In this episode Josh speaks with Randy Bern, Co-Founder of Vannguard Utility Partners. Randy shares his story of growing his business from 4 employees to 500 employees in 20 years.

Randy grew up in North West Iowa and played college football at Iowa State University. He started Vannguard Utility Partners in March of 2000. Has double the size of the company in the last 3 years from 250 to 500 in 6 states.

Every time Vannguard grows, opportunities for advancement are created. Their customers hire and keep them because Vannguard strive for quality and customers expect them to provide great service while performing with integrity and that will never change.

In today’s episode you will learn about:

  • Branding your business – know who you are or want to be
  • Leadership in the organization
  • Managing growth
  • Leading your customers and educating customers
  • Educating partners (bank and leasing companies)

Transcript

Narrator:             Welcome to “Cracking the Cash Flow Code”, where you’ll learn what it takes to create enough cash to fill the four buckets of profit. You’ll learn what it takes to have enough cash for a great lifestyle, have enough cash for when an emergency strikes, fully fund a growth program and fund your retirement program. When you do this, you’ll have a sale ready company that will allow you to keep or sell your business. This allows you to do what you want with your business, when you want in the way you want.

In Cracking the Cash Flow code, we focus on the four areas of business that let you take your successful business and make it economically and personally sustainable. Your host, Josh Patrick, is going to help us through finding great thought leaders as well as providing insights he’s learned through his 40 years of owning, running, planning, and thinking about what it takes to make a successful business sustainable and allow you to be free of cash flow worries.

Josh:                      Hey, how are you today? This is Josh Patrick. You’re at Cracking the Cash Flow Code. My guest today is Randy Bern. Randy is the CEO and founder of Vanguard Utility Partners in Iowa. He has quite a story. I think that we’re going to enjoy talking with him. He’s grown his business from four employees to 500 employees over 20 years. That is a big deal. There is less than one 10th of 1% of the businesses in the world that have ever done that. Let’s bring Randy on start the conversation.

Hey, Randy, how are you today?

Randy:                  Good morning, Josh.

Josh:                      Tell you I’m kind of interested in this story is that how did you go from four employees to 500 employees? Let me ask you another question to go along with that. What was the biggest challenge you had with doing that?

Randy:                  Well, in the early days, it was certainly cash. Money was the biggest restrainer on it all. I worked for a company that did the similar work, didn’t like what they were doing, decided I could do it better, quit my job and had a wife and kids at home and had a mortgage, the house and cars and everything that I had figured, I had a job before this, I could find a job after.

I started this company and got our first piece of work. It was with a utility here in Des Moines, Iowa. Over time, it was like pushing a snowball up the hill is kind of where I described it until people understood who we were, what we were about, and what made this different. Then I’d say probably the last 5, 10 years has been kind of rolling down the hill where people know who we are, and what kind of a different company that we actually are.

Josh:                      What makes you different?

Randy:                  Well, we do underground locating for utility. We put paint and flags in the ground mark and gas electric lines. It’s not like we make widgets and how many widgets do you make in a day. It’s we put paint in the ground. We’ll do a million and a half jobs a year with different addresses stops throughout six different states. What makes us different is it’s all about quality and service.

We get measured by how well we do our job put in paint and flags in the ground and accuracy. We get measured on accuracy on a daily basis. I have a number of competitors. Some of them aren’t, they’re not quite as good as we are.

Josh:                      I assume putting the flags in the right place is a big deal.

Randy:                  Yeah, so majority of my work is gas electric utilities. That’s how I work for gas electric utilities. I was always trying to figure out what my niche was. I’m in the very beginning, I say the first five years here just in business, there is no necessarily manual of how to build this business. I’m trying to figure it out along the way of how I’m going to build it, grow it.

I started realizing I got a billion dollar competitor. I can’t compete with them on price. They have the economies of scale that I couldn’t even comprehend as to what they could do as far as purchasing vehicles and equipment. I figured I had to be right over the top service and over the top quality. That was the only way I was going to compete. I knew that my pricing was probably going to be higher.

I had to very much perform when I said I was going to perform. That took an immense amount of training for employees. I always kind of describe it to our own management team as we’re a people business that does [inaudible 00:04:27]. We’re training business because we constantly are training our employees in the field and making sure that they don’t deviate from what our process is to make sure that we do the painting of the blind marking correctly.

Josh:                      When did you decide the systemization was an important part of your business?

Randy:                  I’ve been doing it for 25 roughly years, been in business for 20 of them. I knew from day one, the process was the most important piece. I recently probably last about five years discovered a race that I just thought it just absolutely fit my business which is called the normalization of deviance.

There’s a natural human tendency to rationalize shortcuts when under pressure especially when nothing bad happens. The lack of bad outcomes can reinforce the rightness of trusting past success instead of objectively assessing risk. There’s a lot of words in there, but ultimately it came down to employees will go out, you’ll teach them how to do the job, they’ll figure out ways to cut corners and do the job differently than you expect them to do.

 If there’s no issues, and they don’t have damages, or something that occurs then they’re going to continue doing that same tendency that they took the shortcut on and all of a sudden the process that you put in place becomes replaced with their deviance as to how they want to do the job. We constantly have to go back and make sure that they’re doing the right things and not letting them normalize that deviance.

Josh:                      When someone comes up with an idea of what they might want to do that’s different than what your process is, do you often end up making changes as a result of that or you just go back to what you were doing before?

Randy:                  What would you say make changes? You mean changes as in, if they found efficient way to do something, what we change or do we make changes in personnel because they won’t change back?

Josh:                      I’m talking about system changes, not people changes.

Randy:                  Okay, I would say there is very rarely anything that this is said ABC, ABC, ABC every day all day long. A locator pulls up to a job site. I’ll just give an example. They pull up to a job site to look at their prints. They get out of their vehicle with their equipment. They go to the house. They connect to the gas meter, electric meter. They put paint in the ground, mark it out.

They located from house to [inaudible 00:06:33] then they go back to their vehicle, double check their prints to make sure they got them.  The problem is, is the sometimes people will just get up pull up to their address, they get out of the vehicle, they go locate it.

They locate from the meter back to the street, and it’s just the opposite direction of where we want it done. They don’t look at their prints. They don’t double check their prints. All those little steps there when we miss them that are when damages and miss marks occur.

Josh:                      So when somebody doesn’t follow your procedures, what is the methodology used to get them to either follow the procedures, or have them understand they’re not a good match for your company?

Randy:                  Yeah, I mean, obviously always begins in the training or the hiring process. You’re trying to find the right person to fit, what the needs are. You have people that go through the training class and will do things exactly correctly. Then you find out later that they’re not going to or not, they chose to take a different step.

We’ll go ride with them, work with them, and put them back through a training class if we have to. We will do everything we possibly can so we’ve certainly invested time in them. When it comes down to a personality, I’ll say the personality flaw. They just choose not to do the job the way we want it done then that’s when placed.

Josh:                      How often, I mean 500 employees, which means you’re probably hiring people on a pretty regular basis. What percent of your employees that sort of problem with?

Randy:                  Oh, I’d say there are probably 20% of the employees out there that you’re always working with and trying to make improvements with. We have full time trainers. We have lead techs. We have mentors.

They’re always constantly working with the individuals that are out maybe some lack a little bit of skills, maybe some of them just didn’t quite grasp it well enough, or maybe some of them just didn’t quite understand. The training’s constantly going. So I guess it’s probably roughly 20% that we’re constantly working with.

Josh:                      So for every hundred people you hire, how many become successful employees for you?

Randy:                  I’d say real successful, probably about 50% of them. The other 50%, we probably have a good 20% turnover on an annual basis. It’s a service industry. It’s a stressful industry. It doesn’t seem like it, but you’re putting paint in the ground to protect people’s lives. There’s a certain level of stress.

Josh:                      What do you use your hiring process? Can I ask you that just out of curiosity?

Randy:                  Put ads out. We get the applications and they review the applications. Try to look for some comparison system background. Maybe some people that field work. It’s not necessarily always important. Then we bring them in for the interview. My managers, supervisors do all the interviews. They may bring them in for a second interview with the supervisor or manager.

Again, there are a number of questions that they ask them to test that they take to understand that they know directions. I mean, that’s obviously an important piece. That’s basically the interview process. Then we bring them in and we put them in class. They’re in a classroom and a training process for a good four to eight weeks depends on the individual.

Josh:                      Wow, that’s a big investment. Do you guys have articulated values in your company?

Randy:                  When you say articulated values, can you expand on that?

Josh:                      For example, when I teach people hiring, I teach them to hire two values not to technical skills. Technical skills, you have to get over that hurdle before even talk to you about the job, but once I’ve got the technical skills handled, I don’t even talk to you about them at all anymore. I only talk to you about two things.

One is are you going to be a good fit for my company, which means I need to have clearly articulated values with clarifying statements. For example, one of my values is rights and respects. My clarifying value around that is always respecting you as an individual. I expect you to do the same with me and all the people in our organization. If you do that was great, if you don’t do that we can’t work together.

When I’m interviewing, one of the things I will interview is no open ended question, to get somebody to say, “Gee, are they going to respect other people? Or are they not going to respect other people?” If the answer is no, I can’t hire them. I used to have a food service and vending company, which I grew from one person to 90.

We had like a 35% success rate until we started hiring for values. Once we started hiring for values, our success rate went up to 85%. It’s something I always recommend to people. If you’re at below 75%, 80%, for success rate, hiring the values is a really, really important thing to do. Does that make sense? Y

Randy:                  Yeah, absolutely makes sense. I would say that we don’t have anything written as far as hiring for values. I guess, the thing that we talked about most is our quality service and integrity as a company and who we want out there in the field doing the work.

Josh:                      The way I do this, often as I hit, I’m a real big believer that your values need to be the same as the company’s values. The reason is the person leading the organization, whether they like it or not, are going to put their values into the company. If you have clearly articulated values yourself, then you can start using them as tools for hiring, tools for disciplining, tools for getting people to look at the system and not the people.

I’m a huge believer in W. Edwards Deming, the guy who invented quality control. He’s also the father of Lean Manufacturing, but nobody says that. If I have a good system improvement, I can often not have people problems, but I try to have system problems instead because I can fix systems, I can’t fix people.

Randy:                  I would say it’s far easier to hire people when you got an unemployment rate of 6% versus 3% and 2% finding those people.

Josh:                      Believe me I’ve been living in Burlington from where I live, we’ve had 3% unemployment for at least 25 years. I tell this story because I tried an experiment. Well, about two years ago now when I hired her last assistant for our company. I do this when I hire virtual assistants is I write a short paragraph about the success factors are for a job. I write four or five paragraphs about what our values are and why our values are important.

We were hiring for a part time person in Burlington with 3% unemployment. I had 130 applicants for a part time job paying $17 an hour. My little experiment, I’ve done this experiment a couple of times with clients also. By doing that, what I found is I’m getting a lot more applicants, and I’m getting applicants that are interested in who we are not what we do, which I found really interesting.

Randy:                  Yeah, actually, I think I’ll find that book, but you said, when you find something new that you’ve not heard before you’ll find the book and you’ll go learn on it. So I guess I will do the same thing on this.

Josh:                      The book, by the way, is Robert Half on hiring. I’m not sure if it’s still in print. I found it about 35, 40 years ago. It’s still the best book I’ve ever read in hiring. Its 150 pages long. Robert Half is a guy who started Robert Half International, which was I don’t know if they still are but they were like one of the more important headhunting firms in the world.

Randy:                  It’s interesting. I know, in Iowa, I was been two and a half to 3% unemployment for a number of years. This year, we had roughly 8000, or over 8000 people applied for the positions that we had open. That was before the pandemic and that was when the unemployment was still at that 3% level. Then yet we go to Minnesota. Minnesota’s got the same unemployment level and we just get applications that just kind of trickle in with basically the same type of ads. It’s interesting in the different areas.

Josh:                      My suspicion is you’ve been in Iowa long enough where you guys have a reputation as being a great place to work and you haven’t gotten there in Minnesota yet.

Randy:                  Well that would be a good theory but actually we’ve been in Minnesota longer than we’d been in Iowa by probably eight, nine years.

Josh:                      Oh, well that was a good trice. I guess that’s not it. So what do you think the reason for that is? I mean, this is curious. I’m curious about this.

Randy:                  Well, actually, this year, the starting pay for our locator in Minnesota is $17. Some of it has to do with the pay, some of it, that’s been the difficult part of this business of mine is the pay. I’ve been working with our customers for a long time trying to get them to continually pull them along, to try to increase the pay.

I can only do it at such a pace and I still got to stay with my competitors yet that most cases I know I’m probably hired price in my competitors, but it just takes a cost more to do the job correctly. But yet I got to try to continue to pull the customers along to get the pay rates up higher for the employees.

Then conversely, the customers will come back and say, “Well, how can you have so many turnovers? Why do you have this turnover at the 20%?” That you go, “Well, we need to get the wages higher. We need to keep moving the wages along.”

It’s been fascinating from the fact that if someone in an office position wants a job, they’re going to go online. They’re going to go look for a job. They’re going to go apply someplace. My employees are in the field every day working with utilities, contractors, excavators, homeowners. In essence, every time they speak to somebody, they’re at a job interview. It’s easy for them to find something different that’s in the same type of field and move very easily even if they’re not looking.

Josh:                      Same situation the food service business and my father was also in the same business. He always say, “How can we can’t get good managers?” I would say to him, I said, “Well, it’s pretty easy to figure that out.” Now, let’s see, you have to get up at two o’clock in the morning. You have to go out and work with the guys have any routes, and you walk into these plants, and people yell at you all day long because they’re losing money in the machines.

We can only afford to pay them I think at that time was like $30,000 $32,000 a year. They said, “You’re not going to get the best people for that type of money doing that type of work. We have to try to get people who are not as good and then make them great with our training and the way we treat them.” It was an ongoing conversation we had for years.

Randy:                  I’ve always just tried to describe it as it’s the intangible. Since probably 50% of the revenue goes to pay employees. We’re dragging the customers along. We got to have something tangible that’s going to make them like this company, make them want to stay here and appreciate what they have for the job that they’re doing. As always just trying to find that way to be more comfortable, warm, feeling fuzzy, feel to accompany that they may not get someplace else because they’re not sticking around because they’re making $17 $18 or $20 if they’ve been here for a few years.

Josh:                      So when these people leave your company, are they leaving for higher wages usually?

Randy:                  I say majority of the time they leave for higher wages. We have like I said, I got a billion dollar competitor that’s all around my footprint. I think that the key for me is that I’ve kind of looked at as my employees are not leaving to go to my competitor either.

They’re leaving to go to a contractor that’s putting the cable in the ground. They’re making three, four or 5, 6, 7 dollars more an hour. I can’t compete with that. The good thing for me is I just know that they’re not leaving because they don’t like my company. They’re not leaving to stay in the same industry to go work for my competitor.

Josh:                      Yeah, that makes it a challenge. You’ve built a big business in a very difficult industry with a very difficult situation.

Randy:                  Yeah, there were a lot of things against me in this industry, for sure especially starting off from scratch. A lot of people go well, you have 500 employees so did you buy some existing companies? No, I built it from day one, brick by brick. My managers I’ve had with me for 20 years.

Josh:                      We just have a couple more minutes. Are you thinking about, obviously, you’re not going to tell me if this is true but someday you’re going to leave your business? Have you thought about what that looks like?

Randy:                  I’ll say I certainly have thought about it. I try not to think about it too much because then it gets real enticing. I really enjoy what I do. I got lots of opportunities ahead of me. I have customers that want me to continue to grow with them. I have more of an idea of how I want to continue to grow and what that looks like versus when can I get out?

Josh:                      See, the interesting thing that you’ve done is this is my theory by the way. I have worked with lots of companies over the years that were not sale ready. We’ve helped them get to the point where they are sale ready. Then they go back to the owner I say, “Okay, you’re sale ready now. We can market your company. Let’s go find a investment banker.”

They always look at me like I’m crazy, which you would do if I said the same thing to you, you’d say, “Why would I want to do this? I’m having too much fun and making too much money. I’m spending my time doing exactly what I want to do.” Is that you?

Randy:                  I’m 54 years old. What am I going to do? Sit and play golf every day. I can’t do that. I feel like I’m just a builder. I like building my company. I like working on it. I like working with my managers. I have five of them that I talk to you on a daily basis. I just play 20 questions with him. I really enjoy doing that.

Josh:                      Well, you are to be congratulated. I really appreciate you playing with me because I can’t resist doing the sort of deep dive questions and the things that I find interesting. Randy, we are unfortunately out of time. I’m going to bet that there are some people that might want to find you. Would you be willing to have a conversation with somebody if they’re interested?

Randy:                  That’s fine. Sure. I’d be willing to help anybody.

Josh:                      Could they contact you through your website?

Randy:                  Yeah, there’s the website. It’s just randy.bern@vannguardup.com.

Josh:                      Yes. For those listening to the podcast, it’s randy.bern@vannguard.com. I’m kind of obsessed about what I call the sell ready company. The sale ready company doesn’t mean you are going to sell your company. It just means you built a company like Randy that somebody else would want to own. When you do that, you’re going to be a lot happier.

You’re going to make a lot more money. You’re going to have a lot more fun running your business. I’ve written an eBook with the eight steps you need to do to get to a sell ready company. It’s easy to get. Go to www.sustainablebusiness.co. That’s www.sustainablebusiness.co/saleready all one word. This is Josh Patrick. We’re with Randy Bern. You’re at the Sustainable Business. Thanks a lot for stopping by. I hope to see you back here really soon.

Narrator:             You’ve been listening to the “Cracking the Cash Flow Code” where we ask the question, “What would it take for your business to still be around a hundred years from now?”

If you’ve liked what you’ve heard and want more information, please contact Josh Patrick at 802-846-1264 extension 102. Or visit us on our website at www.sustainablebusiness.co. Or you can send Josh an email at jpatrick@stage2solution.com. Thanks for listening and we hope to see you at Cracking the Cash Flow Code in the near future.

Topics: building a business, branding, randy bern, leadership, sustainable business podcast, Sustainable Business, educating customers, vannguard utility partners, managing growth

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