to, even at a discount, we kind of are really conservative with how we value our real estate, that we could do a sale leaseback and get that capital if we needed it. And so, we kind of use that as our hedge against the risk on debt and never want to have more debt than we have equity in real estate. And then, for the most part, that’s where pretty much all of our debt is. And it’s all sitting in kind of, for us, shorter term, fixed rate, low interest. And we were keeping our powder dry for the last several years and wondering like should we be spending some of this cash on some of these deals. But I’m thankful we financed some deals in the last few years that now that interest rates have gone up, we’ve got that dry powder to spend as we’re doing acquisitions now, but we don’t have to do them at the higher interest rates. We just are keeping the debt on the low fixed rate stuff and spending the cash that we had been able to accumulate in that pool or that lake that I talked about and deploy that in acquisitions and be pretty conservative with how we do it.

Alex Bridgeman:  What have you learned about being an effective user of debt coming from using very little debt to now more through real estate and potentially operating businesses in the future as you acquire more? What are some lessons you’ve learned around being an effective manager of debt?

Dave Thrasher:  Well, I think there’s a lot of people that are listening to this podcast that are smarter than me about debt and how to get good rates of return. I think the more I learn, actually, I’m probably still in my infancy in this process, but I think the more I’ve learned, the more I’ve realized that you can actually get better returns using debt. But I don’t sleep as good. There are certain points where I would rather sacrifice maybe a little bit of a long-term rate of return on an investment but sleep really good at night knowing that we don’t have any debt on that company. And so, I think there’s what- I guess what I’ve learned is maybe less academic and more determining what works for you. And I think there’s people that, and I think probably with more time and experience, it’s part of the evolution, I guess, but you get more comfortable with debt or different strategies in business. But for me, I’ve always countered that, and it’s a family decision too, so I’m influenced certainly by my family members who are partners, and we just would rather err on the side of sleeping really well at night, even in a downturn. During the COVID crisis when we were all wondering what the heck was going to happen and everything was shut down, we slept pretty darn good at night knowing at least we don’t have to make any payments. And so, I don’t think that I’m actually probably the right person to teach a lesson on how to use debt because I’m probably still too conservative. But I am starting to see, especially when it was this low interest rate environment, that there’s a good time and place for it, in particular, when you have it backed by something that you know isn’t terribly volatile to economic conditions.

Alex Bridgeman:  That 100 year plan, so what goes into a 100 year plan for a business, and how does that influence decision making today in terms of how you organize the company?

Dave Thrasher:  If we want to be in business for 100 years, we really like to take kind of the Berkshire Hathaway model on a lot of the way we invest. When I say that, I mean we don’t ever buy anything that we don’t plan to own forever, not to say that every possible investment I’ve ever made is something that I might realize wasn’t a good fit for us and sell something off or something like that. But we would never buy, like Warren would never buy a stock that he didn’t plan to hold for at least 10 years, we would never buy a company or start a new company or location that we didn’t plan to own forever. And when we think about a 100 year lens on how we look at our business, it’s really clearly about long term thinking. And so sometimes we make decisions that are counterintuitive if you’re making a judgment based on quarterly earnings or something like that, that we think makes sense for our five year, 10 year 20 year plan. And we would never make an investment in something that we didn’t plan to own forever. We would only buy a company that we think would make sense for us to continue to own forever. And so, if you’re going to do that, I think it’s important to think about not every acquisition is going to make sense for us. When you’re exit oriented, and you have multiple expansion factored into your exit strategy, you can maybe overpay for an asset because it’s going to get flipped in a couple of years and you’ll be able to get your money back somehow and there’s kind of a plan around that. But when you own it forever, you really have to buy them right. Like we can’t drastically overpay for our investments if we plan to own them forever. If we plan to just slowly pay them off and then have the cash flows kind of cover it versus a venture backed investment that if you grow really fast, and you can build value a different way, that can work for people, and there’s nothing wrong with that. It’s just in our view, it’s not a 100 year lens, it’s a shorter term play. And so, we always think about every investment, if we buy this, can we afford to pay it off if we own it forever? And is this a business that’s going to fit with the rest of our holdings if we plan to own it forever?

Alex Bridgeman:  What decisions strike you as short term that you see peers of yours doing?

Dave Thrasher:  Yeah, I mean, I think some of the like well-publicized examples would be like the big tech companies that layoff thousands of employees because they needed to hit earnings. Now, I do think there’s times where any company but certainly a really big company ends up with excess headcount because they kind of got sloppy or whatever. And there’s a time and a place to kind of right size your operation to make sure it’s lean, and that’s the prudent thing to do for a CEO. But I do think a lot of times, those decisions that not only are probably not best for the business for a five year plan but are also certainly not the most humane things for your team members end up being forced on CEOs of public companies or PE backed companies that have to hit a number or you have to grow at a certain speed in order to make that successful exit. You end up having to kind of maybe do things that are unhealthy financially, unhealthy for your people. Maybe you have to hire too many people too quickly, and so you end up with people who aren’t value aligned. You have to lower the bar of quality for the type of people that you hire when it’s a growth at all costs mentality versus saying like, hey, we’re only going to grow as fast as we can hire good people. And if we have to stay flat this year, we’ll stay flat this year. Or in a COVID downturn where you say, oh my gosh, what are we going to do, you say you know what, we won’t make money this year, but we’re not going to lay anybody off because we’re going to need them back when this thing goes away. And there’s just tons of examples of companies that had to make really aggressive decisions because they were just going to get slashed by the analysts at the next quarterly earnings if they didn’t make it happen. And so, I don’t know if those are very specific examples but kind of with a broad brush.

Alex Bridgeman:  Well, the headcount one’s kind of interesting as it sounds almost like a tail wagging the dog, like your dog is the actual headcount of your team, and that should drive revenue versus the other way around where revenue growth or decline drives headcount decisions. When did you develop that thinking?

Dave Thrasher:  Yeah, I think every market or every industry and business might be a little unique in this, but my experience in our companies is, for the most part, all of our companies, we’ve got our Omaha location’s been in business for almost 50 years, we’ve been dominant in our local market here for a long time, a long time in the foundation repair industry. And then we have other companies in much bigger markets that are much younger companies that have less market penetration. But I would just say I don’t think any of our companies couldn’t grow any more than we can hire the right people. Like, it’s just what I have found is when we have more of the right people, we can spend more on marketing, and we can always get more leads, and there’s always more houses to fix. But when we get the wrong people, it causes all sorts of problems, it makes it a lot harder to be profitable, makes the culture a lot less fun to be around. And so, when we think about our annual growth planning at each location, it’s typically governed by how many people do we think we can hire this year and do it well, and then we back into the numbers from there. So, if we say, hey, we want to grow by 5 million at this location, well, that means we need to hire three construction workers, a salesperson, maybe a back office person, whatever those positions are. And then by the way, we also need to buy a truck and some equipment and all those things. And so, we really back into can we afford to buy that much equipment even if we can hire the people and do it with cash? And can we hire and train and then retain the existing team at a rate that we can grow by that much? And then usually the answer is, yeah, we can’t hire that many people effectively without breaking something down. And so, then we say, okay, instead, we’re going to grow by- we think we can grow by three and a half million at this location, and we can do it well. And so that’s really, when we sit down as a team, we really look at who are the current team members, who might we lose through attrition that might quit or might not work out here, and then how many do we need to hire on top of that attrition in order to hit our growth numbers? And we try to be real conservative because it’s hard to find really great people when you’re really picky about core values.

Alex Bridgeman:  Yeah. So, beyond someone aligning with core values, what do you look for in hiring? And what do you teach your managers to look for when they make their hires?

Dave Thrasher:  Yeah, so it’s really an EOS concept where they talk about right people in right seats. And we want to get all the right people in the right seats. And so, when we think about right people, that’s really that value alignment, that culture fit, and right seat means they’re in a position where they are going to be able to do all the accountabilities and all the performance things that they need to do to be successful in that position. And so of course, I’d say the technical competence around putting somebody in the right seat is not to say it’s easy, but it’s, I think, easier to say like do they have the background, they seem to have the skill set to be able to do these tasks in this particular job. But I think that the value alignment piece is harder to quantify. And so, what we’ve done, which is another one from Pat Lencioni, he has a book called The Ideal Team Player, and we’ve adopted concepts from that book for our core values, and our core values are we want to hire people who are humble, hungry, and smart. Humble kind of goes without saying and how we define that. I think hunger is pretty self explanatory as well; we want people who are gritty, who can do more with less, who have a high sense of urgency. And then I think the last one that’s a little bit less obvious is smart is not about IQ. When they talk about smart, they’re talking about people smarts. And so, finding people who have a high level of emotional intelligence, who are going to be able to have tough conversations with people, who have thick skin, all the things around being people smart. And so, we want to find people that are humble, hungry, and smart. And that’s how we identify and we actually measure kind of in our annual performance reviews how they’re doing in each of those categories for value alignment. And then of course, the performance is usually pretty easy to tell just by metrics that we might be measuring in that particular seat to determine what success looks like.

Alex Bridgeman:  What belief do you have that if you- around hiring and managing your team and managing people and culture do you think you’d get funny looks for if you shared with other HVAC or foundation or home service peers of yours?

Dave Thrasher:  I think the one that comes to mind, just like most companies in the last decade or more, probably the last decade where purpose really became a buzzword in business, and there’s lots of books about how purpose is important, and we kind of formalized our company purpose, I don’t know, 10 years ago or so. And we put together what we call a manifesto, and it’s our purpose statement. And we kind of articulate that in kind of a way that really paints a picture of how we want to make a dent in the universe and like what gets us excited as a company. And there’s a lot of fluffy stuff in there about how we want to help each other and how we want to make the world a better place. And we’ve integrated that into our hiring process. And so, if we get through an interview, and we like them, and we want to bring them back for a second interview, when they’re there for that first interview, at the end, we’ll pull out this kind of booklet, this little manifesto. And we’ll say like, hey, this is something that’s really important to us; it kind of talks through our purpose and kind of talk through what that means to us. And you sometimes get really weird looks from people. They’re like, man, I thought I was getting hired to dig holes for a living, and now they’re getting all fluffy with me here about how they want to change the world and be better moms and dads and all this different stuff. And I think you can tell a lot on if that’s going to resonate. And if that doesn’t resonate, they’re probably not going to be a cultural fit here. And we send that home with them. And then the person in the second interview is generally going to say, hey, did you get that booklet? Tell me what you thought about it, what was your favorite part? And if they like didn’t read it, or they just give some crummy answer, and you can tell it didn’t resonate, then that’s usually a red flag for us that they’re probably not going to be aligned with our purpose, they’re probably not going to get excited about the kind of nerdy culture things that we think are really important. And so that’s probably the most practical way that we try to gauge that, if that makes sense.

Alex Bridgeman:  Yeah. I was reading the Steve Jobs biography, and one thing that he would do is for early on hiring engineers, he would bring them to the prototype or whatever computer they were working on at the time, and if the engineer didn’t get excited or nerdy and like have this sense of wow, like you created this thing or did this with the computer, they wouldn’t usually be hired. Yeah, it’s kind of a similar idea. Within your focus around M&A and people, how do those two kind of fit together where a lot of these companies that you’re buying now will retain their own brand and management? How much around your core values as a company get looped into those new companies? And what type of alignment do you need to say that this is a good acquisition for us?

Dave Thrasher:  Yeah. So, most of the companies that we’ve acquired are customers of our Support Works supply company. So, we’ve had relationships with these companies for many years. So, we generally know a lot of the people. We have a general sense of their culture and how well it already either aligns or doesn’t align. And so that certainly makes a difference on when I said not every deal is right for us, there might be a company that like the numbers look good, but we just think the people aren’t going to fit. And that makes a huge difference on whether or not or how interested we are. And I think a big piece of that, too, is we talked about scaling and that we really use our- that we govern scaling the business by how many good people we can hire. And that’s where acquisitions, if you get the right acquisition and they have a bunch of value aligned team members, you can scale, if you buy a company with 80 employees, you can scale a lot faster than if you started one organically and you had to go hire a bunch of people off the street. And so that has been a huge piece of our growth strategy that’s allowed us to continue to scale at a more rapid pace because we’ve been able to buy companies that had a bunch of really good people that maybe, first of all, the company might have been run really well and all we need to do is just continue to kind of point them in the right direction. But a lot of times, if we were buying a company that was maybe a little distressed or the company just wasn’t run that well before, and we want to make it more profitable or help to grow it faster, it’s usually not that the people are toxic, it’s usually that they just didn’t have anybody giving them the right direction. And so being really transparent with them, this is what we’re trying to accomplish, this is what good looks like, this is where we’re going, goes a really long way. Like there’s not really a secret sauce. It’s just point them in the right direction, and then good people usually can figure it out. So, I don’t know if I fully answered your question because I started to pivot a little bit there.

Alex Bridgeman:  Well, what do you ask when you go to a potential acquisition to start figuring out how aligned their team is? What questions come to mind that you start asking?

Dave Thrasher:  Yeah, I would say we generally judge a lot by the management team. So, you can’t meet all 80 people when you’re doing due diligence. And a lot of times the seller doesn’t want anybody to know that they’re thinking about selling, and so you sometimes don’t get to see kind of under the hood or behind the curtain until you’re pretty far into kind of some LOI stages and different things. It kind of depends on the deal, I guess. But we will usually want to sit down with key managers, and we’re going to ask them questions about their business, about their philosophy, about their results, why it’s good, why it’s not. And I would say if there’s a lot of things are different here, it’s really hard, we can’t do that here, I know you guys do it there, like that kind of thinking is going to be a red flag that that person might not be a fit for our organization. But if they’re like, yeah, these results aren’t very good, but like, what would you guys do? How would you help? What do you think I should do? If they’re asking questions and they have an attitude of, oh, I don’t know, just an attitude that comes from a place of humility and a desire to grow and get better, then we don’t really care too much about how their actual, I mean we care, but we don’t care too much about their actual results as much as are these people that we can work with. We know how to run the business, we can point them in the right direction, we can help hold them accountable to getting great results. But we need to know if these are people that we can work with. It’s just trying to gauge that, I’d say that core value, humble, hungry, smart. You try to glean that the best you can primarily through the managers. And then you hope that the people that they’re leading will fit the same mold because you can’t talk to every employee when you’re doing one of these deals.

Alex Bridgeman:  Yeah, it sounds like you’ve refined your kind of diligence list from maybe a lot of different things to only a handful of things actually truly move the needle for you one way or the other. What things have gotten trimmed off your list over the years where actually this thing isn’t that important, and I used to think it was but now not anymore, this thing over here is actually much more important?

Dave Thrasher:  Yeah, that’s interesting to think about what’s been trimmed off because I’m sure there are some things. I’ll start with things that are for sure on the list. And for me, the two things that we’re generally buying that are really critically important is, one, the people. So again, if you can get- a lot of times, we know the people already, so we don’t need to go meet with them because we’ve already, as their supplier and their training kind of organization, we’ve already worked with them like intimately, and sometimes we’ve helped hire these people and we’ve helped train these people for many years. And so, we generally have an idea what we’re getting there. And so, I’d say what do we think of the people. And then the second one is less EBITDA driven and more, I’d say, top line driven, and like how valuable is their phone number? Like how many thousands of times is the phone ringing every year from people in that town that want this company to take a look at their foundation? And we know that if we get a phone call, that we’re pretty good at converting that call into a lead for our salesperson, that we’re pretty good at converting that lead into a sale, that we’re pretty good at getting the- teaching people how to put the work in the ground, and that sort of thing. And so, a lot of times, you might- I would say maybe early on, because I thought that if you read a couple of books, they’ll say like a multiple on EBITDA, and these are different philosophies for calculating value of a company, I used to think about that probably a lot more. I still care about that. But I care, for me, just because of the way our business is set up, I care more about top line revenue because I know even if it’s not as profitable as I think it could be, I’m confident I can get it there. And sometimes, I also am looking at like how many leads did they generate and how many did they squander? So, if their top line was 8 million, but they generated enough leads that if we just converted those leads at a reasonable rate, we could do 14 million, I kind of look at how can I value this business because I know they’re squandering opportunity. And so, I’d actually be willing to pay more for that company, whereas I think a lot of traditional investors might walk away from a deal because it wasn’t profitable enough or the top line wasn’t high enough. And so, for us, because we know how to run this business, if we know the phone rings at a high level, that part of their kind of brand is worth a lot to us.

Alex Bridgeman:  What other like rabbit holes around M&A have you gone down in the last year or so in terms of how you think about your M&A strategy?

Dave Thrasher:  Anybody that has done a lot of M&A probably has talked about or at least maybe if they haven’t talked about it, they felt the concept of deal fatigue. And deal fatigue for me is a real thing. It’s not only a lot of like mental and time investment in diligence on a deal and making sure it’s right, but there’s a pretty substantial emotional toll of most people that are in M&A are pretty competitive. And so you want to get the deal done. And when a deal doesn’t happen or it falls through for some reason, it can be really like a roller coaster of emotion of just like ups and downs. And I think the more experienced I’ve gotten and I think maybe just the more confident in our model, the first few deals were just kind of like, well shoot, if we don’t do it, then our competitor’s going to do it. And like we didn’t- it was blind leading the blind a little bit and so there’s just a lot more fear factor around it. And just the more we’ve done, the more comfortable we get, the better I am able to negotiate on an LOI and know that if it doesn’t happen, like there’s certain things that we just have to put our foot down and the deal goes sideways, that I don’t like let it keep me awake at night. And I used to just get wrapped around the axle emotionally around like if we had to get into a tense negotiation with the seller. And so, I think probably just being able to take a step back and say like, I want to get this deal done. And I also have learned probably there are certain things that are hot buttons for somebody that in the grand scheme, I need to like set my ego aside and not dig my heels in and like potentially blow the deal. Like the seller’s emotional, it’s their baby, they’re going to have certain opinions about things that you might not agree with that sometimes it’s like it’s not that big a deal, just they think that this tractor is worth a little extra, just pay the extra 20,000. It’s a $10 million deal. And I used to just be like that tractor’s junk; I don’t think I should have to pay for that or whatever. And you get your heels dug in on stupid stuff. Or sometimes the lawyers will get their heels dug in on some sort of nuanced contract piece of contractual negotiation that is really never going to happen or you think is a very unlikely scenario to ever happen in real life. And just realizing like let’s get the deal across the table, let’s not major in the minors, and let’s also not let our identity be wrapped up in if this deal gets done. Like I’m still going to be a good person, I’m still going to have a wife and kids that love me. And I want to have employees that are willing to work really hard for me if this deal doesn’t get done. And I think it sounds maybe silly, but I think the reality is there was a long time in my life where winning at work was a big part of my personal identity and going through a process to realize that life is way bigger than me. And this one particular deal or whatever is not going to make or break my significance in life has made this whole process of M&A much more palatable. And the fatigue is a lot less than it was in the early days.

Alex Bridgeman:  Yeah, what’s helped you get over that fatigue and sense that this is the most important thing or winning this deal or that deal, what’s helped you get over that?

Dave Thrasher:  I think there’s probably two sides to it. The personal side would be a lot of soul searching, a lot of trying to like think through what I was idolizing in life and like where my identity was and just like a lot of internal soul searching that has happened in the last decade for me that was kind of forced on like you don’t realize that you need that until it’s a little bit unhealthy and then you have to start digging in a little bit. But I think the other side may be more on the business side is first of all, we started to have more success with the model. I feel more confident in our ability to do the deals. I feel more confident in, if the deal goes sideways and somebody else gets it, we’re still going to be fine. We don’t need to get them all. We’re going to be fine. We’ve got a great business. I don’t need every single deal in order to be successful. But I think this concept of Simon Sinek wrote a book called The Infinite Game that really resonated with me, and he talks about worthy rivals and not looking at your competitor as somebody that you have to just beat and they have to lose in order for you to win. And that like we can all win in our own way and kind of do our own thing, and we don’t need somebody else to be a loser in order for us to be a winner. And just some of that kind of like more infinite way of thinking about why we’re here and what our business is about, and it’s less about needing to win every single deal and it’s more about just like trying to do things for the right reasons. And so yeah, those are the things that come to mind.

Alex Bridgeman:  Yeah, it sounds a lot like kind of a scarcity versus abundance mindset as well. There’s an abundance of opportunity. If this one doesn’t close, there’s going to be another one. You’re going to have more shots. What’s a strongly held belief that you’ve switched your mind on?

Dave Thrasher:  Yeah, I just referenced The Infinite Game, and I think that book, I read that maybe two or three years ago, and it really shifted my thinking around- so I grew up in our business and even my career before I came to work for the family business in sales. And so, I think, as a salesperson, winning and losing a deal ingrains this kind of winning and losing mentality. But I think early in my career, I always thought my competitors were garbage and like just I couldn’t stand them. I thought they must just be terrible people, they probably do bad work at people’s houses or whatever. And so, the more time has gone on and the more I’ve kind of thought about business as an infinite game that like never ends and there’s not necessarily winners and losers, it’s who can outlast, the more I realized like, there’s certainly some bad apples out there, and there’s certainly people that maybe aren’t value aligned and are in business for reasons that are different than mine that don’t align philosophically, but most people are good people just trying to make a living and they might do things a little bit different, but as times have kind of come and gone and I’ve done business with people that I used to be in competition with, I realize behind the scenes, everybody’s just trying to do the right thing. And sometimes if you’re maybe not doing a great job in your business, it’s not because you’re not trying hard. It’s just because you didn’t know how. Like if we had a competitor that didn’t show up on time, and I’d be like, oh, man, they’re a terrible company, it’s like, well, I don’t know. They’re probably good people, they just don’t have a good CRM that told them where to be at what time or whatever. And so I think just realizing that my competition is a worthy rival and not somebody that I should despise is probably my biggest learning from early career to now.

Alex Bridgeman:  Yeah, that’s definitely a healthier outlook for sure. What’s the best business you’ve ever seen?

Dave Thrasher:  I think I’ve referenced Berkshire Hathaway already a few times. I think, as a person who really thinks that the world is a better place when there’s a longer-term strategy on how we think about business, there’s just no better company than Berkshire when it comes to holding things for a long time and showing the power of compounding growth over a long period of time. And if you stick with something for a long period of time, and you do it the right way, and you hold it forever, it can build up, it can create something really remarkable. And so, I think from kind of an inspirational standpoint, that would be for sure one, and by the way, when you’re from Omaha, you have to root for Warren Buffett with the home team. But the other thing I would say for that, and there’s not necessarily one particular company, but I would say, so I’m G2, my parents started the company, my kids are still teenagers, who knows what’s going to happen with them from interest or ability to work in our companies. But I’ve really started to try to meet with and really started to admire multi generation family businesses. I had the chance to meet the CEO at White Castle, they’re like a five or six generation fast food joint, or Enterprise Rent a Car, or some of these companies that have really seen scale through multiple generations. And I’m starting to realize how difficult that is and the different kinds of challenges to think about, like how can I set up Gen 3 for success, to not have infighting or to have a crystal clear estate plan that makes sure everybody understands where they fit in and how it makes sense for them to want to stay in and then have that set up so that they can get to G4 and G5 I think is a really unique challenge that I don’t have figured out yet. But I’m really inspired by any companies that have kind of gotten past G3 because I think that’s really remarkable when you can do it.

Alex Bridgeman:  Yeah, once you figure it out, we’ll have another podcast and talk all about that.

Dave Thrasher:  There you go. I’ll probably be gone, but you can interview my kids.

Alex Bridgeman:  Yeah, certainly. Dave, thank you so much for coming on the podcast. I always enjoy getting to chat with you. So, thank you for sharing your time and sharing about Thrasher.

Dave Thrasher:  Yeah, thanks for having me. I loved it. Appreciate it.