My guest on this episode is Ryan Turk. Ryan raised a traditional search fund in March 2020 and closed on Radiation Detection Company only nine months later in December 2020. Prior to searching, Ryan served in the Navy aboard nuclear submarine USS Michigan as an officer managing their onboard nuclear power system.
Ryan used this experience to launch his impressively short industry focused search. Ryan and I talk about the pros and cons of being from the Navy prior to becoming a CEO, his thoughts on industry focus versus broad searches, establishing credibility and building relationships in a new team, and how his board has been helpful along with other advice to folks working with boards. 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.
(5:26) – Ryan’s background and career in the Navy before RDC
(9:28) – What were some key sales skills you learned working for a startup?
(10:58) – How did you go about the process of developing your Cap Table?
(12:50) – How did you decide your industry focus
(18:13) – Once you had a targeted industry focus, how did you reach out to different companies?
(20:13) – How fast was it from Fundraise to close?
(20:26) – What does RDC do?
(21:57) – How did you build relationships with the most influential people on your team?
(27:27) – Were there any challenges with the fact that you were taking over a 3rd generation family business?
(30:18) – What have you found is most helpful in communicating that painful growth is best for the employees in the long term?
(33:24) – How did your time in the military affect how you look at job progression and giving people more responsibility?
(38:32) – What were some blind spots you developed while in the military?
(43:44) – How have you leaned on your board?
(45:43) – How did you develop your board?
(48:13) – What advice would you offer to searchers looking to create a board?
(52:35) – What college course would you teach if it could be on anything?
(54:56) – What’s a strongly held belief you’ve changed your mind on?
(57:01) – What’s the best business you’ve ever seen?
Alex Bridgeman: It is good to see you, Ryan. Thanks for being on the podcast for this second trilogy episode. I’m excited to hear all about RDC and your search and military background. You have quite a bit of experience all over the place; it’s going to be great to hear all about it. We’ll have to just start with how would you describe your background and journey up until RDC?
Ryan Turk: Thanks for having me, Alex. So, I studied mechanical engineering at Georgia Tech on a Navy scholarship and commissioned as a submarine officer in the US Navy when I finished school. And really the first two years of my life in the Navy was training. And that started with training in nuclear power and engineering in South Carolina. And then I did submarine and diver training in a couple of other states, and then ultimately was assigned to the USS Michigan out of the Seattle area in Washington. And while I was on Michigan, I did four deployments all in the Western Pacific. I got married right after college. So, I was married throughout my time in the Navy and have been married for about 11 years now, and we’ve got three daughters, my wife Kristen and I. So that’s kind of, that was my military career. Towards the end of that time, I really wanted to run a business. I had always thought that that would be a lot of fun. And in some ways, being on a submarine is entrepreneurial in the sense that you’ve got limited resources, a small team, there’s a lot to get done. And when you’re an officer on the boat, you’re in some ways a generalist; you’ve got a lot of responsibility across the ship. And in running a small business, I saw some parallels there that I thought I could be good at and that would also be enjoyable for me. But I was a 20-something Navy Lieutenant, and I had no idea how you go and run a business. And one of my best friends who was in med school at the time said, “Yeah, my cousin went to Stanford. And I’m not really sure what this is about, but a bunch of rich people gave him money, and he went and bought a business and now he’s CEO.” And I thought, well, that sounds interesting. And he said, “You should just Google Stanford and search fund. That’s what it’s called.” So, I Googled. And Alex, I know you know who Irv Groesbeck is, but at the time, Irv’s picture and contact information was right there on the Stanford website and kind of being a naive Lieutenant in the Navy, I just picked up the phone and called Irv, and he picked up. And at the time, I was looking at going and getting an MBA, and he said, “Hey, when you come to Stanford, let’s have coffee. I’d love to chat with you.” So, when I met Irv for coffee, his advice to me if I wanted to pursue a search fund was, one, go to a good MBA program. The second one was try to intern with a searcher, if you can, so that you can really see what that experience is like. And then the third was try to get some sales experience along the way. And so, over the next, at that point, four or five years, that’s exactly what I did. I interned with another veteran searcher and got to really sit alongside him as he ultimately acquired a company. I went to the Tuck School of Business at Dartmouth for my MBA. And in a little bit of a twist, I actually took a year off from my MBA program to work in sales and business development at a startup in Boston. And that was both somewhat an opportunity to really reflect if I was on the right path, but also directly linked to Irv’s insistence that so much of raising money, hiring people, running a business is a sales process. And so, I had that opportunity and I took it. So, I came back and raised a search fund in my second year of business school and kicked it off after I graduated.
Alex Bridgeman: What were some of the key sales lessons you learned during that time at the startup?
Ryan Turk: I learned that sales and sales skills is one thing. So, the ability to run a sales meeting and speak with a customer and discover their pain points and so on, that’s one thing. But running a sales organization is an entirely different thing. And so, I had the opportunity to sit inside of a really high performing sales organization and realize that so much of it was about process and discipline and measurement and process improvement, which as a novice, I had completely underestimated how important that was. So that was a big lesson for me. And then also the one other thing I’ll say is I was selling a potential new product to existing customers, and I learned how difficult it can be, that even though you already serve a certain customer, it can be incredibly challenging to try to sell them something new that you have never sold them before or that perhaps you’re not as adept at selling. And that’s been a big lesson for me at my company, because it can be so tempting sometimes to want to take a really great customer base and push another product through it. But I’ve been pretty cautious about that, just having observed how difficult that actually is in practice.
Alex Bridgeman: And so, then you took that sales experience, finished your MBA, and then decided you still wanted to do a search fund and raise that. So, what did you think about- or how did you go about deciding industry focus, finding investors, building out your cap table and making plans for that search? How did that process proceed?
Ryan Turk: I think where my mind goes first is building a group of investors or so-called cap table. For me, this was something I spent an incredible amount of time on. And in fact, an MBA classmate of mine, after I had already raised my search and he found out about that, he was like, “Dude, I always wondered what you were doing because I would watch you sit there with a notepad paper and just write the same 12 to 16 names over and over again in different combinations with a bunch of different percentages next to them.” And that was me taking kind of the universe of investors and building a mock cap table in my mind – who do I want and where would they fit in and all these other things. But really what was important to me was I wanted a group of people that I aligned with from a values point of view, as well as also like alignment on what this journey would look like, meaning that I believe that they were people that could be true partners as I looked to buy the kind of business that I wanted to buy and that I was going to run a business in a way that aligned with my values. The second piece is a practical one, which is finding a group of investors that really complemented and supplemented my experience because it’s a team effort, and I wanted to know that I had a great team of partners around me to be successful.
Alex Bridgeman: And then did you dive into industry a little bit, or how did you decide industry focus, all that stuff?
Ryan Turk: So, my viewpoint on the value of an industry focused search actually came from my experience interning at a search fund where we tried both approaches. We built lists of all cats and dogs, all kinds of different companies. And we emailed them, and we saw what came back. And then at the same time, we did a more industry focused thesis and I just saw firsthand what those two things looked like. And I can talk a little bit more about that. So, the searcher I was working with was really interested in the healthcare space and initially was interested in home delivered healthcare. And he started by going to trade shows and then he read publications and then he built lists, and then when I was on those phone calls, I saw his level of knowledge and his sophistication and his use of vocabulary in that industry growing. And over time, he had developed a depth of expertise that he could really identify where the attractive parts of that industry were. And when he was on phone calls with sellers, he had a tremendous amount of credibility because he spoke their vocabulary. He understood the trends in their market. He knew the news. And so those are some of the tangible things that I think ultimately lead to search success is that, by the time you even have a company under LOI, you’ve formed a pretty good viewpoint on that industry and why it’s attractive, which accelerates your ability to speak with investors on that topic. And then also more importantly – and this is more important – is the credibility that it builds with the seller and the credibility that it builds when you go to step into the business, because you’ve sort of immersed yourself in that industry. There’s a lot of other benefits, but those are the ones that stick out to me. Contrast that with like one week we’re talking to a landscape business. The next week, it might be a software business. The week after that, it’s a specialty insurance. And you build none of those benefits by the sort of spray and pray approach as it’s called.
Alex Bridgeman: How narrow was your industry focus? Because I could see something like B2B services and then within that, there’s tons of different- there’s like a thousand different variations of focuses within that. So which focus did you choose? And how’d you go about going through that?
Ryan Turk: So, this is a question I get quite a lot and here’s how I searched, and I can use RDC as an example, so how did I find my company. My process was that I started by thinking about attractive customer segments that I would want to serve. And then I worked my way backwards to learn what are the products and services that they consume. So again, I’ll use RDC as an example. I saw an infographic from the Wall Street Journal that kind of laid out the top 10 industries that were going to benefit from growth in the aging population. And one of them was the dental industry. And I had sold to dentists when I was at Formlabs, a 3D printing company. And I thought, well, that’s interesting, let me start to learn more about that. And as I learned more about that- that’s taking a macro theme and saying who’s going to benefit from this. And as I learned more about the dental industry, I learned there’s hundreds of thousands of dental practices in the United States. It’s growing; new practices are being added every year. There’s more demand, longer demand for dental services. And running a dental practice is tough. You’re running both a small business and a clinical practice, and so they use a lot of different products and services. So, then what I did was I did a series- I mapped out all of the products and services that flow into a dental office, and I did a series of interviews with dentists and dental industry consultants. And I asked, among others, the following questions: What products and services do you buy with a subscription? Which ones are critical to your business, you can’t live without them? What’s the hot thing everybody’s buying? What are the things that you have to do because the government tells you you have to do them? And then at the end, I had I think six to ten like sort of niches or business models, and I built a list of about 150 companies from that. And if you think about that list of 150 companies, I already knew from day one, before I ever reached out to any owner, that these were companies that provided a recurring revenue service that was important. It sold into a large fragmented growing customer base. And so, that was a list that had a very high probability of yielding a company that met the search criteria and RDC was on that list. It’s a provider of a regulatory required subscription service to dental practices, although we sell to many other types of customers.
Alex Bridgeman: And so, going from that list of 150, now that you have a very specific, targeted industry focus and business model focus, how did you reach out to these folks or these different companies?
Ryan Turk: It was all cold email initially. And part of the benefit of an industry focused search and, honestly, a customer focused search is think about the quality of communication you can write. So, like a typical email from that list would have said, “Hey, Alex, my name’s Ryan, and I’m an entrepreneur focused on the dental industry. I’ve been really interested in dental membership software, specifically those that are focused on corporate groups and not individual practices. I learned about blah, blah, blah dental software business, and what you guys are doing in that space seems really exciting. Would you be willing to get on the phone with me?” It is impossible to write that email if you don’t really know that industry. And then, if I’m the owner of that business, you can’t fake that email. It’s like, wow, this is a real person that knows a lot about what they’re talking about. They want to talk to me, they know about my industry, my business, they even know the right sub vertical that I’m in. And so, my response rates to my emails were tremendous. I mean, it was at least 35% of people would respond. That doesn’t mean they would respond affirmative, like, yes, I want to talk to you, but they would respond because I think they recognized there’s a real person on the other end of this email. So, it was a lot of that. My goal was to get on the phone and then visit as quickly as possible. I was very fortunate that I didn’t have to do much of that because my search was quite quick, but that was the nature of my communication.
Alex Bridgeman: How fast was your search from fundraise to close?
Ryan Turk: I called capital in July of 2020, and I closed in December of 2020.
Alex Bridgeman: So, then we haven’t gotten to the company itself yet. What does RDC do as a company then?
Ryan Turk: So RDC stands for Radiation Detection Company. And we are a provider of radiation monitoring services to the veterinarian, dental, and healthcare space. So, what that means is the government tells our customers that they have to monitor their employees’ exposure to radiation when they’re using an x-ray machine or if they’re working in oncology, things like that. We help them meet that regulatory requirement by shipping them a little badge that employees wear on a day-to-day basis. They ship that badge back to us after three months, we process it in a lab and then we upload that data to the cloud so that our customers can provide that data to the government.
Alex Bridgeman: Is the badge the core product, or are there other types of radiation detection equipment that you sell as well? Like how wide is your product portfolio?
Ryan Turk: Our product portfolio is extremely narrow. 99% of our business is dosimetry, which is those badges that you talked about. Our competitors offer a much broader range of electronic dosimetry, higher end meters, and things like that. Where RDC has been very successful is by being extremely focused on dosimetry and then especially to professional practices.
Alex Bridgeman: One topic that we talked a lot about just through email and phone calls is finding out how to build relationships with influential members on your team, especially in a new company where you don’t know any of them, they don’t know you. It’s a big transition for everybody. How do you start to figure out- of course, you want to build relationships with everybody, but as you develop those relationships and learn more about the business, how do you figure out who your kind of key stakeholders are within the business that you need to spend maybe some extra focus on?
Ryan Turk: Yeah, I think that there’s a lot of ways to think about that. And I’ll just list off a couple of the ones that I think about. Long tenured employees are always really good to talk to. They’ve stuck around for a long time, and in a lot of cases, they have the DNA of the company culture in them. And so, it’s good to really get to know them and understand their point of view because that can be very representative of the overall company. I think, and Alex, when we talked about this, your question was what’s something from your military experience that you think helped you when you came to the business. And when you’re a junior officer in the military, you show up and you’re kind of this spring chicken; you just graduated college, you don’t know anything, but you have responsibility and accountability, which is similar to showing up as the CEO as a searcher. And you sort of learn that you thought that the captain and all of your superior officers were the people that you really needed to get to know and be able to build a relationship with. And what you find is that oftentimes the most important people in the organization are the senior enlisted team members. And on a submarine, you call those chiefs. And these are folks that are probably 10 or 15 years into their career. They’ve worked their way up through the ranks, so to speak, and they just have tremendous knowledge. They have tremendous kind of grassroots credibility and leadership. And you learn that if you don’t build trust and credibility with them, then you won’t build trust and credibility with anybody because all of the more junior folks are looking to these chiefs to say, “Hey, is Lieutenant Turk a good guy or not? Is Lieutenant Turk trustworthy or not?” So, when I came to RDC, I had this model in my mind. And I knew that these things were important. And at my business, those are the supervisors. These are the folks that have probably 7 to 15 years of experience in my business. They started as that frontline hourly worker and through their skill and leadership, they’ve been promoted now to this management layer or the supervisory layer, and they have the trust, respect, and credibility of everybody that works for them if they’ve stuck around. And so, I knew that, okay, the supervisor layer of my organization is in fact the most important group for me to build a relationship with and have the kind of relationship where they feel comfortable talking to me openly and honestly. And there’s specific ways that I went about doing that, but at a high level that was something that I started to do very early on running my business.
Alex Bridgeman: And can you share some examples of ways you started building those relationships and tactics you took to get to know those folks?
Ryan Turk: Sure. And in some ways, so the story I’m about to tell you I think was in some ways meant to prove this point. On my first day at the business, before I had actually sat down with my senior leadership team, I walked back into the production side of our business and I pulled aside our production supervisor Rachel, who’s been with the company for almost 7 years now. And I just started chatting with her, and I said, “Rachel, I just wanted to introduce myself. I’m Ryan, the CEO.” And we had met very briefly before, so this wasn’t like a cold introduction. But I said, “Hey, before the end of the day, I would love to just chat with you. Could you swing my office?” And the door was open. Everybody saw that I was talking to Rachel, and I just asked her, “Hey, what’s going really well? What are some challenges right now? If you had a magic wand and could wave it, what would be the one or two things that you would change? Do you have any advice for me? How are the employees feeling? If there’s three questions that they all have, what are they? Because I’d like to be able to answer them.” And Rachel in particular I could tell really had the trust of her team. And so, I think- and she has since told me that it shocked her that on the first day, the CEO wanted to sit down and talk with her. And I think it was a demonstration on my part that that was kind of how I do business and that I valued her input, and that’s paid dividends because Rachel and I have built a good relationship. And she’s the one that will come to me and say, “Ryan, we’ve got a problem. That policy that you just announced, like there’s a downside to it that I don’t think we were aware of. And I just need you to know.” And that’s been a great way for me to keep a pulse on the business. And she’s not the only one, there’s other folks throughout the company that I’ve built that kind of relationship with.
Alex Bridgeman: That’s pretty fantastic. Were there any challenges with the company being a family business, third generation, lots of established systems and products, customers, that sort of stuff? Was there anything particular about how long the company has been with a family that made that challenging or maybe even some benefits to that?
Ryan Turk: Yeah, it was very challenging, but there are some benefits as well. So, I’ll start with the benefits. RDC is the oldest or the longest running dosimetry provider in the United States. It was founded in 1949, and it was run by the same two families over its entire 70-year existence. And so, I purchased the company from the CEO who had been the CEO for over 20 years, and then the grandson of the founder. And what I’m about to say is not negative, it’s just the facts that the CEO’s children worked in the business. His spouse worked in the business. The other gentleman that I bought the business from, his children and spouse worked in the business. And the benefit of that is we had a really strong culture. So, the values that those leaders held were really deeply embedded in the business, and most of those values are good values, like integrity and quality and valuing relationships. One of the challenges of taking over a family run business is that I would say the mental model here was RDC was a really stable, profitable growing business, and why would we screw that up? Let’s enjoy coming to work. Let’s enjoy the pace that this company kind of steadily grows at. And there’s no need to rock the boat because we all are really- we’ve got great work-life balance, this is a great business. And as a searcher, when you come in, naturally you have a growth orientation, and you see all the potential. You say, wow, this business is really, really great, and it could be even greater. We can take this great service and expand it to many more customers. And so, I think one of the biggest challenges is really bringing people along that growth is not only- that growth is the next chapter and that it’s necessary for the business to endure, but it’s also going to benefit them. And so, transitioning the company from that sort of what I would call sleepier family run mentality to a more growth-oriented, performance-oriented culture is work that is very difficult. It takes a lot of time and is kind of accomplished step-by-step.
Alex Bridgeman: Yeah, to that point of selling employees on the fact that the business growing will help them, what concepts, ideas, or talking points have you found helpful or most helpful in communicating that to your team and showing them that this growth that is painful and involves new systems, new people is in fact good for them? How do you communicate that?
Ryan Turk: I think, obviously, communication of it is very important, but no amount of communicating or talking will replace true change. And so, if I think about the evolution that my business has been on over the last year, the way that employees are starting to see the benefits of growth to them is we’ve benchmarked compensation across the company. And in a lot of cases, we have proactively adjusted folks’ compensation. We’ve taken an organization that had very little career progression and we designed and put in place career progressions in different departments. And it wasn’t just Ryan in his office writing this stuff on paper, I’ve hired in leaders to do these things and to lead these types of things. We’ve got bonus plans in place now, and we’re working on a few other things. There’re opportunities for professional development. And so, an employee, when they look back and they kind of rewind 14 or 15 months ago, it was, “Hey, I’m a customer care representative, and there is no other job above me besides the supervisor, but there’s only one of those and they’re doing a good job, so they’re not going anywhere. And it’s unclear to me how I make more money. And it’s unclear to me why I should care about whether the company grows.” And now what they know is, “Well, I got a raise and I also have been told that there’s this career progression, there’s these two or three other levels above me and that those come with responsibility and compensation increases. And when we crushed our sales growth goal last year, we got benefits from that.” So, I think it’s sort of these little things that are all- and so where the communication comes in, Alex, is I try to tie all that back to growth. So, hey customer care team, I’m really excited to let you know that we’ve benchmarked compensation here. We’re going to be making some changes, and we’ve also restructured the team and there’s going to be a career progression. And all of that is because of the hard work you do to support our growing customer base. And the profits that we’re earning from that growth are being reinvested in the business. So that’s one example of customer service, but that’s happening throughout the business, and it’s that same story. We’re growing, you’re working harder, and here’s how that’s benefiting you, and it’s because the company is growing and because we’re doing things better and more profitably.
Alex Bridgeman: Did you find a structure like that in the Navy where there were clear paths for advancement and better pay and responsibilities? Or is that something you kind of had to learn at RDC and the military experience was less helpful in that regard?
Ryan Turk: Yeah, this is a great question, Alex, and it’s a little bit of both. So, I’ll tell you why it was both instructive, so it came from my experience, but also something about my experience that was a little bit of a blind spot for me. So, in the military, as you alluded to, there’s a very clear progression of your rank and responsibility and your pay. And I’ve seen it be incredibly powerful because the folks that want to advance, they know exactly what they need to do, and it’s exciting for them to kind of climb that career ladder and have more responsible. And so, yeah, I had a mental model for how powerful that can be, and I think that’s why I’ve been so supportive of doing those kinds of things in my business. Like, hey, let’s give people levels to achieve, and with those levels comes more responsibility so that 5 or 10 years from now, they look back and say, “Wow, I am a true customer service professional, not just an hourly customer care phone customer service person.” So yes, that belief came from my time in the military. Where I had a blind spot, and it’s reared its head here on one or two occasions, is in the military, there’s a really great sailor and you say, “Hey, Petty Officer Smith, I’m going to give you more responsibility. You’re going to own this project.” And they say, “That’s amazing. I’m so excited, thank you.” And I think some of my observations at my company was I would go and tell somebody like, “Hey, I’m really excited. You’re going to take on this initiative. You’re going to own it.” And while not explicitly said, I think the response was like, “Okay, like that’s fine, but what’s in it for me?” And that’s somewhat of a cynical, exaggerated viewpoint, but it’s not entirely untrue. And I think I realized that, wow, not everybody’s wired to want more responsibility without there being something in it for them. And that’s just the reality of the world we live in. So, I’ve had to kind of learn and adjust that if you’re going to ask people to do more, you have to communicate to them why is it good for the company, why is it good for their team and their peers, and then why is it good for them.
Alex Bridgeman: Is there a little bit of, which is within that, trying to also figure out who wants more responsibility? Because there might be a handful of folks who have been asking for responsibility or you feel are wanting that or are capable of taking on more. Do you go to those folks first, or do you try to round out your team a little bit more and maybe see if there’s someone kind of around the edges who you’re less sure about, maybe they want responsibility, too?
Ryan Turk: Yeah, I think people start- in a growing enterprise where new opportunities are sort of created on a month-to-month basis, people step up. And I’m thinking about a woman named Carrie in our customer service department who has a tremendous amount of potential and wanted to step up, but there weren’t really avenues for her because our company was growing modesty. And it wasn’t really growing well enough that new opportunities were created. But over the last six months, we’ve been focused on going after a larger, more sophisticated type of customer. And Carrie’s manager, our Director of Customer Success, and myself could observe that she was starting to show an interest in these customers. She had served a couple of them already. She was asking questions. She was proactively providing input. And so, at a certain point, we said hey, we kind of need a dedicated enterprise customer service person. Let’s create that role and let’s have Carrie be the first one. And I have just seen her flourish because it came with more responsibility. We did give her a raise. And I love it that she’ll run into me in the hall and say, “Oh, Hey Ryan, by the way, we were just on the phone with ABC Dental and they’ve got some really good ideas about how we could improve our platform, so I talked to Dave and he’s going to put those on the software request list.” And that type of energy, like as a CEO, that’s my favorite part of the job is creating those opportunities and then leveraging that energy and that excitement to move our business forward. And when that happened, Carrie’s one example, but when that happens across your organization, it can be tremendously powerful for the business.
Alex Bridgeman: You mentioned the military gave you a few blind spots in regard to evaluating team and responsibilities and growing their roles. What other types of blind spots did the military give you that you’ve spent some time shoring up while working as CEO now?
Ryan Turk: The one that comes to mind right away is compensation. So, when I was in the military, I had nothing to do with what people were paid. And in fact, you could go online and see what everybody made. So, it just wasn’t a lever for me as a leader, and it was what it was. And so, there’s two things that happen. You don’t realize how powerful it can be because it’s never been a lever for you, and you also don’t realize how sensitive it can be because it’s all out there. And I would say that over the last 15 months of running my business, I have sought a ton of advice and input and support from my board and my investors on compensation. So, if you’re a new CEO who’s been in the military, you’ve never dealt with it, when your Head of People comes to you and says, “Hey, our production department is pretty unhappy with what they’re being paid because Tesla down the road is offering $20 an hour,” I just don’t even have a framework for how to deal with that. Like if you come to me and say, “Hey, we’ve got a crisis and something’s on fire,” like I’ve got a framework for how to deal with crises because I did that a lot in the military. But how do you address pay concerns for a department? I have no idea. And I’ll be honest that I underestimated how sensitive it could be. And the best example I have of that is right around when I showed up, it was time for our annual salary or compensation review and increase season. So, employees would go through a review process, and from there, managers would sort of decide who gets raises, who stays the same, and then we would do some kind of overall cost of living benchmarking. I had been CEO for a month, and given the blind spot that I had, when my Head of People said, “Hey, here’s the spreadsheet. Here’s what I’ve decided. This is what we’re going to communicate,” I kind of scanned over it. And I said, “Yeah, okay, tell me how you determined this.” And she walked me through the process, and I said, “All right, I trust you. This looks good.” Well, then we announced it. And over the next couple of days, those people that I alluded to earlier that I trust came to me in despair basically. And they’re like, “Ryan, we have a huge problem. Like half of my team is saying that they’re out there looking for other work,” and I’m like what’s happening? Well, it turns out that we had made a mistake in how we calculated everything. And it’s embarrassing to say this as a CEO, but in some cases, somebody was communicated that they were getting a nickel an hour raise. And again, it was a mistake, but what I realized was okay, I’ve really screwed up. I didn’t give my Head of People the backup that she needed on this extremely important topic. And so, I walked around to every department of my company and said, “I made a mistake. We miscalculated the increases this year. We’re going to fix that. And they’ll be consistent with how we’ve calculated them in the past. This was a mistake.” That was embarrassing, but it’s what needed to be done to make it clear that- you can imagine, Alex, here was this new CEO, new ownership group, it’s the first round of potential raises, and somebody got a nickel an hour. I mean, that’s the worst. That’s like confirming everybody’s worst fears. And so, it took that kind of level of response to sort of set it right. And then we went back, we recalculated, we got it right and re-announced everything. My point in that is when I was in the Navy, if somebody brought me nuclear power plant chemistry results, I rechecked every single calculation, and really, I should have applied the same rigor to this, but in my mind, compensation, it was like, okay, sounds good, I’m sure this all makes. So, I think it’s just that I’ve come to realize how sensitive and important that is.
Alex Bridgeman: Yeah, I feel like getting a nickel raise is almost worse than getting no raise at all.
Ryan Turk: Yeah. And I spoke to that employee and that’s what she said. She said it was offensive. And I said, you’re right, it is offensive, and I’m sorry. That shouldn’t have happened. So that’s one of the- that was a tough day as a CEO, but it was also incredibly valuable for me from a learning perspective.
Alex Bridgeman: Yeah, certainly. You mentioned your board being really helpful. I’d be curious some of the ways that you’ve leaned on your board not to shore up blind spots here and there or stuff like this, but just generally running your business. How do you lean on your board and make sure that they’re helping you and you’re helping communicate the right things to them?
Ryan Turk: The first piece is one thing I love about the search space is it’s all about- there’s such a good community. And if you think about the fundamental premise of the search community, it’s, hey, here’s this model that works really well, you should go do it too, like you should replicate it. And so, in the DNA is this idea that like somewhere out there is probably a really good answer and it can be made available to you, and you can start from that spot. And so, my model with the board has always been like I’ve never had to raise bank financing. I should probably talk to my board and kind of go on a listening tour and collect some early tips and tricks. I’ve never put a bonus compensation plan together. I should talk to my- and when I say my board, oftentimes, I’m looking at my board and saying who do I want to start with? Who’s the right person that has this in their background or has shown an interest in this particular topic? And so, my model is I’ll typically engage them and say, “Hey, I could really use your help thinking through putting together this bonus plan. And you’ll be kind of my dry run.” And then I can go and show it to the rest of the board. And I’ve done that with a lot- I’ve done that with almost everything of importance in my business. So that’s really the way in which I feel like I’ve gotten a lot of value out of the board is just saying, hey, I don’t know. You’ve seen a lot of this. I could use your help as a starting point, and they can often then connect you to other CEOs and folks that have some input as well.
Alex Bridgeman: Yeah, that kind of goes back to the story of you writing out the list of investors and putting different percentages by them. I imagine a lot of that was figuring out where’s the right mix of skills and backgrounds such that whatever question I have, you’re kind of diversifying your advice if you will, and trying to catch a little bit of everything. How big of a factor was that in terms of getting the names and percentages right across your board?
Ryan Turk: Yeah. I thought about my board in a couple of buckets that I wanted to fill. The first was professional firms that I knew would want to take higher percentages of my cap table but who also had a lot of resources to offer. The second was what I called kind of big brothers, which was these are the folks that have, within the last five years, exited a business. And so, they’re a little bit ahead of me in the journey. And those are the people that like the day that I screwed up the raises, I could call and be like, “You have no idea what just happened.” And then they’re like, “Oh yeah, I’ve been there. Like, I didn’t do that. That sucks. But I did this, and it was close.” Like there’s so much value in that because it can be lonely. And then also they’re like kind of- they can help you be a river guide with the rest of the community, like, “Hey, look, I know that such and such is being kind of tough on you, but just keep in mind they did this and that’s why, and they want to make sure you avoid this mistake.” So those are- I grew up one of three brothers, so I call it like the big brother model. Then I had this bucket that I call gray beards, which is a term of endearment from the military. These are the investors that were searchers at one time but have sat on lots of boards. They’ve got tons of pattern recognition. They’re the ones that have designed bonus plans and raised money and raised equity and have sold businesses and bought businesses. And then the last was I did want to have one or two folks that were not necessarily traditional search investors, but who I knew personally and had a lot of trust with and could always be sort of that outside viewpoint. So those were the four buckets that I tried to fill across my cap table. And so then by extension, my board ends up being a couple of those categories as well. So, my board has pretty good diversity of perspective for me as I go to run my business.
Alex Bridgeman: Yeah. If you think of the- you have the different buckets, and it sounds like your board’s been really helpful. What sorts of advice would you offer to searchers or just folks acquiring other businesses who maybe are considering having a board or are in the process of creating one? What kind of advice would you offer them?
Ryan Turk: Two categories of advice, or two categories here. The first is a practical consideration, which is what are you good at? What do you have a lot of confidence around? What do you have less confidence around? Where do you have skills gaps? And then complimenting yourself. So, coming from the military, I had confidence around some things. I had very little confidence around finances, and people were talking to me about balance sheet optimization and that kind of stuff, I didn’t know what they were talking about. So, I knew I needed somebody that could plus me up in that area. So, I think that’s the practical consideration is where do you have gaps and then how do you use your board to plus you up in those areas? And then, the softer side of it is like, look, you’re going to be talking to these people a lot. You’re going to be doing your board meetings, your board calls, your check-ins with these people for years, potentially. So, find people that you want to work with. And I think also find people that align with your values. If you’re a super hard charger and you’re going to run your business hard and you’re going to be- like that’s you, then I would suggest find board members that are going to sign up to do that right along with you. So, in some ways, it’s hard to disentangle values from personality, and I’m not suggesting that your board has to share your personality. But I just think it would be an uphill road if you have some deeply held values about how you want to run your business and those run counter to your board members, and so, you’re almost always butting heads in some way. And I’ll just use one example. And I don’t know how broadly this would be shared with rest of the search community, but it was super important to me that my employees saw real dollars in their pockets benefit from the growth and the performance of the business. And I remember, we did a little- we surpassed our user growth number for the year. We hit 297,000 users way earlier in the year than we expected to. And so, one of my board members had said, hey, every time we hit a user milestone- sorry, not every time, but often, if it was 100,000 users, we would pass out hundred dollars bills. Or if it was 300,000 users, we’d write a $300 check. And so, I did that. And I remember telling that to my other board members and each of them celebrated that, there were like, “That is so awesome. How did they feel? Was that cool?” And I think that’s an example of where I had this value, I knew that I wanted to do this, and I’m very fortunate that I have a board that celebrated that and had the same value, as opposed to saying, “Wait a second, you did what with that money?” I don’t know if that would happen on other search boards, but that’s the nature of what I’m talking about.
Alex Bridgeman: Yeah, it’s interesting. I was chatting with a friend because there’s a number- there’s quite a lot of self-funded searchers, and often they don’t necessarily need boards and they can fund an acquisition all by themselves, and some even are against boards. But a friend of mine I was chatting with who has a board and a group of investors has found having investors and a board is incredibly useful and helpful. And it sounds like that’s very much been the case for you as well.
Ryan Turk: I could not imagine doing what I’m doing without my board and I’ll put it like this: Could I run my business? Yes. Would my business be on fire right now? No, I don’t think so. But there’s a handful of transformational things that we’re doing in the business that I could have never arrived at without the help and guidance of my board. So, yeah, I’m a huge fan of that model.
Alex Bridgeman: I love that. Moving into some closing questions. What college class would you teach if it could be about any subject you wanted?
Ryan Turk: Yeah. This is a fun question to think about. So, I would teach a course on a book called Your Money or Your Life. And the book often gets associated with like people that want to retire early, and that is part of it, but that’s not why I care about it. This was a book that I read when I was in college, and it really changed my life. And I’ll tell you why, so as a little story. I’ve always loved cars. And right after I graduated college, here I was a Navy Lieutenant making money. I thought I was on top of the world and I went and bought my dream car, a Porsche 911, not a new one because that was like not attainable, but a used one. And I love this thing, I went around town in it in my uniform, but it was a financial strain on me. And I was rereading this book, Your Money or Your Life, and there’s an exercise in there where it says, hey, in our society, you work for money and you use money to buy things, which means you are taking your life’s energy and your life’s time and you’re buying things with it. And so, it had you calculate how much you actually make per hour. And then it said pick out different expenses and divide what you pay for them by your hourly rate. And that’ll tell you how many hours of your life are you spending on a monthly or yearly basis for that thing. And when I did that with my 911, I realized I was spending over 200 hours per year of my life to drive this car. And then it forced me to reflect that I was cutting back on much more important things like taking my wife out on dates or traveling or things like that. And the book changed my life because it was the first time where I realized that your personal financial decisions can really drive where you’re spending your time and what you’re doing with your time on this planet. And it was transformational for me. It has caused me to be much more deliberate about what I do with my life, what I do with the resources that I’m gifted with. And so, I would teach that class to college students because they’re about to embark on this journey of making money and making professional choices, and I think that reflection could be really valuable.
Alex Bridgeman: Yeah, no kidding. That’d be a fantastic class. What’s a strongly held belief you changed your mind on?
Ryan Turk: I’ve changed my mind on marijuana use. So, when I was in the Navy, this was like a big deal. And it was- I mean, obviously. And at the time, it wasn’t legal anywhere. And so, my viewpoint was how could people be using this stuff? It comes via illegal supply chains. And I had sort of written that off as like that’s a bad thing to do. And I think with good reason at that time. It was being produced and trafficked illegally. Now that it’s become legalized, I really, in the areas where it’s legal and in the use cases where it’s come through legal supply chains, I really have no problem with it at all. And some people are like, dude, I can’t believe you’ve changed your mind on that, but it really just comes down to the shift in how marijuana is produced and sold. So, that’s something that I often look back and say, wow, I’ve really changed my mind on that. To be clear, I haven’t changed my mind on the illegal supply chain of marijuana, but on the legal side.
Alex Bridgeman: That’s interesting. Does that affect your views of using it versus just the supply chain of it, too?
Ryan Turk: Well, that’s the thing is I think back when it was all illegal, I thought the use of it was bad. I had sort of ascribed the supply chain and the illegal nature of it to the use of it. And so now when I look at it, I could care less about the use of it. In my opinion, there’s nothing fundamentally wrong about the use of marijuana, in my opinion, so long as it’s supplied legally. So that’s the shift was my conservative church attending upbringing was like marijuana’s bad. And it was about- I realized now that it was bad because of how it was procured. Now I could care less about if it’s used.
Alex Bridgeman: That’s a good one. What’s the best business you’ve ever seen?
Ryan Turk: So, the sabbatical that I took when I spend time in sales was in the 3D printing industry at a company called Formlabs. So, we were the largest manufacturer of desktop 3D printers in the world. And I was responsible for sort of big partnerships, so customers that were power users and generated a lot of revenue. The best business I’ve ever seen is called Hero Forge. And here’s the business: Folks that are really into Dungeons and Dragons or like any of these tabletop games with little figurines can go to the Hero Forge website and customize a little figurine, so they can make it a wizard or a knight, and then they can change out the armor or the capes or all these other things. And it’s just endless customizations. And then you click order, and it gets printed and mailed to you. And we were the supplier of the, at the time, the 3D printing technology for them. And this was a, I mean, I won’t reveal any of their top line numbers, but this was a very successful business. Even like by search standards, very successful. And it was a handful of people that had created the software platform, and everything else was outsourced – the printing, the shipping, everything. And it delighted their customers. I mean, they just had tons of really passionate followers. And I loved it. I just thought this is such a cool business that they’ve built this custom proprietary tool, they delight their customers by allowing them to participate in the creation of this little product, and then they don’t have to do any of the hard work. That’s not to be- I’m being a little flippant there, but like they don’t have to actually fulfill the product. And that one’s always stuck with me.
Alex Bridgeman: That’s fantastic. Thank you so much, Ryan, for coming on the podcast and sharing a little bit. This has been a really fun episode. I liked your closing questions, some of the most unique I’ve heard in a while. So, thank you for sharing all about boards, military experience, radiation, and all this other stuff. It has been really fun to hear about.
Ryan Turk: Yeah, thanks, Alex. Thanks for having me.