How much change can your team handle?

Kaustubh: The owner's ability to endure pain is part A, and then part B is your team's ability to endure pain. 'Cause like that is the reality, is like change is just painful. Like when you articulate, "Hey, this new thing is coming down the pipe," whether it's a new policy, new software, an acquisition, right? Like how you position it internally such that like, you know, the benefits are clear. You're like realistic about the costs and the change costs. Like there, it feels to me like there's some best practices here that like I am learning through trial and error, right? Around how to announce and implement change.

Sam: I will never say one way is right or wrong. I think it ultimately- Yeah ... comes down to like the personality of the owner, and let it trickle down from there

Kaustubh: Welcome back to The Intentional Owner. This is Kaustubh Deo, and as always, I am here with Sam Rosati. How you doing, Sam?

Sam: Hey, Kaustubh. It's a Seattle day in Tampa today. Rainy, no sun, kinda gloomy, but hot.

Kaustubh: It's a Florida day here in that it is sunny, blue skies, but it's definitely not hot. We don't do that. I'm excited for my trip to Florida, by the way. I'm getting pumped.

Sam: I am too. I was actually looking at the calendar the other day. Just so everybody knows, he's primarily coming here to golf, so we're gonna be golfing. But what we are- And, you know what

Kaustubh: else I figured out, is I have to go... Like, after I golf with you, obviously I'm going to this tree conference in Fort Lauderdale. Yeah. But my tree company owner buddies, one of them has planned a deep sea fishing trip that I'm gonna go on, like, a s- just a one-day, like a, like a half-day charter. You know what I mean? And then the second day I'm gonna play golf with a couple other business owners there. So it's like, you know, it's, it's the way you want the conference to be. Like, how many times can you walk the trade show floor?

Sam: Totally. Yeah, that's not where the magic happens, on the trade show floor, you know? It's like- No, absolutely not ... well, to be... You're, if you're a seller of goods and services, then it's a great place to be, but- No ... you the consumer, doesn't matter. Couple things I would note is while you're in Florida, we are going to host a happy hour. It will be in Tampa. I believe it's gonna be on Monday, November 9th or Tuesday, November 10th So- I, I'm looking at the calendar. It says the 10th

Kaustubh: I think

Sam: the 10th feels good. So maybe we'll go with that for now. Yeah. Okay. So it'll be in Tampa. We're based, and Kaustubh is visiting. Hold out. Just hold tight for details. We'll probably know them in the next, you know, two, three weeks. Sweet. I'm pumped for that.

Kaustubh: No, so what I wanted to talk about was the concept of change management in a small business, and I've, I've had, like, a few different conversations about this recently, somewhat coincidentally, all around the topic, so I was curious to kind of just chit-chat with you about it. But I'll give you some of the context where one conversation I had was with a really smart business owner friend of mine who basically, like, I would say, like, over-implemented a new, you know, like, pay structure change that was like, it's really clever and it's well-designed and it was just too much. I think it sounds like the team just didn't quite understand it, and, uh, and I totally get what he was trying to do. And so, like, there was some element there of just like, how do you actually roll out change even if it's good for the team? Separately, there's like a co- conversation about, like, how much change can a team handle over a certain amount of time? Like, that you get... You run into, like, real change fatigue, so even if you were to, like, implement change well, you might still just have gone over your change fatigue as a team and so it'll never work. And then the third thought I was having that I, I discussed recently with someone is, like, you know, like, like you, I have a ton of my kind of random side gigs, right? Like, I write my blog, I do this podcast with you, and I was having this kind of thought, you know, when I look at somebody like Rob Brooks, right? Who's in Tampa, right? Yeah. Like, who has, you know, four X'd a business in whatever, 18 months, 14 months, something like that. I have this thought of like, man, if I was 100% focused on Blooma, like, would I be at a better spot, right? Versus the way I do it, which is, like, a little bit more of a portfolio approach, with Blooma clearly being my number one thing. And so I think there's something around, like, yes, and. Like, I think, like, if, like, business owners by their nature are so change positive that, like, it's almost helpful that, like, I think I would by my nature overchange the business if I didn't have other things to distract myself with. Anyways, those are, like, the three vectors I was curious to chat about, but happy to start wherever, you know, whatever kind of caught your, caught your eye.

Sam: Yeah. Well, like, like, my favorite author, or second favorite, I actually found a new one. Oh. Whose book I mailed you. If you didn't read it- Yes, I haven't

Kaustubh: started

Sam: reading it yet ... I want that book back.

Kaustubh: No, I, I, I plan to read it.

Sam: There's either gonna be a quiz or a book report due when you get to Tampa.

Kaustubh: Yeah, you think kids these days are writing book reports? That's, that's just Claude.

Sam: True. So back to your question, though. I think it, l- like my old favorite author, it's whatever you want. It's anything you want. And that I'm increasingly a believer that your philosophies on what you do and how you do it should align with who you are. And so your decision to sort of have a portfolio approach to business and life- Mm-hmm ... I think it matches your personality, and you would struggle with, like, if all you did was Blooma, I actually think Blooma would be worse off for it. Maybe not because, like, you are over-changing things in the business, but because a lot of your side gigs or side hustles allow you to scratch the itch of some of the things that make Kaustubh who he is, like the best financial analyst in town, the deal stuff, that, that's the opposite- It- of small business ownership.

Kaustubh: No, that's, I think that's right. That's like, I, I feel like that's m- what I tell myself, and I hope I'm right. But you know, like, y- we, you and I are l- are, like, I'm looking at, you know, supporting a local business here with some financial advisory and, like, kind of raising some money with them. And that's the kind of thing where it's just like, man, like, is this a good use of my time? It's like I really wanna work. Like, I like these people, so, like, yes, in that regard, but is it a good... Like, am I gonna make enough money for it to be worth? Like, all of those, like, there's so many different elements to the rubric of how you allocate time across all of the things you do that, yeah, I think it, I, it's just, like, murkier in my brain than I want it to be

Sam: Well, is time one of the reasons why Blooma's not growing at lightning speed? Your time?

Kaustubh: No. The example I was giving my friend, though, I... Like, so much of the work you do as a small business owner is kind of squishy in that... And the example I gave of this person I was talking to was, you know, like, I had to buy three new vehicles for the business in the past month. I got pretty good deals for them. I feel pretty confident that we, like, executed well on price and all of that, and they got the, the right vehicles. But, like, could I have spent twice the time and, like, maybe gotten, you know, another $600 off somewhere further away? Uh, like, probably, right? Like, like, and so I... You know, to buy these three vehicles collectively, I probably spent, you know, like 10 hours between shopping, visiting dealerships, pitting them against each other, blah, blah, blah, right? But, like, I- could I have spent 30 hours doing that? Like, probably, right? And I probably would've gotten a slightly better execution on it. That, that's a very small example, but, like, that's what I mean when, like, business owner time is so squishy, where, like, by making that only take 10 hours, it gave me back 20 hours to do other stuff, some of which goes to, like, recording this podcast with you as opposed to something for Blooma specifically.

Sam: Well, is there, like, one or two foundational projects you could do on Blooma right now with your team? Or are you at a phase where it's, like, fine-tuning around the edges?

Kaustubh: There is. We, I mean... Well, so we've, are- we finally have, like, you know, real kind of quarterly initiatives, right? Yeah. Where... A- a- and so, like, in that sense, there are. And, like, the big one we're working on right now is, like, we're, we're trying to bu- you know, acquire a small competitor. Which, you know, we told our team about. You know, it's under LOI, but it's, it's not done yet. So, like, normally I wouldn't, like, tell the team about it yet. But the, the seller was pretty open about it. He's told his team, and so we're just kind of working on it together, which I love as, like, a just everyone needs to come along for the transaction ride. But yeah, like, that to me is the, like, w- you know, should give us, like, 20% growth in one swoop, right? And so, like, that is a good use of my time.

Sam: I agree. So, like, uh, like let's go back to your change management question because while you're... This is not like a standalone business you're buying, it's a full absorption, right? They're gonna become Blooma. So how much more can you really do while you're asking your team to absorb a deal? Like imagine the closing date is Friday. You know, how long of a grace period are you gonna give your team to say like generating day-to-day revenue and gross margin, plus seamlessly absorbing this business, that's it.

Kaustubh: Yeah. I mean, to me, I mean, as I was looking at Q4, like we've got some other projects we're working on, but like we have a P&L goal for this quarter that I've, uh, that, that our leadership team knows, and we have basically all the pieces in place to do it. Like we probably have to make like one or maybe two more hires on the crew, but like 98% of the pieces are there. And so it really is like if we can just execute week in, week out right now on the like base business, like that will deliver t- like I think we have the pieces in place to deliver like 12 to 15% growth in Q4, plus getting this deal done, right? Like that's it, I think, for Q4.

Sam: Okay. So the question is, if you could ask your team to do more, what would it be? Take on another project, take on a key initiative. Like- uh, this is a bad one, but like would you ask your team to go through like an ERP implementation right now? Or yeah, that's probably a, an egregious ask, but think about something

Kaustubh: that's

Sam: big-

Kaustubh: That's egregious. I mean, a lighter, a lighter version, right, that I've been thinking about is, you know, like, and our sales arborists are really pushing for because it's good tree work, is like we don't really do any root pruning right now, and it's a pretty natural extension of our services. We get asked to do root pruning all the time. It requires, you know, like a little bit different tooling. It requires a little bit different training, but it's all within our capabilities. Like we can figure it out and learn it and kind of put together the right kind of stuff. It's probably [figure omitted] of equipment, nothing crazy. It's more of a, like an operational lift, right? Of like how do we price root work? How do we sell root work? How do we actually like operationalize it on the crew side? And you know, we've tested it a few times now. We've done some projects. It, it's funny, one of the Slack messages I just got was one of our crew leaders saying to the Slack, like, "Who decided root pruning was a good idea?"

Sam: That's when you've put n- no, uh, no notifications on your Slack.

Kaustubh: Correct. Exactly. Um, it's funny, 'cause so like, uh, to do proper root excavation, this is a bit of a tangent, but the way you actually do it, to like, basically you need to expose the roots without damaging them. And so you use what's called an air spade or an air knife, which is basically like a, it's like a pneumatic tube that's hooked up to an air compressor, and it's basically blowing air in a really tight space. And so it's blowing all the soil out from around the roots without damaging the roots themselves. Problem with that is like the soil goes everywhere, right? And so if you look at somebody after they've done the root excavation work, like they are, like sometimes if, especially if it's been a- They're a muddy mess year. Like, they can, like one of the guys I was talking to, he said he thinks he had 30 pounds of additional soil on him. So it's a messy, messy service. Anyways, so point being like great service for us to add. People ask us about it all the time. We probably get a couple leads a week for that we refer out to, like there's one local guy who just does only root work. I love his business is called Root Cause, which is awesome. But, and like we're still gonna refer out all the big stuff, but like I would like us to be able to do basic root excavation, simple root pruning. That's totally within our capabilities. And it's just like not the time to do it, right? Like that is a Q1 project. I don't wanna buy the stuff 'cause I have enough things I need to buy right now. I don't want to train the team. I don't wanna ask the team to figure out how do we sell this well? How do we operationalize it? Like it's just not the right time.

Sam: And I think I agree because you're throwing a lot at them, and I know it's still this, it's becoming the slow season. When does the slow season start? November?

Kaustubh: November-ish, yeah.

Sam: Okay. But, you know, standing back and I guess I wear the hat of friend and I wear the hat of investor. And I think both of those hats lead me to the same answer, which is if all that happens in Q4 is you hit your P&L objectives and you integrate the new add-on, it's hard for anything else to really matter. So why try?

Kaustubh: 100%. Yeah. Yeah, yeah. Well, so, and the why try question, right? Like when I look at folks who have grown really fast And you know, like, and I'm thinking of somebody like Rob Brooks. Like part of what I see- Mm ... is they seem to have implemented like four things at the pace at which I would've implemented one. Like sometimes I hear their stories on the podcast or whatever, and I'm just like, "Wait, you guys like changed pricing and you turned over your technician team and you put in a new field service software like all this month?" Like I don't, like I almost like don't understand how it's possible.

Sam: Well, it's always possible. The question is, is it right for you? Right. And so I think I, just because I have the benefit of knowing Rob, I don't know him- Yeah ... exceptionally well, but you

Kaustubh: talk to him- And I'm just picking on him as the example. He's like the most public example right now, but like this is... I mean, I think of this with like Isaac Zimmerman in Chicago and like other folks, you know, like they're, they, he's one of a, like a, a, a legacy now of like some just shocking outlier, you know, operators

Sam: Totally. So first of all, and I think in order to be like a shocking outlier in terms of seeing growth in your business, you have to have a few screws loose. And I say that- ... truly, like, in a complimentary way. You have to have some beliefs about yourself and what is true that not a lot of us have. You know, there's a certain amount of, like, Rob has strong convictions in being able to handle a lot of change. He comes from, like, the staffing and recruiting world. Right. So I think, like, the thing that caught me was how much turnover he has had to endure in his business. Totally. So even though he has, like, a... I don't know what his actual ad is from a team standpoint, but he's churned through a ton of people. Yeah. And it... When I spoke to him, it was really clear to me. It was the i- the concept that churning through a bunch of people to make a bigger business was just something he knew how to do. It didn't create, like, an emotional tax on him to endure that. Right. It just felt like part of his game plan.

Kaustubh: And I mean, the interesting, like, I, uh, the corollary to that is if you are the person who's gonna push hard, 'cause that's in your personality and how you wanna run your business, like, you almost have to churn people to then hire people who think that way, right? Like, m- I have a really good leadership team right now, I feel, and like, like, I've got, like, Flavia and Zane and Alan and Roseanne and, like, they're all good at their kind of categories at, of which they're leading. But, like, they're not... Like, if I said to them, "Hey, like, I want us to grow 50% this year," like, that's not their personal... That's not their personality, right? Like, that's not what they are gonna get. Like, they're gonna feel like that is me being crazy. And, like, we work well together 'cause we do share some personality traits around, like, how do we build s- like, grow in a stable, sustainable way. Like, that's part of my messaging and part of what they've signed up for. So, but then, like, yeah, the question is, like, that means, like, if you wanna grow way faster, you just, like, by definition either have to get people like them but then churn them every time you burn them out, or you find people who are just also kind of chemically engineered to, like, wanna grow 50% a year.

Sam: Right. And then be willing to do the things, both you and those people, in the business that are gonna create even more chaos, right? Like- I'm just trying to think of what that could be for you. It could be saying to them, "Hey, I... It's not that I want a commercial division in 24 months. It's that I want a million-dollar revenue commercial division by next October And it means hiring maybe a division leader and dedicated crews and all of maybe bringing in some more capital to support that balance sheet need, all of the things. You can just imagine, though, it ultimately comes down to the leader at the top and his or her personality, because I think people hire and fire people like them. And- yeah, I mean, the Rob example's a really good one, because it's not like the things he's, he's done are not obvious. Like, they're fairly obvious- Tota- things to do in a residential home services playbook. He's just been relentless at it.

Kaustubh: Right. Right. Yeah, and I guess the key thing there is, like, if you're gonna be relentless, your team is gonna break, or you find people who can handle relentless.

Sam: Correct. And it, but it starts at the top. Like, if you read his stuff from day one, he was on rooftops doing change-outs- Yeah with his team. You know? And so part of the growth drive was, like, he'll d- do whatever it took in the first couple years to generate that growth, if it meant going on a rooftop and helping on a change-out so they could charge a premium and let that revenue progress stack.

Kaustubh: Yeah. Yeah, there's something interesting about, like, like I think I have it in my head that that type of growth is not sustainable, in that it's n- like, it's not like Rob can go be on roofs now, even like 14 months later. But if you grow just fast enough, and you hire just fast enough to keep up, like you can pull it off. It's just there's a lot more breakage along the way.

Sam: Yeah, one of the things, he was by the office a couple weeks ago, so we got to talk about it. I think this is public, so if it's not, then tell me. I'm gonna shut my mouth and we'll, we'll edit this out. But he, you know, he's obviously doing add-on M&A. So he's gonna have here, in I think it's already announced, multiple brands in multiple trades in disparate areas of, of Greater Tampa Bay, West Central Florida. He is implementing like a corporate HQ closer to where he lives to minimize- Hmm ... his travel time. Also to put- Yeah ... some, like, space

Kaustubh: between- Oh yeah, by the way, when I was listening to his podcast episode on, uh, Acquiring Minds, like he went- Yeah ... through all of this, and then it's like, wait, he also lives, like, 90 minutes away or something.

Sam: Uh-

Kaustubh: I was blown away- I know ... by that.

Sam: And that's, that center he's building near to his house is gonna be like a shared services area, right, where like subject matter- Yeah back office experts, back end front office sit there and support- Yeah ... the different brands. And what it w- was so obvious to me, but it's not like I have some great advice around it, is how fundamentally different his role as the owner will be now compared- Yeah ... to a year and a half ago, where he was on roofs, and now there's a world where he doesn't go to his locations- Right and he's operating his shared services, like corporate office. It's so different.

Kaustubh: Right. And like, can you really... can you still lead from the front like that with this like, yeah, like literally standing on the roof type of leadership? Like, it's such a different style.

Sam: Totally different. And I'm not convinced, this is not about Rob, this is about, like, uh, some pattern recognition. I'm not convinced it's a very natural s- change in the evolution of a leader to be able to do those things equally well.

Kaustubh: Mm-hmm. Yeah. No, I, I mean, like,

Sam: to be said for, hey- Just like a distressed CEO and like a- Yeah ... a good time CEO have fundamentally different skill sets. I think this is one of them.

Kaustubh: Well, I mean, also, like, if somebody like Rob, and again we're using Rob as like an example- Mm-hmm ... it's obviously not about Rob specifically. But, like, if he can turn whatever he did, like 300-ish K of EBITDA into 1.4 of EBITDA, like, that is unbelievably differentiated. And, like, if his next step is to take one point, you know, four of EBITDA and turn it into three of EBITDA over the next five years, that's not actually unbelievably differentiated. So like, it's still impressive, but it's not that differentiated. And so, like, there's almost something to be said for like, yeah, like his brand and style of change management and capabilities are better suited at that 300K EBITDA size.

Sam: And I think he knows this. And again, not just about him- Yeah ... but the skill set, totally different. Yeah. It goes to show you, like, the playbook that's gonna take, you know, from 1.4 to 3 is gonna feel and look very different. M- it might, we'll see. I, I obviously hope that he kills it. But it may- Yep ... actually end up being the case where, like, his superpower is to buy something micro and get it- Right ... to, you know, a million of EBITDA. And he can make- Yeah ... a bunch of money doing that, if that's what he wants.

Kaustubh: Totally. Or he should just partner with somebody who runs the, the big thing, and he just drops in, like a, you know, like parachutes into the, the latest acquisition, blows them up over the first 12 months, and then hands them off to the, the platform.

Sam: By the way, like, in our entire ecosystem of small business owners, if you told me that I had the phone number of somebody that I could drop into a 300,000 EBITDA business and wake up a year and a half later and it's a million- ... like, that human can extract a lot of value.

Kaustubh: Correct. Exactly. Yeah, it just, it's just like how many heart attacks will they have by the time they're 50? That's a different question. But I think you, but you think he's kinda built different, right? Like you just, he just can't sustain that in a different way.

Sam: Yeah, I, I think his intensity level and- Ability to endure pain is pretty off the charts. Right. The question will just be like, does the... He's gonna endure pain anyway 'cause he's gonna choose to endure it. Will that playbook to go from one and change to three or four or five- Right ... work as well?

Kaustubh: Correct. Yeah, and so that's the... Yeah, and so like going back to our original change management conversation, right? Like, your, like the owner's ability to endure pain is part A, and then part B is your team's ability to endure pain. 'Cause like that is the reality, is like change is just painful. Yeah, and like one of the things I've thought a lot about is like, okay, like how do you communicate change to a team, right? Like, when you articulate, "Hey, this new thing is coming down the pipe," whether it's a new policy, a new software, an acquisition, right? Like, how you position it internally such that like, you know, the benefits are clear. You're like realistic about the costs and the change costs. Like, there, it feels to me like there's some best practices here that like I am learning through trial and error, right? Around how to announce and implement change.

Sam: All right. Well, in a couple weeks we're gonna release an episode all about like EOS, right? Right. And that's a operating framework that that's where my answer goes to, so- Right ... maybe we'll defer on that. But I think, I hate to say it continues to be, it needs to match like the personality the, of the owner. But for you, I get the perception that m- in many things, the answer is always what is gonna create the best chance of sustainability where we minimize the short-term toll in order- Right ... to maximize our longevity and comfort in being here. Right. And so I think that generally means the speed has to be dialed down and then... Somebody told me this once: "What your kids really need is to have extreme predictability in, in what happens at home." Like, they can come home and they know exactly the vibe that's gonna exist. Mm. A predictable routine, like consistent boundaries. That's like how they get their safety is they have complete predictability. And so at work, if what your people are doing, we talk about this, right? Is like they are trading their time, uh, for a relatively low risk career and wage, and y- you the owner get burdened by the upside or downside. I, I would say like the communication just needs to be extra level to make sure- Mm-hmm that's the case. Like, there is no, "Here is the change," but almost have it be led in a conversation where they participate in the decision to make the change.

Kaustubh: Right. No, a- and you know what's kinda cool about this new acquisition I'm working on f- for the first time is Flavia and Zane are fully like working on it with me. Like, we are meeting with the seller and his number two on Friday, and like Flavia made the agenda. Sh- you know, like I'm really having them lead the like, "Hey, how are we gonna integrate these two operations?" And like that way it's not as much of a like me putting this on them, and it's really like we own this project together.

Sam: Right, but they didn't decide to do it. They didn't- Yeah. ... source it. So how did you, how did you... And, and maybe it's not the first time they've been a part of one either, right? You've done an add-on before.

Kaustubh: Yeah. No, but this is the first one- S- ... 'cause the, the add-on I did before, like nobody knew about it until like basically the week before.

Sam: Okay. So does everybody in the company know that like, uh, inorganic growth is sort of a, a tool you plan to use indefinitely?

Kaustubh: I have talked about it before to say, "Hey," like because I've done it, if we find, you know, companies that are kinda simpatico with how we like to do things and have a good, you know, brand and kinda customer base, like that is an option for us. So like that, that isn't news, I would say.

Sam: So my guess is that nobody's gonna be surprised forever, and even when the new team joins Blooma, they're gonna know fairly quickly that you guys are in the business of absorbing competitors.

Kaustubh: Yeah, totally. Yeah, and I think the... Yeah, there's this like interesting dynamic of it's one thing to absorb a competitor, it's like ano- or to understand we're absorbing a competitor. It's like another to like feel it and feel the like day-to-day impact of that, 'cause like integrating a tree com- And like this one, assuming this deal goes through, knock on wood, like it will include us having a second location, which will be big.

Sam: Oh, I forgot about that.

Kaustubh: Yeah. So that's- All right, so- ... a big lift

Sam: my, my take here is First of all, like, I know that you and I come, are cut from, like, the M&A cloth, so we see- you know, acquisitions as, like, a, a no-brainer way to grow. But given your skillset, given the opportunity, like, there's always gonna be an acquisition/integration overlay into your strategic plan and your o- and, and the day-to-day of your business. I think that will forever hamstring how much, how many other special projects you can take on at a time.

Kaustubh: Yeah, I think that's probably right. You know, like, I... And I have said this. I mean, I think I even had this in my annual letter last year, so the team definitely saw that, right? Like, I think I phrased it as kind of, like, part of my work, it's not to close deals, but it is to keep the pipeline going such that if a good deal comes its way, like, we actually are ready and able to do it. And so, you know, like, you know, Jon Matzner at Sagan, like, he loves to talk about the idea of kind of maintaining idle capacity on your team. Like, that's how you are able to really execute well is, like, you need anyone who's not your, kind of, your bottle, your, like, your key resource. Like, which he calls a constraint, but that's sort of a, there's different ways you could explain that. But, like, he wants there to be idle capacity everywhere else. And so, like, in some senses, like, if you think of your business as having, like, a fixed amount of change budget, like, if you want to be opportunistic and be able to, like, attack a deal when... 'Cause you don't really control when the deal comes your way, you know, all the time. Like, you almost have to on purpose leave some, you know, change budget idle.

Sam: And what does that take from? Does it take from, like, the organic growth that you sort of push and drive for every day?

Kaustubh: E- organic growth or more realistically it's like- Just like business improvements writ large, right? Like, it's like, you know, we right now are sales arborists. You know, we don't have regions for them. Like they, everyone goes everywhere. 'Cause when we only had two, that it didn't really make sense to have regions. Like, now we have more. Like, we actually have enough critical mass now that, like, we could allocate, you know, each of these regions ha- need a full-time arborist. But actually doing that, retraining our CSRs accordingly, like figuring out what the regions should be, like, that's a lift, right? That somebody has to undertake that, like, is getting delayed because we're doing an acquisition.

Sam: Mm. And is the acquisition gonna... It's gonna be fully absorbed so that, like, your, your team... Are you hiring any OPEX from the add-on?

Kaustubh: One quasi who, like, they, they basically have somebody who, he's kind of like a foreman in, like, the classic sense of, like, he drives around, he helps the teams, but then he also helps dispatch. So, like, he's sort of like a location manager So- Okay ... but he's also works on crews too. So that's our one that's, like, effectively OPEX, but outside of him, there's no OPEX in the business. So it's just gonna all get absorbed by our operating team.

Sam: Which means your team, starting next year especially, is- Yeah ... just gonna have to deal with more velocity.

Kaustubh: Correct. Yeah. Ideally, like, 20% more.

Sam: So, so you're already asking people, like, not- beyond M&A- Yeah beyond an integration- you are now going to ask your team forever to absorb more sales velocity, which is- Yep ... just a tax, and you're just choosing- Totally ... to go about it very, in a binary way, where it, like, will literally turn on as soon as the money gets transferred on the deal. Correct.

Kaustubh: And there's some amount of, like, when I think about change management, like, and, like, how do we do this acquisition integration better, right, than the one we did prior? Like, because I'm able to work with the team more broadly, like, we are now... Like, we hired two new CSRs from Sagan, who started yesterday, and, like, part of the reason to do that is, like, we want them to be trained and onboarded, and it's relatively cost-effective to hire them. And so, like, we can afford to hire idle capacity. And so that one of our existing CSRs, who's already good, we can kind of shift her into more of a permit management role, 'cause, like, that role is getting bigger and that Flavia owns. So, like, we're, in order to in- do this integration, you know, a couple months from now, today we are s- doing other initiatives in the business. Which feels just, like, night and day different than how we did the first acquisition. Like, the first acquisition we just, like, did it, and then we're like, "All right, we'll figure it out." Right? Totally

Sam: reactive.

Kaustubh: We just white-knuckled the whole thing. Yeah.

Sam: Yeah. Yeah, yeah. Which, by the way, is probably the norm.

Kaustubh: No, I mean, for sure. Yeah. But, and so this, but there's just, like, so clearly a, there's a better way to do it. And so, and, and so, like, going back to the original thought of, like, how much change can a team handle, right? Like, the better you manage change, the better you implement change, the more change they can handle also, right? Good point. Like, and so there's something about, yeah, I don't know. I'm, like, mixing topics a little bit now, but, like, there's something here around, like, doing a slower change, a, or a more thoughtful change, not necessarily slower, does allow you to, like, in aggregate implement more change.

Sam: I agree. Well, so let me, uh, pose a question. And I hate to do, like, the M&A discussion too much, 'cause I know that's not- Yeah ... everybody's, the, the tool they use to grow. So maybe we'll try and do it, for instance, without M&A. But what if you were buying a business of equal size or even bigger? And you know that we're gonna close in March. Like, would you, would you decline that opportunity solely because of the, like, massive change that would be dropped on your team's plate?

Kaustubh: That's a good question. I mean, I think the way I look at it, right, is, like, coming back to, like, what is our, like, mission and vision for Blooma. And if the transaction doesn't really feel like it aligns with that, which it might not if it's just too big and too different, then like yeah, we probably would decline it. Because, like, part of what I think we're building and doing well is, like, building a really strong culture and brand and place to work. And so, like, yeah, like, I mean, l- like the, our biggest competitor here, you know, they d- do things very differently than us. Mm-hmm. I don't, I don't think they're, like, openly up for sale, but like, you know, the owners seem like they've taken a bit of a step back. They hired a, a, a professional, like, CEO type of role. Like, I wouldn't be surprised, I think, if they sold in the next few years. I, I have no reason to believe they are, aren't selling, but, like, if they were, I wouldn't be shocked. And it's just, like, not the right acquisition for us, right? Like, we are doing things in a different way. We are, like, charting a course that is, looks different than they are. Which isn't to say theirs is worse, it's just different. And, like, I think it would, it would sort of, like, undermine our purpose if we went and did that deal.

Sam: Yeah, when you speak, you remind me of that, like, phrase, "Slow is smooth and smooth is fast." You're- Yeah ... sort of like moving very thoughtfully. By the way, like you've still changed a shit ton in the first- Oh, yeah ... handful of years.

Kaustubh: No, I

Sam: know. Yeah. But you've, you've built a platform now that is m- like more mature than size would indicate. Right. So that now you can scale up, whether it's organically or through M&A, and absorb a lot of that velocity. Right. 'Cause growing is painful. There's just more of everything, and it breaks your systems.

Kaustubh: No, that's, that- So- ... that's 100% right. Yeah. So but like I think the like, you know, and we talk actually about, you know, slow is... Or what is it? Yeah. Slow is smooth, smooth is fast. Like we talk about that all the time with tree work, right? It's like how we want the guys to do their tree work, like in trees. Because y- I mean like you're 80 feet in a tree with a chainsaw, right? Like you h- you gotta go s- like that is, uh, that is one of our mantras for the team. And I think like as the person in charge of deciding how much change to take on and how to implement the change, like having the judgment and the like, uh, I don't know if it's discipline is the right word, but just like, yeah, like holding back is challenging when like it's like fast is fast. You know? Like you see fast and you're like, "Ah, that's, I get that." Like fast is fast. It's, it's tough to hold yourself back.

Sam: Fast is chaotic.

Kaustubh: Yeah, absolutely. But

Sam: it's not fast. Another thing, let's not forget, somebody, uh, helped me see this recently, that some people are just more attuned to dealing with chaos, and they're really good when it comes to those kind of times where it's like sprint mentality, sort of break all the systems. They tend to burn out. They also tend to burn their team out. Mm-hmm. And so they're not like the sustainable solution. You, you appear to be playing this game for the long haul. Right. And so like a lot of the benefit you're gonna achieve is gonna be in the future after having done a lot of this work. What I don't want people to forget is like how much change you implemented in the first few years that probably felt very substantial to the business while you were doing it, right? So it may- Let's go there. Like- I don't know if it's to ask you what is the stuff you did that, like, fundamentally transformed the business in the first few years? Or like, what are the main things that a new owner ends up changing when they buy a company? Because I think a lot of us acknowledge the first year or two, like, just is, is super intense and chaotic. So why? Why is that?

Kaustubh: Yeah, I mean, I feel like the way I've... I think about a business, and we've talked about this before, right? Is like, it is a series of processes t- that, you know, start from step A, then go to step Z. And as the owner, like, uh, initially when you buy the business, you are in a bunch of those steps, right? Like you might be a core step in sending out the quote. You might be a core step in sending out the invoice. Like there, you're in a lot of these steps. And over time your job, the change you're implementing, is hopefully to build systems such that, like, that step is no longer you specifically, and instead you are now an exception to that rule. And then eventually that becomes a step of its own and falls into the sch- the schema of systems. And so I think like when I look back at Blooma and I was, was... If I were to like map that out initially, like I was involved in steps including like unlocking the front gate, right? I was in the step of like, I was the only one who answered phone calls on the weekend 'cause we had one physical phone, like a f- like an iPhone, right? For our company number. And so a lot of changes around like, hey, like, how do we handle, like, multiple people calling? How do we, you know, have good call answer rates? Like, those are all downstream of first changing, hey, we're no longer on a physical phone, we're on a VoIP system, right? Such that we can have mul- Like, there's a bunch of these like weird little changes that happened so long ago that I've almost like forgotten them, right? Yeah. And like our... And in order for like some kind of obvious downstream stuff to work, like we always needed a call-taking team, but in order to have a call-taking team, you can't be on a single iPhone, right? Like that, there, like weird... And like, and the other big one obviously was like we only ever hand wrote our quotes. We gave them to people in person handwritten. We like, you know, like ripped off the, gave them the yellow copy, we kept the white copy. And like everything we've done downstream have started with us moving that to a digital platform.

Sam: All right. I think my experience is identical. I'll frame it a little differently. When you buy a small company, it's almost always at its max capacity. Yeah. You can't go add 50% of revenue onto the business and the team and the set of processes without blowing the business up. You also I think first time small business owners, like they come in thinking they know how the business can grow. They don't- Mm ... and they have to identify how to do that. And largely it comes down to data that's not readily available. Like I, I can't... Honestly, I can't name it all the times that I got involved in a business and realized that like two thirds the business was making exceptional money and like a third of the business was losing money or something like that- Yep that requires data that isn't available, so you have to put the system in place to capture the data- Yeah ... and then put the systems in place to be able to absorb the growth. So it's almost like you have to take all those steps back. And then a year or two later, once you've done that, you can actually go grow without breaking the business- and grow- Yep, yep, yep, yep ... profitably, and grow without you, the owner, being like the chief cook and bottle washer of the business. So yeah, the more I say all this, like the more impressive like these really fast growers sound because like it just doesn't seem to matter to them. They're just plowing ahead- I know relentlessly.

Kaustubh: Well, there's something like, I think like I've thought about change as being sequential, right? Like I change the phone to a VoIP, and then I work on... But I don't change how we answer the phones yet, right? I just like do that, and I help the, our one admin person who answers phones during the day, like help, I help her learn that system. Then we start to move towards, okay, but like what are our different like answering s- types and like how do we route p- whatever. Like all, whereas like it seems to me like people who are more change aggressive, they're sort of like jumping straight to the end right away, and they're just ripping the Band-Aid. And I think there are times when like I wish I had ripped the Band-Aid.

Sam: Yeah. Here, I mean, here's an example. If you were putting in a new accounting system, would you do it at any time of the year other than 12/31? Like I probably wouldn't, right? I care too much about- Yeah ... like accounting cleanliness. Totally. So there's no chance I would ever do like a midyear implementation of an accounting system. Right. I'll bet you there are people with this mindset that are just like, "To hell with when. We're gonna do it right now."

Kaustubh: Yeah, just rip. Yeah. No, I think that's right. Yep. I mean, the one that actually I, going back to the acquisition thing, the one I kind of regret but I, I can see the benefits of was, so when I, when we acquired Out On A Limb, you know, our first acquisition, their team ran on four 10-hour days, and we ran on five eight-hour days. And so our team runs 7:00 to 3:00, and their team ran 6:30 to 4:30. And so like that's a pretty meaningful lifestyle change for everyone, like on their team if we're gonna move them to s- five-eights, right, if they're used to four-tens. And so I was sort of like... And I, I came at it from the mindset of like, "Hey, like if our team could run four-tens, like I'm kind of into this. Like I get a day back, right, like to just run the business, do operational improvements." So what I decided to do, which I, I don't know, you tell me what you think of this, but like we basically let the two locations run separately for a bit with four-tens and five-eights. And we did that for like two months of like if you were... And we were intermingling the teams, right? Because we wanted them to all work with each other, and we hadn't closed the Out On A Limb location yet. And so like- this, it was just this crazy time where it'd be like, yeah, like somebody who normally works five-eights, they would randomly have one day of their week be a 10-hour day. You know? And like vice versa. It was so dumb and chaotic. And, and there was this weird benefit, which was one, we got the data to confirm that the, the four 10s people were basically the same productive as four eights. Like, you almost lost a full day. Like, it just didn't work 'cause you'd get so much more traffic in the evening. Like you- the guys, you get tired. It's physical work, right? Like, your productivity drops at the end of the day, too. And so, like, it became pretty clear to me that like, we had to go to five eights 'cause we were just, it was just way too much of a productivity loss. And then separately for our team, our existing team who were excited about the idea of maybe going to four 10s, they came away from it being like, "Oh God, working a 10-hour day in tree work sucks. Like, never mind. We're good with five eights." So like, I kind of, we got to win the trust with the team of like, "Hey, we tried it," which we truly sincerely did. "It's not the right fit for us. We're moving everyone to five eights. This is why." And like, you know, it, it was harder for obviously the Out On A Limb team, but they got some raises associated with it at the time. And like our team, there was no grumbling 'cause they were like, "Yeah, no, you tried it. Didn't work. We agree."

Sam: Versus somebody with a bit of a chaos approach would probably say, you know, "Logic tells me- Yeah ... four 10s is better. Let's make the hard cut. Everybody's gonna switch." Yep. And then let's say you landed on the same conclusion. Now everybody switches back and you've burned- Yeah ... everybody else out.

Kaustubh: Correct. And like, the entire team is just pissed at you and has no faith in you anymore.

Sam: Oh, and by the way, your P&L probably looks like shit for a little while because, you know, that actually- Yeah, 'cause you lost a day ... shows up in your P&L. Yeah.

Kaustubh: Yeah. No, exactly. So that's the downside, right? And so like, it's, it's this weird thing of like, okay, like if you are making the right decisions consistently, being fast is better, right? But like, I don't, I, I was hoping we would land at four 10s, right? That was the hope. I wasn't willing to pull the, rip, rip the mandate, and I'm glad I didn't. And, and also like, I could have ripped the mandate the other way, right? I could have said, "Hey- Yeah ... new team, you just have to go to five eights. That's just what we do." And in that scenario, like, they probably like me even less than they already do 'cause they didn't, you know, sign up to work for me. And then my team is like, "What the hell? Like, why didn't we go to four 10s?"

Sam: I mean, y- y- I'm not s- I will never say one way is right or wrong. I think it ultimately- Yeah ... comes down to, like, the personality of the owner, and let it trickle down from there.

Kaustubh: Yeah. But those two months were chaos, right? Yeah.

Sam: You were running two different-

Kaustubh: And I think, like- ... businesses. Yeah. And I think I came away from that a little bit being like, "Man, I should have ripped that Band-Aid faster." But now that we've talked about it, I'm like, actually, you know what? No, it kinda worked out. It just sucked.

Sam: Yeah, but that's small business ownership.

Kaustubh: Yeah. No, for sure. Um, so

Sam: anyways, I've, I've come back

Kaustubh: around- You, you look back and- ... that I'm okay with what I did.

Sam: Everything is painful. Every ta- thing takes too long, and then you look back on 1/1 of, at the year prior, and you're like, "Oh, that was a blur, and here's my P&L, my only scorecard."

Kaustubh: My only scorecard. Yeah, exactly. Oh, brutal. Okay. Thanks as always for listening to The Intentional Owner, and that in two weeks you will hear us talk about EOS, which in reality we're gonna record right now. Um-

Sam: So if you're looking at us like you're wearing the same clothes and you haven't moved positions- That's true.