Kelley Powell works every day to grow the portfolio companies of private equity firms. Her new book, Courage to Lose Sight of Shore, will give you a greater understanding of your company’s story and yourself as a leader, so you can decide whether private equity is right for you. She wants to give you the confidence and clarity to move forward by sharing an honest account of what to expect when you pursue private equity.
You’ll learn how to find the right firm, navigate the process, and scale the business alongside your new partner.
Drew Applebaum: Hey listeners, my name is Drew Applebaum and I’m excited to be here today with Kelley Powell, author of Courage to Lose Sight of Shore. Kelley, I’m excited you’re here, welcome to the Author Hour podcast.
Kelley W. Powell: Drew, thank you so much for having me. I am as excited as well to be here with you and launching my book. So, thank you.
Drew Applebaum: You’re welcome. Now, first, can you tell us a little bit about your background?
Kelley W. Powell: Fort the past 20, 25 years Drew, in some way, shape, or form, I have been involved in mergers and acquisitions and growing businesses. I come at it from a lens of being able to contribute from my passion of technology, so I marry those two things together, whether it’s from being a part of a startup, starting my own company, to working on a management team for private equity or being an operating partner of private equity to support portfolio companies.
I get to do what I love to do each and every day.
Drew Applebaum: Now, what inspired you to write this book?
Kelley W. Powell: A couple of things. First and foremost, the industry of private equity gets a bad name sometimes. The bad stories are probably sexier and they get more media attention, but the work that I get to do and the private equity firms that I work with–it’s funny because even the editor and publisher said, I think you should name this book The Good Guys.
They are really good folks who are helping founders grow their businesses in ways founders could not do on their own. Everybody wins. I think that story needs to get more media attention, and I want that story to be celebrated and out in the world. I think that a huge piece of this is a misunderstanding of founders that they have to wait for private equity to seek them out. And no, if you’re interested in this potentially being a path for you, you have a responsibility to figure that out. You have to know who you are as a founder, and you have to know if you’re going to be a right fit partner also.
There are both sides and then there is the, I would say, near and dear to me aspect of Bill Royal who is the founder of Royal and Company. I am very fortunate to work under his leadership through multiple rounds of investing, and investment transactions.
I call them Billisms in the book and they are just amazing stories and lessons for entrepreneurs, regardless of if it is private equity or not, and how to grow a business doing the right thing and being the good guy, and that you can take a company from just being one person and one idea to a billion-dollar company and have it done in a way that is done with integrity. I want to celebrate him.
Drew Applebaum: Now, who should read this book?
Kelley W. Powell: I wrote it for folks who are not sure whether or not they’re interested in private equity and want to figure it out because I think sometimes that can all be very mysterious, Drew. So many of those meetings happen behind closed doors, which is the whole private aspect of non-disclosures. Some of that tends to be scary and mysterious, and opaque. I want to bring some clarity to what are really the basics that I need to understand if I’m going to take on private equity investment to grow my business. Because it may be for you and it may not be for you.
At the same time, in collaborating with Bill, regardless of whether or not you’re interested in private equity, my hope for this book is that anyone who is running a business or is thinking about running a business would read this book and have actionable takeaways on how to grow their business and how to treat their clients and their employees really well, regardless of whether they want to take on investment or not.
Drew Applebaum: Now, do you want to give us a quick high-level overview of private equity firms, what they do, and how they make their money?
Kelley W. Powell: People think that private equity has this money just sitting around. Why aren’t they spending anything? I think that’s one of the things that even in this time of COVID, they don’t. They work for the investors who are participating in a fund. Often times, those are even retirement accounts, those are university endowments, so, when you think about it through that lens, private equity, when they’re successful, are in fact fueling our economy in ways that we really should be saying thank you for the ways that they do that. They’re held accountable to those limited partners and investors in ways that they have to have a return on that investment. When they do, it’s really good for the rest of us.
Drew Applebaum: Now, I have to bring this up. We have to talk about sailing because there are metaphors throughout the book. Is this a hobby for you, is this something you’ve studied before if it’s even in the title?
Kelley W. Powell: It is, I grew up with my grandparents having a place on the Chesapeake Bay. I’ve grown up down there and there’s something about the salty air, the sandy toes, all of that’s very real. When you think about just the sheer awe of going out and setting sail and when you lose sight of land being out there and knowing that it’s about you and the folks that you have in the boat with you. There’s just something very rejuvenating about going out and setting sail.
It takes courage as I thought about going out and setting sail. As I thought about that and thinking about the book, and taking that metaphor as some folks describe that is that red string throughout the book, that’s how I think about a business owner because you’re having to trust. You’re having to trust what you’ve done, you’ve got the right crew, you’ve got the right vessel, and you’re going to be able to go on this journey together, and you’re going to be able to go somewhere that you wouldn’t have otherwise been able to go if you were to just stay snuggled up against the coast or stayed on land. You get to see and do things that you wouldn’t have otherwise done but it can be scary. I mean, storms come up.
Not every day is sunny and smooth sailing, so that’s why I tied those two things together.
Drew Applebaum: Let’s dive right into the book. You write about how to navigate the journey for a founder, a CEO to partner up with private equity and you break it down to nine steps, so let’s walk through a few of them. Talk to us about the importance of the leader of a company having a good story.
Kelley W. Powell: This is something that even I, we jump right in sometimes and we forget to tell about our own personal journey. Even your questions of asking me, “Kelley, tell us about your background, tell us about sailing?” Those things matter to me when I am talking to a founder. Because I think there is this aspect of really having trust and I’ve learned that you have to sell someone on who you are before you can sell them on what it is that you do.
Not everybody might agree with me on that. There are other folks that have debated with me on this concept of that I don’t have to like you to be in business with you, I don’t have to trust you to be in business with you. I would say, with Kelley Powell, yes you do. I want to know that if we are partnering together, that I know who you are. Founders will get when they’re doing a pitch, they’ll get so deep into the product or the service, and really when you think about it, it’s that founder that had the passion and drive to even start that business.
It’s that whole investing in the jockey. I’m very much someone who invests in the jockey because I know that they’re the person who has grown this company with an idea and been able to really motivate and inspire. There are reasons behind that, that I think are really important. And so to know that you yourself, you have to know your own story, first to be able to sell it and then there’s that part of, there’s a whole value system behind why you’re doing what you’re doing and the choices that you have made.
When you understand that value system and why someone has made choices, then you’re going to know why they’re going to make choices in the future. All of that is what you’re investing in and you’re coming together for. You need to be ready to understand all of those things. It’s funny because sometimes as entrepreneurs, we kind of skip that part ourselves, we’re so focused on everybody else, we are usually these high energy folks that are pulling everybody else together and seeing the talents and expertise and what other people bring to the table, that sometimes we forget to tell our own story because we’re celebrating everybody around us.
I encourage folks to step back and make sure they’re doing that.
Drew Applebaum: Now, what are a few ways a company can prove its value to private equity firms?
Kelley W. Powell: For me, the biggest thing is client retention. Do you have happy clients that are paying for your product or service in ways that there’s longevity? Of course, there are very important aspects that you should be making money. As you’re starting a business, you do everything yourself, such as doing your own books and accounting and some of those small things, you think it’s no big deal.
Before you start looking and having somebody else look at your business, take care of those things and have them done–of course, you’re a professional, of course, you know how to do it–but have somebody else do it. There’s this whole aspect of taking a look and doing your own due diligence on yourself.
It’s fascinating to me. Sometimes with founders, we’ll go in and we’ll do due diligence, sometimes even before a private equity firm steps in, and a founder is thinking about putting their business up for sale. They want to know what someone like Kelley Powell is going to say coming in. If you wait for a private equity firm to pay someone to do that, you may not even know what is being said or what’s found about your business.
Do that before you even get involved in the process. I talked about it in the book and I relate it to like a home inspection, doing one before you put a house for sale, instead of waiting for someone to fall in love with your house and then come in and do a home inspection and finding something that you could have fixed beforehand. Why even have that moment?
Look at the business and say what is it that we should do before we even have folks walk through the house and maybe be underrated. This is, I think, one of the really fun parts of private equity and finding that right fit partner. I’m huge on transparency. I think sometimes folks get afraid of what might be described as your warts and the founder has just been dealing with everything and that you don’t have to share the good and the bad. Well, sometimes that bad is not bad.
Maybe, Drew, you’re really amazing at these 99 things and you’re missing this one to make 100%, but I’m really amazing at that 1%, we should team up, we’re going to be a better fit knowing where you might have a gap that you need to fill. Let’s talk about them, let’s share them.
That might be the one thing that we can do together to grow the business. Understanding those things, even before you’re trying to find your right fit partner is really important. Because that could be the one thing that you decide, wow, okay, together, we can do a lot more than if I didn’t have someone who knew that I had this gap. It’s not always bad.
Drew Applebaum: Now, when you find that issue and you’re doing your reverse due diligence, do you think they should go in and fix that problem? Do you do like a home inspection, and you say like I hope they don’t know the boiler is about to explode? What do you do in that situation?
Kelley W. Powell: Right, well, of course, the University of Richmond MBA answer is it depends. You might say okay, that’s getting ready to explode. We need to fix that, why even have it be an issue. Or it might be that you don’t, but you say, Drew, just so you know, we’ve looked at everything and that boiler is about ready to explode. That is something we’re going to have to address. The fact that you have a plan, maybe you don’t have to fix everything but you have a plan, even just knowing if you and I are planning, even if it’s a journey, a trip, and we’re going to have these four steps to get from point A to point Z.
Doesn’t it make you feel much better if I say, “Okay, we’re going to plan the next two weeks.”? Instead of, “Well, we’re going to leave today, I hope we have enough money, I hope we have enough gas, I hope the car worked but you and I are going to end up, we’re going to be on the West Coast two weeks from now. It’s going to be a lot of fun along the way.”
Or would you like a little bit more detail in the middle about how we’re going to get there? If I know that you know the boiler is going to blow up, I know that you’ve got a handle on it. If I go in and somebody finds out that the boiler’s going to blow up and you didn’t know that, what else do you not know, Drew? Because now I’m coming in and I’m telling you things that you don’t know.
That’s the piece about the transparency and figuring it all out. Maybe the boiler doesn’t matter, maybe I’ve got a brand-new super boiler and I wouldn’t even want your boiler anyway because we’re going to put in the new one.
It’s having those conversations, instead of assumptions and figuring those pieces out. There may be something that comes up but if it’s the right fit partner, then you’re having a conversation around how you’re addressing that together and what the plan is or you’re having a conversation that says nope, I’m going to walk away. Both of those are a best right answer.
People ask me, “Wait, what do you mean? We don’t want to know, we want a yes.” However, you want the partner that’s going to work through things together and sometimes that means understanding what those things are that you’re going to have to navigate together. It’s okay if people say no. That’s what you want, you want to find the no quickly and upfront.
When you think about it, it’s kind of like a marriage.
You want to date, you want to make sure that you want to get into this marriage together, you don’t want to get in it and figure out, we really shouldn’t have done this. No, have those conversations upfront and celebrate them.
Drew Applebaum: You mentioned in the book that when you’re looking for the investment in your company, investors, while they’re going to provide capital, they’re not all the same. You mentioned a few factors, but are there any other factors you’d like to talk about why a company offering the most money might not be the best fit at the end of the day?
Kelley W. Powell: I talk about that a lot. This is something that Bill, a lot of folks didn’t necessarily know this at the time, that he turned down the highest bid. When you are the founder and you’re turning down the highest bid, that translates to turning down money that you could be putting in your own pocket, right?
When you think about that and his vision to know that long term, I want to grow this company. Who are the right partners to grow this company and have it be right for our clients and right for our employees and right for the culture? This goes back to knowing who you are and your values and your story and what matters to you. In the book, I call them your non-negotiables.
When you understand your non-negotiables, and for me, one of those is about culture. I’ve seen and experienced on multiple occasions where a deal has just completely gone bad because we think everything aligns but then the culture doesn’t. It just isn’t going to work if the culture isn’t there. I don’t care how much money someone is investing, if you fundamentally don’t believe in the path forward for the culture, you are going to have clashes that just end badly. They would end baldly whether you as the CEO get fired, whether you as the CEO decide to walk away, or whether you are not a good ambassador for your employees or your clients.
So, when you think about those things that matter most to you and where you want to take the company to grow, those are the things that you’ve got to look for in your partner because each private equity firm has the way that they bring operators on. You have to ask yourself questions like, “Do I want someone to be highly involved? Do I want someone who is going to be hands-off? Do I want someone that’s going to help me with sales? Do I want someone who is going to help me with this aspect of operations?”
We talked about filling gaps before but also your style and your approach and how you define success. I should say that I am tailoring most of the conversations around founders that want to stay, want to stay on, and want to be involved. Even for those that aren’t, I am definitely tailored more to those that care about the longevity of the business and growing to have a legacy. They want to keep going and so finding that right fit private equity firm, it is important to ask the right questions. Someone might not be the right fit that you are looking for and again, that’s okay.
That is the theme of the book–figuring out the different types of private equity, the different types of investors, the questions you should be asking of private equity, and yourself to be able to navigate and figure out what that right fit is.
The book is definitely not a Rolodex of private equity firms and it is not a how-to, it requires you doing work. Kelley Powell is not going to tell you what your right answer is. Kelley Powell will give you the lessons and experience that she has seen if you had asked yourself the right questions. I think that is the biggest piece is to set aside what might sound like what the world may want the right answer for you to be and be really honest and candid with yourself. My goal is that this book will help you answer those questions and find your right fit partner.
Drew Applebaum: When you are looking for your partner, you’re seeking investors, are there mistakes that CEOs have made in terms of losing focus on their own firm while they are doing this and what can they do to stay the course?
Kelley W. Powell: It’s tough going through an investment process and that is why I spend so much time talking about knowing your story, understanding all of those things, and prepare because like anything else if you are prepared it is going to go so much easier.
One of the most important things that owners and CEOs and founders can do is prepare in ways that you have to lean on others because the business has to keep going. You have to, on the other side of a transaction, still have a business to sell.
You cannot be completely distracted by the process. One of the things that the work that we do is we make sure that it is something that’s to be celebrated because oftentimes, when we are coming in folks may question, “Wait, why are you here? You are just here to find fault. You want to find a reason that this transaction isn’t going to work.” It is interesting and it is always fun for me. I am not sure what that says about my personality.
We change that and they get this trust that’s like, “Oh, wow, the private equity firm that has hired Kelley to come and talk with us wants to buy our business. They are fully invested and they’re already bringing on operating partners to figure out how to go forward.” Because the conversations that we’re having, even before the transaction, are about how we’re going to start on day one and have everything already started as a partnership instead of trying to figure that out.
Figure out as much as you can before the transaction and when you are doing that, if you have folks that you are leaning on to be in those meetings, to meet with the private equity firms, there needs to be management team meetings that are about how to have those conversations. Communication is a huge piece because everybody needs to understand their roles and every role is equally as important.
Having folks understand that you don’t have to be in every meeting to be a part of this because keeping the business running and keeping clients happy and making sure that employees understand why you are going through this process to grow the business, that is a lot to be celebrating. The biggest mistake is when CEOs get too bogged down, don’t lean on others, and don’t try to be transparent. Because people will notice that you are distracted.
So, if you are not communicating and having folks support you in that, people won’t understand. We as human beings are terrible when we don’t understand something. We don’t tend to jump to, “Well that must be something really positive and wonderful that’s going to happen.” We start thinking all of these bad things–never that positive most amazing, great experiences that have already happened to us. Communication is probably the biggest thing that CEOs can do.
All about the Data
Drew Applebaum: Now I have to ask, you have a data background. I am a bit of a data geek. What is the role of data in all of this?
Kelley W. Powell: Well, since you are a fellow data geek –
Drew Applebaum: Drop some numbers on me, Kelley.
Kelley W. Powell: Yeah it is all about the data. So, this can be a whole other hour of a podcast, but data tells a story. It doesn’t lie. So, understanding the things that you want to measure, the metrics that matter even before the transaction, and after. We have the transaction, now we are going forward, how do we know if we are on track? How do we know if it is working? What are the things that we set out to do?
So, understanding what those metrics are that you are going to measure together in order to be successful. It is fascinating to me. So back to that, I was talking about the communication and I was very fortunate to collaborate with Adam Coffey, who has been the number one bestseller in private equity for a year and a half now. So, he and I collaborated on the book and he didn’t make these huge announcements because he didn’t need to.
He had let the company know what metrics, once they met a certain number of metrics for growth that they would then be out for sale. So, you need to have those communications around the metrics. It is interesting because I highlight Paymerang too and Nasser who is the CEO there, and he has all of their metrics on the wall for everybody to see. This is something that again, is that whole theme of transparency and having the conversations.
Some folks get really nervous about sharing numbers and sharing metrics because you don’t want to hurt somebody’s feelings. But no, it’s not about hurting someone’s feelings. If the metrics are not telling us a good story, then we need to change what we are doing so that they do, so that we are meeting our goals. It is always fascinating to me because, at Royal and Company, one of my roles was leading the data analyst who works with clients around the data and for our strategic analysts that we are watching every week.
Data isn’t something that when we are talking about growing a company or you are talking about meeting your goals, you don’t wait until the end of it and say, “Okay, did we get there?” No, and this goes back to you and I taking our two-week road trip, Drew. You have to make sure that along the way you are checking, and you are holding yourself accountable so that you can pivot, and you can adjust.
I get so jazzed about that with data because it lets you say, “Okay, oh shoot. We are not getting here but now we can.” And you have to look at it and you have to know what it is in order to be able to get there. I think everybody likes to say they’re a data-driven organization. It is much harder to do. So, when Nasser puts the numbers up on the wall for everybody to see, the good that happens from that of celebrating where they are, and meeting their goals, and celebrating where you’re not because you are communicating how you want to adjust.
The Adam Coffeys were saying, “We’re going to get there and this is going to be the next step for our business but we have to get there together.” Know where you are falling short so that every person in the company can help and contribute to meeting those goals.
So, if you are not communicating them, you’re not communicating not only where you’re meeting them, but also where you are falling short in order for people to step up and help you achieve them, you won’t get there. I do talk in the book about what the right numbers are and again, it is going to be different for each business and each company. There are some fundamentals for each private equity firm, they are going to look for and one of those goes back to are we being good citizens, as we promised to those retirement funds, those university endowments? Are we being good ambassadors of that money and growing it in the right way?
There are certain things that you are not going to get away from, but it is really important that you listen to the data and what it’s telling you. The other piece I would say, it is the whole piece of going back to say, “Okay, what is it we want to do together?”
That one piece I think is really important and what I would want business owners to listen to is I think more so we find that folks aren’t necessarily even capturing all of the right data to tell the story. That is the side that’s equally as important as listening to and understanding your data–that only works if you have all of your data and you are capturing it in the right way to be able to tell a story.
Because if you are not and now, I mean, able to maintain data and able to build it, it’s so inexpensive and so there is no reason not to. It is not just understanding your clients and why and how and when they are engaging with you, and all of that, these are things that you need to understand and know and make sure.
Have somebody who is looking at that data to ask, “Do we have everything in place to be able to capture all of the data that we need to be able to inform the metrics that will be able to let us know whether or not we’re meeting our goals?” Because otherwise, you may not be getting the full story and if you’re not, then you are going to be making the wrong decisions. So, there’s that huge piece, which I would say a data geek like you could completely get and understand.
Drew Applebaum: I love a good dashboard and I want everything on it.
Kelley W. Powell: Exactly and it has to be right. It has to be adopted. I think the whole culture around data if you are going to have a dashboard, use it, make it actionable, and make your decisions from it. Don’t just have it be this report that goes out. Have the conversations, be Nasser putting it up on the wall so that you are having a conversation around it. So, I love data a little bit Drew, sorry that was probably a long answer.
Drew Applebaum: I could tell a little bit but Kelley, writing a book is no joke. So, first of all, congratulations.
Kelley W. Powell: Thank you. It is no joke, I will tell you. I would say a couple of things with that. The team at Scribe, unbelievable. Anybody who is thinking about writing a book, this journey with the team, the creative team, the folks who have been there, the skills and the experience, everything that I talked about finding the right fit partner of where you have gaps to be able to be hugely successful and get where you need to go, this team has been there and I am so glad that I was introduced to them at the right time.
Anybody who is thinking about writing a book–I’ve had so many people come up to me and say, “Gosh, I’ve been thinking about writing a book.” My answer is to do it. Do it.
So, on a very personal note, this book was never meant to be a memoir for Bill Royal. He was one of the first people that I sat down to talk to when I even had this idea of writing a book. I told him that I wanted to write a book and that I wanted to celebrate Bill-isms and his lessons because he had been such a mentor to me and has made such a positive impact on so many lives.
Of course, he was hugely supportive. Bill always was and said that he was happy to help in any way I can. Well, roll forward and when I am signing the dotted line with this team and I found the right team and Scribe is amazing, these are the folks that I want in the boat with me, he had just found out he was diagnosed with ALS. So, in June, right as we were finishing up the book, we lost him. He passed away.
Drew Applebaum: I’m sorry to hear that.
Kelley W. Powell: That’s been a very emotional journey for me and just the love and light of that was Bill’s contribution to still being committed to this book even with that, I wouldn’t have had that if I had waited. I wouldn’t have been able to do it in a way that I think celebrates his legacy if I didn’t have this team. I am so grateful for this team for all that they have done and so I would encourage anybody to just do it. Just start writing the book. If you think you are going to, do not wait.
Drew Applebaum: Come on over and tell your story.
Kelley W. Powell: Yeah, come on over and tell your story. The journey of having done that with Bill, to be able to capture his voice in a way again, that was never the intent but what a beautiful gift for those who were touched by his life to be able to have this. I hope that in addition to being a book that’s meaningful and actionable for the founders and entrepreneurs and folks who are in the private equity space, I do hope for anyone whose life he touched, I hope that it is worthy of his love and light for them to have a copy of this book as well.
Drew Applebaum: Kelley, this has been such a pleasure and I thank you for sharing that and I am so excited for people to check out this book. Everyone, the book is called Courage to Lose Sight of Shore. You can find it on Amazon. Besides checking out the book Kelley, where can people find you?
Kelley W. Powell: You can go to kelleywpowell.com and I have two E’s, so it is Kelley W. Powell, so kelleywpowell.com. I am on LinkedIn, please find me, send information to me, give me a shout out. There is information on my website to be able to reach out and if I can be helpful to you in any way. I believe in feedback and by the way, if you embrace feedback and you ever want to get feedback again, I encourage you to write a book.
But I want folks to give me their honest, candid feedback. Please reach out, I mean that. Reach out to me directly and let me know of their experience and if they think there is more to this story in how I can be supportive of them is the biggest theme of the book. The take away that I hope people leave with is that together, a rising tide lifts all.
In the final chapter of the book, I talk about the philanthropic spirit that Bill and I shared of continuing the story and lifting others up.
If there any way that I live that, if there is any way I can be helpful to folks, I do hope they reach out and be brutally honest with me. I can take it. I want the real story. So, if you hate it that’s okay. I really hope you are going to love it but if you hate it that’s okay. That’s the whole point, not everybody is going to agree with what’s my right fit and that’s okay because can you imagine if they’re like everybody in the world whether the whole world was just Drew and Kelley’s that would be horrible, wouldn’t it? And I am so glad that there would be people that would disagree with us, right? We need everybody.
Drew Applebaum: Of course. Well, Kelley, thank you so much for coming on the podcast.
Kelley Powell: Thank you, Drew. It’s been lovely to be with you.