How Scott Denbo Recapped Commercial Insurance Associates and Added 12 Owner Producers

Scott [0:00:00]: Producers in the today or the magic they make this thing happen.

Scott [0:00:02]: Certainly on the commercial side.

Scott [0:00:03]: You know, I think it's true of all parts of the business.

Scott [0:00:05]: The employee benefits personal lines.

Scott [0:00:06]: They have a skill set that not many people have the really good ones, yeah, It's kinda like magic.

Scott [0:00:12]: And they're out there, yeah, in the weeds every day, and they earn their keep.

Scott [0:00:16]: I mean, they should be the highest paid people in a selling organization, like, one hundred percent.

Callan [0:00:23]: Welcome to The Insurance Growth Lab.

Callan [0:00:25]: Where we go deep on the growth campaigns and strategies driving real results in the insurance industry.

Callan [0:00:31]: I’m Callan Harrington, founder of Flashgrowth and in each episode, I sit down with marketing and growth leaders from carriers and shirt tech and top brokers to break down one specific initiative, whether it's how they marketed a product, scale to channel or solve a specific growth challenge.

Callan [0:00:48]: It's no fluff, just tactical insights the you can apply in your own company.

Callan [0:00:53]: So Scott, one, I'm very excited to talk about how you guys recap the business and what that means for CIA going and I think it's one of the most interesting stories I've came across, and I think a lot of our listeners will see that as a pretty unique option that they could potentially do for themselves, not that that's easy as we'll find out, but I think it's really interesting.

Callan [0:01:19]: Before we dive in into all that, Can you tell us a little bit about you being an actual consumer and user of your own insurance?

Scott [0:01:27]: Yes.

Scott [0:01:27]: So definitely can.

Scott [0:01:28]: I had have had a recent event.

Scott [0:01:30]: My wife rear ended two weeks ago on the way to go get her nails done.

Scott [0:01:34]: She was in traffic out in front of this hospital.

Scott [0:01:37]: Somebody rear ended a work van at...

Scott [0:01:39]: I don't know.

Scott [0:01:40]: Probably...

Scott [0:01:41]: They said ten miles an hour after looking at the damage and finding out the car was totaled this week.

Scott [0:01:46]: It was probably faster than that.

Callan [0:01:48]: So...

Callan [0:01:48]: Yeah.

Callan [0:01:48]: Probably.

Scott [0:01:49]: We got go car shopping today, which was really exciting.

Scott [0:01:51]: And interestingly, police reports right now in National taking a very long time for some reason.

Scott [0:01:57]: So we went ahead and turned into into our own insurance carrier, which is Chu.

Scott [0:02:01]: And they have been super great to deal with, and I guess, we'll sub against the, the gentleman's fan that hit us.

Callan [0:02:07]: What was it that was so different about this for you going through the experience?

Scott [0:02:11]: I'd really just think it's...

Scott [0:02:12]: Is a consumer you really don't think about, like, what you're buying and what that means until you have the incident.

Scott [0:02:18]: And, you, Chu has obviously an upgraded product which is great.

Scott [0:02:21]: But the claims adjusting team made it super easy for me.

Scott [0:02:25]: It was White glove service.

Scott [0:02:26]: I I feel like I got value out of paying what is probably a higher premium and I could with somebody else.

Scott [0:02:31]: And that's then that's okay.

Scott [0:02:33]: I think...

Scott [0:02:33]: Yeah.

Scott [0:02:34]: It makes you think about the way that you approach your customers, yeah.

Scott [0:02:37]: Talking to you about the value that they can get from insurance and that...

Scott [0:02:40]: Yeah, you're really projecting their assets at the end of the day.

Scott [0:02:42]: It makes it, you know, easier to communicate with them when you when you've had an experience like that.

Scott [0:02:47]: And, yeah, as an insurance brokers firm, we have claims, but those are, like, financial transactions, Nobody actually got hurt.

Scott [0:02:53]: No property damage.

Scott [0:02:54]: You know, it's an unfortunate part of business, and you you hope to avoid them at all cost do the right things to avoid them all cost.

Scott [0:02:59]: But when you're you're a real physical property or your your house or something that gets damaged, and you had to experience what insurance company can do for you.

Scott [0:03:08]: And what they can.

Scott [0:03:09]: I mean, I know people have had plenty of bad experience with insurance as well, but when you have a good experience, walk phone really good about it.

Callan [0:03:14]: Well, I think that's a really interesting example just in general.

Callan [0:03:17]: I mean, I think about this when I've gone through this.

Callan [0:03:18]: And it's, you know, it's funny when you see somebody that never had an insurance license, and they're talking about it and I'll and I'll deal with this.

Callan [0:03:25]: And we'll be like, well, why don't we do this?

Callan [0:03:28]: It'll it'll be cheaper.

Callan [0:03:29]: It's like, well, it doesn't work that.

Callan [0:03:31]: It's like, yeah.

Callan [0:03:32]: You know what?

Callan [0:03:32]: It will be cheaper.

Callan [0:03:33]: And if we never get a claim?

Callan [0:03:34]: Great.

Callan [0:03:34]: But the second you get a claim and you realize what that thing's actually going to pay.

Callan [0:03:38]: You're going to regret that you didn't get the right coverage.

Callan [0:03:42]: And, like, that your chu example is a perfect example of that.

Callan [0:03:45]: It's gonna it cost more.

Callan [0:03:46]: It's a premium product And as a result, it did like exactly what you needed it to do.

Scott [0:03:53]: Yeah.

Scott [0:03:53]: So we spent the day, like, yet shopping for cars in the afternoon shopping for cars today.

Scott [0:03:57]: We're getting the exact same car.

Scott [0:03:58]: I finally convinced my wife was the right move.

Scott [0:04:00]: But...

Scott [0:04:01]: Yeah.

Scott [0:04:01]: It's me.

Scott [0:04:02]: Mean, I, I...

Scott [0:04:02]: I've had...

Scott [0:04:03]: You, unfortunately, used insurance a couple of times.

Scott [0:04:05]: You, at the personal level I had a tree fall in my house in two thousand and seventeen and caused a bunch of damage.

Scott [0:04:12]: We were planning on doing a renovations at the timing of it was good, and it just sped up the renovation probably by about six months.

Scott [0:04:17]: But, again, yeah, the insurance care at the time to complete care of us, make sure that we were taking care of, yet, asked us a lot of questions, made payments to us.

Scott [0:04:27]: And again, it's...

Scott [0:04:28]: I think it's a story I can tell clients to empathize with them when they do have a claim, I think it also, yeah, something we tell our staff.

Scott [0:04:34]: Hey.

Scott [0:04:34]: Like, talk about your, you know, claims that have happened to you.

Scott [0:04:37]: Because it it is meaningful.

Scott [0:04:38]: Even with, yet, the transition from commercial insurance to personal insurance, personal lines insurance.

Scott [0:04:43]: I still need make issue empathetic.

Scott [0:04:45]: If you've had that experience and you can say, hey.

Scott [0:04:47]: Like, I've been through something similar.

Scott [0:04:48]: This is what you should expect.

Scott [0:04:50]: And this is the low level of service that we're trying to provide as a firm is the insurance broker, know what you should expect from your insurance company.

Callan [0:04:56]: Yeah.

Callan [0:04:56]: I love it.

Callan [0:04:57]: What I took from that is if you're gonna have a claim, make sure it's when you're doing a remodel.

Scott [0:05:02]: Yeah.

Scott [0:05:02]: It's really good deal for me.

Scott [0:05:03]: I probably made out a lot better.

Scott [0:05:05]: I think I got three months free rent.

Scott [0:05:06]: Yeah.

Scott [0:05:07]: While they repaired my roof.

Callan [0:05:08]: No.

Callan [0:05:08]: That's amazing.

Callan [0:05:09]: And so I I'm excited to dive into this.

Callan [0:05:11]: Commercial insurance associates had pretty significant amount of success.

Callan [0:05:15]: You know, you guys moved up five spots to number seventy one on the insurance journal which just came out a couple weeks ago.

Callan [0:05:21]: Yep.

Callan [0:05:21]: For twenty twenty six.

Callan [0:05:22]: Moved up five spots on business insurance list, and then you're also just released that your top insurance employer by insurance business America.

Callan [0:05:30]: That's the third year running for that.

Callan [0:05:32]: Mh.

Callan [0:05:32]: And then and then as I understand, you guys are just about thirty seven million in revenues.

Callan [0:05:36]: Is that right?

Scott [0:05:37]: We'll, I think production revenue.

Scott [0:05:38]: We're...

Scott [0:05:39]: We'll finish up.

Scott [0:05:40]: I think hopefully, this year a little bit more than that from a production revenue standpoint.

Scott [0:05:43]: And, yeah, just under forty five million dollar in total revenue.

Callan [0:05:47]: So so forty five billion.

Callan [0:05:48]: Okay.

Scott [0:05:49]: Total revenue.

Scott [0:05:49]: So, yeah.

Callan [0:05:50]: That is a worthy correction.

Scott [0:05:52]: Yeah.

Scott [0:05:52]: Yeah.

Scott [0:05:52]: I at fingers crossed, We did not have a good August, but I can tell you eighteen different reasons for why we did have a good August, but we'll make it up in this, yeah, last quarter of.

Callan [0:06:01]: I love it.

Callan [0:06:02]: So what I wanna talk about is, you guys...

Callan [0:06:05]: When I was coming across you guys and and just doing some reason.

Callan [0:06:08]: I heard about you guys before, but the thing that jumped out to me was this recap that you did.

Callan [0:06:14]: And so in, I believe this was in January one in twenty four.

Callan [0:06:18]: And then what you specifically did is you bought down the producer comp from fifty fifty to forty forty, and you converted the ten percent buy down into equity and added twelve member owner agents producers.

Callan [0:06:33]: Okay.

Callan [0:06:34]: So I wanna go...

Callan [0:06:36]: I wanna go all the way back.

Callan [0:06:38]: So set this scene for me here, you one of the interesting things about this is in doing the research, like, you guys at the time, we're compounding at almost thirty percent per year.

Callan [0:06:48]: Yep.

Callan [0:06:49]: From the upside, that not lot's going wrong here.

Scott [0:06:53]: Yeah.

Scott [0:06:53]: You feel like nothing's broken.

Scott [0:06:54]: Right.

Scott [0:06:55]: And I don't know that anything really was broken.

Scott [0:06:57]: We just had a long term problem that we knew we had to fix.

Scott [0:07:01]: No one really wanted to deal with it, and I got stuck with it.

Scott [0:07:05]: Alright?

Scott [0:07:07]: So

Callan [0:07:08]: the long term problem meeting that you're at fifty fifty comp.

Callan [0:07:10]: Is that correct?

Scott [0:07:11]: No.

Scott [0:07:11]: The long term problem was actually for.

Scott [0:07:12]: It wasn't the compensation program.

Scott [0:07:15]: And I mean, it was something...

Scott [0:07:16]: I think one we sold pretty hard and allowed us to recruit people.

Scott [0:07:19]: To the producers in the today or the magic and make this thing happen.

Scott [0:07:23]: Certainly on the commercial side.

Scott [0:07:25]: You know, I think it's true of all parts of the business, the employee benefits personal lines.

Scott [0:07:28]: They have a skill set that how many people have the really good ones, you yeah, It's kinda like magic and they're out there, yeah, in the weeds every day, and they earned their keep.

Scott [0:07:38]: I mean, they should be the highest paid people in a selling organization, like, one hundred percent.

Scott [0:07:42]: But we were had long term graduation issues, and and they kinda hit us in the face.

Scott [0:07:47]: In the end of twenty two where we had one partner who had a a pretty sizable stake about ten and twelve percent.

Scott [0:07:54]: Nasa's retirement, and we had another partner that is...

Scott [0:07:57]: Yeah.

Scott [0:07:58]: At the time is aging, still aging I guess, but was doing some mistake planning and one it take some chips off the table.

Scott [0:08:03]: And so we had this very large obligation.

Scott [0:08:07]: In the grand scheme of things, I guess, very large.

Scott [0:08:09]: Probably not not correct, but it it was, yet, you know, sizable obligation, ten million dollars to twelve eight dollars that we had to fund, and we were like, okay.

Scott [0:08:17]: Well, what happens if Yeah.

Scott [0:08:18]: Our other partner drops dead to Markets hit by a mac truck or somebody does this or somebody does that.

Scott [0:08:23]: And so it really kinda hit us in the face and we said, okay.

Scott [0:08:27]: It is really actually time to, like, have a real conversation about it.

Scott [0:08:30]: Yeah.

Scott [0:08:30]: I will say, my dad who's who's the founder of CIA back in two thousand two, he was always super re.

Scott [0:08:36]: So was his partner, Johnny, who's the the gentleman that that retired in twenty twenty two to make any changes to do long term congratulations, and me and some of my younger partners I think every year we're like, okay.

Scott [0:08:47]: Why don't you guys start selling some shares.

Scott [0:08:48]: Like, it's it's time.

Scott [0:08:50]: They're like, no.

Scott [0:08:51]: That, yeah, We're growing at twenty six point, you know, something percent C.

Scott [0:08:54]: And why would I sell them out in the...

Scott [0:08:57]: Here's is the...

Scott [0:08:57]: You know, ultimately the problem.

Scott [0:08:58]: We were actually valued internally on a revenue multiple.

Scott [0:09:02]: And so it wasn't Eb, which was, you, be way more traditional.

Scott [0:09:06]: And so, yet, they were seeing all the growth.

Scott [0:09:08]: They're were seeing the value grow.

Scott [0:09:09]: And they're were like, why would I sell now?

Scott [0:09:10]: I'll wait five years or sell any of it, I'll wait five years And so and just kinda of became this perpetual problem, And I think everybody in knows my dad is he's has got a Bulldog personality and reasoning with him sometimes is is difficult.

Callan [0:09:22]: I mean, he...

Callan [0:09:23]: If I understand this correctly, he was a starting offensive alignment for Tennessee.

Scott [0:09:27]: Correct.

Scott [0:09:27]: Bust the Bulldog.

Callan [0:09:29]: Won an Sec championship, and and and then also was a rhodes scholar.

Scott [0:09:34]: Yes.

Scott [0:09:34]: You is true.

Scott [0:09:34]: And he went to med school for a year as well.

Callan [0:09:37]: Unbelievable.

Callan [0:09:37]: Alright.

Callan [0:09:38]: So anyway.

Callan [0:09:38]: So you're having this conference conversation.

Scott [0:09:41]: Having his conversation, yeah, with this human being who he great, but he's definitely...

Scott [0:09:45]: Yeah.

Scott [0:09:45]: He he believes he what he believes changing his beliefs is kinda tough.

Scott [0:09:48]: So we had originally...

Scott [0:09:49]: I to get step back from the business.

Scott [0:09:51]: My first wife passed away in two thousand twenty.

Scott [0:09:53]: And I had really had not been active for two years aside from just kinda protecting my book, and all the other things that you do taken care of my family while she just sick.

Scott [0:10:02]: She like...

Scott [0:10:03]: She had you had really rare cancer.

Scott [0:10:05]: So I kinda came back to the business early twenty twenty one.

Scott [0:10:08]: Trying to get my back together hunting for ways that I could help the business.

Scott [0:10:12]: And we had grown a lot during the time.

Scott [0:10:14]: We had just associated some producers in baltimore at the beginning of twenty twenty, had continue to grow our trucking practice with some additional producers.

Scott [0:10:20]: There is, yeah.

Scott [0:10:22]: And just adding people.

Scott [0:10:23]: I mean, yeah, again, our split really spoke to people, yet, as it should, but we still had this graduation problem.

Scott [0:10:29]: And we only had seven, members in the farm.

Scott [0:10:31]: And I would say, initially didn't really think outside the box.

Scott [0:10:36]: You know, I kind of, like, you know, tried putting a graduation plan together in twenty two, early twenty three, mainly twenty two that I cobb together just, you know, talking to friends in the business.

Scott [0:10:47]: Or what other firms were doing.

Scott [0:10:49]: Yeah.

Scott [0:10:49]: I would say traditional kind of partnership stuff in order to bring in new partners, and he really wasn't gonna work for us.

Scott [0:10:56]: I actually was doing a presentation in front of a group of peers in a peer group that I meant called Interfere.

Scott [0:11:02]: On our graduation plan, and I'm standing up in front of, like, some really smart people.

Scott [0:11:06]: Yeah, Heads of some very large firms and respected firms, and I'm going oh, crap.

Scott [0:11:12]: This is not good.

Scott [0:11:13]: Like, actually, like, saying all this stuff out out about what we're gonna do.

Scott [0:11:16]: And then I got really hard questions from some really smart people and I was like, okay.

Scott [0:11:21]: I I'd, like turned to one of my partners after I got done with my presentation.

Scott [0:11:23]: I was like, I were throwing this thing in the trash and lighting in on fire.

Callan [0:11:27]: And this was just to clarify, the thing they were lighting on fire was these previous...

Callan [0:11:30]: Plans that you had laid out for punctuation.

Callan [0:11:34]: Is that correct?

Scott [0:11:35]: Correct.

Scott [0:11:35]: Yeah.

Scott [0:11:35]: Gotcha.

Scott [0:11:36]: And it was something that, like, yeah, My my board was kinda on on track with.

Scott [0:11:39]: Yeah.

Scott [0:11:39]: We thought some of the producers that that were not members the firm that were dummy two employees were potentially gonna on track for we also got a lot of kind of negative feedback and then, yeah, when I talk to this group I got.

Scott [0:11:50]: More questions is you maybe think, okay, hey.

Scott [0:11:53]: This is not a really good idea.

Scott [0:11:54]: How are we gonna deal with this long term.

Callan [0:11:56]: Can you walk through some of those?

Callan [0:11:57]: I'm kinda curious.

Callan [0:11:58]: Like, what were are the ones?

Callan [0:11:59]: It was more of

Scott [0:12:00]: like, you know, I think, like, traditional partnerships, and I I again, if get set up right, And I think people trade stock and they sell their stock or they sell their equity in the firm on a consistent basis.

Scott [0:12:08]: And I think a lot of the traditional firms, It's like, yeah, you hit a certain age at sixty, you start selling some of your shares and you gotta be out by the time you're sixty five.

Scott [0:12:16]: So there's equity for people to buy and you're bringing in new people on the back end to try to buy that equity as quickly as possible.

Scott [0:12:22]: I think it works okay.

Scott [0:12:24]: And, again, you gotta...

Scott [0:12:24]: There's some things that you gotta do to prep for it.

Scott [0:12:26]: Gotta be able to have a lending facility for those producer employees they can buy the stock so they can can buy enough of it that is meaningful, But that was essentially what we were trying to do.

Scott [0:12:36]: It.

Scott [0:12:36]: But it was tough especially with a fifty bit split.

Scott [0:12:38]: The business was not super profitable as you can imagine it those sorts of splits, and it didn't allow us to reinvest in a big way.

Scott [0:12:46]: And I think people kinda said, well, what's the value proposition for me to be a member of the firm?

Scott [0:12:52]: I, like, I see a the Fifty split, but the equity is gonna...

Scott [0:12:55]: You know, it's gonna inch up over time, but because the firms not meant to be super profitable, I think a lot of people were scratching their head head about it.

Callan [0:13:03]: So if you don't.

Callan [0:13:04]: I wanna play that back real quick because I think that's really interesting.

Callan [0:13:06]: So what I'm hearing and you say is when you're looking at this model that you're looking at at the time.

Callan [0:13:11]: Essentially, they've got a pretty healthy split.

Callan [0:13:14]: They're doing pretty well.

Callan [0:13:15]: Yep.

Callan [0:13:15]: And so their thought is naturally, I'll be able to buy equity...

Callan [0:13:19]: They're probably not even thinking too much about.

Callan [0:13:20]: And, Could be wrong here This is an assumption.

Scott [0:13:22]: Not thinking about it all.

Callan [0:13:24]: Okay.

Callan [0:13:24]: So they're not thinking about, like, the total valuation.

Callan [0:13:26]: And like, if they do get some equity, that's just kinda icing on the cake because they're making good month, the top producers are probably doing very well is my assumption.

Scott [0:13:34]: Doing very well.

Scott [0:13:34]: Doing very well in that model.

Scott [0:13:35]: And I think they also just said, hey, like, value the firms not gonna grow that much.

Scott [0:13:39]: Because the splits are are so high.

Scott [0:13:41]: And you guys aren't like enormously profitable to drive, like, valuation.

Scott [0:13:44]: I think they were also kinda scratching their head?

Scott [0:13:46]: It's okay.

Scott [0:13:46]: What's the value proposition to me.

Scott [0:13:47]: I may get, like, a decent little distribution off the back end, but I can't buy enough stock that it's gonna be meaningful.

Callan [0:13:53]: Now I'm like, dying to get, like, fast forward to how you'd ended up pulling this off, but I don't wanna cut y'all because this is great.

Callan [0:13:58]: Kia.

Callan [0:13:58]: So I'll those keep rolling on that.

Callan [0:14:00]: Yeah.

Scott [0:14:01]: No.

Scott [0:14:01]: So it actually does seem short meeting.

Scott [0:14:03]: We'd had had a investment banker guy in John K from Dow Hale yet, they produced the hell hills report and also have a investment banking wing coming into a presentation.

Scott [0:14:13]: He basically laid out a paradigm I'm at three different firms.

Scott [0:14:16]: The debt finance firm, the preferred equity finance firm, and then the private equity finance firm.

Scott [0:14:21]: And so it was, Yeah.

Scott [0:14:23]: Looking at returns on each of them, and what was best to the founder owners of the business.

Scott [0:14:28]: And so super interesting.

Scott [0:14:30]: I grabbed him after he got done presenting at the bar and said, hey, you're kinda looking at this differently than than, yeah, A lot of people I've talked to certainly differently than I'm I'm thinking about it.

Scott [0:14:39]: And he wasn't really talking about graduation, but it was just kinda his view of the business that kinda caught my attention.

Scott [0:14:43]: And so he's like, yeah.

Scott [0:14:45]: Let's talk.

Scott [0:14:46]: I got an idea that that I think maybe be helpful.

Scott [0:14:49]: So we hooked up, but I think that that meeting was like, November twenty twenty two.

Scott [0:14:53]: We hooked up you know, December and January of of that year started of having conversations around it and came up with this buy down strategy.

Scott [0:15:01]: Presented our board in early, February of twenty three, And initially, All our board was like, okay.

Scott [0:15:09]: That seems to make sense.

Scott [0:15:10]: Like, I get the buy down strategy.

Scott [0:15:12]: And, you know, everybody who was was, I guess, an Og owner, like me or my dad.

Scott [0:15:16]: Everybody went through the buy down process.

Scott [0:15:18]: So it wasn't just the producers that we we're trying to bring on board who didn't have equity in the firm.

Scott [0:15:24]: It was everybody.

Callan [0:15:25]: So I get a random question here.

Callan [0:15:27]: Yeah.

Callan [0:15:27]: Are all the producers at a forty forty comp now across the board?

Callan [0:15:31]: Correct.

Callan [0:15:32]: Okay.

Callan [0:15:32]: Mh and so when you...

Callan [0:15:34]: Like, you guys were on the same fifty fifty as well, and you did a buy down yourself to get your shares.

Callan [0:15:39]: Okay.

Callan [0:15:40]: Right.

Callan [0:15:40]: Okay.

Callan [0:15:40]: Gotcha.

Callan [0:15:40]: Just wanted to clarify that.

Scott [0:15:42]: Yeah So we treated everybody even see exactly the same.

Scott [0:15:45]: So people who had, yeah, ownership of the time.

Scott [0:15:47]: They took a haircut on their compensation.

Scott [0:15:49]: The people that that we wanted to recruit his members took a haircut on their conversation.

Scott [0:15:53]: But, yeah.

Scott [0:15:53]: Originally, the board kinda I said, okay, yeah.

Scott [0:15:55]: Let's do this, but we have a yes.

Scott [0:15:56]: Obviously, have some work to do.

Scott [0:15:57]: And I I remember it's probably about two weeks later.

Scott [0:15:59]: I was having a conversation with my dad.

Scott [0:16:01]: And he's like, I'm not doing that.

Scott [0:16:03]: I'm like, you're not doing what?

Scott [0:16:04]: He's like, the Dow hale plan.

Scott [0:16:06]: I'm not not doing it.

Scott [0:16:06]: I'm not doing it.

Scott [0:16:07]: Like, I just, like, we're not changing.

Scott [0:16:09]: We're not gonna do...

Scott [0:16:10]: We get do this, and I was like, I Like, okay.

Scott [0:16:14]: So it turned into probably four months of arguments, like, literally daily about, you, what the value was this the firm, you, what the value was to him is is the largest shareholder at the time what the value of...

Scott [0:16:31]: Yet, literally, yeah, really just for graduation.

Scott [0:16:34]: Like, hey, if we don't do this, like, there's not a lot of other solutions for us.

Scott [0:16:39]: The other thing that that was interesting is we did not have non solicit unsolicited and not at the time.

Callan [0:16:43]: Interest thing.

Scott [0:16:44]: That's that's something that I forgot to tell you.

Scott [0:16:46]: So it was...

Scott [0:16:47]: Again, kinda like meant to be this really old school for it.

Scott [0:16:49]: And I understand it.

Scott [0:16:50]: My dad came from a place where all the brokers were to ninety nine.

Scott [0:16:53]: You a place called security insurance

Callan [0:16:56]: commissioned like commission Yeah.

Scott [0:16:58]: And he ultimately left because him and the owner at the time could figure out a way to perpetuate it.

Scott [0:17:02]: And so if he decided to start commercial insurance associates.

Scott [0:17:04]: So you had thought maybe, like, that experience would would have, you know, rung his belt a little bit.

Scott [0:17:08]: It didn't again, yeah, God love it.

Scott [0:17:11]: But so we we argued about it a lot.

Scott [0:17:13]: And I, you know, I can't remember exactly what I said to him, ultimately, they kinda, like, changed his mind.

Scott [0:17:18]: I think, like, he had sold a family business, a scrap metal business about two thousand seventeen.

Scott [0:17:24]: And, ultimately, I think I called him a bad name and said, hey, partners you guys didn't sell this because you guys can agree as a board, you know, what to do with the with the family business.

Scott [0:17:33]: And so either we can figure it out or we don't, but, like, we're gonna have to do something, like, sell the company or something like that, and we can't figure this out.

Scott [0:17:40]: So Ultimately, he kinda, yeah, it came to...

Scott [0:17:43]: My brother's one of my business partners came to as well, and, yeah, everybody else kinda fell mind on the the kind of original seven member board.

Callan [0:17:50]: Alright.

Callan [0:17:50]: I'm gonna ask a dumb question.

Callan [0:17:51]: Why not sell?

Callan [0:17:53]: At your size, growing at that rate, in that year specifically, I mean, this would have been an absolute gold mine.

Scott [0:18:01]: Well, I mean, at the time of the seven, like Bounty members.

Scott [0:18:04]: I don't know controlled, like, sixty percent of the revenue, so we probably did that There's forty percent that we didn't.

Scott [0:18:08]: It the numbers may not be right.

Scott [0:18:10]: But there's a portion of term that if we chosen to sell we couldn't have because we didn't have non competes not solicit.

Scott [0:18:15]: That wasn't like a big, big part of our thought process to be completely honest.

Callan [0:18:20]: Yeah.

Callan [0:18:20]: Yeah.

Scott [0:18:20]: It was more, like, hey, like, yet.

Scott [0:18:22]: I take at the time.

Scott [0:18:24]: Like, I'm forty eight today.

Scott [0:18:24]: So it'd would've been, like, forty five then.

Scott [0:18:26]: Yeah.

Scott [0:18:27]: I don't really wanna work for anybody else.

Scott [0:18:29]: My brother...

Scott [0:18:29]: Yeah.

Scott [0:18:30]: God love him does not need to work for anybody else and can't work for anybody else.

Scott [0:18:34]: And, yet, I think there's just a lot of entrepreneurial spirit within the from.

Scott [0:18:38]: That's something we really really believe in.

Scott [0:18:41]: And at the timing was definitely not right.

Scott [0:18:43]: It wasn't something we leaving considered it when it's just...

Scott [0:18:46]: It was a reality check though, hey, Like, we may have to, if we can't figure this out.

Scott [0:18:51]: In being forced to sell in business sucks.

Callan [0:18:54]: Oh, for sure.

Callan [0:18:54]: But and I think this is something I think a lot of people don't realize is that everything could be going great, and it's...

Callan [0:19:00]: I think people oftentimes, it's easy to look at a firm of the size that you guys were growing at the rate that you were and say, Well, those...

Callan [0:19:07]: What I just said, those guys can sell for a hundred million dollars.

Callan [0:19:10]: Why would they not sell.

Callan [0:19:11]: And there's always things like, well, this fifty fifty comp would have been a problem.

Callan [0:19:15]: And actually, the reality is the non solicit, and those would have been a problem.

Callan [0:19:19]: And if you would have sold depending on who that agency was, they would have made some harsh decisions very quickly.

Scott [0:19:27]: They had to made some really harsh decisions.

Scott [0:19:28]: It would have been a very hard deal for somebody to consume.

Scott [0:19:32]: And, yeah, we just didn't have the structure in place.

Scott [0:19:34]: I think the other thing is, yeah.

Scott [0:19:35]: It just is...

Scott [0:19:36]: Yeah, the business was transitioning to the next generation.

Scott [0:19:39]: I think there was also just a lot of pride.

Scott [0:19:41]: Hey, We have built a really good business.

Scott [0:19:43]: Yeah.

Scott [0:19:43]: A very growth centric business.

Scott [0:19:45]: Let's figure out how to take it to the next level.

Scott [0:19:47]: And do it organically.

Scott [0:19:49]: So that was probably the driver more than anything.

Scott [0:19:51]: And, yet, fortunately, yeah know, my dad and some of our other their other partners ultimately listened, but it took some doing.

Scott [0:19:58]: It.

Scott [0:19:58]: Originally I thought it was gonna be, yeah, fairly easiest naive first time, yeah, CEO stupidly as first time CEO.

Scott [0:20:06]: But thought it was gonna be easy pushing through the board and, yeah, Thing that think people will be regional.

Scott [0:20:11]: But, you know, at end of the day, it's like any other business decision, like, there's facts and then there's motion.

Scott [0:20:15]: It's not really that different for people like purchasing yan insurance from you.

Scott [0:20:19]: Like, at the end of the day, you've gotta figure out problems with somebody's insurance program, get them emotional about it and why they should fire, yet, their current insurance broker moves to you.

Scott [0:20:27]: So...

Scott [0:20:28]: There's a lot a salesman shift and those sorts things that that yet, obviously had to go into it.

Scott [0:20:32]: But you had kinda...

Scott [0:20:33]: I kinda just stupidly thought the facts just spoke with themselves.

Scott [0:20:35]: Hey, This the problem.

Scott [0:20:36]: This is the only solution I can really come up with.

Scott [0:20:39]: In, like, looking back on it, there probably should've have been some other solutions on the table.

Scott [0:20:42]: I still think this was the right solution, but we could've have done things a different way.

Scott [0:20:47]: We could have, you, yeah, said, hey, you know, we're gonna set up a bunch of LLC and each of our, like, satellite offices.

Scott [0:20:53]: We're gonna have ownership the at.

Scott [0:20:55]: And, Yeah.

Scott [0:20:55]: Yeah.

Scott [0:20:56]: They're there are a big different ways to...

Scott [0:20:57]: Solve it.

Scott [0:20:57]: I think looking back on it.

Scott [0:20:59]: I think I...

Scott [0:20:59]: Yet, I rolled into being, you, the CEO in beginning of twenty twenty three.

Scott [0:21:04]: I think yet, stupidly, you, inexperienced whatever.

Scott [0:21:08]: I tried to tackle the hardest problem first and looking back on it, playing money morning quarterback should have dropped targeted something else in twenty twenty three than what I did.

Scott [0:21:16]: But yeah.

Scott [0:21:17]: It's either ear there.

Callan [0:21:18]: So you made this decision that this was what you're going to do?

Callan [0:21:21]: I guess a couple things, how did you circulate this in...

Callan [0:21:26]: With these producers, what did that look like?

Callan [0:21:30]: Can you walk us through that?

Scott [0:21:31]: So I think the one thing that we ran to that we weren't expecting is wonders there's a lot of work to do once we decided we were gonna do it.

Scott [0:21:37]: Like, on the legal...

Scott [0:21:37]: Yeah, the legal front getting other the docs, like, updating the operating agreement.

Scott [0:21:41]: All that was...

Scott [0:21:42]: Slower than what we expected.

Scott [0:21:43]: And some of it was rn in experience.

Scott [0:21:45]: Some of it was probably just know not knowing how much details we went into it and what changes we needed to make to the business from a legal standpoint from an operational standpoint, So we decided to roll it out.

Scott [0:21:55]: I think, like, October, I am making it up October fifteenth of twenty twenty three.

Scott [0:22:00]: We we brought, you, all our producers.

Scott [0:22:01]: And at the time, we finished twenty twenty three at forty three million dollars of revenue.

Scott [0:22:04]: So we were...

Scott [0:22:05]: Yeah, doing really, really well again huge growth over six, seven years.

Scott [0:22:09]: And so we had all the producers in town.

Scott [0:22:11]: We rented out a big room in in in a hotel.

Scott [0:22:14]: We had, yet had, a a friend of ours that does, yet, speak engagements kinda come in and do some leadership training with us, which is a lot of fun.

Scott [0:22:23]: Lady named Tony Cooper was great.

Scott [0:22:25]: And then had John Cra and his team come down.

Scott [0:22:28]: And so we...

Scott [0:22:29]: Everybody knew what what we were talking about we hadn't, like, actually, like, trickled out what the plan looked like.

Scott [0:22:34]: So we put a big slide deck together.

Scott [0:22:36]: I presented some stuff.

Scott [0:22:37]: John presented a lot of stuff and him and his team present a lot of stuff.

Scott [0:22:41]: And we got, like, very good questions back from the producers that were there.

Scott [0:22:44]: I meaning, that, yet, suggestions about, you, operating agreement tweaks that we'd be maybe be willing to make suggestions on, yet, unit grants, stock grants that that, yet, people had, like, good questions.

Scott [0:22:56]: Looking back on it, I think times like one of those things it kills all deals and being, like, the kinder gentle board, we basically said, hey, again, because we didn't have not not competes.

Scott [0:23:07]: We wanna know by December first if you're were gonna stick around.

Scott [0:23:09]: So we gave people, like a lot of times, six to eight weeks, something like that to make a decision.

Scott [0:23:13]: Looking back on it, I probably wish should would have shortened the length.

Scott [0:23:16]: And I think it just gave people too much time to say, hey, is this really what I wanna sign up for I'm sure that there was some head scratching people were like, oh, these guys are really just doing this so they can sell us next year, and I guarantee if people were thinking about that.

Callan [0:23:31]: What was the impact of that?

Callan [0:23:32]: So you mentioned you waited a while.

Callan [0:23:33]: What was the impact of that weight?

Scott [0:23:35]: So the impact was the the way we had a couple producers.

Scott [0:23:37]: Yeah.

Scott [0:23:38]: Say see you later pretty quickly.

Scott [0:23:39]: Like, I think we had two or three, like, jump out the door pretty quickly.

Scott [0:23:42]: And they're like hey.

Scott [0:23:43]: I'm gonna go to...

Scott [0:23:44]: Yeah.

Scott [0:23:44]: I think we lost people to assured partners.

Scott [0:23:46]: Mean maybe, you, gallagher, but it went to bigger firms.

Scott [0:23:50]: And you're were like, that doesn't really make any sense either.

Scott [0:23:52]: You're not gonna get paid forty eight percent commission.

Scott [0:23:54]: And, yeah, you're gonna still have an beat and probably not have much equity.

Scott [0:23:58]: But, yeah, again, people did what they did.

Scott [0:23:59]: Had a couple more leave and decide to start their own firm that I think they're doing okay with, and then had, yet, some other people trickle out really through the end of December beginning of January the the next year or where we thought we'd be able to to keep them around and we weren't able to convince some something and they chose to go a different direction.

Scott [0:24:17]: So it was a madness.

Scott [0:24:19]: I literally probably lost hair sleep.

Scott [0:24:22]: You name it.

Scott [0:24:24]: It was pretty rough time.

Scott [0:24:25]: I kinda figured I was gonna show up one to work, and they were, like, please don't come back in.

Scott [0:24:28]: But net impact was we lost fifteen producers, nine million dollars revenue and about seven hundred fifty thousand dollars Eb from this decision that we made, everything that I made.

Scott [0:24:39]: And, yeah, we woke up on January fourth or fifth.

Scott [0:24:42]: You know, we looked at the people that had signed documents were like, okay.

Scott [0:24:46]: But instead of being, you know, forty three million dollars were, like, thirty three million dollars and it was tough.

Scott [0:24:51]: I mean, like, it was really rough.

Scott [0:24:52]: I would not want to go through that again.

Callan [0:24:55]: What was going through your head at that moment.

Callan [0:24:57]: When you're like, okay.

Callan [0:24:58]: That's fifteen producers nine million dollars of revenue?

Scott [0:25:01]: Yeah.

Scott [0:25:01]: I think I was thinking oh, crap, like, what the hell did I do?

Scott [0:25:04]: Like, the is being Scott the end of the guided blew commercial insurance associates.

Scott [0:25:08]: And yeah, I gotta say looking back on it, I think my board, my brother or my partners, like, we're actually pretty well spirited about it.

Scott [0:25:17]: I think most of producers left were, like, people reinvest at the time.

Scott [0:25:21]: They were growing.

Scott [0:25:22]: None of them had, like, gigantic books.

Scott [0:25:23]: Fifteen producers.

Scott [0:25:25]: Some of them were like, just in the business, and they just chose to leave with whoever their mentor was at the time.

Scott [0:25:30]: And so, like, some of it was, like, okay.

Scott [0:25:33]: It's okay.

Scott [0:25:34]: The people...

Scott [0:25:34]: The people that stayed are the right people and, yeah, you...

Scott [0:25:37]: Again, you can money more quarterback that, like, all day long and, yeah, justify and everything else.

Scott [0:25:41]: But it a lot of it was, like, oh, crap what the hell do we do.

Scott [0:25:44]: And and I would say there were some, like, serious moa here for six months afterwards.

Scott [0:25:49]: Yeah.

Scott [0:25:50]: I had a hangover from it.

Scott [0:25:51]: Chris Miner, my CFO had a from it, and Mah seem had a anger from it.

Scott [0:25:55]: I think a lot of the producers that did stay.

Scott [0:25:57]: Had a pretty significant hangover from it, and they I think they...

Scott [0:26:00]: There was a lot of...

Scott [0:26:01]: Yeah, this is a may bot...

Scott [0:26:03]: Not be the right word, but they were going out what the heck is actually going on.

Scott [0:26:06]: And, yeah.

Scott [0:26:08]: Looking back on it, we probably aren't, like, as clear and as transparent about is we should have been, like, after...

Scott [0:26:12]: Yeah, in the aftermath, but learned a whole hell of a lot.

Scott [0:26:15]: And after we kinda lick our wins, we figured out our footing and what the actual strategy the business was and I don't think that was something I really thought out is, hey, these people are not weak.

Scott [0:26:25]: Because I I think we really looked at it and we're like, hey, this a really great opportunity for you guys said earn some meaningful.

Scott [0:26:30]: Or trade for some meaningful equity in the firm to everybody liked working here at least so we thought.

Scott [0:26:36]: And you still get be a part of the same team.

Scott [0:26:38]: You don't have to disrupt your life.

Scott [0:26:39]: You're just different disrupting your your commission payments for a little bit.

Scott [0:26:42]: So we really didn't think it was gonna be that big a deal.

Scott [0:26:45]: And I wouldn't say I was, like, cavalier about it, But I definitely thought, like, hey, it's better than, you know, any of the other options.

Scott [0:26:50]: That you may have it have at your table.

Scott [0:26:52]: Turns out I was I was wrong.

Callan [0:26:54]: So...

Callan [0:26:54]: So I keep laughing for the way that you're describing it, which is great.

Callan [0:27:01]: So...

Callan [0:27:01]: Okay.

Callan [0:27:02]: A couple of questions on this.

Callan [0:27:04]: When did you...

Callan [0:27:06]: When did it set in that you made the right decision?

Scott [0:27:09]: I would say probably was four to six months afterwards that we really made the right decision and that we had the the crew of people here that we wanted and we, really reimagine what our growth path could be?

Scott [0:27:21]: I think we had some doubts about, Like, yet our business model was Ci really a great place to be for a producer for a few months I think we really had to look at look in the mirror and say, hey.

Scott [0:27:30]: Yet.

Scott [0:27:31]: Are we these things that we profess?

Scott [0:27:32]: Are we a producer paradise?

Scott [0:27:33]: And I think the answer was still yes at the end of the day.

Scott [0:27:37]: But we needed to polish everything up, get better at our game and really look at at what we were doing with farm and and develop a better strategy on how we're gonna hire new people, how we're gonna go to the firm, how we're gonna get, take care of clients so we could grow again.

Scott [0:27:52]: But any probably...

Scott [0:27:53]: At twenty twenty three was not, like, a great year.

Scott [0:27:55]: Wasn't a banner year by any means.

Scott [0:27:57]: Twenty twenty four, I would say was was an okay year.

Scott [0:28:00]: And then, yeah, at twenty twenty five, we had, like, yeah, fantastic growth right at twenty percent.

Scott [0:28:05]: So it's...

Scott [0:28:05]: I mean, it's it's took a little while to get back.

Scott [0:28:07]: Yeah.

Scott [0:28:08]: I would say twenty twenty six is gonna be, yeah.

Scott [0:28:10]: It's gonna be just fine.

Scott [0:28:10]: Maybe not great.

Scott [0:28:11]: Some of that's market, some of that's transactions yeah, Yada yada, But it took us probably a full year to really recover from it.

Scott [0:28:19]: Yeah, in totality.

Scott [0:28:20]: There was definitely a lot of wound licking and and everything else, but it was the right decision for from.

Scott [0:28:26]: Again.

Scott [0:28:26]: I we couldn't stay in in it long term.

Scott [0:28:28]: And we not taken a risk, taking some really hard decisions made really hard decisions, and it was the right decision at the end of the day.

Callan [0:28:37]: Well, the business economically, and, how you're structured with the producers is night day, not to say I mean, it's still a great comp plan, but fifty fifty to really be a truly big and scaled agency would be very difficult to do.

Callan [0:28:53]: Yes.

Callan [0:28:54]: As more layers get added, it's just gonna keep cutting into those those margins more and more as it grows.

Scott [0:29:00]: Yeah.

Scott [0:29:00]: And it just also means you can't invest either like, I think, like, looking back on it, because I'm looking at some of the things that we're having to invest in now to try to, yet, compete with larger firms that have more resources than we do.

Scott [0:29:11]: Yeah.

Scott [0:29:12]: Technology, numero Uno.

Scott [0:29:13]: We literally could not have done that, and we yet kept the business the same.

Scott [0:29:18]: We just wouldn't have be able to afford it.

Callan [0:29:20]: Well, I mean, it sounds like you build a culture that brought in the absolute best producers and those producers did...

Callan [0:29:27]: Well, I mean, they...

Callan [0:29:28]: Clearly, they did well enough that they got meaningful equity in a company that was already doing pushing forty million in revenue.

Callan [0:29:36]: And so you clearly had the model on that.

Callan [0:29:39]: One of the things I was curious about?

Callan [0:29:41]: When you look back at this, what was it that because every single one of those producers that took that deal could have and probably got ridiculous offers, other places.

Scott [0:29:52]: Oh, yeah.

Scott [0:29:53]: Definitely what.

Callan [0:29:54]: Why do you think it was or what was it that was so appealing to them that said, I believe in this.

Callan [0:30:00]: I'm going forward with this.

Scott [0:30:02]: I think some of it was Hayden people actually threw treated to me right.

Scott [0:30:05]: They've taken care of me.

Scott [0:30:06]: They were transparent about this.

Scott [0:30:08]: Some of it was, yeah.

Scott [0:30:09]: We do a lot of cross...

Scott [0:30:10]: Or not cross selling with c selling.

Scott [0:30:12]: CIA where we sell his teams.

Scott [0:30:14]: And a lot...

Scott [0:30:15]: Some of the book was actually just tied to me, my brother, other people there were partners or some people's books were.

Scott [0:30:21]: So, I mean, that's being, like, very real with you.

Scott [0:30:23]: And I think something people were like, okay.

Scott [0:30:25]: Well, yeah, a lot of my revenues actually tied to somebody else.

Scott [0:30:28]: I like working on that person.

Scott [0:30:29]: I don't really wanna leave.

Scott [0:30:30]: But I do think a lot of a lot of the new days People realize that they've been treated well.

Scott [0:30:35]: We've built a good company.

Scott [0:30:36]: Yeah.

Scott [0:30:37]: This is a really major change.

Scott [0:30:38]: But I think it's worth the risk stay.

Scott [0:30:41]: And I also think people...

Scott [0:30:42]: Yeah, may have looked at their at their options and said, well, I'm gonna get paid less at x y z from, I'm not gonna have yet...

Scott [0:30:50]: Yet.

Scott [0:30:51]: It's good at equity upside, and I gotta disrupt my life.

Scott [0:30:53]: And I'm sure some people, like can looked in the mirror and say, hey, it's she's not worth to me right now to do that.

Callan [0:30:59]: Yeah.

Callan [0:30:59]: Well, interestingly enough.

Callan [0:31:00]: Now.

Callan [0:31:00]: I mean, that that equity is pretty meaningful in in value.

Callan [0:31:05]: Not to say it wasn't at that time, but, like, seeing this trajectory?

Callan [0:31:09]: Because I I mean, lot of times has to be expected.

Callan [0:31:11]: This is a totally new company.

Callan [0:31:12]: I mean, I think you said the word that you feel like this is a...

Callan [0:31:15]: I think the exact quote was, it feels like it's a twenty four year old startup.

Callan [0:31:19]: Let me ask you this, what does that mean to you?

Scott [0:31:22]: It means we're we're building the plane as we fly it, probably for the most part.

Scott [0:31:26]: But...

Scott [0:31:26]: Yeah.

Scott [0:31:26]: I mean, we just changed so much, and I think, like, what we had do is look under rocks after we made this...

Scott [0:31:32]: Did this transaction and say, okay.

Scott [0:31:34]: What do we do wrong?

Scott [0:31:36]: What can we do better?

Scott [0:31:37]: How can we get our producers to go out and sell and embrace this and not, like, worry about what happened six months ago?

Scott [0:31:44]: And then we had to say, okay, we actually do have a really good business plan?

Scott [0:31:48]: We have a really good business.

Scott [0:31:50]: And how do we sell that to others and attract talent, so we can, you, prepare for the next phase of growth.

Scott [0:31:55]: That was the hardest thing to really figure out.

Scott [0:31:57]: And again, we were building the plan as we were fly it definitely back then.

Scott [0:32:01]: And, you know, didn't exactly have it figured out.

Scott [0:32:04]: I mean, that was something we had to, you know, do some studying on, unfortunately, you know, affiliated a really good consultant who's an board adviser and, Yet, is a shareholder in the firm got named Rob Land who's who's just been excellent.

Scott [0:32:18]: And and yet met him completely by chance.

Scott [0:32:19]: He's about twelve years older, Princeton And graduate than I am.

Scott [0:32:23]: We got connected through, yet alumni circles, and he's got a lot of experience in in the industry from the finance side.

Scott [0:32:29]: So he was somebody that he was able to come in.

Scott [0:32:32]: Was like, hey.

Scott [0:32:33]: You guys got a good plan, but this is where you need help on the finance side of the business on the share structure of the business, and he's helped us clean up and professional wise a lot of stuff.

Scott [0:32:43]: And I think that that's been, like, not just Rob but some other outside advisers that we had that have helped us really look in the mirror and say, hey, this the way that this firm does it and you thought about that.

Scott [0:32:53]: Or this is the way that this business does it.

Scott [0:32:55]: It's not insurance business, why don't we look at that?

Scott [0:32:58]: And I I think, like, because we we departed so much from the traditional partnership model it works so well in the insurance business for a really long time until valuation started going through crazy?

Scott [0:33:09]: We decided to look at it, hey, This is this is business.

Scott [0:33:12]: We're gonna have to recap it every now and again because it's the right thing to do is so gonna allow us to support afford to buyout out some shareholders and take care of the and create liquidity in those sorts thing So, yeah, I think it really caused us to look at the business differently, which I think is the hardest thing about what's going on today's insurance brokerage world.

Scott [0:33:31]: Is why so many people people, you know, have sold is like, hey, Like, these are hard problems to figure out and you can either deal with them through selling and yeah saying cl later, you can deal with them through bringing you on a an equity sponsor who can help you professional it and that that cost money in a different way, but it allows you to grow.

Scott [0:33:49]: Or you can, you know, figure it out yourself.

Scott [0:33:51]: We just chose probably the hardest path.

Scott [0:33:53]: I don't know.

Scott [0:33:54]: It's really not the least the most costly path.

Scott [0:33:56]: I think, long term, kinda going back to John's, you know, debt versus preferred equity versus private equity.

Scott [0:34:01]: The returns are gonna be best for us, and we're gonna be able to grow in the way that we want to, which is, yeah, ultimately the most important to us and be able to affiliate and associate the the producers and the teams and the people that we think are gonna help us grow to the next level.

Callan [0:34:14]: Well, I mean, I think to that point specifically, if I'm like looking at this objectively.

Callan [0:34:19]: Really look at objectively, the business is totally different and how this business is actually structured and how it can scale in the future.

Callan [0:34:25]: But even more so even looking at it from the perspective of, you had a lot of these retiring owners that is now perpetuated to...

Callan [0:34:35]: I mean, you've got now this...

Callan [0:34:36]: I mean, what I...

Callan [0:34:37]: This is how I'm taking.

Callan [0:34:38]: It correct me if I'm wrong on this.

Callan [0:34:39]: But now you have a very solid foundation of people that are bought in for the next where can we take this from here?

Scott [0:34:47]: Yeah.

Scott [0:34:47]: Today, we have three, three or thirty four, and I'm I'm not exactly sure which which shareholders unit holders.

Scott [0:34:52]: We're in LLC.

Scott [0:34:52]: So technically we're in units.

Scott [0:34:53]: But, yeah, thirty four unit holders, our executive team, All have equity to align them with with what we're doing, and then we've created an incentive program where people producers can earn equity based on their growth same with the executive team.

Scott [0:35:07]: So, like, they're super bought in and what we're doing still think we gotta get out there every day and sell it to our people.

Scott [0:35:13]: Hey.

Scott [0:35:13]: Like, growth is great.

Scott [0:35:14]: And align your pocket looks at the end of the day with really good commissions, but also gonna help you build wealth in in a growing company.

Scott [0:35:21]: And I think that's a harder concept of thinking yet.

Scott [0:35:23]: A lot of producers.

Scott [0:35:24]: Yeah.

Scott [0:35:25]: They want the car.

Scott [0:35:26]: They want the boat.

Scott [0:35:26]: They want the house and that.

Scott [0:35:27]: Yeah.

Scott [0:35:28]: That's where where their money goes And I get it, man.

Scott [0:35:30]: It's that's that stuff's all a lot of fun.

Scott [0:35:32]: And, yeah.

Scott [0:35:32]: I'm probably, like, every other insurance brokerage owner when they hear that somebody bought a house.

Scott [0:35:37]: Or got married or something like that.

Scott [0:35:38]: They're like, yay.

Scott [0:35:39]: Yeah.

Scott [0:35:40]: This guy's is gonna yeah.

Scott [0:35:41]: Get the sky gals and get yeah.

Scott [0:35:42]: Work twice as hard for me.

Scott [0:35:43]: But the equity piece I think is just a little bit more complicated because it's definitely...

Scott [0:35:47]: They can't see it, feel it touch it So we really do try to educate our our people on, hey, what does that mean?

Scott [0:35:54]: We try to get give good reporting and transparency of what's going on in the business across not just the shareholders but, you know, client service people everybody.

Scott [0:36:02]: And it's really been a new initiative this year to provide that transparency.

Scott [0:36:06]: So it's not just the producers or the or the unit holders you're seeing the performance of the company.

Scott [0:36:11]: Everybody's getting you to see it and seeing what the impact of of what their actions are.

Callan [0:36:15]: Well, it's like...

Callan [0:36:15]: One are those things that I always kinda found.

Callan [0:36:17]: That I spent, you know, most of my career on the insure tech side.

Callan [0:36:20]: Broker size well but really on the insure tech side.

Callan [0:36:23]: And until you actually see it?

Callan [0:36:26]: And you see what happens at a change of control, and you see what the equity.

Callan [0:36:32]: You're...

Callan [0:36:33]: Then you're, like, that's the only way.

Callan [0:36:35]: That's the only way that you can work to to true wealth, and most people, I mean, that's not a, you know, it's not a crazy statement.

Callan [0:36:41]: But, like, you know, I was a salesperson for a long time, and I get it, and I get that you prioritized your cash comp over your total comp until you see that and you're like, okay.

Callan [0:36:53]: Maybe I either gotta start something or I need to find a way to get equity because that's where the true generational wealth comes from.

Scott [0:37:00]: Yeah.

Scott [0:37:00]: I wanna understand.

Scott [0:37:01]: I get...

Scott [0:37:02]: Again, the the bit...

Scott [0:37:02]: And the business has just changed so much.

Scott [0:37:04]: That, yeah, the potential to build wealth is so much more than it used to be.

Scott [0:37:07]: I think, like, The insurance brokerage business has been...

Scott [0:37:10]: You know, there's been a lot of, like, country club businesses.

Scott [0:37:12]: Like, it's it's a good business the owner makes a lot of money.

Scott [0:37:15]: The producers do well, but when it goes to transition it, it just becomes really hard to sell.

Scott [0:37:19]: Hey, I mentioned this when we were doing kind of our initial chat, Larry Lenny, who, you yeah, I'm sure a lot of listeners that who he is with with inside as a sale.

Scott [0:37:26]: Really great sales coach.

Scott [0:37:27]: Good person, but he told me about five years ago.

Scott [0:37:30]: He said most insurance agencies start running into trouble around thirty million dollars and the business becomes too complicated.

Scott [0:37:37]: So a lot of people sell because the business comes complicated, and it just makes more sense to transact or bring in a private equity partner because people don't wanna stick around and figure things out.

Scott [0:37:46]: And I would say he's, like, one hundred percent true.

Scott [0:37:49]: Right?

Scott [0:37:49]: Like, and he was, like, I can't tell you that's exactly the amount of of revenue that it is, but it's generally speaking.

Scott [0:37:54]: Like, that's that's where people kind of start running into troubles and you have to to run it as a business and not a partnership and it just gets complicated.

Scott [0:38:02]: And I think the, you have the valuation curve that we've run into over the past twenty years, certainly the last fifteen years.

Scott [0:38:08]: His has complicated it because you took businesses that were really, really great businesses and said, oh, okay, Hey.

Scott [0:38:14]: You guys had value yourself internally at six or seven times Eb, And you have somebody that's willing to pay you twelve.

Scott [0:38:20]: Yeah, fifteen years ago and today, they're willing to pay you twenty.

Scott [0:38:23]: It just is...

Scott [0:38:24]: It's crazy.

Scott [0:38:25]: So I I get why people have have gone through sales.

Scott [0:38:28]: Who've gone through transactions.

Scott [0:38:29]: And, I mean, there's days that I wake up and like, wow.

Scott [0:38:32]: That wouldn't be such a bad idea, but like, again, we're trying we're trying to build like a great firm.

Scott [0:38:38]: We really the at love our independence, and I think mostly having a really, really good time doing it and just associating people that wanna sell that wanna be part of, you know, commercial insurance journey.

Scott [0:38:48]: To be, like, one of the premier, yeah, independent beverages in the country.

Callan [0:38:52]: So one of the...

Callan [0:38:53]: A question that I have on this is somebody's listening to this, they hear exactly and they're like, man I'm in that same exact situation they reach out to you and they say, Scott, what is the one piece of advice that you can give me, if I think I'm about to try to go this route.

Callan [0:39:07]: I

Scott [0:39:08]: would say don't don't.

Scott [0:39:09]: No.

Scott [0:39:10]: I I think I I think you just gotta have some for suit really and say, hey, Like, yeah.

Scott [0:39:15]: If we were unique that we didn't have Na is not competes.

Scott [0:39:18]: And I think that that is like, yet abnormal.

Scott [0:39:20]: I think you gotta be transparent with your people when you go through something like this.

Scott [0:39:24]: Looking back on it, I wish we could have provided more clarity and education.

Scott [0:39:28]: And I think the education piece is really hard.

Scott [0:39:31]: Reach out to somebody that maybe can translate it's not you as a business owner, maybe a recruiter that you use.

Scott [0:39:36]: In fact, were actually laughing with a recruiter we use after we went through this thing, and he was, like, yeah.

Scott [0:39:41]: The the equity piece is really hard for me to explain is, yeah, to people I'm trying to help recruit into other firms.

Scott [0:39:46]: And I was like I wish I had known that six months ago, I would had you come talk about it.

Scott [0:39:52]: They're like, in all honesty, look at your network of people and say, hey, maybe it would be really helpful to bring this person to talk about.

Scott [0:39:59]: Was this mean or bringing somebody, like, I'll volunteer if you guys, get want help.

Scott [0:40:03]: But somebody that's been through a transaction like this before and what it ultimately means for the people that that our shareholders are going to be shareholders in the front.

Callan [0:40:10]: How did you change personally as a result of this.

Callan [0:40:14]: From where you were when you started to where you're at now.

Scott [0:40:17]: It's a really good question.

Scott [0:40:18]: I think I just...

Scott [0:40:19]: Yet, at this point in my life, unpredictable things don't bother me, like, if something doesn't go right I don't let it me up too much.

Scott [0:40:29]: It's more about, like, hey, like, hey, that didn't work.

Scott [0:40:32]: How do we figure out the next answer.

Scott [0:40:33]: And maybe going down this particular path that that's just a dead end and I need to completely rethink the problem in totality.

Scott [0:40:39]: Or maybe the answer is just it's a bad damn idea.

Scott [0:40:42]: And you can do something else.

Scott [0:40:44]: Right?

Scott [0:40:45]: And so, like, I I think like, it's it probably caused me to be more self reflective.

Scott [0:40:49]: It certainly caused me to say, hey, I don't have all the answers.

Scott [0:40:52]: I can...

Scott [0:40:52]: Yet.

Scott [0:40:53]: But, like, if I can lean into really smart people that are willing to help me with a problem.

Scott [0:40:57]: They help me solve something.

Callan [0:40:59]: What's almost kinda like, when you're in this, you can't help, but cat about this whole thing's going to imp.

Callan [0:41:07]: But the reality is you built something very solid over twenty plus years.

Callan [0:41:12]: And you...

Callan [0:41:13]: It doesn't feel that way at the moment, but, like, I I think what I'm hearing you say is when you look back, it's like, I felt it it was very intense in that moment.

Callan [0:41:20]: But the reality is I probably would have been fine regardless.

Callan [0:41:23]: And there were some outlets that I could have turned to, that could have mitigated some of that stress that I put on myself.

Scott [0:41:30]: Yeah.

Scott [0:41:30]: One hundred percent.

Scott [0:41:31]: And I think also, like, yeah.

Scott [0:41:32]: Yeah.

Scott [0:41:32]: I wish maybe I to start smaller and joins me three, maybe he said, hey.

Scott [0:41:36]: Why don't we flip over from operational rocks.

Scott [0:41:37]: And build some trust with with people as opposed to saying, hey, I'm gonna rip the band aid off and do something kind of big and bold.

Scott [0:41:43]: That's probably my biggest regret looking back on it I feel like I probably could've kept more people around going through the transaction.

Scott [0:41:49]: Said, hey, let's let's tackle something simple first is build some trust.

Scott [0:41:52]: In a new role as opposed to trying to tackle the really big problem.

Scott [0:41:55]: That would probably be my big.

Scott [0:41:57]: Certainly people like who renew into, like, a leadership role.

Scott [0:42:00]: Start with something smaller.

Scott [0:42:01]: Don't go after the, yeah, the big gem initially.

Scott [0:42:05]: So I mean, it's...

Scott [0:42:06]: Yeah.

Scott [0:42:06]: I think I think it is about building trust with your people.

Scott [0:42:08]: That's probably the biggest lesson that I've learned from.

Scott [0:42:11]: It is, like, at the end of the day...

Scott [0:42:12]: Yeah, We're I'm fortunate to have a hundred and thirty hundred and thirty five employees at CIA, people that are all working their butt off and tripping every day.

Scott [0:42:21]: And so it one super thing.

Scott [0:42:23]: Thankful forward.

Scott [0:42:24]: It's amazing.

Scott [0:42:24]: Two, I gotta get to know those people understand what motivates them and how they can contribute to get the best out of them.

Scott [0:42:31]: And I...

Scott [0:42:31]: Yet looking back on it I wish Had taken more time to do that back in twenty twenty three.

Callan [0:42:36]: Last question I have for you is if we're having a conversation ten years from now.

Callan [0:42:41]: What does CIA look like?

Callan [0:42:43]: What are you doing?

Scott [0:42:45]: We will still be independent.

Scott [0:42:46]: I I believe.

Scott [0:42:47]: And I hope we've grown from yet about forty five million dollars of revenue to well over a hundred and ten years.

Scott [0:42:53]: I mean, yeah, hopefully, we're, yeah.

Scott [0:42:55]: Like, oh, Cis is two hundred million dollars.

Scott [0:42:57]: And again, we're just looking to associate really good producers, people that have self motivation that are willing to go out and hustle they're specialized in their field.

Scott [0:43:05]: And, yeah know, I I'd kinda joke with people.

Scott [0:43:08]: I'm like, I would hire a producer that has a book of of underwater basket weaver.

Scott [0:43:12]: You know, if it's like, two million dollars a million dollars revenue is it's that specialized.

Scott [0:43:16]: I mean, we...

Scott [0:43:17]: We've we have been lucky to grow through really specialized categories in a tough market.

Scott [0:43:21]: And it's the specialization that has really led and ramped up our growth.

Scott [0:43:26]: So those are the source of producers that we wanna associate.

Scott [0:43:28]: Those are the source of producers that we wanna build yet, as we're building, you, out the next generation of of the young folks.

Scott [0:43:34]: We're just looking for, yeah, industry groups that have need, trying to figure out how we can specialize in it.

Scott [0:43:40]: And I think a lot of my peers are trying to do the same thing.

Scott [0:43:42]: We just kinda started our journey being super specialized focusing on scrap and waste and dirty industrial stuff mainly because it's what my brother and I kinda grew up around.

Scott [0:43:52]: And yeah, my my dad was scrap business and railroads and that sort of stuff.

Scott [0:43:56]: So, know, it was going after get relationships that we had and knew, but we've been able to turn it into, a very awesome vertical, and we just look at like, hey.

Scott [0:44:05]: Yeah.

Scott [0:44:06]: Employee benefits is a great new vertical for us.

Scott [0:44:08]: We have this great railroad construction team and trying to hit them I guess where they ain't for the most part.

Callan [0:44:14]: You guys done an excellent job of positioning yourself against firms that are significantly larger than yourself within these niches, and I've seen that, we were talking about it in our previous conversation, got a lot of respect for that, but Scott, this was a ton of fun, man.

Callan [0:44:29]: This flew by, I love get into the weeds I love yourself d deprecating humor as we go through it.

Scott [0:44:36]: Can't have anything but.

Callan [0:44:38]: I love it.

Callan [0:44:38]: Thanks for coming on today.

Scott [0:44:41]: And Thanks so much, Callan.

Scott [0:44:41]: Appreciate it.