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85: Part 2 of Jim Bonham on EO2019; Plus “Act Like an Owner” and ESOP Practice Development

In this episode, we celebrate Employee Ownership Month, offer practice development tips to emerging professionals, and look at what we mean by #ActLikeAnOwner. Then, we continue from EO Podcast Episode 84 with part two of our two-part interview with Jim Bonham, President and CEO of The ESOP Association, with a focus on their 29th Annual Las Vegas Conference & Tradeshow, #EO2019, which will be held at the Paris Las Vegas Hotel and Casino in Las Vegas November 13-15th, 2019.

Shoutouts to:


Episode 85 Transcript

Bret Keisling: 00:00 In today's episode, we have part two of our discussion with Jim Bonham, President and CEO of The ESOP Association. We begin our series exploring the question, "What does it mean to be an owner?" We celebrate Employee Ownership Month with shoutouts, thanks, and congratulations to employee owners, advocates, and companies. And I'm going to give practice development advice for those trying to gain traction in the employee ownership space. Now, if you're the type of professional advisor who has spent a lifetime watching "Glengarry, Glen Ross," and you understand why losers don't deserve coffee, I'm probably not going to be that helpful. If on the other hand, you're a competent and talented professional and you understand that you can make a substantial living in employee ownership, but you also understand that the average employee owner that we all serve is going to make substantially less than you, but if we all do our jobs right, they'll retire just as well. Then I want to help you grow the employee ownership sandbox, because my name is Bret Keisling and as it says on my business card, I'm a passionate advocate for employee ownership.

Bitsy McCann: 01:09 Welcome to The EO Podcast where we amplify and celebrate all forms of employee ownership.

Bret Keisling: 01:17 Hello, my friend. Thanks for listening. I am so excited as we're publishing this episode on October first it is Employee Ownership Month and if you are the least bit active on social media, it is just filled with exciting stories of companies, employee owners, the organizations, everybody doing their part to celebrate employee ownership. As it says in the opening of our show, we amplify and celebrate all things employee ownership, so we are looking forward to sharing the stories in our various medias wherever they come from. Our contribution to Employee Ownership Month is a series I've been working on all summer and I'm excited to start presenting it. Everyone says employees should act like an owner. It struck me, it's really difficult to pin down exactly what that means. So I'm going to start a conversation and talk to employee owners, but also talk to great employees who aren't owners and we're just going to spend many episodes delving into the question, what does it mean to be an owner. Coming up later in the episode we have Jim Bonham and practice development tips, but first...

Bitsy McCann: 02:23 Shoutouts, thanks, and congratulations.

Bret Keisling: 02:26 It's an Employee Ownership Month and we have shoutouts to the employee owners of Gardener's Supply, King Arthur Flour, Proponent, Restek, and Harpoon Brewery. If you're regular listeners, the last three have appeared on previous podcasts.

Bret Keisling: 02:39 We'll get to all of the employee owners in a moment, but first, if you're looking for ways to celebrate Employee Ownership Month, listen to the amazing celebration that Sebago Technics has planned. For ESOP Month, October, 2019: On Tuesday, the first locally sourced kickoff breakfast; Friday, the fourth financial management presentation; Tuesday the eighth Texas Hold'em tournament; Thursday, the 17th third quarter employee owner meeting; Wednesday the 23rd American Red Cross blood drive; Thursday the 24th ESOP bowling night; Tuesday the 29th the 16th annual chili and cornbread cook-off. Look at the great activities they have and look how they spread them about: Kickoff breakfast. I imagine that's fun, a little bit educational. Financial management presentation, educational. Texas Hold 'em tournament - fun. If they paid attention to the financial management presentation, maybe they'll do well in the tournament! American Red Cross blood drive, folks just helping the community. This is beautiful. Bowling night, ESOP bowling night - fun. Annual chili and cornbread cook-off - fun. They have seven activities during the month. A great mix of education and fun and helping the community and if you want to celebrate Employee Ownership Month, any one of those ideas would be great. The fact that one company is doing all of them really sets the bar for everybody else. I popped over to Sebago's website. They are multi-discipline engineering and land development consulting firm headquartered in South Portland, Maine and as it says on their website they are 100% employee owned company and their employees are what set them apart through commitment and client response. Folks. I love it. They celebrate their employees, they make clear on the website, and I imagine through a lot that they do, that the employees are what set them apart. So to all the great employee owners at Sebago Technics. Thank you so much for everything you do. Thank you for being a vibrant part of the employee ownership sandbox and for leading the way on how other employee owned companies can celebrate their employee owners.

Bret Keisling: 04:42 Next up, during my 12 years as an employee owner or ESOP professional advisor, I've always tried to be mindful that transactions and all of the technical work that go into annual ESOP maintenance is actually all about the employee owners, not the professionals. As I said at the top, professionals have an opportunity to make an outstanding living, but I think it's very important to remember the folks who are doing it for. So here are two employee owners with companies, well known to the ESOP world, but the employee owners that I'm talking about are just members of really great teams. They're both really cool people. One I met in person and one's only a Twitter friend, but to me they both epitomize what employee ownership is all about.

Bret Keisling: 05:21 I've talked for awhile about wanting to do an ESOP Piecast and my next shout out is to the person who inspired me. Beth Dumas works for Gardner's Supply and I've only interacted with her on Twitter. From her account, she seems to be a really big sports fan and really immersed in sports collectibles. Beth caught my attention last year when she tweeted about Gardner'a customer appreciation day in December. Every customer who shops on that day gets a piece of pie courtesy of Gardener's and King Arthur Flour. I've been unable to get that idea out of my mind since then. Some day. I'm going to show up there with a couple of pies and sit down with Beth and her colleagues talk employee ownership and eat pie. And if they let me record it, I promise it will be the very first episode of The ESOP Piecast!

Bret Keisling: 06:04 Next shout out is to Kat Mayerovitch from King Arthur Flour. I met Kat just once at a conference and she was really fun to meet. She's smart, funny, enthusiastic, and a great representative of employee ownership at King Arthur Flour. I seem to have a lot in common with her. According to her Twitter profile, she's "on team Oxford comma." My Facebook profile says that I'm "an Oxford comma devotee." Her profile also says "one space after a period." I owned a graphics design studio in the 90s; she's right about that today, but back then we needed two spaces. She also claims she is responsible for "all the worst puns at the world's best baking company." Just remember: Great buns, ehhh... worst puns! Kat only met you once. Love what I see on you on Twitter. You actually, the stuff that shows up on my feed I find really interesting, but you are just one of the great employee owners like Beth Dumas who just go do your what works, do your jobs every day. You bring some joy not just at work but in your community and those around you. And I just want to give you a shoutout as well and thank you for being part of the employee ownership sandbox.

Bret Keisling: 07:17 The ESOP community is also very fortunate to have extremely talented employee owners who are very active in a number of organizations working hard to help grow employee ownership for everyone. The first shoutout is to our good friend from Restek Mike Shuey. Mike holds the record for most appearances on the podcast and every single visit is in furtherance of employee ownership. Like many employee owners, Mike has a lot of responsibilities and time commitments at his actual job, but he manages to find time to support all of employee ownership. He currently serves as president of the Pennsylvania/Delaware chapter and we're lucky he does. And as I've said before, Mike is just also one of the kindest, most decent people I know, so thank you Mike for everything you do.

Bret Keisling: 07:57 Next, Aaron Moberger works for Harpoon Brewery. Like Mike, Aaron is a very talented professional with significant responsibilities in his day job, but he's also very active in the New England chapter and nationally in supporting employee ownership. Last June I was with Aaron and he mentioned an idea he had for reaching out to craft breweries and employee ownership and later in the next month or two The KEISOP Group is going to debut the "Beer Culture Podcast" based entirely on Aaron's idea. The only reason that it's not out yet is I haven't had a chance to ask Aaron to host it.

Bret Keisling: 08:30 Next, I want to say congratulations and thanks and send just a whole lot of affection to Amy Huot of Proponent. Just this week, Amy fully vested in their ESOP. When you become fully vested at Proponent, they do the coolest thing. They give their employee owner a vest with proponents logo and the words "100% Vested" underneath the logo. Many companies don't acknowledge when their employees vest. Proponent and other companies that celebrate their employee vesting understand that although what is really important is the vesting itself, in Proponent's case, the vest that they wear is a tangible happy representation that someone's a vested owner. Very well done. By the way, companies, if you're looking for an idea, one cool thing if you don't recognize employee owners as they vest - either fully vested or in the increments along the way - announce it during Employee Ownership Month. Same thing, if you've had somebody retire, throw them a retirement party, get a big check with the amount of their balance for the ESOP and let everybody know that employee ownership really is a great way to secure a better retirement.

Bret Keisling: 09:39 Here's a shout out and congratulations to the folks at ButcherJoseph and Company. They're a middle market investment bank focusing on ESOPs and they're preparing to move into brand new offices at the St. Louis Ballpark Village where the Cardinals play. That sounds like a very cool place to go to work. Congratulations on the office space. We look forward to sharing more good things about you.

Bret Keisling: 10:00 Speaking of office space. I am so excited to be recording this at The KEISOP Group's brand new offices and podcast studio in the Denver Tech Center in Greenwood Village, Colorado. So my final shoutout and thanks goes to the property manager here, Caity Armstrong of Office Evolution. When I came out to Colorado in early August, I didn't really intend to relocate. I assumed I'd take a couple of weeks, meet everybody there was to know in co-ops/collectives out here. And then I'd head back to Pennsylvania and do my thing. And then after about two weeks I realized to meet everybody in the co-op/collective and ESOP field in Colorado, probably going to take me four or five years. So I started toying around with looking for office space and I happened upon Office Evolution in Greenwood Village. As I said, the property is managed by Caity. And all I can describe for Caity is she is wonderful, she's exuberant in her personality, she's outgoing, she's bubbly, and there's a whole lot of drill sergeant right beneath the surface. Essentially as the property manager, she's supporting a number of entrepreneurs, myself included, variety of sizes, and Caity runs an operation that entrepreneurs know that as they're setting up offices that everything's going to be well taken care of. The reason Caity really gets the shoutout though is that as she manages this property, she acts in every respect like an owner. So as I look around for examples of what do we mean when we say "act like an owner" can't really describe it, but I can point to people and Caity Armstrong is one of those. So thanks, Caity.

Bret Keisling: 11:47 There's probably no saying used more often in employee ownership and generally business than "act like an owner." I've been saying that my whole career to people. As I've been an employee, I've tried to act like an owner and that I agree is what we're all striving for. But lately I've come to realize I don't know what that means. Is it an attitude? Is it a vibe? Is it that you get the checkbook? Is it authority? I know the feeling of acting like an owner and I can give plenty of examples but I haven't been able to come up with a great definition. So I've been talking to a lot of people. I've been talking to employee owners, advocates, management, non-ESOP, non-collectives, et cetera, et cetera, where the people act like owners. My friend Matthew B. Is 25 years old. He's in the service industry in Lone Tree Colorado. He works for a bar, cigar shop combination. And I've got to know Matt over the couple of months I've been in Colorado. I love this project. I've learned a lot, but it's more complicated if you think about it for a moment. I've made certain assumptions. Everybody knows act like an owner and everybody's been trained that way. Maybe not. Here's Matt.

Matt B.: 13:13 I personally have never heard it. I've had people tell me that, yourself included. I would say that...

Bret Keisling: 13:20 When you say you've never heard it, you've never heard which...

Matt B.: 13:25 That that term.

Bret Keisling: 13:26 So, like in your training or all that kind of stuff, you were never told "act like an owner."

Matt B.: 13:31 No, never.

Bret Keisling: 13:33 You've had customers come in who have said you seem to act like an owner?

Matt B.: 13:38 Yes.

Bret Keisling: 13:38 Okay.

Bret Keisling: 13:39 So Matt and I chatted for a little bit, kicked around the issue and finally I said to him, since you've heard from other customers, myself included, that you seem to act like an owner. What is it you think we see when we tell you that,

Matt B.: 13:54 You know, knee jerk reaction might be poise. But if I were to think of it on a more personal level and deeper, it might be the passion that I have for the place that I'm working. And I think that that might come from the ultimate fear of my name is on that work. So if there is a mistake, the only person who there is to answer for that mistake is myself. And when that ultimately comes down to it, especially in a family-owned shop, regardless of it being a bar or even if it's a local mart, I think that there needs to be this idea that is your name, that's your brand. And people will remember that. And you're not selling anything but yourself and the work ethic and attitude that you have

Bret Keisling: 15:03 All this month. I'm going to have more from Matt and many others as we explore what does it mean to be an owner. Let me give you one more example of how challenging the conversation is. I spoke with a coworker of Matt, a colleague, Kaylin, and when I was explaining the conversation about what does it mean to be an owner, I said to her, for example, somebody can act like an owner. That doesn't mean they have the checkbook. And Kaylin quickly said, "Oh here we all have the checkbook." So folks, I'm really not sure what it means. I'm looking forward to exploring the conversations and bringing them to you. And if you are a professional or employee owner who would like to throw your 2 cents in for a minute or two, we'll have contact information at the end of the show.

Bret Keisling: 15:54 With that, I'm really pleased to bring you part two of our conversation with Jim Bonham, President and CEO of The ESOP Association. We're going to pick up pretty much where we left off on last week's discussion. Jim is going through the national conference taking place at the Paris casino this coming November and he's already, in last week's episode, discussed the speakers, et cetera., and now he's sharing with us the space itself.

Jim Bonham: 16:25 Embedded right in the heart of the -- first of all you, you have to go through this space to get to the main stage...

Bret Keisling: 16:34 Oh, very cool.

Jim Bonham: 16:34 So the foot traffic is going to be massive.

Bret Keisling: 16:37 We should point out, you may have, forgive me, but at the Paris this year, which is a great venue.

Jim Bonham: 16:43 Right.

Bret Keisling: 16:43 We switched over to, well we were in Paris two years ago --I keep saying the "we" -- back to Ceaser's, but it's in Paris which is a beautiful, beautiful venue for the conference.

Jim Bonham: 16:53 It is and this year we have, we've leased out the entire conference space.

Bret Keisling: 16:59 Excellent.

Jim Bonham: 16:59 So when you enter into the space, it will become ESOP world.

Bret Keisling: 17:04 Wow. And that's so cool Jim, because it's also a sign that you -- in other words, it's because you needed the space! That to me is just such a great sign of the robustness.

Jim Bonham: 17:13 Yeah, the main ballroom is the size of two football fields.

Bret Keisling: 17:16 Wow.

Jim Bonham: 17:16 Just to give you a sense of the size of the scale.

Bret Keisling: 17:18 Very cool. So they'll come through...

Jim Bonham: 17:18 So, we'll come through, you've got the space there in the trade show. But we've embedded right into the middle of it, what we're calling the innovation stage. And this is a smaller stage, it's basically like a TED Talk stage. And we are allowing anybody from the employee ownership community who is interested in presenting to the conference. Reach out to us. The stage is available. People are signing up. We've already signed up several the time slots. And we're going be recording these. We're going to be broadcasting them out on our media social media feeds. Some of the topics are going to be really pretty interesting, but we thought, who are we to think that we know everything that should be presented to everybody in this community? Why not we let the community tell us what they want to present about?

Bret Keisling: 18:10 Jim, I love that. That's great. And can I just say something, and I've said it on some podcasts and a lot of -- I'm talking employee owners -- don't necessarily understand this. Professional advisors come, we present all the time. Many of the professionals are very good at it. They're knowledgeable, they're polished, so to speak, and that's great. Employee owners get up and speak at these conferences and the employee owners hang on the words of the employee owners. Quite frankly, if you have a job and you've never really spoken publicly, you're not, you know, really well versed in it. If you take your ESOP experience and your passion and sign up for one of these slots, if you're an employee owner, I imagine there's going to be great appetite to hear what you have to say. So it's an encouragement to folks. This is your opportunity to get up and share your passion in a way that then The ESOP Association will further share it along. I think it's a brilliant idea. It's great.

Jim Bonham: 19:07 So, it's set up, like I said, just like a TED Talk. We'll be recording the presentations. So that's embedded in there. Then we're also going to be featuring a special section, I'm not going to reveal some of the bells and whistles yet, but we're going to be having, we'll have a beer garden that's going to be featuring all of the -- hopefully all of them, but a lot of the craft brews that are made by a employee owned companies. We're going to have a special coffee bar there. We've got we've got a couple of lounges in the area or charging stations. So the idea is this is going to become, as I put it, sort of the "Main Street" of the conference.

Jim Bonham: 19:49 Then on top of that, we're also doing a pre-session for the first time. So three specific sessions for companies/individuals who are exploring employee ownership, where they can come and hear firsthand from other employee owners about what they went through and their experience, and at the same time sort of help them through how to plan their conference. Because there is so much content that if you haven't been one of these before, it can be very overwhelming. Deciding what should I go see, what should I go experience.

Jim Bonham: 20:21 And then two more things that we've changed. One is we are about to launch a very aggressive program to help some of our senior executives at ESOP companies to better navigate and manage the businesses that they're in charge of. We spent a lot of time talking about the ESOP itself, about the trust and how you run the trust. We don't do as good of a job helping our companies succeed. So we have created an entirely new track just for CEOs. Only CEOs are going to be in the room with the presenters. And we're carving out this space that they can go and they can talk to one another. They can talk about "We have this issue, how did you solve it?" They can network with one another and we can create this community of employee owned executives so that they can start working with one another.

Jim Bonham: 21:25 And, you know, one of the things that I want to have happen, and I truly believe this, I believe that employee ownership is a competitive advantage in the marketplace. What I want to have happen is if you own a construction company and you hear that your top competitor is becoming employee owned, that they're forming an ESOP, I want your reaction to be, "Oh damn, they're going to outcompete me. Now they have, they now have a market advantage." That's the reaction we want to create. So we're going to spend a lot of time focusing on the on CEOs. So all the keynote speakers for example, are going to spend an hour in a small setting with the CEOs.

Bret Keisling: 22:10 Now, will the keynote speakers, because of how you're describing it, they're not going to be our regular ESOP presenters or in ESOP space. They're going to be generic? Or is it just folks who will be presenting at the conference and, you know, is it are they the ESOP professionals that have been speaking for awhile and are now doing these specialized thing? It's a new program. Yeah, that's what I was just trying to, that's what I thought. But, yeah...

Jim Bonham: 22:33 This is a new program.

Bret Keisling: 22:34 That's very cool.

Jim Bonham: 22:35 So for example, one of the experts we have coming in is a woman named Leslie Griffin, and Leslie was the top international trade official for UPS. She spent about 10 years of her life in China. The single hottest topic that people were coming up to me and asking about in Washington was, what's going to happen with this trade war? Because let me tell you, it is hurting our business. All of our manufacturers they're having trouble with their imports and their costs have gone through the roof. So Leslie's going to come and spend an hour with CEOs and she's going to talk about, all right, here's what's happening. This is what you can expect. Here are some strategies for you as leaders of employee owned companies to take into consideration because it doesn't look like this trade war is going to go away anytime soon.

Bret Keisling: 23:28 Jim, what I like about that is before I transitioned to The KEISOP Group, at Capital Trustees and it's so important, I had fiduciary liability for setting the value of the company and trying to quantify the value of the effect on the trade wars and the tariffs and that kind of thing. So it's very big stuff. Jim, I know that we need to wrap up and let you onto your next thing.

Bret Keisling: 23:52 Just want to pause and I lost the wrap-up.

Bret Keisling: 23:57 Let me just say this. What I love about what you do and most people don't know my background, my entry into ESOP world was actually as an employee owner. I was the President and CEO of a company in Harrisburg, Pennsylvania, 50 employees, $20 million a year. And Jim, there are people who are professionals today that 12 years ago I was going, why can't I get other people in my industry who are sitting in this room and talk to them about that? And you've actually laid a program that as a CEO I had asked for 12 years ago. And in other words, it shows that there is a good need. Jim, we'd love to have you back. We're going talk about Vegas on the podcast. Anytime you want to have an issue or anything that you want to discuss, we'd love to have you back. Thank you very much for your time.

Jim Bonham: 24:35 Thank you Bret. You know, keep up the good work. Good luck on your new venture.

Bret Keisling: 24:39 Thank you so much, Jim.

Bret Keisling: 24:41 That was Jim Bonham of The ESOP association. I really want to thank Jim for his time sitting down with us and sharing what's coming up at the Las Vegas conference. I joined many, many others in wishing Jim absolute success in his stewardship of The ESOP Association. It's going to take all hands on deck to grow the employee ownership sandbox and we wish him well. And The ESOP Association knows anytime they have information they'd like to get out to our listeners, they're more than welcome to contact us.

Bret Keisling: 25:14 Alrighty. I've been talking for several months now about the need to expand the ranks of professional advisors. I even devoted an entire episode to the professional advisors mentoring program and it seems with the start of a new conference season, we have another fresh round of advisors trying to break into ESOP world. I've been in their shoes as a cofounder of Capital Trustees.

Bret Keisling: 25:44 We built a practice from scratch in 2012 to the point in 2019 where I was able to leave it and pursue The KEISOP Group and podcast network full time. So I've had the experience building the practice. You already know how difficult it is to break into the ESOP space. It's highly regulated. Professional expertise is legitimately required, but also there's a reality that like any other mature industry, one of the toughest barriers for emerging advisors is the reality that the current advisors don't want to give up their space, don't want to give up their percentage of transactions, and are not willing to step aside for those coming up behind them. So I'm going to make a handful of suggestions on what you can do to become more recognized in the space and hopefully help build your practice. But first I'm to build The KEISOP Group's practice. We're looking for contributors and as you listen to the following message, I'd like you to keep a couple of facts in mind.

Bret Keisling: 26:54 I don't know exactly how many people were at the multistate conference in Pennsylvania on October 19th and 20th. I'm going to say 200 might be a little more, it might be a little less, but I can tell you in the 10 days since the multistate conference, we've had two episodes of our podcast, both The EO Podcast and ESOP Mini-cast, that have covered or originated from the multistate conference and in the 10 days since that conference, just 10 days, we've had 304 listens to the two podcasts. Now we're not limited in just these 10 days. The number of listens for those two episodes are going to continue to grow. Similarly, I was fortunate and very pleased to be able to present at the conference with Joe Marx of Principal Group and Jason Yager of Global Tax Management. We had about 45 maybe 50 people in the room and it was great. We really enjoyed it. We've recorded that. As I've done in the past, we're going to put the presentation out as a podcast and realistically we'll have two to three hundred listens in the week or two after the drop of the presentation as opposed to the 45 to 50 who listened live and I'd expect in the course of a year we're going to have six seven, eight hundred listens to that exact same presentation. So if you're wondering how you can grow your practice contributing to any of our podcast properties is going to get you in front of more people than attending a conference.

Bitsy McCann: 28:30 Are you a passionate employee, owner or advocate? What do you like to share your passion on The EO podcast and ESOP Mini cast? We're looking for correspondents to help us tell the great stories of employee owners and their companies. We're looking for one to four minute long segments that can be recorded remotely over the internet or telephone. If you're interested, drop us a line. You'll hear contact information at the end of the episode.

Bret Keisling: 28:56 Thanks, Bitsy. Okay. During the time of that message, you obviously haven't decided to give up on your ESOP streams as you're still here. So let me give you some suggestions. I've been talking lately with a number of professional advisors, half a dozen specifically, four valuation advisors, two attorneys, and they're all sharing the similar problems, the similar experiences. They're talented folks. They come from firms that are not well known in the ESOP space, but they have clients that are ESOPs in one or more practice areas. If you're with a law firm, perhaps some of your lawyers have ESOPs who are clients, but you don't have a formal ESOP legal department or you're trying to establish one and haven't broken through. If you're a valuation advisor. Many of them have ESOP clients who are audit clients and have touches that way.

Bret Keisling: 29:57 So to start, there are a couple of things you're going to have to figure out. Why are you trying to get into the ESOP space? What's your goal? Is it long term or short term? And what's the best way for you to accomplish that, what you want. First of all, why you're trying to get into this space. If you are really passionate about employee ownership and that's where you want to be because it means a lot to you, then that's a good start. You still have all of the tough barriers, but maybe you won't get discouraged so quickly. If you or someone in your practice just looked at ESOPs as an easy practice area to get into and therefore buttress the company, this is going to be a real uphill battle. Another thing to consider is what are the metrics for your bringing business to the firm? If you're a lawyer and you're trying to set up again an ESOP legal practice, are you still going to get origination client if you bring clients to the firm, even if they're not your own. Valuation context, let's say you want to value employee owned companies and your goal is to get on the trustee lists and all that kind of thing. If you can get audit clients or other clients into your firm, is that going to be acceptable? So that's something you're going to have to work out as well.

Bret Keisling: 31:22 You also really need to understand and grasp the barriers for entry. Find out which are legitimate. There are perfectly valid reasons for trustees to hesitate giving unqualified firms an opportunity because of all of the settlement agreements and court decisions. As a matter of fact, one of the folks that I spoke to recently is a valuation advisor in Lancaster, Pennsylvania. My firm was located in my hometown, Harrisburg, Pennsylvania. It's only about 25 minutes from Lancaster and as we were chatting, he pointed out that although he knew that each of the disciplines had a pretty strong barrier for entry, he felt that it was much harder for valuation advisors. And I kind of laughed, not meanly, but I pointed out to him, we only live 25 minutes away from each other and in the past number of years he wasn't able to get more than a moment of Rich Heeter's or my time for consideration as a valuation advisor. And here's why. At least for trustees, the fiduciary liability is so huge that it is simply more prudent, more appropriate to use valuation advisors with plenty of experience. There is a lot more flexibility for ESOP lawyers to be hired, but it only goes so far. You really have to be on top of your game.

Bret Keisling: 32:54 So I'm going to do a bit of role playing here. I'm going to create a fictional firm. We're going to call it the Tava firm. You may recall from last week's episode, Tava is the name I gave a fictional advisor to represent a trustee, attorney, or valuation advisor representing all of you. No gender, no particular discipline. Just a firm that's trying to get into the ESOP space. And my role is going to be professional development and I'm going to give you some suggestions on how I'd proceed. But before I do, 'cause I'm talking about a lot of different disciplines and I'm not giving any advice of any kind. We're going to go to the disclaimers.

Bret Keisling: 33:41 The views expressed herein are my own and don't represent those of my own firms or the organizations to which I belong. Nothing in the podcast should be construed as guidance or advice of any kind in any field. And the fact that I mentioned an organizational website or an advocate or a company on a podcast does not reflect an endorsement. But if you've heard your name or your group's name mentioned on this podcast, I'd love to have you come on and talk about it yourself.

Bret Keisling: 34:06 Okay, so I am the new professional development manager at Tava. It's a firm that has a legal department, a valuation department, full-service CPA, they're TPAs, they're trustees. Everything you want to do in network comes from Tava. Probably the first thing that I'm going to do is recognize that between Memorial Day of this year and the day you are hearing this podcast, we've probably had 9,200 podcasts listens just since Memorial Day. So one of my first questions is going to be how can we reach out to that podcast and volunteer to give a report lasting one to four minutes and each and every time our firm name is going to get mentioned on the podcast and be there forever. So my first step is program development at Tava is going to reach out to The KEISOP Group. Now that I've got that self-serving promotion done. Okay, you're trying to reach in. The reality is this, unless you have referrals to give, your challenge is that much bigger.

Bret Keisling: 35:16 It is a reality of any industry, certainly true in the ESOP field, That referrals are what generate everything, but you don't have any referrals or do you? First thing I'm gonna do is look at all of the ESOP companies that Tava touches. Now, in legal department, that may include some of the ESOPs that are already in the ESOP lawyers department and it may include ESOPs in any other field. Find out if the client happens to be employee owned. Could be an engineering firm. If you have an engineering lawyer, whatever the mix is, figure out, identify who the clients are. Same thing in the valuation department. Obviously valuation services will have ESOP clients or you're looking to build them. Your audit practice may have some ESOP clients. Again, you don't want to just identify the clients you are doing ESOP work for. You want to identify any client in your firm's arsenal that happens to be an ESOP.

Bret Keisling: 36:28 Gather as much information as these clients -- about these clients -- as you can know how to quickly triage whether there are immediate obvious red flags. So, for example, if you get the summary plan description, check with ESOP lawyers that you know or work with. You should be able to look at the beginning and end of the summary plan description and make sure that it has been updated by the various dates required by the government. These don't change, I believe 2014 there was an update. There might have been one in the last year or two. Check out the dates, pull the summary plan description. If they have not have not been updated, you automatically know that they have a need for an ESOP lawyer. Look at the trustee engagement with the valuation firm. Did you know that how the engagement is done could immediately disqualify a valuation firm? The engagement must be to the trustee itself and not in cases where the trustee is internal, also a company representative. If for example, Bob Smith is president and CEO and he's also the internal trustee. If a valuation engagement is addressed to Bob Smith, CEO and not Bob Smith trustee, valuation firm is disqualified from representing the trust. There is an incurable conflict of interest -- that becomes an opportunity. Are your trustees internally or externally trusteed. If they're internally trusteed, that becomes an opportunity. Find out who their third party administrators are. Find out, look at the strength of the ESOP practice for the third party administrators. Candidly with Capital Trustees, I was adamant to my clients that if they had more than one benefit plan, 401k along with ESOP or whatever, some of our clients had seven to nine believe it or not, that the third party administrator absolutely needed to be ESOP savvy. That you have to be careful from having a firm that only does 401ks and then a couple of ESOPs.

Bret Keisling: 38:58 So find out who the third party administrator is. Google the firm. You may not be able to get a exact number of ESOP clients, but one in one indication and it's for any practitioner is ESOP referenced on your firm? So among all of the different ESOPs that your firm's touching in one way or the other, we've now identified at least some of them do not have an up-to-date summary plan description. They actually don't have an updated plan -- sorry, I misspoke. You may find that there are valuation advisors to trustees that have been disqualified. I'd also look at board composition of the companies. Are there any independent directors? So very broadly what you're looking for are, are there anything that indicates that the trust or the ESOP is not operating according to law? Or, as in the case of not having any independent directors, contrary to general thought in the employee ownership space now.

Bret Keisling: 40:05 So you've identified which firms plans have issues. You have identified where there might be openings and valuation or trustees or third party administrators. You have identified whether there are external board members or not. What is all this knowledge? What have you gathered? Leads. Now you find half a dozen plans that are not in compliance. And by the way, there's a lot more information than just the thumbnail I gave you, you really need to check with ESOP counsel. But you have this information, you're in a position to reach out and pass these leads out and then it will be understood that you expect leads back. And I know when you get all this information together you're going to be inclined to rush right out and make the connections and show that you can bring some leads, but I'm going you suggest you not hurry to do that and I'll talk a little bit more on next week's podcast.

Bret Keisling: 41:04 I just want to make clear that if you go through and identify everything you can about every ESOP client that your firm touches, that information, at least some of it, is going to turn into leads and that's going to help you. In the ESOP world, in each of the disciplines, you're going to notice there are things very unique to ESOP world. What you have to do is make a determination as to whether it's good and appropriate that things are unique. In other words, it's a result of court opinions, it's a result of settlement agreements. In the valuation space, there may be generally accepted practices on how certain ESOP expenses are calculated, that sort of thing and very truly they are unique and appropriate to ESOP world. But then take a look and figure out what things are done. Just because that's the way they've always been done.

Bret Keisling: 41:59 I'm going to give you a couple of examples that here, I'll speak to the lawyers, of where certain things in the ESOP space are contrary to your professional rules. Best example I give and it really just makes it clear. When Cap Trustees was formed, we had our ESOP counsel perform, or I'm sorry, prepare our engagement agreement. Very first one we had ever done. We had worked with him. We fleshed it out. We got a great agreement that we could give to clients. About four months later, a lawyer called up and said, Hey, I'm counsel for the company. I've got your engagement agreement in front of me. There are some concerns we have to negotiate. I said to the lawyer, we can't negotiate the engagement. He said, why not? And I said, you're the one who wrote the engagement. In no other place of law, have I ever heard of where lawyers literally can switch back and forth between client, between company, et cetera, et cetera. And it just happens nonstop. By the way, there are all kinds of disclaimers and technicalities. Technically trustee counsel does not represent the trustee rather the trust, waivers could be done but never are. But my point is there are an awful lot of things of that's just the way it's done that aren't appropriate. So one of the suggestions that I would make is pick a side if you're counsel of who you want to represent. I would suggest from a marketing splash that you market yourselves as trustee counsel only. Give up on company counsel gigs, carve out a space as trustee-only counsel. I believe a powder keg in the ESOP space is going to be this counsel switching around. I'll be very candid with you, I've spoken on many podcasts. Cap Trustees has engaged advisors as our counsel or valuation firms and then often we'll see them on the other side and at a certain professional level it's appropriate and it's okay because I can at least speak for Cap Trustees. We haven't worked with the professional advisors that would do anything untoward and we wouldn't tolerate it if we had.

Bret Keisling: 44:34 So as you look around the professional advisors who do attend the conferences and that sort of thing, it's the way it's always been done. At some point I think it's going to cause major problems and it's probably not going to be any of the advisors you necessarily see at conferences. But among the 6,200 companies that aren't touching the organizations, I think that the switching of the counsel is going to be a big problem. So stake out space early and pick a side.

Bret Keisling: 45:04 Here's another area in ESOP world where the treatment of a certain issue was handled completely different. ESOP lawyers and perhaps even valuation advisors have the opportunity to bring in colleagues with expertise. That's where environmental issues arise. 2017, fall of 2017, we had two separate transactions where environmental issues arose. In both cases, a phase one had been done and at various times, phase one environmental study, there were troubling aspects and never followed up on. So now we're in an ESOP transaction and the ESOP way, and it's the way it would have been handled, is to simply get reps and warranties from the selling shareholder in the event that there's a environmental problem, they'll make it right. As far as I know, that's the way it's always been done. The concern we had as trustees was that we had no idea how to quantify what potential impact an environmental issue would have. The other thing that struck us, my partner and I, is we knew that in tiny non-ESOP deals if an environmental issue arose that the deal grinds to a halt until the environmental issues resolved.

Bret Keisling: 46:30 And we were a little bit surprised to see it, in ESOP world being handled by reps and warranties. So we called a great business lawyer in central Pennsylvania. Steve Nudel, he happens to be Cap Trustee's business lawyer. I've known him since I was a kid and he is one of the preeminent real estate lawyers in Pennsylvania and he has a nationwide practice. So we called up Steve and said, Hey, environmental issues arose. They want to put reps and warranties from the owners. It doesn't feel right and Steve asked a question that I think is just dynamite. He said, how close to a water source is the suspected contamination and how close is a school, a preschool and nursing home to the water source? I said, I didn't know. That became the point. We reached out to opposing counsel. We made clear that we could not proceed without clarity as to the environmental issues.

Bret Keisling: 47:32 I believe we got phase twos required of each of them. Initially one of the counsels was not happy, treated it as we were almost negotiating. Another counsel by the name of Paul Fusco. I give him a lot of credit. I like Paul, he's very talented. He was, at the time, with a small ESOP specialty shop. We called them up, outlined the problem, told them we had Nudel's advice and Paul said, whatever you guys need to do to resolve this, Paul supported. So we worked with Steve Nudel. He was paid $2,500, $3,000 something like that. His role was to spend the time reviewing the environmental reports, coming up with a strategy of what he expected from his vast experience moving forward to address the issue, and he provided cost effective guidance that brought clarity. Now, in both of those cases, there was no material environmental problem that threw the deal off.

Bret Keisling: 48:37 I think the company might've spent a little bit of money, 10, 25 grand, which is a little bit of money relative to the size of the deal, but there were no major issues that had to be dealt with. So I'd reach out if there's environmental lawyers in your practice or your valuation firm, find a way to let folks know that in the event there's a phase one that's troubling or a phase two that your firm has the ability to step in with the expertise. When you do the marketing. I'd also candidly lay out what I just did. If you think you're going to handle this with reps and warranties, look at the water source, look at the potential contamination, look at the potential damage in terms of human and animal and wildlife, and I think there's a compelling case for you to become the environmental lawyer. Now look at other practice areas. I gave you the environmental side and figure out other areas that might sink in, or syyc up, where your expertise can be brought to the ESOP space.

Bret Keisling: 49:48 I'm going to give you final couple of pieces of advice for this episode. You're at this big firm, the Tava firm. It's multi disciplined, a lot of professionals, a lot of professionals and all the different areas going out, doing conferences. Firms have newsletters, et cetera, et cetera. What are you doing to help promote ESOPs there. On social media, I see a number of emerging professionals coming from the firms that I'm describing, and because the feeds work as they are, I'll see their partners at all kinds of conferences. I'll even see ESOP lawyers at all kinds of conferences. I see a lot of sharing, but let's say for example, one of your valuation advisors, one of your CPAs, was that a home builder show?

Bret Keisling: 50:36 Some of you like the post, some of you may reshare the post. I happen to think you should reshare the post. You should include a message each and every time that says something to the effect of, wow, what a great home builder show. Home construction would make a great employee owned industry and the blah-blah firm has all of the experts you need including, and then tag the person who did the presentation. Share the social media, always add an employee ownership angle to it. Everybody in your firms are going out doing their own presentations, doing their own spaces. Would it be that difficult to include in the final slide, a big graphic that says our firm supports employee ownership or ask us about employee ownership. If you are at ESOP conferences and you have an opportunity to speak, are you incorporating your other practice areas?

Bret Keisling: 51:32 So in other words, it's not just showing up, looking for the transactions, getting paid for the transactions. It's a coordinated approach, that will take time, on how to grow your practice area.

Bret Keisling: 51:45 All right, folks, we are going to wrap it up for today. On next week's episode, we are very much going to pick up with practice development and I'm going to be talking with specificity about The KEISOP Group. We're going to be talking about additional podcast titles, the beer culture podcast, EO state by state, and we're going to talk about what we're going to be bringing out to the marketplace. Presumably in early 2020, maybe sooner. And that's "ESOPs To Go," we're going to essentially bring conferences to the 6,200 companies that don't go to conferences and among the podcast networks, we're going to do an awful lot of reach out and that sort of thing.

Bret Keisling: 52:29 I'm not dependent at all, I'm not planning at all a dollar of revenue coming to The KEISOP Group for my attendance at conferences. Quite frankly, unlike every other professional advisor, now with The KEISOP Group, I showed up at the Multistate Conference, and I'll be there at one of the other conferences in a few weeks, $1,100 in travel and hotel and food and same thing everybody has. One difference for me, though, is that now what I do is create content. I spent $1,100 to go to an organization's event, prepare content myself, share content, which I loved sharing in public, but it's all content that I'm distributing to for free. So I'm able to sit and just record presentations. That's where the ESOP presentation podcast is going to come from. So I support the conferences. I assume I'll continue to go and I assume I'll continue to join the, or belong to the organizations.

Bret Keisling: 53:36 But next week's episode, I'm going to share what I'm planning to do. And you're going to see it's got very little to do with the organized conferences whatsoever. The organizations are great. We need them, I respect them. There are approximately 800 ESOP companies that touch an organization at least once. That leaves 6,200 ESOPs that aren't connected at all. So I'm going to give you advice on how you can continue to chase down business at conferences in a hyper-competitive environment, but I'm also going to explain why I'm avoiding that altogether.

Bret Keisling: 54:20 My friends, it is October and that is the time to celebrate employee owners, their companies, the professional advisors, the advocates. So if you are in the employee owner space, you have my deepest appreciation and thank you for everything that you do. If you help create employee ownership, you have my respect and I'm trying to become like you. And if you have anything interesting to say about employee ownership at all, please reach out, let us know. Help us share the word. Thank you so much for listening to the podcast. I'm Bret Keisling. With that, I'll turn it over to Bitsy to wrap things up.

Bitsy McCann: 55:51 We'd love to hear from you! To contact us, find us on Facebook at KEISOP, LLC and on Twitter @ESOPPodcast. To reach Bret, with one "T", email, on LinkedIn at Bret Keisling, and most actively on Twitter at @EO_Bret. Again, that's one "T". This podcast has been produced by The KEISOP Group, technical assistance provided by Third Circle, Inc. and BitsyPlus Design. Original music composed by Max Keisling, archival podcast material edited and produced by Brian Keisling, and I'm Bitsy McCann.


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