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Yeah. So, let's talk about what the early days looks like when you are a CEO or coming in as a CEO. Now, I like to think of, if you've, any of you have familiar with like Peter Thiel's book that talks about Zero to One and then everything that comes after it. No matter where you are in your journey today, I think of that as day zero. So, you've got something going on. You're having challenges. You're not sure how to deal with those challenges. And so, it starts, you're wondering, and my bet is if you're all here, you're all thinking the same thing. How do I solve the problem that I have? So, I think of you at day zero. When you make that choice, when you make that change, now you're at day one. You can start going. And this is what we want to talk about today is what does that look like and feel like to make that change? So, in command, getting command of your company is about really 4 very simple steps. So step number 1 is no surprises. I talk about this all the time. You're a CEO, and you're kind of the connection between yourself and the team. And Tulio, while we're doing this, if you see anyone put anything into the chat, please, please respond to them or invite them to come. Yeah, I'm looking at them. And I think we can invite them to join us on the, on the call here, if, if possible. We probably just don't know how to do it yet. But if you're a sitting CEO today, And you're struggling to go through it. Your job is to be that connection between your board and your team. And the four things I always tell everyone is exactly the same. First is no surprises. You know, bad news, fish, and relatives all stink after three days. And if you are not communicating with your board about what's going on, even if you're doing a good job, it's not going to go over well. Second is be on pace. I think about it in 1,000 days going from day 1, you've got your hands around the controls or you've made that decision. I now know what I'm gonna do. Even if you're in your 10th year, there's a pace for you to get there at the right speed. If you go too fast, you'll leave your team behind. If you go too slow, you'll be the bottleneck. So, there's a right pace and you want to push that pace as fast as you can. It's shocking how fast time goes by. Data-driven. I think this is the heart of it all. It's really looking at, do you know what's going on? Do you understand exactly what's happening? And the way that you do it, you got to look at your data. If you have less than 20% of the data, you're simply guessing. If you have more than 80% of the data, you probably have taken so long to get that 80%, everyone else has passed you by. So, it's working somewhere in that gray, in that ambiguity. About how you're going to take it from today's numbers into tomorrow, exactly where you want to be, the number you signed up for, your team signed up for, what the glory looks like for you. Then the final one, I think this is the most important, and I bet we've all experienced this. The team goes, I did the best I could. But we're not a best efforts company. Results are going to matter. And if you're going to be successful, and if you're going to have people who, uh, if you're going to make this company work, you got to score some points, right? So results matter. So it's great to say I did the best I could. You know, if you bat .300, it gets you in the Cooperstown, right? Gets you into the Hall of Fame. In the business world, you got to be right more often than not. You got to be successful. You got to drive the results across the organization with it. So these are the 4 things that I think what it means to actually have command and control of a company. People know what's happening. You're moving at the pace that it takes to achieve the plan that you've all signed up for. You're using data. You got your gut, that's important, uh, but you need data to really show you where you're going. And finally, you actually got to go win sometimes. Okay, so one central question here is, uh, can you state the board's number and the 5 levers that got you there right now without opening up a file? Now let me tell you what I mean by that. When you took your job And there's 3 different types of companies. There's a public, there's a private, and there's a private equity. Today we're going to primarily talk about private equity, but honestly, it doesn't matter. It's important for all of the businesses. With it, there's some goal that you've got to. Typically in private equity, when they buy the company, there's a thesis. In other words, they say, this is what we're going to go do, this is how we're going to make our money. And generally, they're looking for the equity that they invested, they're looking to get a return Somewhere between 2, 2.5 to 4 times. But the most common that I'm familiar with around 3 times. So if they put in $50 million of equity, just using that as an example, they're expecting to get $150 out. Do you know what that is? Does your team know what that is? And do you know the levers that you're gonna pull and in what order? If you don't, you're just running enthusiastically. If you don't, you're not sure how you're getting there. And the unaimed arrow never misses. You know, to make a metaphor, if you're drive— you're sitting today in Sarasota, Florida, and you're going to drive to Chicago, Illinois, if you just randomly start off, you might be making great progress totally in the wrong direction. Maybe you wind up in California. You want to get where you have said you're going to get, and in order to do that, you need to know the plan. Otherwise, plan failure. Okay, now the math for the people sitting in the CEO. This is factual. You can look it up. 70%. Now, in fact, I think it's about 71.6% of all CEOs get fired before they achieve the final goal. 70%, over 70%. You generally get less than 6 months to establish your credibility. That means you go through at least one board meeting. You have them typically on a quarterly basis. You get less than 6 months to do it. And the average hold period is 7 years. Wow, that's a lot coming at you pretty quickly. So the odds are against you. You are, you are absolutely more likely to get fired than you are to actually see the number that you signed up for. That's important. We're going to tell you what to do about that and how to avoid that happening. They typically don't replace you for capability. When you go through the hiring process, again, regardless of what type of company, you're generally very well vetted. They'll have you take tests, they'll meet other board members, You meet the team. You do all of this type of stuff that you're going on. You are capable. You wouldn't be in the job if they didn't think you had the capabilities. The real question is, can you deliver the result? And because the result takes so long to get there, on average over 7 years today, it's the belief that they have in you as you go. And you generally get 90 days to get your feet under you, 6 months to have the plan clearly and start executing on it. If you don't have it after six months, the board behind you after the executive session is going to be talking about what are we going to do about it? Bill's not working out. How are we going to make that work for you? Now, the issue with your job, the challenge with your job is you are the only translator in the in the in the building, and what that means is your board is talking returns. They talk about things like MOIC, multiple on invested cash. IRR, internal rate of return, EBITDA, exit multiples, all the math, because that's what they put in. They don't, they don't know this company. They got the thesis, they went through the deal, maybe they've been sitting on it a while, but the average board member spends about 24 hours a year. Board meetings are about 3 hours long. There's 4 of those a year. They have a monthly financial call, about an hour. So if you do all that math, that's gonna put you right about 20, 24 hours. That's not including travel times and all that, but actually working on it. 24 to 30 hours a year. They do not know your business. They're just going to go off of what you're telling them and what the results are telling them. Now, your team speaks in tasks. They get the go-dos. How are we going to achieve this? How are we going to get this, this multiple on invested cash? They put $100 million in, they want $300 million back. How do we achieve it? You're the translator, you're the decoder ring, you're the one that has to set the goal, Set the goal of what good looks like, and that team has to build a strategy to get there. If you can't translate numbers into tasks, that's not going to go well for you. Okay, one document will solve all of these things, and I call it the CEO mandate, but it's really a board memo. And the reality of it is, and you probably have gone through this yourself already, is when you start out and the board tells you This is what they're wanting. So, we're at $100 million. We need to get it to $300 million. I'm just making up numbers here. $300 million would be an extraordinary piece, particularly in organic growth. But whatever, whatever that number is, in order to get there, you have to be the one that will define that plan. Now, the thing is, since you're only with your board such a little amount of time, you need to show them the documentation because I will assure you, whatever you think your plan is, It's not the way it's going to get there. And so, you have to bring them along. You have to have conversations outside. You have to have very purposeful ones. A lot of times, they'll be social and we'll be talking to them and they'll be happy and it'll seem good. But if they don't understand how you're going to get there and then see it and take that journey with you, it can go bad pretty quickly. Same time, your team, the things that they're doing, the strategy that they're developing, they have to understand and it has to make sure that it's getting to that number. Now I've sat in the chair many times and sometimes I'll get frustrated. I'll just do the strategy myself. When you're doing the strategy yourself, the one thing that is for sure not happening is no one's buying into it. You're doing it late at night. You're doing it on weekends, off hours, whatever. People haven't seen it. They haven't pressure tested it. That is going to be your strategy. And when it starts failing, you know what they do? They start saying, I never thought it would work anyway. And your board, since you haven't brought them along, They're like, we don't know what this is happening. You sometimes, when you take over a company, you actually have to shrink the thing. You actually have to get it smaller in order to get it bigger because you got to get away some, you got to get rid of some of the lack of focus, the things that are not working. So, the goal here is within the first 100 days, you take that board mandate, what they've told you they want to get, you translate that into an operating plan that your team owns. And between those, they need to match. So if your team plans too little or maybe too much, if it's not achievable, if it doesn't deliver that number, it's not going to work. If the, uh, board has an unrealistic number and it cannot get there and your team can't do it, it's not going to work. You're the person in the middle. Your job in that first 100 days is get the goal. You're going to work that with your board. Take that goal, Tell the team about it. Get the team to build a strategy to go achieve that goal. Then the next step is you organize your company all the way around it, and then the final third step is you start executing on. You get about 100 days to go do that. Okay, so what's the board's number? Where does that come from? It comes from the LBO or leveraged buyout. So when they buy this company, typically today, 50% is going to go in equity. In other words, the cash they put in. 50% is going to be in debt. You need to understand exactly what that number is because not only are you going to have to defend it, you're going to have to make sure that that plan delivers that. You're going to need to run the MOIC, or the multiple on cash conversion. So you've got to understand what it takes to only get the number. You then got to decide, is that payoff going to deliver what everyone's expecting, which is your team, which is going to have very high expectations, and the board, which is going to have very high expectations? Are you Guiding them into the right place. And then you've got to get it all locked in onto one page that everyone blesses. This is really important. If every— if it's wrong and it doesn't work, what happens is, uh, you now got to disconnect and you'll spend more time going back and trying to figure it out. I'm gonna run a live sample here first. I'm gonna tell you kind of how it works, and then I've got an LBO calculator I'll show you. It's available on the website. You can go in, you can play with it, you can actually put your own numbers in. Uh, and if we can figure out how to get the chat working here, which I think Tulio can, uh, do, if someone's got a number, they'll let us know on it. So first is your entry EBITDA. That's your earnings. There's a lot of different ways of thinking about earnings— operating income, net income. They're all good numbers. In private equity, we talk EBITDA. That's how we take and value the companies. So whether it's a good number or a bad number, it typically focuses around the efforts that you do, the operations you do. That's why they don't count, uh, depreciation, amortization. So it's earnings before interest, taxes, and so on. It's the operating piece of it. We're going to multiply that. In this case, your entry multiple, what you paid for it. So you find $50 million of EBITDA, you pay 10 times on that. They, as I said before, take half of it, give get banks to borrow the money or lend the money to them, borrow the money from the banks, and then they're expecting to get 2.5 times in 5 years, 20%. Now, 5 years is a very typical hold, uh, period. The funds that people will use to invest generally have a 10-year lifespan. Now, this is important for you, and we'll talk about it later. Uh, so they're expecting to be done in 5. The average fund wants to be done in 3 years, 1,000 days, which is slightly less, but I think a 1,000 days gives us a nice ring, uh, off of it. But it generally— they're planning on 5 years. The average hold period is 7 years. So there's a disconnect there. They want it quick, they know it's going to take a little longer, but it exceeds it. It almost exceeds the entire time of the fund. And that runs into trouble for the people who are operating. As I said, we'll do that a little bit later. Okay, so now we're going to run this, and I'm going to see how good I am with this today, and I'm gonna Share a different screen, so bear with me here just a little bit while I get to my next screen and do the LBO model. Okay, so I believe everyone can see it. So this is on my website, BillCanady.com. You can go and plug in your own numbers. I think it asks you for your email here, but all right. So fifty million dollars of EBITDA. Revenue's great, but revenue's a vanity. We always, like I say, go back and think about the EBITDA. So let's say— so that's what I put in before. I did one deal, it was at $70 million is where I came in at. The multiple that they had bought, uh, paid for that was 10 times. So they paid $750 million, uh, for it, just a round number off of that. Uh, the leverage, that's how much debt we're going to put on it. They had 5 turns of leverage on that. So In other words, 50% of the leverage going. Now you can click here, you can do it as a percentage of purchase price, net debt, net debt. Most people think of it when you're an operator like we are, they think of it on the, uh, the 5 turns. The whole period, 5 years. The target MOIC, my contract was 3 times. The old exit multiple we were planning for was 14 times, which is really high today. 2 or 3 years ago, you were seeing things 14, 15 times if you were in a material amount of EBITDA. So something you know, $50, $100 million or beyond, it's going to trade at these multiples. If you're smaller, it's going to be lower. That's just a fact. We can talk about that. 14 times is where, uh, the multiple that we thought we would get, and that's exactly where we wound up. And the debt paydown, 50%— we did pay down 50% over time. The interesting part though is we kept buying companies, and when you buy companies, your debt, your debt goes up. All right, so In order for $70 million to get, uh, with 5 times, uh, leverage on it to get a 3 MOIC, right, that here you can see to the right, I got to grow it from $70 to $87.5. So that'll tell you as you're looking at, okay, I got to get this thing to $87.5, uh, in order to get the multiple I want that gives me an internal rate of return of 25%, 3 times. At 3 times, my contract fully funds, I get 100%. Plus the multiple. If I come in less than 3, it drops down to like 80. If I get down to 2 or less, it drops down to like 50. If I get below 2, nothing. These are typical private equity contracts you're coming in. So they generally got to get at least 2x their money or you're going to make almost nothing off of it. Sometimes you will make money right now. So the equity debt coming in, they borrowed $350,000. We put in, uh, uh, uh, uh, $350,000 of our own capital. Targeting $1.50 billion coming out of it. The debt we'd be sitting on is about a, about $1.75 billion. Exit enterprise value, $1.2 billion. Pretty good, right? That's where we were at. So if I got 15 times, I only got to get it to $81 million. So I don't have that much to go. If I get it 12 times, well, I got to get it to $102 million. So this will give you a little scale there. Now, where is the sponsor, the private equity firm, making their money? You can see there was 3 things in this. 25% of it came from the EBITDA growth. That's the organic side. 25% of it came from the debt paydown. And the remaining piece, 50%, was that multiple expansion. The accretion from 10 to 14 times gave half the return. Multiple expansion is a big deal. I'm gonna tell you right now, it is hard to get multiple expansion today. It was way easier over the last decade or so. Because interest rates went from double digits, 12%, 15%, all the way down at one point down to 2%. Uh, today they're running about 6%. Now that's just what we see as individuals. Companies vary at something with, uh, used to be LIBOR, now it's SOFR, SOFI, uh, plus that. So they may be on SOFI plus 1 or plus 100 bps or whatever.

Yeah, and a comment about that, Bill, is that we as operator, we should focus on trying to influence what we can control. And if there's something that we can do about it, is the company's results in EBITDA, growing revenue, expanding profit margins, because the market will do what it will do. And if it helps us get a higher multiple, well, great. But if not, we can't— we shouldn't count with that.

Absolutely. And this is critical. This is why this up here, this is the land of the operator. People on this call, this is where they're going to be looking at. This is what you're focused on. Then if you're the CEO, you're also going to go buy this. Now, why did I say the operators up here? And the CEO and the sponsor are here because typically you don't want the people on your team out looking for deals. You want them to find some and pass them over, but they've got to run the business. So at the same time, we went and bought a bunch of companies, and I think we bought about $45 million worth of EBITDA. Now these are smaller businesses than ours, so we paid a lower multiple, and our multiple was running right about 7 times, I think, on average. Lately they've been higher. It's harder to make money when they're higher for the obvious reasons. 25% synergies, that's what we were experiencing. If you're in manufacturing, you might get it up to 50. You can shut down plants, consolidate. It's harder to get the synergies than you think. People think I'm gonna wipe out corporate, I'm gonna collapse the footprint. Yeah, I bought one place and the thing turned out to be a super fund side. And guess what? I could not get the, uh, I couldn't get out of the buildings because I had to Had a, uh, an environmental issue. So we stayed there, ring fixed it, did a bunch of things with it. So, all right. So $45 million, I paid on average 7 times. I got 25% synergies and, uh, and I was funding it by, by net debt, right? So I was at— I was taking my revolver and going and fund those. So the multiple that I really paid on these was 8 times and my effective exit on that, my multiple was 5.6. That's a really good number with it. So $472 million I created by buying $45 million. You can see, so here it is. So $45 million synergies, I, I, I flushed out $11 million. That gave me $56 million to come with capital deployed. I spent $315 million buying that and my gross spread was $472. So that was really good for us, right? So the EBITDA, My edit gave it as 5.6. Remember when I looked up here on my operating side, I'm getting 3 times, which is manifesting itself, giving me just a little bit over 4. Here I'm getting 5.6. So with, with, or with the, uh, with the, uh, uh, acquisitions, I only had to grow, or without the acquisition, I had to grow my EBITDA by $17.5 million organically. To get to the number with the acquisitions, with the buy and build, I actually could have grown my EBITDA by nothing. I could have stayed right where I was at because I only needed to get to 110. So it's higher. Before, I was going to need to be at 87. Now I need to be at 110. That's the value of leverage. That's the value of what you're, you're getting here, uh, on it. And the debt-to-equity, now I'm at 490. Before, remember, if I just stayed organically, I would be exiting Uh, with just, uh, $175 million. Instead, I am now exiting with almost half a billion dollars in debt off of it. So the honest comparison, organic only, I got to grow up by 17.5. Uh, with a buy and build, I don't have to grow it at all. In fact, I can do the opposite because I bought well. But let's say I had bought these things not at 7 times. Let's say I'd bought them at 10. At 10 times, right? What I really paid was 9.1. And look, I got to have better— I can't— I got to actually produce some EBITDA here, right? So it went from a negative 13 to negative 6 off of it. So, so the equity side is working for me, uh, the, uh, and the fact I'm growing it— wow, I'm doing pretty well with this. Okay, so, so I have this. I started with 70, I bought 45, I got $11 million in synergies. Uh, and that got me to $110. I only wanted 3 times off of it. So the MOIC I delivered at $110 gave me 25% at a, at an exit EBITDA of $143 million. So not going backwards, right? That gives me 4.3 times. So the way you read this, to get my 3 times return, I could have actually not gone equity at all. If you don't grow equity organically, it gets you fired. I'll just tell you right now, they're not going to let you go backwards unless you got some magic, uh, uh, board to get 3 times. But by growing my equity as I did, uh, uh, up here— well, I just clicked on something. By not growing my equity, that allowed— by growing my equity gave me— I don't know what the heck I clicked on there. Oh, 57 times. That's what it is. 7 times. I didn't want to have that return. Uh, my exit piece, my exit equity is $1.5 billion. So we put 3, you know, $350 million of equity. We're coming out 4 times. So 4 times 3 is giving me this $1.5 billion. You're going to do really well on this. This is what makes, uh, M&A and private equity so fun and everything, uh, is that you can hit these kind of numbers. But remember what we said just starting off is candidly without the— that 70% of the people get fired going through it. So the numbers are great. This is why people would do it. But if you don't come out strong right out of the gate, you don't have a shot. I know you've had a lot of experience in this.

I'll tell you a comment about this, you guys. So the main use of this calculator and the purpose of Billy showing it is because this exercise is really helpful, especially at the beginning when you are taking control or being on board in this newly acquired company, or you're coming in to fix things, because this will help you get aligned with the board. Because once you have the clarity on the numbers that you need to get and have an idea of what are the levers that you're going to pull to get there, it'll help you really, really have a better plan eventually to actually have a better chance to achieve it. And as Bill said, uh, we have to do what we can do, do it the best we can. And then if we have a little bit of help of the market, that's how you're gonna make a lot of money.

That's exactly right. It's really, really powerful. So, okay, so today's number— so I was at, uh, uh, $70 million. I organically, I needed to get that thing around $84 million. We went way past it. We actually got it to $165, $167. That was both acquisitions and organic. We grew to about $25 million. We held the business for 5 years, uh, and then we added another $60 million or so, uh, through acquisitions off of it. But that gap between where you are and what that LBO calculator shows, well, that's the gap. That's your job. Your job is to go get that. And in order to do it, not only do you have to deliver because delivery takes time, you have to keep people's confidence so you get the time to do it. And the facts tell us that people don't do a good job of that. Okay, with that, so, and if you got questions, please put them in the chat over here. If you got a number you want to share, because I'm happy to go back and run this calculator for anyone with it. So what's your gap? This is the question you should be asking yourself right now. Say that number out loud, share it with us. It says on camera, I thought I'd be able to invite you folks in, but clearly I don't know how to run the Riverside yet, so I got to figure that out. Okay, all right, before you start growing, you need to earn the right to grow. And what does that mean? That's not some secular piece that says you got to be a good person and all that. No, no, no. If you have a broken business and you start trying to bring new customers or acquisitions in, you're just going to upset them. You're just going to get someone in, you're going to over-promise what it was that you wanted to deliver for them, what they signed up for, and then you can't deliver it. So if you can't ship on time, Adding more customers will not make you ship on time. You've got to go and look at your business and make sure that operationally you're getting this thing up and going. You're standing it up on its skis. So this is a simple tool that we use. It's a ratio. It's material margin. So the actual cost of what's going into whatever you're selling divided by total employee cost. So let's say you're building out the greatest widget And that widget is costing you $100. We're just going to use really simple numbers. And then all your employees, everyone including yourself that is on that payroll, everything it costs for them, total burden cost for the employees, add that together and then divide them, divide that in there. And so if you're costing $100 and to buy the product, the material, and in order to have a product to go sell, it costs you $100 per labor, right, to make it, then your ratio is 1. $100 for material, $100 of labor. And if you're at 1 to 1, you're in trouble. What we believe and what rate— what it's shown us is somewhere around 2, between about 5.75 to 2 and 2.3 You're starting to earn the right to grow. So what that means is your $100 cost, you're, you're, you're costing labor-wise about $50, somewhere between $40 and $50 of labor into it. Now once you get over that 2.5, you're in smooth selling territory. So if it's costing you 25 cents of your dollar of material cost, you are in an efficient mode and you should be investing heavily in the business. Now What does that actually mean? Every business is different. It doesn't really matter where you are. You identify it and then your goal is to make it better. I have seen businesses strongly in the green, 3.5 and 4, and not growing at all. They don't have enough people to grow. They've got too few people. I've seen people in the red who are actually doing pretty well. The goal is to make your business better and the fewer people that it takes to— for you to create that product and sell that product, the better off you are. And so that's what drives people towards automation, negative working capital, all that. So that's the ratio. And it just kind of tells you where you are, your labor versus what it costs to get it out the door. Run that. You can do it on the back of a napkin. Ask your CFO what your material cost is, your material margin, and then ask your HR what you're putting into it. It's really simple to do. It'll give you a sense of the idea.

Bill?

Yep, we got a question.

Yeah, there is a question from Jeremy. He's asking to please clarify if material margin is just cost of materials.

It is just cost of materials. Don't put labor in it. You're putting labor in the bottom of it already. So it's just the material to get there, uh, that, that, that, that you are, uh, including in it. A lot of times that will include the inbound freight coming in. It just depends. Don't get crazy with it. Just think about you've got when you're running your your P and L, you'll have your COGS number back out labor and kind of whatever else is in there is pretty good. Your some businesses will get a little funky with it, but don't include labor because you're going to include that in the denominator. Good question. Hey, thanks for it. Maybe this thing is working. So I still don't know why I'm not seeing the questions, but I'm probably. It's absolutely sure I'm doing something wrong. So, uh, okay, so what are the 5 levers? Remember before I talked about, do you know your number and do you know how you're going to get there? One thing you cannot count on at all is the market. There's always going to be some war, some fire, some heat wave, some flood. Market's going to do what the market's going to do. And people will come in and say, well, you know, it was not a good month, it was not a good quarter, I did not expect the war That is going on in Europe to continue. You're like, well, can't do anything about that. Yeah, it rained too much. So we've got a business that does outdoor power equipment. Rain— too much rain hurts us, too little rain hurts us. Don't— you can't control any of that, so don't pay any attention to it. What you can control are these 5 levers that you see right here in front of you. So price and mix, I put them together. It's really price, but you also want to focus as much as you can around Uh, on the, uh, on the mix, uh, uh, with it. Let's see, I'm still convinced I can get to this chat, but some reason I, I cannot, uh— oh, I found it! Look at there, I found it! Hey Jeremy, I can see your question now. I'm so excited. Okay, so price and mix is one. Second one is cost, organic growth. I saw the thumbs up, way to go buddy. M&A and working capital. All right, now why in this order? And this is a real order. You go with price first Because it is the fastest lever you can pull, uh, you know, excluding contracts. You may have someone that's giving you a contract says you can't raise it for, you know, a year or something, very common, but, but you can raise it, uh, and it's frictionless. So if you change your price tomorrow on a product, it's going to flow right through the P&L. You don't need new buildings for it, you don't need new people. You might have to pay a little extra commission, otherwise there's no other friction in it. Cost is the second one, but it takes time to get through cost. You have to negotiate contracts. So some are direct costs and some are indirect. So indirect would be something that's not used in the direct making of the product. An example would be like your phones or the hotels or rental cars or things like that. You can renegotiate your freight contract. That's one of the most popular with FedEx or UPS or whatever, you know, Uh, uh, trucking firm you're doing. You can do that the moment you have in, it goes in. If there is friction involved with it, there will be some switching costs, there will be something— it may not go all the way through, and it takes longer. So cost, you can typically get most of your pricing in within 6 months, and then it flows through sometimes very quickly within 30 days. Cost, generally it takes you at least 6 months before you even start seeing it. And if it's a direct cost, if you're making A, uh, a, uh, a, uh, um, if you're making a highly engineered product, uh, that sometimes takes longer. Maybe you're getting castings out of India for it. It will take you a year to 2 years to get a new source of casting. Hey Greg, I see you're on here. It's good seeing you back in, uh, Hill and Brand. We love that period of time. What a great company. A lot's gone through a lot, right? Boy, it's gone through a lot. So, uh, uh, so that's going to take longer And direct cost is harder to do because if you get the casting wrong, you're in trouble. No one's going to buy your product. It won't work. Organic growth is the one that comes after that. So first 6 months through the year, you're going to see pricing comes in, comes in quick. Costing generally takes between 6 months and 18 months before you see it, depending on direct versus indirect. Organic growth, if it's an existing customer, you can go win that new, uh, customer Uh, and, uh, but if it's, if it's an existing one, you just got to win the new product. If it's a new customer, you have to take them from someone else and they're going to fight you for it. So that generally we say comes after year 1, typically in year 2. If you're selling like Caterpillar— Caterpillar is a wonderful company, I've sold them most of my career. Uh, they have a product roadmap, and if you're selling them a, say, a piston for their engine or a scavenger pump for for the, uh, uh, uh, to do the oil out of the sump, that's 4 years, uh, before they even change it on their, uh, uh, uh, uh, uh, a, uh, uh, before they change in their drawings, right? So recognize that's your third one. Typically we say that comes year 2 to year 3, unless you're a current customer and you're already in the gap, right? If you're selling commodity items, you can get it pretty quickly. Engineered items takes longer. M&A, you need to start right away, but you need to be tempered, uh, with it and make sure your business can handle it. Now, the honest-to-God truth is, in private equity, you want to start dealing— doing deals your first year. And the reason is you need time for traction to happen so you can get a real return. And there's 2 times that you will do the deal. So the first time is early in the hold, that first year into that second year, So you got time to get them in, integrate them, and all that. So you get the benefit of— the second one is you buy them just before you sell the business. If you buy them just before you sell it, you don't actually have to do anything, and they will carry the same multiple that you're selling the business for. So if you're buying a 3 or 4 or 5-term small business and yours is going to sell for 11, 12, 13, you're automatically getting that step up. And that's important to know. So it's in the middle that is really hard, and you typically don't get a payback. On it. So if you buy it in the middle of your hold, it's close to the multiple you think you're going to get, you don't have enough time to get the synergies, uh, for it. And then the final one is working capital. That is releasing capital out of the business. That's getting rid of those inventories, those excess footprints. You remember all the things we did back, Gregory, uh, in Hillenbrand that we did, the same thing we've done in these other ones. So, uh, uh, Wade, it's good to see you on here. Same thing, Art. So I'm glad you guys can hear us. So The working capital, you want to work on that, but a lot of times in industrial, you come in, you're looking at 2 turns, 3 turns, sometimes 4, whatever it is. You want to be in the middle single digits and beyond. Now, it totally depends on your business. If you're, if you're selling software as a service or a SaaS company, there is no inventory. It's a negative working capital business. Many of you may know like a Roper Technologies. It used to be Roper Pumps back in the day. Today they're negative working capital. It's infinity. That's where you want to be if you can get there. But if you're selling a product, most product companies are going to be in the mid— if they're running good or well, the mid-single digits all the way up to maybe you can get into double digits, but it's hard. A good running company in industrial products will be 5 or 6 times, and you're pretty pleased with that, and you're always trying to get it. Now the reason is that is stacks of cash sitting on your shelf. You go out there And you see, oh my God, I've got $2 million, $3 million. The last company we took over, uh, we had $800 million in working capital. We took out $350 million in year 1. We had to do it to save the business. Freed up so much capital. But not only did we get the money back, but we could exit the buildings. We didn't need that anymore. We didn't have to do the care or feeding of it. And so that's the 4th lever that you pull. And the re— excuse me, the 5th lever. The reason I put it there is You start working on it in day one, but if you're putting new products in, if you're collapsing facilities, if you're adding facilities, all that, it is hard to get your working capital. But you can do things like AP and AR really quickly. You can get those negotiated. You know, that'll help you get towards that, you know, proverbial, uh, uh, land of, of plenty of negative working capital. I've never had a negative working capital business because I've always made products and I got to have the material to go do it. But anyway, those 5 steps are the main levers you can control. You can decide what you're going to do on price. You can decide how you're going to get your costing, and you can fight your way through it. The organic growth, you know, if you look at a typical industrial company, uh, uh, you know, we'll say, all right, we're going to get inflation, whatever that is, and historically it's been 3%. Now you can't look back the last few years and say, what the heck is a historical mean? But historically it's been that. Then you get pricing and maybe you get 3% pricing. So if I get inflation, call it 2, I get my 3% on pricing, I'm at 5, and I get my initiatives, my key things I'm gonna do, maybe that's gonna add another 3 points or 4 points. Heck, I'm looking at 9 points. That's how you stack that stuff up. In private equity, the, the, the holy land is 10% on the top, 20% on the bottom. That's what we're looking for. Grow at 10% top, you get leverage coming through. In other words, you don't have to add people. Facilities, PPE, any of that stuff, and you want 20% above. You know you're running a good business when you get flow through your P&L and it comes out at a greater percentage than it goes in. And that's the key, that's the magic right there. Okay, let's go to the next one here. So, all right, first step on this is— so now you know your levers, the board's told you the number, uh, you know what levers you're going to pull. You got to lock that number in with your team. So you've got the goal You think you know where you can go get it. You have an idea. You and the team have to translate that into a strategy that you can execute on, that you can own those numbers. This is critical for you. Now, what are we looking at? The first thing is, do you have the right team? And I think of the 3 people— the last book we just put out called The Rule of 3, it talks about the visionary. Typically, that's the CEO. They're going to own— this is where we're going. This is the vision. All right, then there's the operator. They're the actually the one that's doing it. They're the people showing everything. They're the president, the vice president, the directors, the managers. They're the one that makes it happen. And then the final one, the one I see the fewest companies having, is a prophet. Now I use that term because I think it gives 2 connotations. One, prophet as in money— that's where the money's at. And 2, prophet as in they have the wisdom to tell you the operating system that you will use. It is not unusual in a small company or any, candidly, any size company to have them where they're doing all 3. It's hard to do all 3. It's almost impossible to do all 3. It's common to see the visionary and operator together though. So, your CEO owns where we're going. The operators drive the car to get us there. They, they put together that map, that strategy of how we're going to do it. The prophet has the wisdom, the training to show everyone on it, right? These are how it goes together. Second thing you got to do is you got to make sure that the compensation plan that you have aligns with it. I come in— typically salesmen are paid on revenue. I've certainly dealt with that every time. If you're going to be selling this off of EBITDA, in other words earnings, you need to get everyone aligned around EBITDA. That's what you should be paying on, not 50-some different metrics, not some, hey, we got a top line and a bottom line and all those. The fewer you can have tied to the same thing that the board has tied you to, the more likely you're going to get it. Let's be honest, they're all coin-operated. And you'll tell a salesman, or you'll tell an operator, do this, isn't that great? And you're gonna— but if you're paying them to do something else, they're going to do something else. They're going to do what is not only good for the company, but what's good for themselves, as they should. You're telling them what you want, and you're showing them that by rewarding it. Tulio just took and put in the Rule of Three. You can see all about that book if you like. You're going to need to make sure that you have one owner per initiative, one throat to choke, to use an old term. But what that means is, are they doing everything? Of course not. But someone who's owning the initiative to go that you can talk to. You can use the RACI chart, right? We have all those kind of materials. You can look it up on the internet if you're not familiar with it. But one owner that is showing up on your quarterly meetings, on your monthly meetings, saying This is where we are. This is the date it's going to be done by. This is who owns it. This is the number. This is how we're tracking. Then you're going to take and look at everyone around it and you're going to ask yourself, are we, are we keeping it? Are we doing more of it? Are we going to take and get rid of it? Or are we going to develop? It's the same way with the team. It's the same way with the initiatives. Do I have the right team to get me there? Do, are we focused on the right pieces? You have to go through all of these. Starts with you setting the goal, they building the strategy, then you organizing around that strategy. They have to own that. All right, then you got the rhythm. That's your monthly, quarterly, weekly, annually, all these meetings with it. You got to bake this stuff in, and you want to put it in early. I like to have my calendar being a rolling 18 months. Rolling 18 months. Why is that? Because if you put these big rocks in, these Quarterly meetings, monthly meetings. That means people know when they're coming. I use week 3. I'll tell you why in a second. But then they can plan vacations. People got to have a life. And if they can't be there for it, then they can have a proxy. You don't move those once you get them locked in. It will drive people crazy. So your monthly meetings, you put them out there for a quarter. The MBRs, or monthly business review, those are backwards looking. They're looking at how did we do against our plan. The QBRs Or looking at forward. It's a strategy meeting. Given what's happening in the monthly, is our strategy right with it? So, you have those meetings baked in so people will come and you'll measure and monitor what's happening. It makes all the difference in the world off of it. And then finally, the crucible is that before you go deliver your plan to the board, you want to make sure someone's looking at it. Someone like myself, Tullio. Someone like Jeremy on here, right? Is to make sure that someone is going through and asking you the tough questions before you get in front of your board and you're not prepared off of it. So the operating rhythm is having a calendar, everyone's on it, you're looking for it. I choose week 3. Here's why. The first week we're just trying to close the month, get the numbers. Week 2, you have chance to study them numbers, understand what happened and why. Anyone can report the news. It's the Insight. Week three, you can talk about it. Now, here's what I'm gonna do. Here's my countermeasures. Week four, you got to get ready to close the month. So the week three is the best one. If you schedule all these meetings in there, that's the week they don't travel, right? That's the week they can stay wherever they're after working out of their home, they're working out of their office. Week three is the best one for me. You can decide what works for you. So you're getting ready to go show your board. You're going to show them the CEO mandate, right? You're going to show them this is the board. Mandate that we put together. And there's 2 ways to show up here, right? So the first way is you can do all this yourself. And it honestly, the plans I've seen out of CEOs that did themselves, they were actually outstanding plans. The problem is they couldn't get anyone to buy in. Nobody understood it and they didn't follow it. So without going through a program to help you get ready for it, working with someone outside of your company, working with the people inside of your company, You're gonna show up with this in your head and you're gonna be defending it. But by going through and having someone ask you the tough questions, this is how you have command of it. You understand they're gonna ask you questions you're not prepared for. I do this before every board meeting. I get myself, my CFO, my strategy leader, you know, my operators in the room. I go, all right, what kind of questions are we gonna get asked? What— and we have a lender call. What kind of questions are they gonna ask? We have a lender call every month. Updating them exactly where we are in our journey. There's a lot of money riding on this, so it allows you to go back to those four things and avoid surprises. And if you need to make corrections since people are owning it, it's really it's never easy, but it's it's it's never simple, but it's pretty easy to keep going because you're making small changes as you go. This is a super important point off of this. Okay, at the end of day one hundred, so you came in, you're at day zero now. I'm not sure what to go do. I need a plan. We will help you get that plan. We get you to day one. That's the day when you're starting. And over the course of the next 100 days, these next 12 weeks, you're going to be every week having a deliverable that you've got to go do. You're going to wind up at the end with a signed board document. Now, are you really going to get it signed? Up to you. The board will sign it, but you want to make sure that you've built the plan Showing the board before you get to that meeting. Hey, you told me what it is. I signed the contract. Is this really the number? This is what happens. Did I misunderstand this? Is this great? You'll be shocked at how powerful that is talking to you and your chairman or you and your board members, whoever they may be, on it. Same thing with your team. This is what I understand. You said you could deliver nine points of growth. I'm looking at your plan and we're going backwards. How are we going to get there? You've got to make sure. That people are aligned. You put it down; they can do it. Then you need a bridge that gets you from there with those five levers. Don't put the market on there. You can have the market. The market's just going to tell what you think's going to happen. Whatever it is, it's going to be different than what you put down. But what are you doing in pricing? What about what are you doing in cost out? Your purchasing? What are the initiatives? And you can say I've got a purchasing initiative, but if you can't articulate it, you don't have a purchasing initiative. You can say you've got deals you're looking at, but if you don't have a pipeline full of them, then you don't really have it. It's wish list. Right? It's one thing to put a— here's my list of 50 targets. Have you talked to any of them? The answer would probably be no. Or have you talked so much to them you haven't got the operating capability going? So you have all of that. You've got your monthly MBR. Some people call them MORs, doesn't really matter. Monthly operating reviews, monthly business reviews. You have been running it and you've ran it at least once against it with the people on there who own the initiatives, going to be delivering it. It's super important you do that. Then you've got your board deck. Now, there's different theories around the board deck. I like my board deck to not be particularly pretty. The reason is I'm an operator. I'm not a consultant who's selling these things. I'm going to show up and I need absolutely truth and transparency. And my style is I want to be cautiously optimistic. I want to say, this is not going well. Here's what we're doing about it with clarity, with real action items, with names and times and what we're going to get when we get there. And then I want them to fully understand that. And I'm going to talk to them offline to make sure I've answered those questions so these board meetings are straightforward with it, right? So I show up, they've already seen it, it's already done, they are happy. I do the same thing with the team. I talk to them regularly, both in a group and individually, so we're all aligned. It takes— you go from these big whipsaw changes where things aren't working to small incremental changes. And you will have small changes with Okay, so what is our program that we're here to, uh, to, uh, talk about? The things that we can help you with. And, you know, whether you work with us or someone else, you're all here for a reason. This is the way our program works out, right? We call it the Command 100. That's 100 days. In 100 days, we will take you where you are, which is day 0 today. We will immediately get you to day 1. This is the plan that we're going to go through to do it. It is laid out with training, with weekly meetings and everything else. You and your team working through this. This is critical with it. Getting you ready, helping you be ready to talk not only to your board but to the team, to be that translator between it. The first 14 days, you're going to get that number. You're going to make sure that number is right. You're going to pull the deck. If you are in private equity, you're going to pull that out, and it's going to be clear about exactly what's happening and where's going on on this thing. The second thing, days 15 through 45, getting the strategy. Like, how can I get a strategy in 30 days. Actually, you won't even need 30 days because you already have an operating company. It already is in doing something. So if you are in manufacturing of industrial switches, you don't need to go out and study the restaurant market. You don't need to go out and study what's happening in other places. You need to make sure you are getting depth and breadth into where you are. So it's putting the rigor around what you're already doing and deciding where are you going to focus. The problem for most of us is Not that. The problem is we have too many focus areas. It's getting it down. We're going to run the math, help you do it. So 14 days, you got a number. I am going from X to Y. I know what it is. I own the gap. Days 15 to 45, I need a strategy to deliver that gap. That's what we're here for. It's how you're going to get paid. All right, 46 to 70 is the structure. How do I organize my company in order to do it? Now here's the key point. You're not doing this by yourself. You're doing it with your team. We will show you how to do it. We'll give you all the documents, all the training, but it's you and your team coming together to go out there and actually do it. If you're a solopreneur, still got to do the same thing. You are the team. If you're running a billion-dollar company like Tulio and I are, then guess what? Then you're going to have a bigger team, but you have to show up in that meeting and guide them to getting there, not force them. We're not the military. It's like Command and control, and you're gonna do it my way. No, no, it's getting buy-in so that when you're not in the room, they're still on board because it's their plan. And then 71-200, that's the cadence. That's getting aligned with it. So our program, the way it runs is it's 12 meet— it's 12 90-minute meetings every week. We're having one, uh, they're on Tuesday. Sometimes we change it and things like that. Uh, there is, uh, in this case with, uh, We're getting to the end of the year, so you got Thanksgiving and Christmas. All those things are taken into account, so it puts you into mid-January. By the time you get to January, which sounds like a long ways away, it's 90 days until Christmas. If you haven't got your wife or your husband to Christmas, you better get on it because your kids are going to be disappointed. She's not going to be happy. So I highly recommend you do that. So it takes all that into consideration. You have private ones-on-ones with me. It's myself, Tulio, us. We got a whole team that'll help you go through this. But you're gonna own it. There's templates in there, you fill them out. Do you need to use our templates? Of course not. You can use whatever you want. The deck you build should be the deck that your board expects you to build, uh, not, not using my template. But we do have all that for you. So the next cohort begins, uh, the first of, uh, uh, uh, cohort number 1 begins October 6th, uh, and the second one is in January. So we run these once a quarter. We only take 10 CEOs per course. That's all we can handle. And we're all in it together, so there's no one competing against anyone, and it's everyone doing the same thing. Um, okay, we got a— we got a question from Moses. My industry does not have material costs. We are a contracting service. Would make our material cost be equipment purchase and material cost? I'm a bit confused how to factor in employment costs of percentage of revenue. Okay, that's a great question. You're a service business, right? So the services you're providing is You're doing, uh, in this case building something or engineering. You use that service. So you look at what it is because today you're pricing it somehow off of that. So you use that with it. It will skew your cost. It will make your labor costs seem higher. That's perfectly fine. And so instead of you being great at 2.5 in average, you might be great at 1.5. I have in one of my businesses, we have 1,000 service contracts. We do Uh, pumps and compressor services all over the country. And so when we're at a 1.5, we're doing really well because all our cost is labor. So you're really using it, looking at the material piece going in there. The other thing, Moses, you want to do is your answer— the thing that gets you there is you need to sell subscriptions. So if you're in there doing contracting, the service work that goes behind it, if there is any— there's not, could you look at it? Otherwise, it's a project business. And if it's a project business, we look at that differently. So we can handle all of that. Point being is we have those types of businesses. It works the same in all of it, but the numbers are slightly different, uh, with it. So if you can cost your jobs today, and I'm sure you are because otherwise you wouldn't be in business, we'll use that same costing structure with it, right? We just try to get the noise out of it and think of it from a contribution margin, uh, which is, uh, uh, uh, you know, without putting all the SG&A stuff in We try to get that SG&A piece out. Hopefully that that worked, Moses. Let let let me uh let me know if it didn't. So that's the Command 100 program that we have. Where is four sections that we go through that people that work with us over time really seem to enjoy? So the first one is getting command and control of your business in 100 days. This is the piece that saves your job. This is how you avoid being in the 70%. It's not because you're not capable of doing these things. It is because you haven't got a plan that can be articulated. Now, maybe you own the business. Maybe, Moses, this is your business. You can do whatever you want. But no matter if you've been in the chair for actually day 1 or you've been in there and this is year 15, once you have a plan, think of that as your day 1. In 100 days, you want everybody organized around what you're doing. And in this case, you're a service company or a contracting company. And you need to organize with it. We work with tons of them, so we have great case studies. Once you get the business ready, so you're sitting on the other side of that 100 days, you now need to go grow it. As I said earlier, growing a business that's in chaos only invites more chaos, and the customers will leave you if you don't take care of them. They will leave you. Now you're growing, you're past that, you're past your first year, you want to scale. You're going to double down on what's working. You're doing the flywheel. You've exited things that are not working, you're redeploying your capital in that, that's gonna get you through the next year. The final year, you are preparing yourself to exit. Now, are you gonna exit at $1,000? Probably not. We already know that the average hold period is 7 years, sometimes quicker, sometimes longer, but that's your average. Somewhere in that 3 or 4 or 5th year, companies are getting ready to exit. You cannot solve your issues In the 100 days when you hire the banker, you know, you're getting ready to go, you're gonna— 6 months out, you're gonna say, okay, I'm ready to go. You hire a banker, he gets you ready, he does the same. They're just going to polish it. I have seen companies that have the best deck, the absolute perfect data room and all that, but it's all theater. They don't have succession plans. It's all on the owner. Their costing is out of control. They can't explain what they're doing. You can't fix that in that last year. You must fix all this in that first 1,000 days so it has time to soak in, become part of the culture. So it's real because they're going to look back at whatever it's been and say, do you have good quality revenue? So you may have did 10 times more revenue, but is it junk revenue? Is it repeatable revenue? Do you have contracts? Are they on a subscription? Is it a one-time thing? Were the margins bad? How much did you get add back on it? What are you carrying in add backs? So all that first 3-year program is really to get you so you can run a really real company. You should run the company like you're going to keep it forever because you'll do the right things and people will pay it for you. If you don't, it's just theater. You're just doing kabuki here and people will discount. They'll take a turn or 2 off of it if you're too important. Uh, okay, most of them project-based contracts paid solely on production. It's timber harvesting, logging industry, long-term ownership, family business, secondary Perfect. We work with stuff like that already. We've got a business very similar that goes and does the, uh, re-upfitting around oil platforms. They come in, they have to win it and all that. Same idea. We just take your call structure and work with it. So you— it will be no problem at all, Moses. And that sounds like a really cool thing. I— the logging— so the country was built around that. So that's fantastic. So this gets you set to go and grow from it. You will have growth coming out of it. Our average piece coming out of this, that first year, we'll see about 30% profit improvement because you've taken action around pricing and all these other things. It's generally what you get in that first 100 days. You really start pulling that lever high. I hope that answered your question, Moe. If not, we can set up a call to chat. So what happens to real companies that work with us? We generally see about 350 bps, so basis points. And those of you don't think about that, it takes 100 basis points to equal 1%. And so if you tell someone, I want to grow your business by 5%, is that 5% or is that 5 percentage points? So am I going from 10% of EBITDA to 15%, or am I growing 10% by 5%, which is a very different number? So when we talk in basis points, it's just realizing 3.5 points of growth are going to go on there. That generally translates into about 30%, and the margin in it's about 4.5 to 4.2 percentage points over 6 months. So A $75 million service firm. And Moses, we work with primarily service firms and manufacturers and distributors. That's what we do, of people who have real products like trees. Like, this is a, a, a really, uh, a cool piece of it, uh, with it. So, hey Bill, go ahead.

A little, a little time check, uh, we are running— well, actually we are over time, and I know if people are available to continue, so I don't know if you want to wrap it up in the next 5 minutes.

Yeah, I apologize. We got started five minutes, so I think I only have two slides left. So here's what it is. So there's ten seats in our next class, October sixth. It's not for everyone. Happy to chat about it and walk through it, but there's only ten seats with it. You can take and come. You can build the number that you're afraid to say out loud. You can call me here. Take your phone, scan it. We can have a chat. I don't know if I can help you guys or not. I can't help everyone. I'll let you know in it if.