Julian Scadden – CEO of Nexstar – Ep.179

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(00:03:40) The correlations between Clear, TSA Pre check & Nexstar

(00:06:08) An overview of the Nexstar business model

(00:15:21) What a typical year looks like for a member of Nexstar

(00:24:43) Potential threats to the culture of sharing built at Nexstar

(00:28:22) Scarcity vs. abundance mindset

(00:32:39) Common themes across Founders thriving within Nexstar

(00:37:53) Ways to test and use predictive analytics

(00:40:37) How the market for businesses on Nexstar has evolved

(00:43:59) Raising a competitor vs. fighting them

(00:46:57) Customizing a service for larger-scale businesses

(00:51:40) What’s a strongly held belief you’ve changed your mind on?

(00:53:28) What’s the best business you’ve come across?

Alex Bridgeman: We were talking about Clear just before hitting record. I think it’s actually a funny analogy for Nexstar. And we’ll talk about this as we go, but you mentioned kind of wanting to cap the growth of Nexstar to ensure that quality stays the same. And you’re only allowed to have so many members within a certain population. So, it kind of keeps it a high quality product that is not as widely spread and not for everybody. And Clear, the TSA PreCheck feels like a similar price, that kind of keeping the price high makes sure that the Clear line is short so the product itself is still high quality. It’s funny how you’ve noticed something similar.

Julian Scadden:  Well, imagine this, and I love this analogy, because as I watched the Clear line get longer and longer for this perceived value, yet, should they charge more? How could they potentially cap? And in place of the terminology, let’s just say capping the growth of Nexstar, what if we could better define those who play well with us? And I’ll just stick with the Clear example here for just a moment. What if we said that for now to continue to remain with Clear that you had to, I don’t know, move at a rapid pace, that you would wash your hands, just I’m saying favorable behaviors to fellow travelers. And if you enforce that for your ability to remain in Clear while charging a premium price, then you get exactly who you want. And what we are doing here at Nexstar, we have been very fortunate with some rapid growth in our membership. But the one thing we haven’t done a great job over our 30 years is clearly defining exactly what it looks like to be a contributor at Nexstar, not to just extract the value that we provide but to give back to your peers, to leverage all of our systems. The members that are highly engaged with Nexstar grow at about or over twice the rate of other members. So, I think it’s a bit more about defining who are the core people, who are the key people. And then I don’t think you have to worry about capping because then you have the right people. And I would love to find someone who could enforce some nice traveler guidelines for people to go through Clear. I’d be more likely to sign up if there were some standards and definitions and expectations before you got in that line. I’d gladly choose that line if it was more civil and more clean. I don’t know how that would translate over to the TSA agents. But if we could get them to be a little bit more friendly, too, I would definitely pay for that line.

Alex Bridgeman:  Yeah, that’d be great. I’d pay for that in a heartbeat too. I’d love to go over just a brief overview of the Nexstar business. I think it’s fascinating. It’s kind of a mix of education, content, and data all in this one packaged business. And it’s one that several guests have talked about over time. So, I’m really excited to talk about it and learn more about Nexstar and how you got there in your role. But what’s the quick kind of one minute overview of Nexstar for folks who aren’t familiar?

Julian Scadden:  Sure. Well, first, Alex, I want to thank you for having our members on your podcast. Of the podcasts I’ve heard, not all made up of our members, I think you do a great job. I think you bring perspectives to owners. So, I’m just going to give you a quick plug without you asking, that I have found value and I think it provides value. Then to segue and say we have some amazing business owners at Nexstar. So, as you continue to meet Nexstar members, they are always willing to provide value to others. So thank you for that. So yeah, the quick plug for what Nexstar is, you can just think of Nexstar as a consultancy or a best practice organization. We specialize in residential plumbing, heating, cooling, and electrical business owners. To make it really simple, our mission is to take the world’s best trades people and turn them into the world’s best businesspeople. So that’s our mission. And that in a nutshell tells you what we do. Just the nuance is that we only focus on residential service, repair, and replacement. Those are the good folks that we get to serve in every aspect of their business.

Alex Bridgeman:  And talk a little bit about the ownership too because the member owned piece is really unique, and aside from something like an ESOP, I really haven’t come across a company formed in the same way. The only comparable I can think of is the NFL. But I’d be curious how that structure works in practice.

Julian Scadden:  Yeah. Well, that made me laugh a little bit. I can’t imagine the owners of Nexstar behaving in the same way that I perceive that the NFL owners behave. But interesting. So yes, it is- I love watching, it’s usually either a banker or a tax person, they get really confused when I explain Nexstar’s ownership model. They think it’s a nonprofit. It’s not. They’ll say, okay, it’s more like a co-op. Well, similar. It’s not. It’s an association. Well, it’s not. We are a corporation. But per our bylaws, the way that we are structured to be member owned, every member holds one share of Nexstar equally. So, every one of our members, we are member owned, per our bylaws, they hold one share. But here’s the nuance. The share has no cash value. The share affords you a right to vote for the board of directors, of which there are nine board of directors’ seats, made up of members. Again, the provision’s outlined in our bylaws. And the board of directors ensures that their governing Nexstar as we, the employees, operate Nexstar. So even as an owner, we do take the lead from our members. We do take feedback from our members. Of course, our board of directors helps guide our strategic direction. But it’s really not ownership in the way of tactical or operational involvement. We really do look for the trends, whether they are things that are challenging our members. We look for some of our members that are progressive or are learning in new way so we can bring them back and share. But the other piece of this ownership agreement that tends to confuse people is there’s no equity in Nexstar, meaning that there is no- there are no shareholders, not our founder, no one, no senior executives, no board members that have equity distributions, dividends, or payouts. Every dollar, every penny that we make of profit must go back in the form of goods and services to our members. So, it creates a culture. And I’ve run businesses on my own where at the end of the year, I have to think about what to do for profitability. Now, am I going to pay tax on that? Am I going to make a capital investment? What am I going to do? Where at Nexstar, the only thing I have to think about when we consider a large investment or whether it’s personnel or whether it’s development or anything of that nature, is this something that the members need, meaning the membership at large. We’re always needing to consider our over one thousand members, and are we serving the membership at large, not a one off or boutique solution for one member. And so that’s difficult too. And that’s kind of why I laughed when I thought about those NFL owners because you’ll get one owner hearing that I need this, I need it yesterday. And it’s a solution for something that’s very specific to them, either by size, by region, or by trade. And we need to make sure that we’re operating with the best interests of the overall membership. So, it’s a fine balance, but it is also very unique in that no employee that we hire here at Nexstar ever believes that their day job is to make Julian, your current president and CEO, richer, or our VP of Operations, Carrie Fraser, it’s not Fraser, it’s not for her. It’s not for the board of directors. There is no money leaking outside of the organization in the way of additional benefits. We’re compensated well, we’re compensated fairly. But we’re not here looking for some kind of equitable option or share price at some point that is doubled, tripled, or quadrupled. We’re not driving towards that. We’re driving towards the growth of our members. Because as they grow, we shall remain evergreen to grow with them. And that’s our model. That’s our strategy. So what thoughts, what questions did that create for you? I hope that’s fairly straightforward, even though I like to watch guys scratch their head sometimes, go well, who gets the money? And that’s how I can always tell who I’m talking- well, who gets the money though? The members. It goes back in the form of service.

Alex Bridgeman:  Well, yeah, I’d be really curious to hear how, when you look at similar companies like Nexstar perhaps in other industries that are for profit, or maybe even nonprofit too, what do you notice differently about the way they interact with members or the product and service they provide? Is there something you can point to that’s tangibly different having this model at Nexstar versus something closer to a for profit you might find in a different industry?

Julian Scadden:  I think it’s easier to play the extremes when you ask that question, so I’ll do that. I’m going to create almost some borderline caricatures of businesses to make a point. But they’re true. Many stereotypes exist because they are reinforced. And I had a short stint where I was a consultant and then a full time employee for the government. So, I saw a level of bureaucracy and slow movement, and the money’s coming in, regardless, collecting from taxpayers, high job security, low motivation, low engagement. So, I saw that. And the other thing I’ve seen and even worked with are the nonprofit. And again, being stereotypical, but almost victimized, kind of beaten down, and we’re here to serve and service for service’s sake, and gee, please help us, we really need your help, we’re just getting by, we’re scratching by, we’re eking by. And it’s not very aspirational or motivational to work at a place like that beyond the mission. Where, on the other side, though, I have seen some businesses that are seeking shareholder returns that are all about the money, and it’s only about the money, and it’s a very transactional relationship. Show me what you’ve done for me lately. Show me your conversion rate. What are the dollars coming in? What is the bottom line? What are we doing to seek growth next year, year over year profitability? And so, I think you have these extremes. What I’ve seen out there are these extremes of either the victimized, we’re just getting by, and we just want to do right by everybody, and golly, gee, I hope we grow and get a little profit. And then you’ve got these corporate raiders on the other side who slash, burn, cut, pillage to ensure they have profits and these equitable shares that are worth more later. So those are extremes. So, I’m making those extremes to make a point because I can tell you, even when I was running my for profit business, I did, I made different decisions at the end of the year when I thought about how would hit my distribution, my dividend, my equitable position, for sure. It’s human nature. But I don’t have that here. We don’t have that here. And so just by nature of that not existing, you will behave differently. You have no choice. And with that, though, there is a nuance to running a business like this. Then you may have some employees who seek to kill, to eat, and want that high ticket and always want to chase the bigger thing. And that’s not us. We are still- so then that’s where we flex back into our nonprofit mentality of what, wait a minute now, we’re here to serve, we’re here to help our members. Is what we’re doing, is this truly helping our membership at large? Or is this a gain for your department, aka you individually for you to be compensated on? It’s a very fine balance. But when you’re mission driven, member owned and member led, and we have some very clear boundaries being 31 years old now that we figured out, we’ve stumbled along the way to figure these things out. And so I think we have a really nice mix now of aspirational and motivational growth within our mission driven, member owned organization.

Alex Bridgeman:  So, I asked a couple members who came on the podcast, I asked them, does Nexstar provide benchmarking data, like education, classes, and frameworks on running and best practices and all that? And like, do they provide these things? And they said, oh, they provide everything, like that plus more. So perhaps like a good way to dive into all the different things you offer members, maybe take us through a year of a member, January through December. What would they be doing or receiving or taking part in each month or each quarter of that year?

Julian Scadden:  Our highly engaged members will participate in four key areas that we sincerely want them to understand. Some members will live in one of the quadrants, maybe two of the quadrants, but the highly engaged and therefore the highly profitably growing members will engage in all four quadrants. And so, as an example, operationally, they’ll dig into our workshops. We use the term workshop, a workshop is specific to your business, usually operationally lead, it could be anything from budgeting to your marketing calendar, but you walk away with an action plan. So you go to this workshop, you use your specific data, you build out a plan for the next year or the season or the session, whatever it is you’re focused on. But it’s highly customized to your business. It’s very operational. It’s very tactical. And then you can associate the Nexstar tools that will help you implement or accelerate those tactical initiatives that you’re focused on. So that’s what I would say, it’s more of the coaching when I say the workshop. The coaching is also what I would call the marriage, meaning that your coach is there for you every month. It’s a one to one call usually with the senior leader. It’s an intimate look at your financials and your strategy. So now you’ve done the workshops. I know what your three to five year plan is. We’re checking your progress towards that financially. We’re checking in on the development plans of your leadership teams. So it’s really intimate. It’s where we get to know you. It’s waking up without makeup on and still loving you. The other component, though, is training. So when we use the term training, it usually refers to our three day in person classes. We do have online offerings, and I’ll dive into that in a moment and some of those distinctions. But training traditionally, at least historically for us, was three days. And whereas I said the coaching is a marriage, training is dating, meaning that’s three days. I can be the funniest guy, I can be the sweetest guy, I can be the most patient, clever guy for three days, easy. But if we’re going to be married every day, and we’re getting into my finances, my personnel issues and all that stuff, that’s more of a marriage. So engaging in training and why you would do that, though, training is more of a shift in belief or perspective. So you go to a three day event to immerse, you go there to get a shift in perspective, you go there to learn new information, and to start to shift your beliefs. And then that transfers back to the coaching, which is the ongoing implementation or adoption of those concepts that you learned in training. So I go away for an event, I go away to have an experience, I go away to challenge my beliefs, pick up new beliefs, learn with cohorts, other peers, and go through the experience with them, and to make it meaningful, for sure. And then I have the coaching to support it. So that’s ongoing; that can go on throughout the year. Part of the distinction that I wanted to mention, though, in the online offering is we do have technical training that is online. It’s meant to be complimentary, supplementary to the in-person hands-on training that you must do in your shop. In any workforce development, there is a portion which must be experiential. And of course, technical in the trades that we work with, you must have that. But I don’t care what it is. I don’t care if it’s accounting. I don’t care if it’s a salesperson making phone calls, entering the data into the CRM, there’s a component that has to be experiential. But then there’s also the component where you have some form of a class or a coach or a mentor. So, you work through these different things. You can read an article and get an idea, you can work with a coach who gives you feedback, and then you’ve got to go out and do it. So, training hits all of these components of making the idea or the concept real and giving you traction. So that’s two of the four areas, the coaching and the training. Those are what we’re most well known for. So I lead with that. But the other thing is that we were founded and we kind of stumbled into a strategic partner program. Language that might be more familiar across different organizations or different industries, excuse me, would be a buyers’ group. So we represent independent business owners across North America. And as you can imagine, if you ultimately bring in, let’s just say, $5 million in revenue a year in a specific trade, well, you may not be able to get the same types of rebates from manufacturers’ distributors as if you had $100 million dollars in a given year. So what we do is we bring together the buying power of our members to help them receive rebates and discounts and other special incentives with vendors that serve our space. So that’s another component, the strategic partner component. We have some members that this is essentially a profit center for them, participating in the Nexstar rebate program. We have members that bring in hundreds of thousands of dollars annually by participating in this program. So that’s another way that you can engage with Nexstar. It really helps the whole though. So, the more that we have our larger members engaged in, it really helps our smaller members. Our smaller members, every dollar counts. So, this is another way of leaning into Nexstar and how it synergistically helps. The last component that we focus on though is connections. And I believe that this is really not only the ownership model of Nexstar that makes it special, but one of the things that makes next are critically successful is this concept of sharing. Our founding principle from our founder was success through education and sharing. And I think when you speak with our members on your podcast, we hear a lot of the education piece. Nexstar has it all, as if we are the sage on stage that knows it all. But the reality is our secret sauce came from observing and recording. We’re much more of a repository than R&D. We’re not thinking up things. We’re not innovating and hoping that they work and testing them on our members. Our members are out there every day real world testing strategies and running it by our coaches with best practices, of course, with operational knowledge to help jump the learning gap for them. We don’t want them out there learning without some other perspectives. So we do bring huge value. But the connections piece is huge. You talked about benchmarking. Well, we collect data from across our membership to help let someone know in the Midwest in HVAC if their sales are down a little bit this month, is it just them or is it everybody? What should they be paying for a service manager in this region, in this market, for the size of business they are? There are so many factors that we can provide data and benchmarking on that’s helpful, but it only helps if the members provide that data. And that’s one of the secret things about Nexstar. Our founder would go out, Frank Blau Jr. would go out to different regions, invite contractors in that local region to meet him at a hotel. They would sit at tables, and they would share their inventory lists. They would share their marketing strategies. They would go through their financials together. That’s how Nexstar was founded. And if we lose that founding principle, I think this thing could fall apart, even if we’re just member owned. So, there’s the aspect of we’re not doing it just for the money. That means us the employees or the board of directors or the shareholders per se. But the other part of it is, if we lose that willingness, that ability to get transparent and share, what you may not know, Alex, is I was a member. I had a plumbing, it started as a plumbing shop in Atlanta, Georgia, we added HVAC and then we added electrical. The ability not only for me to chat with my coach monthly, look through my P&L, help me with my watch outs, look outs, did you notice, did you think of, those type of conversations, sending our call center and technicians and salespeople to the training, all of that was great, leveraging the strategic partners for buying power. But the ability to pick up the phone, call another member, and just let them know, I’m thinking I’m going to add HVAC, can you tell me what type of trucks? How do you stock your truck? What style of truck? What have you noticed? And here’s the region, here’s the type of- here’s the temperate climate of what we’ll be doing. Here’s the geography that will be driving these trucks in. What do you guys use? What did you learn? What would you do differently if you could do it all over again when you add this trade? That is invaluable. It is priceless. There is nothing better. So those are the four components. A year in the life, long winded answer. Now let’s just bring it back together. Engage with your coach. Do the hard work of having a strong relationship, and I call it the marriage. Tell your coach the truth. Have those conversations. Have the difficult conversations, and we promise to do the same. But also date your spouse, date your partner, go out on date night, go to training, get energized, get invigorated, get new ideas, new concepts, keep it fresh. Leverage the strategic partnership here where if we can all rally our money together to get some rebates, discounts, let’s do it. And then let’s continue those connections to keep this fresh. To have any relationship, I believe, I believe this, it’s may not be true for all, but there are aspects, there’s a web of your life, there are components, and some people use a sprocket or a wheel where you’re at the center. But there are certain components of your life that if you don’t nurture and if you don’t take care, whether it’s financial, spiritual, health, mental and physical, all of these aspects, if you don’t take care of them, you’re just not going to grow, you’re not going to thrive. And that’s that fourth component of connecting, where you can get out there with your peers, figure out, and then help lift others up. And so those are a year in the life at a high level or maybe not such a high level of what it would look like to engage with Nexstar.

Alex Bridgeman:  That’s the perfect level. Yeah, thank you for sharing. You’ve talked about how a lot of Nexstar’s business model or maybe all of it is based around this culture of sharing and being willing to share inventory, marketing strategies, comp, everything else. If, say, in a couple of years, that has broken and something’s gone wrong, what do you think has caused it to go wrong? What are some possible threats to that culture of sharing?

Julian Scadden:  The threats, as I’ve seen, so I’ve been employed, I was a member before, I’ve been employed with Nexstar for 10 years. And I didn’t experience this in my market, but I saw it more as I became an employee, immediate competitors. So I have seen that in a market. I stay in Minneapolis, St. Paul, that’s where our headquarters is located. And yeah, I can see local competitors saying I’m not going to go to that budget planning workshop with another local competitor in there. Because if they look over my shoulder and see my numbers or see what I’m doing, I don’t want that. Now, I get that. I can understand that. But where it becomes dangerous is now as we start to have members that are going into different regions or thinking of global dominance, or whatever it is, that now that they start to create their own secret sauce, their own formula, that they’re protective of and don’t want to share. Have we always had independent members who have had this mentality? Yes. And they’re careful and guarded about what they share. But fortunately, the majority of our membership has always been willing to share. But they may say, I’m just not going to share with the guy down the street. And I can understand that. But what I think could get in the way of this is the mentality of, and it’s tied a little bit to growth mindset versus a fixed mindset. But it’s this I have to have a bigger slice of the pie versus let’s just make a bigger pie. And Nexstar has always looked at it as you will have a slice no matter what. As long as you have an ethical well-run business that cares about its employees, they in turn take care of the customer, and the business will grow. And we’ve seen that. This is not fluffy, soft talk. I have statistics that will tie employee engagement to profitability that will tie to the business growth. So, this is what we’ve seen to have an enduring business over time. We’re not talking quick/cutthroat strategies of quick money and raiding in industry. We’re talking about being here for generations when I speak in this way. So the threat to that is when somebody starts to think what they have is more important or more special, or they feel threatened. And we don’t have a lot of that, but it’s starting to grow. And I think technology, to a certain degree, is starting to create some levels of scarcity, even though it’s a very abundant thing, that, if I’m the first to capitalize on this technology, I need to hold it and harbor it. But everything that’s out there is learning so quickly, that there’s no way to avoid the sharing. And here’s what I would offer. I think you and I riffed on this a little bit before we turned to hit the record button. All the things that you think you’re keeping private right now, it’s almost like pretending that those targeted ads that hit your social media feed or even your email when you’re logging on, every device out there is watching and tracking you. Nothing you’re doing is secret. So, if you’re choosing not to share, know that everything that you’re using now, at least technologically, is already tracking you. So why wouldn’t we organically do that for and with each other to ride the wave? Instead of trying to capture it, let’s ride the wave. There’s no stopping the sharing or the collection of data that’s going on right now. So how can we ride it to stay in front versus trying to fight it and keep it as our own?

Alex Bridgeman:  Yeah, I love that kind of scarcity versus abundance mindset. Have you found that that’s one of the most powerful mindset shifts that new members have is shifting to, if we share everything, everyone can grow, and everyone can have a successful business, it’s not a, I win, that person loses situation?

Julian Scadden:  We’ve been very fortunate. Again, as long- in my experience from being a member to being an employee, our acquisition team, our sales team has been brilliant. One of the factors that we do take into consideration in bringing on a new prospect is the senior leader’s mentality. It’s a box that we actually check. There’s some behavioral questions we grow through. And if we see a highly profitable, looks like highly successful business in an open market that wants a membership, and the senior leader is just a know it all, a jerk, we will say no. We’ll say no, thank you. We don’t have space for you right now. Well, I thought you had space? No, no, thank you. And we’ll tell them, based on the way that- our perceptions and what we’ve picked up on, how you’re going to participate, if you look like a taker versus a giver, then we don’t have a space for you. So, they’ve done a great job of managing that. And then over time, we have some very beautiful human beings that make up our membership. And sometimes when we see- So we keep an engagement score on all of our members. So, we can actually quantify and we track how members engage with those four quadrants I spoke to, and we can just give them a call, give them a call – hey, Alex, I noticed a dip in your engagement with coaching, how are things going over there? So, we just check in, and so many times what we found is there has been something environmental, circumstantial, situational that has changed in the business. And we realize that it’s just a season. So that’s the other thing too, when I talk about us being an endearing business, we’re not looking to run people off either. As an example, I’ll give you a quick example. We had a member that I would see here at our training center at least four times a year, probably saw him six times, six to eight times a year between all my travels, independent, great business in the southeast, love the guy. And time goes on. Things happen. And I see him here in an event and I think, oh, man, feels like it’s been a year, I haven’t seen you in a year. Has it been a year? Where have you been? I’m giving him a little bit of a hard time because I’ve seen him so much. Come on, you don’t love me anymore? Where you been? What’s going on? He says, yeah, Julian, for sure. I’ve been disengaged, and I’ve stepped away from the business, but I’m back now. And yeah, thanks for checking on me. He said, so about a year ago, I found out that my father was going to hospice care. And I decided that we weren’t going to go that route. So I moved my father into my home. And the last 10 months, I helped my father transition. He’s gone now. He’s peaceful now. And he’s in a good place now, Julian. But yeah, I didn’t focus on the business. I haven’t been to any trainings, really haven’t sent my people. My son stepped in, kept the business running. But I’m back now. And oh, my gosh, if in that moment, just even the little joking that I was doing with him, if I didn’t feel horrible to realize the scope of what goes on in the independent business person’s life and how that trickles down and bleeds through to everything in their business, and how that business rallied in his absence where did they grow as much as they had in previous years? No. Were they as profitable as they had been under his stewardship and leadership? No. But boy, I’ll tell you, I’m so proud of what they did to be there, to maintain, to pull together, community, communal, to ensure that the legacy of his father, the great man that rose him, and now the great son that he was to honor his father, and what that did, that’s what I’ll stand behind more than any EBITDA in a given year, more than any shareholder payout in any given year. That’s what I’m proud to represent and be associated with. To make the point of things will happen, they’ll come and go, they’ll ebb and flow. But if you’re a member here at Nexstar, it’s all going to start with a conversation. We’re not going to be quick to remove you. We’re going to be quick to call you, check on you, check the temperature, see how you’re doing, what’s going on in your world. And if you’ve chosen to just pull back because you’re smarter or you’re pursuing something new, that’s fine. The Nexstar membership may not be a fit for you any longer. And that’s okay. But we’re going to make sure that it’s a very thoughtful discovery process, just as it was when we brought you on, before we move on. So thank you for taking that in.

Alex Bridgeman:  That’s definitely a really powerful story around the connection you can build with Nexstar members and some of these different owners and founders. For founders who have really outperformed and done really well under Nexstar and run a good business, is there any common themes you see across those members that you think could be applicable to founders outside of heating, plumbing, and cooling?

Julian Scadden:  For sure. And here’s where I would really invite your listeners to find the specific benchmarks, KPIs, organizational health metrics for their business, for their industry. We’re not in manufacturing, we’re not making widgets, we’re not global distributors. So there’s going to be some nuance in the execution and the operation. And that’s where I really think that you all should dig in, find your peers, find the specifics. But there’s also some universal truths. There’s some universal truths. This is why John Maxwell, as an author, is so strong on leadership. That’s why Jim Collins, in the books and the work that he has done is empirical evidence, as he calls it, and Pat Lencioni, and there’s so many great thought leaders out there. And what we find are really similar to the attributes, well, actually, let me back up. First, I think you need to define the business that you’re in. And here’s what I mean. When chatting with my nieces and nephews and my children as they get to working age, first identify whether a business is based on value or volume. So these are my words, value or volume. But all I mean by volume is, are they chasing an end goal? Do they- more customers, more clients, more money, it’s just a volume play, and they tend to be a transactional organization. You’re not wrong if that’s what you’re doing. I’m just asking you to define it, just as you would get into any relationship. And when you work with a business, that’s a relationship. You’re getting a lot of the time out of my day. So what I tell the young folks, I don’t care what they tell you in the interview process, I don’t care what their website looks like. And if you choose to join them, just watch, watch the senior leaders. Look at their calendars. How much time do they spend on development of you and others? When they check in with you, what is it around? Do you have a cadence of reporting your operational numbers? Because I think every great business has scorecards that are in front of people at all times. And that’s where I said it might be specific by industry, but you got to keep the score up. People need to know if they’re winning, need to know, I don’t care what their personality style is. But when I check in on you, much as to the retention of our members, that member that I spoke to earlier that was away from his business for a while, we could have kicked him out for being low engaged. You’re not engaging, get out of here. We don’t need you. But no, just as an employee, if they’re having a down period or a downtime or a leader is not performing as they should, aAre they going to dig in into what are the entire- what’s the entirety of your experience here that’s contributing? Is it a lack of information that we’re giving you? Is there some equipment or tool that you need? Are you short handed? Is your bandwidth tight? And so, you’re going to focus on this if you’re a value-based organization. And the owners that we see that are successful fall into both, fall into both, and I’m going to call you out here in public because I think you’re all beautiful. And I have seen some of the volume-based owners who were sprinting towards the sale of their business. They didn’t have a generation they were going to sell it to. They had plans of where they wanted to be financially in life. And they still ran great businesses. In no way am I saying they ran bad businesses. But their very goal was a timeline driven on a financial return. And that’s how they behaved, and they created a great business. But even within that, they had to carve out the space for the development of future leaders, because guess what, those of you who think you’re going to sell it for all these multiples that you see in the news, when you come to get valuated, they’re valuating your leadership team. Because if it’s all you and you’re the whole strength of the organization, you’re not worth much. So no matter what, what I’ve seen here is the investment in the building of a leadership team. Of course, the processes, the systems, the operational efficiencies and awareness, such as the scorecards and the communication cadences, the repeat business, all of these things are basic fundamentals. But I think you need to start, as the senior leader in your business, decide first, what’s your end goal? Are you going to hand this thing off? Is it going to be long term and evergreen? Is there a financial payout of which you’re seeking? Will it turn into an ESOP? So, you’ve got to get really clear there. Then as you create your own personal mission of how you’ll behave and lead, then you can lead with authenticity and clarity. And everyone can be aware of your goals and your mission. I have seen some businesses that are pursuing a financial end still run with beautiful cultures. And I’ve seen some businesses that say they’re here to help everybody and help develop everybody, and they’re horrible because then they don’t focus on the operational factors that they should be focused on. So, I do think it is the fact of succession, whatever it is, and whatever succession means to you, whether it’s financial or the handoff, the successful, the most successful leaders that I’ve seen here figured that out at some point along the way. And then they find a beautiful exit that was defined by them. And I wish you all the best as you seek that out.

Alex Bridgeman:  And as you think about the Nexstar business, and, of course, a lot of these folks have improved their businesses tremendously being a part of Nexstar, one thing we talked about that you’re curious about testing or working with more is using things like AI to create predictive analytics, potentially based on your benchmarking data and other practices and whatnot. What are some ways you’ve been able to test and use more predictive and analytics in your business? And what are some applications for it perhaps?

Julian Scadden:  Yeah, well, we’re just getting started. We are in a extremely advantageous position that a lot of our strategic partners are much farther down the road than we are. And we watch, we learn, and we observe, and then we report back to the members. So, whether it’s an efficiency, operational efficiency in booking a call, whether that be online or interacting with a person, we have specialists, meaning our strategic partners, that provide those services. And so we really lean more into them and what we’ve learned over the past few years, and you all know this, the speed at which technology leapfrogs each other meaning that if there’s a brand name, and you associate the technology with a brand name versus the service they provide, what we’ve learned here over the past decade is not to so much fall in love with a brand name or even a company but simply watch how they develop, how they research, and how they’ll continue to product test. And our members are great about this. Our members have helped create platforms that are now billion dollar valuated companies in our industry because they’ll apply the real world applications. So, some of the areas that we’ve seen that we would focus on, again, call taking, call booking, but also the automations behind the scenes that will help you check the purity or the quality of your leads. When you have a large organization, you don’t have a QA or you probably won’t have a QA department that could go through and listen to every call, track it back to the lead source, make sure that you’re being billed appropriately for the lead source or distribute the lead if it’s not. And that’s just a real easy example of an operational efficiency that exists out there at this point in time that we would, again, we’d point you to a partner, we would tell you to leverage that technology. And then, Nexstar, again, we have the advantage of sitting here watching this. And we can pick up best practices. Our benchmarks will shift as we watch these machine learning or AI learnings craft more efficient member organizations. So, we have this fluidity in the benchmarks that we coach to as we watch them develop through other organizations that specialize in this because what I don’t want to become, Alex, is I don’t want Nexstar to become some development house or to start competing with some of our strategic partners. We’re here to build relationships. We’re here on the human side. We’re here to bring the real world application to what your machine might be telling you and that human element and aspect. But boy, we will continue to learn, and it’s an exciting time of hyper growth and escalation in these technologies. I’m fortunate to be here.

Alex Bridgeman:  Yeah, it’s definitely a fast moving industry, especially as private equity activity has picked up over the last decade or so. How have you seen the market evolve over time for these businesses as private equity money comes in more and technological change moves faster? What are some changes you’ve observed?

Julian Scadden:  It really is just that compounding growth. It almost feels like our industry has been on the slow build for decades. And then within the past decade, for sure, has seen this rapid growth, and then the last two years, undoubtedly, it’s almost doubled what it’s done in the previous ten years, it did in two years. And yeah, so the beautiful part though, for anyone in the home services, regardless of what vertical or what trade you might be in, the beauty of the home services is you still have that relationship with the homeowner. So, while we’ve seen business acumen grow, while we’ve seen scaling and shared services grow, and we’ve seen just really some of the resources that come from running a larger organization start to filter into the home services, it’s all good, it’s all great, but you still need people to manage and to lead it. So we’re learning how to leverage scalable growth and teach that to our members. But what I don’t see is a wholesale consolidation. And I’ve heard that a lot from our members or in the industry that potentially the home services of plumbing, heating, cooling electrical might go the way of a hardware store, meaning that it got consolidated down to just five major players, or the airlines got consolidated down to five major players. And I just don’t see that. I think that we are in a great spot of learning how to scale without ever truly being able to be completely consolidated. I think part of that is just because of the ability for anyone with a license to start their own business, and they can go out, and we’re very entrepreneurial people. We are people that build things with our hands. That’s what we do. That’s what we’ve done. And the number of members that we now have that were former employees at an existing member shop, where the member took them under their wing, knew they were going to start their own business someday, they said I’d rather raise my competitor than fight a competitor. And they taught this person how to run a great business for great employees that is priced properly, that takes care of the customers and the community and is prideful in the trades. And so, a little bit of a tangent there and a riff, I apologize. But I do want to say our industry I think is special in that it’ll never be completely consolidated. But what we have learned just in business acumen alone relative to how to scale businesses has really put our members ahead of the curve. So they can have the choice to either go along for the ride, or they can start to create the ride and carve out their own path of scalability. And we’ve learned those through the hyper injection of private equity dollars, large investment, brilliant people getting into our industry now, and navigating the way that they have shown in other industries while still maintaining the agility and ability to be independent. And it’s been a good ride, a good run, lots of great lessons.

Alex Bridgeman:  Yeah, you mentioned anyone with a license could start a HVAC business. And I certainly would feel more confident starting an HVAC business than an airline. So I can definitely agree with you there. Yeah, that’d be a tough road. You mentioned kind of an interesting comment there about how you’d rather raise your competitor than fight a competitor. It sounds like they’re- the way I heard that was it’s better to compete with competitors who think rationally, behave rationally, set prices appropriately, and are educated than to compete with irrational competitors that could make any decision whether it’s good for business or not. Am I hearing that right?

Julian Scadden:  I think you nailed it. And I wonder, so here, I’m going to go out on a limb a little bit here, Alex, maybe scare some of our members that are listening. But I wonder, Nexstar having been in existence for 31 years, I wonder at what point do some of our members just graduate. Because the other thing I’ll offer though, due to sheer scale, some members disengage. Because we were never really built to serve, Nexstar as an organization, we were never built to serve hyper multilocation, large conglomerate. And then there are going to be some things that scale which they need to take inhouse that we currently offer. And we’ve been wrestling with that for two years. And what does that look like? And that ties back to your comment simply by saying I think that we can and will and must find a way to honor our long standing members who are titans and giants and just, my gosh, they’re just icons of this industry. And they’ve hit a level where I think Nexstar needs to understand and then better communicate who we are here to serve. And great job Alex’s Plumbing for becoming 500,000 triple quadrillion million in sales. That’s beautiful. We’re proud of what you did. But you don’t talk to your coach anymore. You’re bigger than that. You’re not really sending people to training anymore. And who is an upcoming prospect in your region that we bring on with your membership? We will still honor you as a member, we’d love to have you. But you’re just not engaging now. Who’s the next one up? Who’s the one that you would sponsor or bring in and say that this is the next, this is the future of the industry. And I think with that mentality, that’s what we’ve always had in our membership. We’re at a really weird stage, though. I’ve been fortunate enough to help three of our children find their way out of our home and into the real world. But it is an awkward stage where it’s like, you’re kicking me out? You don’t love me anymore? And it’s like, no, this is a commencement. This is an exciting moment. And we have to figure out what that is still. It’s not imminent. Well, I think it is imminent, I don’t think that it’s like tomorrow. But I think as we start to negotiate who Nexstar is and who we serve and how our long standing members can best help this industry and the future businesses, that’s something I’m interested in figuring out along with our board of directors and our senior leaders, along with our membership. How can this be done? Because we are prideful, and we do want to help each other, and let’s do it right.

Alex Bridgeman:  Do you think the potential graduation of members as they scale and engage less, do you see that as a potential opportunity for Nexstar to offer a service that’s tailor made or customized for some of these larger scale businesses? Or do you see value in continuing and just maintaining a strong focus on kind of that middle group where you’re not quite a beginner, but you’re not at scale, you’re trying to move from one to the other?

Julian Scadden:  Yeah, and this is something that it’s really easy to wrestle with as it ties to at least my own personal aspirations of wanting to solution, wanting to not lose anyone. And I think our- I know that our current flywheel, our core customer is currently defined in a way that serves the mission by which we were founded, to turn the world’s best trades people into the world’s best businesspeople. And I wonder what shades of grey my aspirations could take us if I look at every opportunity. Because you are correct. There’s opportunity there for sure. And so, what, as I kind of challenged other business leaders earlier here in our conversation to say, what’s your mission? What’s your personal vision? What’s your personal- And there’s no shortage of opportunities. And so there is a true valid opportunity there. I’m not sure that that currently fits with who we were built to serve, how we’re built to serve. Now, could the opportunity be, is there a sister organization? Is there something similar? I think that can be discovered over time, but we’re in the discovery process right now. It’s still so fresh and new with these emerging hyper growing businesses, to say, if we were to serve you, what would it look like? And also understanding who are the competitors out there. As they scale to the size, who are they using? And who would they use? And is there a true distinction in the industry specificity that we might want to provide. So we are in the discovery stages. But I do, maybe I’m just saying this more for myself than even the listeners, but I encourage them to consider it. Opportunity, yes, that doesn’t make it right. And I’ll continue to do my best and, of course, lean into our, all of our member owners to call me if I get too far out of line seeking aspirations and opportunities. But it is interesting, we will explore it, but we won’t lunge.

Alex Bridgeman:  Yeah, I was kind of reminded of your earlier comments around certain folks or certain members maybe not wanting to share as much because there’s a local competitor in their Nexstar group. I would imagine that’s probably even more true with the large, at scale competitors who are competing in multiple markets and maybe have even nationwide scale and directly compete with perhaps any or all of the other members, that would be in that like large, at scale cohort of companies. Do you think that could be a potential barrier to an offering like that?

Julian Scadden:  That’s definitely one. And I completely understand. The beautiful thing about understanding is you don’t have to agree with it. And I can completely understand a large scale business saying things like Julian, we can’t share in one market today. And then as they grow, we can’t share in three markets. And then, ten years down the road, there’s ten markets that we can’t share. And just because we can’t, we got to protect our profits, and we have shareholders that wouldn’t be cool with this. I understand it. It doesn’t make them a great fit for Nexstar. So you’re right, that is definitely a factor that can play, and that’s why I use the term we’re in the discovery process. Because the beautiful thing that I’ve learned in my many scars of learning in life, if I think I know what the answer is today, that’s pretty dangerous. But if I just keep taking one step every day, the answer tends to meet me halfway. And so I think if there is an option or an opportunity, our members are beautiful enough to help us figure it out together. And I think if it’s clear enough, and I’m sure it would be if it’s not the right fit for the organization and the members that own the organization, that’ll be clear as well. And that makes the decision easy. Because if it was up to me, Alex, I’ll tell you in just a couple of years here that I’ve been President CEO, there’s a couple of things that I would have taken that could have distracted the organization that might have made a few more dollars here or there, but I’m not sure the disruption it would have created or the wake it would have created in my decision. And so, it’s beautiful to be surrounded. Wise counsel makes a good leader. So wise counsel makes a good leader, but the leader must ultimately make a decision. So discovery phase, I’m excited to see where it goes. And hopefully someday look back at this and go wow, we found a solution that I never would have known that day when I was talking with Alex, or it was clear as day and I’m still glad that we went through the discovery.

Alex Bridgeman:  Yeah, it’d be fun to hear how your discovery phase goes. I’d love to hear more. Moving to closing questions, what’s a strongly held belief that you’ve switched your mind on?

Julian Scadden:  Oh, wow. And I’m so reflective. I’m so reflective, that’s going to take me a moment. Strongly held belief that I- Well, I’ll go to an easy one for you, Alex, that’s more of from a young man to a grown man thing. But an easy one for me is, I really was brought up in a neighborhood, I’ll just say, poor, I won’t say impoverished because I did have opportunities. But as a young man, I believed I didn’t have any opportunities. I believed nobody cared. I believed that there were only a few ways to make it, very few of them were illegal. I believe that I was destined for the work that I saw my uncles, my father, my mother do, blue collar, backbreaking, no savings, no strategic. And these beliefs can be instilled generationally that you just can’t win. And you can put a bunch of labels on it. You can put gender, race, education, you can put any label on it that you want. But I tell you today, I get to- I am so privileged and blessed to live a life today that that young man didn’t deserve because of that thinking and never could have earned because of that thinking. But over time and the grace of good people just stepping in and saying, you know what, kid, I’ll give you a shot. I’ll give you a shot. Have you thought of this, have you thought of that? So, a closely held belief that has been flipped 180 for me, nobody cares, there’s nobody to help a kid like me. And so now we get to spend- I get to spend my time just looking for those other diamonds out there who are willing to at least consider a shift in belief.

Alex Bridgeman:  Yeah, it sounds like you’ve found that exact role as kind of a mentor to others through Nexstar, like if you think of Nexstar as a mentor to its members. It feels like a good fit for that belief, that changed belief. What’s the best business you’ve come across?

Julian Scadden:  The best business?

Alex Bridgeman:  Yeah, can’t be a member.

Julian Scadden:  Meaning a business that I look at and I think that’s a well run business? I want to understand.

Alex Bridgeman:  Yeah, or just the favorite business that you’ve ever seen or best business you’ve ever seen. A lot of folks have mentioned Amazon, but just maybe a business they admire. Actually another guest mentioned this local Steakhouse in Portland. And they said the customer service was so good that it was the best business they’ve come across. But it’s more of like a- I like asking because I like learning how do guests define what a great business is. Some say like most profitable or best business model or the way it treats its customers or treats its employees. So it’s just a fun way to figure out how does a guest think about great businesses and what do they view- how do they define them?

Julian Scadden:  Great, thank you. Thank you. That really helped. Yeah, I couldn’t say Amazon, so I won’t go into what I don’t like. And then, what I have, the one that I do have is going to have some polarizing aspects but I’ll support why I would say this, I’m going to say Chick-fil-A. I’m going to say Chick-fil-A because they have been very clear on who they are and who they are not. You don’t have to agree with who they’re not and you don’t have to agree with who they are. And I really, soapbox moment, especially for some of our close-minded thinkers out there who might be willing to shift their beliefs that they have some day, we can all coexist. We can all coexist. If you’re not out there harming people or doing violent things, guess what, there’s enough space for all of us. And I think as long as you’re not actively going after someone but simply saying what you stand for and giving back to your community, creating a great experience for your employees who in turn create a great experience for your customer. And I just look at the consistency in what they have. They say we will be closed one day of the week, regardless of the reason, it’s for their own beliefs, and that’s what we’re going to do, and we’ll stand by that. We will train these young people to operate at the highest level of professionalism. And we experience that. They help create opportunities for those people to create future franchises or for future opportunities. One of the things that I love sharing with our leaders here at Nexstar, and it’s a bit intimidating if you want to join a leadership role here at Nexstar, because I think every leader, anyone who leads a business line in Nexstar, so not out there in the membership, internally, leaders at Nexstar, if you’re leading the coaching team or the training team or the strategic partner team, I tell you, you have to be a COO. And if not, you’re going to be at the COO level before you leave this organization. I want you to be recruited away from us. I want somebody to offer you 20 times what we could pay you because you’re such a great operator. And so that’s the experience that I see at Chick-fil- A. I see the way that they invest in training these people. They have their beliefs, they know who they are, who they aren’t, and the customer service that you receive on the other end of that, that’s why I think I would look at that business and want to learn more.

Alex Bridgeman:  I love you that mentioned Chick-fil-A. A friend of mine tweeted out that he woke up thrilled and excited for the day because he got a resume from a former Chick-fil-A manager. And so, he’s, of course, very excited to interview them. But that’s a great business that a lot of folks point to as a role model for a number of different reasons. But Julian, thank you so much for coming on the podcast. It’s really good to get to meet you and finally get to talk more about Nexstar, this fascinating business that so many mentioned. So thank you for sharing a little bit of your time.

Julian Scadden:  Well, Alex, you’re welcome. You made it really easy. You’ve been hyper professional, very gracious. And I just invite others who are listening to make time for Alex. If you have something exciting to share with him, just share it with him. Resist the urge to sit in the shadows and either be afraid or be too proud. And he’s got a great platform. You’ve got a great thing going on. And I thank you for all you’re doing to help business owners. When we listen to things like this, for me, it’s on the drive in, and we hear things and it can be one or two ideas or a concept, just a slight shift in the way it’s said, maybe you’ve heard it before, but the way you hear it on your podcast helps you think differently and accelerate your business which benefits your employees, which ultimately benefits the customer, which ultimately benefits the business. You’re providing a great service, and I just thank you. Thank you so much for the opportunity.

Alex Bridgeman:  That’s really kind of Julian, thank you.