John Corcoran: 17:00
So you joined Newport, which at the time had only been around for a year or so. So you go from running this $100 million division, which is a which if it was its own company, would be massive to joining. What’s kind of a startup? What. So talk a little bit about that decision.
Kevin Poole: 17:22
Yeah. So that move was kind of intentional. I like to say up to the time I joined Newport, I’d never worked for or advised a company with fewer than 50,000 employees. And that’s kind of literally true.
John Corcoran: 17:37
And how many employees did Newport have at the time?
Kevin Poole: 17:39
At the time, I think Newport had about a dozen.
John Corcoran: 17:41
Okay. So a bit of a shift.
Kevin Poole: 17:43
Yeah. And our typical client might have 50 or 100 employees.
John Corcoran: 17:46
Oh, so a massive change.
Kevin Poole: 17:47
Yeah, a massive, massive change. But I know I wanted something different. And I also really liked the appeal of working for privately held, founder led, founder owned companies. And my hunch coming into Newport, my hypothesis coming in was that the work we do would have a much more personal feel to it than what I was doing, advising the Ciscos or the the the Dells of the world, that we could make a difference more quickly because you’re only working through, you know, 1 or 2 layers of management at most, as opposed to 10 or 12 layers of management. And would have just a much more personal feel to it because you’re impacting, you know, not just the life of the owner, but the family of the owner, their long term financial prospects, what have you.
And I’ll have to say that that hunch of mine, that hypothesis of mine has absolutely been proven out in the, you know, the 13 years I’ve been at Newport. Absolutely. zero buyer’s remorse. The fund that we have with our clients, the difference that we make in their lives and their family’s lives, the difference that we make for their employees and their companies, has just been so rewarding for me, because it’s a different type of value that we’re bringing to our clients. You know, we’re basically taking what I’ve learned in the 40, what the other 40 partners at Newport had learned working for these big companies we worked with early in our careers, our ability to know what good looks like.
And we’re taking that knowledge. We’re downsizing it and making it fit for these small, privately held businesses. And we’re using that to help these entrepreneurs scale their businesses and make them more valuable and in some cases, get them ready for sale. And it’s just, again, so rewarding to me to be able to do that for these business owners who are thirsting for the kinds of help that we’re able to bring them.
John Corcoran: 19:44
Did you find, at least in the early years, that it required a big adjustment on your part. You know, it’s not easy to tell, you know, a small company. Well, just do it like GE did it, you know, I mean, it’s like, well, we don’t have those resources. What do you know, how did you adjust in terms of the kind of the world you’d known to this new world?
Kevin Poole: 20:05
Yeah, that’s a great question. So the biggest adjustment was this because you would think it’s well, it’s, you know, different sized companies. It’s, you know, different tools, techniques, what have you. But but for me, really and for the partners who joined Newport, who spent the bulk of their careers selling to professional managers at large companies, when you’re selling to a professional manager at a large company, you’re making rational arguments around net present value and those types of things selling to the brain of that professional manager. Now, when you’re selling to a business owner who’s probably pretty mercurial, perhaps somewhat undisciplined, very emotion driven.
You’re not selling to their brain so much as you’re selling to their heart, and you’re connecting with them on an emotional basis. So for me and the others who’ve joined Newport, really the biggest change is in how we communicate with these business owners, how we sell to them, how we support them. It’s that they tend to think differently and operate differently than professional managers, if you will, and learning how to work with these kinds of mercurial, sometimes undisciplined or less than focused managers took a little bit of time to learn. But once you’ve mastered, you know, kind of the difference between advising a professional manager versus advising an entrepreneurial business owner. It’s an awful lot of fun. It really is. But you’re right, it is. There is an adjustment period. And fortunately, we’ve recognized that. And now the onboarding program we have for partners who join Newport incorporates all of those learnings at the early Newport partners gleaned the hard way.
John Corcoran: 21:50
So I want to ask about the hiring process. So you mentioned that we have a training process once people join, but for you for hiring, you know, whether it’s new, I don’t know if you call them associates or consultants or even recruiting partners to come in. How do you figure out whether someone who, like you, has spent maybe ten, 20 years working in big consulting? They’re coming to work for Newport. How do you figure out whether they will thrive or not, whether they’ll be able to make that adjustment and speak to the heart, as you said?
Kevin Poole: 22:25
Yeah. So that’s a great question and one that frankly, we’re still kind of fine tuning.
John Corcoran: 22:30
Still in the journey. Yeah.
Kevin Poole: 22:32
But we’re certainly a lot better at it today than we were 14 years ago when we first launched. And I think we’re pretty well dialed into our ideal candidate profile in terms of the experience set that we look for. So we look for people who have that kind of hybrid background like I do, meaning they have meaningful senior executive roles and operating companies. And then they’ve also had substantial consulting experience, either on their own or at a regional consulting firm or at a big five type of situation. So they come in already knowing how to run a business. They come in knowing the dark arts of consulting, and then what we need to do then is kind of school them up on that last mile of making sure that they’re able to connect with a business owner on an emotional level. So what we do there is we really probe really hard for the emotional intelligence or the EQ, if you will, of that partner candidate.
And the way that we get at that is by having them tell lots of stories about their background and whether it’s client work that they’ve done or personal stories that they want to share. And then we have them talk to a number of partners at Newport. And I should say at Newport, it’s a bit of a different animal in that we only have partner level individuals, we have no junior staff, we have no junior consultants. So when we do work for a client, the only person they see is the partner who actually sold them the work or other partners that they might bring in. So we spend a fair amount of time deliberately trying to get to know that partner candidate and try and get a sense of how flexible they are, how adaptable they are, what’s their tolerance for ambiguity? What’s their tolerance for setbacks? Because working with a mercurial business owner can be a little frustrating sometimes.
And we just try and get into the mind of that partner candidate and just try and assess their flexibility, their adaptability. Can they operate in an environment where we don’t have lots of staff around to support our partners in the organisation? Can they, you know, travel light, as I like to say, can they do their own slide decks? Right. Can they, can they produce their own word documents. So those are some of the things that we probe for in addition to just the business knowledge of how to run a business and to the kind of core consulting skills that someone might have learned at a traditional consulting firm.
John Corcoran: 24:57
Tell me about this trucking company. You had a client that you worked with, a 30 year old trucking company. Husband and wife had run it and scaled it up. And then their challenge was they wanted the next generation to take it over. And Newport came in and helped them talk about that.
Kevin Poole: 25:14
Yeah. So this particular one, it’s a classic Newport client. You have a business owner that’s scaled the business from, you know, 25 to 50 million or 50 to 100 million, and they want to take it to the next level. And they haven’t done that before. And no one on the leadership team has done that before. And we’re able to come in with the experience set of our Newport partners and help them do that in a more predictable and profitable fashion than they might otherwise do on their own. And the way that we do that is we. What I like to say is we leverage the collective scar tissue that the Newport partners have accumulated over the course of their career to help that owner scale their business in a way that they accumulate less scar tissue on their own and sleep better at night. Because of that experience and the knowledge that we bring to the table.
And oftentimes when we’re helping our clients scale their business, it’s either to perhaps get it transaction ready and prepared for sale. Or in this particular case, as is sometimes the case, we’re helping prepare a business to hand off in Gen two. So in that scenario with this particular client, a trucking company, we’re both preparing the business for a transition. By that I mean trying to make it as easy to operate as possible, because when Gen two takes over a business, they’re usually taking it over with maybe 10 or 15 years of experience versus a 30 to 40 years of experience in operating the business Gen one has had. So you want to make the business as easy to operate as possible. So you’re kind of coaching up the business itself, professionalizing the business, improving the processes, getting it ready for that handoff. And at the same time, you’re getting Gen two ready to take over the business. So helping them develop their skills, particularly in areas that they might not be fully proficient in this particular client situation.
They had two sons that were taking over, both of whom were extremely capable individuals who got along really well, which isn’t always the case I found in family business situations. And also they had the benefit of having very complementary skills. So together they really form kind of a full, I’ll call it CEO unit and that they bring the sales skills, the operating skills, the financial acumen, the HR acumen to the table. So the two of them together really represent a complete package. And we’re about four years into this client relationship where we’ve managed to help the client grow the top line by 50%, the bottom line by three x more than double the value of the business. And it’s a situation where Gen two has largely taken over the day to day operations of the business and is really set up for success. And because of that, the husband and wife who founded the business are able to start stepping back from the business in a way that they can do so safely and sleep well at night as they start to enjoy the very, you know, kind of comfortable retirement that they so well deserve.
John Corcoran: 28:15
I had an interesting conversation earlier this morning with another guest about parenting, the next generation and how you, you know, teach them some of the skills that you learned as a business owner or business founder. And I’m curious, you mentioned that these sons are doing a great job. What do you think it is that led? Is it because they worked in the company for 10 or 15 years? Was it something that the parents did to groom them from a young age? Do you think that they just happened? You know, maybe some of these genes, traits that led the parents to be entrepreneurial were passed down? Is there anything you can point to? That was a reason why they were poised to take over the company and do a good job of it?
Kevin Poole: 29:00
Yeah. So I’d say it’s a few things. Number one, the parents did a great job of raising sons with just wonderful values, right. Just the integrity, the intellectual honesty, the professionalism, the respect, the empathy, all of those things that you look for in a human being. They’re all there. So that’s point one. Point two. They’ve worked in the business for a while. One longer than the other. But they’re just very capable individuals. And I think they’ve inherited some good genes from their parents in that sense. And then the last thing I’d say is that it can be hard sometimes, and I know this as a parent. It can be hard sometimes getting your kid to listen to something that you have to say, but they’ll oftentimes be much more open to hearing it from someone else.
Yeah. So oftentimes we may come into a situation where we’re asked to help groom Gen two, and Gen one knows exactly what the development needs are in Gen two, and they’ll know exactly what advice they need to be given. It’s just that Gen two doesn’t want to hear it from their parents. Yeah, so we’re able to come in. Is that kind of neutral, objective third party deliver in some cases, the exact same advice their parents would give them? Yeah, but Gen two is much more receptive to hearing it because it’s not coming from their parents.
John Corcoran: 30:27
Yeah. Yeah. That’s great. And I’m curious, have there ever been a situation where it came to you, where a company wanted you to groom the next generation and you had to have a tough conversation with Jen. One to say that I’m not sure that this is the right fit for this company. And how do you make that determination? You know, maybe it’s just a diamond in the rough and we need to polish this diamond versus this isn’t going to work.
Kevin Poole: 30:58
Yeah. So that’s a great question. So when we’re brought into a client situation and they’re kind of specifically decided that they’d like to see Jen two take over, you know, we’ll do an initial assessment of the capabilities of Jen two. But no matter how strong we think they might be, we always tell the client that, you know, it’s probably 50/50 whether Jen two is going to be capable of taking over. And for that reason, we’re going to do two things. We’re for sure going to groom Jen two to take over. But at the same time, we’re going to undertake a series of actions in the business to make it more valuable, make it easier to run, Make it transaction ready so that we’ve got both a plan A and a plan B. So plan A may be Gen two taking over. And if they’re capable of stepping up and doing that that’s wonderful. But if they’re not capable of doing that then we’re well positioned for plan B which might be selling the business.
Now getting back to your specific question about, you know, giving that, you know, kind of sobering talk or that straight talk. Yeah, there certainly have been situations where we’ve had to communicate to Gen one, either very early on in the client engagement or halfway through or towards the end, where, you know, our considered judgment is that Gen two is not capable of taking over. But what I found is that more often than not, if we’ve worked with a family for a year, two years, and the owners Gen one have been able to see the performance, or lack thereof, of the Gen two, They’re usually seeing and thinking and feeling the same thing that the Newport Advisors are thinking and feeling and seeing. So it’s unusual that it’s a surprise one way or the other.
So it’s unusual that we’ll come in and we’ll say, hey, we think Gen two is fully ready to take over when Gen one is saying, no, no, no, no, I don’t think that’s the case. And it’s also unusual that the Gen one saying Gen two is fully ready to take over and we’re having to counsel. It’s not I mean, we’re we’re kind of we’re kind of seeing the same signals over that year or two that we’re working with them that the parents are seeing. And as a result, we usually have a fairly aligned view of the situation.
John Corcoran: 33:21
Yeah. By the way, that was a very confusing, multi-part question. I apologize, and you did a great job of handling it. I usually try not to do that, so I’ll ask a simple one. Why no associates? That’s an unusual model. It seems to me like that. Would, you know, maybe limit you from certain types of engagements. So was that a deliberate decision that was made at some point?
Kevin Poole: 33:45
Yeah, that was a deliberate decision made at the time the company was founded. And I will say it is one that we’ve re-examined at various points over the last 14 years. And every time we’ve looked at the question, which we’ll have to admit is maybe every five years, we and by that I mean myself, the leadership team and all the other 40 partners in the organization always come up with the same answer, which is a resounding, let’s keep it how it is. And the reason that we like to do that is that when we get to work with our clients one on one, and the way that we work with them is different than a traditional consulting firm. So a traditional consulting firm is going to come in and do what I would refer to as project based work. So they’ll come in and they’ll say they’ll sell a four month engagement to come in and maybe improve the receivables in an organization or make some enhancements to the supply chain.
So they’ll come in, they’ll give a bid, fixed price bid for a project. We’ll sell the project. The bulk of the work is done by the junior staff, the partner who sells the engagements, checking in here and there. But the, the knowledge that’s being delivered in that situation is based on the knowledge of relatively junior sometimes, you know, kind of mid-level people. And the value that they’re able to deliver kind of plays out over an extended period of time because they’re they’re, you know, bringing value from a relatively limited experience base. And we decided that we wanted to kind of change up that model at Newport. And instead of coming in and doing project based work, we come in as kind of a peer advisor or really a peer mentor, where we’ll help the business owner craft a multi-year growth plan. In the first couple of months, we’re working with them, and then we’ll sit side by side with them.
We might come in for 3 or 4 hours in one afternoon, or maybe a couple afternoons a week, helping them execute that plan. As an advisor, as a mentor, as kind of an accountability coach, coaching them, coaching their leadership team, helping them execute on upgrades to their leadership team, helping them implement plans that we’ve developed through their staff. And we’ve just found that the partners that we attract to Newport enjoy that, that doing that type of work. And also the thing I’d say is that the 40 partners at Newport, we’ve spent, you know, 30, 40 years leading teams of people, and there’s can be a lot of fun and a lot of benefit leading teams of people. But also there’s some responsibilities that come along with leading teams of junior staff.
John Corcoran: 36:30
There’s some freedom of not having to do that anymore. Exactly.
Kevin Poole: 36:33
Yeah, exactly. So the ability to come in and provide, you know, gray haired advice or in cases like mine, kind of no haired advice to a business owner based on 30 to 40 years of real world experience. We’re able to come in and add value nearly instantly, even if we don’t know what their business looks like and we don’t know the details of their industry. We know what good looks like. We know what business 101 looks like where they often don’t know that. So we can add value literally from that very first meeting after kicking off an engagement with a client.
John Corcoran: 37:08
You see you sit at a unique position. And so I want to ask you about two things. And then we’ll wrap it up. The two things are number one is a lot of people talk about like a coming wave of business transferring, you know, one generation wanting to retire and go off into the sunset and transfer along the businesses. Do you notice that on a day to day level or even year to year level. Any comments? Any. Any observations around that?
Kevin Poole: 37:39
Boy, that’s absolutely true, John. There’s just a huge intergenerational transfer of wealth now, in, in, you know, a lot of families that’s just, you know, a stock portfolio being transferred from one generation to the next. But in generations where there’s a family business involved, right, then there’s a more complex set of calculus you go through to figure out, right. Was Gen two even interested in remaining in the business? Do we think that they’re capable? If they are capable, what time horizon are they capable of stepping up in? Is that time horizon consistent with my time horizon and wanting to step back from my business? So there’s a whole set of decisions and discussions that need to be had to carefully orchestrate and facilitate them.
That succession planning is kind of what you’re referring to. Yeah. To successfully move a business from Gen one to Gen two And what I’ll say is, you know, the odds of a business making it to Gen two or Gen three or Gen four, which is the case for some of our clients. Unfortunately, the deck stacked against them. If you look at the statistics, you know, not a lot of businesses make it to Gen two, even fewer to Gen three or Gen four. And, you know, the smart ones are kind of reaching out for help and assistance in figuring out how to make that work.
John Corcoran: 38:57
Yeah, yeah. And then the last piece was everyone’s talking about AI. Are you observing that? Is that having an impact across your client base now?
Kevin Poole: 39:07
Yeah, it absolutely is. Both in terms of how we deliver work for our clients and how we’re encouraging them to get work done for themselves. So literally, I might be in the middle of a meeting with a client and a question will come up and we’ll just we’ll just pull up ChatGPT or perplexity or any of the other AI tools and put a question to it and get a response back, you know, kind of a thoughtful response to help facilitate a discussion that we might be having. So it’s a productivity tool for us at Newport as advisors. And when we use a tool like that, we’re always very transparent with our clients that we’re using a tool and then we’re encouraging them to use these tools themselves in their own work.
So for instance, I have a client that was going to be hiring their first outside salesperson. So I said, you know, to their person running HR, we’re like, well, let’s develop a position spec for an outside salesperson. And since it was the first outside salesperson, they really had no other position spec to draft off of. So we said, well, let’s, let’s, you know, put ChatGPT to work and say, let’s draft a position spec for an outside salesperson in this particular industry with this set of responsibilities and 30s later, we had a 95% complete draft. So there’s there’s absolutely uses for AI I even in mid-size companies for internal productivity and in client facing situations.
John Corcoran: 40:39
Well, Kevin, this has been great. Really appreciate your time here. And where can people go to learn more about you, learn more about Newport and and soon to be launching Newport Podcast.
Kevin Poole: 40:50
Yeah. So just come come to the the Newport website, NewportLLC.com, and you’ll be able to see a number of case studies, understand the background of our partners, hear from some client experiences, understand the the offerings that that we have for our clients, whether it’s value creation work that we do for them or the sell side M&A work that we do for them.
John Corcoran: 41:14
Excellent, Kevin, thanks so much.
Kevin Poole: 41:16
Yeah. Thank you John. Enjoy the conversation.
Outro: 41:21
Thanks for listening to the Smart Business Revolution Podcast. We’ll see you again next time. And be sure to click subscribe to get future episodes.