What It Takes to Be a Private Equity CEO

What It Takes to Be a Private Equity CEO | Bob Post | CEO Campfire Chat | The Sterling Woods Group

The Sterling Woods Group is saddened to share that Bob Post passed away unexpectedly on December 4, 2020. Bob was a one-of-a-kind executive and mentor to more people than you could count. We extend our sincere condolences to his family and loved ones. To learn more about Bob and contribute to a cause that meant a lot to him, please read this press release from Knowland.

 Bob Post is a CEO of private equity portfolio companies, with a specialization in restructurings and operational turnarounds. He began his career in a financial role at Westinghouse Electric Corporation but was soon drawn to the world of private equity because of its practicality. 

As he began to lead private equity-backed organizations, he discovered that it was a lot of fun to grow a company.

Of course, running a private equity-backed organization is different from other CEO roles. You are taking over an existing company, and there’s often some dysfunction in the way it runs. The existing team is wary of their new private equity leaders, and it’s incumbent upon you to win their trust. And you are leading the company on behalf of the private equity firm, which means you do not have unlimited latitude—no Elon Musk-style, maverick CEO antics allowed.

One of the benefits of being a portfolio company CEO is that you get to see how a lot of organizations run, and you develop a playbook for turning things around.

Bob shares that his playbook is really more of a rough outline than a strict set of rules, and that he lets the realities of the organization he’s leading guide the specifics of his decision-making.

The first day on the job involves evaluating where an organization falls in the market. Are they truly a growth equity organization? Are they a company that’s been mismanaged but has the opportunity to grow again in the future, if run properly? Or are they in the falling knife category?

Once he knows where the organization sits in the landscape, Bob turns to the people. The institutional knowledge that a team can hold—both about the industry and the company itself—is invaluable, so Bob does not come in with the intention of wiping the slate clean. But he does sit down with each leader to understand how they fit at the organization and to learn whether this is someone he can trust.

The third step, once he’s evaluated the place and the people, is to start creating bite-sized execution wins. Bob’s motto is “nothing breeds success like success,” and so he gets the ball rolling with quick wins that can motivate the team and build momentum.

At present, Bob is the CEO of Knowland, a data and analytics firm serving the hospitality industry. Knowland focuses on helping hotels book group and meeting sales, so of course their customers have been hit hard by COVID.

Bob and his team saw the writing on the wall early. When hotels in Asia began reacting to COVID very early in 2020, the Knowland team had a sense of what was to come in Europe and the US. They immediately began to shift towards education for their customers.

Bob asserts that there are still deals to close in the world of group and meeting hospitality sales, and Knowland has created great educational material to help its clients unearth pockets of opportunity during this difficult time for the industry.

Bob’s experience with remaining flexible as he takes over new organizations have come in handy as he’s led Knowland through a COVID-driven pivot. With a cool head and steady hand, Bob remains optimistic about the future of hospitality and is proud to be helping Knowland’s customers find success in trying times.

Episode Transcript

Rob Ristagno: CEOs who lead private equity portfolio companies face unique challenges. Bob Post, a serial PE-backed CEO, has developed an approach to jump-starting impressive turnarounds at the organizations he leads. Hear more about how Bob takes on each new role and what he’s doing to guide his current company, a data analytics firm serving the hospitality industry, through the turbulence caused by COVID.

Intro:This is the CEO Campfire Chat, with your hot, Rob Ristagno. Taped in front of a live studio audience, join us to hear successful growth stories from middle-market companies just like yours. Sponsored by the Sterling Woods Group.

Rob Ristagno: Welcome to the CEO Campfire Chat, recorded live in front of a studio audience of senior executives. I’m your host, Rob Ristagno, and I have the privilege of introducing you to Bob Post, the CEO of Knowland. Bob is a proven senior executive specializing in restructurings and operational turnarounds for private equity, focused on the growth path from $10 million to $200 million in revenue. Bob, welcome.

Bob Post: Well, thank you, Rob. It’s a pleasure to be here.

Rob Ristagno: All right. We’re really looking forward to learning a bit more about you. And so let’s hear your background. You’re a serial private equity portfolio company CEO. How did you get into this space?

Bob Post: Yeah, well, like most things, by accident. So as Katrina knows, when they let me out of reform school, I needed to find an actual trade. The CEO gig sounded like a good one. But no, I started my career way back in time with a company some of you might recognize called Westinghouse Electric. It was a competitor to General Electric in many, many industries. And I started in the management program and went through a number of years there, primarily with finance. Unfortunately for Westinghouse, it wanted to compete with GE Finance at one point. It turns out our guys weren’t quite as smart as the GE Finance guys. And they managed to get our company in a little bit of trouble. And so my job along with four other people was to go around the company, it was a conglomerate, and find entities that we could sell in about 90 days’ time. And so that’s what I did. And it was so depressing because you knew as you were selling these companies exactly what was going to happen to all of the people. And I swore that I would never do this again.

Bob Post: And so one of the companies that we discovered but we weren’t able to do anything with in that timeframe was a company at the time called Micros Systems. And Micros was a point of sale vendor based out of, at the time, Beltsville, Maryland. And was a public company back when you could be that, but it was 65% owned by Westinghouse. Anyway long story short, I went there as head of financial planning, followed shortly by a couple executives from Westinghouse that took the CEO and CFO roles. And we took Micros through a secondary offering, got Westinghouse out with a nice profit, and we fortunately got a company we could go run on our own. And we expanded out from point of sale, and this is how I got into hospitality tech. We bought a company in Munich, Germany called Fidelio Software, which does property management. And over time we built all of these verticals out, and all of this was international. And ultimately I left Micros back in 2000. But Micros sold five, five and a half years ago to Oracle, and it’s not Oracle Hospitality. That little $20 million a year company, and they sold to Oracle, I think, for four and a quarter billion.

Rob Ristagno: Wow.

Bob Post: So it was a great path.

Rob Ristagno: Excellent.

Bob Post: But since that time that I left then, I bought companies myself, usually turned them around. I like to think of myself as an operator and that’s what I like to do. And I’ve worked with Benchmark and Bain Capital and I do a lot of work with Serent Capital out on the West Coast these days. And I just like the private equity model. And it’s a lot of fun to be able to try to take these companies and grow them. It’s a lot more enjoyable than having to turn around and fire sale something. So that’s how I got there, Rob.

Rob Ristagno: Yeah, what else about the private equity environment is appealing to you?

Bob Post: Well, I find it eminently practical. And like anything else on a distribution curve, there’s good PEs, there’s not as good PEs. It all depends on the situation. And so you have to try them on and find the ones you really like. I currently work with Serent on three different companies. I think we know each other. I know what’s important to them and their LPs. They have the level of trust. And I think that’s not atypical. I think that’s true with a lot of operating executives. And I find these guys are obviously financial engineering, they’re fantastic like all these people are. They’re all so brilliant. I would never be able to go do that myself. But it’s nice to be able to put your operating skills to work with capital and be able to produce the results you really want to get to.

Rob Ristagno: Excellent. So I imagine over the years you’ve developed your portfolio company CEO playbook, where you come in, you can quickly assess a company, figure out where the leverage points are, get the team motivated and then executing against your new strategy. Tell us a little bit about the secret sauce and tell us about your playbook and what are some of the key tenets in it?

Bob Post: Well, if I told you that, then it would be everybody’s playbook.

Rob Ristagno: Our memories aren’t that good.

Bob Post: I think Vista Equity really has a playbook. Now those guys really have that. I don’t know that it’s that so much. And I just think it’s experience. And I think it’s probably the errors that you make, you figure out what you don’t want to do. I suppose to think of it in terms of evolution, probably when I first began to do this because I come from a finance background, that’s how I used to view everything. So that was my hammer and everything else was a nail. But what I found over time is that that actually is not the right sequence.

Bob Post: What I found is that any of these things you look at, I really need to figure out where they fall in this ecosystem in the market. Are they really growth equity? Are they something that actually could grow again but it’s just been mismanaged? Is it in an industry that’s catching a falling knife? And you have to figure that out. It’s not that you can’t make money in any of those scenarios, but how you approach it is much different. And that’s how I view them today. I try to stay away from the falling knife category if at all possible. But I do like the ones that are slightly damaged because it almost invariably turns out that it always comes back to just bad decision-making by management. They saw something or they were too rigid in their thinking, and I think there’s always opportunity there.

Bob Post: The second thing that I do, and it’s hard when you go into a company and do it, I know there’s always a level of trepidation, but I’ve really come to the view of I really don’t want to have to replace the team. Now, that’s easy to say. Hardly ever works out that cleanly. But it is not a case of coming in and sweeping everybody and bringing in your own team. There are times when that makes sense to do. But you’re probably not going to be a native in that industry. And so you need to try to get that knowledge that these people have. And you need to evaluate the people and figure out, does this person have room to run, is there head room here? Can I make them into something bigger than what they’re doing now? Is it a bad fit? And I’m sure everyone on this call is an experienced executive and manager, so you’d know pretty quickly whether somebody’s going to be the right fit and the right vibe.

Bob Post: And that’s really where I focus next is on the team. At this point, then I really come to that business strategy. I kind of know where I want to take it, and then it’s just a question of then, all right, let’s get some bite-sized execution wins. Because nothing breeds success like success. And we’ve got to have some short-term wins. Helps to motivate the team, helps to bind them together. And as Katrina knows, I’m really big into celebrating wins. If I have to, I’ll sit up all night long and come up with something in order to let these people celebrate a win. Because you’ve got to get that team dynamic. You can’t have a growth company, I’ve never had a growth company that doesn’t have that. So again, that’s pretty high-level stuff but happy to take any questions on that if you have any.

Rob Ristagno: So it sounds like, yeah, three things. One is just assess the industry and the situation. Is it growth? Is it hit the skids but it could be growth? Or is it falling knife? Then it’s the team. And then it’s really how you can take advantage of some quick wins. What questions do people have around-

Fred: Bob, I’ve got a question for you. Back to selecting or at least identifying the talent in there. Do you have a formula for that? Or do you do a one-on-one with each of them? How do you assess that quickly enough without taking away from focusing on the company itself?

Bob Post: Yeah, Fred, it’s a good question. My normal way of approaching that is when I come in, and we’ve replaced the CEO. I sit them all down and I kick the private equity guys out of the room, and I just explain to them, I said, “Guys, look. It’s a new day. And this is why it happened. This is what I hope to do. This is where I hope to go. I’d like to hear from all of you. And we’re going to take the rest of the day.” And then I do exactly what you said. Then I do the one-on-ones. Then I pull them back together at the end of the day and then say, “All right, talk to me about your teams. What kind of reaction, what’s happened, how can I help you deal with that?” And we always do an all-hands. But it’s really that executive team. That’s who’s going to make it happen at the end of the day. So that’s what day one looks like. And it’s always a tough day, but you have to get through it.

Bob Post: And then from there, it’s almost like, I use the analogy of my kids. I need to make sure they have things to do because otherwise they tend to get into trouble. There’s nothing worse than people at a company sitting around and doing the gossip. So you need to invest a lot of energy right from the get-go past day one. There’s a lot of tasks. Okay, educate me, let’s pull meetings together. And it’s that kind of energy level that they hopefully realize, okay, it’s a different day. And then I do check-ins usually with the key executives each week. How is it going? How are you doing? How are your people doing? What can we do different? What can I help you with? Not everybody buys into it. I would say most times people do. They want to be successful. And I think that’s what I’m there to do is to help make them successful, put them in a position to do it. But other people don’t. And in which case usually if I have to move somebody along, I usually almost always do it within the first two weeks.

Fred: Yeah, I was going to say how quickly-

Rebecca: And hey, Bob, a quick question because I’ve been in this situation with years ago, well not that long ago, but with when Yum had spun off Long John Silver’s they went through a lot of private equity exchanges. Do you guys typically, when you’re bringing in new ideas, is the team also aware that you’re bringing funding in or an injection or that you have a new strategy? Are they often aware that you’re going to do things a little bit differently? Or how do you approach that for some of those folks who may have some trepidation on that level or may not have the full story?

Bob Post: Yep, no, it’s a fair question, Rebecca. With the executive team, I try to be very direct about that, if they haven’t seen financials, which I can’t imagine they wouldn’t have, but sometimes you get surprised. With them, I let them know exactly where it is. If I feel I have to, I’ll have the PE come in and let them hear it from the PE direct. And then usually do something more in terms of all hands meetings and say, “Look, this is the reality of where the company is. This is where we’re trying to take it. This is what we think we have to work on funding,” or if that’s something we have to work on. I try to be transparent with them. We all know you can’t do that across the board and in great detail. But you can flesh out the framework.

Rebecca: Right. Give them a sense of where you’re headed.

Bob Post: I think they deserve that.

Rebecca: Absolutely. Yeah.

Rob Ristagno: So I’m curious, you talked about that you’re not necessarily the industry expert coming in. So I’m interested when you or how you engage with the customers and the market as a new CEO. Obviously there’s due diligence prior to the deal. But are you then out there trying to meet people yourself? Do you take the word of your team? Do you look at the research that’s been done? What’s the mix and what’s the timing?

Bob Post: I guess I would qualify it a little, say it depends when I’m there how I actually see the role. Sometimes I come in to fix things and then find a more permanent CEO to transition. In other cases, I come in and I’m going to be the CEO. And in the cases where I’m going to be there for a period of time, but in fact we’re not necessarily to explain that to the market or explain that to the customers, I’ll usually figure out pretty quickly in that day one of the executive team, who seems to really know the customer base well. And yeah, I’ll trust the team initially, but it’s the old trust but verify thing. And then I’ll say, “All right, I know who the top five customers are. Go set meetings up. I want to go talk to all five.” Pick up the phone that first week and call them and introduce myself and say, “I’d like to come see you.” And then we go through that. Of course now we have to do Zoom calls, but it would be the same.

Bob Post: And I think that’s just the standard thing. Sometimes, I had a company that’s since turned out to be very successful with a dynamite CEO who we were able to develop from the management team. But when I first came in there, there was just so much … the CEO spent so much time with the customer base externally that things didn’t get done in the execution. So we have to find a balance point there. So I’m happy to be external. But ultimately, and again, I think you’re all experienced executives, you know that you’re probably the most successful when you can be the force multiplier. And therefore having your people be able to own a lot of that is going to be the more effective thing. And you pick your spots where you dive in, including customers.

Rob Ristagno: Thanks. Brett, was it you that had a question?

Brett: Yeah, I had a quick question. So are there one or two things that you look for when assessing the talent and trying to get a handle on fairly quickly, whether you want to keep them or whether they need to be changed out? Are there just one or two things where you can spot right away whether they’re going to be keepers or not?

Bob Post: Yeah. It’s a very insightful question. Thank you. To me, the first thing is can I trust this person? There’s two levels to that. Will you flat out lie to me? Or will you puff yourself up? Sometimes executives forget the fact that obviously I do research on a company. So I have the sense of what they do. I talk with the board, I have materials, I have a sense of what actually makes sense and what doesn’t. And I pose a whole series of questions that first day and that first week. And then I look for those answers and do those answers actually hang with the reality of it. And that’s the first thing. Because if you just find yourself in a situation you can’t trust, then you have to deal with that quickly, very quickly. So that’s the first thing that I look to.

Bob Post: And then the second thing is when you work your way through that first week, and you’re talking to the different teams, you usually pick things up from their employees. You can usually pick up the signals, as I’m sure you’re all attuned to. Yeah, that’s a flat note. Something doesn’t sound quite right there. And so now you circle it back in there, which is why it usually takes about two weeks to figure out exactly who you’re going to keep, who’s not really quite there, and can you do that with a role change or do you just need to ease that person out?

Brett: Yeah, thank you.

Rob Ristagno: Is this two-week window, is this the assessment period and you’ll take action right away? Or that’s the assessment period and then you start looking for a replacement before you actually announce the change?

Bob Post: Kind of both. When I look at it from an external perspective, I might draw my own thesis about this team. I will tell you very often that thesis ends up getting blown up. I’m wrong. And you’ve got to be open to that. But it shouldn’t really take you much longer than that to figure it out. But when I go in those situations, if I think, for example, okay, I think I have a week just in sales, I’ve already figured out who I might be able to bring in the door and fill that spot. In other cases, you’ll have somebody and it’s not that they’re bad, they’re just not a great executive, they’re not an A-level player, they’re a C plus, B minus. Well, if it’s not the highest priority thing, I may let them stay there for a year’s time because I have other fish to fry.

Rob Ristagno: And what about, you mentioned celebrating quick wins. Any creative examples you could share with us? I think people are a little tired of Zoom happy hours. So what’s some advice you have for us looking to celebrate some wins?

Bob Post: I’m not particularly fond of happy hours because I really like things that are mission-focused. Usually when I find a growth company that the growth stalled, that’s the one I referred to is, it’s damaged but it can still get back to what it was. It’s usually because it’s a diffusion of focus. People aren’t focused or they don’t understand, well, what’s our mission, right? That’s the thing that any CEO, that’s the thing you need to constantly reinforce why are we here? What is our purpose? Why is it important? And so anything that relates to that mission, I love to do.

Bob Post: So yeah, I’ll use an example. So with FranConnect, which is a company in Herndon, Virginia, it’s the one I said has a dynamite CEO by the name of Gabby Wong. She’s just doing amazing things with that company. And sales was a real problem for them. So we found this massive ship bell. And every deal that we would win, we made the sales person and the customer service person go up and ring that bell. And that damn thing was so loud, you could hear it through four different buildings. But it was great. And everybody began to look forward to it. So that had nothing to do with the financial incentive. It was just a chance to be able to do that. But it was a great way to join everybody about celebrating the win.

Rob Ristagno: All right. Everyone, get a bell. That’s the secret.

Fred: I actually had one of those. I had a streetcar bell. And every $10,000 of an order, they’d ding. That thing started dinging for a while. People got excited. It worked well.

Bob Post: Here at Knowland we use a gong. So whatever makes a lot of noise.

Rob Ristagno: Go with your gut. Follow your heart. Trust your intuition. We’ve heard this kind of advice before. And sometimes it works. Like when you’re trying to decide what movie to binge tonight, or you’re on the fence about asking her out for that second date, or you have a sneaking suspicion about which neighborhood dog keeps digging up your lawn. But it’s not the way to make major business decisions. When you’re facing challenges with growing your revenue, it’s not enough to rely on instinct. That’s why we’ve developed a data-driven solution to help you easily unearth your best opportunities for growth. No guesswork required. To learn more about our system, go to SterlingWoods.com. 

Rob Ristagno: All right, actually let’s shift gears a little bit, talk about Knowland. You’re the CEO there. For people who aren’t familiar with the company, do you mind just giving us a little bit of context? Tell us a little bit about what Knowland does?

Bob Post: Oh, sure. So Knowland is a data analytics company. What we specialize in is we track group events, group events being large groups of people gathering, whether it be corporate, weddings, whatever it is. And typically it’s at hotels but it can be at venues, et cetera. So you can imagine in this environment where we’re not allowed to gather in more than 10 people, that’s a little bit of a problem for our poor customers. But those 18 million events now, unique events that we track, we pull in all sources of data and we append it. And so it’s a very rich, deep prospecting tool.

Bob Post: So if you, for example, were in charge of a hotel, and you wanted to fill, you had a hole in your schedule in February, the week of February 5, and okay, I need to fill it, I know how big my ballroom is. Where can I find an event that I could possibly fit in there? We’ve got a great tech team. We do a lot of artificial intelligence. And basically we serve up to you across 18 million events plus what we know that is happening out there, we serve up to you, here’s your top five things to go after that you could logically put into that space in that timeframe.

Bob Post: And so our business model is that someone who has space like that, typically we’ll say it’s hotels, it’s a monthly subscription on an annual or annual or longer basis. And that’s what we do. Originally we used to just be a database almost like the Yellow Pages. But over time of course we made it a very interactive tool. We are also, a lot of that same data is very appealing to the people that plan these events, i.e., meeting planners. And so I think we’ll get to it somewhere in here. So things that we’ve done differently in terms of our product is tried to pivot and be able to start to create products for those people to use.

Bob Post: Right now in our industry of course it’s so distressed. But it doesn’t really matter because it doesn’t matter what we do product-wise because frankly they just don’t see a tremendous amount of business, and they’re so capital constrained. But what we’re teaching the market is, is that, look, even in these terrible times, we’re still running about 10% to 15% of the volumes that we ran pre-COVID. There’s business. It’s just much different business. And you need to go after it a different way. So anyway, so we have about 3,500 unique hotels as customers pre-COVID. We have most of the large convention bureaus around the country in the primary and tertiary markets. So that’s what we do.

Rob Ristagno: You started going down the path, and I’m really curious to hear how you’ve addressed the pandemic, and you’re in the crosshairs of the pandemic. It sounds like you’ve come up with some new product ideas. It sounds like you’re educating the market. Just help us understand what’s going on.

Bob Post: Yeah. We could see the signs of this getting shaky back in the end of ’19, because of course we all remember originally this started to show in China and then broader Asia-Pac. So we could see that. And we had the experience of having seen this during SARS and some of the other smaller pandemics. I don’t think anybody predicted how bad it would be. But ultimately once it got outside of Asia and began to spread so virulently, we knew that hotels would shortly probably go into shutdown.

Bob Post: And so you have to do a couple things. One is you have to make sure your own business survives. So we did all the things that you all would do, restructured our capital, made sure we had available cash, et cetera. The second thing was we knew our customers would be in really difficult financial position. And so we either offered free months or we suspended their service. We basically helped them build their own cash out. So they took a break between April and June. And then they began to come back on.

Bob Post: And of course as they’ve started to come back into the hotels and try to find business, our industry over the last 10 years, it’s been flush times in the hotel industry. If you could open a hotel, you could make money. And now it’s a much different scenario. You have to go out and you have to find business where it used to just walk through your door, fall in your lap electronically. That is not the scenario. And so fortunately our tool is great to do that. But what we’ve ended up doing a lot is we’ve had to take a lot of our people and put them in thought leadership. Katrina could probably speak to it, but we probably do, I don’t know, seven, eight times the number of webinars. And it’s just teaching hotels how to sell. And that’s not that we don’t know how to do it, but we’ve got about, I don’t know, 450 years’ worth of hotel experience across our company between the executive team. And so we just have to teach our customers how to fish, if you will. And so that’s where a lot of the effort has gone into.

Bob Post: And I expect ’21 will continue to be difficult. But we do expect the curve to move up and to the right. It’s going to be tough. It’s going to require, there’s going to be ups and downs. But in a way we have to teach our customers, you have to be resilient. That’s just the way it is. The world rewards those who are resilient. So there’s a little bit of parish priest, there’s a little bit of educator, there’s a little bit of good old analytics vendor.

Rob Ristagno: Got you. And Katrina, what advice do you have for people? Seven to eight times the number of webinars is a lot of extra work, what advice do you have for people out there who are trying to get into the thought leadership game or do thought leadership better, but they feel resource-constrained or they don’t know quite where to start?

Katrina: I think Bob made a good point. We really did a quick pivot to thought leadership. One of the advantages we had was the data resources. We were able to go out to the market really quickly and hit it fast with information. People were hungry. They wanted to understand what was happening. And because we have the data, we were able to present it to them really well. So that was really the foundation. And as Bob mentioned too, we have such a rich source of experience in our leadership team that we were able to tee them up in webinars and in articles. And the industry was really hungry to understand, as we were talking, that we didn’t really … they were used to the business just coming. And so now, you have to teach people to be hunters and how to go after the business instead of just waiting for it. And that’s how we leveraged our thought leadership, having thousands of people sign up for a webinar. And we basically do it several times a month. So we’ve got a pretty big following now.

Rob Ristagno: Excellent, excellent. So it sounds like a combination of data plus expertise plus being educators, being teachers, having that kind of mindset.

Katrina: Right. Not just telling people what’s happening but telling them what they need to do next, how to move forward, what the things are they need to do to get ready, how to start taking action. Those are the things that we’re helping people understand, and that’s what our clients and hoteliers are coming to us for, what to do now, how to be ready.

Brett: Were you guys doing that pre-pandemic or is this post-pandemic that you’ve really started playing the teacher role?

Bob Post: I think we would do it, Brett, a little bit pre. But really it’s a different world. It’s a different world. If we did it, it was maybe 5% of all the stuff we did with customers. But it’s just a complete re-pivot of what we do every day. And this is not something that so we get compensated for. We’re not consultants in that way. But it’s a means to an end. If they can’t be successful, then why would they use our tool set? But the inverse is true. Use our tool set, we can help you be successful. It’s definitely a shift.

Audience Member: Have you considered consulting? Would that dilute your value proposition?

Bob Post: Oh, I don’t think my private equity guys would like that very much. That doesn’t bring the multiple that they’ve come to expect. But at the end of the day, we will all come out of this. It will be different, but we will come out of this. We’ll return to something approaching more normal performance in the hotel industry, et cetera. And our business will, I think actually our business is going to probably bounce back much greater than it was before because I think we’re more deeply embedding ourselves in the day to day of how hotels have to operate. And I don’t think they’re going to want to lose that when they come back out of this. So that’s good news. But at the end of the day, we really are analytics. Half of our company, they’d be okay if they actually never came back in the office again. They like working at home and being on their own and doing their complicated algorithms that no one else understands. So I don’t think consulting’s in our future that way.

Fred: So I have a question. Some of your customers I would presume have very little other revenue coming in from being a hotel as opposed to some who maybe have a big hotel business in addition to the group meeting business. But in the hotel business itself, what are we looking at right now in terms of reduction in revenue just in general around the country? What would you say?

Bob Post: Yeah. So if you looked in North America, and I’ll give you a couple of breakouts that’ll hopefully be instructive. So if we just stay in North America, they measure their health by a measure called RevPAR, revenue per available room, and they look at occupancy which is basically what percentage of my rooms am I filling every night? And the industry in North America overall was running at about low 70% occupancy, which doesn’t sound great if you’re not in the hotel business, but that’s actually pretty good. Because you’re always pulling rooms out for cleaning, repair, et cetera. Right now, if you look in the US, the US is running about 45% occupancy. So 45% versus call it 72%. So that’s not very good.

Bob Post: And the way that they’re filling those rooms, and again, I’m going to simplify this, there’s three kind of ways you would fill the rooms. You would have what’s called business transient, which is the business traveler who’s really unaffiliated. You would have the leisure transient which is somebody on vacation. And then you have the group business which is, hey, we bring in the American Medical Association and they take 200 of my 300 rooms for the night. So the group business is essentially down to about 10% of what it was. So they’re trying to fill the rest of it up with this two types of transient business. Well, there’s a limit to how much business travel is going on. We all know that. And you can only attract so many leisures.

Bob Post: And I split this because the hotel industry, if you were in what we think of as a limited service, so think like Hampton Inn or even Marriott Courtyard, okay, you’re probably doing okay because you can fill those rooms, you can bring a leisure traveler in just as easily. If you are a full-service downtown New York City hotel, like the New York Hilton that basically they turned the keys in on, that’s a big problem. Because you have huge, massive hotel or spaces, the holding conferences and things, and there’s nobody there. And you can’t fill them. And you can’t make your service by bringing in Mr. and Mrs. Smith from Dubuque, Iowa for a two-day trip around New York, even if anything was open for them to see. So when you look at that end of the market, that market really struggles right now. The Hampton Inns, especially in the secondary cities around the country, they’re okay. It’s not good but it’s okay. So you’ve got to really look by segment within the industry to see where it is.

Rob Ristagno: Just as a benchmark, is there a break even occupancy rate?

Bob Post: Yeah. Roughly you should be thinking 50%. You need 50% occupancy to be break even. But again, it does vary by size of the hotel, size and segment of the hotel. So that Hampton Inn, it can probably be okay down in the low 40%s. That New York Hilton, they’ve got to be right up around 65% in order to make it work.

Dave: I was curious, Bob, what you’ve done with your sales team through this period. Are they doing something different? Did you furlough some of them? Are they helping with the webinars or making the most of embedding your customers more deeply? Have you reduced their quotas? Give me an overview.

Bob Post: Sure. Yeah, we had to take our sales team down in size when this was all happening. But we kept roughly about 50% of the team. We had to take them out of sales and put them in a non-sales role, and I’d break it by corporate. We actually had to pivot them to re-contract a bunch of existing customers, basically figure out what they need for financial relief, help them through that, re-contract the back end. Now, if you have sales people, most of us have sales teams that are a mix of hunters and farmers. Ours was more hunters. That’s what we were because that’s the kind of growth mode we were in. This is not something they would prefer to be doing as a general rule. But it was the way to, when nobody really knew what was going to happen, financially we could keep them there and transition through it.

Bob Post: We’ve made the pivot. We started making it at the end of the third quarter. And basically sat them down and said, “Okay, we’ve gone through this, we’ve done all that we can do around the base. It’s time now. It’s time to get back to business. We’ve got to eat our own dog food.” And we’re showing them how to be able to go out and find business that nobody actually thinks exists, but it does, and book it. Now it’s time for you guys to get back to doing what you were hired to do. And of course they love that because that’s exactly what they want to do. So yeah, we’ve tweaked quotas and we’ve done things like that because we have to ease into it. But I think as either a sales leader or a CEO, yeah, you have to … you’ve got to set that bar high. And you’ve got to demand that they find a way to get there. Because it isn’t going to happen by sitting back.

Bob Post: One of the questions I think Rob sent across is, and unfortunately it’s true, a lot of people in the hotel industry are taking this wait and see attitude. Well, you’re going to be waiting and watching your hotel be sold out from under you. That’s not a good answer. And I think we are in the same situation as executives. We need to get our people back out there. And sure, if we need to adjust things in the market, we do it. And they know it. They have no hesitation coming down the hall and yelling for what they need by way of product or we’re not addressing something that’s in the market. But we need to get them back in that hunter mode. So I’m a firm believer in that. Does that answer your question, Dave?

Dave: It does. Any action on that gong?

Bob Post: Yeah.

Katrina: Oh, yeah.

Bob Post: Actually has been pretty good. In fact, I threatened our dev team since we’re still, we are open, we have our offices open, but 80% of the company is still remote. I threatened our head of development and said I’m not authorizing one more dollar spend for your team until you get me an electronic gong that appears on everybody’s computer screen, overrides the mute button, et cetera.

Dave: Awesome.

Rob Ristagno: That’s great.

Katrina: The virtual gong.

Dave: If I can have a lighter on my phone that you hold up, I’m sure there’s a virtual gong out there.

Bob Post: Absolutely. Got to celebrate the wins.

Rob Ristagno: We’ll license that if you develop it. Let us know. All right, Bob. This has been super interesting, very informative. What can the group do to help you out?

Bob Post: If you all have any good reason to go travel again, safely, do a small group, I am sure my customers would be very appreciative of it. And we just did ourselves, I took the executive team and we did a socially distancing, responsible planning retreat for 2021 for a day and a half. And I think after all the lousiness of 2020, your staffs would probably like the idea to be able to get away for a short period of time.

Rob Ristagno: Excellent. If people listening want to get in touch with you or the Knowland team, what’s the best way to do that?

Bob Post: Oh, sure. Yeah. You go to Knowland.com, that’s K-N-O-W-L-A-N-D dot com, or Katrina and I are happy to provide our email addresses to you as well.

Rob Ristagno: Excellent. Thank you, Bob Post. And this has been the CEO Campfire Chat. I’m Rob Ristagno. To listen to more episodes, sign up for the email companion. Or to take a two-minute business growth assessment, visit CEO Campfire Chat.com. See you next time around the fire. 

Outro: This episode of the CEO Campfire Chat podcast is brought to you by the Sterling Woods Group. Middle-market executives and private equity investors need to achieve rapid revenue growth but face limited resources and time. We’ve developed a proven system to quickly and confidently uncover your best opportunities for growth, so that you can scale up and maximize exit value. To learn more about our proprietary data-driven approach, check out SterlingWoods.com.

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