Episode 2: Ownership Transfer, Hourly Employees, Bootstrap Careers

Dave Phillips (00:00):

… because it is a very complex process, and you can do this cheap. You really can. I mean, you can go make your own team. Everybody that I talk to, I advise against it. It is complex, and if you make a mistake, it can blow up in your face. They handled everything, and made it easy for me to do, and it was seamless to do it.

Speaker 2 (00:23):

From Lazear Capital, this is The ESOP Insider. In this four-part podcast, we will take you through all you need to know about selling your company through an employee stock ownership plan, or ESOPs as they’re more commonly known. Welcome to episode two. Now, we recommend if you’re just jumping in, to start back at episode one to get yourself caught up, but in this episode, we’re sitting down with Josh Ohl and Dave Phillips of ASI Commercial Roofing and Maintenance. ASI started back in 2001 and grew throughout the aughts when in 2017, they went ESOP. What makes ASI unique from a business perspective is a majority of their workers are hourly workers, and their industry is highly susceptible to turnover. You will hear just how effective an ESOP is in addressing these needs. And secondly, Josh Ohl, current president, got his start with ASI as a worker, a heartwarming bootstrap story. So, without giving any more away, let’s dive in.

Dave Phillips (01:21):

Right out of college, the way I got into this business, most people get into the

Speaker 2 (01:26):

Meet Dave Phillips. Dave is the founder of ASI and the person who took the company through their ESOP. Dave got his start in the industry in the mid-80s working his way up through sales at a construction company on into the corporate HQ. However, when the entrepreneurial bug bit him and he decided to strike out on his own, ownership transfer, retirement, and ESOPs were about the furthest things from his mind at that time.

Dave Phillips (01:48):

That business became not as good, because they wanted to hire all of us. They didn’t want to pay us commissions. So I was selling roofing products, so I thought, “Well, I’ve seen enough guys do this.” I just opened the doors and tried it. It was very close and tight-knit. I did all the bidding, all the estimating, and all the… ran the projects, and we had a couple superintendents that put the roofs on. Yeah, I knew where everybody was all the time.

Speaker 2 (02:12):

And Dave, skipping ahead a little bit, I know you grew a very impressive and profitable business on up through the 2000s, but considering the lens of this show, I’d like to know, did you have any generational transfer of ownership conversations with your children at any point during the business’s history?

Dave Phillips (02:29):

Well, it really wasn’t a continued family business. It was just what I started, but yeah, they didn’t want to do that. They wanted to go to Chicago and start their own deals, and understand, the business wasn’t that attractive in 2010, ’11, ’12, when we were in the recession. I mean, there were times when I had to come home and tell their mother that, you know, we didn’t get a paycheck this week because I had to pay the employees. So that wasn’t something they saw big stars and that they were going to get rich on. So they went and did their own thing, which was fine. But I knew some point in time, I had to do something with this.

Speaker 2 (03:04):

And so we have our hero, Dave, who knows that somewhere down the line, the business will need to be transferred, but it’s unclear what that will look like. Now, this is a great reminder about how early these conversations about business transfer and ESOPs can really start, most times years before the deal is even penned. And now let me welcome Josh Ohl, current president of ASI. However, that title wasn’t always a given.

Josh Ohl (03:28):

So, when I grew up in a construction family, and another friend of mine had done some commercial roofing, and he was the vice president at the time for ASI, and during the college, they needed some help here and there, and since I was used to doing construction, I kind of came and helped every once in a while during that time when I could through college, and then when I came out in the crash, that period, I had graduated in 2008 from college, there really was no jobs where I was at, so I had a business degree and nowhere to go. Since I knew somebody at ASI, I asked if I could get a job, so I got a job out in the field, started out in the field as just a low helper. Then about six months in, Dave found out that I had a college degree and asked me to start doing a little bit different part of the job. So he asked me to come in, be an estimator, a junior estimator, junior project manager, along with I did some superintendent work, so I learned all kind of aspects of ASI, and at that point, we were roughly doing about eight million, I think.


So I was there, worked my way up to estimator project manager for Dave, was there for seven years. When I left, we were doing about 13 million. I was gone to Chemcote Roofing, estimator project manager over there for seven years, went through an ESOP with them, then ultimately talked to Dave, and Dave brought me back as a project manager at that point in time, three-and-a-half years ago, and haven’t looked back. We’ve now far exceeded expectations in sales. We’ve almost doubled since I’ve been back, in sales size.

Speaker 2 (05:06):

So Dave, rolling now into the aughts and knowing at one point, you’re going to want to sell the company or transfer it out of your control, do you remember the first time you came across the concept of ESOPs?

Dave Phillips (05:19):

Oh, I thought it was a great idea. The first time we met, it was because right before I met Ted, in the year before, a large national company came and offered me to buy us out, and when you peeled the onion back, it was not a good deal. It was a good deal for them, not us. In fact, they just made another call last, what, three months ago, wanted to revisit it, and we told them no. But no, I was never skeptical. I thought it was a much better vehicle to sell, since my children weren’t coming in, than to sell to a party, if you will. And when Ted explained what the whole thing was, then it really perked up my interest. And by the way, I want to interject. When he left the first time, and I wasn’t happy about that, but it’s okay, but I always kept my sights on him, because he’s good at what he does. And it turned out going away for seven years was a good thing, because he learned how another company was run instead of just… Because he came to us right out of college. And when we hired him back, there was no intention of him being a project manager very long. So this was a work-in-progress.


But no, once we met and Ted explained everything, and how this worked, and then how I could stay on and continue to work, and be an employee and earn shares myself, it just was something that I made the decision shortly after we met, that okay, you know, this is the way we’re going to go. Just now we got to figure out how to do it, and where to do it, and I think with Ted’s help and everything, I did the math, and then my financial planner and I sat down and stretched it out, and I knew the… As long as we kept the company making money every year, I knew the endgame was going to work. I mean, the numbers bore out and showed me that they would work.

Ted (07:16):

Yeah, no. As he said, when we first met, he had a great company, and it was growing. But when I talked to him, he had a lot of great things that would be happening in the next year or two that would make it a lot better for him. So we looked at that. We looked at, as he said, getting the service business bigger. Also, I always… It’s sort of a three-legged stool when you sell. You got to think not only about, “How much money am I going to get, you know? Is that going to be enough to live the rest of my life? What am I going to do if I sell the company? And what’s best for the company?” And it was clear it was what’s best for the company, and with an ESOP, it’s great, because you know what you’re going to do post closing, but you also got to think about is it enough to live the rest of your life?


And so I thought the combination of the company being stronger in a year or two and getting a much better sell price that would allow him to live the kind of life he wanted to afterwards, that we could work together for the next two years. And I didn’t charge him anything during that period, to talk about what it could be, and to go ahead and do it when it made a little bit more sense.


Yeah, when you do an ESOP, there is some complexity, as Dave said, and there’s some costs. Now, the good news on the cost is usually, you’re just financing the costs and you get them all back plus a return. But, all of that, the complexity that you have people that help you with, and the cost, it makes sense to be a certain size. Usually, we’ll tell people today, probably two-and-a-half, three million of EBITDA, or earnings before taxes, to do an ESOP. And he was a little below that, but he also had such good things coming that the value would be a lot better in a year or two if he did that.

Dave Phillips (09:11):

Well I’m sorry, one of the other things, too, is usually in a… We’re still a small business, even though we’re approaching $40 million in sales and we’re going to have a little over five million in EBITDA this year. No, we’re going to have five million in bottom line, pretty close. Way over in EBITDA. So it’s been a growth story. But typically, the son comes in, sometimes now the daughters, but most of the time, the son comes in, one of them, and takes over, and there’s a whole marketing exercise on second-generation businesses failing because the kids forget what it took to get where they needed to get to. So it was a better opportunity for him. It’s a good opportunity for all of them. We have two other vice presidents that they’re where they are because of the change in me leaving and handing over more duties to them.


But since the ESOP has been going, and now that people believe it… And the reason they believe it, we had one individual who was let go, because he was a troublemaker, and he got his pay, and now everybody that’s quitting, he tells them, “You’re going to get paid,” so the word’s getting around that it wasn’t fake. But if you don’t live by the way we want to do things, you’re not going to be here. We’re just not going to put up with it. And so, I’m sorry, what I was getting ready to say, we’ve had very few people quit, but we have turnover, because we usher them out. People would quit pre-ESOP for 50 cents an hour. You’re talking mostly the hourly people. Well, now they’re starting to understand that the ESOP’s pretty good, our benefit package is really second to none. Not only do they have the ESOP. We have a 401(k), and the turnover has gone way down. And employees are the hardest thing in the world to find right now, as everybody knows. I don’t care what industry you’re in.


So yeah, I think… We always call it the migration, every spring coming out of winter. All of the hourly employees, roofers, they go find out where they can get the biggest buck. They just go make the circle. And we don’t see that now. I mean, they’re coming to us, but we don’t see them leaving. What we’re trying to teach these people, if you got a bad apple over here that’s not doing… He’s hurting not just himself, but the whole company, and you own part of the company, so it hurts you.

Speaker 2 (11:33):

And Josh, do you remember the first time that you heard about an ESOP?

Josh Ohl (11:37):

So, like anything, you’re skeptical when you hear about sales and stuff. I began to research the ESOP as soon as it was announced that we were thinking about it, so I had a little bit of an advantage on some of the guys who might not get the jump on doing research, and find out stuff, and understanding some of the lingo. But at first, you’re a little skeptical. You see, at first, you get a high value. You know, the next year, you start to see more, and then you start to see more, and you can really watch it kind of grow, and you’re not really putting any of it in yourself, so it’s like a great thing if you realize what you’re looking for in retirement. At my age, I don’t know if Social Security’s going to be around. There’s lots of things that are failing out there, and the ESOP’s important to me for retirement, especially. I can count on it, so.

Speaker 2 (12:24):

What was your experience with your employees on kind of adoption rates with the ESOP or understanding exactly what’s going on with that business transfer and how it works?

Josh Ohl (12:34):

Yeah, I think it’s not real to some of those guys until they see it in hand. I think most of the managers slowly bought in faster than some of the field employees. Again, also, it matters the growth of the company. With the way ASI did so much better faster, the share values jumped high, quickly, which makes it a bigger value, so it sticks out to people.

Dave Phillips (12:57):

When you have two tiers of employees, and our office staff and the salary people are a little more educated and understand things a little better. A lot of your hourly employees, I mean, nobody’s ever given them anything, and they work for what they get, and to tell them that you’re setting them up for retirement, they just shake their head like, “I don’t know if I believe that or not.” And there’s no way to prove it. I mean, that’s just… They got to believe what you tell them, and again, I’ve never lied to them, and I don’t think Josh is going to lie. It doesn’t work, because they do figure out when you’re screwing them over. They will get theirs from you.

Speaker 2 (13:36):

Have there been any employees that, let’s just say, didn’t quite get how the ESOP worked?

Dave Phillips (13:41):

One. One of our foremen, as soon as he found out he thought he was an owner, he said he wanted a… He has a company truck now, and he goes, “Well, I want a bigger truck.” “Well, why?” “Because I own this place.” “No, you don’t. You’re confused.” I said, “You can go buy a share of Apple Computers if you want to, and you’re not going to go in there and tell them you want new computers and tell them how to run their business,” so… There may have been some others that I don’t hear about, but…

Josh Ohl (14:06):

Yeah, so I think at first, when they hear ownership, they think decisions, but you know, once you explain what it is, what you’re buying into, and again, the whole ESOP thing works great when you have good leadership. It starts with leadership, then your management team. They all have to be on board. Dave’s surrounded himself with a bunch of people who want to be successful, which has made it easier for me to step in, because as long as they want to be successful, the ESOP is successful, and so it’s easy to try to keep them motivated to stay that way.

Speaker 2 (14:37):

Going back to the point on share price, do you remember what it was when it started versus, say where it’s at now?

Dave Phillips (14:42):

Yeah, it started at $12, and it was 188 in 2022. Last year, it dropped… Sorry, 2021. Last year, it dropped to 168, but it’s still way up, and that was… We were told that was, a lot of it was out of our control. We missed our budget by a little bit, but it was more of an interest rate going up and stuff like that. I’m betting this year, it could push 200. That’s a bet. He and I similar thing, because at the end of this year, they’re paying me off. We will have only about 800 grand left on our first note debt, that we could pay off, but it’s at 3% interest, so why would you pay it off? We have no debt in the company, zero debt, and we’ll have somewhere between 6 and $8 million in cash sitting in the business, with 22 million going into next year in backlog, with promises that we have more. And when I say 22 million going in, that doesn’t even count what industrial and service will do. They’re doing about three million a piece. So we’re going into next year with about $30 million in backlog.

Speaker 2 (16:01):

So Dave, I’m curious, what were your thoughts, once you… like post-ESOP and kind of handing the baton down to Josh, how did that go for you?

Dave Phillips (16:12):

It was tough, but it was rewarding at the same time. I mean, you know, I’d rather do it this way… And I’m still involved. Not as much as I was, but I’m involved in some of the big decisions, and some of the decisions we’re making going forward, some things we’re going to do with the company. Had I have sold to somebody else, I may have been run out the next… Who knows? But no, yeah, it’s tough, but there comes a time when you… If you don’t do it, then you turn around and you’re too old and you can’t enjoy what you worked for, so…

Speaker 2 (16:53):

Do you find you’re able to strike a balance now, between working and enjoying life?

Dave Phillips (16:57):

Josh runs day-to-day operations. I do not get involved in the day-to-day operations. What my job is now is looking forward, trying to give them a five-year plan. One of the beauties of ESOPs is you don’t pay tax. We’ve had three or four fabulous years, where we have a lot of cash. We have to figure out what to do with that. Whether that’s going to acquire businesses, expand what we do, whether we grow, add more divisions, or go out and add more offices in other cities, those are things we’re kicking around right now, so that’s kind of what I’m working on, and keeping him involved with all that while he’s running day-to-day. But yeah, so I’m doing what I want to do right now. It’s fun.

Speaker 2 (17:50):

And so with all the success, I want to know what’s next for ASI and what’s five years down the line in the future looking like for the company?

Josh Ohl (17:57):

Well, I’m looking forward to what’s next. Like Dave said, we’re looking at buying some people to move a little bit. I grew up on the residential side. My dad was a builder-developer. I didn’t choose to take over his company, so you know, the ESOP could have been a great thing for him. But I’m looking forward to taking over, trying to grow, trying to continue the management, and also just keep the team that we’ve had. It’s going to be a challenge, because other people will come in and try to steal them, but I think that most of our people are pretty vested in this, and it’s basically a pension fund when we put the money in there, for when they retire, we’re going to be paying them, so a lot of the upper management see that.

Speaker 2 (18:39):

And Dave, do you have a five-year plan?

Dave Phillips (18:41):

I’m out of here. I’m wherever. I’m going to be in Florida. I’m going to be here. I have another couple businesses I do on the side, real estate and stuff, but I enjoy working, okay? I’ve got a lot of buddies that are retired, and they don’t have anything to do, and they’re… That just doesn’t fit my DNA. I’ve got to do something. Plus, my wife told me, very explicitly, “Your retirement plans should not include hanging around during my house during the day,” so my options are kind of… But no, I mean, there’s not a lot of options. I’m not… And I don’t want to sit around the house. I really don’t.


You know, it’s kind of funny. We had this conversation with a lot of my buddies who work for big corporations, and they typically can’t wait to retire, but when you start your own business, and you’re an entrepreneur, I don’t know if you ever retire. I mean, I will do other things. If I’m asked, I may get on a couple boards. Who knows? I want to keep helping these guys. I just don’t want to be obligated to have to be some place every day if I don’t want to be and grind through the figuring out who’s going where that day. I don’t want to deal with any of the personnel problems, and he’s learning that those aren’t that much fun anyway. But no, I’m where I want to be right now, and I come and go as I please, and yeah, I mean, I don’t want to be the guy sitting behind his desk at 85 years old and didn’t do what he wanted to do, so this worked out perfect for me. It couldn’t have been any better.


And I think it worked out great for the company too. I mean, they are in… We are in such good shape right now, as far as financially. It’s incredible where we’ve come in six years. Five years from now, truth be known, January 4th, I turn 69 years old, so five years from now, I’ll be, what, 74? I need to have some fun. I have kids. My kids in California, I think are moving to Florida, but we travel. We do things. I might stay on the board if they want me to, and I’ll still be here to advise him, but no, I’ve had a good run. It’s time for me to have Dave time.

Speaker 2 (20:45):

And with that, we leave ASI and their growth trajectory in the capable hands of Josh, and we wish bon voyage to Dave. The ASI story is a great example of the broad application of ESOPs. Dave and his team at ASI are a testament to even with a company with many hourly workers, an ESOP can not only act as just the benefit package to employees, but also increase productivity and cut down on overtime. The ASI story also shows off what leadership transfer can look like when done correctly and successfully, in which the ESOP was able to retain and attract top talent that would later develop into leadership, just like Josh.


Now, coming up in part three, we are going to sit down with two other business owners, except this time, we are switching industries to consulting, where the business is capital and value is tied up in its people.

Speaker 5 (21:32):

A few things that have been true since we became an ESOP, 92% employee retention rate and 84% annual client retention rate. That, to me, is counterintuitive when you think about the ESOP, but we’ve been pleasantly surprised when we sit across from our clients, our customers, and say, “Everybody that you work with is an owner of the company that you’re engaging,” they now have trust that the person’s not going to be gone in a month, right? That they are going to be there for the entirety of that engagement, and that is really powerful, and more than I really expected, that has resonated with our clients.

Speaker 2 (22:14):

We’d sincerely like to thank Josh and Dave of ASI for giving us their time today. Now, we know you have questions, and hopefully, we have those answers. Please reach out, no matter what step of the business sale process you are in, so we can help. You can drop us a line or get in touch with us at That’s L-A-Z-E-A-R And, make sure to check out the show notes on the site for this episode for an even deeper dive into all that we talked about today. See you next episode.

Listen to All Episodes of The ESOP Insider

We help business owners make goal-focused financial choices that not only maximize wealth but also honor their personal and financial vision for the future. 

The Established ESOP
Podcast Replay: What is an ESOP and How Does It Work?
The Established ESOP
Podcast Replay: Why are ESOPs so Popular?
Episode 1: ESOP 101 With Ted Lape​

Sign Up for More Insight with the Unlock

The Unlock by Lazear is a monthly newsletter designed to share helpful insights and tips on how to accomplish succession planning goals, connect the dots between exit strategy and healthy team culture, and how to capitalize on tax planning opportunities.

© 2023 Lazear Capital Partners, Ltd. All rights reserved.