My guests on this episode are Michael Curry and Keith Burns who together have acquired 11 diagnostic radiation and other physics services businesses since 2014 through their platform Apex Physics Partners.
This episode is loaded with wisdom and insights. I had a number of alternative titles I considered based on quotes for the conversation like “the CEO of Delta doesn’t know how to fly” or “putting out fires with your face.” Ultimately, earning the right to lead felt right as we talk extensively about their experience being first-time CEOs in an industry they had no background in, but through it all, they’ve managed to build an impressive track record at Apex with an ever-growing team.
Over the course of this episode, we discuss the concept of the messy middle between the start and ultimate success of a business, signal versus noise and learning about the company you’ve acquired, how to know you’re a good leader, letting go of control, and building a culture that grows. Enjoy.
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.
(5:07) – Michael & Keith’s backgrounds
(11:19) – What does a medical physics business look like?
(15:19) – Learning about what you actually bought vs. what you think you bought
(20:17) – Earning the right to lead
(22:33) – How did you figure out where you needed to invest your efforts in repairing relationships with the team?
(28:07) – How do you interpret the “messy middle” of acquiring a business?
(33:14) – Are there key memories where you felt like things were turning in your favor?
(39:33) – Easy choices, hard life. Hard choices, easy life.
(42:34) – How do you let go of people who aren’t a good fit yet are embedded within a small company?
(48:27) – How did you approach hiring people who were smarter than you and giving them control?
(56:14) – What college class would you teach if it could be about anything?
(54:45) – What strongly held belief have you changed your mind on?
(59:40) – What’s the best business you’ve ever seen?
Alex Bridgeman: Thank you both for coming on the podcast. It’s been really fun getting to know you, Michael, and chatting with you more, and having you both on the podcast is something I’ve been excited about for a while. So I’m excited to hear all about Apex and the different topics around leadership and building an organization. I’m excited for all of those. Can we start with intros and backgrounds? And Mike, do you want start, perhaps?
Michael Curry: Sure, I’m Michael Curry, originally from Atlanta, Georgia. Went to undergrad at Emory University which is where I actually met Keith. So, we have been friends for- we’re entering our third decade, so we’re 20 plus years in. I was a finance major, started my career as an analyst in investment banking at Morgan Stanley in London, spent three years doing that. Always knew I had an itch for entrepreneurship. When I graduated from Emory a million years ago, hugged the dean of the undergraduate business program. She told me good luck with your job at Morgan Stanley, but call me when you’re ready to be an entrepreneur. And so that is a thread that I kind of tucked away. Kind of fast forward to 2008, 2009, I moved back to the States. I started a men’s custom clothing business with another friend, a mutual friend of me and Keith’s, right around the time of the financial crisis, which was not a great time to be a bootstrapped entrepreneur. But I think the golden nugget of that experience was meeting a gentleman who introduced me and then I introduced the concept to Keith of search funds and entrepreneurship through acquisition. One of our clients at the time moved to Atlanta to execute a search fund and bought a business in Atlanta. And that took me down the rabbit hole of exploring the world of search funds and ETA. Keith and I, I’ll turn it over to Keith, but around that time, we started to weave this thread of entrepreneurship through acquisition, and it was a function of timing and figuring out how to make it work. But eventually, went to get an MBA at U of Chicago, went in pretty convinced that doing the search fund was going to be the path for me. So, I had to be the odd person out for two years by not going to all of the banking and consulting and tech recruiting events. But ultimately, Keith and I aligned on our vision for doing search, formed Seneca Creek. And I’ll hand it over to Keith to introduce himself and kind of pick up the story there.
Keith Burns: So, Keith Burns, also born and raised in Atlanta, Georgia. Went to Emory with Michael, was also a graduate of the business school. I was a year ahead of him. And then went to Columbia where I got a law degree and a master’s in real estate development. So, interesting fact for me, I don’t have an MBA. And I was somewhat of an untraditional search fund CEO candidate, but I think I’ve been able to leverage my skillset well. I spent a number of years working at large law firms on the corporate side supporting M&A transactions, corporate finance transactions for large companies and private equity groups. Then left that world after about five years and worked for about three and a half years on Wall Street in a compliance and risk management role with Goldman Sachs supporting some of their investing businesses in the securities division, was doing well there, got promoted, and Michael had mentioned in 2008, 2009, he first introduced the idea to us about search funds. And I had an email back to him that I actually looked through a couple of months ago and it was like, yeah, we should do this, and it was like 2008, and we literally just filed it away. And then in 2013, when Michael was looking to come out of business school, I was at an inflection point in my career as well. Things were going well, but that nugget of being an entrepreneur was always there with me as well. And I was getting to a place where I thought the opportunity to make that exit and not get the golden handcuffs was sort of right in front of me. And so, I’ll never forget one of the search fund investors that we were talking to at the time, one of the first ones we talked to, asked me did I tell anybody at Goldman that I was sort of pushing this opportunity. And I said, no, I was still evaluating the opportunity and things of that nature. And basically, I think he was interested but basically said let me know when you’re serious. Like you kind of have to show that you’ve kind of burned some of the boats. And I’ll never forget the next day, I went in and gave notice, and I was just like we’re done. And I didn’t have the fundraise at the time and Michael laughs because it’s just something that I would do. Like just don’t call me out because I’ll show you I’m not afraid. And so I just did it. And I think that that energy and Michael he didn’t go to any recruiting events because he wasn’t afraid, he wasn’t deterred. Nowhere in his mind or in my mind was there a thought that we couldn’t get this done. Now with that being said, it’s obviously the hardest thing that either one of us has done from a professional perspective. And I think the growth and the challenge of running an organization now that we have for eight years is daunting and it always is challenging, and it always sort of tests who you are as a person. But one of the things about us, both our friendship, our partnership, and just our confidence is that it’s unwavering. We really always believe that there’s an opportunity for us to succeed. But we’re smart enough and we have enough experience now to recognize that it’s not going to be an easy path. So, in the end, we decided to come together and form Seneca Creek in 2013, bought a small little business in the medical physics space in April 2014, and eight years almost later, here we are.
Alex Bridgeman: So, can walk you walk through what a medical physics business looks like? What types of products and services did they have? What was their team made up of? How did that look?
Keith Burns: So, our business Kruger-Gilbert Health Physics was a business-based outside of Baltimore, Maryland, and we provided compliance testing and radiation safety services to hospitals, imaging centers, doctor’s offices in the mid-Atlantic region, primarily in Maryland and DC at the time that we bought the business. And we ultimately served as an audit function to make sure that radiology equipment that’s used to diagnose disease and other issues, medical issues, were working in accordance with various regulations, state, federal, or accrediting bodies. So, it’s a compliance-based business in the healthcare space that we thought had a lot of the great characteristics that you look for in a search fund business. It had recurring revenues, high margins. It was a low CapEx business. There were some industry tailwinds as it relates to regulation. Subject matter, what the physicists do, is actually complicated, there’s a lot of science involved, but the service delivery model of a field service business is pretty easy to understand conceptually for us. And so, we had 16 people including us when we bought the business in April 2014, now we’re 170. So, we’ve had a nice run up, very different business that we look at and run and manage today than those days in Jarrettsville between the Subway and the liquor store.
Michael Curry: Yeah. So, I was going to say corporate headquarters was very humble when we began. And it was a very tight knit team. And I think one of the reasons that the sellers were comfortable with us was partially the fact that we didn’t know what we were doing. So sometimes being the outsider and not wanting to tinker to a point of destruction can be an advantage. They wanted to make sure that they transitioned the business to a safe pair of hands, people who they felt they can look in the eye and trust but also people who cared about people in general and culture. And I think one of the things that we’ve learned on this journey is what you believe may be important at the onset changes. So, a lot of folks who are looking to buy businesses, it is largely an academic exercise driven by a spreadsheet and somewhere along the way, you actually meet and build relationships and get to know people and get to know customers and start to become invested in other humans and their livelihoods and their success. And so, again, all of those I think were kind of key ingredients for us having the opportunity to run the business. And one of the things that we tell people all the time is if you’re going down this path of entrepreneurship, particularly entrepreneurship through acquisition, it cannot be purely financial from a financial motive. There are plenty of ways to make a very good living. This one is probably on the medium to hard degree of difficulty, particularly because you don’t necessarily get to build a culture that you want, and you don’t necessarily get to draft the team that you want from the beginning. And so, there’s a lot of time spent getting to know people and building relationships and you being a bit of a chameleon and assimilating and adapting to what exists and then coming out of that inflection point, really starting to put your fingertips on a business and starting to drive that culture and lead that business in the way that you believe is going to set it up for long-term success.
Alex Bridgeman: Yeah. One concept we talked about a lot was how long would it take to figure out what you bought versus what you think you bought. How long did it feel to find that out for your own business for that first company?
Michael Curry: I’ll turn it over to Keith, but I think one very strong piece of advice that we got from an investor and board member early on is don’t let perfect be the enemy of good. And so, his heuristic was first, if you can navigate the business and you got 75% of what you thought you bought, you got a fighting chance. And so, a lot of people are looking for this perfect small business where all of the stars align and it has no problems and every employee is an A plus player, and that’s just not the reality. So, I’ll let Keith kind of talk about when we felt like we knew what we got, but we were shooting for making sure that we weren’t landing somewhere below that 75% of what we thought it was so that we had a fighting chance.
Keith Burns: I mean, we learned pretty quickly because we had a lot of issues in the beginning.Fundamentally, the business was what we thought it was. It was a highly recurring revenue business with high margins, low CapEx, steady client relationships. What we didn’t take into account and what was hard for us, because we have very little interaction with the employees, was the state of the relationships between the owners and the humans and the people who actually worked there that did the work every day. And I think we completely underestimated how much work needed to be done to repair those relationships. And I don’t even think it was all the sellers’ fault. I mean, I think it was the accumulation of them wanting to transition out of the business, the business was run very informally and to suit their lifestyle. And then you have two people who worked on Wall Street with advanced degrees come into this business with investors who have put millions of dollars to work, and what we’re talking about is night and day from how they’ve experienced life. And I think there was some thought that the sellers had some level of lack of empathy for their situation. I don’t actually know if that’s true or not, but the bottom line is the people that worked for us when we started were super skeptical of two people that had never been in the medical physics industry, in the healthcare industry, coming in to run a business that they depended on for their livelihoods. And then there was a bunch of basically tolerated issues that people had in the business. But when they assume that these were the owners and these were just going to be the issues, it’s fine. But now we have these new people, so welcome to the job, now all the issues are yours. So, it was the 401k, we think it sucks. The travel policy is bad. Our computers and our IT provider is horrible. I don’t like my salary, you’re not paying me enough; I should get paid as much as the other person. So yeah, I mean, we bought what we thought we bought, but we completely underestimated the human capital issues that we faced. And we had consultants that came in and did work ahead of time and sort of prepared us in some ways. And I still think we undershot that by a mile. And so we spent the better part of I’d say four of the first five years ticking down every issue that was raised in that first six months, the 401k, the IT provider, the salary adjustments, the appropriate hiring, buying enough equipment so people didn’t have to share, moving from the office that was in horse country to a much more sort of normal place to have an office, not doing our books on green ledger paper and actually putting them in a system. You’re laughing, but this is a true statement. I used to write checks on green ledger paper because we couldn’t sort of put it in the system. So, all of those things took a long time. And so, the biggest thing that I continue to appreciate and learn is, for me, particularly in a human capital business like this, but I would say it probably matters in any business, you have to figure out how to get the people right. And it’s one thing that Michael and I have a natural affinity and gravity towards, but if you don’t, you have to figure out how to get there. I think it’s critical.
Michael Curry: I think the other thing to note is particularly in a business that you didn’t start, we had the earn the right to lead, and I think that a lot of people believe that because you have letters behind your name and your email signature, that people will follow you, or people will be on board with the vision, or people will step out on a limb and be open to change. And it’s just not the case. And so, I think lots of folks have had different experiences buying and operating businesses. Some of them came out of the gate on fire. And we like to tell our story because it’s more of a tortoise and the hare story of really compounding learnings and compounding relationships and really learning and getting to a place where we earn the right to lead, and we rolled up our sleeves and it got punched in the mouth enough to become seasoned operators of a business so that when we took this group of 16 people including us and said, hey, the next step of this process is we’re going to take what we’ve built, share it with other people across the nation, and build a multi-regional heading towards a national franchise that everybody can be proud of, many of the people at the beginning of the journey who frankly thought we would fail in the first six months were some of the first people, when we decided to form Apex, were some of the first people to grab oars and say, hey, we believe in you guys, you got us from where we were. And we essentially doubled head count from a technical perspective in about four years, expanded more deeply into Virginia and Delaware and Pennsylvania. And no one, if you’d ask them to be honest in those first six to twelve months, if you asked them if they thought that they would be a part of that business and now a part of this business and being successful, having opportunities for career advancement, they would have told you they were crazy, and the two crazy Black guys from Atlanta are out of their minds to step into medical physics. But we’re here, but we’re still here.
Alex Bridgeman: Absolutely. How did you start to- I mean, there’s a lot within the idea of earning the right to lead, but it sounds like within a lot of those issues, there were a lot of prioritization that you had to make where certain issues are much more immediate or much larger than some of these– There’s a little bit of signal to noise as well. Like some of these might be issues, but some might be much more minor issues then they sound like they are. How did you start figuring out what issues to focus on and where to invest your effort and time into repairing that relationship with the team?
Keith Burns: So, we had a group, an HR group, it was called Right Management, and they came in and did a round table discussion with all of our employees. And they literally just went through different areas of the business, why people liked the business, why people didn’t like the business, what they thought should change. And ultimately, we got a really nice 20 page report of all of these things that we needed to do. So how do we prioritize the 20 pages? I always believe, I kind of believe in the snowball effect, which is quick wins to sort of build credibility. So, we started at the bottom. We hired a new IT service provider. We said people were meeting in the parking lot of the local supermarket to exchange equipment, and we just said we’re going to buy the people that do certain types of work enough equipment so that everybody can have their own equipment and easily sort of do this work, and we improved quality of life that way. We got a new 401k provider that didn’t charge exorbitant fees and had more investment options. We hired some new physicists that we needed to divide some of the work, and we started to build a system that actually managed the capacity of the team so that we can actually have visibility into how much work people were doing so that we can distribute work more fairly and equitably. We made some pay adjustments. We had to adjust people’s salaries to the market. But what we also did is we also had to tell people no. I think we got to a point where here are the things that we’re willing to fix, but we’re not running a charity, we’re running a business. We bought a business with a certain revenue level, a certain earnings level, and we need to grow that over time. And so, we did tell people no, and we told people we’re going to take on new business. And they said, no, we can’t take on new business, we have so much to do. And we’re like, look, it’s a grow or die mentality. We have to grow. Now we can grow smartly and we can be thoughtful about staffing and looking at all these things, but we had to tell people no. There were certain people that didn’t align with our core values and our mission and our vision, and they left the organization. And so, that we had to sort of draw a line there and say here’s what we’re doing, we understand if that doesn’t work for you, and we wish you well, but we have to have people that are willing to sort of follow us and follow our direction. And so, those are some of the ways we approached it. More often than not, we had to make the place a better place to work.
Michael Curry: Yeah, the one thing I will say about prioritization because one of the things that me and Keith pride ourselves on is not giving this overly dramatized version of the story where everything goes up and to the right, we’ve gotten much better at it over time. And so, when things are going wrong and you’re new in the seat and you’ve taken people’s money and you’re trying to make good, and this is a big opportunity cost for people, there is a lot of pressure and a lot of stress. And so, I do recall we worked with a woman in the early days who sometimes just described our management style as putting out fires with our face. And so again, very young operators with lots of new stakeholders. It does take time to sort of sift out signal versus noise. And I think over time, I think we started to really internalize kind of what Ray Dalio says as another one of those. So, I can recall specific situations about pay, about capacity, about growth, about culture and people living values. In the first instance, all of those situations seemed dire, life or death, and like no one else who had ever operated a business had dealt with those situations before. And now for each of those examples, Keith and I have at least a handful of another one of those, that’s another one of those. And so, I don’t think at the onset anybody’s going to get the prioritization right. But I do think recognizing that it’s a process is important. And I think the second thing that did help us though was when we started to think about how we ran the business with EOS because I think that gave us a frame and a framework with which to bucket problems, to look at them and then to decide how to solve them but also how to organize the business so that the right person is solving those problems in that Keith and Mike are not responsible for solving the problems, all the problems in the business.
Alex Bridgeman: One concept I know we talked a lot about was the messy middle where there’s this time you get in the business, it’s kind of exciting you’ve closed, and then at the very end, there’s the sell or exit or things have stabilized and are good, but there’s this middle part that’s kind of fuzzy and messy. How does that concept- how do you interpret that concept within your own business, and where have you experienced that concept the most?
Keith Burns: I think that’s- I’ll let you start that one.
Michael Curry: So, there’s actually been multiple messy middles. So, kind of think about it, we kind of always talked to our team about kind of three phases for the business. Phase one was the two guys that you’re talking to running a business in the middle of horse country in Maryland that have no business running the business, getting it to a place where it could be a model for other businesses. And I think the messy middle in that business was figuring out growth, figuring out how to manage capacity, starting to build a culture and to build a team to manage. And so that’s why I hearkened to the fact that we don’t kind of overdramatize that everything was great, and then one day we decided to form Apex. I can recall coming home from work one day after not getting a sale that we really needed to make our budget, that our board told us that we needed, and parking in the Safeway parking lot and calling my mom because that’s the only person that I could think to call and just crying and just asking myself what the hell am I doing? I just finished U of Chicago. Keith just left Goldman. We’re literally rowing this business by ourselves because at that point we hadn’t gotten the buy-in, we hadn’t started to appoint people as leaders in the business. And there wasn’t this it’s a slam dunk that we are going to make this work, we’re going to turn the corner, we’re going to grow and expand into Virginia and start to build the business and create a structure with teams. Another messy middle story that I can share is Keith and I talked to a good buddy and a fellow Emory alum who was also a search fund operator – hat tip to Andrew Saltoun. And I remember coming home from work and I took the call from my car, and he introduced us to a book called The Hard Thing About Hard Things written by Ben Horowitz. And after we kind of explained what was going on with the employees, what was going on with our board, customers who didn’t get what we were trying to sell and that we needed to grow. That was just a very sobering conversation that it’s all your fault and what he meant by that statement was you guys run the business and even though you may not have caused all of the issues, you may not be a hundred percent responsible for all of the things that are going on, until you flip the switch and kind of take a hundred percent accountability for what’s going on internally and externally with all the stakeholders, you’re not going to ever put your arms around the business and start telling people internally or externally here’s what we’re doing and here’s what we should do. So that’s also kind of a messy middle memory. And then now. Keith mentioned we formed Apex with Krueger-Gilbert being the first practice in 2019. And now there are seven Krueger-Gilberts and all of the work that it took to build relationships and trust and to build a system that works, having to do that in multiple places at the same time with new people, many of whom were not there to see 16 people in between the Subway and a liquor store and how we were able to grow and transform that business and still have a healthy degree of skepticism that all of this, that we’re all working together to pull off with Apex is going to work out. And Keith and I talk all the time, in addition to our day jobs of growing and managing the business, we have to be the metronome because we’ve seen a previous version of this messy middle, and now we do have allies and leadership that as a part of KGHP that’s seen it as well, but we have to be that steady metronome to let people know we hear you, we feel you. Growth is messy, ugly, it’s painful, but we’ve gotten to the other side of the chasm before, and we’ll get to the other side of the chasm again, but you have to trust us, and you also have to be honest enough to tell us when we’re falling short of the mark as well.
Alex Bridgeman: Are there any key memories or moments where it felt like you were about to cross that chasm where things were starting to kind of turn a little bit in your favor?
Keith Burns: Look, I mean, there’s so many. I think the first inflection point for us was literally the president of Krueger-Gilbert now who’s kind of been our longest tenured leader except for Michael and I, so we made her a leader after the first year we owned the business. So, she’s been a leader of the business in some respects since 2015. She came to us two months into our ownership here because we had a 12-month period where the former owners were still supposed to be consultants, and she came to us and she said, look, I’m from the military, we believe in chain of command. And you guys are- you bought the business, so you’re the leaders, you’re the chain of command. And having this concept of the former owners still being as involved than they are, particularly given the issues and you guys, is going to lose you the team. So, I don’t really know you from a can of paint, but I’m telling you, you might want to make a decision because you’re probably going to lose a lot of the team if you don’t make a decision. I don’t know why we believed her other than she had no interest in telling us that other than I think she wanted the business to survive for other people and maybe for herself. So, we basically had to fire the former owners two months into running the business. And the whole plan was to learn from them for the full 12 months. So, we basically- they had taken a long, extensive trip in Europe after selling the business, they came back, and we said, hey, we really appreciate everything you did, selling us the business, but it’s going to cause issues with the team if you guys are still around, so we’ll still pay you, but you’ve got to go home, we’ll take it from here. And I still think about it. It was stupidity or courage; I don’t know which one to call it. But it was such a critical moment that things could have just gone in a number of different directions. But it’s the moment I always think back to because I said we’ve never been in a worse position to make a decision as we were then and given the magnitude of the decision. And I think we made the right one and it made all the difference, and it is the thing I go back to when I face decisions now about people on the team that we may lose, decisions about clients, decisions about which business to buy. Michael and I have always been willing and courageous enough to make a tough decision and they don’t all go right. But I do think that one actually was a big turning of the corner for us because it identified her as a leader for us. It also showed people that we were willing to make a tough call. And at that point, we weren’t sure what this thing was going to do. So, it kind of was a resetting of expectations for us because we were like, oh wow, we’re really out here. There’s no- We can kind of call them, but they’re mad because we just had to let them go. So, we really just had to figure it out. I think other points were when we first bought a business. So, in 2018 was the first time that we actually bought another practice. And our philosophy was so simple. We just went and met the guy like three or four times. Michael had been talking to him for almost a year. And he finally just felt comfortable enough for us to buy the business and we were able to buy the business, and it’s one of the best acquisitions that we’ve ever done. I mean, we more than doubled the amount of revenue we got from his client base, we were able to fold it seamlessly into our business. And it was the time that Mike and I said, oh wow, I think we might’ve stumbled onto something. And we bought two more businesses in the next three months. And then we actually had to stop because we were like, wow, we didn’t recognize that this thing was going to actually work the way we thought it was going to work. We slowed down and we tried to integrate the businesses in the right way, but that was the first time we really figured out that this idea of acquiring other similarly suited businesses and operating them with EOS and some of the things that we had learned from Krueger-Gilbert would work. And then I think the last and most recent was COVID was really a challenge for us. I think it impacted numbers of businesses. Our business wasn’t as directly impacted in terms of our volume, because we had a require business, but it really did hamper our ability to get out and meet other practice groups and draw them into our partnership, to meet the people that we were bringing on into Apex. But despite all of that, we still grew, we still added partnerships in the last two years, we still expanded client relationships. We were able to hire really good team members. And so, it’s funny, every other week I have a message in our level 10 meeting that we do at our senior leadership team, and I just leave a headline and I say 2022 is going to be a great year. And it’s because I know I have type A people who all want the gold star and they’re just looking at their list and saying this isn’t working right, and they’re going to ask me about this and I don’t know what’s going on, and this client needs so much from us. But I know that this is the point where you can get pretty low on yourself because there just seems like there’s so many things to do. But in the end, we know that we’re doing exactly what we need to do and that the result on the back end is going to be what it’s going to be, but it’s going to come from the work we’re doing now. So, it’s our job to keep people’s morale and head up because we can see things and we know where this thing is going to end up and other people may not see it. So, as we go, so goes others. So, that’s the thing that we like to sort of remind each other. And that’s why it’s great to have a partner because between the two of us, it’s very rare and we’re both having a bad day on the same day, which is pretty nice for everybody.
Alex Bridgeman: Yeah, certainly. And Michael, in the background, you have easy choices, hard life; hard choices, easy life. Has that been a bit of a motto for you in a lot of these decisions too?
Michael Curry: Yes. So, the one thing that has been imprinted in our brains is making decisions theoretically versus making them in real life are two completely different enterprises. So, you read all of these books on when you think a person is not a good fit that you should find a way to transition them out of the business as quickly as you can. It’s better for the organization, it’s better for that person. But actually having to do it is hard. And so, what we have found is the realities of hard decisions don’t change by ignoring them and kicking them down, kicking the can down the road. And so, what we find often is the easy choice is to ignore that you have problems or try to paper over them or try to use euphemisms and not call a thing a thing. But typically, the hard choice is to make the tough call, to have the difficult conversation, to pull the trigger even if you don’t have full facts and information, but in the end, it actually makes things easier and it creates, we think, an environment of transparency and accountability and trust. And what I will say, particularly on the human capital side, is not making decisions, and so we use kind of EOS parlance GWC, which is get it, want it, and has the capacity. When you have members on the team who don’t GWC or don’t meet kind of your core value threshold, but you allow those people to remain in the organization, it really has a negative compounding effect on the morale of people who do GWC and are core value fits because they’re looking around to say I’m doing the right things, but we’re allowing people who may not be the right fit for this team to remain on the team. So how serious are we about these values that we espouse and who we say we are? And sometimes I would say in the early days, those were the easy choices. And we never regret, I think now, making the harder choice faster. Because you’re going to have to make the decision either way. And so, it’s kind of like you’d rather go to the doctor where you can work out and do a little exercise and change your diet because you’re prehypertension versus showing up in the ER under cardiac arrest, and now you still have to make a hard choice, but it’s a much harder choice because you didn’t make the hard choice when you needed to.
Alex Bridgeman: Yeah. Especially in a company when you start out with only 13 employees, that’s a pretty tight knit group. How do you let go of folks who are not a fit but are within this pretty small company where everyone’s fairly familiar with each other and might even be friends? How do you let go of someone from that kind of business?
Michael Curry: I think, and Keith feel free to jump in, I think it has to do with trust, and I think it has to do with clarity of expectations. And what I mean by trust is we didn’t go in saying it was Mike and Keith’s way or the highway or just start making just very shortsighted, very flip decisions. And so again, that earning the right to lead when something has gotten to a place where we’ve had to make that decision, we actually have built up enough trust in kind of the trust deposit bank so that people actually know that if this is a decision that we’ve reached that it’s not something that hasn’t been thought out, it has been examined and is what we truly feel is in the best interest of the business. But I think going to the expectations, a lot of times, we have had to transition people out of the business, but in many cases, people have opted to leave because the expectations and the culture that we were building weren’t a fit and so they opted out. And so, I think when we made it very clear that the expectations and the culture weren’t changing and that we felt very strongly that the decisions that we were making were going to put the business in the best possible place for success, if people disagreed, they at least knew where we stood and then they had a decision to make as well.
Keith Burns: Yeah. And it’s just never easy to let people go. I think you want to be able to allow them some level of dignity in doing that. We tend to be really generous in terms of supporting them for the most part. Because in most cases, it isn’t a core value issue. It’s, hey, they don’t get the role, they don’t want the role, or the role has changed, the business has morphed and now we need them to do something different, or they were never a good fit in the first place, and somewhere in our recruiting process, we sort of missed the mark. So, in most cases, we just say, hey, there may be another place where you get to sort of work in the role and do the things that you want to do. In a couple of cases where it’s more of a core value thing, even then, we do look at it and say did we not set them up with the right training? Did we not set the right expectations? So, I do think there’s some self-reflection there. But at the end of the day, I think you do harm your business more when you keep people that aren’t good fits, both that person, the business, and then the other people that sort of see that as well. And it’s just something that is what’s required of a leader. I think that’s the real hard part. It’s people love I get to make all the decisions and I get to tell people what to do, and I get to have the biggest salary or the biggest piece of the pie at the company picnic. But the reality of being a leader in a company is sometimes you have to make financial decisions or you have to make a personnel decisions that impact people’s lives. And you have to do it for the betterment of everybody. And it’s really challenging. And we’ve had people question we can’t lose this person because if we lose this person, everything is going to go to hell in a hand basket, and eight years later here we are. We’re eight times the size that we were when we first started, we have ten times the amount of employees. And so, it’s through our experience that we know that there are graveyards full of irreplaceable people. And it’s not a callous thing because that actually points to us as well. It is the collection of people and processes and clients that we’ve amassed that should outlive any one individual person. And as long as we treat people with respect on the way out, and we were really clear about where they were meeting or not meeting the mark, I think we can sort of let people go with a relatively good conscious. But anybody that tells you that it’s easy, or this is the fives down process, like I don’t know. I mean, it may work for them, but like it’s heart-wrenching to fire somebody. It just never gets easier to me and I’ve done it a fair amount, not a crazy amount, but I’ve done it enough to fill couple of fingers on a couple of hands that it never gets easier. And that’s why your recruiting processes and making sure you’re hiring the right people that are a good fit is really important. Managing the finances of your business so that you’re not hiring people faster than your business is growing, are key things. And that’s something that when- I’m on a board of a couple of companies as well, it’s the number one thing that I talk about is, hey look, costs are growing. SGNA is growing faster than revenue, and at a certain point in time, that’s not a good sign. I know we think we need all these people and we need to build this big organization, but the business has to support it. So, it’s something that I think, if you’re being honest, never gets easier, but you just recognize the responsibility. And as Michael said, it’s all our fault. It’s the number one thing that you have to do that you may not like to do in the seat.
Alex Bridgeman: Yeah. And you mentioned as a leader that some folks enjoy being able to make all the decisions and have complete control and all that, but obviously you have to outgrow that eventually. How did you approach hiring folks who would take on specific roles in the company that were hopefully and likely very much smarter than you at doing that role and having to let go of control to folks like that who are talented, but maybe it’s kind of scary letting go of something that you did for a long time? What did that feel like? How did you approach it?
Keith Burns: It was hard. I mean, I had to probably do a little bit more of it than Michael just because he has such a unique skill set and always sort of had a different focus. But for me operationally, and I’m not a CPA, so I had to ultimately hire someone to do finance operations. I’m not a physicist, so I had to hire someone to sort of manage the physics team. For me, the one good thing, and it’s probably more than one good thing, but the one good thing about me being an attorney is my whole world was about learning new subject matter and asking a lot of questions. And so, I was really able to ask a lot of questions and glean enough to be able to manage them and manage the business because again, I don’t need to be a subject matter expert. I had someone say to me, I can’t remember where I heard or where they said it, but they said the guy who runs Delta airlines doesn’t know how to fly a plane. But it doesn’t mean he doesn’t know that the airplane has to show up on time and people have to fly it and people have to get on it and pay for it. And so, I’ve always let myself off the hook in that way in that I don’t need to know the absolute nuances of finance and accounting, but I need to be able to understand the numbers and the trends and the business model. But it’s very tough for me. It was very tough because I grew up getting the gold stars. Like, we have this business coach, and he calls our management team the AP kids. I have two masters level physicists who are off the charts smart, then I got a couple of other really smart folks, and then you got Michael and I who we’re pretty humble, but look, this is a smart group of people, so he calls us the AP kids because we’re always trying to get the A on the test and get the gold star. So, like for the AP kid, I’m like I can do that pretty well. Should I give that up? I don’t think I should give it up. They are going to screw it up. I don’t think they’ll do it right. And so, most of it was having them do it right and then some of them even saying, look, I just did it right, so why are you looking over it again? I’m like, okay, fair enough. Now it’s funny because I am comfortable with doing it, and then they’re like but you’re not looking at it anymore. So, you have to balance that. They are like you don’t pay attention, you’re not even looking at it. I’m like I’m looking, but I’m measuring it. But it was really hard for me. I think you have to hire people that are willing to speak truth to power and say I got it. This is a director level issue, this isn’t a presidential issue, this isn’t a CEO level issue. We got it at our level and we’re going to run with it. And then I also think it made me much better at setting scorecards and deliverables and timeframes, and then also giving people a decision format. So, Michael and I, one of our board members and mentors set up this framework of inform, recommend, and workshop. So, all of our leaders know they have to do one of those three things when they bring it to Michael and I. They have to inform us of a decision that they’ve already made because it’s clearly in their purview. If it’s not completely in their purview, then they need to recommend a decision. But just saying here’s a bunch of facts, question mark, is not an appropriate response for a leader. Like you need to recommend, you need to take some ownership, not put the proverbial monkey on our backs. And then the last one is workshop. When you legitimately don’t know what to do or where to go and you want to brainstorm and be open about what the options can be, that’s a third option, but it should be an intentional one, not one where you’re just not making a recommendation. And so that was also a really important framework for us to teach to our leaders so that they build that confidence themselves of making the decisions. And we have a failure budget. They don’t always make the right decisions, or they don’t always do the right thing. But I can think of a number of scenarios where people made decisions, they hired the wrong person, or we forgot this entry in our accounting, or we didn’t do this for a client and we almost risked loss. And I can’t remember a single one of those where anybody got let go, got fired. Because again, we’re not robots, we are people. And frankly, I think a lot of people overreact to sort of failures and they actually basically pay for the failure and never get the benefit of it. If you fire somebody after they made a mistake, in a lot of cases, you’re still going to pay for the failure, but now you get no benefit from the lesson. And our view is we’re going to get benefit from the lesson. Now we don’t appreciate the same mistake being made by the same person. But having that failure budget and actually capitalizing on people’s mistakes and actually getting a benefit of the learning has been pretty critical for us.
Michael Curry: I also think that a lot of people have to question or assess how they frame being a leader. So again, I would argue that if you are making all the decisions in the business, that is a poorly run business and has a huge bottleneck in you. And so, I think being in a situation where you want complete control and make all the decisions, you’re probably better off being an individual contributor or doing something kind of freelance where it literally is you’re a one man show. But I think leading a business is really about you being kind of the GM and the owner as well as a coach in many cases, but you have a philosophy on how the team is going to play, what’s the strategy, and then you find the people to put on the field around the pitch and really the team, your expression of the strategy and your thoughts should be manifested through the team and not a hundred percent through you. So, we would argue, over time, we would hope that fewer decisions actually make it to us and those be the truly important decisions in the business. Because that means that we have the right people in the right seats and we’ve given people the right confidence, support, and decision rights to really own their domain. So, ownership is one of our core values. And so, being in a position where you are making all the decisions in the business, we don’t see that as being a net positive and frankly not sustainable. I think even the brightest of person can say that not all of the best ideas are going to come from their two ears. And if so, you probably are kind of building a team of B minus, C players to stroke your ego versus building the A team to go out and execute and build something of value is my two cents.
Alex Bridgeman: Yeah, I love that. I’d love to ask you another hour’s worth of questions, but we can’t unfortunately. I’d like to do some closing questions, first one being what college class would you teach if it could be about any subject you wanted?
Keith Burns: I mean, I always say that I should have majored in organizational behavior or psychology because I feel like a lot of what I do is sort of behavior. So, I would probably teach some type of organizational behavior, managing people, psychology type class. Because again, that to me, being able to get to the root cause of people’s psyche and what causes them to make certain decisions to me is a very large part of what I do. Understanding numbers and business strategy is great, but what has really set us apart is being able to understand people. So that’s what I would teach.
Michael Curry: I would teach a class on sales. I think not enough students in the United States are actually taught the fundamentals of sales, but effectively you are influencing and selling all of the time. So, from raising capital from investors to prospecting for a business to purchase to getting those first 16 employees to actually give us a shot to going out and landing business, all of that has an element of sales. And I think sales gets a bad rap. But really what it is being curious, asking thoughtful questions, empathizing with people, and trying to help them solve their problem. But I think more people could benefit from improving their sales skills and ability.
Alex Bridgeman: Would it be a class where you walk in and every desk has a phone in it and just a list of phone numbers and that’s the whole hour you spend there?
Michael Curry: Or sell me this pen.
Keith Burns: You’ve got to pick up the phone for sure.
Michael Curry: There’s no substitute for picking up the phone or engaging somebody you don’t know in a conversation and really be interested in understanding who they are and what their problems are. I think it is just a very helpful skill.
Alex Bridgeman: Yeah. One of my favorite scenes of all time in any finance movie is DiCaprio’s speech in Wolf of Wall Street where he’s talking about if your girlfriend thinks you’re a loser, good, pick up the phone and start dialing. It was one of the most epic speeches I’ve ever seen, but that’s a favorite of mine. That’d be a great one. What’s a strongly held belief have you changed your mind on?
Keith Burns: I’m the best person for the job all the time. That’s it.
Michael Curry: That’s a good question. I have changed my mind that I have to care about everything. So, I think that there is a- what I find is that there is a finite amount of time and bandwidth that we all have. And so, even people who are promoting very positive causes, again, going back to sales are trying to sell you that this particular world issue or local issue or national issue is the most important thing in the world. And our brains are just not wired to care about all 7 billion of the world’s ills. And so, I guess, choosing to focus on what I can control and having the right to not have an opinion about everything.
Alex Bridgeman: I like that one. That’s a good one. What’s the best business you’ve ever seen?
Keith Burns: The best business, good question. I mean, as I sit here talking to you on my Apple computer, I think those guys have definitely figured something out. I think building the brand and the ecosystem that the customer anticipates and wants whatever you produce because you have that level of trust with them is pretty remarkable. So, I think they have a pretty great thing going on there.
Michael Curry: It’s a hard question because my head says Amazon for a lot of the obvious reasons of turning cost centers into profit centers and kind of really being customer obsessed. But I can’t think of a particular brand per se, but I would say a brand that is small on purpose and that focuses on quality and does not have aspirations of global domination but truly sees that its reason to exist is to provide some product or service in an excellent way. And it’s not kind of been bitten by the bug of growth for the sake of growth. I think somebody said the two things that want to grow to no end are kind of publicly traded businesses and cancer cells. And so, I think a nice small business that knows its customer, that knows its product or service that is perfectly content building a beautiful experience for that customer and being able to go home and say that that’s enough is probably, I think, a great business.
Alex Bridgeman: Do you have any notable examples that come to mind when you think of businesses that have turned away big growth opportunities in order to stay small?
Michael Curry: I think of some of the specialty car companies. I also think of kind of a stereo and headset companies that intentionally don’t mass produce their cans, I’m somewhat big audiophile. And so, some of the best of the best headsets, they don’t have 17 different types of headsets. They don’t release them every 30 minutes. But you know if you spend the extra money to buy that set of cans, that process and the care that went into making them and the company standing behind, you’re going to get the quality of the sound that you’re paying for.
Alex Bridgeman: Yeah. Isn’t there, there’s some headphone company in I want to say New York that makes them homemade and it’s some family business that’s been passed down and there’s a cool video of them hand-making all of them. They’re really expensive, but they’re really high quality. I can’t remember the name of that. Do you know which business I’m referring to?
Michael Curry: I know I can’t afford those cans just yet, but I know who you’re talking about, and those are the types of businesses that I really admire because they really stand for something, not that larger businesses don’t, but I think that the different pressures and different incentives that often go into bigger businesses or people buying businesses believing that unless they achieve some Apple status in terms of size or some Amazon level of success that is not successful.
Alex Bridgeman: Yeah, certainly. Well, thank you both so much for coming on the podcast. It’s been a really, really fun episode that I think could have been several hours. So, thank you for helping me try to condense it into one hour. Thank you both for sharing a little bit. This has been really fun.
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My guests on this episode are Michael Curry and Keith Burns who together have acquired 11 diagnostic radiation and other physics services businesses since 2014 through their platform Apex Physics Partners.