Joe Heieck – Time to Sell or Keep Going?

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

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

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

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

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(3:46) – Why was the location of a business in your search so important to you and your wife?

(7:17) – What other ways did you optimize constructing your life around the business you would buy?

(9:05) – What enabled you to focus and get an acquisition done in just 6 months of searching?

(15:42) – Did you aim for a software company initially?

(18:52) – What would a government use your GIS software for?

(20:45) – Do searchers grow more risk-tolerant as their search lingers and what risks did you feel were acceptable when acquiring your company?

(25:04) – What did you have to change about your leadership style transitioning from the military into a civilian business?

(29:22) – Building family-based vs. team-based companies

(33:22) – How do you negotiate the balance of empathy in a team-oriented environment?

(36:29) – Can you give an example of proper time management within your company?

(39:08) – What’s your philosophy on strategic acquisitions to roll into your business?

(44:08) – How do you think about exiting a business?

(48:12) – How do you know if you’re the right person to keep running the business?

(52:12) – Is there anything you would go back and do differently?

(54:01) – What college class would you teach if it could be about anything?

(55:41) – What’s a strongly held belief that you’ve changed your mind on?

(57:24) – What’s the best business you’ve ever seen?

Alex Bridgeman: I thought a fun place to start that we talked about over lunch was during your search, which was pretty short, only six months, you would, whenever possible, try to bring your wife with you to all these different company site visits just so you could both see together what it was going to be like to live there for 7 years or 10 years or however long you were going to own that business. Can you talk a little bit more about that? I think that was kind of an interesting part of our lunch that I thought was really interesting and fascinating.

Joe Heieck: Sure. So, one thing to note, my wife and I have been together since we were 16. So we’ve lived- I used to be in the Navy, so we’ve lived all over the country and where we lived, we loved some places more than others. And when we tend not to really enjoy the place we’re living, there’s kind an underlying tone of kind somewhat misery because you don’t- it doesn’t feel like a home. It feels like you are there and just counting time until you can move somewhere else. And so, a big part of the search world when I was searching in 2014 is you need to do national, and you need to be willing to go live anywhere. And I wanted to do a regional search, but it was also really important that my wife who’d been with me for such a long time, we were both happy where we were living. I didn’t want her to be miserable because if she was miserable, I would inevitably be miserable, or vice versa. Like I could end up not liking the place either, Alex, and it would be hard on her. So, I was always a big believer from when I was prepping for the search of getting in front of owners as soon as I could. And when I would do that, I would take my wife with me. And often I would get- she would drop me off to meet with that owner, and I would spend how many hours or a day with them, and then she would just go drive around. And she’d go where are the churches, where are the grocery stores, talk to local people, what’s going on. And after the meeting, she’d ask me how my meeting went, and I’d tell her, and I’d say, “Well, what do you think?” And she’d either say, “Nope,” or “I could be here.” And if it was a no, no matter how good that deal was, that was the end of it. And thankfully, my investors were supportive of that. And I’m very glad that I did that because in the last 8 years, I’ve known a lot of other searchers – not a lot, I should say three specifically come to mind – who took the philosophy of I’ll live wherever. And they lived in a location where either they or their partner or both of them were miserable because they didn’t like living there. And those three all exited those companies within 3 or 4 years. And at that time, exiting within 3 or 4 years, more than likely, you’re not in a position as a searcher to where you’re seeing much upside because you likely still have debt, and you likely haven’t returned all your investor capital yet. And so, for me, it really reinforced you’ve both got to be happy in the location and location matters greatly in search as much as the company.

Alex Bridgeman: That was pretty interesting because there’s still an element of you want to build your company and kind of life in such a way that you could do it for a long time because it’s going to take you maybe a couple years before you really feel like you know the business well and how the cashflow dynamics are and growth opportunities. And so, if you can’t get to that point where growth starts to compound and you’re miserable, like you’re not going to be able to get there all the way. I find that philosophy really interesting. What other ways did you try to optimize for constructing your day, the company you bought, your life, the city you lived in, in such a way that you felt excited to be able to do that for a long time and you had that longevity to be able to get to those compounding years?

Joe Heieck: So, I remembered when I was in business school and I took the search fund courses, the professors had data that showed that most searchers actually end up within a hundred miles of their desired locational preference. And when I would talk to searchers who were doing a national search and say, well, where do you really want to live, and they named three or four locations, and you just keep in touch with them, most of their deal flow came from those three or four locations. That matters, I think. I think people know that matters. And so, for me, to live- we wanted to be back in the Great Plains, the Heartland, because that’s where our family was. And so, I really put a lot of effort into sourcing, while I looked throughout the Great Plains region, I was really focused on finding things that were within a couple hours of Omaha where I live and where I grew up and my wife grew up and where we have family still. And I had a lot of good deal flow from there. I mean, it’s what I was incentivized and what drove me. And I think a lot of people will find that in a search. And so that drove that. And how I worked my days, Alex, I worked my days kind of working out in concentric circles, if you will, what can I work on local and then build out from there. So, then I’m looking in the Dakotas and Kansas or Oklahoma, Texas, or Iowa, how do I build out? And then I ran my call sheets based on that.

Alex Bridgeman: Yeah, your search was really quick, only six months. And can you share a little bit about what enabled that focus and that short timeframe?

Joe Heieck: I think, again, this was 2014, so much has happened in the search world since then. It’s evolved quite a bit. When I was searching, it was still very much the funded searcher route. Self-funded was starting to take off a little bit, starting to get some legs under it, but it was still very much a funded search. And at that time, the funded search was national. When I dug into my- I spent my whole second year in business school getting ready for my search, and I spoke to a couple dozen searchers, probably another couple dozen investors. And the thing I realized when talking to them, what national search actually meant at the time – so again, I’m putting this in the context of 2014 – was search on the coasts and then major metropolitan areas outside the coasts, like Chicago or Houston or Dallas, but everything else, that’s like don’t look there, look where everybody lives. And so, I focused, well, that wasn’t what I wanted and what my wife wanted. So, we wanted to focus in the Great Plains region of the country. And so, when I was searching, as far as knew at the time of all the searchers that were out there and still know, I was the only one at that time looking in the Great Plains. There may have been someone else, but I was not aware of them, and I never ran into anyone else. And I think that helped. I was the only one out there, the only “sophisticated” buyer that was out there looking for a deal. I think that mattered. I had really good deal flow as a result. I had this attitude of I wanted to get in front of owners as soon as possible, but I also had the same mindset for intermediaries. So, I did proprietary outreach, but I also worked a lot within intermediaries, brokers and M&A advisors. I wanted to get in front of them as soon as possible and build those relationships. They’re people, they’re trying to work a business. It’s important to develop those relationships to help drive deal flow. So especially with people that live within a couple hours with me, I would drive and meet with them and meet with them in person and sometimes do it a couple times. There’s things like Corporate Finance Associate (CFA) and the Association for Corporate Growth (ACG), they put on regional conferences, at least they did at the time, and I would go to those. I went to three of those, and that gives you the opportunity to meet with lots of intermediaries. And so, I developed those relationships. And so, they knew I was real, they knew I had committed capital, and it helped with deal flow. I mean, it really did help with deal flow, just getting in front of people. I had an aha moment early on in my search, Alex, where I was part of- So, I had two investors and they backed some other people as well. So, there’s like a cohort of us out there searching. And we were all doing regional searches, and we would share deals with each other because we didn’t really have overlap in each other’s regions. So, we worked really well together. It was a nice team, all working towards the goal of finding a company in our region. Well, I noticed early on that I would find deals in other regions from intermediaries in my neck of the woods. And then I kind of had the aha moment in the second month, well, these intermediaries, they’re calling all over the country to find companies to represent. I can’t just focus regionally from a sourcing perspective. So, I had a national outreach for intermediaries when it came to sourcing. And I found deals. I looked at a deal in North Dakota represented by a firm in Texas. I looked at another deal in the Midwest represented by a firm in Maryland, one out California. So, I think having that early aha moment where I needed to have a national presence for intermediaries really helped my deal flow. So I was, except for a couple weeks in August when everyone takes vacation, I never had a trough coming in to look at. And it really helped me stay on my metrics. And that was the other key thing, that you hear no a lot in a search, and the way I approached my search was things I learned from when I was in the military and it applies to just running my business now, which is identifying key activities which taken together increase the probability of success, not a guarantee, but the probability of success. And so, I identified what I thought those key activities were. And then I kind of boxed my time and how I would spend them. And so, I would spend mornings- and I wasn’t doing sophisticated email marketing back then. I didn’t know that; I knew other people that were doing it. There were searchers out there at that time and even now that have been wildly successful doing that. I didn’t know how to do that. So, I just called people and sent emails. So, I’d spend my mornings doing cold calls and I’d spend my afternoons- or doing meetings and I’d spend my afternoons doing meetings and doing follow up calls and then book travel around that. And I had set metrics – I wanted do so many calls per day and so many follow ups per day. And I wanted to look at five good companies a week, and I wanted try to do one IOI a month and one LOI every quarter. And those were the goals I worked against. So, despite hearing no a lot or we don’t have anything for you or pound sand, as long as I was hitting those metrics, I could still say I had a good day. And so, I think kind of the confluence of those things helped me in finding my deal. And then the final thing is this: there is some luck. There’s obviously some luck. The search is like a deck of cards, and this is how I always think about it. And your company you’re looking for is an ace of spades, and that ace of spades might be at the top of the deck or the middle of the deck or the bottom of the deck. And your job is just to turn over one card at a time until you find that ace of spades. For some people, that card’s not in the deck. And if you have enough runway and money, you buy a second deck and start to move through that. So, there’s definitely an element of luck. And I think the final thing for me that helped me was I inevitably landed on doing a funded search because I needed that sophistication of investors to help me really understand good deals from bad deals. My background was the military, and then I went to business school. I mean, I’m not a deal guy. I wasn’t. And having them there available to me, and I only had two, which means I really could talk with them, really helped me understand and learn good deals from bad and good deal characteristics from poor deal characteristics. So, when you take those kind of three different elements and put them together, I think that really helped me run and inevitably have a quick, relatively quick search.

Alex Bridgeman: And then how’d you land on a software company then? Was that something you thought of, that you aimed for from the beginning, or did that evolve pretty quickly? I mean, it must have evolved pretty quickly with only six months.

Joe Heieck: Yeah. So, because I was regionally focused, Alex, I was industry agnostic. I was very keen on the business model and business characteristics of what I looked for. And I found those things in various industries. I found it in healthcare, I found it in energy, I found it in IT, and then eventually software and some other services, things like that. And I was not focused on finding a software company. In fact, when I was doing my search, I thought of software companies as there’s tech complexity, there’s technology and change risk, so that’s a lot of money, that I don’t have that background. Those aren’t good deals for me. I’m not going to look at them. I’m going to focus on where I can come in and get to work. That deal came to me via an intermediary. Actually, that deal came to me from a broker. And I had done all the things I mentioned. I developed a good relationship with her. She would share deals with me if they- and she was looking and she had deals she was representing nationally. I would pass them on. If I thought they were good deals, I’d pass them on to other people in my network. She really liked that I would do that. And so, she had this deal that she was developing, and she told me, “Hey, this owner doesn’t think I can bring people to the table. And would you mind just taking a meeting with him so that I can prove to him I can bring people to the table? And then if he signs with me, I’ll give you a one week exclusive look before I bring it to market for everybody.” I’m like, “Well, what’s the business?” She’s like, “It’s a technology company that sells to the government.” I was like ooh, it’s technology and then it’s government. Government’s going to mean long sales cycle and low growth. “Ah, okay, I’ll do it. I’ll do it for you. I’ll take the meeting.” That ended up being the deal. And it was a company that had a software component and a consulting component. And that software component only made up 38% of revenue. And the rest of revenue came from consulting and professional services and custom software development for other entities. And it was focused on GIS. And I had used GIS as a consumer in the Navy, so I felt from a customer consumer standpoint, I understood it enough that I felt comfortable with the technology that I could learn the rest, the back-end side of it, once I was in the business. So, I had some comfort level around there. But that’s kind of how it happened. It was not set out that I must buy a software company.

Alex Bridgeman: What is GIS?

Joe Heieck: GIS is- so digital mapping. It stands for geographic information systems. So, Google Maps, Apple Maps, those are very light GIS applications. And there’s more, much, much more robust ones out there. And we sell web GIS, sell web-based GIS applications. That’s what we sell. And so, yeah, it’s just digital mapping.

Alex Bridgeman: So, and these are for government. So, what would a government use your software to do?

Joe Heieck: So, on the GIS side, they’ll use it for- there’s a few different use cases. It’s very- one is for public records, so you can visualize a lot of public records and then make them available to the public. So, a lot of times, the public wants to interact with their government around real estate properties, but also things like flood plains and emergency zones and all sorts of things that can be visualized, planning and zoning, zoning districts, and different things like that, election districts. Those things can all be visualized in a map context. You make that available to the public and they are now consuming that online. They’re not calling into the office. So, we have about 100, 90 counties that use our products for those reasons. And those 90 counties get like 4 million hits a year on those websites. Those are not phone calls those counties are getting. So that’s one use case. The other use case is a lot of counties will use them for internal operations. County assessors who are evaluating and applying tax assessments, they use it to help with their tax assessments, especially with ag land, farm property and things like that. Emergency managers use it for planning purposes. Cities and highway departments will use it for infrastructure, physical asset management, so managing their assets and where they’re located and that kind of thing. So, it very much ties into the operational role. During my research of buying this original company, I had a consultant that I was talking to, and they had a bunch of research that showed that 92% – I think they got it from Gartner or something – 92% of all government documents have a location on them, therefore they can be visualized.

Alex Bridgeman: So, one thing within search I find really interesting is the quality standards that searchers have tend to go down over the course of their search, where they’re willing to take on more and more risk. I think part of that is just understanding how small companies work, but also there’s probably an element of like they’re just more willing to take on more risk to get a deal done. But I’d be curious, which one of the two did it feel like for you? And then what types of risks did you take on within the business that you felt like were an acceptable risk to take?

Joe Heieck: So, you definitely feel that ticking clock when you’re doing a search, and I had enough funded capital for a year with my investors and then with an option to do another year. So, I definitely felt a ticking clock definitely sharpens the mind and the focus. But I tried to de-risk things where I could. And again, this is why I was thankful I had investors that I could learn from. Focusing on a business model and business characteristics when you’re regionally focused and agnostic to the actual business industry helped me find a lot of good businesses that met those characteristics or most of them. That was important. That helped me maintain my deal flow and look at a lot of good companies and be more disciplined at what I was looking at. I mean, in the six months that I ran my search, I looked at and reviewed 300 companies. I don’t know if that’s a lot, but I was a solo searcher. That was a lot for me. And a lot of them ticked off different characteristics of what I was looking for. So that helped me maintain discipline because it’s tough to maintain your discipline when you’re wanting to get a deal done. The emotional side of you starts to take over. To also help with keeping that in mind so I could just try to stay disciplined, I focused just on finding a good business, not a great business – it’s my job to make it great. And that was my attitude. You really hope you kind of find that unicorn when you get out searching because you hear about all these unicorns out there. Well, I don’t mean unicorn as it’s used now, but this idea that these searchers who found these amazing businesses and they transformed into all these things, and you want to do that too. And so, you want to find that great business right out the gate. You want to find a good business that’s got good bones that has a resilient business model, as resilient as it can be. And it’s in hopefully a good market, depending on what your thesis is, that’ll define what a good market is for you. But I think focusing on just finding a good business helped too because I was willing to accept hair on the deal. And then tied to that was with due diligence, and this is a philosophy I maintain to this day, particularly when you’re buying a small company, you’re just dealing with that owner. It’s not like he has an executive team behind him and all these third parties he can or she can lean on to help them. It’s all them. And so, deal fatigue, time, time kills deals, deal fatigue kills deals. And the longer something takes, the certainty level drops for that seller. I would just focus my due diligence around five or six key go, no-go criteria for that business. And the rest, we just accepted as hair on the deal that I would deal with in the business. We just focused on a few things. Having now been through a recap myself, and I went through a very invasive and intensive and deep due diligence process, we definitely don’t do that. If I were to layer that on a small company I’d buy, that deal would die for sure. But I have an executive team and I have third parties that I can lean on to help me, so I was able to manage it. So, I think for me, what I did was when I had the business model I was focused on, focused on finding just a good deal and then really limiting the scope of the due diligence to just key go, no-go criteria to help try to stay focused and disciplined on finding a good deal and finding a good deal quickly.

Alex Bridgeman: One thing we’ve talked about before, too, is given your military experience, you’ve been in leadership positions and led military teams. What are some differences in- like, what things did you have to change about your leadership style coming into this company versus leading in the military?

Joe Heieck: In the military, I think it’s important for the military people to remember with the military that it is a group of people working together to achieve a purpose. They come from all walks of life. And at the end of the day, they’re just still people. And so, a lot of the things you do in the civilian world and the military world are the exact same. Because it’s still just people and people will find a way not to follow orders or follow directives or to sandbag in the military just like you would find in the civilian world. It’s a lot of those things are the same. And so, from a leadership perspective, it is still around clearly identifying the mission, the objectives, aligning people behind it, and then bringing what resources you’re able to bring to bear, to position everyone in the overall organization for success. Those things are the exact same. I think a couple of things that I did not expect in the civilian world versus when I was in the military, one is around culture and tradition. So, in the military, I was in the Navy, we had over 200 years of tradition and norms and culture that you just got brought into. It existed. And you very quickly learned the norms and existed and lived within that. So often when you come into a small company, that culture is directly a tie to that personality of that owner. So, if that owner was loosey goosey, hey, high fives and beer on Friday, the culture reflects that. If that owner was very authoritarian, had to own every decision, the culture reflects that, and the people reflect that. And so, one of the things I didn’t take and appreciate when I came in was that I had to build a culture and tradition from scratch. And that’s a huge lift. I mean, that’s still ongoing. It never ends. I didn’t have all that- I didn’t have 200 years of history to fall on. That affects your leadership because you spend a lot more time talking about your culture and who you are as a company. You have to beat that drum all the time. Whereas in the military, it’s ever present, and you don’t have to necessarily enunciate it all the time. So, that changed my leadership style. I think the other thing that in the military, it’s the military, so there’s that part of the culture plays into it. You still need empathy, but you don’t necessarily wear your empathy on your sleeve. It’s not necessarily as public. I think in the civilian world, people have to know you are empathetic and they have to be able to feel it from your interactions. But you don’t necessarily have to be that way in the military because it’s still we’ve got to get a job done, and it’s not done, and I don’t care that it’s six o’clock. We are staying here until it gets done. It’s different in the civilian world. The other thing in the military is you do your job, whatever the job is, there’s always someone higher up to pass the buck – “Hey guys, we’re going to be stuck here all weekend doing this stuff” came down from flagpole, we’re here. And now as a leader, it’s your job to own that – hey, this is why we have to be here. You have to own that leadership, so it passes down, those decisions. But in the civilian world, you are the ultimate arbiter of decisions, and you have to be more cognizant that people have lives and they have families. And they’re going to clock out at five and go home. And you can ask them sometimes to stay more for something that’s really needy, but you can’t do it all the time. In the military, you kind of had that safety valve of, hey, we’ll just work until it’s done. You can’t really do that in the civilian world. You have to be much more cognizant of life in general than in the military.

Alex Bridgeman: Yeah, certainly. This kind of leads into another point that we had discussed earlier about building family-based companies versus team-based companies and some of the nuanced differences in there. And I know you’ve obviously seen a lot of companies and invested in a couple as well, and I’d love to hear kind of your thoughts on leaders aiming to build family versus team oriented companies.

Joe Heieck: So, I’m very much in the team camp, and I’m very much not in the family camp. And I’ll start with the family first and then move to the team. So, a family, let’s just think of our families. We don’t pick our family members. We wouldn’t necessarily want to work with all of our family members. It’s not- the purpose of a family is to exist as a unit and exist together as a unit over time. Typically, you have a patriarch and a matriarch, or some sort of combination of those things that are really the guiding hand on things, and people take their directions from them. But whenever a family’s together, they always kind of live within the parameters and the boundaries owned and set by those people, kind of the parents, if you will. But families can be complete [inaudible [RD1] 27:33], and that’s just fine because you all love each other. It’s unconditional love. And I don’t like that mindset in business. And so, I’m very much about the team mindset in business. And a team to me, Alex is a selected group of individuals working together to achieve a purpose. So, you’ve got to break that down. Selected group – you’re selected to be on this bus with us. You got picked. You’re not just here because you happen to be born two years after me. You’re on the bus. You were chosen to be on the bus. You have to do your part to stay on the bus. That gets to working together. The team works together. They may do things individually, but it’s in the effort to help the team. And they’ll do things as a team. Big thing on team, with teamwork is trust, dependability. You have to be able to trust that other person. They need to be able to trust you. They need to be able to count on you. You need to be able to count on them. It just takes on a different level of effort in a team to work together to do what they need to do, which is achieve some sort of purpose. So, a sports team wants to win the championship. A company might want to be the number one in their space. That’s the purpose they’re working towards. And so, for me, that drives a better outcome. And that drives finding higher quality folks who share that mindset that want to be a part of that team because they get excited about that, and they get excited about being able to count on other people. In a family environment, love is the thing that trumps overall. And so, things go unsaid. You can’t necessarily always count on people, but you just kind of lumber along. And when I’ve looked at companies where they have a “family culture,” you see a couple of things. You don’t see wild growth and you see extremely low turnover. There should be some turnover in the business because some people graduate off a team to go do something new and exciting. Some people are kicked off the bus because they’re not successful on that bus, but maybe they’ll go be successful somewhere else. And as a team, you’re more likely to achieve greater aims. So, that’s very much why I’m in the team camp and sit towards that. So, when I’m interviewing people, I’ll ask them, what kind of culture do you prefer? Do you prefer a family culture or a team culture? And they’ll give me whatever answer, and I’ll say, well, what does that mean to you? And if people give me a family culture, and then they give me some reason that lines up with that, they don’t get on our bus.

Alex Bridgeman: That’s a pretty hard line in the sand. You talked earlier about empathy. There’s still an element of, even in a team-based culture, there’s an element of empathy and understanding the constraints and pressures that are on various members of your team. How do you negotiate that balance where you still want to be seen as somewhat empathetic to your team? How do you draw that line? I’d be curious.

Joe Heieck: Yeah, it’s tough because in leadership, it’s all about dichotomies. You have to be accessible but aloof. You have to be friendly but not friends. You have to be empathetic but dispassionate. You have to find as a leader to balance those things. What I do to try to balance those things is keep everything as simple as possible. In fact, it’s one of our core values: keep it simple. But boil everything down to what matters the most. So, every role is defined. What success looks like in that role is defined. What are two or three things that if you are doing these, you know you’re successful. And as long as you’re living within those, you’re great, so that you can find- you can balance your work-life choices. Sometimes is there going to be a higher need for things? Yeah, but that’s meant to be the exception, not the rule. And we’ve defined those for each team in my- each kind of sub team. Each department within my company, they all have those very clearly defined- they have very clearly defined north stars, roles are clearly defined, so everyone knows whether or not they’re successful and what they need to do to be successful. And then we reinforce that. We do professional development training every week. So, we want our team to grow and get better at their craft. If they get better at their craft, they’re better at their job, they’re happier in their work. The other thing we try to do, we spend a lot of time on, is just time management. We spend a lot of time working with people on how to manage their time. People that don’t manage their time, the following things always happen. They get stressed, they get anxiety, they get overwhelmed. Therefore, they then burn out and they leave. So much of that is preventable. If someone just focuses on managing their time. So, as part of managing time, they need to have reasonable and realistic expectations and metrics and goals that they have to achieve. Try to stretch them a little bit so they’re reaching to just be a little bit better than they were the day before. So that’s part one of managing your time. And then the second piece is just really teaching our folks to be ruthless with how they manage their time. And by doing that, they end up setting boundaries. The goal is time is a valuable asset, your most valuable asset. You need to own your time. Don’t let others own your time for you because that’s when you get in this bad situation. So, we try to do these things to get the team well oiled, if you will, and working well together and avoid not only stressors on the individual, but stresses within a department or stresses across departments.

Alex Bridgeman: Can you give an example of proper and effective time management within an example role in your company?

Joe Heieck: Sure. So, sales is a good one. So, we do what we call timeboxing. So, what does a salesperson have to do? They have to prospect, they have to develop, because we’re software, they have to demo, they have to contracting and negotiation, and they’ve got to close the deal. And there’s lots of calls and touchpoints and emails within those things. It’s very much important on the sales professional to own that schedule. So, a good example of that is demos. We teach our salespeople to not say to a prospect, “Oh, whenever you want a demo, I will do it” because now you’ve completely turned over your schedule and your time to somebody else, and then compound that by all the people you have in your pipeline. What’s better to do, from a timeboxing perspective, is to say, for example, Tuesday afternoons and Thursday afternoons and Friday mornings, let’s say, I’m devoting to demos. So, I’m going to make sure my calendar links and all that for demos show only those time periods available. And those are the only time periods available that I give to the prospects, and then I’m going to box this time for prospecting. I’m going to box this time for working on contracts and going over them with clients and securing the council votes and those kinds of things and box time. And we do timeboxing and not rigid time allocation. Rigid time allocation, to me, Alex, is like I’m going to spend 15 minutes on this contract, then I’m going to spend 30 minutes doing this call. Then I’m going to do 20 minutes of prepping for a demo, and then I’m going to spend 30 minutes on a demo. Because what that ends up doing is as soon as you miss one of those time periods, you start gaining anxiety, and you start getting stressed, and then it ends up upending your day. And at the end of the day, you don’t feel good. But if your time box says, hey, during these time periods, I’m doing demos, and you set those boundaries, then you know that’s your time period. And if you happen that afternoon to have no demos, well, you’ve got time to put towards something else. And we have found by taking that approach, it works well within our company to, again, help keep the stress level down and people feel like they have ownership of their time. And I tell my folks all the time, guys, we’re the authority, we’re the professionals, we know what we’re doing. Therefore, we should be the authority on our time. Not a prospect, not a client.

Alex Bridgeman: One thing we’ve also talked about is M&A and strategic acquisitions within your company, and I know you’ve done a few. I’d love to hear kind of how your philosophy there has evolved. And you mentioned some of the go, no-go decisions within search. How do those change when you’re looking for companies that you might acquire and integrate within your existing company and team?

Joe Heieck: So, there’s different types of acquisitions. One, you have opportunistic, and then you have programmatic. But then another level deeper, you have three distinct, to me, three distinct types of acquisitions or buckets, and you can have a thing in more than one bucket. You have adjacent acquisitions. So that’s where you’re acquiring new products or maybe new customer verticals or new geography. So that’s adjacent. You have competitors. You’re buying a competitor. Most likely you’re going want their book of business because you’re going to end up moving people into your products or cross selling your products. You may keep theirs. They fill in the adjacency camp as well. And the third thing is transformational. Transformational is where it just totally transforms the business into something new. And for me, I started out as opportunistic. So, the very first deal I did after my initial acquisition, it was in the first year, and it was a very small deal, and it just happened to be an opportunistic deal. And we did it because we wanted to learn how to integrate, successfully integrate and then create value from an acquisition. So, we were opportunistic, and we succeeded. Once we showed that we could do that, we became programmatic about our follow-on M&A approach. And that happened to land around the time, around 2017 where I kind of had my aha realization of the business I was really in, so I was in my third year, I was like, okay, I’m really in this business, and this is what we need to do in our market to really distinguish ourselves. Therefore, our M&A needs to look like this. And it became programmatic. And then, in a sense that day, I’ve been very- almost like running a search, doing the activities again to lead to success, very much like a search just without the stress of the time clock. And so now I’m programmatic. The first- I did two follow-on acquisitions after my first one. Both of those fell into the adjacency bucket. And the second one I did fell into adjacency and transformation because it was a very key acquisition tied to kind of the aha realization I had of the business. So, we kind of had to be really bold in that company that we bought, and I was very targeted in that. The business was the same size as mine, but they actually had more employees than mine. They had about 50% more employees than I did. So, I went from 20 employees to 54. We added an entirely new product suite. We added hundreds of new customers in geography. It was transformational, but it had to happen for us to be on the path of where the business has been on since, which is where we wanted to be. So, I’ve done those two buckets. Now I’m looking at the third bucket, the middle bucket, competitors. So now I’m targeting those as well. So, I’m still targeting- now I’m targeting all three. So, I’ve been able to broaden my aperture of what I can go after. But that’s how I think about M&A. I started opportunistic. Some people will start programmatic right away because they’re a lot smarter than me and they have a lot more experience, so they know how to dive in and do those things. But I wanted to prove we could do it. And my board wanted to prove that we could do it. And then we went programmatic and then those sub buckets, the adjacent, the competitors, the transformational. It’s how I look at things, and they might share characteristics. That’s how I approach follow on M&A. From a due diligence perspective, how deep you go really depends on the size of the business, the size of the company. If a company looks like mine, where they have an actual executive bench, a lot of times in these small businesses you buy, they have “managers.” Typically, that’s the best person at that job. They’re not really a manager. I’ve seen that three times now, and I’ve seen that in the companies I’ve acquired and then just looking at other companies and anecdotally from friends who’ve done search, but if they have an actual executive team and they have a certain size and certain sophistication level, you can go really deep during due diligence because they have the bench to handle it and it’s kind of expected. And basically, at that size, it’s going to be a large deal, so you really have to go deep. If I was to buy another million EBIDA business, I would take a similar approach that I’ve done in the past, what are the six key things that we really care about that we have to confer, accept everything else. Well, we’ll pay for everything else with reps and warranties and contingency if we need to or whatever. You can pay for the rest. So, that’s how I would still do it. I would still take on small deals the way I’ve always done it. And then large deals, I’d go deeper.

Alex Bridgeman: Kind of building on that is sensing an exit point in your business where eventually a searcher’s going to want to sell their company to somebody. How do you think about where that timeline comes? I know you did a recap recently. I would love to hear a little bit about your thought process there in addition to these thoughts. But how do you think about designing or thinking about your exit? And then where did your recap fall into that thinking?

Joe Heieck: So, I think exit, so commonly in the search world, I’ve heard it so many times, that the CEO drives exit, the exit process. And why do CEOs want to exit? Maybe they felt they’d been in the business long enough. They’ve taken it as far as they can. So, it’s ready for the next phase, which that’s not what they’re there for. They’re not having fun anymore. They’re miserable, frankly; that could be a possibility. Or there’s new opportunities on the horizon that they want to pursue. There’s lots of reasons why a CEO may want to exit, and there’s no kind of timestamp on them. Now, in the funded search world, some of these search investors now, they’re raising actual funds. So now there are potentially some time constraints involved that you have to be more PE like and be considerable of those. But for a searcher, it is a very personal journey to get to that exit point. For a CEO, there could be lots of reasons. We did do a majority recap very recently, and my investors, which I’ve had from the very beginning, exited out of the business. We brought in a really good private equity firm out of Boston called BV Investment Partners. They are really deeply experienced in technology and gov tech and have done roll ups and have done growth strategies, all the things that align with what we’re doing as a business. So, they’re really the right fit partner for us, and we had lots of interest during our deal process, but I kind of saw and my executives saw throughout the process that these guys were clearly the best and had the most conviction. But what got us to that point, Alex, was not me. I didn’t drive that. So, it was a bit different. It was actually my investors that drove us towards the exit in that, as part of my programmatic M&A outreach, I was developing good deals, but deals with really high price expectations. And we started seeing it enough, at first, it was like Zoolander. Like, am I taking crazy pills? Like what is going on with the market? So, my investors and I, we started meeting with investment banks and talking to other people in the industry, and we came to learn, no, that’s where the market is. That is where the market is. And the last deal I found, it was late last summer, where it had a very high price expectation, and we had some independent parties look at it and say, yeah, that’s probably right, my board said to me, they said, “Joe, this has happened a number of times now. We’ve outgrown the capital in the business.” Because we are acquiring companies using our cash in the business and our debt capacity. And then if we had to put a little investor equity in, that was- the governor on that was how much money I could put in because I was [inaudible [RD2] 44:24] with my board by that point. I didn’t want to be diluted. So those were the three things we had to buy a deal. Anything beyond that we couldn’t do. Well, we were finding a lot of deals beyond that. And so, my investors said, “Joe, we’ve outgrown the capital. We are now hindering the growth of this business, and we need to step aside.” And that was very hard to hear at the time, but I understood it. And so, I was like, okay, let’s do this. And that’s what kind of started this journey. So, it was kind of kicked off somewhat by them versus the CEO, which is typically the case. But it was the right thing to do. It was absolutely the right thing to do.

Alex Bridgeman: One thing within that process of your investors view themselves as hindering the growth of the business and you want to keep going, how do you know that you are the right person to keep running the business? How do you know that you have the skills to continue taking the company to the next level? Because I imagine there’s CEOs who they just run out their skill set, and they’re just not designed for companies of a certain size. They don’t feel like they could get to that point effectively. Like how do you self-evaluate- evaluate yourself and say that I am ready to continue growing this business versus, oh, maybe I’m actually reaching my ceiling and now I might be the hurdle or the hindrance in this company?

Joe Heieck: That is an excellent question. I had always thought and had talked about with my investors, if any one of us leaves, all three of us leave. All for one, one for all. And so, I just kind of assumed in my mind when we had decided we were do this, and I had close knit relationship with my investors. I’ve known them for almost 10 years now. We’ve always worked so well together, that I’d want to- we’d want to do that again somewhere else. So, I just assumed that I was going to exit. And in fact, when we went to market with our investment bank, we went to market with letting everyone know, hey, I’m taking a knee too; I’m leaving the business as well. But as I started doing fireside chats and started meeting with all these different private equity firms, I realized that my work’s not done here. Like I haven’t realized my vision. My conviction in this business is still a hundred percent. I’m really- I feel like we’re starting to get to the good stuff. I’m really excited about what’s going to unfurl over the next five years. I don’t know if I am ready to step away. And the firm we went with, BV, they matched in lockstep our conviction and our thesis and the vision we have for the business, that that got me even more excited. So, I kind of went from I’m leaving to I’m staying. But then it got to the point that you talk about, Alex, which is can I even do this? I was a search fund CEO who was in the military before this and all I have other than that was a business school. That was my business experience. And going with a legitimate top quartile rockstar PE firm, it’s like you’re getting called up to the bigs. You’re getting called up to the majors. Am I really ready for this? Well, we have a hundred percent alignment on what needs to happen, which is great. And I know the path of how to get there. It’s just execution. Well, I know how to execute. My executive team knows how to execute. My employees know how to execute. So yeah, we can do it. Now, it’s at a much higher acceleration rate than which we wanted to do it so you can’t help but have self-doubt. So, I am simultaneously, as I embark on this next phase, I’m just one month into it, excited but also terrified because I’m up and it’s prime time. But I’m going to just do what I’ve always done. I’m just going to put my head down and do the work. And what happens is what is meant to happen. So, it’s a bit of a question mark. I have the conviction of the business. I have the conviction that I have the team and we can do it, and we’ll add more team members to get there. But you can’t help but have a little bit of self-doubt. Can I do this next phase? Because not every CEO can be at every phase of a business. So few are. So, I’m realistic in that and I’m going to give it everything I’ve got.

Alex Bridgeman: Yeah, I think a little self-doubt is probably helpful. It’s good that your mind is providing a check and balance for yourself over time. I think a little bit of that is helpful. Too much is not good, but a little bit will be good. I’m excited to watch primetime Joe and see what you do over the next 5 years. One last question before we do closing questions. What, if anything, would you change or do differently starting over in this path?

Joe Heieck: Everything I have learned along the way I felt should have happened, so I wouldn’t necessarily go back and change anything. I had to learn those things. I had to experience those things. I had to go through the downs and the ups. I mean, there’s a saying in the Navy that a calm sea doesn’t make a good sailor. And so, you have to go through the rough seas. It’s how you get good. It’s how you get better and more confident. And hopefully you’re building that confidence over time. So, I wouldn’t necessarily change anything over time. I wish I would’ve learned faster. There’s a lot of other folks out there that are a lot smarter than me that’ll learn faster and get on the value creation path sooner than I did. But it still worked out okay. I mean, I really- the first couple years were really difficult because we took some really big risks. We didn’t start to really see those turnout until year three. I think other people probably would’ve gone through those better than me. That’s just a wish. I wish things could’ve happened faster, but they didn’t. I think if I could only change one thing, Alex, it would be just spending more time on myself, not to sound selfish or immodest, but more of that kind of self-care thing, spending more time with my mindfulness and my sleep and my activity and just spending time doing things away from work and outside of work. My mind’s always thinking about the business, and it’s important to break away. And I’ve gotten a lot better at doing that over the last couple of years, but I struggled with it for the first five. And it put a strain on me and probably put a strain on my family. So, I wish I would’ve been more mindful of that from day one.

Alex Bridgeman: So first closing question, what college class would you teach if it could be about any subject you wanted?

Joe Heieck: I think a really cool and fun course, but I nerd out on this, would be to teach a course on how to ask questions and how to listen. Those are two skill sets that anybody can learn. And if you can learn them, you can be really effective in so many different things. And generally, in my experience, people are not good at asking questions and they’re not good at listening. I was an intelligence officer in the Navy, so I spent a lot of time and went through training on these things, and I would love to teach that. Those are definitely two skill sets anybody can learn, and it would benefit personally, professionally, socially.

Alex Bridgeman: Yeah, I completely agree. How would you set up that class?

Joe Heieck: Well, first I would start with questions are your best friend. I mean, when in doubt, ask questions. And then just kind of start to break down the different types of questions to ask. So, there’s two kind of macro type of questions, and then there’s a bunch of different questions beneath that that you can ask, and how to think about asking questions and how to stage them, how to do follow ups. And are you trying to learn, are you trying to influence through your questions and how that leads to different types of questions you ask. If you had to learn uncomfortable things, how to ask those questions to elicit that information. And then, how to listen, to retain a lot of that information, because you don’t want to be asking questions and writing stuff down; it just looks awkward. And so how do you retain that information that you can write down later?

Alex Bridgeman: Yeah, that’s a good point. It’s hard to write and talk at the same time. What’s a strongly held belief you’ve changed your mind on?

Joe Heieck: So, I feel like I evolve over time. I think a big thing that changed with me was- so yeah, I’m an introvert in the sense that my energy comes from within. An extrovert, they get their energy from other people. And so, I’m very much an introvert, but I was also shy growing up, and that would lead to social anxiety. And I always thought that’s just the way it’s going to be. It is just going to be a tough road. But I don’t think that way anymore. I feel largely that I’ve overcome that social anxiety and that shyness, and I just always believed that it wasn’t possible. And I very much felt this way probably until I was in my early to mid-thirties. So having gone through the Navy and been in a company. But I realized, I had some realization at some point, like I’m able to do these things in my business context because the business requires it of me, so it’s just a mental hang up I had, and I was able to get over that mental hang up. And it really reinforced to me the power of your mind and mindfulness and how you think is how you are. And I was able to kind of overcome this belief that I was always just going to be shy and socially anxious and struggle with that. And I don’t anymore. I have no problem mingling in a crowd. I have no problem calling people, doing any of those things, things I struggled with for a long time. So, I think that would be the one that comes to mind.

Alex Bridgeman: I like that one a lot. As a fellow introvert, I also resonate strongly with that one. What’s the best business you’ve ever seen?

Joe Heieck: That’s a tough question. So, I can think of the business type I’ve seen, because there’s a lot of businesses that fall within this. In fact, this is what we’re trying to aspire to be, which is this idea of product led growth. And the idea of product led growth is your product, so in my case software, is the key catalyst in acquiring, expanding, and retaining clients. So, it totally changes the way you think about your business, totally changes the way you think about project market fit, user experience, the type of- removing friction from someone’s life to be able to use your product and experience value quickly and keep experiencing value over time to where they want to expand and take on new things. And so, there’s companies out there that fit this model. Google’s a classic one, Atlassian, Dropbox, Twilio, Slack. They’re all very much product led. The product does all the heavy lifting. So, it totally affects the way you think about go to market and sales and marketing and support and client success because everything is now built around product. Product is the catalyst for the success of your business, lo and behold. I mean, it’s kind of an amazing thing, that it shouldn’t be, but it is. And so, product led growth, those types of businesses are, if you look at them and study them, versus peers that are not that way, they are multiples better in so many different regards, not just valuation, but resiliency and sustainability and growth and cash flow. Like those are just, they’re amazing businesses. So, we’re on the transformational path as a company to go product led.

Alex Bridgeman: That’s going to be exciting. I’m looking forward to that. Thank you so much for sharing a little bit of time. I’ve always enjoyed our coffees and lunches. And so, it’s been super fun to be able to record one and share a bit more. So, thank you so much for taking some time out of your day.

Joe Heieck: Yeah, it’s been tremendous fun. Thank you, Alex.