Dave Reid (formerly EPIC Information Solutions)

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David Noël: Welcome to the Manitoba Business Podcast, featuring interviews with business leaders and entrepreneurs based in this great province. I’m David Noël.

Today’s guest spent about 20 years building up his business. He had set a goal to exit the business before he turned 50—and that’s exactly what he did. In the interview, we cover a wide variety of subjects, including the strategy behind his path to a successful acquisition.

I hope you enjoy this episode. If you do, please consider adding a review on iTunes. I would also encourage you to spread the word about this podcast—the website is www.manitobabusinesspodcast.com

Without further ado, here is Dave Reid:

[to Dave Reid] Thanks for coming on, Dave. It’s really great to meet you.

Dave Reid: My pleasure.

David Noël: Can you start by having you tell us a little bit about who you are and what your company, or previous company did?

Dave Reid: Sure. So, I’m a graduate from the University of Manitoba with a Computer Science degree. And how I stumbled into entrepreneurship is, I’m not sure exactly. I joke sometimes that entrepreneurship is a gene that skips generations. My grandfather was an entrepreneur and had a company in Winnipeg called Wilson Automotive Electric.

David Noël: Oh, okay.

Dave Reid: But none of his children carried on with the business. And that prompted him to sell and exit his business eventually. And now I started my own business. And ironically, the same thing is happening. My children are not interested in taking it over, so maybe their children will be entrepreneurs. So I don’t know, maybe I’m onto something there. Recessive gene. So I started Epic in 1995, really in a partnership with a company out of Edmonton, and I had some skills and abilities that were similar to what they were offering in Edmonton with their company, called Complete Integrations at the time. And so we decided to open a Winnipeg office of Complete Integrations in 1995. I owned half of it and they owned half of it.

And we went along our way. That was really back in the days where we were doing ERP enterprise, resource planning, and selling software and doing custom development. And if you remember in 1995, Windows 95. So it was the birth of client server technology, the idea of Windows and applications being on a desktop opposed to being in this back office and this back server in the back, and you just had these displays that were just character interfaces to whatever application you were using. So it was really in the beginning of that transformation.

David Noël: Yep.

Dave Reid: And we were selling products that were pre-that, and then we were picking up products that were post-that and in the client/server model. So through the 90’s, we worked together on building that. I grew faster than they were growing, to the point where I was bigger. My Winnipeg office was bigger than their original Edmonton operation.

David Noël: Right.

Dave Reid: And so in ’99, I pursued asking them to sell me their shares and allow me to take over – at that point, we had now changed our name to Epic Information Solutions – and continue in the business as my own. They were graceful enough to enable that to happen, and we did a deal and off we went. And then promptly a few years later, I think by 2005, they were basically gone. So probably a pretty good decision on my part to move on and continue growing the company. And so we evolved. That was sort of, would call version one of Epic, when we were in this application development space.

And then in the early 2000s, we moved into the infrastructure space after Y2K and the collapse of all sorts of IT companies and so on. We moved into the infrastructure space. That’s our version two of EPIC. Later, around 2007, we built out a really strong services component and a non-services practice, and that was our version three. And then most recently, really expanding into data center and cloud computing, which would be the current version four of Epic. Now it’s in someone else’s hands and we’ll see what version five is.

David Noël: Awesome.

Dave Reid: Evolution, I think, is such a critical part of business. If you just keep doing what you’re doing, eventually you’ll just become a dinosaur.

David Noël: Totally.

Dave Reid: Technology, of course, there is no industry that moves faster than technology.

David Noël: True. Okay. There’s a bunch of things that I want to pick apart. We’re going to jump right back to the very beginning. You said you did your degree in Computer Science. That was in the late ’80s. Is that correct?

Dave Reid: Yeah. I graduated in ’89.

David Noël: Okay, cool. And then the company that become EPIC, you made that partnership with Complete Integrations in 95, right?

Dave Reid: Right.

David Noël: What happened in between? Between you graduating?

Dave Reid: I had a number of jobs with a couple of local companies, worked in a development shop that was a professor at the university who didn’t know business.

David Noël: Okay.

Dave Reid: Eventually, after I was there for about a year or a year-and-a-half, they eventually were laying people off, and then the financial wreck. And then I moved into a company called George and Jackson, who’s a local manufacturer of upholstery and blinds and a family-run business, and frankly, a place where I learned a lot about business.

David Noël: So were you working for them as a developer?

Dave Reid: I was the developer. I was the systems guy.

David Noël: Okay, so you were that all-around guy that has to do everything.

Dave Reid: Yeah, and really pre-1995, these small mid-sized businesses could run on one individual running all their IT, including writing programs, keeping the systems up, and being the jack of all trades. Today you can’t do that with IT. IT is far too complicated.

David Noël: The role of IT in the business has changed a lot.

Dave Reid: Right.

David Noël: Okay, so you were working and you started to learn. What were some of the business lessons you learned while working for George and Jackson?

Dave Reid: You know, certainly around strong financial management, saw lots of people-oriented processes and strategies that were very important, and certainly strong customer focus, customer service, strong reporting around customer business.

David Noël: How were you exposed to that? Were you the guy in the back watching everything happen?

Dave Reid: No, I was dealing with the owners and the VPs about how to help them develop systems. So it wasn’t they would have these ideas and I would be able to explore these ideas with them further and talk about what I could do or what I can’t do with regards to the data or writing a program, and then we’d work together on coming up with a system or something. I remember one of the best projects we did there was building a customer report card, and it pumped out all these sales.

David Noël: Oh, interesting!

Dave Reid: And I actually had to build, write code to graph sales data. This is back pretty early. That’s pretty low level stuff.

David Noël: Yep, yep.

Dave Reid: Lot of effort to print a graph out on a laser printer.

David Noël: No kidding.

Dave Reid: You know, so it was quite interesting, and learned a lot through that. And from there, I went into consulting. And again, started doing work with companies like Motor Coach Industries and [inaudible], and learned even more about business. And Motor Coach was helping them implement their ERP solution at the time, doing a lot of customization, a lot of work for them, and filling the gap between what the application did and what they needed it to do.

David Noël: You were working as an independent consultant at that point?

Dave Reid: For a little while, and then I started Complete Integrations with my partner.

David Noël: Gotcha.

Dave Reid: And those customers just continued on under that umbrella.

David Noël: Okay. So you were working for George and Jackson, and then you decided to go out on your own. What prompted that, the shift into being an independent consultant?

Dave Reid: Well, I was actually with another small consulting company that was a startup and learned a few things about how not to run a business.

David Noël: Yep.

Dave Reid: But learned a lot about this consulting gig and working for customers and working really on that leading edge of technology all the time, which is fun. It’s one of the best things about being in the consulting industry or in the technology industry. You’re always working on current stuff. Whereas if you worked for an end user, if you just worked for Motor Coach, let’s say, or you just worked for George and Jackson, it’s new at the beginning, but then eventually it becomes old and you’re just maintaining the environment. And they need to do that because they can’t keep up with spending money on technology changes all the time.

But in the consulting business, or in the IT service business, you’re constantly always learning more new stuff and always working on the “who’s adopting the latest technology.” And you do a little bit of maintenance and support for that older stuff but you’re really forward-thinking and working on being thought leaders in that industry.

David Noël: I mean, like, Motor Coach is a pretty hefty client for an independent consultant to pick up. How did that happen?

Dave Reid: Well, I was, again, kind of lucky. I had a niche in an application or in a development language called Progress, at the time. I quickly became the best guy. Very few people were using it, but enough were using it. And people were buying applications that were written in this language but they didn’t have anybody with skills.

David Noël: Oh I see. So did Motor Coach have an ERP that was written in Progress?

Dave Reid: So they bought a product that was written in Progress, exactly. And all their staff had been around for a long time and were old.

David Noël: Oh, I see.

Dave Reid: Dinosaur programs at the time, and they weren’t able to adapt or work effectively in that language.

David Noël: That’s interesting.

Dave Reid: So I came in and was doing the work of three or four of their other people, and training them, in fact, as well, trying to help them become more effective and so on.

David Noël: Yep.

Dave Reid: So I was able to quickly adapt and help them get that gap between what the out of the box system did and what they needed it to do to become fully operational. It took them from that over the course of a year. We went to a point where we could go live, and went live and continued supporting them for a very long time and helping them with even making better improvements and leveraging the software even more.

David Noël: No kidding. Supporting them for a long time, did they become an EPIC customer later on?

Dave Reid: Yeah, yeah, they were a customer of EPIC’s probably for, I think, eight years.

David Noël: Oh, cool.

Dave Reid: But like all good customers, they become rich and become non-customers.

David Noël: I’m going to dig into that in a second, actually. That’s an interesting statement, but before I do…so you’re at that point where you’re an independent consultant and then you decide to make this partnership with Complete Integrations. Was that just the opportunity came up and you saw that it was an opportunity for growth, or was it something you had been looking for? What was the thought process there?

Dave Reid: Well, I mean, they certainly brought a little bit of capital. They brought some vendor relationships and some experience. And I saw that as a good opportunity. There are times in your career that partnering is by far the best option to reduce risk and also to bring people that are smarter, to leverage people who are smarter than you, or at least smarter than you in other areas. And then eventually that can form into doing it your own way. But at that point in time, I had a young family and not a whole lot of capital, so having them as a backer and being able to leverage these people who had been in business for quite some time was advantageous.

David Noël: So was it basically just you…there was this company in Edmonton that had been in business for a while and you saw that and you basically approached them and said, “Look…”

Dave Reid: They actually found me.

David Noël: Oh okay. And so they were looking to expand into Manitoba.

Dave Reid: That’s right. Just prior to that, I was working for this small consulting company, and then I had left. But they weren’t selling the same product that this company in Edmonton was.

David Noël: I see.

Dave Reid: And so as soon as they caught wind of these guys not doing so well, and that I guess I was the smart guy, they came and seeked me out and away we went.

David Noël: Gotcha, okay. The backing of this other company, were they funding at the beginning? Did they allow you to hire some employees and stuff like that, or were you basically on your own just with their letterhead? What did the partnership look like?

Dave Reid: We hired a couple of individuals right away. Our sales person had hired an admin support person.

David Noël: Yep.

Dave Reid: And then hired more programmers shortly thereafter. From 1995 to the first few years, I think after three to four years, we were up to 15 people in the office, and very self-sufficient. We would break even, let’s call it, in our first year, but after that, we made money every year ever since. They really let me go. They saw they didn’t need to babysit me and they just let me go.

David Noël: Very cool.

Dave Reid: I built it to the point where in ’99, I said “Well, this is great but all I’m doing is writing checks back to Edmonton and not really getting any value. Maybe it’s time for me to take the leap and put my money where my mouth is and acquire the rest of the company from them.” And again, they saw that as being a good opportunity, so we did that.

David Noël: Interesting. You described the company’s history in different phases, and that was the first phase. You said you did a lot of customer development, is that right?

Dave Reid: Yep.

David Noël: And so at that point, was it mostly building custom additions and integration to ERPs?

Dave Reid: Yeah, we did some custom development from scratch, but for the most part, it was working with existing larger applications and enhancing them. We were customizing them, building on top of them or adding functionality, lots of reporting, of course, is always a big thing, pulling the data out in a manner that the customer needed it to operate.

David Noël: Yep.

Dave Reid: But really just doing those tweaks to make it work better for the business. Those were the days where we would take applications and make them fit the customer processes.

David Noël: Yep.

Dave Reid: Today, we don’t do that. We do that less and less. Today, it’s change your business processes to fit the application.

David Noël: Okay, I see. Interesting.

Dave Reid: Because custom development is just so expensive to do and hard to keep current on your software.

David Noël: I see, I see. Is there also an element of it where the software is designed with best industry practices already in mind and…”

Dave Reid: Sometimes.

David Noël: Okay. Sometimes, but sometimes not.

Dave Reid: You don’t always know what’s under the hood.

David Noël: Yep, gotcha. Okay. You said that the shift between part of that first phase and the second phase was driven by Y2K a little bit. Is that right?

Dave Reid: Yeah.

David Noël: Now, my memory of Y2K is I’m sitting on my parent’s friend’s basement and we were watching the countdown and wondering if all the computers in the world were going to stop working. How did that actually impact your business? What was the reality of Y2K for you, and how did that precipitate the shift into the next phase?

Dave Reid: Well, in the ’90s, I was still pretty young and I was definitely a naive business owner and didn’t…you know, worked day-to-day. My vision was “What do I have to get done this week?” Not looking out where we’re going to be in three years or five years.

David Noël: Yep.

Dave Reid: I knew Y2K was creating business in the late ’90s, but I didn’t realize how big. And it was really sucking the life out of companies in terms of budgets to get themselves to Y2K compliancy and were really being taken advantage of by lots of IT manufacturers and companies. Nonetheless, Y2K happened. It was a non-event. But what happened after that was, businesses basically had used up multiple years of forward money for IT before Y2K to get Y2K compliant, and they had no more money to do anything. And so two things happened right away. One, where we were able to sell enterprise resource software quite easily in the late ’90s, because people had the option of fix or rip and replace, and they would just go and buy software. So there was lots of opportunities to sell software.

After Y2K, the compelling event of buying new software went away. If they survived Y2K, their software was good. So the compelling reason to change was no longer there. The big compelling reason to change software wasn’t there. And so we saw a drop off in ERP opportunities like instantly. It dropped very fast. And then we also saw consolidation happening in the IT space, so large ERP manufacturers of software started buying out a bunch of the little guys. And that really changed the landscape quite a bit in terms of how to partner and how to represent.

David Noël: No kidding. Okay. And so then if you couldn’t sell ERPs anymore, was that when you started shifting to selling more infrastructure stuff?

Dave Reid: Yeah, so what we noticed at the same time, was that a lot of the large national companies that were selling infrastructure, Y2K was over, so they picked up and left and created a bit of a hole in the marketplace. Another company called Cortex at the time, which was a major provider of IT in Manitoba, was acquired by a North American company called Insight. They had a different model of going to market. So again, we saw this opportunity of serving those customers the way Cortex used to serve them, not the way Insight was going to serve them. And so based on that, based on a few opportunities that dropped in our lap, we saw this as the opportunity to get into the infrastructure space. We went from a nobody, with a company like HP, to being the number one partner in Manitoba.

David Noël: Wow.

Dave Reid: And in certain aspects of it, number one in the west for them really quickly, and allowed us to really just build on that business very quickly.

David Noël: So then what was the model at that point? You were selling hardware for HP?

Dave Reid: Yep, we were highly focused on HP product, and we quickly became known as the HP partner in town. Sometimes even…

David Noël: So that’s actually a pretty big shift then. You went from doing software work, customizing ERPs, to essentially selling hardware, selling servers for businesses. Is that…

Dave Reid: Yes, that’s correct.

David Noël: Okay, wow. Did that represent a shift in the employees in the company as well? Was there a lot of turnover at that point?

Dave Reid: We still continued doing our ERP practice. We were still selling ERP. We were still supporting ERP, but we essentially stopped investing in it, to say, “This is not where we’re going to be, long term.” Also, the problem with ERP was that it was kind of heavy focused on manufacturers, and so you had a very narrow group of customers. And I certainly didn’t like the idea of a product line that lived and died with whether manufacturers were doing well or not doing well. And so, when we got into infrastructure, all of a sudden we quadrupled our market space in terms of customers, or opportunities for customers. And so that was a pretty good move. And I was a general technologist anyway. I was a really good programmer, but I understood infrastructure to a certain point as well. I started hiring people that were specialized in that area and really double downed on that.

David Noël: I see, okay. And so then that led you to around 2005, which is when you made the split from Complete Integrations. Is that right?

Dave Reid: We did that in 1999.

David Noël: 1999? Oh okay. I see. So you actually did that before Y2K?

Dave Reid: Before Y2K, yeah.

David Noël: Okay. And at that point, what was your thinking? Basically, it was like you said, that you were sending them money and you kind of wanted to…

Dave Reid: Well, they weren’t really adding value. Although we still had some common thoughts around product lines and things like this, we were doing a number of different things. We were really moving quite rapidly forward with technology, and they were a little stuck in the mud.

David Noël: What were you doing differently than they were?

Dave Reid: Well, we just weren’t happy being complacent.

David Noël: Okay, so you were just pushing the gas.

Dave Reid: Correct, just more aggressive and wanted to become something bigger and something more relevant.

David Noël: I see.

Dave Reid: And so you have to keep growing.

David Noël: Yep.

Dave Reid: You know, you can’t stand still in this business.

David Noël: Yep.

Dave Reid: Any business, you can’t stand still.

David Noël: Yep. Okay. So you decided that you needed to make the cut. I assume that meant you needed to write them a big check to leave you alone?

Dave Reid: Yep.

David Noël: At that point, was it basically a no brainer for you, or did you feel like that was a big risk to be taking?

Dave Reid: That was a no brainer.

David Noël: Okay.

Dave Reid: You can’t be scared.

David Noël: Yep. All right, all right.

Dave Reid: Can’t be scared about this stuff. You have to be committed to…failure is not an option.

David Noël: All right, all right. So you decided that you needed to make that shift. You got rid of them. And then Y2K came along and you shifted into kind of the second phase of the business. And then you said…what did you say? How did you describe that third phase again?

Dave Reid: The third phase was really moving into a service-oriented business, so we did a couple of acquisitions in 2007 that brought a larger group of people that were really oriented around services. So trying to expand upon, not just selling infrastructure products but creating more of a professional services group around that. And ultimately, what was happening at that time was what you call managed services, the idea kind of outsourcing but really helping customers manage their IT infrastructure more efficiently than they could do it themselves.

David Noël: So this is the idea where a customer comes to you and instead of just buying a server and installing it, they have to take care of it from there. They buy a server from you and they also buy you guys taking care of it until the end of time.

Dave Reid: That’s right. So we started to work on developing a methodology on how we were going to deliver that service, and we took it very seriously and made a lot of investments. So even today, EPIC is still the only company, local company, that has a full time help desk where there’s people sitting answering the phones. There’s a distinguish between the smart guys that are doing the difficult work to people that are answering the phone, so that when a customer calls, we answer the phone. It’s no “I’ll call and maybe I’ll get to the engineer.”

David Noël: Oh okay, I see. So you instituted a help desk where you’re actually giving direct help.

Dave Reid: Yeah. So we really stepped up the service level that was being offered. And moving from a kind of materials-type support model to a flat rate service model, so that the customer had an expected cost but knew that they were going to get all the support they needed. As well as really a proactive support model, so it wasn’t just waiting for the customer to tell us they have a problem; we were monitoring their equipment and we were doing things to install best practices in terms of how their infrastructure was configured and built so that it would reduce the number of problems. So as we said, let us do what we do really well, IT, so that you can do what you do really well, which is plumbing, or TV or whatever you do, right?

David Noël: Yep.

Dave Reid: So, let us do the things that we do really well so you can do the things that you do really well, which is not IT.

David Noël: Yeah, yeah. For any company, that IT is not their core competency. Okay, so then you did the third phase of the business, which was a service model, and then you said that you moved toward the data center type of infrastructure.

Dave Reid: The last phase is really the migration to cloud services, and that really takes the next level of saying to the customer, “Look, if you don’t manage it, then why even own it? Why not just rent your compute and let someone else take care of it,” and really changing the methodology of how business does IT from a high capital expense to an operating expense.

David Noël: Right.

Dave Reid: Lots of issues around why you need to do that, and lots of good reasons why you want to do that. The old capital model of buying capacity for the next five years with the hopes that you hit it right and you don’t have to do a forklift upgrade because you underestimated or you overestimated and you never actually used those resources but you paid for them, goes away with cloud computing.

David Noël: Yep.

Dave Reid: You pay for what you use more so.

David Noël: Yep.

Dave Reid: And that is a very effective way of helping companies manage their cash flow and get a better return on their investments.

David Noël: Right. What did that look like, operationally, for EPIC? I understand that recently…this is after the acquisition or possibly started before the acquisition but it was the building of the data center. Was the goal always to sell cloud stuff in local data center, or were you also selling cloud stuff in remote data centers? Was there a hardware focus or was this purely selling cloud stuff that lived elsewhere?

Dave Reid: No, it was just one more extension of what we were doing. Our ideal customers were buying gear from us, were a managed risk client, and using our cloud services.

David Noël: I see.

Dave Reid: We were early enough into the cloud that we had opted to actually build our own cloud and operate it locally. And I kind of called that a regional cloud provider, which allows us to do things on a slightly more customized manner. We don’t certainly have the efficiencies of a Microsoft or an Amazon, right?

David Noël: Right.

Dave Reid: But we’re closer to the customer and we’re able to integrate the cloud pieces with those other service models, whereas you can’t buy managed services from Amazon or…they’re not going to take care of your desktop or your local environment.

David Noël: Oh I see. So your sweet spot was actually people who had both. They had your managed services; they had some hardware on site, and then they were supplementing that with your cloud offering.

Dave Reid: Right. So we would help them migrate so that we could take their environment and make it a more resilient and more reliable IT environment, which ultimately enables them to do what they do best better.

David Noël: Right. And long term, it would still allow you to migrate more and more stuff to the regional cloud as opposed to their local infrastructure, their onsite infrastructure, but that would be something that could be part of your managed services. Basically it wouldn’t be their headache.

Dave Reid: Right. The business for us about why we were doing a lot of that, the financial mechanism, was really to take these one-time sales, when I sold someone a server or whatever they bought one, and then three years later, they might buy the next one from me, but no guarantee to a model where it’s all reoccurring revenue.

David Noël: Right. And if people are only paying for what they’re using, then the reoccurring revenue, they’re happy about it too. Like you said, it simplifies their cash flow.

Dave Reid: Yeah, it helps. It makes it easier. When you don’t have to spend all that capital, you can divert that capital to other things and you can defer it. The reoccurring revenue stream or that subscription model, which is what IT has been moving towards for the last decade, because everyone recognizes it. Microsoft recognizes it. That’s why they’re trying to get out of selling you a license and sell you a subscription. Apple’s been doing it as well.

David Noël: Yep.

Dave Reid: So everyone’s doing it because they recognize that customer acquisition is the toughest thing to accomplish, and that if you can basically get them into a contract, your chance of keeping them long term is much higher.

David Noël: Right. Plus, the ones that don’t stick around, they’re probably customers you didn’t want anyway, and they would have been a headache if you had somehow convinced them to spend a bunch up front.

Dave Reid: Right. That’s right.

David Noël: Okay. Since we’re talking about customers, I’m going to circle back to what you said before. You said that the best customers eventually turn into non-customers, in the context of Motor Coach Industries. Explain that one.

Dave Reid: Well, again, my experience has been that regardless of who the customer is, there’s moments when you say “This is my best customer I’ve ever had,” and then sometime in the future, they’re no longer your customer for sometimes a variety of reasons. Often it’s out of your control, frankly. They’ve had a change in leadership. And when you have a change in leadership…we’re all in the relationship business at the end of the day, and the relationships go away. And if you’re unable to build a new relationship with the new people or they come with their own relationships, you’re going to be at a disadvantage. Sometimes it’s they change their technology direction.

David Noël: Yep.

Dave Reid: Sometimes they were your best customer because you’re on a contract, an RFP. Well, eventually the RFP runs out and they have to reissue it, then you might lose.

David Noël: Right.

Dave Reid: So, all good customers eventually become non-customers. I’ve had customers that were 50% of my business and they’re no longer my customer.

David Noël: Yeah.

Dave Reid: So, you have to realize that and you want to keep those relationships as long as you can, but eventually they will… there’s something that’s going to happen.

David Noël: Oh, I see. So the statement that all good customers eventually become non-customers is just accepting the reality that over time, the customer base of the business is going to turn over.

Dave Reid: Well, yeah, and it will. It will always turn over. Very few companies could probably say “I’ve had this customer from day one, and they’re still my customer.”

David Noël: Right.

Dave Reid: They may have that example, but that’s gonna be less than 1% of their current customer base.

David Noël: Right.

Dave Reid: One of the realizations there is, that as soon as a customer represents 20% of your business or more, you better start planning the day that they’re not going to be.

David Noël: Right.

Dave Reid: It can go to zero very quickly.

David Noël: Yep, yep.

Dave Reid: Because the customer evolves, and your company evolves. A lot of our customers back in the ’90s aren’t our customers because we don’t do what we did back then.

David Noël: Right. I was just going to say that. I guess with all the different changes in EPIC’s focus, it wouldn’t make sense for these customers to stick around for the ride because they’re not necessarily interested in the next thing that you’re doing.

Dave Reid: You go your separate ways, right? So it’s just natural evolution. Sometimes, as you evolve, you need to cut those things off because they’re just big anchors for your company.

David Noël: Yep.

Dave Reid: As you decide to move from doing this to doing that, those customers that you did this for, you need to start divesting of them.

David Noël: Yeah, that makes sense. We were talking about the different phases of the company. Let’s jump to talking about the acquisition. Well, actually, first of all, were you looking to sell the company before you started talking to MTS? Was that on your radar as something that you wanted to do, or what was your thought process there?

Dave Reid: Well, in the mid 2000’s, I was doing a lot of thinking about long term, ten years out kind of long term, and I guess I was fourty-ish, 39 or 40 at that time. I started to think about “What do I want to be doing when I’m 50? What do I want to be doing when I’m 60?” And I quickly came to the conclusion that it would be nice if I was untied from the business when I’m fifty-ish. That would be a good place to be. And thought about different ways to accomplish that, how would I exit the business, how would I get my equity out, thought about selling to employees, thought about selling to management, and thought about selling to another re-seller. I thought about all these things, and eventually just really thought about who are the strategic buyers, who’s going to pay…

I mean, buyers have a range. Some buyers pay top dollar because they know the value that they’re getting, and they see it synergistically how that’s going to make them more money. And then you have buyers who are just looking to buy a bunch of assets and merge it into their existing business and just keep plugging along, right? Just private expansion, and they’re not going to pay for all the value, because they don’t want it. So, knowing that, I wanted to maximize my equity, you know, who might that be, and so I thought long and hard about that. MTS was one of those companies I identified as being a potential strategic acquirer of EPIC at the time. And then I started thinking about “So what do I have to do to actually be attractive enough for them?”

David Noël: Yeah.

Dave Reid: And then I set out on a plan to actually accomplish that. Basically, I had a ten-year plan. It was a loose ten-year plan because you don’t get to decide when you get the sell; a buyer decides when you get the sell.

David Noël: Yeah.

Dave Reid: So I set out on a plan, and this was in my background all the time about preparing the business for sale and setting it up so that it could be sold at any point, and understanding the things that buyers were going to want and what they don’t want. I did some buying. I did some acquisitions. So I learned what it was like to be a buyer.

David Noël: Yep.

Dave Reid: Even went through a couple of sale opportunities where some people were interested in acquiring us, but I didn’t really have any intention of selling but went through the motions anyway to understand the mechanisms and educated myself on what it was going to take…

David Noël: Why did you know those kinds, the ones where you went through the steps, why did you know they weren’t going to be good?

Dave Reid: Oh, just, again, they were low value, non-strategic buyers.

David Noël: I see. So they weren’t buying you to add a capability; they were buying, like you said, for your hard assets and for your people.

Dave Reid: Just to expand what they already did, and so there was not a lot of value in that. But it’s good to go through that exercise to see the delta between what they’re going to pay and what someone else might pay for your company.

David Noël: I see.

Dave Reid: So, really, it’s that idea about thinking about exiting. It’s a plan. You have a strategic plan to do that. I had decided I was going to sell the business. My kids weren’t going to take it over. I wasn’t going to do all these other mechanisms. That wasn’t the right method for me, so that was what I was going to do. And so I set out on a mission to accomplish that.

David Noël: So you were trying to position the business to be acquired, and you had MTS as a potential acquirer in mind. Was the list of potential acquirers long or was it…

Dave Reid: No, it was very short. It frankly was very short, but still open to opportunity and always looking.

David Noël: During that time, besides positioning the business to be valuable to these people, were you also trying to build relationships with these potential acquirers?

Dave Reid: Yeah. So what you do is strategic. When you’ve identified strategic buyers of your business, they may or may not realize it themselves but your best attack is to start building a relationship with them. Now, that could be a partnering relationship, or it could be a competitive relationship.

David Noël: I assume at that point, EPIC must have had some kind of relationship with MTS at the time already.

Dave Reid: Yeah, sure. They were a provider of services to us. We competed against them at times.

David Noël: Okay.

Dave Reid: As we got closer to our actual acquisition conversation, we were actually doing a lot of competing against them.

David Noël: Yeah, I was just going to say that. You just mentioned that you can either try to build a competitive relationship or you can try to build a different kind of relationship. Did you intentionally choose that by building a competitive relationship that would make them see the value in your company more? Was that your thought process there?

Dave Reid: Yes.

David Noël: Okay.

Dave Reid: That was part of why we expanded our business into Cisco practice.

David Noël: I see, okay. Interesting. You were competing with MTS in one division of their business. Obviously, EPIC was a much smaller company but your goal was to basically to be a big enough thorn in their side that they couldn’t ignore you. Is that accurate?

Dave Reid: Well, no, it was just to make sure they knew who we were. One of the things we had to do was get big enough to be worth someone’s time to look at. Small businesses are small businesses, and the owners often just own a job, not a business.

David Noël: Yeah, MTS isn’t going to acquire…

Dave Reid: No, we need to be big enough that the business operated more or less without me on a day-to-day basis, that I was wasn’t pinnacle to the operation. And so that’s all just part of the preparing the business for a sale opportunity. And then just wait. Looking and paying attention, and waiting for the opportunity that made sense to get into that conversation. And that’s what happened in 2013, when I approached MTS to talk about partnering on a data center build. They were interested in that, but they weren’t really interested in partnering.

David Noël: So the data center build was really what kicked it off? You approached them?

Dave Reid: There was a huge opportunity in our marketplace for someone to build a new data center. We were seeing lots of opportunity around that. And so they were interested in doing that. They were looking at it as well. And we were looking at it. I couldn’t have done it on my own. It was just too much capital.

David Noël: But they could have.

Dave Reid: Yes, but they also realized they lacked some expertise.

David Noël: Okay, interesting.

Dave Reid: So one of the values we had was, frankly, our expertise, our IT expertise. They saw that as a good opportunity, as well as all the other things we did. So that conversation led into “Well, maybe we should look at acquiring.” And that was the start of the sale process.

David Noël: You approached them, you said, at the beginning of 2013. Was that right?

Dave Reid: No, in 2012. And then we really got into conversations in 2013, and ultimately closed the deal September 1.

David Noël: I see. Okay. So the entire process took almost a year, if you count the initial conversations?

Dave Reid: About 10 months.

David Noël: About 10 months? Okay. Interesting. And what was…

Dave Reid: And eight years before that, eight years of plotting and planning and thinking and all the things that we needed to do to make ourselves attractive. I’ve looked at many businesses to acquire and many of them are just not in a good state for acquisition. Because the best company you acquire is one that you acquire and you just keep going, that their next year, the year after you acquire them is better than the year before you acquired them. And that’s certainly what happened with EPIC. Although we had a good year the year we were being acquired, the following year, it was actually better, by a significant amount.

David Noël: Wow, okay. You said one of the things you needed to do was to position the business so it wasn’t super dependent on you. In general, both in the businesses that you acquired and in the way that you were trying to position EPIC, what were the key points in terms of setting yourself up to be desirable for an acquire?

Dave Reid: Well, I think, first and foremost, is a strong management team. The less I did, the better.

David Noël: Yep.

Dave Reid: And so, over those eight years, I spent a lot of time hiring, firing, managers and my executive team that really reduces the risk for an acquirer. Because when so much is wrapped up into one person, there’s a lot of risk in that one person. And I had to remove that from the company, that I wasn’t required necessarily, that I could step out and get hit by a bus or whatever and the person acquiring wasn’t going to lose a lot of value.

David Noël: I see.

Dave Reid: So that’s the number one, certainly to have extremely strong and capable management staff that all have different skill-sets and different personalities. A good team won’t be all the same type of people; it’ll be a bunch of different types of people.

David Noël: Right.

Dave Reid: The second piece was to have a very strong financial management, and strong finances. So, to understand your balance sheet and to understand how that affects a sale price, how that affects your day-to-day business, and managing that really tightly. So we had excellent financial management systems and we managed finances very well. And that, again, translated into good value, because…

David Noël: Was that something you always did, or was that a change that you had to implement when you started positioning yourself?

Dave Reid: Well, no. It was something that we had to get better at. Back in ’99 when I acquired the company, we got ourselves into a little bit of a financial mess. That’s when I decided I didn’t want to do that again, so we worked ourselves out of that financial mess and then never looked back and never got there again. I think that was really key, is to have very strong financial management systems. The last piece, which I think was really critical, was the ability to scale and having a methodology around recruiting people, and developing people, and managing people so that you could build your staff relatively rapidly.

In 2007, January, we were 20 people. At the end of 2007, we were 50 people. By 2009, we were 75 people, and ultimately 100 people by 2013. When you go from 24 to 100 people, a lot of things change really fast and you don’t have time to fumble around the best way to do it. You have to execute quickly and effectively, and we kept that at the top of mind.

David Noël: Right.

Dave Reid: Because it’s hard to hire people and it’s hard to keep people.

David Noël: Yeah. I’m tempted to dig into that a lot more but we’re running on time here, so I’m going to have two more questions. One of them, just fast forwarding to this year, you left EPIC this year. Is that right?

Dave Reid: Correct.

David Noël: I assume that was part of the acquisition. You had a contract to stay there for a certain amount of time, and then that was up and you decided you wanted to move on. Is that kind of…

Dave Reid: Yeah, it was a mutual agreement between MTS and myself, that it was good timing. New CEO at MTS was realigning things to fit his management style and the way he wanted to operate the organization, and it made sense for me to step aside and allow them to do the things they needed to do. So it was a good time. I don’t regret that at all.

David Noël: Yep. Meets your…

Dave Reid: I had a plan.

David Noël: Exactly. It fits into your goal of wanting to be able to have an exit, right?

Dave Reid: That’s right. I’m a year ahead of plan, basically. I’m not 50 yet, so.

David Noël: Oh, fantastic. And then I guess my final question…well, actually, I’ll sneak an extra one in there. What’s the future now for you look like? Are you basically just sitting on a beach somewhere or…?

Dave Reid: No. I say I’m temporarily retired because I know that I can’t sit still for too long. My plan right now, I’m very interested in doing corporate board work.

David Noël: Okay.

Dave Reid: To that end, I recently completed an Institute of Corporate Directors education program, which is probably the foremost program in learning how to be a director of corporations.

David Noël: Oh cool.

Dave Reid: And so my current quest is to seek out and try to find my way onto a number of paid corporate boards, as well as augment that with some consulting and doing the type of work that I want to do.

David Noël: Yep.

Dave Reid: Which I’m already doing with my current company, Plan B Gurus.

David Noël: Cool.

Dave Reid: And that’s quite exciting and fulfilling.

David Noël: Okay. Very cool. All right, final question. Which people, if any, have influenced your approach to life and to business?

Dave Reid: You know, I don’t know if there’s been any one person or…because experiences come from all sorts of places. I’ve gained experiences from my customers, from my parents, from my business colleagues, from employees. It’s really a sum of all those things. I don’t think I’ve modeled any one person; I think I’ve modeled a bunch of other people.

David Noël: I see.

Dave Reid: So it’s really hard. I can never really…I get asked this question a lot. I don’t really pin it down to anything. I read a new book and then I get an idea out of that and I morph it with other ideas, and then I create something new.

David Noël: Yep, yep.

Dave Reid: And that’s one of my traits, is I like to create things, come up with new ideas, and I like to be my own person. I don’t really want to be like other people, so I don’t really have a role model that I follow.

David Noël: Fair enough.

Dave Reid: Other than I do appreciate people with modesty, that are successful but modest about it.

David Noël: Right.

Dave Reid: There’s lots of people like that, but you don’t know who they are.

David Noël: Yeah, absolutely. I mean, that’s actually something I’m discovering through doing this show, is that there’s a lot of very interesting people out there that you have to do a lot of work to dig out, because many of them don’t seek any attention whatsoever.

Dave Reid: The best business people are the modest ones. If you read books, some books like “Good to Great” and stuff, they cite that quite clearly, that the best performing companies are run by people that you don’t know.

David Noël: Yep, yep. Interesting. Well, thanks so much for your time, Dave. It’s really been a pleasure.

Dave Reid: My pleasure.

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