BE CLEAR ON YOUR PRIORITIES (Searchfunder Interview)

SEARCHFUNDER INTERVIEW OF MICHAEL AUBREY

We spoke with Michael Aubrey. Michael discusses his experiences as a searcher-CEO and what it’s like now as an investor.   

Thanks so much for taking time here. You said that you were pretty slammed on time so we’ll keep this brief.  

It’s my pleasure. Happy to help out. 

Anything you wish you had known as a new CEO that you unfortunately had to learn along the way?  

If I could do it all over again, it would be: being very clear with the priorities. Often times people on the team -- in an effort to try to do a good job -- try to do a lot of things at once. What inevitably happens is that you can’t get to them all. I would focus on really making sure that people understand what is important and how they can help the company’s priorities and really keeping them focused on just those tasks. That is something that took me a lot longer to learn the first time around. I definitely won’t make that mistake again.   

Is that the employees of the company you took over? 

Yes, absolutely. It is the whole organization, including me -- the CEO, who bought the company. I also want to try to do too much, too fast. 

How did you and Daniel end up doing the search together? 

We were classmates together in undergrad. He called me when he was graduating from HBS. He told me what a search fund was and his plans for doing it. He asked me to be his partner. I said, “Yes.” And, I am really glad that I did. I’ve learned a lot from him. 

How did you and Daniel make decisions in your partnership? 

Going in it was very clear. Dan was in charge of finance and operations. I was in charge of sales and marketing. That was established on Day 1 and clearly communicated to everybody so there was no ambiguity. 

Under what circumstances should a searcher do a partnered search or a solo search? 

I’m glad I did a partnered search. It would take a very special person, who is going to be a first time CEO, to do a solo search. I think the search is better with a partner. You need a devil’s advocate to ensure you don’t buy a bad business. 

It was a pretty rough economic situation at the time? 

 (Chuckles). That is an understatement. But, yes.

How did you overcome it? I’m sure employees were pretty nervous. How did it impact your leadership? 

They were (nervous). We overcame it with the help of our private equity partner, Prairie Capital. Unfortunately, we had a lot of our original search fund investors pass on the deal. We had to go to an outside firm to raise the capital that we needed. With their help, we were able to obtain the senior debt and equity required to do the deal. That’s how we overcame the acquisition part.

In terms of the fear that people had, it actually served to our benefit. The economy wasn’t great and there weren’t a lot of other opportunities, which caused them to stay. It helped them to get to know us and us to get to know them. When the economy got great, no one wanted to leave because we had become such a tightknit family.  

Do you feel like the economic downtown helped the pricing of your business?

No, we ended up paying a very full price. Our search fund investors didn’t invest because they felt we were overpaying. 

It’s often difficult to hire high-powered talent into businesses like these. Could you talk about what you were able to do? 

It’s so difficult. I was really blessed that I went to high school with the woman who became our COO. She eventually led our second portfolio company, Delasco. I knew her personally. She was in my network and that long history helps.  

This area is where board members can be particularly helpful to new searchers. When you bring in a qualified person, and you introduce them to a David Dodson, Bill Egan, Will Thorndike, just as examples, that is pretty impressive stuff. I would encourage the searcher-CEO to utilize their investor network in selling the potential of how these things go. Because it’s really tough for a 30-year old, first time CEO to convince people that they are going to build a great company.     

When you first stepped in, did you maintain or change the culture?   

We maintained the existing culture, which was wonderful. The culture was dedicated toward the customer and towards each other, a family-like atmosphere. I suspect that’s typical of most search fund bought businesses. The part that probably was not typical for them was the accountability piece. We brought accountability to the culture and that made a lot of difference, without changing the family feel or customer service aspect of it. We wanted to keep all the good aspects of the culture. 

How did you bring accountability? 

First of all, you have to define the priorities. After you define the priorities, you have the management team define what success looks like. You do that with SMART goals. (Specific Measurable Attainable Relevant Time-Bound goals). You have the team tell you what they can do and when they can do it by. Then, you ask them, “What should happen if these things aren’t hit?” You would be surprised what people say. They say, “Maybe I should be let go” or “Maybe, you should bring someone in above me.” They’ve almost decided for you what is going to get done, when it will be done and what should happen when it doesn’t.  

You let people decide their own goals and measure themselves against it? 

Yeah. At the same time, our jobs as leaders is to not let people sandbag. So, you have to push a little bit. I think allowing employees to be successful is good. And, taking things off their plate that will prevent them from achieving that is important. As long as you don’t overburden people and they start to have successes. They like the way success feels and they start wanting it more without you having to manage it. That has been my experience. 

Did you implement new incentives following your acquisition? 

We did. Yes.

A lot of searcher-CEOs talk about having a learning phase, followed by an adaption phase, and then finally a growth phase. Many mention that they pushed the growth phase too fast and should have spent more time learning. How did it go for you? 

 We did not start the growth phase too fast. We actually waited about a year or eighteen months. I would tell new searcher-CEOs to meet the customers and hear what the customers have to say. You’ll learn what it is going to take to grow and what problems you need to solve. Before you build a catalog or build a sales team or do your search engine optimization – however it is you’re going to grow, it is really important to understand the messaging that will work. You can’t do it without talking to the customer yourself. 

Earlier this year, you brought in a new CEO, Dan Eckert. Can you tell us a bit about your decision process?

I stepped away because I wanted a new challenge. We had been running the business for 7 years. I wanted to go up another learning curve in my personal development. The timing was great because our investors wanted to monetize their investment. So, we sold a majority of our interest to a new private equity firm. Part of the deal was to ask the new private equity firm to find a replacement for me.    

It looks like you’ve invested in a couple of search funds. How is it different sitting on the other side of the table?

That’s a good question. I think searchers sometimes are overly optimistic. In particular, the execution of the plan is harder than people think it is. So, what I have learned unequivocally is (and I am sure you’ve heard the saying), “It will take twice as long and cost twice as much.” It is true. It will be much harder than you think.  

I feel like I got so lucky. In life, you have to put yourself in a position to get lucky, which is what search is – an attempt to put yourself in that position. I’ve talked to searchers who have purportedly “failed” because they did not make an acquisition. However, before we closed on our first acquisition, our bank account was down to $7,###-###-#### If we hadn’t closed on StatLab, we likely would have been shutting our doors. That difference between so-called success and failure is so slim.  

Knowing what you know now, is there anything you would do differently in terms of your investor communication as a searcher?

I was blessed to have a really good business partner, who was good at that kind of communication. I give him all the credit.   

Thanks so much for your time.  

Summary of Insights

Here are a few of the key takeaways from our discussion with Michael: 

• • Despite the tough economic situation and their dwindling cash, they were able to persevere and successfully close a deal.
• • Management skills like being clear on your priorities is key. And, that means managing yourself, too.
• • They maintained the culture while holding the management team accountable.
• • They spent about a year to eighteen months before entering their growth phase. Spending the time listening to customers helped hone their messaging.