Right to Win Series EP.1: Patience and Persistence with Kyle Baer – EP.271

(00:00:00) – Intro
(00:05:20) – Kyle’s background and career path
(00:13:08) – The search fund decision
(00:17:59) – The long road to acquiring Crystal
(00:23:31) – Navigating the acquisition process
(00:26:25) – Building relationships and support systems
(00:31:06) – Challenges and learnings as a new CEO
(00:42:26) – The importance of patience and continuous improvement
(00:50:11) – Hiring the right people and building a strong team
(00:51:24) – Final reflections and podcast conclusion

Alex Bridgeman: Kyle, thanks for coming on this first episode of our latest series with Pacific Lake and Trilogy, talking all about going from Datacor to Crystal and all this stuff in between. We’ve known each other for quite a while, and you’ve been very gracious about opening up your home whenever I’m coming through Texas. And so, we’ve chatted a bunch about a lot of these topics before in some way. So, I’m excited to make it a little bit more of a focused conversation around a couple of these. The first obvious one is your background around Datacor, but then also prior to that and how you got from Accruent to Datacor. I think that’s an interesting journey. And then you learned, of course, a ton at Datacor. So, I think we can spend a pretty good chunk of this episode talking through that.

Kyle Baer: Sure. Yeah. Thanks for having me on, Alex. I’m really excited to share my story and background. So going back, Accruent, my most recent role there, actually was there for two different roles, and my most recent role was 2017 to 2019. And I was doing acquisitions for them. And so, they were private equity backed, provider of software to real estate and facilities companies, and they’re highly acquisitive. I think they did 19 acquisitions in nine years through three different private equity sponsors. And so I was really focused on the organic, outbound, reaching out to sellers and building a relationship and got to see a bunch of different businesses and really enjoyed it. Had a blast doing it. It was fun to see all these different types of software that’s used in what they call the built world. And unfortunately, the time there kind of got cut short when they went public through an acquisition by Fortive. And then the acquisition pace really slowed down. And so, I remember I was grabbing breakfast with Clayton Sachs at Datacor up in the suburbs of New Jersey. I think it was a classic New Jersey breakfast diner. And we were just catching up. I had known Clayton for a few years, actually through Accruent, and kind of told him that I was a little bored and really wanted more pace and also wanted to get my hands dirty and get some operational experience. And Clayton told me like, oh, just join us. We’ve got lots of messy operational problems to solve and we’ll just throw you right in. And I thought, oh, wow, that sounds really interesting. I think at the time they were 50 employees. And so three weeks later, I ended up joining. And that was September of 2019 is when I first joined Datacor, actually, I joined as an independent contractor and it was four days a week. And that fifth day I was going to search for software companies to buy. It was going to be a three month project. And then I ended up staying five and a half years.

Alex Bridgeman: So how far into Datacor were they when you joined?

Kyle Baer: Let’s see here. So, I think they closed early 2016. So they were about three years in at the time.

Alex Bridgeman: Gotcha. And what was the state of Datacor as a company and team and process when you arrived versus when you left recently for Crystal?

Kyle Baer: At the time, they were building out what they called the strategy team, which is probably most similar to what Vista Equity does with their Vista consulting group and their value creation plays. So Datacor was adding to the strategy team. I think at the time they had three people on the strategy team and I was number four. And those people were really involved in driving recurring revenue growth, which is their North Star. I was more focused on acquisitions. So, they’re looking at their first two acquisitions, and they were pretty close to closing that first one when I joined. And so, I was going to help out with the integration there and figuring out operationally how we’re going to connect these two businesses and then significantly scale the newly acquired business. So that was my first project. But I think they were just starting to kind of figure out how are we going to significantly grow this business over the next five years and hire the right people to drive that growth.

Alex Bridgeman: And can you talk about some of the, like when you think about your time at Datacor, what were the maybe two or three things you felt you got the sharpest at by the time you left?

Kyle Baer: Of course, I did a lot of acquisition sourcing, so I got really comfortable at cold emailing and cold calling and sometimes cold texting people. Got my fair share of angry emails and angry phone calls in return, of course… Stop talking to me. I’m never selling. I’ll sell it to you for a billion, those kinds of snide remarks. So I think I learned persistence was a big one. I think the second thing is just how transformational the right hires can be. And I saw that at the strategy team level at Datacor, just these amazing, some with MBAs and some pre-MBA, hires that Datacor had made. So there was Baker, Jeff, Rohit, myself, and then Clayton were all kind of part of this team. And what we were able to accomplish as a team was just remarkable. And I think some of us were in some ways overqualified for those roles and working in a smaller company, but Datacor or Tom really enabled us to really own our strategy and really drive the growth forward. So it was really cool to see. I think the last thing is just compounding over time. That didn’t really take place until later in the story, but just seeing what can be accomplished when you’re really patient and you hire the right people and you pop your head up in year six and you look back and you’re like, wow, we 5Xed revenue in the last couple of years and just seeing that remarkable growth that happens in those out years, that was really impactful to see.

Alex Bridgeman: Were there any common philosophies or mantras or sayings that you had drilled into your head over time with your five and a half years that maybe if I followed them around the office for a couple of weeks, I would start picking up on and be like, oh, that’s an interesting way to view the world? Is there any that stick out to you, maybe that you use at Crystal now?

Kyle Baer: Yeah, there’s a couple of comes to mind. Tom would always talk about the North Star, which was growing annually recurring revenue or ARR for short. And we would always focus on that. That was what we’d think about each day. I think Clayton would say something like, every morning when you get up, you should think about how am I going to grow ARR today? And that was just the driving North Star as they called it. So that was definitely a term that we would hear frequently. I think they would commonly quote people like Will Thorndike and Warren Buffett. And I think we actually read The Outsiders together as a leadership team. And then we did a session with Will, which got a lot of gold nuggets out of that session. It was just cool to pick Will’s brain and learn about all of the amazing CEOs that he has gotten to know in his career. I think also just decision-making. When I first started, they gave me the book Thinking Fast and Slow and said, here, this is required reading. Read this. We’re going to talk about it. And just really knowing when to make a quick decision and when to really slow down and wait and gather the right information. So those are some things that come to mind in those early days. But it was six years ago, so it’s a little fuzzy in my mind at this point. I’ve taken the North Star to Crystal. I keep using that phrase of ARR. I copied one of Datacor’s famous board slides and put that in our board deck and said, hey, this is what we’re going to stare at each day and this is what we’re going to think about. And we really wanted people to be driving ARR growth.

Alex Bridgeman: Nice, I love that. And you mentioned that you started as a contractor four days and then the fifth day was going to be sourcing software companies. So, were you thinking about search as a path for you from the get-go or was this something that kind of evolved over the years?

Kyle Baer: Going way back, I actually learned about search in 2013 from some Carnegie Mellon grads that had launched a search fund out of Pittsburgh. At the time, I thought, wow, this is really cool. You’re young, you’re in your 20s and 30s, straight out of business school, and they give you capital and say, go find a business, and then we’ll make you the CEO of the business, whichever business you find and buy. I thought, this just seems too good to be true. That’s when I first learned about search. It was back in 2013. At the time, I really wanted to be a CEO. That was my career ambition as a young 24-year-old. I thought, maybe a search fund is the right way to become a CEO later in my career. And so, when I left Accruent, I went to Datacor specifically because I wanted to raise a search fund, wanted to work under Tom and Clayton and get that operational experience. And the goal was with that fifth day, I would start sourcing deals and then eventually raise a search fund. And Tom and Clayton were going to help me raise it. But a couple months in, COVID ended up hitting in, I guess, March of 2020. And that made me slow down and think, okay, this is probably not the right time to raise a search fund when we’re not sure what types of businesses are going to be around two years from now. Everyone was panicking at that point. And so, I thought, okay, I’m going to slow this down and just spend some more time at Datacor. And so from there, it was kind of a year by year. I was like, okay, I’ll spend one more year here and I’ll spend one more year. And then I think I had been there about a year and a half and Clayton and I were talking, and he said, hey, you should go five days a week, go W2, we’ll make it worth your while, stick around for a few more years, get us through a recap, and then go launch your search. And I put a lot of thought into that. And at the time, I thought, okay, two more years here I think could really pay off. And so, at that moment, that would have been 2021, I decided to kind of delay a search for a few years.

Alex Bridgeman: So, can you talk through that decision? Because that decision, like there’s a lot of people who’ve had a kind of a version of that decision of stay here in a place where you’re learning a ton versus go off. Like, I feel ready to go off and do it on your own. Maybe you felt ready at the time, but like, what were the two paths and what did they each look and feel like?

Kyle Baer: I definitely had that entrepreneurial itch at the time. And I remember having lots of conversations with my wife on, I think I should leave. And I really want to run a business. And I want to do this. And I remember her being very supportive and saying, well, if you want to go do that, I’ll support you and let’s do it. But if you want to stay at Datacor, I’ll support you in that too. There was lots of thinking and dwelling on that and trying to figure out when is the right time. I think for me, and one thing I picked up from Tom and Clayton is, Tom was a little bit later in his career compared to some searchers. He was late 30s. And he really encouraged me to slow down, make sure you buy the right business, take your time. This isn’t a sprint, and you don’t need to hit triples and home runs in your 20s and 30s. And it’s better to just be patient and find the right business. And so I think from there, I just thought I’d settle in and really get to learn the operations of small software companies and just see how you grow a small software company. And so I’m glad I stuck around for those five and a half years. It was a tremendous learning experience. But I just remember that toggling back and forth. It’s like, oh, I’m going to do it. I’m going to launch this in six months, or no, I’m going to stick around. And just that ambivalence and, in some ways, ambition to go do it.

Alex Bridgeman: Well, and also sticking around too gives you more time for relationship building with both investors but also some of the owners that you met like the Crystal owners where maybe they’re not ready now, or there’s an investment you can make with patience over a longer period of time with those owners that is going to make you stand out tremendously. That’s your competitive advantage you’re building as a searcher by having a more patient time horizon versus just a two-year, that probably feels closer to a sprint than five and a half years.

Kyle Baer: Yes, 100%. And my story is pretty unique because it doesn’t really fit into a typical two-year search period.

Alex Bridgeman: Yeah, because there’s no funded search, right? This is closer to what a self-funded might even look like.

Kyle Baer: Exactly. Yeah. There really was no fund that I raised to cover the two years expenses. And I actually love telling the story of how I found Crystal back in 2019. And I got a vision exam in Austin. It was a $50 vision exam that completely changed my career outlook. I asked the doctor afterwards what software they use. And she said, oh, we use Crystal and it’s a local company. And she jumped right in and said, oh, we love it. It’s great, highly customizable. And okay, great. So I dug up John’s email at Crystal and just sent him a quick email. And this was June 5th, 2019. And just basically said, I’m interested in learning more about your business. I work in software – at the time I was still at Accruent – and would love to meet for lunch. And I thought he would reply back and be like, yeah, sure. How’s Wednesday at noon? Let’s meet at In-N-Out Burger. But no response. And so another email, another email. I think I sent him 10, maybe 15 emails, zero responses. And I tried calling their support line. Every time I’d call their support line and try to talk to John, I couldn’t get through. They did a good job with the gatekeeping. And I thought, okay, all three of these founders went to University of Texas. And so there’s a bakery, the original was close to UT. Most Longhorns would know about it. It’s called Tiff Street. So it was actually started by a Texas Longhorn. And so, okay, if I send them a box of Tiff Streets, they will know that I’m local because only someone who lives in the Austin area would know that. So I sent them a box of Tiff Streets.

Alex Bridgeman: Yeah, you’re in the know. You’re in the club.

Kyle Baer: Exactly. Yeah. I’m in the know. And I think he immediately responded right after that, like hey, got the box of cookies. Let’s talk. And so, from there, we grabbed lunch for the first time and just started the relationship.

Alex Bridgeman: So June 5th is the first email. Lunch is?

Kyle Baer: I think that first lunch wasn’t actually until early 2020. Actually, we did a phone call pre-COVID, and then our first lunch was three months into COVID. It was one of those really awkward lunches where you don’t know if you’re supposed to shake hands or just fist bump or like how much of a distance to keep. Do we wear a mask at this lunch? And the vaccine wasn’t out. It was June 2020. Do you remember that? I think during COVID, our interaction was pretty sparse. So, I think there was a whole year that passed until we met up again, just because of the uncertainty of meeting in person.

Alex Bridgeman: Wow. That’s wild. So, like nine months or close, like around nine months from, well, even almost a year at that point… cause if you’re in March, add three months, you’re probably May, May, June-ish timeline. And as a funny like timeframe comparison, Michelle and I got married in August 2020, so like two months later, and two weeks ago celebrated our five year anniversary. So that whole thing happened like in between your lunch and you becoming CEO, just as a way to like level set how much time you had building that relationship.

Kyle Baer: Yeah. That’s an interesting analog and congratulations on five years.

Alex Bridgeman: Oh, thanks. Well, you too. Yeah. This worked out well for each of us, I think. So you had… I love that you remember like the email too and the lunch. So what was- it’s not obviously, from what it sounds like, he wasn’t thinking about selling or maybe open to selling at that moment, maybe he was thinking about it. What was his thinking at the time when you met for lunch for that awkward COVID lunch?

Kyle Baer: So, we met for lunch, and I do remember that they told me a price in the first lunch, which in my sourcing experience, that almost never happens. And we closed slightly above that price, but that price kind of held. And really just talked about the business, the challenges, what they were trying to do to grow it. Talked a lot about Longhorn football and their kids and sports and just trying to build a relationship to start. I think we obviously hit it off because we kept meeting for lunch, and I told them, probably not at the number you want today, but let’s stay in touch and maybe your business will grow into that valuation and we can make something work here. And so that’s kind of what we did was just stayed in touch. And every three months, we’d grab lunch. It was always at the same Mexican restaurant, Tex-Mex called Dos Marys in Austin, Texas, on Office 620. And that’s always where we would meet. A lot of memories at that restaurant.

Alex Bridgeman: Nice. How many lunches did you have between the first one and then a signed offer?

Kyle Baer: There had to have been at least 25.

Alex Bridgeman: 25. My goodness. That’s a lot of… Is that a burrito or taco you’re getting every time? That’s a lot. Like put them all on a table. Like that’s a lot of time.

Kyle Baer: Yeah. A lot of tacos. And I think I was so nervous for most of those lunches where I would just take the lunch menu and I would just pick whatever’s on the top of it. Like, oh, I’ll just take the enchilada. I probably ordered that enchilada 10 times.

Alex Bridgeman: I’ve started doing that. I would read the menu online before, pick out what I want, and then just order like when they come by and not look at the menu… the same problems.

Kyle Baer: Yeah. And then there’s the dilemma of, oh, do I go enchilada? Because you can use your fork and knife. Or do I go tacos? But then it’s kind of messy and I don’t want to have salsa all over my shirt.

Alex Bridgeman: That might look stupid.

Kyle Baer: Yeah, exactly.

Alex Bridgeman: Obviously, you warmed up eventually. And it sounds like the business kind of grew into that, that number over time. And so maybe fast forward to like the last six, nine months of time right now and this year in 2025, when you’re closing out an offer, there’s a signed offer. Now you’re getting into diligence and it’s becoming more real. You wouldn’t have to move. There’s some benefits there too. Talk about that time.

Kyle Baer: So, the LOI was signed August 7th of 2024. And it didn’t close until February 13th. And actually, so 2023, we started talking and put an LOI in front of them. They seemed really interested. Timing was great. I was right there at the right valuation, felt like things were moving in the right direction. And then they disclosed the 11th hour that there was another party. And so, we had a competitive situation there, and they ended up signing with the other company. And I said, okay, that’s fine. Yeah, sign with the other company. But if you get retraded on the LOI, let’s talk again. And that’s exactly what happened. So, six months later, they came back to me, this was January of 2024, and basically said like, yeah, we now see the value in working with a search fund. And we want to keep talking. Are you still interested? And of course, I kind of played hard to get. I was like, well, yeah, we need to make sure that the business has still been chugging along. But yeah, I think I’m interested. And of course, I was. Didn’t want to be too overeager. And so then between January and August, we met for lunch a few more times, got another data download from them. They got me back into their QuickBooks, gave me QuickBooks access. And then on August 7th, we finally signed the LOI.

Alex Bridgeman: August 7th, 2024, that is? Or 2025?

Kyle Baer: 2024.

Alex Bridgeman: 2024. Okay. So, from signed LOI to closing, what was that timeline?

Kyle Baer: It was about six months. We thought it was going to take three or four months. And like most small businesses, their accounting and financial data was pretty messy. And so that really slowed things down. I probably spent a few weeks of my life in QuickBooks, just pulling data out of QuickBooks into CSV and analyzing it and turning it into pivot tables. That was slow. And then the holidays, of course, kind of slowed things down as well around Thanksgiving and Christmas and the New Year. But we kind of marched forward, and the goal was originally to close by end of year. And then that got pushed to January, and that got pushed to end of January, and kept getting pushed. And then finally, mid-February, it finally closed.

Alex Bridgeman: Great. So, you’re closed. You’re now- so that puts you at about six months, seven months in now at this point?

Kyle Baer: Yeah, so I’m six months in. Really enjoying it. It’s been fun so far, and really grateful for the support of Tom and Clayton and the other Datacor executives. Looking back, even that due diligence period, Tom and Clayton were super helpful and even thinking through, who do I put in my cap table? Questions I had never asked before. Who do I put on my board? How much information should I share with investors? What should I put in my SIM? Just all those types of questions. Tom and Clayton, they were almost like Chat GPT for getting a search fund deal done. Like you’d text them and you get the answer right back. And they were always accurate on that. And so then Tom actually joined my board as well. So it’s great to have that continued relationship of having worked with him for five and a half years at Datacor and now he’s on my board.

Alex Bridgeman: Yeah. How did that influence, the relationship with Tom and Clayton, how did that influence investors and then the board that came together?

Kyle Baer: Yeah, I think they were really helpful at helping me to think through what types of investors to work with. And there was kind of four main buckets. There was the more hands-on CEOs that have run businesses in the past. There were the larger family offices and funds that could write bigger checks. There were the former colleagues and friends. And then there was kind of the general software entrepreneurs that maybe this was their first or second search deal that they had invested in, but they knew software and they liked these smaller software companies. And so just to understand the mix of those different archetypes was really helpful. And then also just designing a cap table for what I want to do with the business. And I really want to run it long-term. And so, finding the right investors that didn’t want to punch out in year three or year four but wanted to be along for a longer journey. So, they were really helpful at thinking through those dynamics.

Alex Bridgeman: When did this feel like it was actually going to happen? So, you have, there was an LOI process that got competitive, and then sign-in took a while. When did you feel like, okay, we’re actually going to leave Datacor and this is going to come to fruition here? Because it was, it sounds like it was already taking longer than you expected. So, I’m curious, what was your mindset of, when is my mind going to switch from focusing on Datacor to Crystal and make that, start making that switch?

Kyle Baer: Probably three months after the LOI was signed. There’s not really a point in time that I remember like, oh, that’s when I knew it was going to close. And it was actually, in some ways, anxiety-inducing up until the final close and the funds were wired. But I think as we went through the process and we started to align on what we wanted to do with the business and how we wanted to grow it… And I do think there were a few conversations with the sellers where they said something like, yeah, we’re doing this. We’re not backing down. We want to get this deal done. And there’s always those tense moments where you’re negotiating something and it can be really tricky. And at the end, I’d kind of just let them know like, hey, I’m about to spend a lot of money on legal and just want to know that you’re committed. And of course, they’d say like, yep, we’re 100% committed and we will let you know if we’re no longer going to do the deal and we’ll be very upfront with you. And I trusted them, too, because I’d known them for five years at this point. So I had a high degree of trust in their character and that if we weren’t going to do the deal, that they would let me know. It was definitely a stressful period. And I think it was maybe the seventeenth acquisition that I worked on in my career, and it was by far the most stressful. I think there’s just something about attaching your name to something and having it be your deal and you start to kind of identify with it and get your identity wrapped up in it, and it can definitely kind of take over and almost feel like a whirlwind at some points.

Alex Bridgeman: Yeah, no kidding. It probably helps too that they’re in Austin. Like you can go see them in person, spend a lot of time in person and not only through the years that you knew them prior, but even during the deal, like you could have a, I don’t know if you had like a weekly lunch or some weekly check-in that you had with them that was more in-person oriented. Like what was- that’s a huge, to me, that’s a huge advantage that it must have a material impact on your likelihood of close.

Kyle Baer: Yes. The general proximity really paid off and just being able to hop in the car and go drive to their office. If we were negotiating something or I needed information on something, I’d usually just drive to see them. They’re 25 minutes from where I live. And so it’s really valuable. They’re also trying to run a business, and they’re pretty involved husbands and dads and they have a bunch of kids and vacation schedules. And so, they’ve just got a lot going on. All I’m thinking about is buying this business. And so, yeah, the face-to-face was definitely beneficial.

Alex Bridgeman: Yeah, absolutely. What’s been the first six, seven months at least like from an initial challenges perspective? Or even before that, just like how would, if I was your shadow for a day or two while you were at Datacor versus at Crystal, first off one’s remote, one’s in an office, but what are some other things that I might pick up on there, like oh, that’s a very different day that Kyle’s having?

Kyle Baer: Datacor initially was actually in person, and I would travel up to New Jersey every other week. This is pre-COVID… And then during COVID, it switched to remote. I think what I’ve learned most about myself is in most executive roles or managerial roles, you’re more of a doer. And when there’s a problem, you roll up your sleeves and you jump in and you fix it. And as a CEO, you don’t really fix that many problems. You lead people and you encourage them to fix things, but you don’t create budgets. You don’t sell software. You don’t write code. And so when the problem pops up, it’s like, if there’s a support issue, I don’t know how to answer a support call. And I don’t know how to troubleshoot and debug. And I need to work with my support manager to get those problems fixed. And so, I think if you were to look at the contrast between Kyle at Datacor and Kyle at Crystal, Kyle at Datacor was definitely more hands-on and more doing. And Kyle at Crystal is more thinking and strategizing and leading, but definitely less doing. And that took a few months to learn as well. I’m definitely a doer and a fixer at heart. And I like fixing problems. And I think my board was very wise. And they told me in the first three months, there’s three things you should do. Talk to customers, talk to employees, and close the books. Don’t do anything else. And that’s the best advice I could have gotten. Because I wanted to get in there and fix and tweak and implement and change. And I think in your first 90 days, you can actually make problems a lot worse by trying to do too much.

Alex Bridgeman: Yeah… especially if you’ve been used to like fixing these problems directly, you’re like, oh, yeah, we just got to do this. And to make sure that they know how important this is to you, you want to get involved and spend more time on it. There’s some versions of that that I admire in other CEOs. I was reading about Henry Schuck at ZoomInfo. Like, his social team prepares a spreadsheet with all of the social comments about ZoomInfo that are negative and a link to them. And so, he reads through them all and then will like respond individually to the ones that stand out to him. Like there’s a level of involvement that feels like, oh, okay, that’s a cool way for the CEO to show like what matters and send a signal to the team without getting too involved. I don’t know, is there a balance that you’ve found between like you have done some of these things before and maybe there is a way that you’d recommend doing it versus fully staying out of it and not, like forcing yourself not to be as involved?

Kyle Baer: It’s a balance and I think it comes with time. The first few months I would say I was a pretty insecure new CEO. I’ve never done this before. Crystal had never actually had a CEO in its 25 year history. So not only am I a new CEO, I’m Crystal’s first CEO. And so, I think there were a lot of people that were like, what does a CEO do?

Alex Bridgeman: Valid question, yeah.

Kyle Baer: And there were definitely some kind of power dynamics that popped up. And as a new CEO, you just think like, oh, everyone should respect me and everyone should do what I tell them to do. And in the information economy, that doesn’t always play out. And this isn’t the army. You don’t just like give orders to people and people don’t want to just be told what to do every day. You’ll be labeled a micromanager if you do that. So I think learning that balance. And there were a few things that I jumped in and fixed pretty quickly. I do remember one opportunity I saw where we were still sending out contracts in PDF form and expecting customers to print out those contracts and then sign them, scan them, and send them back. And I asked the contracts manager, I said, do you think there’s a better way to do this? And she said, yeah, I think DocuSign would help. And I said, really? She said, yeah. I said, let’s get it. That’s a great idea. Do you want to be the administrator if I get you a license? And she said, yeah, I’d love to. And so I bought a DocuSign, just assigned her as the admin. And I remember Tom, one of the key points of wisdom he gave me was if you have a good idea, try to convince someone else that it’s their good idea because then they’re going to drive it forward. But if it’s your good idea and you just tell them to do it, they’re going to reluctantly do it. And so, I think in that instance, I thought, okay, if I really wanted to get this done, I need this contracts person to think like, this is my great idea and I’m going to get this done. That was super helpful. And so just being really strategic about where you solve problems. And also I’ve discovered that all the easy problems in a small business have already been solved. Like if it’s super obvious, it’s probably already been fixed. So the problems that are just kind of festering are the ones that are more tricky or they involve humans, and they’re always more complex and multifaceted than you originally realize. For example, there was some comp plans at Crystal that I needed to change and tweak. And in my mind, it’s like, oh, this is a 30-minute conversation, and I’ll just send them the new offer letter and they’ll sign it. Well, it doesn’t go that way. When you’re changing people’s comp, it is a multi-day activity and it is back and forth, and they’re going to go find some market study and they’re going to come back and they’re going to change what they want for the bonus plan and change this and change that. And then they’re just not going to sign the offer letter. So, it always involves way more time than you originally guess.

Alex Bridgeman: Yeah, the long-term festering or people problems seem like, yeah, a big chunk of challenges for the first six months or so. Do you feel like you’re better able to handle those today? Like you’ve had enough of them that you’re like, okay, there’s a method to approaching these problems that is better than what I came in thinking I would do?

Kyle Baer: One thing I’ve really been trying to do is understand human behavior. And I’ve been using the DISC profile and going to have my executive team actually take the DISC profile next week. But just thinking through, how do people process information? What does the resistance to change look like? Are they a high D or a high C or IRS? And just thinking through, how are they going to react to this change? And really trying to craft the message, the narrative, the process to fit that individual. And you can’t do that in every situation. Sometimes you just need to rip the bandaid off and say, we’re doing this, and this is just a company-wide initiative. For those kind of stickier situations, just really understanding the audience. And that’s something I’m working on. And I’ve got a CEO coach who’s been really helpful in giving me these tools to think through. And I think a good analogy he’s used is in my career, we would spend days talking about different acquisitions. Like, oh, I like this recurring revenue profile and look at these gross margins and look how fast this thing’s going to grow and look at this TAM and hours and hours and hours talking about acquisitions and businesses. And when was the last time you had a conversation about an executive or a manager of like, well, they have this profile and they can do this well. Like usually, you’re like he’s a good employee, he’s smart, or he’s a bad employee. Like it’s that simple. It’s almost binary. Like he’s good or he’s bad or he’s going to crush it or something like that. But you almost have to learn the language of people and explaining like, well, if he’s a good employee, like what is he good at? Because he’s not good at everything. And there’s probably some things that he’s going to be terrible at. And so just thinking through all those core competencies, that has definitely taken me to the next level. And I’m still learning that every day. I have a lot to learn there. But that has definitely given me a greater appreciation for how to lead and motivate people in a way that they want to be led and motivated.

Alex Bridgeman: Are there other self-guided resources, books or podcasts, perhaps, that are helpful in answering some of these questions? DISC sounds, of course, super helpful.

Kyle Baer: DISC is great. It’s not new. I think it’s been around for almost 100 years. The book Who is excellent. I think it’s well known in the search fund community. I’m a big, big believer in topgrading. One of my board members, Pete Flick, he got me on the topgrading, and I will never not top grade an executive at this point. I think you can just get so much depth in an interview from doing a topgrade and you actually begin to pull out those core competencies. And some of them you can actually learn over time, like for example, how to run a meeting or how to be more strategic. And there’s other ones that you can’t. If someone lacks integrity or if they lack assertiveness, you can’t just learn those things. You either have them or you don’t. And so topgrading has been really beneficial. And I think just being slow in gathering information. I’m starting to use Gen AI in this area as well. And the cool thing is Gen AI has ingested all of these materials. It knows the DISC profile. It knows all the topgrading competencies. You can upload your DISC profile to it, which I did the other day. And then you can say like, how should I talk to this person that’s a high C? And obviously the LLM knows your DISC profile, and it will craft an email or a strategy or maybe a few talking points that you can use. It is really beneficial. So that’s been cool to experiment with.

Alex Bridgeman: I hadn’t thought to use it for that. That’s pretty sweet. I was thinking about just like uploading blood panels and stuff like that, but that makes… that’s a pretty new, pretty interesting application that I definitely will be stealing. Who by Geoff Smart, that’s been referenced a lot. That’s clearly like a common theme through a whole bunch of pretty smart people in search funds.

Kyle Baer: Yeah. There’s two books Geoff Smart was involved in. Who was the first one and then the CEO Next Door is another one. Highly, highly recommend that. Definitely breaks down some of these biases that we have about CEOs of like, oh, they went to Ivy League schools and they’re typically males, or they played contact sports, or they have really high IQs. That book just breaks all that down and says, no, there’s actually no common factors. And it does go through four common factors that it finds with CEOs, but it’s not something that you can look at a resume and know like, oh, they have this. So that’s a really good book by Geoff Smart.

Alex Bridgeman: The funniest one is like all S&P 500 CEOs are like 6’1 and above or something like that, or like the average is like 6’1, which as a 6’1 guy just feels good, but who knows the data on that one either.

Kyle Baer: Yeah. Not sure if there’s a causation there.

Alex Bridgeman: Yeah, there might not be a whole lot. Is there any pieces of maybe advice that have come out of this that could apply to others in a, maybe not an exact same situation as what you had a Datacor, but something that kind of rhymes where they’re in a search-esque role but considering a search?

Kyle Baer: So are you asking like, what would my advice to future searchers be?

Alex Bridgeman: Yeah. It’s like if you are yourself four years ago thinking about some of this stuff.

Kyle Baer: Oh, okay. So, four years ago talking to myself, I think my advice would be, be patient, really slow down, get to know yourself. I think Peter Drucker said it best in his essay Managing Oneself. I think just understanding your limitations and what you’re good at and where those blind spots are that you’re probably going to need to hire an executive to help you compensate for those or lean on your board in certain areas. And then just knowing what are you trying to get out of running a company? Is it just to prove something to people, like, I can do this? Or do you really want to be the person who’s in charge, who bears all the responsibility at the end of the day? Because it can be exhausting, and it’s fun and thrilling, but it is way harder than I imagined. It’s almost like becoming a parent in some ways. People will say it’s hard, and you’re like, oh, yeah, yeah, yeah, they’re just saying that because their kids aren’t going to be as great as mine. And then you become a parent and you realize like, wow, this is so hard. And then you talk to someone who has got kids in their 20s and 30s and they’re still talking about how difficult it is. And I think you don’t understand just the challenge of being a parent until you become a parent. I think CEO is in some ways just like that. So you can probably read every CEO book in the world and watch every masterclass and YouTube video and podcast and still not be prepared for becoming a CEO.

Alex Bridgeman: Yeah, there’s certainly a lot that goes into it that’s hard to share. Like, even as… thinking about having kids, you can go play with your younger cousins or friends of yours who have kids, but you’re still handing them back at the end of it. You’re not seeing everything else that goes on behind the scenes. The podcast feels kind of similar, interviewing CEOs. That’s kind of like the same sense that I get. But harder in what way would you say most often? Is it just the, like it’s constantly on your mind? Is it more the mental workload or stress of it? Or is there something else or something deeper that creates, like makes it feel harder or hard?

Kyle Baer: Sometimes it’s the weightiness of decisions you make. And I haven’t had too many of those yet, but I’ve had a few where they’re just tough decisions and you have to make them. No one else in the organization is going to make those tough decisions. And that’s just the job of the CEO. And you also make mistakes sometimes and those mistakes can really affect people and affect others. So yeah, I think the weightiness of it is definitely challenging. I think also the reality of you don’t really do that much, but you take a hundred percent of the blame. So your people underneath you are the ones that are performing, but when things aren’t going well, it’s ultimately going to be your fault and probably means you need to replace some managers and think through some new hires. But you kind of have limited upside and all downside in some ways. That’s the way I would think about it. And then also I think in our society, we expect so much out of CEOs and leaders. And I think running a small business in some ways, you get some grace in this, but I can’t imagine being the CEO of Microsoft or Google or Meta. And anytime an event happens, whether it’s political or something happens, and then employees expect you to respond to it. So not only are you running a company, but now you actually have to have an articulated response to whatever just happened. And I think we’ve just seen how CEOs are kind of in the crosshairs in our society. And it’s a big responsibility. I think it’s a big responsibility.

Alex Bridgeman: Yeah. And it has to be a cohesive point of view that, if it’s different than what you thought or said six, seven years ago, people are going to dig that up too and point at that.

Kyle Baer: Exactly. Yeah. You’ve got to be careful on Twitter because all of your tweets are on there and someone’s going to dig it up.

Alex Bridgeman: Yeah. There’s really nowhere to hide. When I think about some of your reflections or, yeah, reflections on your time at Datacor and how that influenced Crystal, the idea of patience stands out as does, patience both in terms of like building experience so that when you become a CEO, there’s more that you’ve been able to handle in the past, but also patience to find the right company that works best for you. And even patience in operating… Even just like the, oh, we’re going to do this in 30 minutes and solve this comp problem. Like, oh, this will actually take like a week or maybe more. There’s kind of levels of patience it sounds like Datacor has given you. Does that to you sound like a top three, top two thing that you got from Datacor? What are some others that might fill in there too?

Kyle Baer: Patience is a big one. And that’s hard for me because I’m generally a very impatient person and I want things to be done yesterday. The second would probably just be continuous improvement. And I think that’s in some ways a derivative of compounding of if you continuously improve every day and get 1% better, at the end of the year, you’re going to be way better. And so, leading that culture of continuous improvement and what the Japanese call kaizen, finding those people that they’re going to be self-taught and self-learners and they’re going to have the drive. And when something new comes up, like they’re going to spend time on the internet reading about it and teaching themselves. Those are the dream employees that we all look for as leaders. And I think they can be hard to find sometimes. But that’s something I spend a lot of time thinking about is how do I create this culture of continuous improvement? And I think the third one would be doing business with people you trust, and not just your friends, but people that you enjoy doing business with. I think that’s a big one. There’s so many different investors out there and so many different businesses. And I think we get to be choosy as CEOs and we get to pick who’s going to be in my boat and who’s going to be rowing with me on this and really understanding what are those decisive factors of like, I want this person in my boat with me rowing in the same direction and really looking out for those. And that’s one thing I encourage searchers and want-to-be CEOs is really think about like, who’s going to be on your team and who do you want to take along on the journey? Because that’s probably the most important decision you can make in those first few months is building your roster of investors in your board.

Alex Bridgeman: Yeah, that’s a huge decision. There’s an owner I met last week who he’s been divorced and had a falling out with a business partner that he had to be… there was a separation that had to happen there. He said the business one was 10 times worse than his divorce. He says he’s still friends with his ex-wife, but that breakup with the business partner was so much worse and more devastating, at least to him. I’m sure others, it’s the other way. But those are hard things to change later. Like a bad hire, that takes time to fix, but at least that’s a two-way door, that the business partner or the investor or board member, CEO you’re buying from, seller you’re buying from, those are hard to undo later.

Kyle Baer: Yeah. Once lawyers get involved, it gets ugly.

Alex Bridgeman: Yeah. Ending on a high note, what’s one thing that’s gotten better than expected?

Kyle Baer: I’ve been pleasantly surprised by our customers and just how loyal they are to the software. I think coming from the ERP software space, most businesses don’t love their ERP. And I thought EHR would be about the same. And I think our base of customers is actually far more loyal and far more healthy than I imagined. And they want Crystal to succeed. They want to buy more software from us. They want to partner with us for the long-term. And that’s been really, really encouraging. And then the second thing, just to add on to that, is people. We’ve made a few early hires at Crystal. One was our VP of finance. And it’s just been amazing to see what happens when you bring in just that incredible candidate and you just let them go. It’s like a vacuum cleaner, just going around and cleaning up all the messes. And I think what was really validating with that hire, it was the first big hire that I made, and what was really validating was one of the founders of Crystal, was really impressed with this VP of finance and congratulated me on the hire and said, wow, this guy accomplishes so much and we should have had him like five years ago. So that felt good and definitely made me realize like, okay, let’s make these first couple of hires right and bring in the right people because that’s going to lay the foundation for an amazing culture.

Alex Bridgeman: Yeah. And that’s a new benchmark for like who is the- like the next hire has to be as good as this guy.

Kyle Baer: Exactly. Yeah. Every time we’re interviewing now, I just point to Josh and be like, he’s got to be at or above what Josh is at. So yeah, that’s the new bar.

Alex Bridgeman: That’s awesome. And you’ve got some very neat features coming up here pretty soon that I’m excited to hear how they go. But thank you so much for doing this podcast. It’s been super fun hanging out with you for many years now and complaining or getting excited about the Steelers too.

Kyle Baer: I’m optimistic this year.

Alex Bridgeman: Yeah, me too. It feels generally good. Rodgers looks more in his veteran form, which is a pleasant surprise. But this was super fun. Thanks for doing this.

Kyle Baer: Oh yeah. Thanks for having me on the podcast, Alex. This was a blast. And best of luck with your search.

Alex Bridgeman: Thank you. Thank you. See you in just a little bit here.