Growing Your Business With A Winning Culture With Scott Arias

Welcome back to the show. I'm your host, Phil Risher. And on today's episode, we're going to be discussing how to grow your business by building a winning culture with Dr. Scott Arias. Thanks so much for joining us today, Scott.

How you doing today, Phil?

Hey, good man. Thanks so much for coming on. So Dr. Scott Arias is the CEO of Ace Consulting, which is a company specializing in project scheduling, construction administration, staffing, security and training services. His company's actually been recognized on Inc. 5000 the last three, three years for his high, highlighting his rapid growth. And today he's here to share all the secrets with us. So thanks so much again for coming on. Can you tell us a little bit, like, how did you even get into construction world, that kind of stuff?

Well, so I, I, I grew up in New Mexico, and my brother joined the Navy, you know, about four years prior to me. So I saw him come home with a new truck every six months. So I thought, you know, there's something to that. So I joined the service and I just happened just lucky enough to go into the seabees, which is the Naval Construction Force.

Yeah.

So that kind of led me into construction and then, you know, kind of fit me really well. I did that growing up, too, so it, you know, really fit me well. And ultimately that's kind of laid the path for my career.

Wow. Okay, Very cool. What part of New Mexico did you grow up in?

About 40 miles outside of Albuquerque, east of Albuquerque. So a small town called Moriarty.

Moriarty, okay. The Sandia Mountains.

Yes, yes.

I used to live in a school bus, actually, and I traveled around. And Albuquerque, New Mexico, is one of my, like, hidden gem states. I always tell people, like, New Mexico is beautiful. You just never know it because you don't really see it on stuff.

Well, it depends on what you define as beautiful. I love Kentucky with the green grass and the rolling hills and stuff. So, yeah, so I guess there's what you, what you see, the mountains, the.

Hiking, that kind of stuff is Gotcha.

Gotcha.

So, okay, so you went into CBs and then you were doing construction in the Navy, it sounds like. And then, and so how did you make the transition out of that? What did that look like into, like, commercial world?

So, you know, during my, while I was in the service, I had different duty stations. One of my duty stations was I was a Navy recruiter because when I came out of my first duty station, they had such a, they, they were, they were not meeting their goals and they needed to have more recruiters in the field. So I figured, you know, what the heck, it was one of the more difficult duties. And I got out there and figured out how difficult it actually was. And then. But I was fortunate because I eventually was awarded recruiter of the Year and station of the Year, and. And it kind of fit me well, and that kind of plays into kind of my business. So after I. After I left there, I did various different duty stations, and I ultimately medically retired from the Navy. And after that, I went to move to Chicago and I built US Embassies overseas for about three years. And then that led me to Kentucky to taking a position because that's. There was a lot of travel, I mean, going back and forth. We built embassies throughout Africa and places like that. And that's, you know, you got to fly all the way to Europe and then you got to fly down to Africa. So. So after three years, that got kind of old. So then we. We wanted to move somewhere different than Chicago. So we found. I just happened to get a call randomly from a company and Lexington, Kentucky, and it was the oldest design construction firm in the United States. So I took that position, did that for about three years. And then ultimately that led me into wanting to start my own business. And just. Just so happens that the Eastern Kentucky University offered me a position during that same time frame. So I figured, what the heck, you know, I have summers off, I could do this. So I figured, what the heck, we'll try this. So it started with me the first year and the 7,000 revenue the first year. And then fast forward to last year, that was 2008. And then fast forward to last year, and we did a little over $25 million. So grew from me to about 237 people.

Wow, man.

So awesome. So very, very fortunate. Right place, right time, and the. In the. The way the company is set up, it's. It's set up based off a lot of my experiences. You know, project administration, because I taught scheduling, and I did a lot of scheduling when I was in service, plus I was in the military. So that was a sector that. That we were involved with. Recruiting, because my recruiting background, training, because I. Todd is a professor, and then security, because when I built embassies, I saw a need there and, you know, so kind of follows the lifestyle. Everything kind of centers around construction, but that's kind of kind of what led me here.

Wow, man, amazing story. 7 7k to 25 million. What a crazy story.

It is a crazy story. Sometimes I look back and I just think to myself, this is just a wild ride, you know, but, but you know, to be fair here we just talk about, did I get here by accident? No, it was intentional because there's a lot of tensionality about going about it. So you just don't wake up one morning and be like, oh, it's a 25 million company. You know, it doesn't happen that way. So. But it is amazing. As you know, we're Christian based company and it is amazing what God has done with the resources that he's. He's provided me.

Yeah, you didn't, you didn't go and hide your talents, you went and multiplied them. So that's a testament to getting after it. So good job as far as your services go. Like the staffing stuff, project training, security service, all this kind of stuff. So our audience is 1 to 10 million home service type businesses. Where do they like what is the issue that you see that those things like where's your expertise fall that helps those companies? Like is it on a staffing side? Like they don't hire, right. They don't have good culture, Is it on the, the training? I mean, I'm sure there's. Yes, all of them, but is there one in particular that you're like, hey, this is usually where they, they need help.

Well, staffing is largest section of our company and obviously talent is tough no matter if you have. I heard an unemployment read this morning was little over 4% and you know, they say less than 5% of unemployment is full employment. You know, because you do have 5% of the society out there that just doesn't want to work. Right. So, so, you know, staffing is always a constant issue with people. I will say this is, you know, it works in some environments, it doesn't work in others. Fortunate from construction and a lot of services businesses in general, the employees are, you know, or transitory, you know, so they ride a wave of, you know, say construction projects in a specific area and then they move on to something to keep them in that area or maybe type of, type of construction project. And so that's where we kind of come into play because I always say we're like the largest general contractor in the world because we have all the staff that has all this experience and they're not, they're willing to come to do a project, but they're very high level. Nobody could really hire them because they can't retain them, you know, and then our staff is a little older and more seasoned and by, and when you get a little older and a Little more seasoned, you want some benefits. And one of the benefits a lot of people want is they want to be able to stay in certain place, you know, so. So we offer our. We offer all our. Our guys and gals, you know, regional presence, because obviously with construction, you got to be understanding, you know, travel is part of the game a little bit, you know.

Oh, yeah, for sure. So one of the things I wanted to highlight there was the issue a lot of times is retaining them. And in. In our, you know, home service space, like, yeah, you get great people on board. But then that retainment piece, usually, you know, you don't do one to ones they don't have goals. They get to the year and they're like, hey, boss, I need a raise. And it's just like, that is the. And then they leave and they go start their own thing or go to somewhere else, and it's that whole retainment piece. So what are some things that you would recommend or that you've seen implemented in the business that you're like, okay, this is how I retain great, great talent. Help them scale my business, even at that.

Well, before I go there, I'll just simply say that it doesn't matter how talented you are, you will never get to 25 million by yourself, you know, so you have to realize you have to have people and only have to have people. You have to have good people. And the funny thing is, is that I don't know if you know much about the Netflix model, but Netflix has a culture model which is kind of famous or infamous, depending on how you look at it. And they do things a little bit different, you know, and one of the things is they. They say they hire fully formed adults. And what does that mean? That means we don't make stupid rules. You know, we don't. We don't make rules that, that we just know, you know, that here's, you know, and here's an important one here. You know, we have our culture. Part of our culture is we have unlimited pto. I like saying we have no pto. And that doesn't mean we have any pto. That means just listen. We don't have a policy. Our policy on PTO is we have no policy. You know, so. And many companies look at that and say, well, I couldn't do that. Well, you can do it if you have fully formed adults, people that understand I can't take two months off this year or I'm busy right now, so maybe I have to put some of my own life on hold or I need to work around my schedule. You know, construction very busy during spring, summer kind of tailing off during fall. But winter is really where we take take a break normally. So you plan your life accordingly to that, you know, so. But, you know, that's a, that's a good example of a culture item that is really important to me. And Netflix as a model in general, is a great model of doing things. Like when I say about fully formed adults, they don't make all the stupid rules. All the things like, hey, don't take somebody's food out of the fridge. Well, why do we have a stupid rule for that? You should know that you don't take something with somebody else's name on it unless it's your brother or something, you know, so. But, but we have a lot of, lot of those culture type items.

Yeah, I think for a lot of people, when you don't cultivate the culture with, with adults, you're just bringing people in and saying, oh, this is a warm body. You know, they can fog a mirror and you stick them in and then you, you know, they call out the next day, oh, well, we have unlimited pto. And they just call out and leave you high and dry. Those are not people that are taking responsibility of the actual work that they're doing. And they might not even have some performance pay or some. Something in it. And those are not the people that you're referring to. So you kind of got to get the right people in order to have the right culture that you want in place. It sounds like.

Yes. And, you know, people from EOS will hear me preach this, but, you know, you got to get the right people on the bus. Right? So you got to find the right people and you got to get them on the right on the bus, but you also have to have them right seat, you know, and this is an interesting concept that I've learned through business for all your US people is you can have the right person on the bus, but have them in the wrong seat, and that's your fault as leadership. Right. So you got to make sure that if they fail, you can put them in a seat where they can be successful. You know, I think that's an obligation, especially as a small business owner. We have an obligation. You know, I don't say that we're quote unquote, like family, because family means unconditional love. And sometimes there's a condition, you know, and, and I always like to refer to us as a tribe, you know, and that's. It's a meritocracy you know, you earn your right here, you know, so. But that's kind of. That's kind of what. What I, you know, refer to when I won. I think of culture items and I think of how do you grow an organization? And it's really through good people. No matter if you sell product, a widget, or you sell people, and we sell both, you know, but you can't do it successfully unless you got some really good products. Really good people.

Yeah. So let's talk a little bit about this, the operations. I think so for EOs. Do you run on EOS or.

I do. I do.

So when did you start implementing that? Was it when you got over 10 million, or was it, hey, we need some systems and process in place before then? Or what did that look like?

So in 2017, and I didn't allude to this, but I taught for a decade at Eastern Stack University doing construction management. And when I. To take the next step in my business, I either had to do one or two things. Either I had to throttle back or take on more. So I just chose to. I was tenure professor, so I could retire. At that point, I just retired up to 10 years. And then so in 2017, you know, is when I. When I actually went through that, I give them a year's notice. 2018, we implemented EOS, and. And we've kind of been on it ever since. I won't say we were fully implemented 2018, because I don't. I don't ever think you're fully implemented, you know, but we have. We have. We're like, I'd have to say 98% there right now currently. So it's ingrained in our culture. You actually see behind me, I actually have all of our, you know, our culture items there, our core values, that type of things, and it's. It's very integral to everything we do.

Yeah, I love it. So a lot of homesteaders, business owners, like, they want to scale, but they don't trust their team to operate without them. And I think that's a really big thing. Kind of what you're talking about. Like, you want to go all in, but then you have to have the right team, I guess. So how did you transition? Like, were you. Since you were doing this, you were a professor, were you working in the business, like, running the business, and then you started to bring team members on, or how did you, like, trust them, you know, to do a good job?

Well, you know, I was very fortunate because my first few employees were former students of mine So I had a chance to do a four year interview. So, so that's, that was very helpful. But it was also, you know, my, my very first employee was the person that is the president of my company and he will take over as a CEO when my work, when we transfer over to esop. He, he was just one of my first student, was a non traditional student, was in the military and he had all the, he, you know, being me was, I was former military. We had a lot of similarities but we were also a lot different. You know, our personalities were a lot different. The way we went about decision making was different. And so you know, I, I, I had that fortunate aspect but you also got to, you know, you never fine tune it as. I mean I remember Steve Jobs talking about how we hired professional management in his company and then you realized they didn't know jack. Well, you know, the thing is that you figure out what you need to hire. What are some things that are important. We, we don't care necessarily about the, your experiences doing what we do. What we care about is that you have some of the core beliefs that we do, you know, you believe in. You know, we have three core values. One is do the right thing. Second one is with extreme urgency. And the last is be the gold standard. So we call it the, we call it rug, you know, and as an acronym and we give every quarter, we give medals for those, each of those core values. You know, we, we hire, fire and promote as the OS preaches based on those core values. And that's what I care about. I care that you're going to go do the right thing. Do I care how much you know about scheduling? No, I'm going to teach you that. Do I care how much you know about staffing? No, we're going to teach you that it matters. Those, those intangibles. And if you look around a business, you'll find that those are probably the most difficult for any business owner.

Yeah, absolutely. Inside of eos they have this GWC which I think for any business owner, if you think of this, it's the, do they get it? Do they want it? Can they do it? And when you think about team members and you're frustrated with them or they're not doing something, or something's off. It's like if you go back to the gwc, do they get it? Do they want it? Can they do it? It will help you figure out, okay, is there a missing piece of this or is there something bigger going on that then you can evaluate what's actually, you know, what they're doing and how you can support them.

And with gwc, I always say, if you have two of the three, we can work with you. But if you only have one of the three, I'm sorry, but there's no path for you to go. If you have all three, you'll be a superstar.

Yeah.

You know, so, you know, so that, that has played out well for us, I'd have to say. And that's, you know, finding people, highly competent people you can trust that are loyal, that are hardworking is a tough thing. And. And like I said, I had the fortunate aspect of knowing people. And when you know people, it's much easier. And I'm sure a lot of small business, we know somebody know of a friend or know somebody that we can help or somebody that we can bring in and offer them a big opportunity.

Exactly. Yeah. My business was the exact same way. Hey, I worked with this person before. I know they do good work. Like they're going to crush it here, so.

Absolutely.

That's just. Yeah. Naturally how it is. And I think good people attract good people. Like when people know that you're going to do the right thing by them and you show them a path to actually growth, it's like, oh, my gosh, where have you been all my life? I want to work here. Because you actually see it's not about you, it's about the person. Like, it's not about the.

Exactly. And so few people get that.

I know. Yeah. I interview Mike Michalowicz from Profit first, and he recently read this book called All In. And it's like, your employees won't go all in on your company until you go all in on them. And that shift was so monumental because it's like, I need them to know that I'm all in on them. Like, I. It's all on the table. My heart is all on my sleeve. My pocketbook's out there and people get it.

So.

Yeah, I love that. I also read that you're doing some AI scheduling. Erp. Something like this. Is this.

Yeah, we do. So we have what they call AI assisted scheduling. And it's just a matter of. Of, you know, scheduling in the world of technology has changed dramatically. It's become far more complex. So it's taken. The problem we have is that we have, you know, you have experience and then you have education. Right. So the software is all about the education. Right. Learning how to use it, whatever. But if you don't, if you never built a building before and you don't have. And it doesn't matter if it's a building. It could be anything. Whatever you do, if you've never done that before, the chances of you being successful are very slim. You have to understand the nuts and bolts of your business. And that's why I still tell people I was fortunate, because I didn't buy a big business. I grew up in a business. I did every job that we do in the business, including being the accountant, including the being the janitor. I did all those items and at one point in time didn't do them well, but apparently we did. I did them well enough to get where we are today.

That's right.

So finding out what you're not good at and then getting the people to help you in those, those areas is the key. And that's what I did. And I worried a lot less about my pocketbook. Many people who own small businesses worry constantly about every single dollar. We'll spend a hundred and eighty thousand this year strictly on professional development for our staff. So sending them to leadership, you know, leadership trainings like Vistage or Convene, sending to, you know, sending them to different organization groups to get training all those items. And when you talk about being all in, people care. When people care about you, when they know you care about them. It's real simple human logic. I mean, it really is if you've been married, you know that. Well, actually it is if you're married or you're, you're a father, you know, if you care about them, they'll care about themselves. No, that's just, but, but, but, but the truth is, is that people, when you care about people, it's, it's, you know, being a Christian organization, I always say it's countercultural because that's how Jesus Christ was. And that's what it is. It's countercultural. So people don't expect that.

Yeah, you're absolutely correct. You mentioned this esop. So I want to talk about this exit plan because people might not know what ESOP is or how to structure it or what, what happens. So, so first off, how did you come to the decision? Have, did you think like when you're scaling this business, like, oh, I'm going to sell it one day. Did you think, I'm just going to run this and give it to some, you know, pass it off in a legacy type of thing? But how do you come to that decision that you're going to exit the business business?

So in 2020, you know, I knew what, I knew what I needed to do to get out of the business. Right. And as far as like, you know, monetarily what that looked like. And I also knew in order to get where I needed to go, I needed to have, I needed to grow the company to a certain point. So in 2020 I decided we're going to go to an ESOP, an employee stock ownership plan. I did that for a few reasons. Number one, the tax benefit after I'm gone is huge for the company. And I shouldn't say that as number one because that wasn't the most important thing to me. But the most important thing to me is that the people that helped me build the business had an ownership stake in it after a period of time. It also was important to me that there are some central principles that the company always lives by. And one of them is, is we give 10%, everything we make to a Christian based charity and we're actually rolling into helping out Habitat because we do construction in our vision for a company where we're in the business of building the kingdom. So you know, I always say business because you have to have a successful business building because we do construction the kingdom because we're a Christian based organization. So, and I don't remember, remember where I was going with that entire thing, but I was going somewhere with that.

The ESA situation about how you came to that decision.

So, so the ESA. So then, so in 2020 I said, okay, I sat down with my wife, we just said, okay, we want to sell the business, we want to sell it to an employees. How can we figure out how to, how to do that? And so we decided we're going to do it. Then we fast forward to this past year and we formalized the esop. Yes, it takes that long to do all that stuff, right? And so right now we're in the stage where it doesn't turn over to a complete ESOP until 2030. But right now they're, they're, it's a matter of pre funding the ESOP with the, with the company's 401k contributions. And I say the companies, not the employees. What the company contributes to the 401k and that's pre funding it. And so the company will be able to live on without me. It'll be able to continue to do good things. And there's some basic principles I wanted to live by. And that is, you know, I don't want to, you know, not to put down venture capitalists in here or anything like that because there's a lot of private Equity, there's great private equity, but let's be real here, private equity, the job of private equity is to come in and drive out cost and make it a more profitable business. So. But that wasn't what I was about. The money was never what it was about to me. What it was about to me was to do something bigger than myself. Yeah. And, and I want to make sure that carried on with that without me. Plus it's also good to retain some really good talent and we have some very, very high level talent. I would have never been able to attract or retain without having the esop.

Yeah, the ESOP always is very curious to me because a lot of the companies that we work with, they, in 2020 they went to this, who this huge PE boom home service. We had a company that we helped go from 3 million to 8 million and sold to private equity and within two years they were out of business. And like it was, it had been running for 30 years before that or something. And then they come in and it's gone.

I'm like, yes.

And they didn't even care. They just sent out an email and we're like, hey, yeah, it's over, go call these people.

Use your own box to take your stuff home. You know. So, yeah, just crazy.

So with the esop, it sounds like, I'm not too familiar with it, but there's like you would have stocks, I guess, and then slowly the company would be buying them back from you using the 401k proceeds that you would maybe do a match with an employee or something like that. Is that what it kind of is, yeah.

So basically the way they're funding it from here to time I exit is pre funding with the employer's contribution for the 401k. And then after that point the bank will step in, they'll leverage the company's valuation to basically pay me out, let me exit. And then the employees have a certain vesting period and usually a vesting period.