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Jim Lindstrom – Lessons from Being a 3x CEO – EP.245

Jim shares insights on governance, operations, capital allocation, team alignment, and business simplification, drawing from his extensive experience in various leadership roles.
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Episode Description

Ep.245: Alex (@aebridgeman) is joined by James Lindstrom (@James-Lindstrom).

The episode features Jim Lindstrom, a seasoned CEO with experience in leading companies like IES, Providence Services, Motive Care, and Verdian. The discussion covers his experiences with accelerating company growth, executing turnarounds, managing balance sheets, and strategic value creation. Jim shares insights on governance, operations, capital allocation, team alignment, and business simplification, drawing from his extensive experience in various leadership roles.

Listen weekly and follow the show on Apple Podcasts, Spotify, Google Podcasts, Stitcher, Breaker, and TuneIn.

Learn more about Alex and Think Like an Owner at https://tlaopodcast.com/

Clips From This Episode

Discovering a Company's Opportunities Before Becoming Involved

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How Do You Manage Cyclical Businesses?

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(00:00:00) – Intro

(00:03:55) – Is there a model you try to follow as a new CEO in the early days?

(00:07:26) – Identifying problems and meeting philosophies

(00:13:37) – Encouraging urgency

(00:16:54) – James’ first executive role

(00:21:54) – Formative career experiences

(00:25:26) – Preventing layoffs

(00:31:15) – Discovering a company’s opportunities before becoming involved

(00:37:11) – How do you approach a turnaround?

(00:43:21) – What is a “normal” level of company debt?

(00:47:53) – How do you manage cyclical businesses?

(00:52:27) – Fostering imagination

(01:00:39) – Are there any industries you would stay away from?

(01:02:40) – Advice for CEOs

Alex Bridgeman: There’s actually a tweet that I saw recently that I would enjoy your take on. Shaan Puri had a tweet about hiring a new CEO for one of his companies, and that CEO was starting to do the typical kind of like get to know everybody, learn their systems or get logins, and then start creating a master plan or vision. And he told them like… he told them about a different CEO who took over GitHub, and the first day 8 am call with the whole team, he screen shares just a list of 100 customer issues and customer complaints and says, we’re just going to solve one of these every day. We’re going to pick one and solve it for the next 20 days. So today, we’re going to pick one. And it was an interesting take on setting the tone, focusing on customers. And then I would imagine you would quickly figure out who can fix things, who can solve problems, and who can’t. That’d be an interesting way to learn more about your team. And you’ve been the CEO now of three companies, maybe more, many of which you joined as they were already, like they were already an existing business, and you came in. And I would enjoy your take on the kind of first day, first week, first hundred days, is there a style or approach that you’ve tried to follow or maybe you’ve refined over time for how you approach that early period? 

James Lindstrom: Yeah, it’s a good question. Every situation is obviously different. You have people coming in who’ve been elevated sort of internally, who already know the ropes and the cadence and the culture of the business and the issues. So that’s a different approach than someone coming in from the outside and maybe outside the industry, like me. But also, even within someone who’s coming from out the outside, I’d been on the board of IES for probably six or seven months before I jumped into the interim CEO role. So, I kind of knew what was going on, knew the issues. So, it was a nice… it wasn’t like I was just coming in cold. So, we had already been jumping on to some of the issues that we were dealing with at IES like very, very quickly. We were just able to move much faster and really place a new sense of urgency on some areas. So, in that instance, it was very much, here are the, almost like the GitHub example that you gave, here are the issues that we’re dealing with. And they weren’t necessarily customer issues. They were more operational issues. And so there was a high degree of focus on that. We weren’t stepping back and like thinking about strategy or capital allocation or anything like that. We were really about hardcore operational focus at the beginning. If you contrast that with a company like Providence Service Corp that I came into, I actually spent a number of months at the start as CFO and was prepping to step into the CEO role. So again, I didn’t come in and we didn’t have a whole bunch of issues besides integrating businesses that over the past year had taken us from a billion to two billion in revenue. So, there were a lot of operational issues, but it was around like how do we get the 10K out with a billion dollars of new revenues coming in from around 14 different countries. So that. And it wasn’t until I became CEO a handful of months later, where I’d already spent time with the business, spent time with the leaders, learned the issues, where we’re able to press the accelerator down on what the urgent issues might be. So, I’ve been sort of blessed and fortunate to have an inside look before I’ve stepped into the seat, which certainly helps. I think outside of that, coming in as an industry outsider, which I typically have, I’m a bit more in sort of listening mode and focused. If I’m going to talk about anything, it’s talking higher level strategy, values, culture, sort of my process and how I work, versus we need to do X, Y, and Z. Because I want to hear from all the stakeholders, customers, employees around what the issues are. And a lot of the times, you’ll hear the answer that you’ll be pursuing months later during that sort of listening tour, for lack of a better word. 

Alex Bridgeman: Is there a favorite question you like to ask people to understand kind of what the problems are, like maybe one or two that you can kind of get to it quickly? 

James Lindstrom: Oh, I think the you’re the owner, you’re in charge. What are the number- what are the top three things that you would change immediately? That’s one. The second one is, what do you think we do really well? Where do we excel at, and where do we waste time? What shouldn’t we be doing? Because I found a lot of companies spend a lot of time spending a lot of effort on stuff that doesn’t really add value. It’s not bringing in revenues or profitability or making someone’s life easier to do their job better. I think those are probably three areas that I dive into. 

Alex Bridgeman: What are some common things that you find, common activities that companies you see are doing but they don’t add any value? What are some common ones you come across? 

James Lindstrom: In general, a lot of meetings, a lot of quantitative analysis, sheets and sheets and sheets, and PowerPoints and PowerPoints and PowerPoints, that, when I step back and you look at, in my meetings with like the best investors in the world, they’re very much able to sort of zone in on the top one, two, three levers of a business. And so, if you can do that operationally and get people really focused on those key levers, that helps focus everybody. You don’t want to overwhelm everyone with 15 pages of KPIs and monthly meetings that would take up three days, which is three days out of 20 working days for people who are generating real value and meeting with customers and delivering revenues. Like that’s too much to have a monthly meeting. So, I encountered that, like where the CEO would have everyone fly into headquarters, it’s probably 30 or 40 people, and for three days a month. So that’s 15% of the month, that’s huge, where you’re not generating any revenue. 

Alex Bridgeman: So, what’s the fewest meetings you’ve been able to get away with? Like how do you cut that down? What gets cut and what stays? 

James Lindstrom: Yeah, it’s also a tough balance because you want people to feel like they’re part of something bigger and understand other aspects of the business that might be going on, particularly in corporate. So, I try to have recurring meetings no more than once or twice a week per company. Now there are some groups that go on, but the ones that I’m involved with, hopefully it’s not more than sort of one per group per week or every couple of weeks. 

Alex Bridgeman: How many meetings per week would you typically have? And when was it too many? Is there a number you hit where you start feeling like you’re falling behind because you’re in too many of them? 

James Lindstrom: I think if you’re having… I mean, I have friends who are in back-to-back three or four or five a day. I just never approached that. So I don’t know. I feel like I haven’t reached my limit ever. I feel like I’m pretty disciplined about keeping it down. 

Alex Bridgeman: What are some things or processes, methods, systems that have helped keep the number of meetings down? Like how do you encourage a company-wide lean towards fewer meetings? 

James Lindstrom: Well, it’s getting easier now. We use Slack in all of our companies. We also use Jira or Asana, depending on the company. So, we’re kind of in constant communication throughout the day or night or weekends, and on our phones as well. A lot of us can do a lot from our phones, or mini computers, as they should be called. So, yeah, I think those technologies help us keep in more constant contact and collaboration and even Slack. You can video on it and do a group meeting instantly. So, that’s good. But there’s nothing replacing in person gatherings as well. So we get together at a minimum once a week in person. And just, we only have one, maybe two meetings, but just being around each other, I think, helps as well to mitigate the meetings sort of when you’re not in person. 

Alex Bridgeman: When you say running, like our phones are mini computers, it makes me think of Mark Cuban running his companies just from his phone. Like he wouldn’t be on his laptop, he’d just be straight off his phone. I’ve tried to do that more. There was a funny quote I heard of someone talking about like generational differences where we would, like 25 and older today, instead of buying, like making a major purchase on your phone, you’d go to your laptop to do it. And I’ve done that for most of my life. Like I’d go buy, like if I was getting an airplane ticket, like I’d buy it off my laptop instead of my phone. Which it’s dumb, like there’s no reason to now because everything is just as easy on your phone. But that kind of made me chuckle. 

James Lindstrom: Yeah, it’s a whole new world. I mean, on the weekends, I can sit out and have my coffee, and I might be on my phone, and this weekend, I’m on Help Scout answering some questions for one of our companies, like with a customer. On my phone, I’ve got Stripe, I’ve got project management tools, I have access to our mobile learning system, so it’s all there. 

Alex Bridgeman: Yeah, it’s pretty amazing. You mentioned you like having a fast pace. What are some things you’ve done to show that you want to encourage a fast pace internally? 

James Lindstrom: Well, I operate with sort of I call it a short-term urgency but a long-term vision and long-term goals. So, we’re very patient in some ways, because sometimes businesses just take time. And they take luck for someone to discover maybe what you’re doing, and you have no control over it. So, in terms of the short term urgency, that’s just how I operate. I just love what I do. I love business.  I love talking to people about it. And so, I’m just sort of built that way. I can’t mandate or do anything for the team around that. I think I probably went through a long period where we would have meetings after five o’clock and I would ping people on the weekends. But I think over the past five or so years, that’s really toned down. Because I think I’ve become a lot more empathetic towards other work styles and priorities. And yeah. And plus, it’s really tough to find good people. And when you do, you’ve got to be respectful of that. And also, having been connected in different ways, we can adjust to those work styles. And I can work sort of with urgency on a Friday night if I want to or first thing on a Sunday morning. And other people don’t need to have that same cadence. I’d love to find people with that same urgency and obsession. But we don’t mandate it in our companies. I think companies take- some people operate that way. Maybe it’s a third, maybe a third are nine to fivers, and a third are somewhere in the middle. And I’m okay with that. Yeah, we’re not like some companies where like everybody needs to be 110% obsessed with what we do. 

Alex Bridgeman: Yeah, I’ve got a couple of friends who they use Slack in their companies too, and they’ll have thoughts and ideas that they want to share with someone on their team over the weekend, and they’ll write out the Slack message and then schedule it to send on Monday morning. In that moment, they can still like know that they’ve gotten that idea shared or that concept or feedback. But it’s scheduled for later, so it all just kind of happens automatically for them on Monday, which I thought was pretty savvy. I love being able to schedule emails and do that same thing. It works really well. When I have time to answer certain things or send certain emails, I can do that at one time, but have it send for later in the day when I’m in a bunch of meetings and won’t be able to physically send the email. So, stuff like that’s savvy. 

James Lindstrom: Yeah, I think it’s being a little bit more respectful of people’s time. And now you can do it on text too with iOS 18. 

Alex Bridgeman: I haven’t tried that yet. Does it work pretty well? 

James Lindstrom: Yeah, yeah, yeah. It works. I think. I haven’t been on the other end that I know of. 

Alex Bridgeman: I want to test that later. I would love to kind of dive into some of the value creation moves and levers that you use. And you’ve got kind of four key categories that you’ve laid out, strategy, governments, operations, and then capital allocation. I’d love to hear about like how those interact and maybe how you’ve used them at some of the companies you’ve run. 

James Lindstrom: Yeah, sure, where do you want to start? 

Alex Bridgeman: Maybe at the beginning? Is IES probably, is that the earliest CEO role you’ve had? 

James Lindstrom: That is. I was CFO of a public company when I was 29, which I learned a lot about then, but then also before then, I was at a company called ChiRex, which we took public in ’96 and sold in 2000. That was a pharmaceutical outsourcing company. 

Alex Bridgeman: You were a CFO at 29 of a public company? That’s impressive. 

James Lindstrom: It was a very tiny public company. 

Alex Bridgeman: They publicly traded, nonetheless. 

James Lindstrom: But it was like all my other, I think, roles. It was probably a role that wasn’t high on the list of a lot of other maybe really good CEOs, so that’s how I ended up there. Yeah, so maybe we’ll start with that one. It was called Kankakee Federal Savings and it had been around for many decades. It was about an hour south of Chicago. And there was an activist in it, last name is Seidman out of New Jersey, who was an activist in bank stocks. And the person who had been a shareholder of ChiRex, which did pretty well when I was there, recruited me to become CFO, and my old boss from ChiRex became chairman. Because he was like, I don’t want to sell this company. It should remain independent, should remain- there’s a lot of value in it. And so I came in as a CFO and worked to recruit a new CEO. We focused a lot on the operations and disposing of some of the businesses that maybe weren’t working so well, and then moved into acquisitions before we merged it with another bank from another small town in Illinois. But some of the things that I saw were probably a deficiency in systems. I remember walking in and seeing an assistant controller doing a lot of the accounting by hand in a public company. Granted, it was 2002, 2003, but Excel was around. Excel was around. So, that’s one area. There certainly wasn’t sort of a big focus on capital allocation. I ended up taking over and leading the IT group as part of a lot of my operational duties. And again, there was an antiquated system that our whole frontline was working off of that needed to be converted and replaced with a new system. And so, we made that investment, and that made everyone’s lives on the frontline that much easier and that much more efficient. So we not only had to make things more efficient from a cost point of view, but from a productivity point of view as well. I think that sort of translated in or those type of discoveries are what I have seen in other businesses, right up through my most recent public company CEO stint was at a company where we had a billion dollar division. And a good example of what you discover when you start to peel back the covers was, one big example is we had 20 different call centers around the US, and we had 3,500 people working in the call centers. And there was no workforce management system around the staffing and scheduling. A lot of it was done on Excel. And workforce management systems have been around for 10, 20 years. And so, a major undertaking and a real pain in the butt. But when you take sort of that, have that longer term vision, the longer term approach, and you can see sort of, you look at, put on your capital allocation lens and say this is the investment, this is the payoff, there are a bunch of intangibles to think about as well, like we’re going to make people’s lives who are working in the business better because we can give them better visibility into their schedules and it’s less hectic and there’s more clarity, then it’s a pretty clear answer to make a major investment like that. A real pain to convert and to do things like bank conversions, but it makes sense longer term and from a financial point of view. 

Alex Bridgeman: Yeah, the doing accounting on paper sounds like an experience that would stick with you for a while. Are there other formative early career experiences you had that kind of created a new worldview for you at one point? 

James Lindstrom: Oh, I think it’s mostly around people. I mean, I think discovering opportunities to make businesses better is really exciting, and it’s exciting for the stock price and the value of the business. But I think when you ask the question and you say the formative, I think the biggest, most formative sort of issues are when you’re talking about your interactions with people. So, on the really tough side, when you have to let go of a whole group of people that have been part of a business for several years, and by no fault of their own, because of the misguidance of probably management and the board, you now have to be the ones to separate from the business with them and sit across the table and separate from them. I’ve had to do that a few times, and it’s horrible. And it is obviously much more horrible for the person it’s happening to, but it’s just a horrible situation. And most of the time, it can be prevented. So that’s something, unfortunately, again, I’ve had to go through and had to see families go through. And I feel like everyone should sort of experience that because we all get- a lot of people, particularly some of your listeners who come from a finance background, we all look at the spreadsheets. And you can’t just focus on the spreadsheets. You’ve got to focus on the qualitative and the quantitative. And part of the qualitative is the lives that are involved in these businesses. Now on the other side of the spectrum, when you talk about performative, the best times, this is going to sound very odd, that I’ve had in businesses is when I’ve had a handful of people picked off by other companies, not competitors, because that would tick me off, but by other companies where they’re leaving for bigger jobs and getting paid like 2x what we’re paying them. So we lost our head of IT at IES to an energy company where he was going to go from making X to X times two. I lost someone at Providence Service who went on to work for one of the big 3G companies in a very high profile role. And he was in his 30s and he was being recruited by the CEO of one of their companies. So, when you see that and you see someone who maybe you had some sort of formative influence on get recruited into these big roles, it’s really super exciting to see people get recognized. And it hurts to have them leave, but you’re like, wow, I’m so excited for that person. And so, creating those environments where we can really set people up for success and then see them succeed, it’s like having, it’s like watching my 12-year-old child do really well on the field hockey field or seeing your kids take the next step. It’s just really, really, really rewarding and a great part of being a leader in a business. 

Alex Bridgeman: You said earlier that layoffs can often be prevented. What do you mean by that? What have been some efforts that have helped maybe redirect jobs somewhere else in the business earlier on before you’re kind of out of options? 

James Lindstrom: Yeah, yeah, I think there are a couple areas that lead to that. So, one is poor strategy. I ran a business where I was the sixth CEO to come in in under 15 years. And there were a number of strategic steps that were continually redone around sort of the integration of this business. And they built up an 80 plus person headquarters to take more responsibility from sort of the field operations. And that’s a strategic call. Like that means, all right, we’re going to start controlling supply chain centrally. We’re going to start controlling more of finance or customer service, whatever it might be, scheduling, operational scheduling from one location, because we think we can do it better. And then that takes place over a number of years. You start hiring people. Those people start hiring more people and assistance. But then you get a few years later, you start to realize, this is not the right model. This is not working. We’re losing revenues. We’re losing people. Our centralized headquarters is not connected with the business. And so, all these people that you’ve hired, or maybe you’ve moved their families to one central location, you now have to let go because it’s not working. If you keep that going, you’re going to continue to damage the business. Or capital allocation. I want to buy back, I’m a CEO and I want to buy back $500 million worth of stock or a billion dollars worth of stock over the next few years. And yeah, I’m going to take on some debt to do that. Well, all of a sudden, your stock maybe starts to not do so well, your operations start to not do so well, and all of a sudden, you have a debt issue. You’ve got a capital structure that’s not working. So you’ve made a strategic and capital allocation discussion or choice and that debt becomes an issue for you. And now how do you fix that? You’re going to start cutting costs. And what are those costs? It’s your vendors, it’s your employees. And so those decisions are directly affecting people’s lives, and they’re probably affecting your customers as well. So, there are a lot of implications from those choices. 

Alex Bridgeman: How do you go about designing an effective strategy? Like if you think of the opposite of some of those decisions, where does a good strategy come from? 

James Lindstrom: Yeah. I think you really need to look at sort of what makes the core of the business what it is and what makes it special. Like, why is the business where it is today in sort of the most successful areas? And there’s an author, a professor, I think he’s in Virginia, Edward Hess, who’s written a few books, and it’s all about organic growth. There’s a Bain consultant who’s written a few books too about profiting from the core. I think it starts from you’ve got to understand what are the core drivers of your business, what’s working, and then reflect on that to inform strategy. Because to come up with new strategic ideas, if you haven’t reflected on what’s working, you can easily run down a lot of rabbit holes and waste a lot of capital and time. And I’ve just seen a lot of businesses try to alter strategy from that core focus and it not work out. So that’s how I think about it. But even I run down rabbit holes. And a lot of other people do. So that discipline of focusing on the core, but also thinking about innovation in the core, if you can do that, I think that’s a great way to go about it. That’s also recognizing that there are certain, when I think about strategy, you think about also, this is where you’re sort of blending in cap allocation. Like what are the right types of businesses, you put on your investor hat, that you really want to get behind over the longer term? And so, thinking about and integrating into your strategic thinking, what keeps those customers coming back to make this revenue sort of recurring. What makes us, what is our competitive advantage that gives us, that makes us a smart capital allocation decision and a good investment decision as well? So that definitely bleeds into sort of the strategy also. 

Alex Bridgeman: And this is kind of a good segue into looking at the opportunities that a business has before becoming CEO. You’ve had the chance to be on boards of companies before becoming CEO, so you had a pretty good inside look at what was going on and strengths, weaknesses, opportunities for any company. And you’ve also bought companies that you weren’t involved in prior. What are some ways you’ve sought to understand what is the opportunity that this company X has in front of it without prior involvement?

James Lindstrom: Yeah. So obviously, you’ve got to understand the industry and the industry tail winds. Hopefully there are tail winds because it’s a lot easier to operate within tail winds. There’s no surprise there. So, talking with industry insiders. I don’t really have an industry expertise per se. I’ve done a lot of B2B service type businesses or software. But understanding that. But that’s what everyone does. And they’ll hire consultants and we’ll talk, we’ll all use GLG or AlphaSites or whoever to talk to experts and get an understanding. And we’ll go through sort of the checklists that everyone goes through in terms of recurring revenue and asset light and blah, blah, blah. I think probably the maybe the area that I spend time on, which maybe other people don’t as much, is I spend a lot of time on the people within the business and the people at the competitors. So, LinkedIn is just a phenomenal tool for this. Like you can go in and you can see, who are you competing against? And what’s the turnover like there? Are you competing against Stanford MBAs who are major league players? Are you competing against single A players? Who’s the team of the company that you’re getting involved with? Is there a lot of cultural turnover? Is there something there that just where it’s difficult to build a talented team? Are you inheriting a bunch of single A players, and you’re competing against a bunch of major league players? That’s not something you necessarily want to… That’s a really tough, that’s a tough putt. And so, understanding your team and your opposition from a personal point of view I think is one of the areas that I’m not sure people really spend as much time on versus recurring revenue, like the checklist that we’ve all been trained in. 

Alex Bridgeman: Have you found any ways to… because a concern would be if you’re going to buy a company, talking to existing employees, the seller may not like that, but also, they may not be that excited to talk to you. But I’ve heard of people who would pretend to be outside consultants and talk to current employees and figure out what’s going on that way and then later on, of course, reveal that they bought the company. Have you done anything like that, or do you engage employees before buying? What’s been any, if any, process there? 

James Lindstrom: Never. No, never engaged any consultants to talk to employees. 

Alex Bridgeman: You would pretend to be a consultant. 

James Lindstrom: Oh, yeah. No, no, no. No, that just seems a little… No, and I think that would violate the NDA, any good NDA as well. So no, that’s never happened. Everything sort of goes through their advisor and their owner or CEO. But you can tell a lot from LinkedIn. You really can. You can see areas like turnover, growth, the backgrounds of people, where did they work, where did they go to school, how long have they been there, what’s the churn, turnover in the workforce. So I think that, frankly, it sounds so simple and easy, but it tells you a lot. And you can talk to customers. You can hire, and that’s what we’ll do. Again, depending on the situation, we always want to do it above board, but that can tell you a lot as well. The other thing is going to conferences. You pick up a lot of, quote unquote, scuttlebutt by going to conferences and just walking around the booths and hanging out at the bar. And you find out a lot that way as well. So, a lot of times, if you just call up a customer, they’re just going to tell you, oh yeah, they’re great. So, to find the truth, you’ve got to be creative and entrepreneurial. 

Alex Bridgeman: Yeah, I found industry subreddits are also pretty helpful. In fact, if you type in that subreddit and then add a company name, you can often find people talking about that company and they might say like, oh, this company was horrible to work with. I always recommend Company Y. And then someone else is like, yep, plus one, Company Y is great. Okay, that’s interesting. A little scuttlebutt there. 

James Lindstrom: Yeah. Glassdoor is great, the review sites, if you’re dealing with software, G2 or Clutch or Capterra. Those are all helpful insights as well. So there’s a lot of them. Google reviews, perfect, yeah. 

Alex Bridgeman: Are there any interesting corners of the internet you like to look up things to learn more about a company? Any interesting tricks of the trade you’ve learned over time? 

James Lindstrom: I think we probably hit most of them. My biggest thing is, as I’ve mentioned a few times, is LinkedIn. If you’re dealing with overseas companies, I do some stuff in Europe and the UK, so there’s Companies House. So you can see all their filings on Companies House, which is interesting. I don’t spend a ton of time on Reddit or not doing any sort of dark web stuff. Maybe I should. I don’t know. 

Alex Bridgeman: I haven’t done any dark web stuff. That’d be interesting if there was any kernels of information though. You also have had- I’m curious about turnaround specifically, given your IES experience, but would you talk maybe about your approach there? Because your approach in a turnaround would be very different from a company that’s growing and is having success and just needs to go a little bit faster or add a couple of key roles. In a turnaround, what’s been your approach in running that situation? 

James Lindstrom: Yeah. And so, the turnarounds that I’ve been sort of involved with, they’ve mostly been listed companies that are B2B, or I guess the bank was B2C as well, but own sort of different businesses and have, again, grown through, a lot of them have grown through acquisition. And so, I guess the common theme that I’ve seen is, what happens is, you might have a good company and they start to grow. You’ve got that good sort of core growth business, but eventually, you have a hiccup, or Wall Street might want more growth or diversification. You start to get these other influences, and people start to buy other businesses. And most operators don’t have a background in investing. They’re not used to looking at acquisitions and investments, and their board probably isn’t set up that way as well. And so they start to get seduced by Wall Street and buy other companies. And that might work for a while, and they get some growth going. But eventually, the music stops. It might take six months or a year or it might take five years. And so, I’ve gone into situations where typically that’s happened. And so the result is you’ve got to figure out which of those businesses are worth keeping and which aren’t and which can be fixed. And sometimes the core business needs to be fixed as well because management’s taken their eye off the ball with the core business. So, I think you’ve got to focus on the core business, but then also the portfolio of companies that maybe you’ve inherited. So, yeah, that’s sort of a high level approach of how I think about it. 

Alex Bridgeman: Within maybe IES being the most obvious example, what were some non-core businesses that were within IES that you sold off? 

James Lindstrom: We actually didn’t sell off anything that I remember. Actually, I think we closed down a few locations where there was probably a history of losses and the inability to replace that local leadership team with a new leadership team that we had confidence in turning around that smaller business. It’s very difficult to bring in people from the outside in a lot of businesses and have them, particularly in service businesses and B2B services businesses, to have them sort of right the ship. Because if they were that good, they probably already have a business themselves. If they’re 45 years old and they’re really good, they probably already are doing quite well with their own business. So, it’s really difficult to do. And to sell a loss making to the business, unless you have sort of extraneous costs that are obvious to a private equity firm, it’s tough to do. And if it’s that obvious to a private equity firm, it’s going to be that obvious to me and my team. So we just do it ourselves. So, at the following, at the company I went to afterwards, Providence, we did sell some businesses and for a couple of different reasons. At the end of the day, there might have been a buyer who was more excited about the potential business than we were. They had sort of a new angle about where they could take a business strategically that we just didn’t have sort of the confidence in. And so they placed a higher valuation on it. So yeah, we sold a couple of businesses when I was, actually three at Providence when I was there. 

Alex Bridgeman: Was Providence, was it profitable at the time? 

James Lindstrom: Oh yeah. No, we were, I mean EBITDA-wise, we were north of $100 million in EBITDA. 

Alex Bridgeman: Okay, so that was kind of one less challenge to figure out then. 

James Lindstrom: Yeah, we just had $600 million in debt that we had to deal with, and some businesses that we just weren’t as confident in as maybe some of the buyers out there that were more interested in how great they could be. We were probably trading at six, seven, eight times EBITDA when I got there. I don’t remember exactly. The first business we sold was at 15 times EBITDA. So, I put on my operational hat, I knew the challenges of that business, and the capital allocation hat. I said, all right, I can sell this business, I can pay down debt to a reasonable level that I’m comfortable with, and I can buy back stock. And so, we bought back I think 20% of the float in the first 12 to 18 months I was there. When people weren’t paying attention, they saw a new CEO who came in who was probably 43 at the time, who was outside the industry. They’re like, who is this guy? We’re not going to buy a bunch of stock here. But I saw the potential of the business and the core businesses and where we were trading. And so, we piled a lot of cash back into buying the stock and bought it ourselves and worked out well. 

Alex Bridgeman: So is that how you- you said 600 was probably more in debt than you would have preferred. What would you consider a normal level for you at that point? What were you trying to get to? What was your goal? 

James Lindstrom: Oh, I don’t remember what my goal was, but we ended up with a hundred million. Before, when I left, we ended up with no debt and a hundred million in cash. Fast forward to today, they’re at somewhere around a billion, back to a billion in debt. And I’m not sure what their cash level is. And I think they project maybe 170 to 180 of EBITDA. So, they’re back to the situation, and the stock reflects that. That is, yeah, not where it was when I left. Put it that way. 

Alex Bridgeman: So, you had no debt. That seems fairly unusual for a company that size. 

James Lindstrom: Yeah, well, we were putting the cash to work. We were putting- and it was a recurring revenue business, asset light, like a lot of great aspects. And so, we bought back, like I said, a lot of stock. And we were looking at acquisitions as well. Nothing crazy, but businesses that would have put a hundred million to work. 

Alex Bridgeman: So, the fact that you were at no debt, is that kind of a personal value of yours that you try to be at very low or no debt in any company? Or is that more just a reflection of the company at the time? I think a little bit of debt would be fine and helpful. 

James Lindstrom: Oh, definitely. No, I think running most businesses that I look at, a turn or two or three is fine. But every situation is different, and timing doesn’t always exactly work out. Sometimes you have to carry, you might be at four or five times, or you might be at net cash. So, ideally, for most good businesses, yeah, to run some debt is fine. I think my old mentor that I worked for for many years would say it’s good enough to- gauging the right debt level is, you think about it during the day, but it’s not keeping you up at night. If it’s keeping you up at night, you’ve got too much debt. And another thing to think about is there are other liabilities that don’t show up as debt, that keep you up at night that you need to think about. So do you have customer concentration? That has the same risk effect, and so that keeps you up at night, and obviously you’re not going to get a lot of debt if you have a customer concentration. Sometimes you might look at a public company and you see they don’t have much debt or they have cash, but they might have other issues that maybe they don’t want to be in a debt position. 

Alex Bridgeman: Were there other debt-esque liabilities you would have and would keep you up at night besides like the customer concentration one? That’s an interesting example. Are there others that come to mind kind of like that too? 

James Lindstrom: There could be a regulatory issue. I mean, if you’re in the healthcare area, that could be a regulatory issue that might be looming over your head. So that can be common. There could be an industry trend that might be an issue. You could have, if you’re in a project-based area or construction, jobs that you take on, you might find yourself in trouble or underwater with regards to a certain contract. You see that a lot in the construction industry, and that’s what happened to create a lot of trouble for IES historically before I got there. It wasn’t so much leverage. It was taking on, chasing growth and taking on projects that ended up not doing so well. You see the same sort of dynamic in asset management industries like insurance. Like Charlie Munger talked about this, there are times when you want to be writing insurance and times when you don’t. And having the discipline around that dynamic, like you don’t want to be writing insurance at the top of the market. Because you’re taking on a lot of risk. You want to write it when no one else is and you can get pricing power. So those are just a few examples, I think, to think about. 

Alex Bridgeman: How have you run companies that were in cyclical industries? Like how do you approach cyclicality and manage it? It seems like low debt is one answer to that question. 

James Lindstrom: Oh, for sure, for sure. No, I think I was just at dinner Saturday night with someone who their family has a multi-billion dollar chemical company. And no, debt is the killer in commodity type businesses. And so, owning them outright, you really better understand that cycle and your capital structure and see, have the ability to pay down the debt before everybody else figures it out because things can move quite quickly. But sometimes, like IES, for example, they have exposure to cyclical industries. Residential construction is a big part of their business, and that’s cyclical. The housing industry is cyclical. But sometimes, those runs go for a long time. How long has Texas been in a super construction building cycle for single-family and multifamily homes? So, it can last a while and far beyond your own expectations. Or the data center business as well. In 2011, we were very excited about it. Would I have guessed that it would last into 2024 and then continue to keep on going? No way. So, who knew that those two businesses that were under 10 million in operating income I think today are well north of 100 million in OI. So, it’s tough. 

Alex Bridgeman: What have you learned about spotting big trends like that? 

James Lindstrom: I think a lot of it for me is about reading. I spend a lot of time reading, not only sort of old business biographies, which we’ve talked about, but I spend a lot of time reading the newspaper. Every day and every weekend morning, I’m reading and looking for trends. I’m spending more time on the internet these days where you can spot the trends. And so, yeah, and part of it’s just luck. I just feel like really, a lot of it comes down to luck, being you need to put yourself in sort of that place. But I’m seeing it right now with one of the businesses that we just acquired called Financial Crime Academy, which is focused on, one of the areas of focus is anti-money laundering education. And we bought it because I thought it was a good business, and it was a good operational model and good trends. But the more that I learn about AML, it’s a massive trend. So as part, I mean, part of it was just luck. When I bought Buzzword in early 2021, focusing on ESG reporting, and I sold it earlier this year, part of that was just luck and having an interest in that space and reading a lot and identifying a business that other people weren’t necessarily interested in or IES too. So, I think a lot of it’s reading and putting yourself in a position to go after those opportunities when you realize like this is a bigger trend than I thought and finding an asset that can capture that trend. And I think, I had dinner with one of the founders of Silver Lake, and someone asked him about sort of what makes a good, a great investor that maybe they don’t necessarily teach in business school. And he captured it so well; he said imagination. Like part of it is you’re not going to- getting ahead of a trend. You’ve got to see something, you’ve got to understand the industry dynamics, and you have to imagine what things could be, sort of if certain things play out. And that’s not something they teach you in business school or on Wall Street or you get from a spreadsheet. So, I think that, imagination plays a part of it as well. 

Alex Bridgeman: The imagination piece is interesting. A common theme it seems is for positive trends that are growing, it’s very easy to underestimate how big they can get, and your imagination is kind of hampered by that inability. Are there things or ways or systems you’ve implemented to help grow that imagination, to think maybe more exponentially versus just linearly with any trend? Or maybe did he have an answer? 

James Lindstrom: That’s a great question. No, I think just sort of understanding the supply dynamics that play into the trend. So, if you’re talking about residential construction, you want to think about how does the supply, what does demand look like? What are the factors that flow into that? And then understanding the supply dynamics. Like we were focused on licensed electricians. So, you couldn’t create licensed electricians overnight. There’s a there’s a licensing and apprenticeship process. And so understanding that supply demand and having a very optimistic view is where I’ve seen people do really well in different industries, particularly cyclical industries. So, I have a mentor, a former boss who really understood that supply dynamic and was optimistic as well and had some pretty- he was very, very confident. And when he did, he really put the pedal to the metal. And so, I remember there was a steel stock that was trading at a couple dollars a share. And some people, a lot of people thought it was just going under. And so, fast forward a few years later, it was bought for, I think, in the low 60s, definitely within sort of five years. But what’s interesting is most of us, most of us rational beings, would probably sell the stock after it’s tripled or quadrupled, at eight or ten or twelve dollars a share. But someone with that optimism and understood the supply demand dynamics and understood it could be a longer trend added to the position over time. So, yeah, it’s tripled, but I want to put more to work. That’s the difference that I see with really supercharging and hitting a grand slam than hitting doubles and triples. And that’s a very, very uncommon trait, and most of us would think is irrational and crazy. 

Alex Bridgeman: Have you followed MicroCapClub by chance? It’s kind of a community of microcap investors, like stocks under 100 million, and they talk about that a lot because they’re buying companies that have a market cap of maybe 20 million or 50 million. And most of them probably shouldn’t be public, but somehow something in their history forced them to go public. And they often have- good ones will have big run-ups, but the company is now in the couple hundreds and million market cap, and many are still piling in, some taking off. There was a good interview recently with Jason Hershman and Ian Castle. They talked about Jason was a big investor in Xpel, which had some, I don’t know what the numbers were, but it grew massively. And he made well over 100 million owning Xpel stock. And he talked about that. When do you sell, when do you add more? I feel like you’d probably like that episode, maybe even that community as well. If you like that kind of thinking or thought experiment, that place is a good place to read more about. 

James Lindstrom: Yeah, I mean, that effect can take a- can happen in a few different types of businesses. You can have the Netflix type of business where you just have that sort of business and business model that can 100X or obviously Amazon. That’s not sort of where I’ve personally done well, where I think I’ve- what I’ve been exposed to are the companies like IES or Patrick Industries, which I’m not sure if you’ve heard of, but they started out making interior parts for RVs and was trading for under a dollar in 2009 and 2010. But they had a very aggressive CEO who was very good at making acquisitions in and around the space, and that’s well north of 100 today. So very acquisitive, felt comfortable using the balance sheet and leverage. And so when you find someone who can operate and buy well in buying smaller businesses at four, five, six times, and they’re trading at 10, 12, 14 times with some leverage, the math just works really well. Or Brad Jacobs at XPO, he’s not making small acquisitions, he’s making bigger bets, but also just very, very good at it. And it’s really, really, it’s a lot harder than people think. Because for every one, for every Brad Jacobs or Todd Cleveland at Patrick Industries or or Jeff Gendell at IES, I could name 20 CEOs who hit the wall with that same approach. 

Alex Bridgeman: Why do they hit a wall? 

James Lindstrom: It could be a couple of different reasons. One is they bought a business that was maybe too outside the core that they didn’t understand. They paid too much for a business. Maybe they were trading at 12 times, they paid 15 times or something. They levered up too much. They bought a business or a series of businesses where maybe they bought smaller services businesses where they buy 100% and they think they’re going to integrate them and those businesses are going to continue to do well. When in fact, the right model is to buy 60, 70 or 80% of the business, make sure that founder stays involved, and just sort of leave the business, quote unquote, alone, but keep that founder tied in or the management team. So, I think it could be, again, price, strategy, leverage, how you structure the deal. And so, if you have someone who sort of has that model down, it can be really effective. Another one who I’ve had some exposure to over the years is Jay Hennick at First Service or Collier’s now. They started out doing a lot of smaller acquisitions. Over a few decades, I think this is still in effect, but he’s generated 20% plus a year, but in very ordinary type businesses, property management type businesses. But it was around the structuring of the deal, buying 60, 70, 80%, and recognizing the influence and power and importance and significance of that owner and keeping them involved and saying, you know what, we’re just going to run a very thin hold co structure. We’re going to structure the business as well. We’re going to use a little bit of leverage and we’re going to pay fair but not high prices and be very disciplined about that and keep the founders involved. And that works very well. Versus I could name a number of healthcare businesses where maybe they- which are recurring revenue, asset light, all the things that check the box, but they levered up and maybe paid too much and maybe missed a few things in terms of how the businesses work, and it’s destroyed stocks and companies in that industry. 

Alex Bridgeman: Are there industries like that that you personally would stay away from for one reason or another, or you’re just not interested in? 

James Lindstrom: Yeah, industries. So, I can tell you what I have focused on, and that’s sort of B2B service software, and in healthcare, I think the energy area and infrastructure area can be pretty attractive, real estate services. But if you get too much into the commodity areas of places, of areas like the energy area, that’s where there are people who just focus on that. And I’m not going to outwit them. So, it’s more sort of the picks and shovels and the technology that plays into healthcare, infrastructure, financial services, technology. Like who’s selling to Microsoft or Google or Amazon. I’m personally not good at understanding sort of the next Netflix. I wish I was. 

Alex Bridgeman: Yeah, we all do. That’d be wonderful. You mentioned the financial crime business. That seems to be kind of an interesting place. I would think that- I’m an accounting major, so I find financial fraud just kind of interesting as a topic. I would think AI and machine learning would be a trend for both sides. It seems like it’d be easier to both spot crime and do crime. Is that a trend that you’re looking at or paying attention to? 

James Lindstrom: Yeah, certainly on the software side, yeah, that’s popping up. And we’re using AI within the business, not only to sort of help create and refine courses, but also in just sort of the daily operations of the business. And there’s an AI tutor as part of the subscription. So no, AI is playing an aspect of all the businesses that we’re involved with, for sure. 

Alex Bridgeman: In closing, any final advice for CEOs on how they can run faster or build bigger businesses or have a greater imagination? 

James Lindstrom: I think the biggest thing in terms of where I’ve tended to do well is really understanding the core business and staying pretty focused and process driven. And now, in today’s world, using technology to help drive that process not only helps you to stay focused and disciplined, but it just makes your business better and it helps keep everyone on the same page as well and provides better customer service. And so, in the businesses that I’m investing in, like Financial Crime Academy or other parts that are on [brilliantinsights.com?], like we have a business focused on capital allocation and we’re rolling out a whole education and training and certification piece, it’s very much like focused on process. And so, hopefully boards and certainly investors appreciate the fact that you can integrate sort of good process, even in the areas like capital allocation. It helps prevent a lot of downside, hopefully, down the road, and a lot of headaches and a lot of destruction, just through sort of implementing best practices and process. 

Alex Bridgeman: Love it. Well, Jim, thank you so much for coming on the podcast. It’s been a ton of fun, and I look forward to hopefully catching you in New York on a trip here pretty soon. 

James Lindstrom: Awesome. Well, thank you, Alex, and thanks for the podcast. It’s a great one. Appreciate it.

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