Episode Transcript
[00:00:00] Speaker A: Welcome to the Independence by Design podcast where we discuss what it means to be a business owner and ways to get unstuck from the day to day so we can design a business that gives us a life of independence.
Today I've got Pete Walker on the show. He is from Canada and he is spearheading the employee ownership movement in Canada. He was referred to me from my dear friend Josh golden, who turned his company txi, which is a software development firm in Chicago, into an ESOP years ago. He's been on the podcast. I'll make sure to put that in the show notes below. Josh moved back to Canada. Pete and him have been talking for years and just the way that the world works. Pete's passion behind employee ownership is fantastic. I want him on the show because Pete's passion behind keeping companies in the community is palpable and I was super excited just to let him share his story about why he thinks it's so important that companies have the opportunity to transition and stay in the community and how that can help foster ongoing communities and then keep the money and the ownership where we all live. So I think you're going to love this conversation. It's not all about Canada, it's about just the spirit of employee ownership and why it's so important to at least think about it as a transition plan for your business. I'll put a link to the esop playlist on YouTube which I've got a ton of in depth previous episodes on the esop like the technical transaction and how it all works. So if you want to go check that out, look at the show notes. Otherwise just I think listening to Pete and understand like hey, what is the purpose of a business? How does it impact the community? And add that to your variables as you're thinking through what to do with your company long term. All right everybody, I hope you enjoy this podcast with Pete Pete. I'm super pumped to get caught up. Shout out to Josh Golden. You guys put he put me in touch with you and your passion for employee ownership.
Your non traditional path to this I think is going to be exciting for the listeners. Your background of the farm to then banking to then a big proponent of helping people on the employee ownership. So welcome. I know before like you even go down I I, I think it's so fascinating because both Marcel sent me a picture of you and me you were like referencing in my PowerPoint or something and then like Josh golden sent me a picture of you and I'm just like who would have known that I Have, like, all these cronies up in Canada and that we're all talking about employee ownership. And so, yeah, Marcel and Golden, such
[00:02:38] Speaker B: a fun Canadian that keeps referencing me.
[00:02:42] Speaker A: Yeah, man, super excited. Why don't you just give us the Cliff note for the listeners and then I'll be able to pull us down the rabbit holes.
[00:02:50] Speaker B: Good stuff. Yeah. Just really appreciate the chance to catch up. It's been great getting to know a little bit more about you and your work ever since Josh first introduced us last year.
Just love the different topics that you cover over the course of the different podcast episodes that you do. And looking forward to the chat over the next little bit. And now you're on this side. And now I'm on this side. I do have to ask, based on one of the previous recordings, you are recording right now, correct?
[00:03:15] Speaker A: Ah. Hey, thank you very much for that. I am. And we'll see if that you are one of the people that listen to your own podcast or not, because it's always interesting to see if the guests actually listen to themselves or not. So are you going to be one of those people?
[00:03:28] Speaker B: I will be. Although with trepidate. I don't know if it's like this for a lot of your other guests, but I hate listening to myself, I'll be honest. But I'm gonna. I'm gonna buckle down anyways.
[00:03:38] Speaker A: Yeah, you're gonna slide to this conversation. Very. There you go. Okay, so give us, you know, like, what we're your family, the farm, the whole story. Like, I'd love to hear the story arc and to. To land where we are today, and then we can figure out what are some of the different rabbit holes, because you got some really interesting things that I'm excited to catch up on for sure.
[00:03:57] Speaker B: So, yeah, a quick little primer on the story of me. So my name is Pete Walker, living in Toronto, Ontario, but I was born and raised on a potato and cattle farm in a community called St. George's Prince Edward island, which is a community of 90 people on the very east coast of Canada. So for any of your listeners out there who managed either to read themselves or are reading Anne of Green Gables to their kids when they're growing up. That's where I grew up. As I said, grew up in a potato cattle farm. My family's been on the same plot of land since the 1800s, and that's the decade, not the century.
So I can trace my roots back to when the first generation of my family emigrated from Scotland a very long time ago.
Currently in Act 3 of my career, there's kind of two halves in my brain. And I know this is one of the rabbit holes we'll explore, but with this third act of my career, there's two halves. There's business transition planning writ large. And again that's how do you normalize the conversation that business owners need to have just to figure out what they actually want to accomplish before they go and execute on their plan. And then the second half of my brain is very passionate advocate for employee ownership and all its forms here in Canada. You know, it's starting to evolve a lot more over the past couple years, especially when you look at the five decades of experience with ESOP models in the US and so I recently jumped into that as of about 18 months ago and that's currently what I'm up to now. I said that's act three of my career. Act two, I was at one of the big five banks here in Canada for 14 years.
Act one of my career was kind of the Canadian version of being an advisor to a cabinet secretary in the U.S. and so the portfolio for the minister that I supported in Canada was for economic development in my home region of Atlanta, Canada. There's two things I always saw in that first 20 years of my career thing. One is capital very rarely flows east of Montreal in Canada. And the second thing that I found is that even more rarely does that capital flow to the non urban parts of Canada. And so again I just always encountered that and applying those learnings as well to my third act. From an education standpoint, as I said, grew up on the farm, went to the US for school undergrad at Yale, came back to Canada after that, and then I did my MBA at a western university here in Canada as well.
You know, I think a lot of my story has to do with starting in a very small place, obviously like 90 people in my hometown.
[00:06:10] Speaker A: How many people are of that? 90 or your family?
[00:06:14] Speaker B: Cousins would be like half.
[00:06:15] Speaker A: That's kind of what I. Yeah, that's
[00:06:17] Speaker B: clearly you are careful out of the community to date, et cetera.
And yeah, so you know, by Prince, Rhode island standards, I grew up in the boonies and I always took a lot of pride in that. But for a long time, even when I was growing up, before I left home, having grown up out in the country, smallest province in Canada, like there was always a little bit of imposter syndrome, especially when I was first leaving know to go to school in the us Took a long time to sort of figure out my way through and around the world. But, you know, especially when I really found out why I got in to, to college, that kind of changed everything for me because I got to know the admissions officer who let me in and, you know, if you can think about some small farm kid getting let into a place like, place like Yale, I got to know him and he. It was like just one day my junior year, he's like, do you want to know how you get in? I was like, if you don't mind.
So he's like, your scores are great, but you look like a few other thousand people that applied. We could tell through your interviews and your essay that you wrote that you had a really strong connection to your community and community values and the importance of contributing to community around you. And we wanted you to bring that to our community. I was like, whoa. And so all the things that I grew up with thinking were like huge impediments to success was the reason why I was being successful in the first place. And so that just completely changed my frame of reference in terms of what are the types of leaders that I want to work for, what are the types of companies that I want to be a part of, what are the types of communities I want to find myself around? Because it was just a really life altering conversation to find out that those types of things aren't hindrances, but actually be viewed as strengths for people that see them as important. And so that's just something I've always tried to take with me as I go.
[00:08:03] Speaker A: How does, how does that lens or reframing impact your. How has that stayed consistent through your decision making with your three acts that you've framed it up as?
[00:08:14] Speaker B: You can draw a straight line to every career decision I've ever made. Back to that. And so if you look at, you know, like 20 some years ago now I came back to Canada, you know, that first act I was working in, really in politics, but, you know, government in the public service. Right. And specifically the. The person that I worked for was doing economic development for, call it from an economic standpoint, an underappreciated part of Canada.
And so, you know, again, just that idea of community service giving back to those around you, that was that aligned really strongly with just things that were important in how I was raised.
You look at the school that I picked for grad school, London, Ontario, awesome town, college town, and it's not the Toronto or the Montreal of Canada.
And so when you go to the program that I went to, everybody's there. You're part of the community for the year that you do that program, the bank that I worked at, TD bank here in Canada, again, the leaders that raised me and the culture of not only what it meant to work there, but also to be successful there it was, you look after your employees, you look after your customers, and you contribute to the community around you. And all the shareholder returns will follow. Right. Like, there was just a lot of people who, in a very authentic sense, that's how they led and that's how they encouraged other people to become leaders underneath them. And now kind of fast forward to this third act that I'm in. Again, it's the exact same thing, right?
Especially when you look at the, like the generational transition of private business ownership. I know it's the same in the US Same as it is here in Canada.
As you go through that generational transition of private business ownership.
In my view, it would be an absolute crying shame if at the end of the transition we had a lot of smaller communities across both of our countries lose the anchor employers in which those businesses operate. It can run the gamut from huge manufacturing centers that employ a lot of people. It can be the gas station or the corner store. In a rural community like where I grew up, in a lot of cases, it can be an anchor employer, it can be an anchor meeting spot. It's just there are so many great communities across the continent, really, that's why I have a soft spot in my heart for where I grew up in Atlantic Canada. And I just think the more we can normalize that conversation for business owners, the better prepared they will be whichever of the paths they choose. I just also think that as more business owners in Canada learn what the different employee ownership options are, they'll resonate with them and more people will choose that path.
[00:10:51] Speaker A: What is your definition?
Asked the question. Very fascinating frame of reference. Because community employee ownership, I've got like, I'm not shocking that that's where we're going to go with this, but I, I like the thread between all of the different things that you've been doing.
So question about your definition of community. Like what. Why is it like, what is your definition of a community? And then like, how does that.
Yeah, let's start there.
[00:11:22] Speaker B: That's a great question.
So I like to keep my options open when I'm defining things. So you lock this in once.
[00:11:32] Speaker A: This is the only time you get to ever define this. And we're going to lock it in. I'm going to repost this every time
[00:11:36] Speaker B: you contradict it for the next 45 years.
I would define a community at its most basic level as, you know, just a group of people with a shared sense of place and a shared sense of values, working together for the benefit of everyone in that community.
I like it. That's really easy to do. You might not have to change it.
Well, I'm glad you're recording now. A lot of that is rooted in, again, my own personal experience where I grew up.
You know, those types of things are really easy to do when you know you're related to half the people within a five minute drive of you, the local church is a mile up the road kind of thing. It's one of the reasons why I've enjoyed the experiences I've had so much. Like I mentioned, the different career acts and the different schools I've been to, every single one of those organizations and schools had some form of community ethos to what made them tick culturally.
[00:12:46] Speaker A: Tell me how you see that definition of community and when you see a community thriving, what does a thriving community look like versus not?
[00:12:59] Speaker B: I think there's again, big picture. There's two components. One's the economic and one's the social.
And from an economic standpoint, you know, talking about gainful employment, that obviously not each community is going to be the provider of their own services, but services are available.
And more importantly, there's a sense of promise for the future.
Like one of the components of how I grew up.
This is back in the mid-90s. If you look at my friends who stayed home on pei, predominantly they're teachers, lawyers, healthcare professionals, tons of opportunity and you can have a great life. Thirty years ago, I ended up working at a bank. My little brother's an engineer. We had to leave the island because there wasn't much opportunity to do that. And so especially from an economic standpoint, if you can see that sense of future opportunity, regardless of your chosen profession, that's, I think, a big part of the economic sense, which I believe also bleeds into that social component because the more cohesion you can have on that economic side, then the stronger foundation you have for some of that social cohesion on the social side. And so again, just that ethos of looking out for your neighbor, being open to letting people help you, let your neighbor help you at the same time. I know that can be hard for some people, but again, when you just are part of a community, you know that everybody's got each other back. That can be very powerful from a social sense.
[00:14:29] Speaker A: Super fascinating. I like how you frame that up. So I'll give you my, my thought of why I think this is very fascinating, important for ESAPs. And then I want your, I want to hear your reaction to it. Because what I found fascinating about our first conversation is, you know, not shocking because you're close with Josh, like, big picture, like you, you know, you even opened up with like the words of capital flows. Like, so you're thinking about demographics, capital flows, big trends. I am curious on where that, how that mindset was developed or how you have that, because I think that's what I want your reaction to is that lens that you're bringing at it is because this definition of community. And I think it's very interesting, Pete, because I just actually was sitting down with a guy that, who went through my program, sold this company and he's actually writing a book called the Unbundling.
And it's really fascinating about the unbundling of the family unit and community.
And naturally I was like, well, that's because the financialization of America and the decoupling of sound money. And then he's like, okay.
But it's a fascinating frame of reference to say, well, there's a massive problem where we've unbundled what was very cherished for a long time.
And ESOPs have a unique way of fitting into this. I'm going to use Mike Spacs. Unbundling is like, fascinating way of putting this.
And I think it's important because that.
What's your reaction to that? I just want to. I'll stop there because I think it's. Yeah, there's a lot there.
[00:16:08] Speaker B: Yeah. And whether you're looking at the, I mean, pick a country.
America, Canada, Europe. You can probably make that argument in a lot of different places across the globe.
And I'd say one of the reasons why I'm as focused as I am on the employee ownership side of the fence for the solution in which I look to gain expertise.
Because again, if you step back, as you well know, there's a lot of different ways that as a business owner, in terms of the path that you choose to transition your business, there's a number of different ways you can do that to keep it locally owned, operated and thriving in the community.
Right. Like you can keep it in the family, you can sell your employees, you can form a worker co op.
You can probably make an argument on search fund or entrepreneurship through acquisition deals. There's lots of different ways where you can keep it locally owned and operated. Selling to a third party or private equity firm could also achieve that outcome.
But as you go back to your earlier comment on unbundling, probably less likely that that'll be the outcome if you go down that path. It's possible, but one never knows.
And so that's where I just keep getting so anchored on that. How do you keep it locally owned, operated and thriving in the community after it's gone? Or, sorry, after the existing business owners moved on? Because again, that's just where I think, especially when you look at the non urban parts of at least Canada capital is concentrated outside of the boonies where I grew up.
And when you further go down and talk a little bit about what are the types of things that will make someone feel confident that they can stay in their community and envision a prosperous future for themselves, ownership is one of the big ways you can do that. And so as I look back to where I grew up, and not just my little hometown, but just even the province that I grew up in, there's 100, and now there's 180,000 people living on Prince, Rhode Island. It's a small spot. And there are so few opportunities where someone can actually own a company or even own a slice of the company they work at.
Right. Like, if you're just going and working hard and earning a paycheck, it is exceedingly unlikely that you're going to have enough cash lying around to buy a company or buy a slice of a company or finance a purchase of a company or anything like that.
And so whether it's the ESOP model in the U.S. whether it's the. Because again, there's like, there's ESOPs in Canada, there's Employee Ownership Trust in Canada, there's worker co ops in Canada.
All of those things provide people with a chance to just like, earn a great living and earn the spoils of the hard work that they do in an environment where they likely never would have had a chance to do so otherwise. And that's a great anchoring effect to kind of again, give give folks a sense that there's more economic promise in the future than they would have enjoyed otherwise.
Yeah.
[00:19:14] Speaker A: And I did a podcast probably about seven years ago called esops, the Purest form of Capitalism.
And admittedly it was a brilliant title and I probably had no idea why I titled that.
Now after seven years, I can like argue to the death why I actually believe what I said, because I didn't hear that one.
[00:19:36] Speaker B: What? What did you argue? I probably agree, but what did you.
[00:19:40] Speaker A: So Daniel Goldstein, I interviewed him. He's a. It's a, it's an ESAP. He's a. He's a big cat character in the ESAP community in the U.S. he ran Foliance, which was a ESAP holding company. They went from, like, the Cedar Rapids Gazette to, like, buying ambulance manufacturers. I mean, like, it's in the reason I titled that, because we were. That's what we were talking about.
But now I think I just have a better understanding of why he was arguing that. And it's like, when you spend your time. Because my wife works at an esab, when you spend your time instead of just trading your time for a salary, which effectively is slavery, like, you have the ability to earn the ownership, the economic benefit, the actual equity of the thing that you're building.
So instead of, like, literally, I mean, I, I mean, these are my words, not Josh Golden's, but like, he wanted to do an esop because as a professional services firm, someone sitting in the boardroom siphoning off all the money of other people's labor just didn't reconcile with his values.
And so it was like this way of saying, like, hey, okay, well, people are going to work and get money for a salary, but they also have the ability to own ownership in the thing that they're creating value in, keeps the money and the economics inside of that system.
[00:20:54] Speaker B: And that's what I keep. You know, you talk about Josh and the, you know, the values component.
I. When it comes to employee ownership, I actually think values are the cherry on top of a really solid economic business case. Right. Because again, I'm.
I'm part banker. I'm part former, you know.
[00:21:14] Speaker A: Well, you, you, you said economic and social. I mean, they're. They're one and they're.
[00:21:17] Speaker B: They're.
[00:21:17] Speaker A: They're both combined. Yeah, I like it.
[00:21:18] Speaker B: Exactly. And as I see sort of that investable business case from.
From an employee ownership standpoint, assuming you've got a strong leadership group, it gives you a better chance that you have a strong culture at your company.
So you got those two things going for you.
Once you combine an actual ownership stake, that's very powerful, but even that's not in and of itself sufficient. I would imagine that in your wife's example, if you can combine the ownership stake, plus actually teaching people how they can do something with it now that they have that ownership stake, how is it that you can do your day job and do it a little bit better?
[00:22:03] Speaker A: Connecting the dots to meaning, I mean, really.
[00:22:06] Speaker B: Right. But actually just like, supporting people on a human level through a major transformation and saying, now that you have this Stake and here's what we're going to do to teach you how to actually do something with it. That's where you get all those really fantastic financial results that have been studied through the US ESOP model, right? Like 8 to 12% more productive. That's going to make them more profitable. They're more resilient in downturns. They fire fewer people, they pay back their loans faster. People retire with whatever twice the amount of retirement wealth in their accounts.
And you bundle all of that up into what your reference Josh was saying earlier. From a legacy standpoint, I really like the idea that it's going to stay in the community and the people that help me build this thing are going to enjoy the spoils moving forward.
Just the continuity on top of the economics behind it. It's just like, why wouldn't you do this?
[00:23:00] Speaker A: Yeah. And agreed. And I want to put a comment there and then we can come back to it is I think it's the inability because people don't have sustainable, predictable, transferable cash flow where it meets their retirement goals. Where like with my father and I it was like Corey retires or he doesn't retire and if he retires, everyone gets fired and it becomes this effed up, like binary situation. That is the false choice. But like that is a very real choice. Especially as and I think this is why you're beating the drum is like the moment people get tired, good luck spending five years ERP systems and new products and services, putting in a financial model, hiring an executive team and like, dude, I told you I was tired. So there's that. The moment that I see people have no gas in the tank for the energy wise, it's like, oh shit, this is going to be a long slog. And then therefore it happens to be retirement versus everybody else. And so it's a.
[00:23:55] Speaker B: And that's where, you know, I mentioned there's those two halves of my brain. There's over here at the point of transition when someone's ready to move on.
How do you make sure that should they choose an employee ownership option, you know, the expertise is available, the capital is available to finance it all that sort of thing. A lot of what you're talking about and one of the reasons why I enjoy listening to the podcast so much and one of the reasons why I quote it as blind spot number two in my seven blind spots all entrepreneurs must know.
It's just that sense of like, no matter what designs you might have for the outcome, you want to drive over here.
It makes absolutely no difference. If the business owner in and of themselves can't come up with a confident path for what they want to choose. And this is where my political and banking sort of business management training comes into play.
We have to be obsessed with the customers here. And in my view, the customer in this whole thing is the existing business owner.
It's their decision, it's their life, it's their probably retirement fund and fundamentally their decision what they're going to do with the business when it moves on. And so the more we can obsess with just helping those folks understand and make a confident decision what they want to do, regardless of path that they choose, it'll be far more likely that things continue on their community. You mentioned your, you mentioned a number of times the transition path that you and your dad went through. So the business transition. The first conversation I ever had was with my dad as well. I was 14 years old and it was about the farm that I grew up on.
So the consulting firm that I've opened for myself as a sole practitioner, it's called Bolton Riverview Consulting. And that's a nod to Bolton Riverview Farms, which is where I grew up on the island.
As I said, we've been there for generations. We were pushing 200 years on the same plot of land when dad sat my little brother and I down at the kitchen table. I was 14 years old.
We had a one sentence conversation.
So you imagine all the conversations you and your dad had trying to figure out what you're going to do with your family business.
Our conversation was one sentence. He said, I don't know what the two of you are doing with your lives, but you're not doing this.
That was the talk.
[00:26:07] Speaker A: Thanks. Thanks for the combo, dad.
[00:26:10] Speaker B: Right Now I was 14 and I was like, I took yes for an answer because I didn't want to do it. But if you look at like the context of how that conversation came to be, you know, it was two really bad summers of disease in the potato crops. And so as a 14 year old I was pulling 16 hour days of my dad just spraying the ever living shit out of our crops to keep the disease away, out the door. 330.
[00:26:37] Speaker A: How many acres?
What was the size?
[00:26:40] Speaker B: We were 100 acre family farm and about 100 head of cattle. So one of the reasons why I have that painting there over my shoulder, my wife and I found that at a, at a craft shop in Stowe, Vermont on a ski trip. And that's the exact type of Hereford cattle that we had in the Farm. And I was looking at, awesome. We kind of have to buy that, like, cows we had growing up. And she's like, okay, yeah, we had the farm. And dad dropped the decision.
And he could just see that over time, at some point, with consolidation and agriculture, 100 acre operation just wasn't going to work anymore. And the one thing that dad knew was, we're not losing this land. And so he made the decision that he was going to operate the farm as long as he could, but he was going to wind it down while he could, and he was going to be the last generation of our family to run the farm.
That lasted for 10 years.
So dad operated for another 10 years, wound it down quarterly. So we still have the land, and mom and dad are still there, and we still have the buildings, and dad leases the land out for local farmers in our crop rotation. But he stopped, right? And when you look at what happened when he stopped, 15 of our neighbors lost their seasonal employment. A whole bunch of local businesses lost a customer, like the feed service and the fuel company and all that sort of thing.
The tax base shrank by that tiny little bit in our corner of the province.
That's just a series of really crummy outcomes. And so when you compound the risk of what could happen as we go through this generational transition of business ownership in US And Canada, we have to figure out a way to help people avoid that outcome, regardless of the community in which they find themselves, large or small.
[00:28:25] Speaker A: It's such a powerful example that I think is so real. Hopefully people can, like, visualize it with their company or their, their local companies that they're. Or their friends.
The private equity space is like this, like, sound of just hoovering up companies, and it's their access to capital. And by the way, I don't like. And I, I've. I've really struggled with this, Pete. Like, I don't.
I don't hate private equity. For instance, like my buddy Nick Bradley, I just did a podcast like, two weeks ago, the Private Equity Operating System.
[00:28:59] Speaker B: So I think I'm like, friends of mine, classmates of mine from school, awesome people.
[00:29:05] Speaker A: Well, because. Well, that's where all the money is. Like, that's where, like, yeah, if you want an actual job as an executive or a service provider, it's like, go to where the money's at. Well, they can raise really cheap capital through debt and equity. And then. But what happens is taking that example that you just gave and then rippling that through the US And Canada, and you go, this is a thing Right. Like we went from like 4,000 PE firms to 18,000 in the last 11 years or something like that. And the ownership decision. So let's talk about, like, your. With your experience as a banker and like your understanding of finance, too, which is fascinating. And I love how you said, you know, there's, there's two things. There's the economic part and then there's the social part. And my buddy Nick, who actually from private equity, he's like it, businesses, people and numbers, and they're both the ying and the yang. So, like, we're all agreeing on that. But let's talk about the ownership structure and how that relates to that Hoover vacuum sound and like, where the decisions get made and where the prosperity gets made and how it's different in the two ownership structures.
[00:30:10] Speaker B: You want to.
[00:30:10] Speaker A: Want to speak to that?
[00:30:13] Speaker B: Yeah. And the way you position that question, I think there's like two very distinct, call it time periods that I think you want to talk about. So I'll talk about just how, again, my view of the way the two models operate. And then if I can remember, I'll go back to how that relates to the decision that the business owner themselves has to make. Because it's their call.
Right.
And so, you know, similar to your example, like, I've got friends that work in private equity. They're great people. They don't necessarily do the slash and burn thing that you hear the horror stories about in the media, but there's
[00:30:49] Speaker A: still an economic incentive. There's still a fundamental baking in of the decision making of the game. Even if there's good people, there's a specific structure there.
[00:30:58] Speaker B: Yeah.
And so at a really high level, the way that I kind of look at it, within the private equity space, two of the things that I'll say are more prevalent, I think one is when you're buying. Well, probably three things that are more prevalent compared to, like, employee ownership stuff. So thing one would be at the point of sale, a lot of these firms, private equity firms, will just have a lot more money at their disposal and they can give more of that money to the business owner upfront, which dramatically reduces the level of financial risk that they're taking on as the selling owner. And so, you know, that helps people sleep really well at night, as well it should.
So there's that once the company's been sold, I think it's fair to say that there's higher use of leverage in a lot of these companies once the company's been bought. Right. Like, that's how you're trying to maximize the growth and the return and things like that.
I think the third thing is more often than not the exit. Like a lot of the value and the, like the return that is generated by the firm, which is the reason why they're buying this company in the first place, is at some point they have to sell the company. And most, I would say private equity firms are not looking to hold on to these companies for a very long time. And so because you have that built in, like need to transition the company. Right. Like you talk about constraints of time, cash flow and all the time. Right.
Those are two really big constraints. And so there's an incentive to actually sell the company far sooner than say employees might. And so that's just the nature of that game, as you call it out.
Contrast that with the employee ownership space. And so here's where I'll speak a little bit more specifically on the Canadian model. There's some big differences between how the Canadian and the US Model are structured.
But if you look at employee ownership in Canada, I'm separating between worker co ops, which have been around for a very long time, and then within employee ownership more broadly, you can do a management buyout, you can have options, you can have all sorts of things.
[00:33:07] Speaker A: So just to clarify for the listeners, when you say employee ownership, you're using the broad bucket of all different types of employee ownership instead of necessarily specifically ESOPs. I just did one on workers co ops too, which is interesting. Yeah, but like, agreed. So like employee ownership, various forms of employees owning the company.
[00:33:26] Speaker B: Different, different ways to do it. But by and large, especially when you get into, I'll call it broad based employee ownership where, you know, employees own half or more of the company or just like a meaningful percentage of the company, that.
Right. It's that little story of like, show me someone's incentives and I'll show you their behavior.
[00:33:47] Speaker A: Right.
[00:33:47] Speaker B: If the people that are working there are the ones that have more control over decisions that are made, there's a really good chance that there's less pressure to feel as though you have to sell the company at some point in the future to make a return.
And so as you look at the, like the notional continuity of branding and people and impacting community and all these sorts of things, like, it's just the incentives are different. So if a lot of people are kind of working at the same organization in the same community, you have that social license and freedom to contemplate things other than just the financial return if you want.
Now that's not to say financial returns don't matter, because as we talked about a few minutes ago, when people get a really good understanding of how they can do their day jobs and deliver greater results, when those results are going in their pocket, they'll do that.
You get to compound some of these other things that are beyond just the financial component of what you're trying to accomplish. And it's, again, one of the reasons why I'm such a big fan of these employee ownership models is it lets you provide some space to breathe for legacy items.
If that's what matters to you, it won't matter for everybody. Which is kind of that second point that I was raising earlier, because one of the first conversations I had with business owners, first question I asked them, it's like, what is the story of you that you're trying to create?
When I was a corporate executive at a bank, I used to ask it in interviews when I was interviewing people to be on my team. When I was doing career development conversations with members of my team, I'd ask them the same thing.
I ask the exact same question with business owners, and I almost always get one of two reactions.
Reaction one is people's eyes bug out because they realize they have no idea, and they're like, oh.
And you can see the realization on their face as their eyes get wider. It's like, oh, I should have an answer for that, but I don't.
[00:35:53] Speaker A: I've never thought of this. You have no idea.
[00:35:54] Speaker B: I never thought of it. Exactly. And it's a very human reaction.
That's reaction number one. Reaction number two is everything that comes into reaction number one. The eyes bug out. But then somebody's like, I should have an answer. And they just go complete stream of consciousness and say whatever jumps into their mind.
And as a listener, I can tell they still don't know.
Right? And so as I ask that question to people, regardless of whether it's a corporate environment, business owner environment, there are so many people that either haven't asked the question of themselves, or they've never been taught how to answer the question for themselves, or they've tried to ask the question of themselves. And as they realize that they're writing their professional will, it gives them the willies, and they're just like, nope, I'm avoiding this. And they push it off until it's far too late, which I'm sure you've encountered quite a bit in the work that you've done with your clients.
And so as you just keep bouncing together all those different emotional factors of if I'm a business owner and I've never thought about what I want to do, I know the clock's ticking. Like that time constraint you talk about. If I have a decent understanding of how much I need to sell the company for that wealth constraint that you talked about.
If I've got a private equity firm giving me the money that I want mostly upfront, that's a hard thing to turn down.
But if you can actually really push people to think about, just as a very starting point, how much do you care about the money you sell for versus the legacy you leave behind?
Even if you can just figure out which of those two things, are they equally important?
Are they not? If you're the kind of person who's like, I don't really care about the legacy, I want to sell for top dollar when I'm done, Employee ownership models probably aren't that appealing for you, and that's fine.
Focus your time and effort on strategic or a competitor or a PE firm or whatever you want to do.
That's more likely to get you what you want.
But I continue to encounter so many people who, because they never thought of it, they also don't have that social license to contemplate things outside of the money. Right. Because conventional wisdom would tell you, if you're not selling for top dollar and nothing else, you're an idiot.
Well, I don't think you're an idiot if that's what actually is important to you.
That's where some of the conversations that Josh and I have had and webinars that I've delivered with Josh, where I did a fireside chat with him, and he was just walking people through.
You know, I got a fair price, and I knew everybody was keeping their job. And I knew that the people who were going to be taking advantage of all of the ownership benefits after I was gone were the people that helped build the company. It's like, that's what I want. And so that's what he did. And I find that as more and more people become aware in the Canadian context that this new option exists or this newer option exists, it becomes appealing to people. But again, there's a lot of work that you got to do to help people understand.
You can look beyond conventional wisdom if it's something that's appealing to you.
[00:39:11] Speaker A: So many good things in there.
So I want to unpack.
So my first reaction is, I agree. The challenge that I've seen, Pete, is I think most of the people. I mean, there's been close to 4,000 people now that have been through my workshops, founder led people, like we're talking about, if they had complete awareness of all their decision making. I mean like most people I like, they'll, they'll take a couple extra dollars less to do the like because there, there's an alignment there. Some of the challenges I've seen is like, they don't have the timing, they're exhausted. The valuation gap, it literally becomes more like my dad and I, which is like, wish I would have known. I'm tired. And it's literally between me retiring or my employees keeping their jobs or like, and like, and, or if it's, if it's maybe not that dramatic, it's like not optimal, but I gotta do this. So like it becomes like this.
I have to. And like, and then they end up on my podcast with all the regret stories because they didn't get their earn out, they didn't get the roll equity. It was a bunch of, they didn't have like, and, and, and, and, and so, so like it becomes like this false choice where it's like, I think it is because it is a false choice of like more money versus not more money because like the, the chances of you getting all of the perfect home runs and the earn out equity, rolled equity, all that stuff to equal what you thought you were going to get anyways. Exactly. So, so then it's, it's a false comparison at the onset, which I think is a fucked up situation because it needs to be comparing apples to apples. But outside of, and you can't see
[00:40:47] Speaker B: it right, like right when you're sitting in the chair and you've got the offer in front of you, like, you just, you can't envision that.
[00:40:51] Speaker A: Well, because you don't know. Like, you don't. Like, like my definition, like of being a capital allocator is like when, so in module number two, when I talk about the three lenses of value of discounted cash flow, the multiples and the normalized EBITDA and then the transaction value, there's three lenses that I think we need to see through to actually understand how to view our trade offs. Because if we don't understand value, we can't actually make a good decision because it's like, well, if I, if, if I'm, if I don't know how to like, I would say like if this is my iPhone and you think it's worth a hundred grand, I think it's worth 10 or $10. Like we can't trade. So there's this issue that I'm seeing like, where, I guess what I'm, what my, my first comment is, like, I agree with the reaction that you're seeing because I see the same thing, but I think it's actually a false choice where it's actually not ESOP versus pe, because if I were to do neck and neck with the tax benefits and everything like that, I would say the knee app would probably generate more money, net proceeds a good chunk of the time. But I think what, what I find is fascinating is this. No, people don't know what they want.
So I like, what do you make of that as someone that has been a planner since you were 14 years old, sitting down, talking to your dad about a legacy, going to Yale, getting it, you know, being in the banking world, like, what do you actually make of how little people understand what they want?
[00:42:11] Speaker B: Well, I completely understand it because I was the same way. Right. And I chuckled when you had this, when you made your comment of me being a planner, I have the illusion of a plan. I've never actually had a plan.
And that's where it's true. Right. Like ask my wife. She's like, you're not a player.
But again, like, you can trace each of those steps that I've made since I was 14 and I've never actually had a plan.
I've made sure that I keep an open mind and take advantage of my, what I think is just a natural adaptability, that that's probably what served me best as I navigated public sector, private sector, and now working on my own. You know, I like to joke, I. If you look at this third act of my career, I traded two of the, like most punishing bureaucracies Canada has to offer in the federal government Big five bank. For now, I work on my own.
You asked Josh when he and I were having this chat called two years ago when I first moved on from the bank, never on my radar, was being on my own.
I assumed I would go back into financial services somehow after my adult gap year. But I never would have thought I'd get into doing something independently and certainly not something independent in terms of business transitions and employee ownership models.
But back to what you'd said earlier.
Again, I've experienced that and I've lived through that sort of anxiety and sometimes deeply rooted anxiety when you're trying to figure out either what is it that is going to feel meaningful for me in the very long run, measured in decades and as I'm sure you've encountered with a lot of the people you've worked with. The farther out into the future you try to project your desired outcome, the more ambiguous it becomes, the less confidence you have in what you're thinking about and the worse you make your underlying anxiety.
Don't know if that resonates or not. That's how I felt.
[00:44:19] Speaker A: Yeah.
[00:44:20] Speaker B: So that's one aspect of it. But at the same time, the, you know, again, I've.
I've actually worked with a lot of people because I went through that experience myself. I was very fortunate that I had a couple people teach me how to think about that, you know, 15 years ago.
And so even though I never really had a plan, I keep talking about stories. Right.
It wasn't until 2011 when I, for the first time could like put on paper a version of what I wanted that story of me to be.
It's my second year at the bank.
Even up to that point, I knew that I was constructing a story.
It was a great story.
And so I made sure that I could convey the story that I had already pulled together over the first, whatever, 15, 10 years of my career to that point. And so I knew that I could confidently talk about a story leaning on my political training.
But I still didn't know what I wanted the story to be.
[00:45:21] Speaker A: Until you're framing this up as story.
How does that impact identity and how that helps you navigate decisions?
[00:45:30] Speaker B: Yeah. And so the biggest piece for me, and so there's a bit of a segue that I'll get into. One of the reasons why I'm wearing a Top Gun shirt. Talk to the Goose. It's a bit of a personal story that outlines an extremely rough part of my life that I went through. Some things that deeply impacted my identity as a person, as a leader, as a. As a new parent. But the reason why I tell this story is because all of these things that people had taught me in terms of how to think about my story before that, it empowered me to a couple years later, make a really challenging professional decision for me, despite all these emotional and identity driven things that were wrapped up. And so there's a reason why I tell this part of the story because the headspace that I was in and some of the decisions I had to make, it was that stuff that people had taught me long and ever ago that I just leaned on. And that's awesome. Gave me a lot of confidence to make this switch. And it's also the same stuff that I think a lot of business owners go through themselves. Because when you think about all this, this identity driven and emotional Stuff of like, I'm making payroll and pillar of the community and leading all these people and. Right. Like, as you well know, there's a lot of emotional stuff that goes into planning for your transition. So the story for me, I. So I was at, you know, one of the largest companies in Canada for 14 years.
Got my first executive role right smack dab in the middle. And a couple months after I got my first executive role, my wife and I, we got married earlier that year and we found out we were expecting twins. And holy smokes, we were over the moon.
Unfortunately, didn't work out for us. You know, one of the things that happened for us was they were born too early and they didn't make it.
[00:47:17] Speaker A: So what were they, natural twins or did you have any infertility stuff leading up to that?
[00:47:22] Speaker B: Natural twins, boy and a girl.
And we, you know, things were happening pretty quickly. A lot of things were going great and then just out of nowhere, because unfortunately that's what happens with twins sometimes. No rhyme or reason. My wife went into early labor and it was too soon. And so the twin didn't survive. And so my first legal act as a parent was signing my baby's birth certificate.
So when you think about all the emotional identity driven stuff that kind of goes into just that aspect of it, that's pretty.
That's pretty tough to deal with on a personal standpoint. You know, I mentioned how I grew up in the boonies and went to an awesome school and had an awesome career up to that point. You know, I've always been a high achiever and super driven and go, go, go kind of person. You know, when that event happened, that sort of spark and drive just completely shut off. And that was just a major component of what made me tick in my own personal identity for 25 years.
And so when that sort of extinguished after we lost the twins, I was like, what do I do now? Am I ever going to get it back? I've just started my executive career at this awesome organization and am I going to suck now?
One of the things that happened, and I talked earlier about strong leadership and strong culture, one of the things that happened, and this was actually the day that the twins passed, my wife, we'd been in the hospital for a couple of days. My wife was finally getting some sleep. I just tried to check out and distract myself however I could. And so I was just going through a newsfeed and an article had been posted that day in one of Canada's two national newspapers. And it was a story about how A series of different, really senior and well known executives in Canada, banking and beyond.
Just, they shared their personal stories about how when life got really hard for them, leaders around them and their companies kind of demonstrated what good looked like.
And one of the stories was someone that I looked up to at the bank, and he told the story about when his daughter had passed away, like a generation ago.
And the handwritten note he got from the CEO at the time, all it said was, whatever you need, Ed, referring to the CEO.
And when I read that in the hospital room, just absolute convulsive, sobbing and crying, and it was instinctual. I had no idea why, couldn't figure it out, just blurting everything out, until I realized I was subconsciously just because of the people that I'd worked for and the people I'd worked with and the company that I worked at and their leaders.
I knew that that's how I was going to get treated, too.
And it was hours after the twins had passed, and here I was just having this tremendous instinctual, subconscious reaction to reading something on Twitter.
And that had just such a profound effect on me, not only personally, but as I started to grow into myself being an executive leader. Once I came back at the bank, it's just some of those motivating factors that are incredibly, incredibly important to me because on my very worst day, the company I worked at showed up at its very best. And, you know, a couple years after that was Covid. And when you think about the amount of grace that my leader showed to me when I was on my comeback, right, because when I first came back to work, I might have been at 60%, I was terrified because I was like, I'm going to come back. I'm not going to be at my top of my game. I'm going to suck. I'm going to do all these things. And that was causing me, as I was talking to counselors and therapists before I came back to work, all these things running through my head. And so I talked to my boss about it before I came back. She's like, I don't care what percentage you're at, we're just going to be really happy to see you back. We'll figure out the rest.
Just be the grace that everyone showed me as I was coming back had such a profound impact, personally and as a leader, Part of the story that I evolved for myself was I want to be one of the people that helps with that generational transition of the culture that impacted me on the worst day of my life. I've ever had. And so when you think of all the identity driven stuff, my identity as a parent, as a leader, as a.
A leader at this awesome organization, like, I took that really seriously and I just thought that was going to be part of my story until probably two years afterwards and I realized that I changed my mind.
Tell me more.
[00:52:06] Speaker A: What do you mean?
[00:52:06] Speaker B: I didn't. Well, that's just it. I didn't really know why. Took me a while to pinpoint and figure it out.
And like, that reckoning that I went through internally, trying to understand what I wanted my story to be, but also just knowing inside that I was getting increasingly miserable about something, but I couldn't put my finger on it.
I didn't understand why.
And so that old adage of follow your own advice sometimes. I'd spent years coaching people that I'd worked with.
Here's how somebody taught me to think about their story and make sure you revisit it every six months or so. And either you confirm that you're still trying to do the same thing, or you change your mind. And that's great too. At least, you know, of course, I'd forgotten to do that for myself.
And so I just went back.
[00:52:53] Speaker A: Did you feel a wedge starting to come in, that there was misalignment between your story that you wanted and what you were living? Or how did that creep in part of it?
[00:53:04] Speaker B: Well, you know, you know, trying to run a bank during COVID and all this sort of stuff, like, there just. There was a lot happening. So the general demands of leading large teams and pace of change and all that sort of stuff. It was just the more that I kind of kept pushing to try to move up, the more that I started to realize. And eventually the conclusion that I raised was if I'm actually going to become the next best version of myself, I can't have something so deeply entwined to my personal identity and that event be a driving force for what I want to accomplish at an organization that is just the supreme level of unhealthy.
It has nothing to do with the company I was at. It has life happens. And it got hard.
It was a pretty big reckoning to come to internally. But eventually I just came to the conclusion because I started thinking about what I wanted my story to be. I was like, you know, if I keep relying on the worst day of my life as some sort of like, tie in to some of the things that I'm trying to accomplish professionally, at some point that's going to end very badly. And so as Much as I, you know, deeply, deeply respect the people that I work with and the company that I was at, I just like, for myself, I have to move on. I can't be here anymore.
[00:54:34] Speaker A: That's super fascinating.
How do you think that that could be correlated to what owners are feeling when they want something different where like you were able to quit and then owners who wake up and go, I have payroll and personal guarantees when that crisis is happening. Have you seen her come? Like, have you had exposure to like, what kind of correlation do you think they could be when on how someone could process it?
[00:55:04] Speaker B: Yeah, so the.
I think so I think the biggest thing that's different between like a corporate environment and a business owner environment is all the stuff you just mentioned.
Right. Within a corporate environment, there's still a pretty big backstop or like the company's not going to explode if I'm not at the bank anymore. Right.
There's a lot more of that riding on private business owners, especially if they're like you often talk about in your work on Are you an owner? Are you an operator, Are you hyphenated, Are you an actual owner, are you a capital allocator or do you have a job?
Especially if you're an owner who's in that you have a job whether you know it or not. Bucket. There's a much bigger risk of all those identity and emotional driven actors collapsing if the owner's not there.
Now, one of the things about my story is it's not as though I just went out and came to the snap realization like it was about a year and a half reckoning that I had to go through before I figured out that something was off, figured out that it was bad enough that I had to really think about it, went back, took my own device, thought it through it some more, came to the conclusion that I had to leave, and then it took me a little bit to manufacture my exit as well. Right. So within that period of time, you're looking at a year and a half, two years from start to finish, which I would imagine is not that far off from some of the things that business owners are going to go through from a time horizon standpoint. And so that's where what I try to remind people is the specifics as to why life gets hard, the specifics as to why you're feeling what you're feeling from an emotional and identity driven standpoint.
The specifics aren't that it can actually feel kind of lonely, in my opinion, if you focus on the specifics of your Own situation.
Everybody's got their own story.
[00:57:01] Speaker A: As far as I, I like that
[00:57:03] Speaker B: what I do think brings a sense of community for people is the, like, the impact that it has on you emotionally is going to be really similar.
You know, angst and fear and lack of confidence and all these things that just can compound on you, lead you to avoid doing the things that are really important, drive you closer to burnout, and just increase the likelihood of a really poor outcome. And so that's where I try to just focus everybody on. If you anchor yourself on sort of like the feeling, the impact that it's having on you, you are not alone.
The specifics as to why you might feel how you do and I might feel how I do, you can kind of tailor that and you just figure out where people are. You meet people where they're at to help them take that first step. But that's where I keep talking about how do you normalize the conversation for everybody?
Because as more people get that social license to address some of these things that are bouncing around in their brains that they don't have the confidence to either verbalize or get on paper in a coherent fashion, normalizing that type of thing will help the more people have a good understanding, as I said earlier, of do I want all the money? Do I care a little bit about legacy?
Normalizing that conversation will help people self identify our employee ownership options. Good for me. Or not. And if they're not, great, if they are also great. You know what I mean? And so just how do you, how do you sort of just keep giving people the social license to talk about this? Because, you know, you can talk about mental health crises and how open people are to having these conversations every day of the week. Right?
[00:58:51] Speaker A: I love it. What I'm going to pull up here,
[00:58:54] Speaker B: I'm going to show you this.
[00:58:55] Speaker A: The way that I have done what you're saying to normalize a conversation is through the owner's goal setting.
And the way that I have framed this up, you've already mentioned it's the time, cash and wealth. And Pete, what I think is the way that's possible is like, so I was in my group call, I got my mastermind of 16 clients and it's like, I don't care if Your goal is $200 million or someone else's goal is 2 million.
It's about making the decisions based on the constraints so we can understand our trade offs. And I think that that is the number one thing that becomes the root source behind anxiety, the stress, the Freak out and not understanding how much longer do I have to do this and what am I giving up or what am I gaining? And I think that's what is just mind numbing and eating at people and then allowing us to say, okay, well, because like even how you're wording legacy versus money I think is more nuanced than that because it depends on what the person's goals are. And I don't think it is a binary choice. And that's where it's like it becomes an interesting conversation. And I figured you did too. Like just more like I agree with
[01:00:06] Speaker B: that because where I'm the difference between what I see, sorry, the space that I play in versus the space that you play in, there's kind of within that half of my brain I can sub compartmentalize into two pieces. One is the actual business owner themselves teaching them how to think about how they want to set their goals before they even get into like the actual work that they're going to do with someone like you. On okay, I have this goal now what do I do? Like I'm the in. If it's a business owner specifically, I'm like, even before they're ready to talk to anybody, I'll sit down with them and I'll teach them how people taught me to think about stuff. And then whatever it is that they come up with and for time immemorial, they're far better positioned to have conversations with folks like you and others on what do you actually want?
More importantly, why is it that you can confidently tell people that is what you want?
And therefore here's the list and the order in which we have to execute on things to make it a reality. So that's the business owner specific version of it.
I actually spend a lot of my time trying to help the broader ecosystem of organizations get more comfortable with that conversation too, because they're not there either.
[01:01:22] Speaker A: You mean you're talking about different advisors and stuff like that?
[01:01:25] Speaker B: Economic development groups, industry associations, leadership incubators, banks, credit unions, wealth advisors.
There are some people who are really well trained and comfortable in sitting in the emotions of the people and don't care if you're crying or they're crying. You're both crying together. There's some people who can do that. There are a lot of people who just, they aren't prepared to go down that road and they kind of don't really know how to tackle the problem, which even puts the business owner at a worst disadvantage because they don't know where to go to get help. And so the way I think of it is from like a. Just a foundational ecosystem standpoint, if the people who the business owners have a trusted advisory relationship with already, or if any of your stakeholder base is a private business owner, help everybody get better at just normalizing this conversation. Because at the end of the day, it will filter down to more business owners having better conversations, having far better conversations with folks like you so that you can actually, to your point, get over that. Whether it's a dichotomy or some other level of dimensions of the problem where people are willing to like, get over the personal hump that's holding them back from just expressing what it is they're trying to accomplish. Far better sense of having a wild.
[01:02:53] Speaker A: I'm tracking you, man. Like, it is a wild thing to me how in equipped most people are to deal with this. And like, it's just fascinating. So, like, and by the way, as far as like, and I'll to reciprocate how I'm dealing with it, I'm assuming that most people that I'm talking to have no idea. It's like independence.
It's like so, like. But we start there.
[01:03:15] Speaker B: What does that mean for you?
[01:03:16] Speaker A: Yeah, well, and then, and then, and then I've got like, I've got all these exercises in my owner's academy, like, well, what's your noble aim? And I have people, right? I mean, I have my client, he just sent me, he wrote me his eulogy. So it's like, what's your noble aim and your eulogy? And then it's like, okay, well, now this is what you want then. Okay, how do you manage that into your time and the relationships that you want? How much cash flow do you need? Like, so it's like breadcrumb by breadcrumb by breadcrumb.
Because again, people aren't having those conversations about the emotional stuff. But, like, I literally was just laughing my ass off. I had this new owner that I just signed up and he's like, yeah, we had like, you know, because in a family business association, like, like the problem that my dad and I had, we'd have these kumbaya conversations. I'm like, dad, I love you. Like, that's not part of the discussion. How much money am I gonna make? And what's my, like, what's this company worth? So, like, I'm also not trying to be greedy. So it's like this weird, like, I get it, dude, I love you.
But, like, how are we gonna do this? And it's having the ability to bounce back and forth, forth. And I think that's the thing that the advice or the advisors miss. It's like it's mechanical and it's mechanical in one puzzle piece versus holistic, starting from the ying and the yang of the emotions and the numbers at the same time. And it's just like, I don't know, man, it's. It's very fascinating.
[01:04:32] Speaker B: But I think, I think on top of that too, though, one of the things. And so I found this a lot in my banking career. A lot of that technical, mechanical, like the deal making, transaction stuff, it's really fun, right? And so when it's that really fun kind of sexy stuff and you know, you can distill things down into a number, it's really easy to just stop at the number.
But, you know, as you're using the expression of, you know, the eulogy or the things like that, a big part, at least in my pre. In my banking experience, the conversations I have with people, people were far better able to do a eulogy for themselves when they could explain why, right? And so like really getting, getting into that underlying whatever it is that really gets people going.
It's. It's sometimes jarring for people when I'm having these conversations because I warn them up front, like, look, we're at the phase of our conversation now where you're going to see me close my eyes.
I'm not asleep, I'm paying attention. But the reason why I'm doing that is because when people start answering these questions after a little bit of time, they just get into the stream of consciousness flow and they just start talking about things that really make them tick, but they can't understand it and they can't hear it. But I can hear it through the modulations in their voice. I can hear when energy is just subconsciously pumping their voice with more energy, even though they may not necessarily register that sort of thing. So I'll tell them, it's like you're going to talk for about five minutes, I'm going to close my eyes and I'll tell you what I heard. And off they go. And I'm sitting there just like this, and they just keep going. A couple minutes later, I come back like, hey, so the two things that I wrote down that brought the most energy in your voice were A and B. How does that sound? And they're like, oh, yeah, totally.
But it's just some of those things where again, if you're, if like conventional wisdom and social pressure and all these other sorts of things are encouraging you to focus on the money or the technical stuff or, you know, all the stuff that keeps you in Excel for a long time, figuring out numbers.
It's just, it's a huge disservice to people if you don't try to tackle the emotional stuff, because that is the driver of whatever it is that is going to help someone feel as though they had a meaningful and purposeful end to their business ownership.
[01:07:00] Speaker A: What I love is connecting both those dots of the emotions to the hard work. So one of my favorite concepts that snapped together for me last year was so Huberman and Peterson. We're doing a podcast, Andrew Huberman the neuroscientist and Peterson the psychologist. And it was like hand in glove of technical psychology. Like, it was intellectual porn for me and the Huberman. And it landed on like, with Peterson, that with a clearly identified noble aim, the higher the noble aim, and over the longest time period, impacting the most amount of people, if we aim up, which is like the definition, I mean, like missing the aim is sin.
And if we aim up to the highest noble aim over the longest period of time with the highest amount of impact, and then we strive for it, every unit of progress that takes uncertainty and makes it into clarity releases the highest unit of dopamine mechanically in the brain. So I fucking love dopamine. Like, I'm, like I'm a dopamine addict. So like all of my problems. Yeah, right. So what's fascinating though is I think that back to your point about owners, I've been trying to take the psychology, link it to the biology and then link it to the financials and say, here's the deal, you want this.
But I believe that if we actually reframe this, clear it all up, like take the red pill in the matrix and see all the zeros and ones and see the meaning of the hard work in front of us, then we can be addicted to the hard work. And then it's not something we're trying to run away from, it's something we're actually trying to move towards. And it's this purpose of clarifying that noble aim, but then connecting the through line all the way and I'm going to get really geeky, is like, if I know that I'm going there and I go all the way down to my budget to actual this year of this month and say, okay, I now, like, I'm working with a client right now, we missed revenue. Should we take the half million dollar bonus or not? Well, Guess what? We own the goddamn company so we don't have to say yes or no to the private equity firm, right? And they're a partial, like, there's some cool ownership structure. So my point is, like, that's where it was an earlier comment that I made about the ownership structure impacts that constraint. So it's like, okay, now that we have our goal clear, we have our legacy, we have all this stuff. We go all the way down to, like, I want to have this much cash flow and this much money in this period of time, but we missed the target. And now the trade off is between me and my employees.
And then that trade off becomes so clear in that cash flow statement because it's like, okay, well, and that's where, like the, the ownership structure will dictate what happens to that money because the timeline and the incentives. So I'm just.
[01:09:45] Speaker B: And everyone will understand, right?
Everyone will understand what the.
I know in various episodes you've talked about, like, what game are you playing?
Right? Like in each of those scenarios, everyone will understand what the game is.
And so maybe you don't like the. If you're an employee, maybe you don't like the decision, but you can understand it, right? Like, there's that part of it. There's also, you mentioned a couple minutes ago how, say you've, you know, if you're looking many years into the future in terms of what you're hoping to accomplish, like the, the importance that you called out of having digestible and tangible progress that you can see along the way. So that, you know, like, obviously it's going to take a very long time to get to the top of the mountain that I'm looking for. But, like, I can see progress and therefore I can feel confident that I'm continuing to make good decisions for myself and employees or whomever my stakeholders are. But the confidence and the habit that that grows over time can reduce a lot of that angst. If you have, as you said, if you've got a really good understanding where you're trying to get to and you can see how you're making tangible progress
[01:10:57] Speaker A: along the way, what's the trade offs? Right? And like, back to, like, hey, you know, because I.
[01:11:01] Speaker B: And sometimes, sometimes the trade offs really suck.
[01:11:04] Speaker A: Well, a lot. Well, it's a trade off by definition. You're giving up something you.
[01:11:08] Speaker B: But at least, you know, at least, you know.
[01:11:10] Speaker A: Yeah. And like, back to Huber. One of my favorite quotes from Huber, because he's like the bearer of bad news, like, alcohol sucks for You? Nah, like, you know, I mean, like, everything he says is like, okay, so do nothing, go to bed at nine, you know, like all that stuff. It's.
[01:11:25] Speaker B: He goes, I know, you're right, but.
Oh, I don't want to hear that.
We talked a while back about the benefits from employee ownership. Through numerous studies in the U.S. over the five plus decades, it's been happening.
One of the benefits is in financial crises and others, fewer people get fired and fewer businesses close down in that ownership structure, everyone collectively, because they're more of a community. It's like, we're okay taking a little bit less if it means we all survive.
That's pretty sweet.
[01:12:00] Speaker A: Well, because, like, think about it. It's like, it's like, okay, well, I mean, we all saw it in the US it's like owners got millions of dollars of PPP and erdc and employees got laid off.
[01:12:14] Speaker B: Right?
[01:12:14] Speaker A: Right. I mean, like. And it's like, I remember my dad pulled up in a freaking Maserati when we could barely pay our payables.
I know. And God bless you, dad. And he would tell the story. I'm like, and like, I'm the one. And so then he gets. And then he went to the cabin. I was like, for God.
[01:12:32] Speaker B: He goes on vacation.
[01:12:33] Speaker A: Yeah. The collateral damage I had to deal with, like, there's nothing that Ryan can say that's going to change what just happened. And it's like back to the wealth inequality that's going on in the US and like, and, and, and so I think there's a book called the Donut Economy. You read that book?
[01:12:50] Speaker B: I've heard of it, but I haven't read it yet.
[01:12:51] Speaker A: The Donut Economy and makers and takers. I mean, it just talks about the incentive structure that's baked in the system. And like, the employee ownership feedback loop that you're talking about, Pete, I think is so fascinating. And I, and I guess where I will get to, like, I will like, if someone has the time where, like, hey, I need to take care of myself. And that is an okay thing to think. And I think that's where. I don't know if you notice that with people that sit down with you, like, I remember we didn't know. We're like, I don't know if we have enough money. I don't know if we're going to have enough money. But if they can see the future and say, I can reasonably make 30 to 50 grand a month in distributions and the thing doesn't fall off the rails and I'll Be okay. Maybe I can wait 18 months to do something. You know, I mean, it just be. Gives them like, some peace of mind to say, okay, like, I'm willing to not take this money and this shitty situation right now if this is a plan and leadership becomes a big problem. And I want to, I want to talk about that at some point. But you were, you were going to say something.
[01:13:50] Speaker B: Well, yeah, so that's part of the conversation that I mentioned before I with Josh Golden. One of the events that I did was a, like a fireside chat with him for an organization called Family Business Atlantic here in Canada.
And, you know, probably half of that conversation was me prodding him for his thinking on, like, how did you know what was enough?
[01:14:12] Speaker A: Because I asked him like a thousand times.
[01:14:15] Speaker B: Exactly.
Right.
[01:14:18] Speaker A: And he's a super smart, very technical, analytical guy, too.
[01:14:21] Speaker B: Right. But, but, you know, I know that you're one of the people that he credits for helping him think through all the stuff that led to a decision that he's really happy about. And it's, you know, you would know because you deal with thousands of people on this topic, everybody's going to have their own version of what enough is, and there's going to be God knows how many different variables clouding people's thinking. But like you said earlier in the conversation, like, it's not what I think, it's not what I want. It's your story.
So let's figure out how much you think is enough for you.
[01:14:51] Speaker A: Well, and Josh actually waited two years, so he got the valuation and everything because he had that huge Covid bump. And then he ended up waiting like 18 months to actually get closer to his number. So instead of selling to a third party, I mean, like, it's just. But that gives back to the clarity, the meaning, and like, it just.
[01:15:09] Speaker B: And the time horizon. You know, I always talk to people about how much money versus your legacy, the one piece that isn't on that visual that I put on screen, but it's just a core fundamental of the thought process is what's your time horizon?
Like? Are you sure?
Are you, you know, in this for a long haul? And you're just way ahead of the planning game because, as you know, that'll. When I think back to constraints as
[01:15:33] Speaker A: well, people's lack of clarity. So, like, when you shrink that when you talk about the time horizon, most people, I think, conflate cash flow and wealth. So then it's like, well, because, like, and, and especially if it's coupled with your time, which is why I go back to that Venn diagram all the time because it's like, well, if my time is not tied to my cash flow, I've got a lot more time line, you know what I mean? So then it's become like, it's like double clicking on it to spread it all out. Because I, I just believe that like the ownership structure that you're promoting and I'm doing the same thing, man, like you're approaching it where like we need to think about this stuff in hopes that there will be a path to more employee ownership. And I've, I've, like, I think I might have said that in a first call. I validated that, like, I am not an esap, like promoter guy. But like, I talk about this stuff and the people that naturally are founders of businesses or family businesses land here because of value alignment and time horizons and community and all those things. And if they have a path, there's going to be a natural bump up in those type of ownership structures too.
[01:16:40] Speaker B: Yeah. And that's kind of where we're at in Canada is. So I mentioned there's a, as you know, there's a bunch of different ways in which you can do employee ownership. The, the newest one of the models, it's called an employee Ownership Trust.
That's the one that's actually closest to a US ESOP, but it just came in.
[01:16:57] Speaker A: EOTs in the US are not like EOT, like so the employee trust in
[01:17:01] Speaker B: the US so unfortunately when you're looking at Canada and the US even though like the acronyms are the same.
[01:17:08] Speaker A: Yeah.
[01:17:08] Speaker B: The structures themselves, you have to invert them.
[01:17:11] Speaker A: Nice. Make it easy for everybody.
[01:17:12] Speaker B: Yeah, yeah, exactly.
[01:17:13] Speaker A: Thanks for collaborating, everybody.
[01:17:15] Speaker B: So I'm not going to use any of these acronyms. I'm just going to talk about how the structures work. Okay. And so if you look at the, like the transition, like the business sale transition mechanism version of employee ownership in Canada, that's the newest one that was implemented in 2024.
There, you know, there's been a handful so far in Canada.
Couple of things like legislatively that we're working on. Part of it is how do you expand the addressable universe of who can claim the tax break as an individual.
The second thing that we're working on this is the really big one is the like the personal tax incentive itself is set. It's going to sunset at the end of this calendar year if it doesn't get sort of like renewed and made permanent. So a big component of what we, you know, I'm on the board of Employee Ownership Canada, others are trying to do is just trying to get that taken care of so that you, as you know, you need a lot of time to do these things and plan them out effectively.
So assuming that becomes a permanent fixture of the marketplace as a tax incentive, you know, it's reasonable to assume that more and more business owners will choose it over time because, you know, you'll have a lot more support in the marketplace. You can compete with the third party
[01:18:20] Speaker A: sales and stuff like that, and you
[01:18:21] Speaker B: can those sorts of things. Now the, there's probably, you know, in the Canadian context, because Canada doesn't yet have the same like corporate tax incentives as US ESOPs do.
So right now the tax incentive is to help encourage the business owner to sell into the structure during the transaction. It's not necessarily after the, during the transaction. Okay, so that like almost like the
[01:18:44] Speaker A: 1042 versus like the, the, the Canadian
[01:18:46] Speaker B: version of it basically. And so the Canadian version is for capital gains tax. If you sell into a qualifying and meet all the rules, the first $10 million of your capital gains are exempt by the federal government. So it works out to two and a half or three million bucks, depending on the problems you're in.
That incentive is what we're trying to get made permanent, even though the trust structure itself has been baked into the Income Tax act. And it's there and it's awesome and all that sorts of stuff. So that's one component of what we're trying to build over time.
Another version of employee ownership where the employees actually own the shares themselves.
You can get to a place where, and there are large construction companies in Canada that 100% of the company is owned by the people that work there. Through this again, we call it the ESOP version in Canada.
In each of those components there's just a tremendous education gap.
And so whomever I talk to, it is in Canada, it's highly likely that when I talk to them for the first time, it's the first time they've heard of employee ownership. And they hear about it and they're like crazy. This is amazing. Why don't I never heard of this? I'm like you and 40 million other Canadians, unfortunately. So, you know, how do you, how does it get that going, right?
[01:20:01] Speaker A: Because I've seen in the US a big problem where the inflation has hit advisors and advisory fees. So like what used to be like, hey, $5 million used to have $1 million normalized, but it's like no, 3 million normalized, but I'm like, great, now that's 10 companies. I mean, I mean, so like, I've watched all of the good advisors go upstream stream because they need to. They've tripled their minimum fees and stuff like this. So like, God, Pete, I mean, if I were at the, if I were king for a day, like unlocking this for the actual lower market to say, like, yeah, the 30 to 50 employee company is completely hosed for how many transit. Because, like, you need, like, the cash flow is too lumpy. You maybe you got the SBA loan, but the sba, like, the whole thing's a complete cluster. And like, there's got to be the other problem.
[01:20:50] Speaker B: Canada doesn't have SBA loans, so you have that other advantage, a whole nother problem.
[01:20:55] Speaker A: My God.
[01:20:56] Speaker B: We could talk for another hour and a half on access to capital in rural parts of Canada. But all of these things you're talking about compound the general problem, which is it's one of those classic barbell things.
You have a hard time getting the capital you need when it's time to transition at the point of sale.
And compounding that is all the stuff we've just talked about for the last hour and a half, which is the business owner probably isn't prepared and the likely isn't in as good a sellable shape as it could be.
[01:21:25] Speaker A: Yeah, yeah, we could obviously keep going. What are any, like, final kind of thing you want to say at the. On the mountaintop of like, what mission you're on and how you've.
I'm really fascinated about that story and how you write your stories and stuff like that. So what is your story and how you want to. How does the, the employee ownership fit in and how do you.
[01:21:44] Speaker B: What.
[01:21:44] Speaker A: Where are you headed?
[01:21:46] Speaker B: Yeah, so the big picture outcome that I want to be part of solving in Canada is as we go through this generational transition of business ownership, I want as many of these businesses as possible to remain locally owned, operated and thriving in their communities.
Obviously, there's a bunch of different ways you can do that. And so where I spend the majority of my time is in that employee ownership space because, you know, I'm on a mission to help tens of thousands of Canadians become the collective majority shareholders, the companies at which they work. I think any combination of those two things would be amazing, amazing outcomes from an employee ownership standpoint. You can check out the Employee Ownership Canada website, a lot of really great things there on all of the different components of ownership, not just the transition vehicle or the share vehicles. And so again, helping more People understand that this option is out there is a great outcome. But even more importantly than that, it's how do you normalize the conversation for business owners? Because you know, if people keep thinking it's really scary trying to do your professional will, it remains highly likely they'll continue to avoid it. And the longer people avoid it, the worse off we're all going to be. And right where we started this conversation. That's not just an economic problem.
[01:23:01] Speaker A: You say professional problem. Is it because you think that they're like writing their gravestone kind of thing?
[01:23:06] Speaker B: I think that's how people see it.
[01:23:08] Speaker A: Remember when we first met, I said the word exit is the worst four letter word anybody's ever heard.
[01:23:13] Speaker B: And because of that I don't use it anymore. I was like, you are right. I've stopped using the term exit.
I use transition. I don't know if that's better yet, but at least I don't say exit.
[01:23:24] Speaker A: Like, I don't drink 12 beers a day, I just drink six.
Honestly dude, like, whatever I can do to help. I have just, I've just launched. I now have all of my owner's academy and I've got my owner operator framework and the whole thing. The, the ownership operating system put together. Pete, what I have found has worked is by saying, do you want out of your job?
That's how I've solved this. Like, I mean I've got a significant chunk of my clients that are transitioning right now.
That's not why they join.
[01:23:56] Speaker B: Transitioning or exiting both.
[01:23:58] Speaker A: A couple of them are selling third parties. More so than that would have have sold to internal buyers and ESOPs. So I say that because when they came to me it was like, I don't know what I want. I'm totally lost. Everybody's trying to fucking sell me something or do something or take something or whatever. And I'm just like totally sos.
And what I think is the balancing act that I made Pete is hey, you have a job and you have an asset. We don't have to make any decisions right now. That's actually what I'm probably probably if I were to clearly say, it's like you don't have to make any decision. We're going to help you think.
And so by thinking about like, hey, my job, my ass. They don't have to think in like the claiming it as the ownership operating system from the boardroom. It's decision neutral. It's a system that'll get them to a decision without me projecting a decision to them. So free. Free to use all of my tools or whatever I can do to help, man.
[01:25:02] Speaker B: If you or I even hint that we're trying to project a decision onto people, it won't work.
[01:25:10] Speaker A: Yeah.
[01:25:10] Speaker B: I don't want people to tell me what to do.
[01:25:12] Speaker A: I'll do the wrong thing.
[01:25:13] Speaker B: Your story yours. Yeah.
[01:25:16] Speaker A: I like how you've been framing that up. I like that a lot.
[01:25:18] Speaker B: And that's one of the reasons why I enjoy the work that you do so much. Is even just that really easy to understand framing in an emotional sense of like, are you an owner or do you have a job?
Because I think people can feel that whether they.
Whether they can tag it or not at the start, you know, we'll see.
[01:25:39] Speaker A: But something's got to change.
[01:25:40] Speaker B: Like, if you can feel that. And as long as people can tag some sort of feeling that they know is like, yeah, you know what? Got to do something about this. I think that's the. You know, if we can get people to a place that starts there, I think we're in a good spot.
[01:25:53] Speaker A: Cause both of us are trying to move people to action. Either way, gotta move, gotta act. Instead of, you know, being paralyzed, ironically,
[01:25:59] Speaker B: trying to move them to action.
Of. Just like you said a minute ago, after they've done some thinking.
Right. Once you get, like, once an offer comes your way, it's really easy to act, but you're likely gonna blow the whole thing up.
[01:26:13] Speaker A: Yeah.
[01:26:13] Speaker B: Yep.
[01:26:14] Speaker A: Yep.
[01:26:14] Speaker B: If you can prepare yourself to act through some really good thinking, then you're in a really good spot.
[01:26:21] Speaker A: Great way to end, man. Pete, I will put your material on the show notes. Any other specific place you want people to go to your LinkedIn. Anything else?
[01:26:29] Speaker B: Yeah, LinkedIn's best way to find me. You can. I'll send you a link for that and you can put that in the notes and would love to continue the conversation with.
[01:26:36] Speaker A: It's all fun, man.
[01:26:37] Speaker B: Anyone who feels any of that resonated.
[01:26:40] Speaker A: Appreciate you, man. Thanks for coming on the show.
[01:26:42] Speaker B: You too. Good to see you.
Sa.
