In this episode of the IC-DISC show, I speak with Tim Loney about his transition from airline industry professional to IT services entrepreneur. He shares his path from working at Continental Airlines through major mergers to establishing Solutions Information Systems, explaining how his experience with severance packages motivated his shift into entrepreneurship.
We discuss the importance of business continuity planning, particularly for companies in hurricane-prone areas. Tim tells me about a Houston client whose facilities experienced severe flooding, highlighting how proper data recovery systems made a crucial difference in their ability to resume operations.
Managing sensitive data is a key topic in our conversation, as Tim's company works with high-net-worth families, family office sectors, as well as companies in a variety of industries. He explains how word-of-mouth referrals have helped build trust with these clients who require careful handling of confidential information.
The conversation turns to Tim's approach to business acquisition, where he focuses on purchasing IT firms from retiring owners. He describes his method of maintaining and growing these businesses post-purchase while sharing insights about how remote management tools have transformed IT services over the past 35 years.
SHOW HIGHLIGHTS
- I discussed Tim's career evolution from working in the airline industry with Continental Airlines and American Express to establishing his own IT services firm, Solutions Information Systems, in Houston, Texas.
- Tim shared insights on how his managed IT services company has established a national presence by utilizing robust remote management tools and enterprise-class processes.
- We explored the importance of business continuity and rapid data recovery, highlighted by a story of a Houston-based company that faced severe flooding and required effective disaster recovery solutions.
- Tim's firm specializes in managing sensitive data for high-income families in construction and family office sectors, emphasizing the importance of trust and credibility built through word-of-mouth referrals.
- We discussed Tim's strategy for acquiring small businesses from retiring owners, focusing on enhancing the value of these businesses post-acquisition to ensure continued growth.
- Tim reflected on his entrepreneurial journey from modest beginnings, emphasizing the significance of diversifying income sources and the evolving importance of data protection in the digital age.
- The episode concluded with an exploration of the evolution of office communication over the last 35 years, showcasing the technological advancements that have redefined the IT industry.
Contact Details
LINKS
About Solutions Informations Systems
GUEST
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Tim Loney |
TRANSCRIPT
(AI transcript provided as supporting material and may contain errors)
Dave: Hey, good afternoon, Tim. Welcome to the podcast.
Tim: Hi, Dave, good to see you.
Dave: So where are you calling in from today? What part of the world are you in?
Tim: I'm in Houston, Texas, just north of Houston, in the Tomball area.
Dave: Okay.
Tim: Up in our corporate headquarters for the company.
Dave: Okay, and now are you a native Houstonian.
Tim: I am not. I'm not a native Houstonian. I should be probably classified as a native Houstonian because I've been here for about 35 years or more.
Dave: Okay.
Tim: But my background is I migrated from Canada the day before my 21st birthday.
Dave: Oh, you did.
Tim: Yeah, I became a permanent resident here in the United States. And what caused you to want to do that? The economy was pretty bad in Canada at that time and I was working for a commercial airline that had gone through a severance package and they released me with my severance package and I said you know, maybe I should try another country, not just a job, but maybe another country.
Dave: Okay, so when you came to Houston then did you stay in the airline?
Tim: business I did. I worked for one of the large international airlines called Continental Airlines at the time, which has since been acquired by United Airlines.
Dave: You know, to this day I can still tell a legacy Continental flight crew from a legacy United flight crew. Very different cultures, very different cultures, or, as I say, the Continental folks are nice and the United folks are not so nice.
Tim: Correct, yeah, I was there during the heavy competition years between Continental Airlines and United. I was actually there in the process with Continental Airlines during a very large merger and acquisition of multiple carriers. We acquired Frontier, people Express and New York Air and put them all under the umbrella of Continental Airlines. So I was there during those years.
Dave: Okay, so were you there in the late 90s. So were you there in the late 90s.
Tim: I was there from 1985 to 1990.
Dave: Okay, yeah, I was only asking because I'd worked at an executive search firm in the late 90s and we worked with Continental during their like, go forward initiative or move forward initiative.
Tim: Yep the go forward plan with Gordon Blithoon. He was Yep.
Dave: Yep, that was it. So then you left the airline business. What did you decide to go do then?
Tim: So I left the airline business and I went to work for one of the largest credit card companies in the world called American Express.
Dave: Okay, I think I've heard of them.
Tim: Yep and because I had a lot of automation knowledge of how the airlines work. From an automation standpoint, American Express was interested in me and understanding the automation behind the airlines and travel agency systems and they brought me in to be a systems person for the airlines to help them in kind of standardizing a lot of procedures within American Express.
Dave: Okay, well, that sounds like a fun opportunity.
Tim: Yeah, very rewarding, very educational. I learned so much during my term at American Express.
Dave: Okay, but you decided that at some point you wanted to unfurl your wings and see what you could do on your own. Is that right?
Tim: unfurl your wings and see what you could do on your own. Is that right? Yeah, you know now that I look back at it. You know I was. I grew up in a family where you were encouraged to go work for a large organization and a big fortune 100 firm, and through your entire life, and leave with a gold Rolex watch and have a great retirement plan.
Dave: Yeah.
Tim: But as I followed that path, I found myself continuing to get severance packages over and in my experience with the Fortune 100s I received three or four severance packages and those packages kind of educated me on that. It was maybe not the right gig for me and, you know, I was smart enough to be able to exit out of the Fortune 100s and do something on my own, and that's when I decided to start my organization.
Dave: Okay, and what's your company called?
Tim: So my company is Solutions Information Systems Solutions IS to abbreviate it and we are a managed service provider of IT services across the United States, managing about 175 customers across the US oh wow.
Dave: That's interesting. I would have thought you'd have your clients would all be in the Houston area. I guess this newfangled internet thing lets you serve clients remotely. Is that, I guess, how it works?
Tim: Yeah, yeah, and we can talk a little bit about what makes us so successful, but the ability to manage and monitor and remediate issues remotely has come a long ways over the years that I've been in IT. Now it's pretty much if you can't do that, why are you in this industry, right?
So yeah, and you know it's a lot of like the entire work from home program that the whole world has kind of moved to. We have that ability to do exactly all of that stuff, not only from our corporate headquarters, but remotely as well. If one of our employees needs to work from home, they can do remotely as well. If one of our employees needs to work from home, they can do that as well. So it requires a massive tool set, and I'll refer probably to our tool set a lot, because that's what makes us successful, right Is the tool set that I've been able to put together and build a toolbox full of tools to be able to manage, secure, maintain these infrastructures that we're responsible for.
Dave: Well.
Tim: I thought IT service firms were.
Dave: I thought that was a commodity service. I thought they're all the same.
Tim: Oh no, there's quite a bit of difference in how these managed service providers operate and I'll tell you, I would consider us probably in the top 100 nationally and probably the top three in our region of service providers, and the reason I kind of give us that grade and that's a grade that I've given us is that we've been at this for 25 years.
I started this practice 25 years ago. I started this practice 25 years ago and over those 25 years I not only brought in enterprise class processes and procedures from my 10 years at American Express, but I've improved upon those processes and procedures over those 25 years.
Dave: And we continue to improve on those processes. Okay. Well, what? Yeah, I'm guessing that you're. The clients tend to stay with you for a pretty long time. Is that like until they sell or go out of business or some significant event occurs? Absolutely.
Tim: Yeah, and that and that's the type of client that we want to have in our portfolio, right? This is not a consumable product that you go and buy once and go away this is a partnership with our customers.
Dave: It really is.
Tim: You have to think about the IT infrastructure of any business out there. It's number one, a foundational piece of the business, and it is an instrumental piece in continuing to do business right. A lot of conversations I have are around data protection and security, and that's a lot of what we do right Is how do we protect the data that the customer has and how do we make sure that it remains secure and that nobody compromises that data or extracts that data or modifies that data that's on their infrastructure.
Dave: Okay, and I'm guessing you're not trying to be the low-cost provider.
Tim: We are not the low-cost provider. I wouldn't say we're the most expensive organization out there, but we are in the higher side, and the reason that we're the higher side is we bring a huge value to an organization. There is a lot of components within the IT support model that our lower competitors don't provide or don't understand, and those are the weaknesses within an organization that will cost them considerable damage to an organization if they get exposed right.
Dave: Yeah.
Tim: And then kind of go through those if you want to cover some of that stuff. Like let's just give an example of a business continuity plan right.
If a company doesn't have a business continuity plan, that should be something that they should have in place, and they should have worked with their IT service provider or internal IT team to make sure that they've got a business continuity plan. If they don't, when an event happens, it's a total dumpster fire right, because they don't know what to do and they're very disorganized and it takes them an extremely long time to be able to recover, if they recover at all. So that's one example. Another example is compliance. There's a lot of compliance that's out there and that compliance is in place for a reason. Compliance is in there because somehow something got compromised and this is a compliance requirement that you now have to be in compliance with. It may be an access control compliance thing. It might be a reporting compliance to a legal agency.
Dave: So talk to me about the first thing you refer to as the disaster recovery plan or the disaster recovery and business continuity. Okay, so my listeners love stories, so could you give me an example, like of one of your clients you know anonymously, that maybe went through a situation or maybe a company who was not a client but after they had an issue they hired. You guys give us a sense of like the elements of a really good you know continuity plan.
Tim: Sure. So I'll give you an example. I had a neighbor that was in my neighborhood that you know. We would see each other at the neighborhood community pool. Our kids would play together, you know weren't real close to them. But you know you get into the conversation of having hey, what do you do by? The way, and you know, I told him I ran a managed service provider, an IT service firm, and we manage customer networks and we keep them secure.
Dave: And he goes oh, okay, okay, Well, we got a guy.
Tim: We got a guy he's good, he's been with me for five years. At that point, and you know, and wow, that's great. Well, if we need anything we'll call you, right, the conversation went away and that was about 15 years later. So the guy had been working for him for 20 years managing his stuff, managing his infrastructure, managing his backups, making sure again going back to data protection and security making sure that everything was safe and secure and we could recover it. Well, lo and behold, 20 years later he calls me up it. Well, lo and behold, 20 years later he calls me up, not him, but his wife calls me up, and his wife, you know, worked in the business for a period of time but it exited out. She called me up. She said by the way, I still have your cell phone number. I'm wondering if you're still doing IT, was their question.
Dave: Okay.
Tim: And I returned back and I said absolutely, I'm still doing IT. What's going on? She goes well. He was afraid to call you because he's embarrassed and we were in a very bad situation. This is a second generation builder supply company, probably doing annual revenue about $10 to $15 million in annual revenue.
Dave: I said OK, what's going on?
Tim: And she goes. Well, we've been ransomed and our data has been held for ransom and we don't know what to do. And our IT guy doesn't know what to do and he is really stressed out. And so the next step was is like well, I can jump in and I can help you. Let me know if you need my assistance. But these type of scenarios we've worked with before and we know how to be able to either negotiate with the criminals and negotiate the ransom to a point where you can actually pay it. If that's your only option, that's your worst option. But if we can recover your data from some sort of backup, we can go through the recovery process.
Kind of summarize it we spent that particular client was not a client at the time and so they didn't have any of our backup or recovery procedures in place. They didn't have any kind of policy in place. They didn't have retention policies, they didn't have off-site backups. They had a lot of things. They didn't have offsite backups. They had a lot of things that were missing in that internal IT person's procedure.
So what happened was is we came in and we immediately got on site and determined that they were using tape backup, and this is like way tape backup had expired like a long time ago. They had tape backup, they had ancient equipment, it was really. They obviously had put no money investment into their IT. Okay, the recovery for that client was about a week and a half and we were able to recover about 90% of their data. So it comes down to what we call RTO or recovery time objective. The recovery time objective is how long will it take us to recover your network based on our backup and recovery procedures? That particular customer we were able to get back up. Like I said, it was an extended period of time that they were out and they weren't able to do stuff. They were writing sales orders on paper and going back to a paper process.
So they could continue their business, but we did get them back up and operational. We got them recovered and they became a customer and today we run very successful trials of the recovery system, as well as continue to make sure that their data is protected and secure.
Dave: Did they end up paying the ransom they? Did not Because you got them close enough to 100%.
Tim: We got them close enough where they had physical paper backup of the information that they were able to put back into the system.
Dave: Okay, now help me understand the other end of that spectrum with somebody who was a current client that something like that happened to, and what was the difference as far as how long it took before you had them up and running?
Tim: Well, you know, our current clients knock on wood have not experienced that.
Dave: Because they've got a tighter IT infrastructure.
Tim: Right, we've got the security and controls and again going back to the tool set to detect and have early detection of these type of events before they happen. So we have the security operations center that is constantly monitoring the security of the networks and the access to the networks and they look for anything that's kind of out of order.
Dave: When something's out of order.
Tim: then we identify it. We either isolate that system or we investigate it further and see is this a normal procedure that should be going or not? A normal procedure and a lot of this stuff is becoming part of AI now. Part of the AI capabilities is to be able to identify those things very early and stop them before they get any further into the network. So prevention is obviously a whole lot better than remediation. Right and that's what companies hire us to do is to prevent anything like that, a catastrophic event, from happening.
Dave: Okay. Well, what about something that's more like a hurricane hits and wipes out their building? I assume you've had some kind of like natural disaster kind of thing where you've had to enact a continuity plan.
Tim: Yep, yep, yep, absolutely so. Hurricanes here in the Gulf Coast of Texas, with the Gulf Coast of Texas being in a hurricane zone, we've had customers that their facilities have gone underwater. So one particular customer was on the south side of Houston and their facility went about five feet underwater. They, interestingly enough, had the server on a brick, thinking it was high enough. Well, it wasn't quite high enough, it was a foot off the ground, but it needed to be five feet off the ground. So that server went underwater and it was on when it went underwater. So it shorted out a lot of the components on the server, in which case, you know, they were like we don't know what to do In that scenario.
We actually brought the hardware to our facility and we found out what component had failed and we replaced that component on the system and we were able to recover that system oh, wow, okay yeah, that's what we always want to do, is we want to try to use local recovery as much as possible just because of bandwidth or um, no, because of the time it takes to get the data transferred over from a replication process right.
Gotcha If you're dealing with terabytes of data. You have to transfer that terabytes of data from either our data center facility or a cloud infrastructure, and that can be time consuming. That can be hours, if not days, depending upon the data. Okay, so some great stories. I mean, obviously we've had events happen. It's not uncommon for events to happen, but how we handle those events and how quickly we can recover from them is critical to a business to continue business for our customers and they can get back to business and be doing what they're doing selling things, manufacturing things, distributing things, whatever it is Okay.
Dave: And are there any particular industries that you have, like you know, kind of particular expertise in where you know you would say that people in this industry might look out to you for yeah?
Tim: There is. We're a very horizontal organization so we do have multiple industries that we play in. So we do play in the construction industry A lot of construction firms are in our portfolio, but also kind of an area where we've proven to have not only expertise in what we do but also the trust factor is in family offices.
Dave: Oh, really Okay.
Tim: Yeah, either high income families or ultra high income families. Obviously the privacy of those organizations, the privacy of the families, absolutely critical, and then the data that they're working with has high confidentiality. So, you know again, if that information was to leak out of the network or leak out of the system, then it would be a serious issue. So we've dealt with some of the highest wealth families in the world, oh interesting. Yep Obviously can't name them, but some brands that you would know, some organizations that you would know.
It's amazing when I look at our portfolio, the amount of business like when I'm driving around town and I see companies around town and I'm like been in that building, worked in that customer, handled that particular customer, things like that. So yeah, you know, it's our high income or ultra high income. Families are probably a good percentage of our business. Okay, because they have multiple entities that we can support, consistent across all of those entities. So it's very standardized the way we do our business and very proceduralized so it makes it easy for them to understand. They get a quarterly report that provides them with the details and data that they know what we did for them previously and then we also forecast with a forecasting budget in the October November timeframe to provide them with a forecast so they can budget for their future IT needs and know what they're going to need replaced in the future.
Dave: Okay, so was this just a case? You happened to stumble across, you know one of these family offices and then you know they run in the same circles and we're just got around that you guys were the go-to folks.
Tim: I will say it has helped right In the. You know, in that particular market referrals are a huge thing. Our first family office we did stumble across. We didn't know we were working with an entity, one of their businesses, and then we, you know, they introduced us to another piece of their business and then they introduced us to the family office. You know we're having troubles with, you know, my buddy, my other firm over here, and we'd like you to kind of help in that area. So that expanded out quite a bit. And you know, again, there couldn't be.
Our organization has to be the most trusted organization as a vendor that any company is going to hire, right? Sure, because you have to think about the access to the data that we have. We have access to absolutely everything. We're the administrator of your network, right? We have access to your email account. We have access to your email account. We have access to your employees' email accounts. We have access to your data, your financial data, your payroll data, your bonus data, all of the data that's out there on the network we have full access to. So you have to trust our team to the utmost in order to keep that information private, and I always approach a customer with. We're here responsible to secure and maintain that data. We're not here to look at what that data is. We don't know what that data is. Okay.
Dave: Well, that's interesting here. I thought I figured you picked up that first client when you were on your mega yacht at the Cannes Film Festival. It didn't work that way.
Tim: Huh, no it didn't work that way. No, it didn't work that way. I don't have a mega yacht and I wasn't at the festival, so okay, okay, yeah, not that I don't enjoy that stuff. I do have a house over at tpc, sawgrass and the players club and I do enjoy the country club life. You know I probably have the least expensive house in the neighborhood but I do enjoy the life.
Dave: So nice, nice, I like it. So what do your clients tell you that makes your firm unique, like folks that have moved from another firm to yours, then they've been with you a while and I imagine you'll have a conversation hey, how's it going from your end? Are we meeting your expectations? I imagine you have conversations like that. What are they? What are? Are there any common themes? When they end up comparing you to the prior provider, they had, or how does that go?
Tim: Yeah, there's a couple of scenarios there on why customers come to us and leave their current service provider right. One of the biggest things that I found with a customer that may be using a smaller service provider is they are really good at the tech stuff. They're not good at the business or the accounting side of the business, sure. So there's a delay in billing or an inaccuracy in billing and it's all of a sudden they get a stack of invoices three months later for work that was performed that they have no idea whether it got performed or what, and so there's a huge problem with the office operations of those particular service providers. So there's a pain point there and they're like I'm done, they come to me and they go, I'm done, this guy doesn't bill me. And then he bills me all at once, and then I got to try and back that information back into my financials and it totally screws up my forecast and my monthly reporting.
So that's one reason that customers come to us. The other one is they don't get a response or the response is like unpredictable. So when they call in, they may get the guy right away, they may get the person like return their call the next day or three days later, so response time is really huge. I have a service desk here that is operated 24 hours a day, so our first level response is within minutes. So if you call my office, you'll get a response within minutes. If not on the first ring, it'll probably be the second or third ring.
Dave: Oh, wow.
Tim: Yeah, very rarely does any of our calls sit on hold or back up in the queue, so that's one way that customers come to us. The other way that customers come to us is that we have acquired eight other companies in the past 25 years.
Dave: Oh, wow.
Tim: Yeah, we completed our last acquisition in 2024. And we've gone out and found other service providers that may be struggling. They may not have the right business acumen to be able to run the business, so they're either marginally making money or they're losing money because they don't have the standard operating procedures that we have in place and the true business acumen to be able to run the service as a company. They've got customers, they're doing the work, they're getting paid, but they're not profitable. So we end up with firms like that that have come in through acquisitions.
Dave: So yeah, I can see that and that's probably where your American Express background was helpful. Right Because you've had exposure to, you know, enterprise grade operations billing HR. Right operations billing HR right To where? Because American Express strikes me as just a well-run, well-oiled machine?
Tim: Absolutely yeah, and I will say yeah, I will give them credit for that. You know it was a great run over there for 10 years and I learned not only about you know my job role and continuing to build on my experience in my job role, but how a company operates from a branding perspective, in branding your organization and keeping that brand consistent, but also in standard operating procedures and standardized deployment of systems. Right. I always refer back to not only my American Express days but the Southwest Airline days of standardization. If you can standardize the particular piece of your business that you're running, then it makes it so much easier. So we have standard software applications that we put out from a security tool set. We have standard equipment that we sell out to our customers, all on the Dell platform. My team is trained on the Dell hardware. They're trained on the tools that we use. The security tools, the management tools and all of those things integrate together to make a successful business.
Dave: And again it goes back to enterprise level policies and procedures and way things that are, you know, repeating things that are successful you know, repeating things that are successful, okay Well, it sounds like like the first two parts of your success just seem mind blowing to me how you thought of this. But answer the phone when clients call and invoice timely Wow, I mean that's, that's quite a that's quite as. I mean I can't believe, to be honest, that you shared that secret sauce with me. I mean, my goodness, I mean that's. If you're not careful, there'll be other companies will start answering the phone and invoicing timely with that, you know inside knowledge.
Tim: Yeah, I hope that we can improve the rest of the service providers out there, right.
Dave: Sure.
Tim: Competition is good. I like competition. It keeps us going. It gives us something to work towards as well.
Dave: Yeah, so you talked a bit about some of the acquisitions and it sounds like you're kind of in a place where you're always open to the right acquisition. What are kind of the ideal characteristics of like the ideal acquisition? I'm guessing you're not going to try to acquire like E&Y's consulting group. I'm guessing you're looking for smaller operations than that.
Tim: Yeah for sure you know. So an organization, the organizations we have acquired, have been anywhere from a half a million dollars to two million dollars in revenue. Those organizations the owners may be getting older, they may be getting ready to retire and they're not sure what they want to do with their business. What they do know is that they don't want to continue to run it Right and that it's marginally. They're making the same amount of money or less than if they had a corporate job Right.
So it's sad to see, because they love what they do right and they want to place their customers in with a firm that has a similar culture, that takes care of their customers and really make sure that they're doing the right thing for their customers. So a firm that might be in a half million dollars to two million dollars in annual revenue, or the firm might be a five employee firm or smaller, and that they're getting to that point where they're kind of tired of running the organization and they'd like to transfer. They've taken care of their customers over the years and they've made relationships with those customers over the years and they like to put them with an organization that will take care of those customers and make it a seamless transition for the customer base sure, and I bet, I bet these sellers would probably be shocked if they were able to come in and look at the finances of their business like two years after you've acquired it.
Dave: Right, because I'm guessing?
Tim: Historically, yes, I will tell you, in probably at least half of those transactions that we've done in the either 12-month or 24-month payout period, they've made more money in that 12-month or 24-month period than they've made in the last three to four years.
Dave: Oh, because that earn out ends up being a function of how much you bill over those 12 to 20. And you dramatically increase the revenues, so they're automatically getting participation in that. Absolutely. If they'd known that they would have sold to you 20 years earlier. They just wanted to work for you had their payout and then just become an employee. Right, they want to come out way ahead. Exactly, yeah.
Tim: Yeah, now it's really good to see that. I mean, you know, that's one of the things that my competitors don't do. They try to come in and offer this ridiculous number for a business and then the earn out. They beat them up on the earn out and end up with anything. They end up with an initial payment and then maybe they'll get an earn out, maybe they they'll get an earn out, maybe they won't get an earn out, but they're going to tell them how horrible their organization was and how bad the customer base was and how it's not profitable and you know, it's just not how I do business.
Dave: Yeah, and I'm having done. Did you say eight acquisitions? Correct, yeah, I'm guessing you've done enough now. That now you have the ability Correct? Yeah, I'm guessing you've done enough now that now you have the ability, the same way that I understand you know when Berkshire Hathaway acquires a at that same point. Now You've got enough success stories that you can point to those as another differentiator, right?
Tim: Yeah, absolutely, absolutely. We're not at the Berkshire Hathaway point, but we got a couple under our belt and a couple of examples that we can refer back to and have some validation around our acquisition process.
Dave: Yeah, because I'm just like, as I'm just playing through some hypothetical numbers, like you know, if a company had, say and you don't have to confirm these, but say a company was doing half a million in revenue, the profit is say you know 50 grand and you buy them, is say you know 50 grand and you buy them, and it wouldn't surprise me if, like, two years later, you know that revenue number doubled and the profitability number like quintupled probably, and or you just you know dramatic increase. Just because you know I mean, quite frankly, you just have a better run business model but they had you're able to plug them in and so that's absolutely our goal.
Tim: Yeah, and so your win isn't so much we like to see play out right.
Dave: Yeah, and so your win isn't like other folks where you promise the moon and then you figure out all of these ways to not pay them.
It sounds like your process is just like hey, because in your mind, being a strategic buyer, that business is worth way more to you.
You know two years later, once you've done your magic to it, that business is worth way more and so you're okay paying them on an earn out, on a growing revenue number that maybe they didn't even contribute to, because at the end you know, as a I mean like on the front end you might pay, say you know, one times revenue, let's say just to pull a number out but by the time you get to the end of it, if the business is doubled and the profitability is quadrupled, you really ended up paying only one third or one half revenue. And so all of a sudden, whether you know found a way to squeeze them to where the imputed value you paid was one third annual billings or it was half of annual billings really doesn't matter, because the real value for you is like, year three after the earn out. You've got this great profitable book of business that you know you didn't pay much for in comparison to what it's worth two, three years later in your enterprise. Is that right that's?
correct, yep, absolutely but the reason you didn't pay much, though, in in all honesty, was because the business wasn't very valuable.
Tim: And it really wasn't right.
Dave: Yeah, I mean they had owner value.
Tim: Street value had a zero valuation on it right.
Dave: Yeah, they had probably owner concentration risk. They may have had customer concentration risk, poor processes systems. You know the type of company that you know. There weren't people beating their door down to buy their because, effectively, you're just buying a job. If you bought that business, all right. How much do you pay for a job? Most people don't want to pay very much for a job. Now, what do you look for in an employee, just like you know the most techie person you can find. Is that really all that matters?
Tim: No, it's not necessarily you know the most skilled technical guy out there, right? So one of the strategies that we have and maybe I shouldn't share that because my competitors may hear it, but we are a strong supporter of our veterans, so we have veterans that work in our organization. We're probably a 75 percent veteran organization.
Dave: Oh, wow, ok yeah.
Tim: Yeah, and we enjoy that. They come to us with technical skills and abilities but we build upon those we really do Right and we develop those particular individuals to be much better at what they do. But having our veterans on our team has been hugely successful from a reliability standpoint, as well as a dedication standpoint and the understanding to be able to follow orders as given, right Okay. So that's how we've been able to do that and our retention rate is extremely high. I would say that our culture is very good. We're very family oriented. We're very you know when work has to get done, work has to get done. But we also realize that the family comes first and there's family things that come in the way that need to be addressed. Right. You can't. Your kid gets sick. You have to go take care of your kid, you can't be at your job, right? Those kinds of things and being able to balance that.
That was one of my challenges at American Express. I was a new father in my ninth year at American Express and I realized that, even though it was written in the book and preached on the values of the company, when it came time to actually exercise that it wasn't as flexible as I had hoped I was like you know. This is another reason I kind of need to get out. I need to raise my daughter and I need to, you know, and I plan to have other children. So family values and longevity of employees, it makes a huge difference you have to think about. If you have an IT guy in your organization and they're only there for a year or two years, they've gained a little bit of knowledge about your business and how it operates and what computer systems are, what systems and software you're using in your business. They get intellectual knowledge right that walks out the door when that employee leaves or you release that employee.
Dave: Yeah.
Tim: With maintaining our staffing. I've got people on my team that have been with us 15 plus years and they have a history of our customers that is like you can't buy that right. Sure, you've got that knowledge of that network, of when it was built, like we've built some of these companies, so we know it from day one and what we've done to different applications and how we've modified them over the years. So just having that knowledge be maintained with your service provider is huge, so, and we can go back and look at you know, oh, here's a ticket from 15 years ago that I worked, that I resolved this issue, wow.
Dave: And how do you know? You know, cause it sounds like the company has been growing both organically and through acquisition. How do you know when it's time to hire? Do you wait till? Like people are working a hundred hours a week in complaining and quitting.
Tim: Is that?
Dave: the point you say oh geez, we probably should get somebody hired and we should probably hire in a hurry. The first person we come across Is that your growth strategy?
Tim: for your people? No, definitely not, definitely not. So we have a lot of KPIs in the business that we can measure the performance of our organization, and mainly that's around resource utilization.
Okay, so we have a lot of tools in our toolbox that give us an indication of when an employee is overloaded or when they have too much on their plate, so we can shuffle that within the business and be able to see who's got the workload and who doesn't have the workload, be able to move things around within the organization. But then we can also look at our utilization levels and, number one, make sure that we're profitable with those utilization levels but also staff appropriately to those utilization levels and know when it's time right. It's like okay, we acquired a company with five big customers and we didn't get any employees with it. Do we have the bandwidth or do we need to increase our staffing? So we really have a lot of KPIs around measuring that to make sure that we don't stress our existing resources and we balance it out that our people are profitable but they're not overworked.
Dave: Yeah, no, that makes sense. And then how do your new employees come to you? Is it referrals from other employees mostly, or no, we do have.
Tim: I sit on the board for one of the technical colleges and I use that technical college as our you know more or less recruiting platform. We find the best of the students. You know the kids that are shining. You know they kids that are shining. You know they're showing up on time for their classes, they're interested in developing their skills and they're really, you know, the top students in the tracks right Okay.
Yeah, and then we recruit them out of there. We recruit them in at our first level, our entry level, on our service desk team and we build them up in our organization over a period of time, so lots of opportunity for them to grow once they come into our organization.
Dave: Yeah, that sounds like a great way to bring new folks on. You can train them the way you want trained with your processes and systems.
Tim: And then keep them right. Keep them you can give them a growth path and keep them so that they can be. They can get better at what they do, get a higher compensation, be successful in life. There's nothing makes me happier as an owner than to see an employee grow from where they came in the day they started with us to being successful in life.
Buying a home buying a car, having a family, all of those kinds of things right, those are really important for me. They're kind of like energy for me to see a person develop over the course of their career with our organization.
Dave: Some of my guests. When I ask them, like what's the most satisfying or gratifying part of the job, it seems to fall into two categories. It's either the satisfaction they get from serving the customer or the satisfaction they get from watching their team grow. It sounds like you're probably more on that watching the team grow and that and then they. I think it was Herb Keller that had the idea of take care of your employees, and your employees will take care of your customers Absolutely. Is that right, that your satisfaction comes more from taking care of the employees, and then the happy customers are just an expected outcome?
Tim: Yeah, that is a result, right, absolutely. So you know, when I started started this organization, I started in the spare bedroom of my house. Oh okay, I had two analog phone lines. One was for my phone and the other one was a backup phone line, but it was also used for my dial-up internet to be able to help, oh wow, remote into into customers. Right, and looking back, I walk in now to our operations center and we have a pretty impressive organization and a pretty impressive facility that we own. And walking in now I'm like, holy crap, what the heck did I build?
Dave: right that's awesome. That's super satisfying right, super yeah I can imagine well I cannot believe how the time is flying by. I always tell my guests it's like the fastest hour of their life is being on the podcast.
Tim: How are we going to fill that hour, Dave?
Dave: Yeah, I know. So I've got just two questions just to wrap up. If you had a time machine and could go back and give some advice to like your 25 or 30 year old self, what advice might you give yourself?
Tim: Ooh, that's a good question. I don't know. I don't know the answer to that. What do I give myself? I probably would have started my organization sooner.
Dave: Bingo. That's the answer that 90% of the people have.
Tim: Yeah, I would have started my organization sooner. I needed that enterprise expertise, but I would have started it sooner.
Dave: Sure, yeah, it's yeah, because the funny thing when you're an employee and if you follow the career path that your family suggested is actually they think it's a low risk, safe career path.
But it's actually a high risk path because you have a customer concentration issue, meaning you have one customer, your employer and, as you learned three or four times that if they decide they don't need you anymore, you basically lose 100% of your income. They don't need you anymore, you basically lose 100% of your income. So it's actually less risky to have you know, even if you're just doing like consulting and all yours, just like a contract employee working 10 hours a week for four different companies, doing whatever.
I find that that's far less risky, because if one of the companies doesn't need you, then you know you've only lost a quarter of your revenue.
Tim: Yeah, I call it a scenario of I get hired multiple times a month. I hope I never get fired, but occasionally I get fired. But it should have an impact. I like it Well.
Dave: so here's my last question. So you're a naturalized Houstonian, like I, am Tex-Mex or barbecue.
Tim: Ooh, I like both really well. But yeah, tex-mex thing. If I don't have Mexican at least once a week, I'm going through withdrawals okay, so Tex-Mex?
Dave: yeah, now, one person answered that question. I borrowed this from somebody else. One person answered it. They told me about a Mexican restaurant that has great brisket and they make like brisket enchiladas and brisket tacos and brisket quesadillas and he said that was like the best of both worlds there. And I thought, boy, that sounds like it.
Tim: Yeah, there's nothing better than a brisket taco, for sure.
Dave: That is awesome, I make some of those myself. That is great. Well, hey, as we wrap up, is there anything? I did not ask you that you wish I had Tim.
Tim: No, I'd like to close by saying I shared with my team today and I'm always trying to come up with something that I share with my team every day and today I came up with solutions as a defense system designed to protect the most critical assets of your business the data. I like to just kind of close with solutions I as a defense system designed to protect your most critical assets your data, think about think about if your business lost access to its data, regardless of the circumstance.
If they lost access to the data, what would that do to your organization? That's what we protect from. That's what we protect from. That's what we protect from happening.
Dave: Yeah, Charlie Munger talks about the number one key to recognizing a great business opportunity is finding a company who's riding a wave that's only going to grow and increase over time, Because really all they have to do is just stay on the wave. Well, that certainly has applied to you, right? Because 25 years ago you probably had some companies that said ah our data is not that important. You know, I've got a Rolodex with all my clients' phone number and email, and you know, so the importance of data has only increased during that time, right?
Tim: Oh yeah, it's dramatically increased yeah.
Dave: Well, it's also.
Tim: Everybody trusts that data will be there when they're ready to use it.
Dave: Yeah, well, and also the other fact is digitization right 25 years ago, most of their data may not have been digital, it may have been analog or paper or whatever, but now virtually everything is digitized, which makes the data even more important.
Tim: I go back 35 years in this industry and when I go back and look at it, I replaced the inner office envelope. Oh yeah, people would type up a memo on a typewriter, put it in an inner office envelope and put whoever was going to and put it in their outbox and the mail guy would come by and pick it up. I replaced that guy. That's true?
Dave: Well, that is awesome. Well, Tim, I really appreciate your time. This has really been fun and you've really given me kind of an insight into what makes a really well-run IT services firm operate. So I really appreciate your time.
Tim: Yeah, I appreciate your time as well, Dave. Always good to chat with you and good to catch up and appreciate your time today as well. Thanks so much.
Dave: All, right, yeah, you too.