My guests on this episode are Lori Harrington and Bruce Vanderzyde. Lori launched a search in October 2020 and recently acquired Bruce’s company Anterra Tech at the end of 2021, which offers business intelligence software for the construction and real estate industries.
This episode is a great discussion of how building a better relationship with a seller, negotiating upfront, bringing great advisors, and emphasizing strong and frequent communication can lead to a successful deal.
Whether you’re buying or selling a business, this conversation has a ton to offer. During the episode, we go over how their first meeting went, how they made their due diligence process easier on each other, the power of building a strong relationship, and their advice both for searchers and owners looking to sell their companies.
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.
(4:36) – Lori & Bruce’s Career backgrounds
(10:00) – What has become more difficult as the company became larger?
(11:18) – Why made Lori’s offer more interesting than others to buy your company?
(14:33) – What was it about meeting with Bruce that made his company more attractive to buy?
(16:10) – How did meeting with Lori increase your confidence in the deal?
(18:51) – What parts of the process did you focus on to make the transaction as smooth as possible?
(22:45) – The importance of constant communication during an acquisition
(23:36) – Bruce’s experience balancing due diligence while still running the company
(26:38) – Thinking about life after selling your business
(29:02) – Thinking about life after completing the search process
(30:10) – How do you look to the board for guidance?
(31:09) – What did your first 30 days look like in terms of communication, especially with a remote team?
(35:07) – Are there any compound benefits to running a remote company for 6+ years?
(36:00) – Dealing with letting go of control of your company
(39:09) – How do you discover best processes from a company you acquire?
(40:02) – What advice would you offer to searchers and sellers?
(45:45) – What college class would you teach if it could be about anything?
(47:53) – What’s a strongly held belief you’ve changed your mind on?
(49:33) – What’s the best business you’ve ever seen?
Alex Bridgeman: Thanks for doing the episode. It’s the first time I’ve had a searcher and the seller that they acquired the business from on the podcast at the same time. So, I’m excited to have this as a new format. One thing I’d love to start by doing is just hearing from both of you on backgrounds, Lori, from your career, and then Bruce, on the business you started. Lori, do you want to start and give us a background and kind of lead us up to the point where you met Bruce?
Lori Harrington: I’m a chemical engineer by background. I started out working for Chevron. I worked for them for a really long time, around 10 years, in a variety of roles from construction, project management, operations. And then I left to go to business school at HBS in 2018, and that’s where I discovered searchfunds. And I was really drawn to it because more control over your career, I knew I didn’t want to do a start from scratch because that’s very difficult to do, so one of the reasons I really, really admire Bruce. When I graduated and I started on the search journey, I knew I wanted to go into an industry that I could leverage my skill sets I had acquired before business school. I didn’t want to throw away 10 years of engineering and construction work. So, I really focused on industrials, construction services, infrastructure services, and that’s how I kind of found Bruce, through a proprietary outreach. And when I saw what the software did, I was just in love with it. I thought it was fabulous. It was something I wish I would have had when I was running construction projects. We did a lot of our financials in Excel and a lot of our forecasting in Excel, and this took all of that friction away. And so our first meeting, we just did like a product demo and really hit it off. And then I went for a visit, I believe, right, Bruce?
Bruce Vanderzyde: Yeah. You came down here was it May of last year? June?
Lori Harrington: I think it was June; June, or July.
Bruce Vanderzyde: Yeah. Time flies.
Alex Bridgeman: Bruce, do want to share a little bit about your business that you started?
Bruce Vanderzyde: Sure. Well, my background is I’m a chartered accountant from Canada and I articled at Pricewaterhouse and immediately got into their computer consulting division, which got me really interested in computer systems and databases and helping clients succeed. And I ended up moving to Vancouver, BC, where I became a general manager of a development home builder company and, yeah, built construction stuff, managed the whole company. And then I actually found this accounting software that worked really well, and I kept getting used as a reference for them. And then what happened was this super large company kept asking me questions. They just phoned me. They used me as a reference. How do you do this? How do you do that? Because I set it up myself because I was a consultant, so set up my own system. And then that giant company said, “Would you come and help us? We’d pay you.” And I go, “Really?” There’s an opportunity. So I talked to the guy who was selling it and, yeah, decided to start a consulting company, setting it up. And then I became the business partner or VAR for British Columbia and got an opportunity through that same company that got me into it. It’s a funny story. They’re a company that’s one of the world’s largest real estate companies based out of London, England. And they had me doing a lot of work all over North America. And then they said, “Well, we use this development performance software and valuation software out of London. If you were to bring it over here, we’d buy a bunch of it. We love you.” And I said, well, that’s really an interesting opportunity. They introduced me to the owner of that company who wanted to expand in North America. So, he made me an offer to join his company as a minority shareholder. And I thought, well, that’s what I wanted to do. I wanted to build software. So, I joined that company and was very successful launching into North America and Australia. And then we got acquired by a company out of Houston. So that’s how I ended up down here. And a couple of years after we got acquired, I determined I have a disease called founder’s itch, which is a horrible disease. I no longer have it. But it means after two years of a phenomenal company, great job, I decided I really did like building software and turning wrenches and working with clients and designing software. So, I started this company because I saw a need in the construction industry that none of the ERP construction cost systems had any good reporting. Every single client wanted better reporting. So, I decided I could build a reporting system that would work with different databases and normalized data and then build out this reporting tool, which got us into better reporting. And then our clients pulled us into higher end functions. They said, “Well, we can’t forecast our jobs very well. We need a better way of doing that.” So, we built that and then they needed to do work in process management. They couldn’t do that, so we built that. I mean, basically everything’s client driven. If you just listen to your customers, they’ll tell you what they want to do. And then, you interview enough customers to get a market perspective and design to that and it just works. But yeah, I took this company to a great plateau. We’ve got a phenomenal opportunity in front of us, but I realized that I didn’t know how to scale a company. Like we should be doubling in size like in a year and double that the next year if this opportunity pans out. And the opportunity needed more capital, a bunch of it. And I’m not that young anymore. So, if I wanted to invest that kind of capital and commit to that kind of hard work, it would be recommitting to a whole bunch more years because it’s a big opportunity. And so, when Lori’s offer came along, it was good timing because I did want to make sure that this thing succeeded and still be part of it and needed some help.
Alex Bridgeman: You mentioned a plateau of sorts. What has become more difficult as the company got larger?
Bruce Vanderzyde: Well, it’s a plateau in technology of the customers. Sorry, maybe plateau wasn’t- We were still growing nicely. We hadn’t stopped growing, but what’s happening, there’s a major shift in the technology. Where the plateau is, companies are moving from on-premise accounting systems and construction management systems to cloud-based ones. So, the plateau is companies are needing to migrate up to those cloud-based systems and it’s just going to be like, believe it or not, it’s going to be like DOS to Windows where a couple of years from now, nobody will be looking at an on-premise system and buying it. So, the plateau is we have to invest and get ready to do this. So, we’ve been engaged by one of the major firms to build a data migration tool for their migrating thousands of companies to this new cloud platform. And we were lucky to get partnered with a great company out of Florida who knows how to get the data into the new system, so it’s a terrific partnership. So, the plateau is we have to take this business to another level.
Lori Harrington: Which means investment in some of the growth that we have on the horizon, just takes horse in front of the cart basically.
Alex Bridgeman: Bruce, you had also mentioned that you had had offers to acquire the company beforehand and you decided that those didn’t really pan out the way that you thought they might, but what made Lori’s offer more interesting to you?
Bruce Vanderzyde: Well, of course, 2021 was a year of significant M&A activity. Like there’s several things driving that, one, just the economy and, two, the amount of money in private equity looking to get placed and looking for quality investments and, three, a threatened huge capital gains tax increase got a whole bunch of owners saying, wow, if my capital gains rate doubles, I have to work a bunch more years to get to the same place. So, all of that happened. And then I did have two very serious approaches, one with a solid offer, but I’ll call them contingent offers that they were serious, but they required something else to happen. They were wanting to basically secure our company so that when their events happened, they could come along and merge with us. And so, they were real and solid, but then Lori came along with an un-contingent offer, a non-contingent offer. And I just thought it was a better alignment because my criteria for selling or for allowing more people in as investors and partners is that, first, it had to be good for our customers, period, that if it didn’t make sense from the customer point of view, it wouldn’t work. It wouldn’t be sustainable, and customers would drop off and try to find other solutions. So, again, I always try to think customers are partners, not targets. And so, whatever we do corporately from a corporate organizational point of view and investment had to make sense for customers. And then it had to make sense for our staff because the offers I had were very strategic and would work, but when you merge in with another software company, you lose your roadmap, and your staff now get new bosses and new ways of doing things. And that can work. It worked in our last company that I sold. But it’s such a big change. So, from a staff point of view, keeping the company as is and growing it means it’s easier on the staff, that they have more opportunity in our company than they did before, because there’s more capital coming in and we’ll be a bigger company, which means they can expand in their current roles. And so, it’s good for the staff. And then it had to work out for me that letting go of your company, I want this to succeed and grow and continue. I didn’t want it to be folded into something and get kind of lost. Like it’s just kind of done, and the technology gets folded in and then it’s gone. There’s no you didn’t build anything, it just becomes a cog in a bigger wheel. So, yeah, so it met all those criteria, and of course, it had to be somebody- the toughest part is finding somebody that can take it over. Because it is something that you build and you put a lot of hours and sweat into, and it’s all fun along the way, but it has to be somebody that can take over it with industry knowledge. Again, that can happen when you get merged in with a strategic company. But I really was impressed with Lori and her eagerness and her experience all lined up. So that’s what made sense to me.
Alex Bridgeman: Yeah. And Lori, from your perspective, I’d love to hear from Bruce too, but on those first few interactions, you mentioned a demo and then actually going onsite. How did those go? What sorts of things happened? What made the company more and more interesting as you got to know it?
Lori Harrington: Well, a few things. So, going onsite, it wasn’t really onsite because we’re a fully remote company. So, it was just going down to meet with Bruce and his wife. And honestly look them in the eye and say is this person honest? Are they ethical? Do they really genuinely care about their employees? Because I really cared about those things. I didn’t want to do an LOI with a company just because it was a good price where I didn’t trust the business owner. I thought this was someone I could work with, and we just really hit it off. And so that was more of the going onsite part of it was just for the personal standpoint. And then, also at that point, we went on site, we had had several phone calls before that. So, it was also to kind of hash out an LOI, like what should this look like? And so, we got a conference room and we did that. We wanted to be as fair as possible, but obviously by that point, I was very taken with Bruce and with the technology. Again, he spent 10 years and started out with consulting with clients and really building out this product, one, that’s very thoughtful and it looks very simple to use, but it’s very powerful, and that’s really hard to do. And it’s one of those things where I looked at other construction softwares and I felt like if I had enough money, I could build the same software in a year. That’s not the case with this. It would take years to build it to the capacity that Bruce did, no matter how much money you threw at it.
Alex Bridgeman: And Bruce, from your perspective, how was meeting Lori and chatting with her in person? How did that go from your perspective?
Bruce Vanderzyde: Well, I think I’ll just echo that, that, again, it has to be somebody you can trust your customers and staff with. That this is going to be successful. Eventually, you’re turning your customers and staff over to this person and that I was really impressed with Lori and that it wasn’t about just all numbers. It was about culture. It was about taking care of the staff. Like a lot of our staff have been with- some of them have been with me 15 years through multiple companies. So, those people are family, and yeah, you look after them and you support them when they’re sick or families are sick or something. You do what’s right. So that was important that she got that.
Lori Harrington: And I will say part of what I really liked about my interactions with Bruce during those meetings when we were negotiating the LOI is we tried to get out everything we could think of in that LOI that could possibly be a deal breakerthat we could figure out early on. So, like working capital, earnouts, pricing, but there were some other terms, like deferred revenue, right Bruce, was another one that we worked out. And we got lawyers involved and we said to them, tell us everything that surprises sellers when they go to do the purchase agreement. We don’t want to have any surprises. So being very transparent and fair between each other was nice.
Bruce Vanderzyde: Having done this once before, I mean, the first time I did it, it was very amicable as well, very fair, and the person and the companies that bought when I was the minority shareholder, they were very easy to negotiate with, but it was a little- because I had never done it before. And my business partner who was the majority owner in London was not financial and I tend to be a financial person. So, I helped with a lot of the financial side of it, but you just know what’s going to happen. So, I would say that typically there is a process that you go through and the LOI sets a purchase price and sets some big terms. But I didn’t realize afterwards a working capital negotiation had to happen separate from the LOI. And it wasn’t that the first company did anything wrong. That’s the normal process. So, understanding the whole process means I understood all the points that were going to get negotiated- I’ve only done it once, so it’s not like I’m an expert, but you know the process once, and now Lori and I talked about all that upfront, so there wouldn’t be like multiple major negotiations. So that made it a lot easier to do the purchase agreement because we’d already been through all the clauses that can cause angst.
Alex Bridgeman: Yeah, certainly. What other types of things did you hear from searchers or business owners who had been through transactions that had caused conflicts at certain points in the process that you wanted to do differently? So, getting terms out at the start of the process makes a lot of sense, and it sounds like it worked really well. What other types of things did you do to smooth the process as much as you could?
Lori Harrington: Well, I think a really big help, I was reflecting on this, was the fact that Bruce’s wife Doreen does all their books, and they are just super, super clean. And so there wasn’t any like- we knew what the business looked like when we were doing the LOI. So I would assume if your books weren’t clean, then maybe that would cause some conflict later on. So that was really helpful. And I think Bruce getting his lawyer involved and making sure he had representation and that he understood the terms and what was in the LOI versus potentially feeling tricked later on if you didn’t have that legal representation and didn’t fully understand the terms. What are your thoughts, Bruce?
Bruce Vanderzyde: I think that’s huge because Lori was- Well, I was referred- interestingly, I stayed friends with the person who bought my first company. We just stayed friends. I left on good terms. I left to go start my own company again. He totally got it. It’s no problem with that. He supported me in many ways after that. And when Lori came along, I got a referral to a good software company law firm or law firm that has people who specialize in software acquisitions and sales. And so, getting somebody involved early that’s really good at it saves you tons of problems down the road in that, again, you’re talking about everything upfront. It’s very easy. And then we had a great meeting, the first meeting we had with Lori’s counsel and the fund’s council, man, the two councils got along famously, that they were all talking about the issues and just stand back and let them work stuff out. Like when the LOI came through, our lawyer expressed, as they always do, they’re doing their job, that maybe this could be worded this way and this clause could be worded that way. And both lawyers, there was no controversy at all – just yeah, that’s makes sense, let’s do it that way. Having really good lawyers is important. And when Lori said that some searchers don’t even bring a lawyer in for the LOI, I’m thinking, well, they can’t be serious then because let’s just say it that maybe it’s 10 hours of a lawyer’s time to help you with an LOI. If you can’t spend that, how serious can you be? Because you’re basically pushing all kinds of problems down the road. If you sign an LOI without legal advice and then a good lawyer comes along after, they’re going to open it all up again if you made some mistakes. So just bringing in good legal counsel at the front, I can’t see doing it any other way.
Lori Harrington: And you were referencing sellers, right, Bruce, there?
Bruce Vanderzyde: In both cases, we had very reasonable counsel. It happened the last time I sold my company too. The lawyers were very good to work with. They weren’t adversarial. And I think that you may find that sometimes lawyers do feel their role is to protect every interest of their customer and prevent the agreement from happening because they have to win every point. And really it is a buyer and a seller working together to make this happen in each of their best interest. But of course, you have to give some things here and take some things there. And it’s just a matter of not having super hard lines anywhere but making it all work.
Lori Harrington: I’ll say it also helped that Bruce and I probably chatted on the phone almost every day during the diligence process from like August to December. And so, we formed a really great relationship. We were very honest with each other about where we were at, what was going on with the business, and then what I was finding in diligence and sharing that information as it happened. And so real bond of trust there through the process.
Alex Bridgeman: Yeah, it sounds like communication was a big one where you both had lots of communication up front and then ongoing constant communication on how the process was going and anything you were finding. That’s pretty impressive to be able to chat every day about the process as it goes through.
Bruce Vanderzyde: Yes, and the due diligence process, as we said right at the start, was kind of exhausting. And then, it is every time because you’ve got to respect the fact that the acquisition, the firm buying is making a significant investment and they’ve got to know what they’re getting. I totally get that. But I think maybe one thing, Lori, that came up was called rolling due diligence where you might’ve been getting requests from different investors. So just when you think you’re done, oops, here’s a bunch more. So, you’re never quite at the finish line.
Alex Bridgeman: Bruce, in our conversation, we talked about how you’re still having to run the company during this whole time period, ongoing through due diligence and these new requests for extra information. How did you balance managing the company while also running due diligence?
Bruce Vanderzyde: You can’t balance it. You just can’t. You’ve got to just work more. There’re no short cuts there. You just have extra hours. You have to do both. And that’s where the fatigue comes in. And Lori understood that you want to get it done as fast as possible. In fact, the first- The nice thing again, well, I married well above my station and my wife is also a chartered accountant who is really talented and good and keeps everything in good order. So, when we got that first due diligence request, I just pounded through a weekend and got like 75% of it done in like three days because everything’s just ready. It’s just there. So that made it a lot easier. And a lot of the stuff that we could have done better, like you keep track of every client NDA, we’ve made sure- we had to go back and find a bunch and stuff that you signed, that all of your agreements and stuff was a little more time consuming because over 10 years, that’s a lot of things to go back and find. And you want to do full disclosure. One thing I was very keen on doing was making sure Lori knew what she was getting into because she made such a big life decision. For her to commit to this is a huge decision personally for her. So, I made, I don’t want to use the word over disclosed, but I made sure I told her everything to every degree possible so that there’s no surprises, she doesn’t get disappointed. Every company has its problems, and I was sure to tell her that here’s where we struggle, here’s where we don’t do well, here’s what’s wrong. Because you try to work on those things, but every company has that. So, she needed to know that so she made a fully informed decision because it was so important to her life that I couldn’t have lived with myself if didn’t tell her something – oh, she’ll figure that out later. I just didn’t have that attitude.
Lori Harrington: Which I was very appreciative of. I can tell you now actually being in Anterra that he did fully disclose everything, and I knew what I was walking into, and it’s been really fun the last like 50 days since I joined.
Bruce Vanderzyde: I think that saves a lot of time too. So, and again, we don’t have any giant problems. All our problems are growth oriented. We’ve been actually growing really well. So, they’re the best business problems to have. We have more work than we can handle, so we have to staff up. So, that’s the kind of problem you want to have. They’re not- We have really good employees, really good customers. Like really working with the customers is so much fun. They teach us stuff. They push our product, they teach us, and they’re appreciative of what we do. And it’s so rewarding when a customer says we run our business on your software. It’s just so rewarding knowing you can really help people. So, yes, it all works.
Alex Bridgeman: That is pretty amazing. You mentioned it was a big life decision for Lori, which is of course true, but it’s also a big one for you as well in selling your business. When you started contemplating what your life would be after selling the business, and you start thinking about what does selling really mean, what sorts of answers started coming up for you?
Bruce Vanderzyde: Well, it’s tough in a number of ways that having done it again once before, you have to really- you need to let go. It’s hard to let go. So, I’ve got to make sure that I help Lori to transition into the role and not get in her way. So, I’ve tried to really do that, but also support her and help her understand some of the reasons why things are the way they are. There’s some thought put into things. So, you can’t know it all, it does take some experience and kind of what they call institutional knowledge, like why is it this way and not that way? And so, you may look at something and say, oh, we’ll just change that. But that might be that way for a good reason. So, helping her understand that without interfering is important. So, letting go is hard because you’re wired to- I think Lori sent me an article about the search process from Harvard Business Review and it was right on that you become the business. Like you wake up thinking about it, you go to bed thinking about it, and when you’re walking your dog, you’re thinking about it, you get an idea how to do something differently. It’s so intertwined with your life that it really is your life, that you’re always thinking about it, working on it, and it never lets go. So yeah, letting go of that is going to be hard because it’s not just the work side, it’s the enjoyment side. So, I do have to think about it and about how to transition gradually and successfully, supporting the company and helping continue its successful growth. And then I’m fortunate in that I do have a bunch of hobbies and I’ve been doing volunteer work and stuff. So, the transition to retirement eventually I think I’ll handle well because I won’t have a problem staying busy because I think you’re saying you ride motorcycles, ride motorcycles, work on old cars, have a bunch of friends that do all that. And then volunteer work is good. So yeah, I think I’ll be all right. I have no desire to start another company. That’s for sure. I don’t have another one in me.
Alex Bridgeman: Lori, how’d you think about making the opposite transition? So, going from searching without a business to now not searching with a business, what’s that like?
Lori Harrington: It’s definitely better, for sure. I mean, I tell people if you love searching, then you should have gone and worked in private equity because that’s what private equity is. If you don’t like the search process that much, then you’re probably a good fit for the operating role. So, it’s been a great transition. I was very concerned, I will say, about the fact that it’s a fully remote company. And so, what would that look like on day one coming in? How do you introduce yourself to the company? Would I be twiddling my thumbs day one, trying to figure out how to shadow Bruce? But it was actually really easy which was a great surprise. And it has been good really leveraging the board too on the first hundred days. So, since we are a pretty small company team member wise, leveraging them as like a leadership team to really set- to get feedback and help with strategic initiatives have been really helpful. So, I didn’t realize how helpful a board could be in these first hundred days until going through this process.
Alex Bridgeman: With your board, what kinds of questions or points of guidance would you ask from them?
Lori Harrington: One big one was we have two board members that have a lot of experience in either the construction ERP space or in the business intelligence space. And so, working with them to think through sales channel management strategies and have them be able to go off on their own and create some documentation for us to look at. We have an operating partner for one of our lead investors, and he spent a week with me up in Salt Lake going through different exercises to think about how to set strategic goals and introduced me to the book Traction, which I feel like has changed my life. I really highly recommend everyone who is searching or has a business read that book.
Alex Bridgeman: Are you implementing Traction now?
Lori Harrington: We have been. We’ve been doing weekly rock reviews, quarterly goals. We’re still in the early, early stages, but yeah, we’re trying to implement it. And Bruce has definitely been a big help with that and onboard.
Alex Bridgeman: Yeah. So, with a remote company, when you can’t really easily be in the same place, how did you go back and forth over those first, even like the first 30 days of- probably you got a lot of the questions answered about the company before buying it, but of course, there are still little things here and there that you still need to get from Bruce. How do you have that communication after closing and you’re now running the company?
Lori Harrington: Bruce and I, we meet all the time. So, we do a like five o’clock meeting catch up, we ping each other, we use Teams pretty regularly. And we’ve been thinking about how to divide different roles over time. We do need to do another in-person meeting soon. We were just talking about that before this meeting, just to kind of workshop some things.
Bruce Vanderzyde: I’d also say that we’re lucky, we’ve attracted really good people over the years and they’re mature and they’re calm. And we’ve worked- We actually transitioned to a remote company almost accidentally. This was done in about 2015, 2016. I was living in Houston, and we had two or three employees in Houston and we’d all go into the office every day. And then we started realizing, well, we don’t need to all be here every day. Most of us are doing online meetings with customers or developers or we have an offshore team. And so why do we come to the office just to sit in our office with the door closed and drive 30 minutes each way? That’s just crazy. So, people just started working at home. And so, they’d start working a couple of days at home. Then they come into the office one day a week. Then one day every two weeks. You just start working effectively remotely a long time ago. And having mature staff that you can trust and get stuff done on their own is important. And one interesting thing that one client said to me that’s absolutely true is that the transition to remote works if you have employees that can work on their own, and that the employees who struggle working remotely are the same ones that struggle at work in the office. So, if you can work effectively, it doesn’t matter where you are. So, we made that transition a long time ago and having good staff helps that.
Lori Harrington: The other thing I did focus on in the first 30 days from a relationship building standpoint was really building relationships with the CTO. We had met during diligence. He was one of the few employees who knew about us going through diligence. And so, I met with him in person right before the transaction closed. And then again, I met with him the other week. I went down to Houston where he’s at. And so, we formed a really tight relationship. And that’s been a lot of after hours, like phone calls just talking and talking about the future of the company and getting aligned. And that’s been really beneficial.
Bruce Vanderzyde: Yeah. And that’s one of the keys to success is I’m more of the business side and product management, understanding the use cases and how people do things. And then he and I meet to go over features and he turns that into developer specification. And he improves the spec that I write out. So, it’s teamwork; technology and business have to go together. Because you couldn’t do it with just the technology side, because, again, that whole process of making software look simple and it’s complex behind- the calculations are very complicated, but it has to be easy to interact with. So, the old persona thing, I’m saying our software should work well for the mid-fifties project manager at a construction company who needs to do forecasting, including S-curve forecasting. A lot of project managers aren’t very good on computers. Their background is actually coming from trades in a lot of cases. So, they work up from a trade to a site super, site foreman to site super to project manager. Being good on computers isn’t one of the skills that’s required. So, we have to make it work for them. And that keeping that in mind all the time really helps. So, our CTO is very good at making sure the interface is nice and clean, and we’ve got great development team. One of our offshore developers really helps too. He’s always making suggestions on making it easier for users. So, if everybody has that user driven focus, you can end up with good technology.
Alex Bridgeman: What kinds of compounding benefits have you seen from running a remote company for six or seven years now?
Bruce Vanderzyde: It does help with scalability that you can hire people from different states. You don’t have to come in to the same office. So, your talent pool isn’t within 40 minutes of your office. That’s the biggest benefit. So that helps a lot.
Lori Harrington: Yeah. I think also being able to give employees flexibility to go pick up their kids from school or visit someone and work from home somewhere else, I think attracts better talent when you’re able to have that flexibility as well.
Bruce Vanderzyde: Yeah. I always tell staff you should never miss your kid’s Christmas concert at school. If you do, you’re not a good time manager. You know about it months ahead, put it in your calendar. Work will flow over it, go. Yeah, you shouldn’t miss those things.
Alex Bridgeman: Bruce, we also talked about how letting go of control can be hard in some areas and maybe not in some other areas, but I’d be curious as this process has gone on and you’re still going to be around in the company, of course, but there’s definitely pieces of the company that you’re letting go of control of. How has that felt from your perspective? Is that something that you’ve been excited for? Is there some trepidation that you had to think through a little bit more? How has that process been from your side?
Bruce Vanderzyde: Well, it’s been actually pretty good because part of it is, again, revamping some of our internal processes where we could just do better. Some of our challenges are with growth and scaling, and some of those relate to defining client work very well the first time, so we don’t go back and forth fixing things. We do a lot of really good customer reporting. So, letting go of that and watching the process evolve and contributing to the process has been good. I think one of the things I know I’ve been actually doing some research on selling, retiring, successful retirements. And one of the things is you do feel after this that you have accomplished something and that knowing that you’re passing it to a Lori and a board that are going to look after it means you can kind of close the door behind you. You know it’s going to be in good shape. So, there’s still the big opportunity we’re working on that I’ll continue to be involved in. But I think, yeah, that transition, knowing it’s going to be looked after, is easier.
Lori Harrington: And I will say what made it really great for me, at least for the first 30 days, Alex, is when I came in, I told Bruce I really wanted to learn how we do things and write out the processes and take time to try and make some things that were kind of [inaudible [RD1] 37:42] more efficient. And so, he continued to do a lot of the day-to-day stuff, so I could take the time to do that. And so that was super helpful to help me get to speed and learn. Because he wears a lot of hats. There’s no way I could step into Bruce’s shoes. We’re going to have to make some hires to step into some things that Bruce does, but he wears a lot of hats.
Bruce Vanderzyde: Yeah. And I think that that was a good move to have Lori learn the business by documenting what we do, documenting all the processes, which will help us scale. But also, she sees how the wrenches are turned, like what you do to deliver a new implementation or custom reporting or we’re just doing another systems integration now. Actually, my daughter got hired by a really good company. She graduated out of UT and then her company actually started her rotating her through the administration side of all the departments in their business. And I thought that was just fricking brilliant. I have learned more from talking to people who do I’ll call it accounting functions and clerical functions. They know how the company runs. They’ll tell you how to make things better. And they know way more than they’re given credit for. So, putting my daughter through that, that company really taught her how the business works and then she got promoted up. But so, Lori is doing kind of the same thing. Seeing how all the admin works and how the development process works herself is necessary for her to manage the company. She has to know how things work.
Alex Bridgeman: Yeah. What were some effective ways of discovering these processes? Because I imagine a lot of them are documented in some way, or at least there’s some digital evidence that they exist, but when you’re trying to piece together these different processes, what’s that like?
Lori Harrington: So, there’s a lot of interviews with folks and having them walk me through certain workflows. But at a small company, a lot of things are verbal and people end up doing things different ways and maybe not the same way each time, and so, it was documenting and understanding the gaps. And then we just actually rolled out a new- or I would say improved process for our management of our development and customer workflows and tickets, just to make sure that everyone was on the same page as we scale. So, it was understanding how people did their work and then writing it down and seeing where the gaps were and where people thought we could improve.
Alex Bridgeman: If you think about your time searching and now closing a business, what advice would you offer searchers who are trying to accomplish the same thing?
Lori Harrington: My first advice is I really believe in paying interns. I think everyone should pay interns. And I think that’s your biggest bottleneck if you’re doing a proprietary outreach is use them to help you outreach and then focus on industries that you either can really speak to, so either learn the language or if it resonates with the background, I think it is helpful. And then I think, there’s something that you said about using brokers. I didn’t really use brokers because I was told that, oh, don’t use- that’s not a great channel. And I started that up like maybe a month before I talked to Bruce, and I started getting a lot of like good deal flow coming through there. I didn’t act on it because I just didn’t feel like it was fair to keep outreaching proprietary or looking at SEMS when we were under an LOI, I didn’t think that it was fair to Bruce. So, kind of stopped the outreach there. And then the other thing is be fair to the seller. Treat them like a partner, be upfront. And if you find you don’t trust the seller, I would run away. I don’t know. That’s just me.
Alex Bridgeman: Bruce, on the seller side, what’s your advice?
Bruce Vanderzyde: Well, I think it’s important to, again, get good legal counsel because it is a negotiation. You still have to have- it has to go smoothly. And so, yeah, try to find the way that- when you come across something that you have to work through, it’s how do we make this work? As opposed to I’m taking this position, comma dammit. I mean, when you start drawing lines in the sand, then the negotiation turns from a how do we make this all work to I gave up this point, you’ve got to give up this one, and then that kind of becomes controversial. And now you start scorekeeping on what you’ve given up and what you’re- you don’t need to do that. You can just work through each point and say what’s fair, like Lori just said. And yeah. So, getting good legal advice upfront and then fully disclose stuff because I can’t imagine selling your company and then the buyer finds out- the buyer has buyer’s remorse. Imagine that, that you buy a company and now you think, oh my God, I didn’t know this. I wouldn’t have done it if I had known this. I couldn’t live with myself, first, if that happened. And secondly, it can’t be successful and sustaining if that happens. So yeah, you’ve got to fully disclose everything. And I guess from a seller’s advice, I could have been a bit better prepared. I wasn’t. Because I wasn’t looking to sell. This kind of came out of the blue. So, again, 2021, I did have a couple of serious approaches, so that got me thinking about the value and that made it easier to talk to Lori because I had already basically talked value with two other serious companies and companies I respect a lot. And so that gave me the range of value. So yeah, that helped a lot too, because that’s probably hard to know until you go through a process. Again, there’s a whole seller side of you don’t know how much your company’s worth to someone else. And I guess the other thing as a seller is you’ve always got this FOMO, your fear of, oh, if I just wait one more year, I’ll have all this more revenue and it’ll be worth more. Yeah, you’ve got to figure out when’s the timing right. But this, again, for the fact that we’re ready to scale and go to a much bigger level and needed an investment. And again, I’ve been so happy with the way this is going because, yeah, the board has been really helpful because I certainly am just one person and can’t have all that experience. So, yeah, this has all been good. But the advice would be get good legal counsel, fully disclose everything, be prepared to work many more hours than you’re used to because you do have to run the business while you’re doing this. There’s no shortcut. It’s just you have to do it. And then, yeah, you’ve just got to keep pushing. So, it’s really, the whole process is a marathon, not a sprint. So, you’ve got to keep thinking that way. Now, a couple of times I probably pushed Lori and her lawyer a couple of times because things were just not moving. And if you don’t keep pushing, it isn’t going to close. We wanted to close by the year end, and we thought we were going to close by November 30th. We didn’t quite get there, but both Lori and I pushed hard to make sure that everything was- it’s a lot easier to close at a year-end for accounting and tax. So, we did that. But we had everything lined up by like the 15th of December so that we were ready to close on the 31st. So yeah, you just got to keep pushing it because sometimes it can stall and be hung up by- lawyers last year were very busy, too, with all that M&A activity. So you’ve just got to keep pushing them a bit to get done.
Lori Harrington: Yeah. And I think part of the thing with the diligence process as a searcher is you have this pool of funds, you’re trying to buy one company, and so you also want to kind of stretch out the diligence process where you do [QOV [RD2] 45:04] before you start deep diving into technical diligence versus legal. And so having that time to really understand the business was good. I don’t know how Bruce feels about it, but not being rushed to try and close in 30 to 60 days before really understanding and taking time to get to know Bruce was super beneficial, but it was towards the end, when the lawyer’s getting busy, it was a big push to make sure that we were- everything was buttoned up. Because as a searcher, you also have like preemptive rights notices to your investors that is like two week waiting period. So, diligence is done, but you’re just waiting on a response for equity.
Alex Bridgeman: Moving into closing questions. Lori, we’ll start with you. What college class would you teach if it could be about any subject you wanted?
Lori Harrington: Any subject I wanted – I think I would teach a search class, honestly. Like that was my favorite class at HBS. And I think really trying to empower more women to go into search because I think if you hadn’t had like a stay in like private equity before, I did do a short internship in private equity. And so, I kind of learned this language of finance, and it was very intimidating before I got into it and then I was like oh, this is all this is, it’s just networking and finding a good business and it is not as much hard financial stuff going on there. And so that really empowered me to do search. And so being able to kind of demystify that for women would be great.
Alex Bridgeman: That’d be fun. Bruce, what’s your class?
Bruce Vanderzyde: I think it would be going through the selling of a company process. When I sold my last company, again, I worked with the VC partners and they kept telling me how founders leave all the time. And they actually leave, they told me that the founders often leave within six months, like leave period. And there’s a couple of reasons for that. One is they may have the finances and now there’s attitude changes towards work, but a lot of it is they get frustrated. And I think you can alleviate that frustration if you go in with the right attitude to the sale and help the company succeed because it’s like your kids succeeding – you want your kids to be more successful than you are. And that’s what this is kind of. But there’s a lot of things about letting go and how to let go and how to stand back sometimes and let the train run, leave it on the tracks. You don’t have to be the engineer all the time. And figuring out the emotional side of it, about when to sell and going through the valuation process, because having some objective data to value your company as opposed to saying, oh, I thought it was worth more and why? And you have to go through and document what your company’s really worth. So, I’d like to teach a class on how to sell a business successfully because I think it’s not done often is what I understand. I could see why.
Alex Bridgeman: Yeah, that’d be a great class. What’s a strongly held belief you’ve changed your mind on? And Bruce, maybe we will stick with you for this one and then go to Lori.
Bruce Vanderzyde: Sure. Well, I mentioned it earlier, that I used to have an attitude that you talk to lower level – “lower level” – employees in an organization, and they’re just punching the clock and doing their job, but what you don’t realize is they know more about the business than anyone else. I let that go quickly as soon as I started more interaction with different levels of staff in a company, that how much they know and how good they are at their job is under appreciated. Yeah, I learned more about how to design software from them, from those working with client staff at different levels than anyone else. So that was a belief I had that I was happy to let go.
Alex Bridgeman: Lori, what is a belief you’ve let go?
Lori Harrington: It might be kind of similar to Bruce’s. When I was starting out my career at Chevron, I was managing projects. And at the time, I didn’t think I really needed to deep dive into the details of what like the engineering firms were doing or the construction, but what the engineering firms were doing and really understand those details to be a good project manager. And I did a role offshore for two years where it was very much like start out platform, things were going wrong, basically became a real engineer for the first time. And that actually translated really well into being a better manager and high-level thinker because you understand how the pieces fit together. And so, I think when people say you don’t need to get into the weeds on things, I think you do initially need to get in the weeds of things and really understand how things fit together. And then you can go high level. You don’t need to stay in the weeds forever, but I think it’s really important to understand what the weeds are to make good decisions.
Alex Bridgeman: That’s a great one. I like that one a lot. Lori, what’s the best business you’ve ever seen, besides Bruce’s?
Lori Harrington: Funny enough, when I was working in oil and gas, there was this company called PEC Safety. And what they did is every- so all the vendors that we used had to pay them to be in the system for like their safety record. And it was just so brilliant because it was a downturn, people are still paying them because it didn’t matter what oil price was because you had to be in there to get more work. And so, it just had a- and they had a corner on the market. And it turned out that a searcher actually from HBS bought that company like five years ago or six years ago, and I was like, wow, that was such a great find and what a sticky business. So that’s probably one of the best ones I’ve seen.
Alex Bridgeman: That’s awesome. Bruce, what about you?
Bruce Vanderzyde: I’m going to go Texas since I moved down here from Canada. The first time I went into a Buc-ees, oh my goodness, what is this? It’s a gas station that also sells all kinds of clothes and hats and candy and good food, and wow, clean restrooms. I’m saying you go into a- if people come to Texas, just try a Buc-ees. They’ve got these branded logo shirts and hats and everything, but you know what? They’ve turned a gas station into a well-run enterprise, and the employees are real friendly and nice and seem to be having fun. They post their wages. They’re paying like double what normal retail pays. And you can send your kids in with five bucks each and they’ll have a blast. I mean, everybody, people, shoppers are having fun. So, I just think they really captured a way and bottled a way to turn a gas station into a destination. I’m so impressed.
Alex Bridgeman: Yeah. I’ve not been to a Buc-ees before, but there’s another Buc-ees unrelated chain of gas stations also called Buc-ees here in Omaha, but they’re not the same scale. But even just looking at Google Maps on some of these Buc-ees locations, they’re gigantic.
Bruce Vanderzyde: They are massive, like 50,000 square feet for a gas station store. It’s crazy. Our kids could, when they were little, they could spend half an hour in there running around and having a good time. It’s good.
Lori Harrington: And people will plan their trips around it. You’ll see a sign for Buc-ees that says a hundred miles next Buc-ees and people are like, okay, can we make sure we can fill up there and plan our trip around it.
Alex Bridgeman: Wait, did they buy billboards along the highway saying-? Oh, that’s smart.
Bruce Vanderzyde: Exactly, a well run company. Yeah.
Alex Bridgeman: That’s one of those businesses that I think is so interesting where they take kind of a mundane task or location, like a convenience store or gas station, and they make it into something that people are excited to go to. That’s just so much fun and so interesting to study those kinds of companies.
Lori Harrington: Yeah. Especially since you see people wearing shirts and like pajama pants that are Buc-ees branded, like that’s phenomenal.
Bruce Vanderzyde: It is.
Alex Bridgeman: That’s fantastic. Well, thank you so much both for coming on the podcast and chatting a little bit about buying and selling this company and the process and all the different things that you guys have gone through to get to where you are today. So, thank you very much for taking part in this new format for the episode. So, thank you so much.
Bruce Vanderzyde: I hope it helps some people.
Lori Harrington: Thanks, Alex.
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