What Alkeme Insurance is Looking For to Acquire P&C Agencies

the way that we look at acquisitions is a number of different ways. We really go at the owner operator level, right? We look for the owner and the operator of that company. Who are they? What are they good at? How old are they? Not from an age discrimination standpoint, but how much energy they have or how much gas do they have left in their tank to continue to build beyond just an turnout period to really align culturally at the top to create value and take the company up. Welcome to Insurance Shot Talk. This is the podcast where the world of commercial insurance gets a little closer to home. I'm your host, Eric Stein, and in every episode, we're taking a deep dive into the insurance industry. From the latest news and trends to in-depth interviews with insurance experts, carriers, and agency newsmakers, we're covering it all. So sit back, tune in, and let's start the conversation. So Curtis Barton is the co-founder and CEO of Alchemy Commercial Insurance. In financial services, he's based in Ladera Ranch, California, Southern California, one of my favorite areas. I've known Curtis about 10 years now. We started working together at my brokerage in Church Solutions. This was before Alchemy was formed, actually. I believe it was venture specific. Is that right, Curtis? You're correct. And then Alchemy's had some huge growth organically, and also through acquisitions of other retail agencies as well. I've been staying in touch with Curtis kind of keeping in touch with what he's doing. And so Curtis, getting right into it, why don't we give us insight on a, your background, and b, why Alchemy was created. So I think you were part of ISU even before that. Yeah, we were part of United, and see the cluster out of Pennsylvania. So my background, yeah, so my background's pretty simple. I got a new insurance-seal fashion way. I came out of college. My dad had owned a brokerage, sold it while I was in college, retired, realized he didn't like off as much as he quite thought he did, and then recruited me to come start a brokerage with them, which turned out to be venture-Pacific. So we started at DeNovo. We had $0 coming in the front door. Didn't really want to be an insurance, but I told my dad I'd give him two years of my life, and here I am 26 years later, and we've got Alchemy going. My dad's subsequently retired, and I bought him out of the business. And we're just chugging along now, and I can tell you how we got from venture to Alchemy, or how we want to go. You just instruct me, and I'm here to, here to answer some questions, and hopefully shed some light on who we are and what we are. No, awesome, yeah, no, like what was the impetus, I guess, for the create Alchemy then, and like, because you were rocking and rolling with your agency already, and growing very quickly there, what made you, you know, pivot to say you wanted to get the private equity backing, and start doing acquisitions, and organic growth. That's a great question. So venture-Pacific itself, again, we started at scratch, and we built it to about $4.5 million in the top line revenue. When I went to my father, I said, hey, you need to retire at this point. It's time for you guys spend some time with Bob. I'm going to buy you out. So I did that, did that transaction with two minority partners in the business of venture-Pacific, and then we took the business from $4.5 million, about $9 million in top line revenue. During that process, I've literally done everything in insurance, from take out the trash, to do auto ID cards, to service, to be, to have a $2.5 million revenue book myself. And so ultimately, what I saw was that certain things were eating away at my time, and was disallowing me from giving out in the market doing what I like to do, which is being entrepreneur, to make connections, to write deals, to make things happen. And so, I met with a guy, my kids went to school together, and Tom Razzetta, who happens to be a co-founder of Alchemy as well. And we were having a discussion. I was expressing some of my issues. He said, well, why don't you talk to some of the Consoliders out there and see what the options are? And ultimately, that's what we did. So we together kind of interviewed a number of the Consoliders are in the space. And what I quickly found out was, nobody was an owner operator model. Everyone was what I would like to call a financial engineering play, and they were just stacking EBITDA. So they're just buying companies as fast as they could at a low interest rate, piling them on top of each other, leaving them dislocated, not worrying about integration, not worrying about, you know, really capitalizing on how to grow the company, or even carrying if it was a forever company. And they just didn't register with me. They didn't speak my language. And I was kind of disillusioned by that process. But I also knew that to go from 9 million to 18 million, I had to have capital from the outside. And so did I want to lever up myself? Or did I want to go get some private equity money? The issue that we had at 9 million dollars was, in revenue, is that's not quite big enough to get private equity interest. And so what I had to do that is back into it. And I had to figure out what the platform starts at, which is around 25 million dollars in top-wide revenue. So I went and found six or seven, I think it's seven of my friends at the time who were all part of the United Agencies. We were all having issues at the cluster. And we decided, hey, you know what, if we would emerge together, we've got a 25 million dollar platform, then we could hit the private equity market, see what kind of interest we get. And we could grab our own deal from an owner-operated perspective, leading with insurance, leading with insurance knowledge, and actually providing a different opportunity in the marketplace that people haven't seen until today. So that's really kind of how outcome he started. Anton Rosandek, the co-founder, has a deep history at the macro level of insurance. He started insurance carriers, worked at Guy Carpenter. He's a attorney by nature. He was an imminent attorney, a securities attorney. So he's done kind of everything from the distribution tranches, literally from retail to wholesale to actually running a carrier. And we were just lucky to stumble in each other at the right time. So I asked him if he'd like to come, help us get alchemy launched and become our chief operating officer, and he agreed. And so intellectual knowledge at the thought within helped out, and we were able to financially model it out, and then go to market, and we secured a number of, I mean, the interest was off the charts. We had like 11 IOIs, then we dialed it down to like really two that we ended up with on the L.O.S. data. So we'd up go to GCP Capital out of New York City. Fantastic partner from the private equity side, very user friendly, entrepreneurial. They were the first institutional money in behind Acrosher. So we felt like, hey, they were able to set Acrosher up for their next tranche of institutional funding with Gensar Capital. So that's kind of the genesis and a short, short span. But we had seven original agency partners, who were proud to call part of Alchemy in the beginning. And they'll be called those the seven. And then, you know, everybody else that we've been able to build on was really built off of that core group of seven that jumped off the cliff with me and followed my lead. So it's pretty impressive. Incredible. That's awesome. You know, I was wondering, you know, if your private equity group had experience before, so Acrosher, that's a good model to emulate, you know. Yeah, absolutely. And so they have, they've been at multiple distribution levels. They've done carriers, balance sheet, investments. They've also done wholesale brokerages. So they've got a nice handle on the insurance industry space. And they're more of a boutique firm. I wouldn't say they're not small by any stretch of the imagination. But again, it makes it more user friendly and less threatening from a private equity side. Because I'm a true entrepreneur at heart, you know. And my big fear with private equity was I didn't want to become employee number 3000, you know, insert company A there, right, where they just want to take my EBITDA and my revenue and just stack it on theirs and move forward on a compression play. Got it. And then like, you have a certain goals that you are looking to hit from a number of acquisitions or like, what's the strategic objective in that regard? Yeah. So look, I mean, these businesses can't be run, especially in today's interest rate environment on a purely a positive basis. So you have to have strong organic growth, which is actually my core of what I'm really good at, right? So I like marketing. I like understanding how to get people to the table. Top of discussion about sales. So we're really stoked that we've been able to carry a double 12 and a half percent organic growth clip all the way through our 36 year or 36 month run that we've had at Alchemy. And a lot of that's because of the cross synergies we create with our own partners and creating opportunities. And for them to interact and actually cross self effectively. And then the other side of it's the acquisitive side, which you have to do. And once you've gin that up and you start to get the bottle going the right way, you know, it kind of builds on itself, right? So we started off, I think we did six deals and we did 12 deals. And then last year, we did 13 deals. This year, we're going to do 25 to 50 deals. And then, you know, the next at some point, we'll go through a recapitalization event and the next private equity ripple comment and they'll be like, hey, you need to go up and do 50 deals, right? But the key to this is, as you've seen there, and you've seen this all the way across the board is, you know, it's, it's a leverage issue, right? People sort of over lever in our business because debt was cheap, multiples were low. Now debts buoyed up and people have been caught in what they call the squeeze, which means that basically they hit their incurrence and they can't borrow anymore money. So they can't lever up anymore. So they try to de-lever by, you know, cutting costs in the business. And we're capital intensive, people intensive business, right? That's where, where our costs come from. So really, that comes down to them cost-cutting by letting people go, which we've seen across the board in our industry, right? The other thing is, is that when we started this, you know, thesis, you know, seven plus years ago, it was how many deals can you do? How quick can you do them? Who cares about integrating them? Who cares about migrating them onto one platform? Go, go, go, go, go. You know, now the interest rates have risen. It's like, tell us your organic grill story. How do you have discipline and rigor? We'll be started with that. We started with, hey, we want to buy the right pieces of the puzzle. We want to put them in play. We want to be interactive as a group, right? And collaborate with each other. And we want to build a forever company. We didn't just want to build a financial model that would just yield a big result for me. That's not my interest. So I want to, I hate to say that, but I call to fill the dreams. If you build it, they will come, right? So if you do write by your people, provide them the opportunity, make them wealthy, then by product, you're going to be wealthy, and you're going to be successful, right? And it's not all about money. It's about building something special and unique with people you like. No, no, make sense. And I noticed when you, in the groups that I run into that you have purchased, you kind of left their culture, slash logo, or branding or name the same as well. Yeah, I mean, we have a stair stepped approach to branding, we call it one alchemy. So basically what we do there is we say, hey, look, if you don't have an intrinsic value in your name that you see and that you feel, then come in and use alchemy's branding and for that, then we'll give you a whole suite of marketing services that we can provide to you, right? From brochures all the way through. If you feel like your brand's super strong, we'll do a side-by-side branding technique where we'll put, you know, alchemy on one side and the name of like venture-specific on the other side, I'll use an example. And then year two, we'll flip it to our alchemy's on the top, venture-specific's below, and year three, we just drop venture-specific off, which we just did. I'm proud to announce. Multi-generational agency that we basically let the name go, but the fact is that alchemy carries more brand recognition, alchemy's a bigger name, and where we're going, it's better offer my people to be under the alchemy umbrella. No, no, that makes sense. And like, when you guys are looking to, you know, make an acquisition of it, let's say, you know, P and C, agency, what kind of criteria are you looking to use, if you will, you know, to fill in that piece of the puzzle, like you mentioned? We take a dart and we just huck it at the wall. Now we're very strategic. So we started a south, our thesis started in the Southwest region. We had, we called the two-hour rule, we wanted to be able to fly a plane and be on the ground somewhere and still leave in the morning to be there in the afternoon to be able to be effective in the business if needed. And so the way that we look at acquisitions is a number of different ways. Who are they? How old are they? Not from an age discrimination standpoint, but how much energy they have or how much gas do they have left in their tank to continue to build beyond just an urn out period to really align culturally at the top to create value and take the company up. And so we don't buy, we typically try to stay away from people or look at it at a three-year rod and just want to get out of the business. We want someone that wants to hang in the business for 10 years. Someone that wants to take their business literally from what we call, you know, a lifestyle business Eric, which you're very familiar with, and move it into a wealth creation vehicle. And this is exactly what these do if they're done correctly, they're managed correctly, and that's really our primary goal. And so then the other, beyond that, just beyond the owner operators, then we look at geography, we look at mix of business, and then we look at, hey, do you have anything that stands out, something that brings you above and beyond? You know, what everybody else is doing in your territory? What are you good at? Do you have a specialty that we can build on? And so that's really what we look at when we evaluate the business. And then we have internal metrics we apply to. We don't want to buy a company that hasn't been growing organically. And we don't buy a company that we don't feel like we could double in size over a five-year run. Got it. Okay, so they got to be on a growth spur. We want the owner to stay in if possible or have a succession plan with either a good offer. Number two, you know, star number two, number three. Some of that, that's got the energy, the infectiousness, the desire to continue to build. Got it. And then what about, you know, other than trying to find that unique piece, is there a certain client base, you know, that you're looking for, like, you know, that at all, or is it just based on the market and the in the program they may have? Yeah, so obviously, wine's a business matter, right? I mean, obviously right now, personalized has been hit pretty heavily. So everyone's really nervous about personalized concentration. But by nature of the original seven guys that came into it, we had a strong middle-market presence on the commercial side. That's where the, the gist of our business was. And then we had to hang over and, you know, what we call a combination style writing for personalized and a combination style writing for benefits. Well, we looked at that and we looked at our numbers and we said, you know, one, when the personalized market got dislocated the way it did in California, it was a major shift and then it drifted across a number of states and across the United States as it's in its total. But we really looked at the personalized business and said, hey, we really need to cap the personalized exposure. So let's keep it under a certain percentage. And then let's continue to build in on benefits and we'll continue to build in on personal lines at the high net worth level as opposed to just building in at a, you know, a standard level. So we've methodically thought that through and again, it's a risk profile that we put in place and we want to de-risk the business as we move it forward. So we want to be cognizant about what we're doing and what we're buying from a from a percentage basis, right? And so the way I look at the insurance business is that middle-market piece is the human piece, right? That's the human element. It's the hardest to dislocate. There's always going to be people in the middle. So what we want to do really is take that business. We want to enable it with technology where needed to make jobs easier. And then we want to get them to grow into the high net worth personal lines, get them to grow into the benefits, put them with people that can handle their surety. We bought a wealth management practice. Why do we buy that? Well, number of reasons. One is clients always have liquidation events. Why not have a wealth management bucket there to catch that, right? We do 401K. So the key is to bring all the different pieces of the puzzle together to the table for our partners and give them more opportunity to grow their businesses in different directions that they weren't capable of growing on their own. That makes sense. You can cross sell all these other services within the client base. 100% because you got to remember organic gross free. When you buy an agency of cost of money, organic gross free. So in theory, I mean, you pay for marketing, but you get what I'm saying. So the numbers fly way heavier in the models. When you run the organic gross side at a heavier clip, your numbers go off the chart as opposed to just doing just straight acquisitions where you stack it up debt. And so our industry has been really, there's been a flight to quality from the investment side to put money into the insurance sector because it's more stable. It's a low cap or zero cap acts business with with reoccurring revenue. So it's like a magic fly with these companies used to sped off a ton of money. Unfortunately, with interest rates going up the way they dead, some of it's politically driven, some of it's driven by whatever else. You know, you put your insert there, but interest rates booed up the way they did. It really left a lot of people like I said, flat footed in the space that had gotten too addicted to debt. It not really focused it on how do we integrate the company? How do we make the company work together? And how do we grow organically? And that's kind of we started with that mind. So we kind of had a head start from that perspective. Plus when we came into the business, we were at the tail end of the limited straight cycle. So we had to be had to have rigor. We had to have discipline. You know, our debt facilities were like, just, hey, go out and do as much as you want, right? They were cautious. And so by nature, we were cautious. And I think that really helped us. So have you been impacted still as things, you know, on the interest rate side, how you're banking, you know, facility now like for the private equity group, are they? They have cash still to make it. There's a ton of powder in the space. I mean, debt facilities are there. The credits are loosening. You know, like I said, I mean, we've got a large DDTL with our debt facilities. And they've been fantastic partners to us as well as the private equity guys are always there to what I call, you know, the private equity, what they're really good at, not only just helping you operationally and understand your business more effectively and how to create efficiencies. You know, but also what they're really good at is understanding like, look, if we need to continue growth and to accelerate growth, we can put additional capital to work inside the business, right? So a lot of these people that went straight to a debt facility got rid of private equity really kind of cut their nose off despite their face because there's no one there to cut the check in. And we've seen that in a number of deals where what they've had to do is they've got to go in and I'm getting complicated here. So they just told me to knock it off if I do it too much, but they've gone in and they put into their debt stack, they put what we call a pit preferred into the into the debt stack and what that pit preferred does is it sets above all the other equity delutes, all the equity downstream so that the downstream acquisition with their equity chunks that they've gotten has been completely annihilated by these picks. It's a really dangerous financial instrument. It's useful at times, but it can be really aggressive and over the top at other times. And so, you know, there's a lot of deals that are in the consolidation space that I pick into their debt stack. There are people don't even understand what that means and they don't understand what it does to their equity. And then there's liquidity traps to the number of these deals where basically they're not getting dollars out. There's no active internal market. There's no way to get your you get your stock and liquidate it, right? Okay. So because we're not publicly trading companies, we don't trade on a commodity, right? But we're not trading on the exchange. So when you look at that, we created an internal marketplace for our people to cross sell their stock out from class to class. And the company will backstop it as well and buy the stock back for people if they need to get liquidity. So just creating opportunities for people to get liquidity drips out of the business in between recaps. Got it. No, no, I totally get it. And then I think we'll we hopefully have some agency owners on this, you know, podcast or listening to this podcast. And so when today, you know, when you go in, what are the financial metrics like? Are you buying on gross revenue net income? Like how are you evaluating the agency? What are the what are the multiples looking like, you know, in 24 right now? So we we do it off of a multiple of you, but on most of our deals, I might say the majority over deals. Tuck-ins, we can do it on multiple revenue, but that's a really small agency. That's something that's sub one million in in top line revenue, but anything that's, you know, above a million dollars in revenue, we do it off of a multiple of you. And so what we've really, you see in these businesses is again, hitting back to it. It's it's not an issue, but they're lifestyle businesses, right? They have a lot of expense that flushes through the company that's technically really shouldn't be in the company or maybe it should, whatever else. I don't know. I'm not here to judge that, but at the end of the day, when you right-size the pro forma or their income statement, you know, we try to get them to operate, we'll be called operating to a margin, you know, we want to see between 30 and 35% margin play in the business. And so when they right-size their pro forma, that's how we transact the deal multiples. I mean, they're all over the place, Eric. I mean, it depends on what size agency you're talking. I mean, they can range anywhere from 9x EBITDA to 14x EBITDA, depending on size of the agency complexity of the agency, what's inside of the agency, what type of business they have, what type of specialties they have. So, you know, that's a real, you know, that's a shot in the dark there. Right, right. And you have all various forms of payment, like half down, half over time, just it depends on the. No, so we have a pretty standard model on most of these roll-up still or consolidation plays do. We do, we buy 100% of the entity, so you go to buy 100% of the company. Okay. Pay out 75% in cash, 25% in stock in NUCA, Alchemy. And then we have a 1 into 3 or earn out that they work towards growth incentive. And so that's really the way the model works. No, that makes sense. Okay, that's simple. And that's nice. You go ahead and go to 100%. And again, I'd caveat that. This is what people get concerned about because they look at their numbers like I've got a nice life, right? Okay, and that's great. But are you creating well, right? And that 25% in stock that you take, even though it might pay a comparison to the dollars you got on the front side, that's the growth equity play. That's the side that's going to over a period of time. If you let it bake in and you continue to reinvest it, we'll show you a big return. And so that's in and I've modeled it 10 ways till Tuesday on my own company before I did a deal to make sure that I could not ever outpace scale. And you can't as a small agency owner. You cannot outpace scale and you cannot outpace resource. Right. Oh, that's just good. And then tell me like a, you know, how about the due diligence process once you get through an L.O.I. or you're in an L.O.I. And now how intense is it? How, you know, is it a hard process for that agency owner or, you know, is it challenging or what's been the feedback? Yeah, so we really try to make that as easy as possible on the others. And that's where I'm unique is because I've been through it. I've owned my own agency. I've sold it. So I've sat in their chair. I know their businesses. I know where the holes are in their business. I know it's going on. So I tend to to hold their hands through that process to some degree. Obviously, as we get bigger, it becomes harder to do. But really what you do is you move into what they call quality of earnings, right? Which is basically all we're trying to do there is test or revenue, right? Because we're going off of assumptions based on books that they're showing us, right? And so everything's based on a TTM or a trellying 12 months. And then what we do is we take their pro forma that we've we've identified and we have the quality of earnings assessment done against that. So we hire an outside firm comes in. They're going to tick and tie all the numbers. They're going to make sure they can verify income. They're going to verify expense. They're going to put the pro forma together for us. And once we get there, then we present the pro forma to the agency owner. We have them sign off on that pro forma EBITDA analysis because that'll form the basis of the deal, right? And then what we do is we use that as first year budget. So we institute that as your one budget. And then we build ground up budget year after year after year subsequently. So from from our standpoint, I think we've only fallen out on one deal that we've done. I mean, we've looked at a thousand deals. I mean, so pretty high hit ratio in there in terms of choosing the right quality partners and also, you know, making sure that they're giving us the right information that would be able to tick and tie that back. What about, you know, as far as what, oh, wait, what, how many agencies do you have now underneath you? We're up to 39 agency partners. Congrats. That's huge. As far as, okay, once you do the deal, you go through the due diligence, the deal is closed. Talk about integration. Like, what do they have to change? Do they have to change agency management systems? Do you carry your appointment issues, getting that transition? Like, what does that look like? That integration? Yeah, so I'll step back one step on that. So during that, during that L.O.I. process, as we're doing the QOE, we have an integration team that takes over two. And so each department reaches out meets with that prospective new new partner, right? Talk about HR. We talk about IT. We talk about legal. We talk about markets. We talk about all those different things. And so we set a plan for integration. We run what we call a fully integrated, fully migrated model. So we use Epic as our system, applied Epic. And so what we do is we pull everybody into one database within or one instance within Epic. And that way we can consolidate financials. We can run analysis in there. We can take data and analyze it in there. And, you know, again, what the investors are looking for now is a more integrated model. They don't want a bunch of loosely corroborated companies that are milling in their financials. They want to know that they've got the full package and it's all in one place. So we consider our Epic system to be as far as the data is concerned, to be our Bible. And then we have a data lake with overlays and all the other stuff on the outside that we can take the outside agencies and dopamine to in the migration process. And so right now, we're working on some killer technology that allow us to truncate the time frame it takes to actually migrate people onto our system and integrate them. And so what we ideally would like to do right now, we run about 120 to 180 days. We'd like to bring that down to 30 days. And so we're doing that by creating code and using resources outside that will actually help us do that. P and C just have you run into Biberg, which is a Berkshire Halfaway company, Forting Workers Comp, for either your prospects or clients. Well, great news. In shirt solutions, a national MGA has an appointment that is set up to allow you to quote, bind and service Biberg at your agency. And the coverage is in all states. It's a rated. Startups are even accepted. There's 125,000 maximum premium. And some of the tough industries they write are construction, transportation that includes towing and possible delivery, manufacturing, security guards that are armed and unarmed, motor mediation, and many more. So go to our website at insuredsolutions.net, click the get appointed link. We'll get you log ins for you and your team and can set up a webinar for training if you'd like. Also, feel free to email [email protected] and I can handle a submission myself or call 7-7-0-402-5-343 to glad to speak to you in give you more detail. Thanks. Then they stay there with AMS 360. Verta 4. So do they keep that too? And then roll into everyone's on. Well, we're at period of time. We'll transition. And again, it depends on size of agency, complexity. Do we have the manpower to train their people? So they will run on their own system for a little bit, but as soon as we can get them on to Epic, we'll fully train them up in Epic and get them moving on Epic. And the reason we do that too is there's another issue that you see right behind me. This is our Salt Lake City office view. We created Alchemy Resource Center in Salt Lake City, which we basically use that as our fractalized labor, task drive labor. We really use it as a cafeteria type plan where people can dive in and out and utilize it. Like I can tell you, sometimes I'm running a business. I know anybody listening to this. If there's anybody listening to this, I hope there are, they can dive in and they can say, look, I need a quarter person. I don't need a whole person. So either have choice. Either they're going to overburden your people you have. You're going to use patra or resource pro or one of those outside resources, which is great. Or you can go to our office in Salt Lake City and you can fractalize a person and get a quarter person to help you during the transition period, or you can have our office person there, which is curious to the resident, you can have that her go ahead and hire on someone for you and fully manage them there. And so it's paid a play in there. Oh nice. So you're like your own near shore, onshore back office. So US based talent, which are licensed all insurance professionals can actually transact with the client on the phone can transact with the producer on the phone. And we work on the time zones that the people are in. So if we have someone that's in Hawaii, which we do, you know, we'll work on Hawaii in time if we hire someone there and we got people in New York, we'll work on the Eastern time. So, you know, we work on the time zone. And from my perspective, it's always nice to have know that you got someone that's actually licensed as a professional can speak the language handling those service tasks. You have seen some near shore before or they couldn't be licensed. So just more administrative. This is nice. I mean, I think that Utah market is a pay scale. Good people are good and you're at what mountain time zone right having a middle. Yeah, you're in the mountain time zone. I mean, it's a couple of different things. You got five schools that really feed into this valley. People want to be here for one reason or another, either it's religious or it's, you know, active outside, you know, my son goes to university Utah. I'm kind of lucky from that perspective. So I do spend a lot of time out here with my team trying to build this thing out. We think we started with two people and now we're up to like 65 people, I think, in this office and working remotely from the office as well. We got people in Colorado out of all over the place that will work through that office. But being managed there, and it was really out of a direct result of kind of wage inflation that we were seeing during COVID in California where we were like, hey, we got a person that we're paying $90,000 a year, you know, and you know, ABC company comes in and offers them 130 and you're going, whoa, like I was, didn't want to pay 90, but now you're going to pay 130, okay? So really it was kind of like as we lose people in California, we try to move them into Utah. And reason being is, again, what you talked about, more stable alignment of philosophy, better pay scale, business friendly stay, a lot to offer here to everybody. So I just keep your margin control. It helps you keep your margin control under your thumb. Yeah, like, so what, like what does an average CSR then salary that say, you know, it's licensed average right now? I don't know. I mean, it's all over the board, depending on state, you're talking about in Utah person specifically. So I don't think you get much of a break on the actual salary portion of the labor. I think ultimately at the end of the day, what you get is you get a more stable labor pool here. So, and again, if you have to let someone go in California, you know, because you've dealt there, right? Let someone go in California. The next day, you're getting legal notices about 12 things that you've supposedly done wrong. You know, you have the document things 18 times till Tuesday. And I love California. I'm born and raised in Southern California. So this is an knock on California. It's just where the tort law is. And, you know, it's a, it's an egregious employment system there. And unfortunately, it's going to drive labor out, which we've seen across the board from tech all the way through. It's not just an industry specific thing to insurance. It's it's something that really drives across the entire portfolio of companies. And then, um, that's that while we're on employees, like when you make having acquisition, you're, you know, let's say you're four months in now, it's closed, like talk about employee transition issues. I mean, got your ops team, integrations team coming in. I try to smooth things out. I'm assuming you try to leave that as much of the culture at that agency there as you can. But, you know, everyone's still, I've been through it. You've been through it. Um, you know, gets freaked out just from the whole acquisition game, you know, and what's it going to be in store for me? And how is it going to affect me? Like, what you've seen big issues there or is your team doing a pretty good job of keeping things, you know, people level headed about it. So our model's a little different again. The other operators that we're buying are then become stakeholder partners in our business, and we basically give them control and ownership over their own key and L, right? So the hiring, the firing, all that, they keep under their, under their budget, under their management, and we help them. We just augment. We take off HR. We take off accounting. We take off IT. We take off legal. We pull that stuff out of their way so that they can focus on the business itself and actually growing the business and being more effective in that area. But what we do is we, we tell them all the reasons why it's going to be a good thing as opposed to why it's not going to be a good thing, right? We don't want to have operational overreach from corporate. It doesn't make a lot of sense. It doesn't translate into certain geographies. So what we really want to do is really empower those local leaders to continue to drive the alkeny message to optimize. We call it "alchemize" the employee base and understanding why we're doing it. The resources that they're going to get, you know, like stuff like just basic stuff. We've got an AI system that checks policies, right? It's all automatic. You code it. You send it up. It comes back. And so when they start to see that type of stuff come in, they're like, wow, now we see the upside. And when people go through a transition, they think about three things. They think about, it might be impaid the same. Am I coming to the same office? And who am I reporting to? Is that going to change? If those three things don't change, people typically aren't going to miss. Makes sense. So obviously you've seen some good success there when the people see the value of what you're doing, you know, on the teams there. So the current owner then is still in charge of the business per se and running the day to day. And everyone's still reporting to them. I'll be it with the extra resources. Correct. That's 100%. That's excellent. And that's our web hub. We call it our web of reliability, right? Those are our people. So there are web of reliability. The stakeholder partners are what hold the business together. It's a people business. So if you think you're going to go into someone's agency, buy it and then come in and try to run it from corporate level down and get rid of those owners, you're going to have a real problem. You're going to have people hitting the door. So again, we're bored out of California, which is, as you know, like the Wild West when it comes to non-compets and all this other stuff. So we don't operate with a stick. We operate with a carrot. You know, and that's the big issue that you see across the United States. As a lot of the other states, the owners operate with a stick in that they're threatening people about leaving all the time. And the FTC is going to come down with a ruling on a ceiling probably in the next 12 months, which will probably put the non-compete issues on the same foot ground as California. So all these people that are operating with the stick are getting a big trouble because they don't know how to provide a culture. They don't know how to drive culture. They don't know how to to bear hug their people in the appropriate way outside of using the stick as a mechanism. I've never operated off of a stick. You know, I like to understand like what's my upside in this business and how can I keep driving my career forward and let me know what that looks like for me. And as long as I'm cool with that, then I'll give you my heart and my soul and I'll run through a wall for you, you know, make big sense. And then I'm moving over to like the owner of the agency for a minute. So what's the most prevalent goal being that these folks are not going to just immediate retire? Like you said, they got some more runaway to stay on. What's been some of their reasoning to join you, like the catalyst other than the money, you know, to say I need to pull the trigger and do this with alchemy versus aqua sure, whoever else, you know, yeah. So a couple of things that go into that. I mean, one is why do people sell their business as well? You build a business to sell ultimately and people will tell you they don't, but that's what you do, you know, having a paper asset doesn't really do you any good. So again, people are after kind of multiple bites of the apple to create wealth, right? We've heard that monologue thousand times over. A lot of times it comes down to career access. It comes down to resources internally. Look, a dollar comes in on a small agency. It has to get broken up, right? So you're going to have to give up some things or you have to give up your personal income to grow the agency. A lot of agency owners have a hard time giving up their own personal income to grow the agency effectively. I've seen a number that do go that way. I went that way. I had a two put, I had a two and a half million dollar revenue book myself, but I was only taking a small salary and dumping that back into the agency to hire producers to grow the business. I had a more longer term vision to where I wanted to go with the business than what is it going to do for me today? And how much am I going to put in my pocket today? So again, they're looking for different things I think and, you know, more, more firepower to get into bigger deals, opportunity to cross sell, opportunity to go into that. What we call the gold mine and put your hat on and go mine the mine the gold, right? And make sure that your clients are getting the best customer because oh, about the clients in a day, it doesn't matter about anything. Clients are the key. So if you're not giving them opportunities and telling them what you do and giving them other areas that you could focus in on to bring value, they're going to go find a broker that's going to fill in that void and then cross back over into the piece that you write. So you need to call it gating, you can call it hooks, you can call it walls, you can call it whatever you want. I just call it pure customer service. What are our offerings? Can we bring more offerings to the table for the client? And then can we bring me more resource to the employees that are servicing the client so that they have a better job experience so they can deliver a better customer service platform and we call it being an proactive risk management strategy instead of a reactive risk management strategy. You know, customer service is not issuing a certificate. That's reactive. That's expected. We want to get people into the mindset of getting out talking to the people, finding out what's going on in their life, finding out if there's anything we're missing, finding out how we can do a better job and then creating that through processes, procedures and work was a benefit. Everybody globally. That makes sense. And then as far as like your growth plans now, so you're at realm 40, you know, agencies now, you're going to keep going with the organic, of course, like play it out for me. What do you think is in line that you can disclose really? Like if you want to, you know, get another tranche of cash, are we going to potentially go public? You know, what do you, what's, if you had your way, you know, what, how does this thing not in per se, but really, you know, take on the next life, you know, later the next five, 10 years. Good question. So yeah, I mean, right now, obviously, GCP capital is our private equity partner. We've been with them for just over three years. We'll go through a recap at some point in the next probably 12 months. I would, I would gas. I mean, you know, it's up in the air. It's up to them to actually drive that process, but that's a normal timing right there. Yeah, so we go fund a fund, right? So what's going to happen is GCP's got a fee to share responsibility of their investor. So they need to come out of our investment to return money to their investors. What they indicated as is they love what we're doing and the model we're building. So they want to continue to drive forward with us. And so what we'll do is probably bring in another private equity partner to kind of go and do, you know, maybe a three-pronged tab where you go, you know, co-control situation where, you know, GCP hangs and we hang in as a management group to our percentage. And then the new investor comes in. When the new investor comes in, they're going to come in with a check. They're going to provide some liquidity across the board, not only for us as the shareholder partners, but also for our investors. So we can deliver them the return. And then we all reinvest back in. So like for where I set, I'm the largest shareholder outside of the investors themselves. So my goal is to, this is the next, so we're at that like right at the start of the J, right? You know the J curve. And we're going to hit that J curve in the next, in the next five year ride. And so my goal is to push forward as much of my equity as it possibly can and play hard into the next five years. Beyond that, you know, we probably continue to go fun to fun. It's good to have a private equity hand in the deal because they've got a lot of operational expertise that can help you grow the business. They're good backstop just across the board. They've got relationship with that management facilities. They've got all these different things they can bring to the table. As far as going public, I mean, nothing's off the table. Who knows? You know, I look at how can we perform over the next 12 months of the next 24 months of the next 36 months? I mean, any type of IPO or anything like that would be way downstream. And I don't even want to go down that road. A lot of restrictions around that, which you're seeing in the space. We're some of these companies have run so big that now for them to go public, the shift is so hard because they're levered, levered means debt just so everybody does out there. You know, obviously, I'll talk about leverage. But if you're up in the eight and nine X leverage point, the public's trade under five. So the publics are like at the fours and the threes and leverage, right? So if you're going to go public, you got to do lever down from nine to, you know, three or four, which means you either have to do one of the above or three of the above, you have to, you know, cut staff, centralize, regionalize, get rid of redundancies, create more efficiencies, raise capital, right? Yeah, it's a pretty heavy lift once you get to a certain size, right? So we're at like the Goldilocks size, they call it, where we're at, which means that we've got enough, enough, we have enough scale right now that the private equity guys can put a big enough check into us. But we also can show them a huge return still over the next run. Once we become a 250, 300 million are EBITDA company, the amount of people that can actually stroke a check in on that deal shrinks, the poll shrinks down significantly. And so your options become less. And so you'll see deals that look like the trade is off. We have like, oh my gosh, I went, why does hub go at this X multiple? Well, hub is a gigantic, great company run very well. But the investment that you have to put in there is so significant to move the needle and truest is going through it right now. But it's like, you get to a certain size where the check is so large, there's only four or five people that can actually do it. And when they're doing it, they don't have a lot of upside potential in that return. They're more like parking money. So not to get into the, you know, inside baseball game, but it gets very confusing as a company gets to a certain size. So a lot of these companies are forced into a position of do I have to go public? You know, is that my next plausible step? And I don't know what the answer is that. I mean, that's kind of where we're at right now. No, that sounds awesome. Exciting stuff that you've done created from this small agency at Southern California to this. And then kind of looking at it, the one last thing is on the, you know, the exiting side. So let's say the owner of the agency, they do the deal. They move through their earn out, you know, three, four years down the road. Maybe then at that point, they are ready to exit. They got a good succession operations team at the agency in place, of course. Tell me about that. How does that look for that owner? Can he just exit out and keep his equity in place and wait for the next event or like, how would that work for that owner? Yeah, they can, they can hold their equity. Most people will take their, want to take some liquidity away. Maybe all of it away because why would you want to set an investment? You're not participating in unless you think, you know, it just depends on their position. I mean, that's a, that's a positional thing. You know, where are they out in their lifestyle? What's their lifestyle like? Is it where they want it? Is it congruent to where they, where they can be in a long-term play? But, you know, in that case, if we're in between recapitalization points, then we've got the internal market where we can sell, they can sell their stock on, right? There's multiple ways to do that. We also as a company will go in and buy the stock, probably not their preferred outcome for them because the company's not going to buy the stock at the same rate as someone that's going to trade it on the internal market. That's just the way it works. So, you can either, again, it's like, if you look at a balloon being full, you want to take some liquidity off every time and shrink the balloon for yourself. So, you know, take a little bit, move some forward, take a little bit more, move some forward. Got it. So, they can exit if they want or stick around, and they still have this equity piece, and they, and you're not going to force them to sell it, the day they exit, per se, as part of the plan. That's how it's set up today, and I could change with the next partner. I mean, you know how that goes, I mean, in privito, a lot of the stuff, too, I'm assuming. So, you know, a next partner might ask for certain things, and so what, what happens typically is you go through what the recapitalization event, which means you're just basically selling from one private equity the next, right? What happens during that process is they may say, hey, we want you as an management group, you guys own 65% of the company now, we want you to roll forward 40% of that. So, then I've got to go out and call each partner and say, and that becomes math. What are you willing to push forward versus what do you need out? And then it says, we have to go back and forth with each partner to get to that level, right? So, I may get, I may push forward 75%, someone else might only want to push forward 40, right? So, we have to get the number up. That's really deep inside baseball, but that's kind of what happens. No, no, no, that's good information, because I think, you know, a lot of agency owners, they built their agencies from scratch, it's been a while, they've usually not gone through this whole process, you know, if they have, it's just the one time. So, I think a lot of people would want to know, you know, how does it look, you know, why do I do it? Who do I partner with? And then how and when do should I exit properly, you know, with the right partner like yourself? And so, if you got all those pieces together as an agency owner, and you can, you know, you see the light of it, it just, you know, makes you feel more comfortable, I think, to do the deal, you know? Yeah, absolutely, and I mean, if you look at it, I mean, and I get, I modeled it a thousand times over on my own personal agency, right? You can never grow your agency the way that the skill will take you in an agency like this. So, you like, I grow you grow there, I can feel a part of our organization, right? You get the benefit of my growth. And so, that enterprise valuation that we're all attaching to and the stock at the enterprise, that continues to go up. And so, ultimately, to the day, it's like, you got to realize as an owner, yes, you may have a great lifestyle business, but everyone's certainly forgot 2008, when everyone was cut and checks back into their company to pay their payroll, right? And, you know, you, there is no perfect timing. Like, I love people that sit around, they're like, I'm going to, I'm going to top the market with my house. Like, good luck. Right. You know, I mean, you know, if you're going to sell high, you're going to buy high, you know? You're like, we're predicting the Scott market, yes, and possibly. Yeah. And so, the idea there is really is like, look, guys, you know, you're never going to see the growth together. At some point, you're going to want to accent take some chips down. Do you risk your position and move into something different? They provide your people more opportunity, long term. No, it makes sense. And the last question for me, that I was wondering about as well would be, you know, carry your market access. Have you seen that you've been able to consolidate and scale that, bring in some new markets, contingency bonuses are getting bigger because your cool was bigger. Like, how does that happen in reality or the way out? And I've seen different groups do it different ways, you know, some totally come in and have said some other just sort of leave status. Well, what's the goal without me? Right. So, you know, obviously, again, scale plays, right? So a lot of our people that we buy, let's say, a sub five billion dollar agency, they don't have all the direct appointments. So, it's a lot of times you're pushing through aggregation pits that are taking a pinch off of it. So, if they move over to us and they're getting paid 10%. Let's say on a traveler's policy through an aggregation point, when they move it into our contract, they pick lift up of five to seven points, right? Just by being on our contract. So they get the natural lift and revenue that goes towards their growth and set up. So they get the benefit of that lift, they get the benefit of the carrier access. Then we took our all of our wholesale agencies and our relationships and we collapsed them down to three major ones. And then we negotiated with them with our volume to say, look, we want higher commission, we want some contingent on the backside and we were able to accomplish that with the three major wholesalers out there. So, you know, again, that's scale, that's what scale provides. And a lot of agencies here are so fearful of like, what's the next step look like? But my question to them is if you've been a two million dollar shop for 10 years, what's the next step look like for you? Yeah, it's hard to get out of that to that next level without this association. Well, sounds great. So Curtis, this has been awesome. And I guess there might be some people that want to contact you to get more information or just meet you in person, meet you in general by phone zoom. Like, what's the best way to catch you? Yeah, no, absolutely welcome it. Love it. I mean, like I like to tell the story. I like to at least my whole thing is to help the industry, right? I don't even if I don't get a deal done with someone, I want to empower them with the knowledge to make the best decision for themselves to either continue doing what they're doing or to make a shift. And even if it's us or someone else. So yeah, they can reach me via email. It's C-B-A-R-T-O-N. So C-Bardon at alchemy. It's A-L-K-E-M-E-I-N-S dot com. And then my phone number is 949-285-2612. They can text or or call me there. And I'll return their phone call. But at the end of the day, it's like alchemy spelled differently. That's the phonetical spelling of alchemy, which is the definition of alchemy is like a seemingly magical transformation of combining seven different metals together to form a more formidable metal. So that's how the name came to be. And we wanted an A alchemy definition fit what we were trying to accomplish. And then I just took the spelling of alchemy traditionally and made a phonetic. So I always miss your email up when I'm sending it. So yeah, thank you. Thanks for giving me like a reminder of how to do it the right way. But there you go. Well, hey, look forward to seeing you soon. I hope to be out in California in the next few months to get some one from it, you know, from Atlanta. So I mean, come skiing while you're there, you know. There you go. There you go. Any time, man, you know, you're welcome. I always say, you know, there's nothing to fear, but fear itself. Like look, information is power. Get out. Get yourself informed about what's going on. Where the market's at. You know, don't just stand idly by. I mean, you know, if you stand idly by, you're going to get beat by your competitors at some point. So, you know, be proactive in the way you run your business and, you know, empower yourself just like you do when you go to school or you get more educating different things. Educate yourself, you know, and we're more than willing to take people on an educational journey. And hopefully it ends in another agency partner. Fantastic. Well, hey, thanks so much for your time coming on. I really appreciate it. And look forward to talking to you later on on a side note, too. Yeah, just one more thing. I just want to point out we're in 19 physical states. We operate in all 50. We literally have offices from New York all the way to Honolulu, Hawaii. We're in the top 40 insurance brokerage. So we've got all the fun stuff that goes along with being a bigger agency. So just so people know it's not some fly by the night, little company that's operating out of a shoebox. I mean, we're a big sophisticated organization. We're headquartered Orange County, California, 70 degree weather, pretty much year-round except for right now when it's raining like crazy. Right. So come out and see us and get a vacation out of it. You know what I'm saying? No, no, that's good. And I mean, I like hanging out with you. So, you know, I know everyone else would as well. My friends. Absolutely, man. So, hey, thank you so much again. Congratulations on everything you've built and are building. And I know this is just the beginning. Yeah, it's a testament to the people. That's all I'm going to tell you right now. You know, you're only as good as the people that are around you. So give them the credit. But I appreciate you and your friendship and your incredible business that you've built and your success. You should be committed on that. It's been a great ride to watch. Absolutely, man. Well, hey, yeah, I'll be in touch with you. We're the Godfather. So, I don't know about that, but we're trying. All right, talk soon, man. Thank you. All right, brother. Have a good one. Okay. Thanks again for tuning in to Insurance Shop Talk. If you enjoyed our deep diving of latest trends, please don't forget to like, subscribe, and hit the notification bell, so you never miss an episode. Until next time, I'm Eric Stein and this has been Insurance Shop Talk.