EP14 - ESOPs as solutions for Government Contractors with expert Hobie Frady with Warren Averett

[0:11] Welcome to the Sup Guy on the ESOP guy and we are on a journey to an ESOP if you are tuning in for the first time today this is a podcast. That we have created really as a resource for those that are thinking they might want to consider an ESOP as part of their business strategy could be that they're using it for an exit plan it could be that they're wanting to implement more succession and, sometimes they want to use it more to just grow the company and use it for a lot of different reasons so, so this podcast you can find all of the podcasts that we have on journey to an ESOP.com so if you go to our website, it's all there for you to review and see if it might be helpful for you to look at that. [0:54] So a lot of times going through an ESOP Transaction what we find is there's particular you know specific industries that we focus on, that are that work a little different than other Industries and so today's, topic is going to really focus in on government would call government contractors and we're going to focus on on the idea behind how is it government contractor set up to do an ESOP transaction and how does all that really work. So the topic in the title today will be government contractors leveraging the value of an ESOP. [1:28] We all know government contractors and as we think about them they're really characterized as doing business with the government so whether they're selling services or products to the. When we focus a little bit deeper a lot of times what we're really talking about our companies that sell to the federal government government in a really concentrated sometimes within you know the Department of Defense and so. [1:52] If that's you today or you know you're any kind of government contract I think it's going to be a helpful, podcast for you to be thinking about it and to do to do that I wanted to invite hoby fradey with Warren Averett on the podcast today, and really get some of his insight into working because this is really what he does full-time in working with government contractors, and his Insight not only in that area that industry but also just the insight into how the ESOP Works relative to the industry itself. Hobie he's got a great experience in terms of, I bet his background he's a partner with Warren Averett what used to be president of Capstone Consulting partners, he was also Chief Financial financial officer and Chief Operating Officer for companies in the Government Contracting industry so I think he brings a wealth of experience he's worked with companies in the range of, twenty million up to 500 million so with all that I wanted to kind of welcome you Hobie to the podcast today. [2:54] Actually by the way here push anything in life great so before we begin I'd like to do this just because I do a lot of movie type of stuff on the podcast so out of these three movies just tell me kind of what you think would be your favorite. And really why so we have the Patriot of course with Mel Gibson we have the Gladiator with Russell Crowe and Saving Private Ryan with Tom Hanks so out of those what would you say would be your favorite movie. [3:25] I think I'm going to have to go Gladiator Gladiator and and I love that movie I love all of them that's why I put it out there why would you say Gladiator. [3:35] You know I guess kind of. You know from situation it was an to the situation he found himself in leadership travels right some people follow a good leader regardless of situation so, that was kind of my take away on that so yeah it's a really cool movie I picked those specifically because their military they're all kind of somewhat level of military movies and that's kind of what we're talking about today but, so you live in reside in Huntsville Alabama one of the things up I we think about Huntsville as kind of the mecca for government contractors is that true. Yes kind of Pentagon South we like to call it. [4:11] It kind of started with the space industry way back in the day one of on Broad all that but it's really increased over the last. 20 30 years you know what have Redstone Arsenal I think the last count we have 74, federal agencies was some type of presence on Huntsville wow so we've got a significant presence here and seems to be growing every day so great market for government contractors, yeah I that's what everybody says so new and you guys have specialized I know you particular specialize in working with government contractors as your as your primary focus right. Yep that's it and the ironic for a long time and in Huntsville you've got to know how to work with contractors it's been part of the market so yeah. So with you know government contractor specifically and then you know your esop.journey and your, definitely an expert in that as well can you go back and kind of tell us a little bit about how you got to where you are today with you know working for Warren Averett and just kind of the how you got exposed to esops and then kind of how you you know how you use it in your current, situation with with the clients that you guys have graduated from college from accounting before you went to work for a CPA firm. Didn't take me long to realize I didn't like audit I didn't like tax yeah so what you gonna do right yeah and so if you talk to the firm that I work with I would probably say that's good because you weren't real good at either one of them that's good. [5:39] Actually went to work for a government contractor back in 92 and I was thinking about this last night so I'm at 30 years somehow or another involved with government contractors now so I'm feeling pretty old thinking about that but. Anyway I thought you said I'll spell kind of half my career on the industry side and alphabet on the CPA firm Consulting side and all of it will government contract or something that's really all I deal. You know it's been an interesting kind of see I'm working with business owners over the years I'm looking at different. Exit options for them we've had times when the Chemin de markets real hot we've had times when it's not. And huntsville's always had. [6:24] Fue subcommittee's back in the day yeah that was successful and then I think it was kind of during the downturn after 08. Where we really started seeing more people look at that as an option. [6:36] So it's not unusual for us to have two or three companies in town go esop.journey cheer mmm don't know the exact total in town though but I would put it at probably 30 to 40 contractor sorry Soph owned yep, and a lot of those are some of the most successful companies in town yeah but that's got a now we got exposed. So so I think it again it's the world's changed a lot and it sounds like enough since 08 to now it has changed a lot there with. You know the options in the education I don't know if some of what's happened in Huntsville for companies going esops is educational because I I see that more when people actually realize what an ESOP is and you kind of break through some of the. The barriers are the misconceptions that people think they know about you know or maybe even their advisors you know can sometimes steer them incorrectly, I don't know if that's what's happening in Huntsville but I see that in some of the pockets in the u.s. so it is I mean even me if you asked me 20 years ago my opinion on an ESOP it was not a big nose, I had the idea it was like a business owner selling a company to his employees that couldn't sell it to anybody else right right right. [7:49] You start to learn more about it and it does present you know a nice option where the founder can get liquidity. Kind of pass on and get the chair of the employees. An opportunity to enjoy the growth in the value of the company and so with those successes and the companies here in town and people seeing those successes people started asked for questions and I was one of those, awesome get more familiar with how it works and. I mean it's crazy now you know we had a large contractor here in town a few years ago that was nice top company that sold to a public company. [8:28] Huge of that for hundreds and hundreds of families yeah and if you look like helping some of the people that have left as I didn't want to work for a public company most of those went to another esop.journey. Wow really. Yeah that kind of tells you a lot right yeah you know what you know the deals I know like you guys have seen this I mean in the last year and a half. And the MMA space has been crazy and there's just been the private Equity people are lit there's just been a lot of money moving back and forth so when you think about. [9:01] We think about that Dynamic with multiples going up and then just demand for buying companies. Versus how an ESOP Works what why do you think again kind of what you had just shared the employees kind of gravitating back to more of an ESOP company with I'm assuming kind of a better culture. What do you think for the most part for government contractors esops or are good Solutions or relatively good solution. You know I think the first thing is a lot of companies founder owner operator has built a business to some scale and maybe they're reaching retirement they don't have. Addendum to try to go to the next level they're still kind of benefiting from small business set-aside contracts and that type of thing and think it through. An actual MLA process more than likely they're going to be bought by a larger company and they'll lose that status so they'll lose one of the tools in their tool kit so. That's a consideration book Forum but more so I think it's just you know the culture that they build. The employees are you so that kind of family feel even if it's. [10:08] 100 200 million dollar Revenue company or something like that you know that that culture that's been there for a long time they want to preserve and then what you want but we have a lot of successful exits to strategics. And those work but they're a little bit different you know you can sign up and spend the change all you want to but things are going to change eventually tell me and so I think it's just been you know the owner operator might be willing to give up a little bit of money. You know to preserve the culture that they've got the employees appreciate it they know enough people around town who work in another each side companies and. And talking about how their retirement account is growing based on the increase in the stock value and so. [10:49] But like you said unspoiled ukitake soften it's a real good opinion All Around Town pretty much like I'm some of our other markets and mentioned esop.journey Ron what are you what are you talking about so I think it is an educational process I think that's why what you're doing is great, it's educated people educated on it is a viable option yeah and I think partly the I always find the best people are the people that have sold you know the owners that have sold and gone through the ESOP process and there, they're out having golfer you know doing golfer fishing or whatever with their people who run company and that's where people like really you know like if they worked for you it'll work for me, I think that really helps going into is there an issue with so specific to government contractors for some of them, they can't sell they are a small company as the government defines it and they can't necessarily sell to a larger company because those contracts, they can't really know they'd over or or is there an issue with Smalls selling to large companies I guess yes yes that's what happened back in l.a. there was a law change before that if you were small business and you had small business set-aside contracts. [12:02] You can keep those contracts for the duration so so you were one year into a five-year contract you know that contract was going to run for five years, for the rules change and offer the Contracting officer the option of terminating contract Change Control okay so not that they would necessarily do that a lot. [12:21] But that gave the buyer some leverage and also you know implied some risk on that work going forward and so when that happened the multiple scholar change and that has come forward so you still see a strategic spying, small contractors they think they can move the work on small business to pull it open, or leverage the work for pulling open opportunities but that was one of the kind of mechanisms that. Through a sentence saying a little bit more all the ESOP side I think well yeah because they even if they know veit the contract right they can't necessarily recompete it because when it comes up then they're going to be they're not they're not going to compete it so you have to kind of, look at the cash flow and sailrite the cash flow will terminate on that contract so you're going to get dinged a little bit from, evaluation I'm guessing so yeah so they've got to either find a small crime that they can tuck in underneath and do 49 percent of the workforce has 100% or leverage that for another bullet open opportunity so, so-so. [13:23] Thinking about like for a lot of companies and I do this analysis for everybody and it's kind of what I do is as far as the ESOP work goes, we always look at like whether a partially stop would work better versus a hundred percent he stopped and there's a lot of particular things that might line up better for like for just a like a construction company for instance, sometimes a partial just works better because we don't over-leveraged the balance sheet the bonding company is a little bit more comfortable so for a government contractor what do you find works better, on an ESOP sale partials or 100%. [13:59] And really why you know we've really seen success both ways I think you know a lot of times people go partial just to kind of get their feet wet. [14:10] You know a lot of the owners of especially the service type companies that we work with or engineer types they're kind of risk-averse that averse. And so leveraging the balance sheet for a hundred percent transaction breaks them out a little bit sure yeah. [14:26] And then you may also see them like if they are reliant on a service-disabled veteran-owned status or a woman-owned status, they may do a partial so they can retain that status for a while keep growing kind of expanding all that and then do the wrestling or so. We've seen that both ways we're saying it successful both ways but you know the ones that do the partials are typically paid off pretty quickly and then turn right around and do that. No the rest of the way yeah how often do you see one of the things I do is I compared a lot to management buyouts when I do the analysis originally how often would you see a government contractor looking at a management buyout us as a serious option compared to a strategic sale or even an ESOP. [15:15] You really don't see it that much yeah, usually if we stay on exit it's going to be strategic or esop.journey 1C a lot of management buyouts unless its own kind of a really small size yeah it was a company car to gets to scale much little more difficult and we just don't see that much. That's interesting because I don't see it either on the Government Contracting side I see a lot more on you know just regular construction companies you know contractors because. You know and it's what people are pretty comfortable with what about the family. Dynamics in a government contractor business so you have family members that are owners and or kids coming into the business do you see any of that happening with you know again compared to the ESOP. Not a lot we don't see a lot of second third generation yeah you know it's a talent business especially on the service side so you know you're recruiting that talent that can kind of take you to the next level and that typically ends up being the next, ownership group for leadership group so we don't see a lot of second third generation type companies and the Government Contracting space. And I kind of along that line to I mean one of the things we all analyze heavily as the leadership in the development of the future leadership and because it's a big part of the. Sustainability the ESOP for for for government contractors. [16:39] You know what what do you see as because it's hard to find people and it's hard to sometimes just really hard for people to exit because they don't have the people in place. To take over are you seeing in that in your space to the government contractors, that being a major issue or something that most companies have a pretty good bench strength where there were there were there able to build good succession planning with people coming up the ranks. Yeah I mean that's a major issue some companies do it better than others obviously, once you get to a little more scale and offers you the opportunity of bringing some additional Talent on and people who can move the needle for you but it's definitely an issue and a lot of it depends on what the owner wants to do Post transaction do they want to go away, when it closes do they want to stay around for a while and maybe you've got a team that's almost there but not quite there, also you can use the first few years post transaction to and a continue to groom and then leave it a little bit later on so it kind of depends on what. What the owner is looking to do and what kind of Runway they've got left on you know, do you need that management team and place at the transaction that but I think it's a huge consideration it's I mean my focus is like it's huge consideration I've actually focused on this a lot and some of the other episodes but. [18:01] It's not necessarily replacing you know to me the CFO position or, the you know some of the other key people citians it's the it's the person that you know, some of these companies they're kind of driven around the personality of the main person right. [18:18] So it's replacing that kind of personality like the the key owner who kind of seems to know everybody and, you know you're trying to find the next person who or percent that can be really driving it may be like connected to how well they do. Business Development and getting the right opportunities with you know putting the proposals together and or maybe you know that person just, has a Charisma that you nobody wants to be part of that company you know so it's the talent you know the talent think so I don't think that's particular to just government contractors but I do find government contractors have. I have a lot of like key like one one or two key people are like everybody thinks about when they think about that company you think about that person you know whether that be you know and so I don't do you see a lot of that and is it you know and your experience what's the best way for them to start working through that. [19:15] Okay yeah we do see a lot I mean you know you mentioned there's a smaller company and there's a couple of people are kind of known as, known as the company really yeah to certain extent it's because they've got a long-standing relationship with some of the customers they know everybody around town it's easy for them to get table partners, back on things so you know that's that's great, that they're not successful with this also rip yeah yeah so you know buyers can identify it that way so I think the more companies can do too, kind of room that next tier bring on additional talent that might have access to a customer you're not currently working with us, and kind of develop that over time where you don't have a single point of failure with that founder owner operator, having all the connections because it was important that the ESOP company at least maintains but hopefully grows post transactions so that the share price goes up everybody benefits and, what kind of works the way it's supposed to so yeah yeah the last thing you want as an owner going out and going to the house once once they get their money and, everybody that's left is like okay well we can't really do what they used to do for us so now yeah not that's not a that's not even in terms of planning I mean that's definitely something that needs to be identified early in the planning process and. Even if you don't end up yeah. [20:40] Yes our that's a big part of any business really you know ask people all the time you know what would happen if you just went away for a month just left her business for a month no contact method. [20:51] You know it would fall apart. What's it called they were somebody else exactly yeah it's a major that's true so yeah that leadership transitions apartment, yeah and and so what I'm saying too and is is if you start thinking about the beginning steps of an ESOP what I do is I go through you know evaluation model so we can come up with an idea. [21:15] That would help you know hopefully be pretty close to and my experience is pretty close to what we end up transacting for, you know nailing that down early on and what the involvement is going to be really important to the model what are the other aspects of the valuation model that for government contractors is really interesting and I think kind of fun. [21:35] Is as we know valuations for esops are going to tend to wait themselves towards the discounted cash flow. And we know that the discounted cash flow itself is really built around a forecast but with these with government contractors your forecast is. [21:52] You know it could be I building on these contracts and maybe I'm doing 20 to 30 million now and revenue but if I get this one contract my revenue is going to really step up and, identifying and doing these Khan these forecasting with with government contractors is very important, but it's also very challenging because it's kind of like what if it was this versus what if it was that right and so. What we could have as a potentially highly overvalued company or a very undervalued company so I'm curious on your idea on your standpoint with that in, how do you help a client with that issue and what are some things you're you guys would do to advise on that. [22:35] Yes I think you kind of got it got it on both sides so and one way I think the government contractors have the easier the forecast because you've got 5 year contracts yeah right that's your one year and you've got run while you can see it's there, unless something unforeseen happens it's going to arm but like you said. You know I've got their pipelines built you know there if it's a very complete that probably got a 90 95 percent probability if it's a new contract of gardens you know it's probably ten percent, so I think working with the company and making sure that they're really. [23:14] Kind of being realistic on their forecasts and if you see something that they're baiting for the first time the same Parsons had a three times like that other than 90% win probability. I'm not going to buy that yeah. It's important for the company realize that but does its binary right you either win or you lose exactly that 80 or 90% that you have in there it goes away if you lose so you know it is a challenge but. [23:42] I think if you can look back up and historically, kind of follow their capture and proposal process and look at you know if they have this as a 30% win did they get it if they had it at 82 they get it and kind of see that history that'll give a little more Credence to the forecast. But it is different in Government Contracting with The Shootin you can add a couple of hundred people. [24:05] Today I know I mean that's what's crazy about like you know that I had when I was a banker I had one where I financed did the acquisition financing or contract financing for them. And they went from a couple million dollars in sales to 20 million in one contract and. It was pretty it was pretty crazy so that that's what it's like and I think it's fun I would say you know for people listening. The best thing I would do is go contract by contract and do kind of what Kobe was saying look at the probability of your historical win rate. And then on the forecast do it by contract and then do the same thing to a probability Matrix and connect that back to the total. [24:49] That's something that you can present you know to your eventually present to the trustee and their valuation firm as you go through it. But it'll help to kind of put some reality to to that if you haven't, you know one in the past what makes it different now you know and there's a lot of obviously story behind all of that but it needs to make sense. [25:12] Because it could be a major difference in my experience is the more difficult the trustee you know accepts that forecast the more you're going to probably get some kind of clawback structure with the ESOP which means, if you don't hit those numbers then they're going to purchase price, you know in the future and because they don't want to buy the potentially high-risk type of situation they're not there to do that so and we typically find that most of the the shareholders are pretty conservative on that I mean if they're if they're thinking about passing it along to their employees, yeah they're not going to put something out there that laying those on the cheap one and most of the time they're holding that for a period of time so so it's in their best interest of the company, Mike's the projections as well so yeah I don't see that a lot of we see it we, yeah I tend to walk away a little bit for sure sometimes people get to to focus. [26:05] In Aesop's on valuation you know in terms of it needs to be holistic I just did a presentation where the guy and Seattle recently one of the things he said I thought was really good it's like you might want to just take and accept a little bit lower valuation that you think you might get. But really build a warrant in the in the transaction and then that gives you some insurance in the sense if it does come back to something higher than you're going to get paid on the warrant payment, so I'm sure you're seeing a lot of that in the structures of Aesop's what you're with what you're doing that kind of policing warrants a lot we see a lot of summer programs so that the owner stays on an executive Position will participate in there as well so, yeah there's another bite at the Apple format that beat the expectations yeah yeah and then they can kind of give a little bit of you know in a sense coming out with a little bit lower, number at the front end, with a warrant gives you a little lower interest payment and that help helps to kind of build the value and build you get through the acquisition financing portion. And then kind of come back to it and say all right well everything's gone really well and you get rewarded for that you know I think that that structure makes a lot of sense for most Aesop's but also specifically for this kind of. [27:21] Structure for a government contractor Olga, so everybody always wants to talk about this you know like okay so how do I get my money out of an ESOP which is you know of course very important when you think about financing, as thus the ESOP itself where what I mean by that is we're going to as the company goes out and we put the structure of the deal together the company is going to have, in borrow money from two sources really the bank which is one source of money which would be the liquidity event for the ESOP, and then also the selling shareholders and having them take on a seller note as well. For the bank portion what do you see as the major obstacles that the banks are dealing with when it comes to funding and financing an ESOP transaction for specific for government contractors. [28:14] So I think it's two things I think one it's understanding the government contracting business and to it's understanding the ESOP you know if if it's a bank that hasn't done a lot of these top bills, yeah that it takes them a little longer to get their head around that and they're probably not going to be quite as aggressive that's one of the. Benefits we have an unsolved number of the banks have done a soft round actions like they understand them they understand the Government Contracting Community I understand the moral of the base so it's a lot easier for them to get Uncle, we get out and some other markets and you're dealing with a bank that the company's been with for a long time, have a good history with and they just can't get their head around and so I think when I'm talking to a company that's looking at the one piece out. [29:01] We're respectful of the current banking relationship and if they don't have an understanding encourage them to you know talk to a few bikes that have done these type of deals mmm you're typically going to get up. Go better structure better rates a lot more understanding of the Dynamics post transaction so yeah I think you know. The bank's key on this and if they understand that you can get a lot better deal out of them than somebody that kind of tiptoeing into it. I think I think what you said is really good because I think you do need both and I my experience Banks. Some banks they don't get Government Contracting at all I mean they may be goodies Upland errs but they don't understand the the way a government contractors business works. As you can we describe the whole idea of the company could grow in a year it could be a humongous company compared to what it was before. [29:55] So they have to be able to finance an underwrite that part of the company but at the same time they need to understand how esops work and, then you have the air ball which a lot of these companies don't have a lot of collateral I mean that's the bottom line I mean their service most of them a service based companies. With great people but at the end of the day there's going to be some of the some of that it's not going to be collateralized so that's going to be. Difficult for people to get their heads around if they're not accustomed to esops. That's right and I think you know the banks that have been successful in the past and they see a history of you've got a five-year term with a seven-year a.m. or something like that it ends up getting kind of paid back into an IRA, you know they've seen that history or just possess the power of a cash-flow yeah you know so they understand that you know so that's why I think it's really key just. For the banker that have an idea of how I see how it looks on paper with the structure but how is it really going to happen post transaction yeah exactly. [30:55] Let's talk about one issue that kind of came up early when we talked a little bit about the partially stop. You know so so you're when you're thinking about the special designations for government contractors and I. Will basically say he have you know we have all kinds of them you have ate a hubzone veteran women-owned they're if they're reliant on those designations. [31:21] And they're getting Revenue based on that. [31:24] It is it is particularly difficult because if they sell more than 51% of the company to an ESOP they lose that. [31:32] That designation is that's kind of how that works right as far as you know if you have a change in the control so so one of the one of the things they're faced with is you know having a partially stop you do get a discount for lack of control. Which kind of is the negative of doing something that is less than control but but you kind of almost have to so my question for you is just kind of going through. As they do that they do they kind of have to start. Graduate into some other areas where they're able to compete without the designations and is that can that be super problematic for some of these companies. [32:13] It can be problematic but it's really something they need to do to increase the value of the company anyway yeah you know if you stay on that and in those designations you know you're limited in what you can do, sometimes we find you know it might be a company where they may not have a prime contract that's service-disabled veteran-owned. But they're a subcontractor to a prime and that Prime is checking the Box. Because the rest of the Osa so if they're no longer you know what's the problem that I just go find somebody else when I can check the box by still be small but they're not STD I was big so I mean you got to kind of look at that understand, even if it's not contractually direct with the government you know is there going to be some Fallout from losing that designation but I think. The partial you know the founder on an operator this is typically their largest asset right and so. You know you're playing with them if they're looking at retirement what do they need. Typically that Gap is the value of the business because it's so we're kind of solving for x at that point and so if we do a partial maybe it lets them diversify a little bit. And then give some a little you know a few more years to kind of get that diversification that they're looking for. [33:27] S do the final piece and that can go to the beach or the mountains or for Cheryl I want to go yeah I mean I think that's where that partial so effective in people say Well when should I do this when should I do this I mean, first off I always tell people plan now I mean whether you know exactly when but for a partial you're way better off starting that earlier than later because. [33:52] First off you can use the benefits of an ESOP to motivate and retain key people you can step into the culture of an ESOP, and then you can plan the ultimate change of you know control where you're going to lose the designation. One of the things I look at is what are we spending on Business Development now. [34:10] As a current designated you know a special designation kind of company what are we going to spend over the next couple of years because what you're typically going to see is people are going to have to improve their business development budget. If they're going to go compete on a lot of other fronts and that'll that'll affect the forecast. And be better it would be better to move through that over a little bit of a longer period of time. As a partially sobbin to wait and then try to do all that and figure all that out because in an assistant guessing game so I don't know what your thoughts are with that. Yeah I agree I mean I think the planning process and you know the good. [34:51] Business owners are thinking about that really early and starting that diversification process and everything so, you know if you find someone that's really and we don't see it it really solely rely on that designation yeah typically they've got a good customer that got good people. [35:09] They're going to get the work some way somehow that's coming through another prime or it's actually a prime contract with the government so we don't people see people really, relying on that heavily but it is a consideration that they've got to look at and you know the quicker you can diversify out on some full and open opportunities that you will be successful at, it just makes everything easier regardless of what Avenue, fuse production so yeah no it's a good it's a good point and that's very specific to this industry because you don't have a lot of that, any other industry to deal with so as we kind of finish one of the things I wanted to kind of, leave off with was this new SBA rowing that came out last year and 2021 and and I'll do my best to explain it but then kind of turn it to you to kind of explain it in better detail but essentially if you're a hundred percent esop.journey in the Government Contracting space the contracts that you have with this new SBA ruling would be more secure, in relationship to the recompete so that's kind of the best way I can explain I don't even know the neck that the technical SBA you know terminology or the legislation but that that was. Came out last year and I thought was really interesting so what it first off what is it exactly and then we can talk about what you're seeing in the in the marketplace with. [36:33] Yeah so it's a follow-on contract provision that was actually in the ndaa the National Defense authorization act for fiscal year 22. That's so what this is It's establishing a pilot program. [36:46] And so there's a lot of hopes and still have to be gone through you know there's a data collection process for the government and a reporting strategy so right now the government really doesn't know, how much of their work is going to 100% recycled companies so the data collection process and I know esca. Is heavily involved with us there's a subset of aspect. Of PCR the employee-owned contractor round table that has really been successful lobbying Congress on this and so. What will happen if this program gets put in place as a bureau qualified business hundred percent esop.journey. Then the Contracting officer can one-time direct award a follow-on contract to you without competition. [37:35] There's some criteria for that you have to have satisfied for the past four months and those types of things but that's another way where an ESOP company can get a little longer Runway so you can do it one time for each concert track so say you've got some, kind of heavy concentration risk 50% of your revenues and one contract. Contracting officer could direct toward that for another five years and give you some additional Runway so it it could be huge for the government contractors but it's a matter of. Getting this data collection done and I think as trying to do a lot of the data collection on behalf of the dump but to kind of move this forward you know but yeah Congress is important to this specifically but also the ESOP sand, we had an ESOP Roundtable not too long ago and one of the vp's from us for talking about and. [38:28] You know there's a big retirement coming up on some of the. [38:34] Members of Congress are Aesop's supporters in 2022 I think there are six that are retiring and if you look back over the last few Cycles there's probably been six seven of the last three or four Cycles so there's big retirement coming. So there is a lot of. A lot of conversation going on will Congress trying to make sure that we keep the benefits of the ESOP and then maybe try to expand them on the Government Contracting side a little bit so yeah this is the biggest the first big step, you know I think there's some thoughts out there about expanding Nike next codes for government contractors at there. Employee limited or Revenue limited maybe expanding that they're Aesop's so there's a lot of things being talked about and you know, esca for the ESOP companies if you're not a member they do a great job advocating on behalf of Aesop's. If your government contractor ECR kind of that subset does as well so OK of course people just to get to know those grapes okay and ask for people that don't know is an acronym for what do you know. [39:45] Employee Stock ownership Corporation of them, okay okay so just tell you right quick okay yeah so just because people are gonna be like eska and again they probably haven't heard of it as we speak at acronym A Lot on ya contracted side now I mean it's those are good I mean there's a good resources and I think part of that. Say deeper in that like getting getting involved of course you may not want to wait until you're actually stopped come Penny but getting involved because esops are really a creation of legislation and, it is it's it's like the best legislation that I can even think of because there's nothing else that exists like an ESOP in other countries like I did a podcast with this guy from Australia, they don't they don't have they have esops been on have the same benefits then on the same tax benefits that will we have and so when you start seeing some of these new rulings it's like that's, you know that's really powerful and what we all want for the ESOP people that work in this space we all want is for, Aesop's to be successful and for them to be more because they're better for everybody they're better for the community they keep companies cultures they keep the jobs in the communities, they're just a really great vehicle as long as they work for everybody's goals and objectives so. [41:02] Sonny wait for you if you don't have that I'll throw esca on our website you can check out journey Tisha corporations of America okay play on S corporate a so it's specific that organization is specific for the S Corp. But yeah they I know they're all over the country to and they have a lot of different you know probably meetings in different states so, so check that out so kind of as we finish a hobby I really want to say I appreciate your time would there be anything that you'd want to kind of summarize to say or for government contractors thinking about going, that you would want to give as advice to people thinking about this. You know I think it's really just you know the business owners got to do what's right for them so I would say evaluate all your excellent opportunities yeah you know if you're just starting out in business start thinking about those planning forum, from the get-go we do it will drive the way you try to grow your business, but as you get to that point you know evaluate everything you know sometimes a strategic sales the right answer. But for the contractors and. [42:09] Yeah I don't know if it's the because you've got these people out here they're working for the Warfighter supporting the Warfighter a lot of them are ex-military it's that sense of, family and camaraderie and the powerful thing and and they want to keep that moving forward on a lot of times. The ESOP transactions are good way to do that you know you can monetize your. [42:33] Your hard work but you can also you know pass that along to the people that help you got to help you get there and they can have an opportunity to monetize that over time as well so I just think it's a we're a big fan of Aesop's. We've seen them be successful you know it does help retention and that helps attracting new Talent, and you can just see a mindset shift in the, and the employee group once they once they get a you know our clients will have esop.journey they announce the do you share price and it's a big celebration so it's a powerful tool I'll I'll just say. If you don't really understand how they work you have listened to some of those podcast Goodwin Estevan. We're happy to set you up to talk to somebody that's been through it, you'll get their thoughts on that so I think that'd be my part of God is just you know know that that's out there explore this opportunity if it's right for you can be a powerful thing now awesome I think those are good good summaries in. In more people like you guys hobey that get it I mean it just makes it really is helpful because you're giving people the right information. As it as key advisors in the whole process so I really I really appreciate your time today. I know it's you got a lot going on like we all do so to make time to help people I think that's just really helpful and I appreciate it. [44:00] Absolutely glad to do it so for everybody else thank you so much check us out on journey to an ESOP.com and we will see you on this the next step on this journey to an ESOP.

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