Episode 081
Private Equity Spotlight: James Sidwa on Nurturing Growth in Family Businesses
In this episode of Private Equity Spotlight, Sean Mooney, founder and CEO of BluWave, sits down with James Sidwa, Managing Partner at Heartwood Partners. James shares his journey from the roots of entrepreneurship within his family to his pivotal role in private equity. With a rich background that spans across continents and sectors, James brings a unique perspective on investing in family and founder-run businesses in the lower middle market. This conversation delves into the importance of trust, strategic planning, and the transformative power of partnerships in driving business success.
Episode Highlights:
1:34 - From Arthur Andersen to the world of private equity.
3:14 - The evolution of James' career and the growth of Heartwood Partners.
5:07 - Personal insights: Family, scouting, and the joys of sailing and skiing.
9:23 - Key traits Heartwood Partners looks for in companies: Trustworthiness and market leadership.
15:38 - Value creation strategies: Building on company strengths and addressing common challenges.
21:07 - Embracing change and innovation for future success.
28:15 - Advice to younger self: Embrace adaptability and seize opportunities that open doors.
For more information about Heartwood Partners, go to https://heartwoodpartners.com/
For more information about James Sidwa, go to https://www.linkedin.com/in/jamessidwa
Episode Highlights:
1:34 - From Arthur Andersen to the world of private equity.
3:14 - The evolution of James' career and the growth of Heartwood Partners.
5:07 - Personal insights: Family, scouting, and the joys of sailing and skiing.
9:23 - Key traits Heartwood Partners looks for in companies: Trustworthiness and market leadership.
15:38 - Value creation strategies: Building on company strengths and addressing common challenges.
21:07 - Embracing change and innovation for future success.
28:15 - Advice to younger self: Embrace adaptability and seize opportunities that open doors.
For more information about Heartwood Partners, go to https://heartwoodpartners.com/
For more information about James Sidwa, go to https://www.linkedin.com/in/jamessidwa
EPISODE TRANSCRIPT
[00:00:00] Sean Mooney: Welcome to the Karma School of Business podcast about the private equity industry, business best practices, and real time trends. I'm Sean Mooney, BluWaves founder and CEO. In this episode, we have a fantastic conversation with James Sidwa, Managing Partner with Heartwood Partners. Enjoy.
I am super excited to be here today with James Sidwa. James, great to be here with you.
[00:00:41] James Sidwa: Nice to see you, Sean.
[00:00:42] Sean Mooney: So James and I were just recently at a big conference together that had kind of an explosion of humanity and information and sensory overload. And so I think James has recovered nicely. I still have some nervous ticks and some stutters from the last time we've seen each other but It's a slow progress that I'm making here.
I'm getting back to whatever that normal is.
[00:01:05] James Sidwa: When you shake 3, 000 hands, you end up with COVID. At least I did. That's right. Believe it or not.
[00:01:10] Sean Mooney: Oh my goodness. The only thing that saved me is I was hiding in my room as much as possible. But it's great to see you. I'm really looking forward to this conversation. I've been looking forward to it for a while. So Maybe to jump in here, James, let's hear a little bit about your backstory a bit. Can you share a bit about the story of you, how you kind of came up, how you got into this industry of private equity?
[00:01:34] James Sidwa: So I grew up with two parents who were entrepreneurs, but they're both professional service firms. My mother ran a legal practice, ended up being managing partner at her firm, and my father ran a small accounting practice. So I grew up around the table talking about how you ran businesses, didn't matter what it was.
It was just interesting to hear about their clients and their situations. So I went to school and kind of followed in my dad's footsteps, studied accounting and thought that was going to be my path, joined that little firm, Arthur Anderson, and started my career, ended up in a group doing mostly small companies, which back in the nineties was tech companies and such, which was a lot of fun.
We also had this random group of clients called the funds and nobody could really tell you what it was, but they were all turned out to be venture capital and private equity funds. And why we were the same people doing tech companies and venture capital. I couldn't begin to tell you, but we were. So I got to know some of the folks there at one of my clients got to become friends with them and helpful to them and vice versa.
And when Anderson fell apart, they called me up a week or so later and was like, Hey, we've got a job opening for you if you want one. And I went and worked with them and I was their CFO by title, but I was a young guy. So it was kind of an inflated title, if you will, but at the same time it was a small firm.
So everybody was hands on with everything and that was really exciting and interesting. In addition, they were developing markets. So we were in Hungary, Poland. Parts of Latin America, South America. So it was interesting to be based here in greater Connecticut area, but be all over the place, depending on what deal you're working on.
It was very interesting start to my career while that was a lot of fun. My time there was two and a half, three years, and then I ended up moving on and then landing here at Heartwood Partners.
[00:03:14] Sean Mooney: Yeah, that's amazing. Your background kind of resonates a lot with me. I too grew up in an entrepreneurial family, kind of in a family business.
Going to work with dad on the weekends.
And our prize was to come back with all sorts of office supplies. And so somewhere there are stashes of my sticky notes somewhere, probably from way back when, and then kind of serendipitously kind of similarly found my way into PE.
And similarly, also the early days I was with a private equity firm, right? Is China entered the WTO. And so we were doing a lot of stuff in China in the early 2000s. Those were wild days.
[00:03:58] James Sidwa: Same timeframe. I was there 2002 to five or so. It was different. The European countries that we were investing in were all those that were ascending to the EU.
So, just similar to your experience with the WTO, exciting time for those countries and exciting time to visit them.
[00:04:14] Sean Mooney: Yeah, I learned everything is possible in these emerging markets and nothing is easy.
[00:04:20] James Sidwa: Very true.
[00:04:21] Sean Mooney: And the word yes doesn't necessarily mean yes, it means I acknowledge what you said. It'd be a yes, yes, a no, no, a yes, no, or a no, yes.
[00:04:28] James Sidwa: Yes, I am brushing you off right now.
[00:04:31] Sean Mooney: So, but we eventually found a way and kind of Rosetta stoned our way into understanding each other. But it's a great background. You saw the investment industry, which was still much different back then, and then doing so in emerging markets in other countries. What a great kind of kaleidoscope of the world in an industry as it was growing up.
[00:04:51] James Sidwa: It was fun.
[00:04:52] Sean Mooney: And so, James, one of the questions I think everyone who listens to this knows that I kind of start off with is one of the favorite things I get to ask people is, We'd know you better if we knew this about you. And so what's maybe a tidbit of trivia about you that we'd know you better if?
[00:05:07] James Sidwa: Like most people in private equity, I'm kind of just a family person who also works in business and I don't think it's that unique or interesting, but some of the fun things I like to do is work with my kids on scouts. My wife and I and one of my children love to sail and we all go out and do a lot of skiing.
So I see plenty of private equity people out there on the slopes as well as. Out on the water. It's been a fun life for us all.
[00:05:31] Sean Mooney: That's a great thing. And I did scouts with my son for a while, and then he kind of navigated into other things. But one of the things that I liked the most and looked forward to the most when my son was coming up was the Pinewood Derby.
And it was fun because that, at least where I live here in Nashville, is mostly about the dads getting to build the carts they wish they could have built when they were kids.
[00:05:54] James Sidwa: It's true. It's true. You either have to be handy yourself or have a good friend that is. And we were fortunate that one of our dear friends from sailing and skiing actually He also has a big woodworking thing in his basement, so he has all the saws and planers and everything else.
I don't even know what half the stuff is called. But my sons would go over there and they would build the car of their dreams. Meanwhile, I'm just like, yep, we brought takeout food and some beer and we'll have a nice night together. But
[00:06:20] Sean Mooney: that is great. I mean, the number of hours I spent on YouTube trying to figure out how to work with my son and.
To be fair, he was included, but this was probably as much as my car is his and not in a productive way for him because I'm like, no, no, we got, you know, like we got the competitiveness of us came out.
[00:06:36] James Sidwa: My older son loved to build them based on different things he'd find online. There's actually a professor from, I think, somewhere in Michigan who had studied where to put the weight on the cars and run like thousands of tests with his son and others.
And so there's a lot of. More research that goes into that than I care to say, but like everything else, you put a bunch of effort into it and you get a great result. And his first time out, he came in first in his age group. And second overall, got to go on to the regional thing for it. Had a blast with it.
My younger son just always built for the design he wanted. He was building clunky looking trucks or other things that didn't go fast, but he had a great time doing it and they looked cool. So he was happy.
[00:07:15] Sean Mooney: That is awesome. All I know is I have apologies to my son, Liam, because one of the things you've learned really quickly in Nashville is.
There's a big automotive industry here, which means there are lots of engineers with access literally to wind tunnels. And so, we would just get smoked, how much time I put in, like these were the most elegant designs you've ever seen and you're just like, okay, there's no chance.
[00:07:42] James Sidwa: One year we had a younger sister participate, cause there's always the scouts and then there was a sibling and father's category.
And one of the younger scouts had a younger sister that showed up, and she had quite literally just taken the wooden block, bedazzled the outside, thousands of sequins it looked like, and then ran it, and came in like fourth overall. All these dads and kids who had spent tons of time building out their cars got smoked by her, which was quite literally the standard block, nailed in the wheels, bedazzled the heck out of it in pink, and sent it down the track.
[00:08:15] Sean Mooney: That's the version of like the NCA tourney pool that we do in our office every year, where whomever picks just by the uniforms they like most usually wins.
Sometimes just try to keep it simple, not overthink it.
[00:08:30] James Sidwa: Important thing there is that the kids all have a good time. Usually there's always somebody who cries. They thought they were going to win and they lose, but most of them have
[00:08:38] Sean Mooney: a great time. Well, 100%. So to turn the page, I'd love to tap your brain on kind of how you think about business.
And one of the things that I would always do when I was in your shoes is I kind of had like a yardstick. It was just because you're looking at hundreds of companies a year and you can't look at them like a craft project. So I was like, you know, here's kind of what I'm looking for in a relatively consistent way that I want to see as an element of value in a company that says this is a really good company, or probably more importantly.
Can eventually be a really, really good company through the application of capital and fuel and value creation. What are some of the things that you look at James when you're getting these opportunities that come across and they're looking for that fuel and that partnership from you all?
[00:09:23] James Sidwa: We invest in family and founder run businesses that are in the lower middle market.
With that, one of the key things that we have to do is not only assess, do they have a good market position, good cashflow, most of those basic things that people are looking for, we really have to dig into. Is the seller group because we're often looking for them to roll over and continue to manage the business for at least a period of time, if not indefinitely, are they a group we can work with?
And the big piece of that is, are they trustworthy? Because they have been in this business since it started or since they took it over from mom and dad or whatever their situation may have been, and they know it better than any amount of research we could ever do will get us to that point. Yeah. We need them to be open, honest, and transparent with us at all times in order to have a good working relationship.
As they're assessing us as buyers, they want that from us, and we need it from them as well. But that disparity of information that they have so much more than we do early on, it's a critical piece of it. But like everybody else, we want to know that it's a good business and a great market as appropriate market sizing or TAM as we normally refer to it.
And the ability for us to grow that business after we get into it, be that through organic actions or through add ons, but that trustworthiness is a real piece for us early on. Like everything, you don't always get it right, but you hope that the work that you do gets you to a really good spot to start off with.
[00:10:41] Sean Mooney: I love that perspective. And one of the things that. We've talked about on this podcast is when you're bringing in private equity, you're bringing in a partner, it really is a marriage and you're going to be in it together every day. And you're trying to build something that's better and create growth.
And by bringing two together, you're creating a greater whole. And it's something that as I look back where things did go wrong so often in my career, it was because you didn't have that. Eventually I arrived at a firm that I think would always say it really well and they would say it right at the beginning.
Three of the most important things we can do together is have alignment of goals. We can have mutual respect and trust. And what you articulate there is so important. And I'm curious, James, is there a way that you're able to go and kind of assess that when you're meeting teams to say, these are folks who I think are kind of cards face up and we can work with?
[00:11:40] James Sidwa: I wish there was a few little things I could point to, but no, it's everything about how they're communicating about their business. When you're fortunate enough to get to a management presentation, you're having dinner with them ahead of time or afterwards, that everything they're telling you is lining up that when you Google them and do other things online to check into them, that it all matches up with what they've been telling you.
So much is available online these days. And then if we do pursue further, we use background investigation firms to look into other aspects and make sure that everything's aligned. And occasionally you find things they didn't tell you about. Usually they're small enough items that it's not a concern, but occasionally we've had to have some pretty tough conversations with people.
You told us the following, we found that that's not entirely true and you make a decision whether you're going to walk away or whether you can work around that. It's always a thing you have to assess through. One piece I would just point out is. I spent a bunch of years in between the other private equity firm and this one in consulting, working for generally much larger firms.
And when doing that, they were often buying from other private equity firms. We're buying entirely from founders and families. So these are people who this is something they've run for 20, 30 years. They're not the hired gun coming in to transition this from one private equity firm to another. They value that transparency.
They value that trust as well. So. You mentioned partnership earlier, those really do need to come together because we really are going to work together and we're often seeking them to roll over 20 percent or whatever it may be, but that's a meaningful amount to them and to us. So we really will be partners for quite a few years.
[00:13:14] Sean Mooney: Particularly in family businesses, having grown up in one, you can see the culture of the family as a tangible reflection. When you look at the culture of the company and the people and how they act. And to your point, like there's probably never gonna be one or two or three things, but you get this spidey sense.
You kind of just know it. You don't know why. And I would say 90 percent of the time you could know, I was like, these are good folks, but every maybe 5%, 3 percent of the time, the hair on the back of my neck would stand up and I go, something's not right here. And you just couldn't put your finger on it, but you just kind of knew.
[00:13:54] James Sidwa: And we've passed on plenty of deals when you get to that because you're walking around and none of the employees will make eye contact with you because the boss is standing there. What does that tell you? They tell you they care about the employees, but the employees are scared of them. It doesn't line up.
There's so many little factors you'll find as you observe as you walk around.
[00:14:13] Sean Mooney: And I think it's a great lesson for business builders out there as well. You should do this, A, because it's smart for business and it's good for life to manage with integrity. But even if you're going to operate entirely through selfish altruism, people are going to be looking.
So, you know, be good, do good kind of a thing.
[00:14:32] James Sidwa: We understand this is a big monetization for their families when they're doing this. So they've got many things that they're worried about, including what is my aunt so and so who owns 10 percent want to see out of this or whatever their personal scenarios might be, but we need them to be open and honest with us.
Need to believe everything that they're telling us, at least the vast majority of what they're telling us is true and good in line with what we want.
[00:14:54] Sean Mooney: I love that point. And it's a really, really good one that should put two underlines
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[00:14:59] Sean Mooney: it.
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[00:15:20] Sean Mooney: So, James, as we turn the page here, I'd love to hear from you in terms of How Heartwood approaches value creation, and what are some of the resources that you bring to bear when helping these family businesses reach that next level of greatness?
[00:15:38] James Sidwa: I'd say first, over years, we've observed that most of these family businesses have a few consistent weak spots, and we've brought in three people that we refer to as value creation specialists. One focuses on marketing, another focuses on HR. And the last one kind of on operations and integration, a little bit of it mixed in, and those are, as you're dealing with family businesses too oftentimes that.
Head of HR is somebody that's been in the company for a long time, but never really grew up in an HR department. They kind of moved into that as they grew in the organization grew. So that's a great person to have. You don't want to lose that person, but how can you get them some coaching? Well, our person, Bruce Ennis focuses on exactly that.
Let me coach that person up. Let me help them address any weaknesses they have and bring them some tools that can help them get through other things. And Same with both Michelle Ryan and Jason Phillips, who help us in the other two areas I mentioned. That's one way that we really try to bring something to them early on.
In fact, Michelle will be working with me next week at a management presentation at another company, because that company needs a little bit of that attention. And all of them work on a number of our companies at any point in time. So, that's one way that we bring that value to the table is trying to help address those three areas.
In addition though, we work with you guys to help find other consultants that can, whatever challenge that business might be facing, be that location issues where they want to expand but don't have the ability to, so they've got to go to another place, integration things, IT, whatever it may be.
We've got a big Rolodex of people we've worked with in the past that may or may not be the right ones. And if they're not, they're often able to help us find somebody else who can help. And that's another way we bring, because we don't profess to be experts at any of the businesses that we're working in, not at least at the operational level.
We can envision the strategy and where we want the business to be in a few years and all those things. Don't get me wrong, but how to make whatever day to day issue that is better. We've got ideas, but you need people who can be on the ground and help them execute.
[00:17:39] Sean Mooney: I really like what you said there in terms of how you're approaching the value creation phase.
And then it's kind of a must do in private equity, right? The application of fuel and strategy used to be enough, but now it's, you got to do and, and, and you're bringing in and are kind of like the core areas where most companies can need help, particularly a family held business that's kind of going to reach the next level.
And it's not that they're not great companies, it's just, it's hard to be good at everything. Right. And so as you, we go back to this conversation about our partnership, like you're bringing something that they don't have to be good at, but they can. And one of the things that you brought up that I think is another really good point that's not talked about nearly enough is the whole idea of coaching.
It's this idea that Tom Brady had like six coaches and he was the greatest of all time. This whole idea of a coach that you can have someone that can help you navigate through the complexities of humanity is also really, really helpful, I think, for any aspiring business builder. And it's something that I actually have taken my own kind of Kool Aid on this.
and hired a coach. And it's been really helpful because it can be incredibly lonely also sitting at the tops of these organizations trying to figure everything out. And so bringing that to your companies, I think can be a tremendously valuable thing that no doubt is paying dividends.
[00:18:54] James Sidwa: Yeah. So in addition to the three I mentioned, We've brought other coaches from the outside in for various people.
We've had some CFO coaches for very good performers who just need to round out certain areas. Several CEOs have had coaches as well as joined organizations like YPO and others of that sort. So it's been worked out well and no one approach fits all. Another way we've always helped to create value, which many P firms do is, of course, through add on acquisitions.
And we have two people that are strictly focused on sourcing new deals, both platforms and add ons, and they're a wonderful resource for their companies as well.
[00:19:31] Sean Mooney: That's another great way to really supercharge what you're doing and how you're growing in a way that kind of inherently creates value if you know how to do it.
And I think that's one of the best reasons as well to come in with. A private equity firm who can not only give you the fuel to make those acquisitions, but also the know how and the capabilities and the sourcing execution capabilities that can really kind of like light speed your progress.
[00:20:00] James Sidwa: Yeah. Not every business needs add on acquisitions, but those that do you want to train them up over time and help build those capabilities inside so that they can keep doing add on acquisitions without us.
Those always need a little help there. Don't get me wrong, but After two, three, four, five of them, they get better and better and they can do the bolt ons in particular very quickly.
[00:20:20] Sean Mooney: I think it's an excellent point. I think the really important levers of value creation that needs to be at least looked at for every company, and to your point, not all of them, doesn't make sense because they've got this organic.
Kind of growth opportunity, but for some of them, it can be a great lever. So James, the one constant in life is change. Seems like we've been going through more change lately, from the COVID area to AI, to all these other type of things that are happening in this kind of washing machine of life that we at times live in.
I'm interested to learn what are some of the top value creation kind of opportunities that you all are kind of thematically thinking about and engaging with your portfolio company leaders that maybe others should also be thinking about.
[00:21:07] James Sidwa: I think some of these won't be overly unique to us, but again, with.
Being in the lower middle market and focusing on family run businesses. One of the first ones we're always worried about is just succession planning. And very unfortunately, we've had some issues over the years where people have gotten ill or passed away unexpectedly. And by having those plans in play, we've been able to keep the company running in the right direction.
There's always a hiccup, don't get me wrong, but as smoothly as possible. So we feel for the families that have been impacted by those things. the company we need to look out for as well. We try to do right on both angles of that, but that succession planning and making sure you have backups for all your key players has always been something we focused on.
We continue to, but those hard lessons, some of which occurred during COVID were reinforced that. So we start on those processes within the first few weeks, if not the first few months, and you're constantly revising it forever. Other ones are safety. Every company has some safety incidents, and I don't mean the cut your thumb with a box cutter kind of thing.
I mean, bigger issues that unfortunately occur. You want all your employees going home at night and going back to their families just like you want to do. So you got to make sure everything goes smoothly and every company will have some issues here and there. But a company I bought a number of years back, about 10 days after the close, got that horrible call of, we just had an incident.
Something they were building collapsed on somebody who was inspecting it and they were underneath and it was a horrible situation for all involved. But those types of situations teach you that you need to keep focused on that. Keep driving for further improvement all the time. And while those are rather basic items, there are many other areas we focused on cyber security.
We've developed protocols for every company on those we've moved into other areas, but really those are what I refer to as value preservation. Really? What do we got to do to make sure we've got the blocking and tackling in place that even if something bad hits the company, we're going to be okay. And then from there, you kind of have the foundation to go and grow.
So we really focus on some of those first things I mentioned early on. You have all your controls in place for your CFO and the finance part of the organization, all the reporting and KPIs that you need in place. A lot of those, what I consider basics, and I'm sure many of our industry focus on those right away as well, but you need those in place in order to turn your attention to the next things.
The last thing you can do is ask your CEO to go work on an add on if they're fighting a fire inside the business already. So take care of some of the small things and then go forward. But a lot of times before we really started doing the real work on terms of growth, we Some outside consultant or another and work on a strategic plan.
And really that's just pulling all the great ideas management already had and that we formulated along the way and getting to know that company or that industry and putting them all on a, on a board and creating prioritization, which ones are going to create the biggest bang for the buck, which ones can we execute quickly?
Some of that might be really big opportunities we need to start today, but we might not see that opportunity for two, three years. We start putting them all up there and ranking them and. Go out there and execute and on each of those, you need to have a few key people inside the company that can take care of them, but you're matching them up with people from the outside as well.
Be those are three value creation specialists, the business development folks that we have sourcing deals for us, or somebody else we bring in from the outside, occasionally Sean from your organization as well, that helps us push everything forward.
[00:24:22] Sean Mooney: I really like how you frame this part of our conversation here, James, and that, you know, Anytime you're going to do something, you've got to build a foundation first.
And if anyone's ever tried to build a tall sandcastle, but uh, If you didn't really pack that sand down at the bottom, you weren't going very high. And if you didn't make sure the water wasn't coming around it, the whole thing would collapse on yourself. And, What you're articulating here is this, you gotta get the foundation set before you can grow and create real incremental value.
And that comes from the people. He said, like, who's gonna be in charge? It's failure to plan is planning to fail. If you don't do these things, it's this idea that you're gonna make sure the barbarians at the gates of your sandcastle, From a cyber perspective aren't coming in. It's this whole idea of like having safety.
That's such an important thing in these companies. I grew up in a business that was a manufacturing business and I feel pretty good, too. My specialty was painting things safety yellow. I think somewhere under my nails, there's still lots of, like, yellow paint. I was like, I wasn't trusted with any important jobs.
What you're articulating is so important, like, you gotta get the basics before you can do anything. And then you get the foundation down and then you put together the strategic plan and then it's about execution and hitting the gas, but so many people just want to hit the gas and they go plowing into a tunnel and they don't know if there's a train or a light at the end.
[00:25:52] James Sidwa: I have to give credit for that analogy to Rob Tucker, one of our managing partners here. He's the one who's been using that one since I started here many, many years ago. But it, it resonates well with us, obviously resonated with you and it resonates with a lot of the portfolio companies we're working with as you're sitting there and talking about the improvements that need to be made before you can go tackle some of the, what they often think of as the exciting stuff, but creating that value and that growth.
It's exciting. Probably the most rewarding part of the business is watching some of the companies hit the goals that they had and what that means for the people inside of it in terms of upward mobility for them. We're very proud that most of our companies have significantly more employees when we exit than when we started.
So that means they're growing their employee base and giving opportunity for new people as well.
[00:26:34] Sean Mooney: That's the fun part. And exactly what you're saying there is. As you think about these businesses you're building, they become job creation engines, which is why today from the hundreds of P firms that we're working with and privileged to work with, truly excellent ones like yours.
Nearly half of the, every call we get for a project need and a really, really excellent third party practitioner is for people. It's recruiters, it's interim executives, it's mid level recruiters, it's organizational effectives, people's coaches. And exactly what you've shared time and time, you get the foundation, you get the plan, then you grow.
And then the fun part is now you're bringing all these great people in. And that's when it gets really fun. You know, you're like, Oh, The music gets going, and it's kind of the happy vibes, you know.
[00:27:17] James Sidwa: Yeah. If everything's growing, everyone's happy.
[00:27:20] Sean Mooney: Now, it's not always that way, but
[00:27:23] James Sidwa: When everything's growing, people are usually very happy.
[00:27:25] Sean Mooney: There's a very good reason why the only hair I've left is gray. And so But it's the happy times I remember, so So, it's more of a mindset thing, I think. If we turn the page here, one of the things I'd love to hear is another piece of kind of wisdom that you would have shared with your prior self. And I've been a collector of these things my entire life, because if it were up to me to figure out how the world works, it would have been a very short career and a really tough life.
And so I've kind of Frankensteined myself through the virtue of other people's hard earned lessons and wisdom. And so if you were to go back to 22 year old James, And share a piece of your advice that you think would make a difference. What's one of those pieces of advice that you would share that you wish you knew then?
[00:28:15] James Sidwa: Several of those are probably not appropriate for the podcast, but from a professional perspective, I would certainly remind myself to go after every opportunity that opens additional doors. And I wish I could recall who told me that initially, but it was great advice. And I took that advice and every job I took, I tried to take one that would leave me with as many possible avenues for the future.
Didn't matter whether it was an Accounting and started off as an auditor, went into some of the small business stuff, which I just thought I could fit in better on later on some of the consulting roles, the first PE firm, this one, all of them were just places where I thought I'd have more opportunity coming out of them than the other options that I had at the table at that time.
And it's worked out for me. So I tell that to my kids all the time, if they're struggling with, should I play this sport or that sport, or should I take this class or that class, whatever it may be, it's just about what's going to give you the best options. What's going to teach you the right skills to open more doors for the future and from there have fun
[00:29:13] Sean Mooney: I love that piece of advice and it's in this is great kind of like growth mindset, right if you're saying where am I gonna go?
That's gonna give me the best option to become a better version of myself and you continue do that It's just this iteration that compounds on itself over time and if you have the audacity to kind of look at the doors in the first place a lot of people kind of You Go into a hallway and they just keep on walking, but they're missing all these doors to the left and the right and not even like peering in just cause you just kind of get into this hamster wheel.
How's that for mixing? Like four metaphors. Um,
[00:29:46] James Sidwa: 22, you may have known what you wanted to do. I had it inkling, but I certainly wouldn't have predicted at 22 that I'd be where I am right now. I would have probably said I would be a partner at a public accounting firm or something like that. But when Anderson fell apart, I had options and took care of those and went on to something private equity, which just gave me, in addition to doing some accounting work there, I got to work on deals and got to travel around and work with portfolio companies.
And that opened a lot of doors. And I continue to do that time. And again, it works out.
[00:30:17] Sean Mooney: And it's also such a good lesson because who at 22 knows what they want to be. I had no clue. I got my first job out of college because all my roommates went into that industry. I'm like, all right, I don't know what that is, but I'll go do it.
[00:30:29] James Sidwa: There you go. That worked.
[00:30:30] Sean Mooney: And I don't think I really knew what I wanted to be until I started BluWave. And that was crazy. I worked my whole life for this one other job, and then I go do a crazy startup. And so your path is a much more sane, serendipitous journey.
[00:30:47] James Sidwa: Yeah. I don't know about that, but okay.
We'll go with it.
[00:30:51] Sean Mooney: It's turned out okay, right? It's
[00:30:54] James Sidwa: turned out well, but I mean, I've joined two small private equity firms. I mean, when I joined Heartwood, we were seven people. When I joined Effie Clean Energy back in 2002, I want to say we were six people. So in both cases, it was very small firms. Everyone was rolling up their sleeves and doing everything they could, whatever was critical that day and grew from there.
But we're 28 people today and heck of a lot more assets under management and it's been a great journey here.
[00:31:19] Sean Mooney: It's amazing. And you can see why, as I kind of revisit our conversation here, you do things first with kind of trust and integrity. You're thoughtful about building foundations. And then you're kind of open to the universe of opportunity ahead of you.
Seems like a pretty good recipe.
[00:31:37] James Sidwa: I liked yours a few minutes ago. It was failure to plan is planning to fail. I've heard that one before, but I don't use it. I think I'm going to steal that from you.
[00:31:44] Sean Mooney: I by no means came up with it, but like I said, I'm a liberal borrower of other people's wisdom.
[00:31:50] James Sidwa: Me as well.
Reality in our industry is there's very few truly unique and creative ideas. We're cobbling together lots of great ideas, many of which have been done by others before. Most, if not all, have been done by others before. Private equity started many, many moons ago, longer. Our founder started in private equity in the late seventies, still on IC meetings and such today.
I was born in the late seventies. He hates when I point that out, but anyway,
[00:32:16] Sean Mooney: you're the young kid in the firm now. Yeah, no, I'm not.
[00:32:21] James Sidwa: I was when I joined, but I'm not anymore. But it's been fun.
[00:32:25] Sean Mooney: Well, that's great. Well, James, this has been a really, really great conversation. I appreciate you taking the time to share some of the hard earned wisdom that you've gained on this really kind of spectacular journey that you've been on.
And I've learned all sorts of things that I wish I knew before. So for that, I am extremely appreciative of it. So thank you so much for joining us today.
[00:32:46] James Sidwa: Thank you, Sean. Thank you for all the help you've given us in the past. We have several board members. We source through you guys as well as. A handful of consultants who helped us do a lot of great things, so appreciate all you've done for us as well.
[00:32:57] Sean Mooney: Likewise. And we appreciate the acknowledgement and certainly the opportunity to serve because it is a privilege to watch you all do how you do things. And I try to borrow as much as I can as we do it ourselves. So thanks again.
[00:33:10] James Sidwa: Thank you.
[00:33:20] Sean Mooney: That's all we have for today. Special thanks to James for joining. If you'd like to learn more about James Sidwa and Heartwood Partners, please see the episode notes for links. Please continue to look for the Karma School of Business podcast anywhere you find your favorite podcasts. We truly appreciate your support.
If you like what you hear, please follow 5 Star Rate, review and share. It really helps us when you do this, so thank you in advance. As a measure of gratitude, we're also making a donation to Feeding America and the related associations for each five star review we receive in your podcast platform of choice.
So thanks again. In the meantime, if you want to be connected with the world's best in class, private equity grade, professional service providers, independent consultants, Interim executives that are deployed by the best business builders in the world, including hundreds of the world's top private equity firms.
Give us a call or visit our website at BluWave. net. That's B L U W A V E and we'll support your success. Onward.
I am super excited to be here today with James Sidwa. James, great to be here with you.
[00:00:41] James Sidwa: Nice to see you, Sean.
[00:00:42] Sean Mooney: So James and I were just recently at a big conference together that had kind of an explosion of humanity and information and sensory overload. And so I think James has recovered nicely. I still have some nervous ticks and some stutters from the last time we've seen each other but It's a slow progress that I'm making here.
I'm getting back to whatever that normal is.
[00:01:05] James Sidwa: When you shake 3, 000 hands, you end up with COVID. At least I did. That's right. Believe it or not.
[00:01:10] Sean Mooney: Oh my goodness. The only thing that saved me is I was hiding in my room as much as possible. But it's great to see you. I'm really looking forward to this conversation. I've been looking forward to it for a while. So Maybe to jump in here, James, let's hear a little bit about your backstory a bit. Can you share a bit about the story of you, how you kind of came up, how you got into this industry of private equity?
[00:01:34] James Sidwa: So I grew up with two parents who were entrepreneurs, but they're both professional service firms. My mother ran a legal practice, ended up being managing partner at her firm, and my father ran a small accounting practice. So I grew up around the table talking about how you ran businesses, didn't matter what it was.
It was just interesting to hear about their clients and their situations. So I went to school and kind of followed in my dad's footsteps, studied accounting and thought that was going to be my path, joined that little firm, Arthur Anderson, and started my career, ended up in a group doing mostly small companies, which back in the nineties was tech companies and such, which was a lot of fun.
We also had this random group of clients called the funds and nobody could really tell you what it was, but they were all turned out to be venture capital and private equity funds. And why we were the same people doing tech companies and venture capital. I couldn't begin to tell you, but we were. So I got to know some of the folks there at one of my clients got to become friends with them and helpful to them and vice versa.
And when Anderson fell apart, they called me up a week or so later and was like, Hey, we've got a job opening for you if you want one. And I went and worked with them and I was their CFO by title, but I was a young guy. So it was kind of an inflated title, if you will, but at the same time it was a small firm.
So everybody was hands on with everything and that was really exciting and interesting. In addition, they were developing markets. So we were in Hungary, Poland. Parts of Latin America, South America. So it was interesting to be based here in greater Connecticut area, but be all over the place, depending on what deal you're working on.
It was very interesting start to my career while that was a lot of fun. My time there was two and a half, three years, and then I ended up moving on and then landing here at Heartwood Partners.
[00:03:14] Sean Mooney: Yeah, that's amazing. Your background kind of resonates a lot with me. I too grew up in an entrepreneurial family, kind of in a family business.
Going to work with dad on the weekends.
And our prize was to come back with all sorts of office supplies. And so somewhere there are stashes of my sticky notes somewhere, probably from way back when, and then kind of serendipitously kind of similarly found my way into PE.
And similarly, also the early days I was with a private equity firm, right? Is China entered the WTO. And so we were doing a lot of stuff in China in the early 2000s. Those were wild days.
[00:03:58] James Sidwa: Same timeframe. I was there 2002 to five or so. It was different. The European countries that we were investing in were all those that were ascending to the EU.
So, just similar to your experience with the WTO, exciting time for those countries and exciting time to visit them.
[00:04:14] Sean Mooney: Yeah, I learned everything is possible in these emerging markets and nothing is easy.
[00:04:20] James Sidwa: Very true.
[00:04:21] Sean Mooney: And the word yes doesn't necessarily mean yes, it means I acknowledge what you said. It'd be a yes, yes, a no, no, a yes, no, or a no, yes.
[00:04:28] James Sidwa: Yes, I am brushing you off right now.
[00:04:31] Sean Mooney: So, but we eventually found a way and kind of Rosetta stoned our way into understanding each other. But it's a great background. You saw the investment industry, which was still much different back then, and then doing so in emerging markets in other countries. What a great kind of kaleidoscope of the world in an industry as it was growing up.
[00:04:51] James Sidwa: It was fun.
[00:04:52] Sean Mooney: And so, James, one of the questions I think everyone who listens to this knows that I kind of start off with is one of the favorite things I get to ask people is, We'd know you better if we knew this about you. And so what's maybe a tidbit of trivia about you that we'd know you better if?
[00:05:07] James Sidwa: Like most people in private equity, I'm kind of just a family person who also works in business and I don't think it's that unique or interesting, but some of the fun things I like to do is work with my kids on scouts. My wife and I and one of my children love to sail and we all go out and do a lot of skiing.
So I see plenty of private equity people out there on the slopes as well as. Out on the water. It's been a fun life for us all.
[00:05:31] Sean Mooney: That's a great thing. And I did scouts with my son for a while, and then he kind of navigated into other things. But one of the things that I liked the most and looked forward to the most when my son was coming up was the Pinewood Derby.
And it was fun because that, at least where I live here in Nashville, is mostly about the dads getting to build the carts they wish they could have built when they were kids.
[00:05:54] James Sidwa: It's true. It's true. You either have to be handy yourself or have a good friend that is. And we were fortunate that one of our dear friends from sailing and skiing actually He also has a big woodworking thing in his basement, so he has all the saws and planers and everything else.
I don't even know what half the stuff is called. But my sons would go over there and they would build the car of their dreams. Meanwhile, I'm just like, yep, we brought takeout food and some beer and we'll have a nice night together. But
[00:06:20] Sean Mooney: that is great. I mean, the number of hours I spent on YouTube trying to figure out how to work with my son and.
To be fair, he was included, but this was probably as much as my car is his and not in a productive way for him because I'm like, no, no, we got, you know, like we got the competitiveness of us came out.
[00:06:36] James Sidwa: My older son loved to build them based on different things he'd find online. There's actually a professor from, I think, somewhere in Michigan who had studied where to put the weight on the cars and run like thousands of tests with his son and others.
And so there's a lot of. More research that goes into that than I care to say, but like everything else, you put a bunch of effort into it and you get a great result. And his first time out, he came in first in his age group. And second overall, got to go on to the regional thing for it. Had a blast with it.
My younger son just always built for the design he wanted. He was building clunky looking trucks or other things that didn't go fast, but he had a great time doing it and they looked cool. So he was happy.
[00:07:15] Sean Mooney: That is awesome. All I know is I have apologies to my son, Liam, because one of the things you've learned really quickly in Nashville is.
There's a big automotive industry here, which means there are lots of engineers with access literally to wind tunnels. And so, we would just get smoked, how much time I put in, like these were the most elegant designs you've ever seen and you're just like, okay, there's no chance.
[00:07:42] James Sidwa: One year we had a younger sister participate, cause there's always the scouts and then there was a sibling and father's category.
And one of the younger scouts had a younger sister that showed up, and she had quite literally just taken the wooden block, bedazzled the outside, thousands of sequins it looked like, and then ran it, and came in like fourth overall. All these dads and kids who had spent tons of time building out their cars got smoked by her, which was quite literally the standard block, nailed in the wheels, bedazzled the heck out of it in pink, and sent it down the track.
[00:08:15] Sean Mooney: That's the version of like the NCA tourney pool that we do in our office every year, where whomever picks just by the uniforms they like most usually wins.
Sometimes just try to keep it simple, not overthink it.
[00:08:30] James Sidwa: Important thing there is that the kids all have a good time. Usually there's always somebody who cries. They thought they were going to win and they lose, but most of them have
[00:08:38] Sean Mooney: a great time. Well, 100%. So to turn the page, I'd love to tap your brain on kind of how you think about business.
And one of the things that I would always do when I was in your shoes is I kind of had like a yardstick. It was just because you're looking at hundreds of companies a year and you can't look at them like a craft project. So I was like, you know, here's kind of what I'm looking for in a relatively consistent way that I want to see as an element of value in a company that says this is a really good company, or probably more importantly.
Can eventually be a really, really good company through the application of capital and fuel and value creation. What are some of the things that you look at James when you're getting these opportunities that come across and they're looking for that fuel and that partnership from you all?
[00:09:23] James Sidwa: We invest in family and founder run businesses that are in the lower middle market.
With that, one of the key things that we have to do is not only assess, do they have a good market position, good cashflow, most of those basic things that people are looking for, we really have to dig into. Is the seller group because we're often looking for them to roll over and continue to manage the business for at least a period of time, if not indefinitely, are they a group we can work with?
And the big piece of that is, are they trustworthy? Because they have been in this business since it started or since they took it over from mom and dad or whatever their situation may have been, and they know it better than any amount of research we could ever do will get us to that point. Yeah. We need them to be open, honest, and transparent with us at all times in order to have a good working relationship.
As they're assessing us as buyers, they want that from us, and we need it from them as well. But that disparity of information that they have so much more than we do early on, it's a critical piece of it. But like everybody else, we want to know that it's a good business and a great market as appropriate market sizing or TAM as we normally refer to it.
And the ability for us to grow that business after we get into it, be that through organic actions or through add ons, but that trustworthiness is a real piece for us early on. Like everything, you don't always get it right, but you hope that the work that you do gets you to a really good spot to start off with.
[00:10:41] Sean Mooney: I love that perspective. And one of the things that. We've talked about on this podcast is when you're bringing in private equity, you're bringing in a partner, it really is a marriage and you're going to be in it together every day. And you're trying to build something that's better and create growth.
And by bringing two together, you're creating a greater whole. And it's something that as I look back where things did go wrong so often in my career, it was because you didn't have that. Eventually I arrived at a firm that I think would always say it really well and they would say it right at the beginning.
Three of the most important things we can do together is have alignment of goals. We can have mutual respect and trust. And what you articulate there is so important. And I'm curious, James, is there a way that you're able to go and kind of assess that when you're meeting teams to say, these are folks who I think are kind of cards face up and we can work with?
[00:11:40] James Sidwa: I wish there was a few little things I could point to, but no, it's everything about how they're communicating about their business. When you're fortunate enough to get to a management presentation, you're having dinner with them ahead of time or afterwards, that everything they're telling you is lining up that when you Google them and do other things online to check into them, that it all matches up with what they've been telling you.
So much is available online these days. And then if we do pursue further, we use background investigation firms to look into other aspects and make sure that everything's aligned. And occasionally you find things they didn't tell you about. Usually they're small enough items that it's not a concern, but occasionally we've had to have some pretty tough conversations with people.
You told us the following, we found that that's not entirely true and you make a decision whether you're going to walk away or whether you can work around that. It's always a thing you have to assess through. One piece I would just point out is. I spent a bunch of years in between the other private equity firm and this one in consulting, working for generally much larger firms.
And when doing that, they were often buying from other private equity firms. We're buying entirely from founders and families. So these are people who this is something they've run for 20, 30 years. They're not the hired gun coming in to transition this from one private equity firm to another. They value that transparency.
They value that trust as well. So. You mentioned partnership earlier, those really do need to come together because we really are going to work together and we're often seeking them to roll over 20 percent or whatever it may be, but that's a meaningful amount to them and to us. So we really will be partners for quite a few years.
[00:13:14] Sean Mooney: Particularly in family businesses, having grown up in one, you can see the culture of the family as a tangible reflection. When you look at the culture of the company and the people and how they act. And to your point, like there's probably never gonna be one or two or three things, but you get this spidey sense.
You kind of just know it. You don't know why. And I would say 90 percent of the time you could know, I was like, these are good folks, but every maybe 5%, 3 percent of the time, the hair on the back of my neck would stand up and I go, something's not right here. And you just couldn't put your finger on it, but you just kind of knew.
[00:13:54] James Sidwa: And we've passed on plenty of deals when you get to that because you're walking around and none of the employees will make eye contact with you because the boss is standing there. What does that tell you? They tell you they care about the employees, but the employees are scared of them. It doesn't line up.
There's so many little factors you'll find as you observe as you walk around.
[00:14:13] Sean Mooney: And I think it's a great lesson for business builders out there as well. You should do this, A, because it's smart for business and it's good for life to manage with integrity. But even if you're going to operate entirely through selfish altruism, people are going to be looking.
So, you know, be good, do good kind of a thing.
[00:14:32] James Sidwa: We understand this is a big monetization for their families when they're doing this. So they've got many things that they're worried about, including what is my aunt so and so who owns 10 percent want to see out of this or whatever their personal scenarios might be, but we need them to be open and honest with us.
Need to believe everything that they're telling us, at least the vast majority of what they're telling us is true and good in line with what we want.
[00:14:54] Sean Mooney: I love that point. And it's a really, really good one that should put two underlines
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[00:14:59] Sean Mooney: it.
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[00:15:20] Sean Mooney: So, James, as we turn the page here, I'd love to hear from you in terms of How Heartwood approaches value creation, and what are some of the resources that you bring to bear when helping these family businesses reach that next level of greatness?
[00:15:38] James Sidwa: I'd say first, over years, we've observed that most of these family businesses have a few consistent weak spots, and we've brought in three people that we refer to as value creation specialists. One focuses on marketing, another focuses on HR. And the last one kind of on operations and integration, a little bit of it mixed in, and those are, as you're dealing with family businesses too oftentimes that.
Head of HR is somebody that's been in the company for a long time, but never really grew up in an HR department. They kind of moved into that as they grew in the organization grew. So that's a great person to have. You don't want to lose that person, but how can you get them some coaching? Well, our person, Bruce Ennis focuses on exactly that.
Let me coach that person up. Let me help them address any weaknesses they have and bring them some tools that can help them get through other things. And Same with both Michelle Ryan and Jason Phillips, who help us in the other two areas I mentioned. That's one way that we really try to bring something to them early on.
In fact, Michelle will be working with me next week at a management presentation at another company, because that company needs a little bit of that attention. And all of them work on a number of our companies at any point in time. So, that's one way that we bring that value to the table is trying to help address those three areas.
In addition though, we work with you guys to help find other consultants that can, whatever challenge that business might be facing, be that location issues where they want to expand but don't have the ability to, so they've got to go to another place, integration things, IT, whatever it may be.
We've got a big Rolodex of people we've worked with in the past that may or may not be the right ones. And if they're not, they're often able to help us find somebody else who can help. And that's another way we bring, because we don't profess to be experts at any of the businesses that we're working in, not at least at the operational level.
We can envision the strategy and where we want the business to be in a few years and all those things. Don't get me wrong, but how to make whatever day to day issue that is better. We've got ideas, but you need people who can be on the ground and help them execute.
[00:17:39] Sean Mooney: I really like what you said there in terms of how you're approaching the value creation phase.
And then it's kind of a must do in private equity, right? The application of fuel and strategy used to be enough, but now it's, you got to do and, and, and you're bringing in and are kind of like the core areas where most companies can need help, particularly a family held business that's kind of going to reach the next level.
And it's not that they're not great companies, it's just, it's hard to be good at everything. Right. And so as you, we go back to this conversation about our partnership, like you're bringing something that they don't have to be good at, but they can. And one of the things that you brought up that I think is another really good point that's not talked about nearly enough is the whole idea of coaching.
It's this idea that Tom Brady had like six coaches and he was the greatest of all time. This whole idea of a coach that you can have someone that can help you navigate through the complexities of humanity is also really, really helpful, I think, for any aspiring business builder. And it's something that I actually have taken my own kind of Kool Aid on this.
and hired a coach. And it's been really helpful because it can be incredibly lonely also sitting at the tops of these organizations trying to figure everything out. And so bringing that to your companies, I think can be a tremendously valuable thing that no doubt is paying dividends.
[00:18:54] James Sidwa: Yeah. So in addition to the three I mentioned, We've brought other coaches from the outside in for various people.
We've had some CFO coaches for very good performers who just need to round out certain areas. Several CEOs have had coaches as well as joined organizations like YPO and others of that sort. So it's been worked out well and no one approach fits all. Another way we've always helped to create value, which many P firms do is, of course, through add on acquisitions.
And we have two people that are strictly focused on sourcing new deals, both platforms and add ons, and they're a wonderful resource for their companies as well.
[00:19:31] Sean Mooney: That's another great way to really supercharge what you're doing and how you're growing in a way that kind of inherently creates value if you know how to do it.
And I think that's one of the best reasons as well to come in with. A private equity firm who can not only give you the fuel to make those acquisitions, but also the know how and the capabilities and the sourcing execution capabilities that can really kind of like light speed your progress.
[00:20:00] James Sidwa: Yeah. Not every business needs add on acquisitions, but those that do you want to train them up over time and help build those capabilities inside so that they can keep doing add on acquisitions without us.
Those always need a little help there. Don't get me wrong, but After two, three, four, five of them, they get better and better and they can do the bolt ons in particular very quickly.
[00:20:20] Sean Mooney: I think it's an excellent point. I think the really important levers of value creation that needs to be at least looked at for every company, and to your point, not all of them, doesn't make sense because they've got this organic.
Kind of growth opportunity, but for some of them, it can be a great lever. So James, the one constant in life is change. Seems like we've been going through more change lately, from the COVID area to AI, to all these other type of things that are happening in this kind of washing machine of life that we at times live in.
I'm interested to learn what are some of the top value creation kind of opportunities that you all are kind of thematically thinking about and engaging with your portfolio company leaders that maybe others should also be thinking about.
[00:21:07] James Sidwa: I think some of these won't be overly unique to us, but again, with.
Being in the lower middle market and focusing on family run businesses. One of the first ones we're always worried about is just succession planning. And very unfortunately, we've had some issues over the years where people have gotten ill or passed away unexpectedly. And by having those plans in play, we've been able to keep the company running in the right direction.
There's always a hiccup, don't get me wrong, but as smoothly as possible. So we feel for the families that have been impacted by those things. the company we need to look out for as well. We try to do right on both angles of that, but that succession planning and making sure you have backups for all your key players has always been something we focused on.
We continue to, but those hard lessons, some of which occurred during COVID were reinforced that. So we start on those processes within the first few weeks, if not the first few months, and you're constantly revising it forever. Other ones are safety. Every company has some safety incidents, and I don't mean the cut your thumb with a box cutter kind of thing.
I mean, bigger issues that unfortunately occur. You want all your employees going home at night and going back to their families just like you want to do. So you got to make sure everything goes smoothly and every company will have some issues here and there. But a company I bought a number of years back, about 10 days after the close, got that horrible call of, we just had an incident.
Something they were building collapsed on somebody who was inspecting it and they were underneath and it was a horrible situation for all involved. But those types of situations teach you that you need to keep focused on that. Keep driving for further improvement all the time. And while those are rather basic items, there are many other areas we focused on cyber security.
We've developed protocols for every company on those we've moved into other areas, but really those are what I refer to as value preservation. Really? What do we got to do to make sure we've got the blocking and tackling in place that even if something bad hits the company, we're going to be okay. And then from there, you kind of have the foundation to go and grow.
So we really focus on some of those first things I mentioned early on. You have all your controls in place for your CFO and the finance part of the organization, all the reporting and KPIs that you need in place. A lot of those, what I consider basics, and I'm sure many of our industry focus on those right away as well, but you need those in place in order to turn your attention to the next things.
The last thing you can do is ask your CEO to go work on an add on if they're fighting a fire inside the business already. So take care of some of the small things and then go forward. But a lot of times before we really started doing the real work on terms of growth, we Some outside consultant or another and work on a strategic plan.
And really that's just pulling all the great ideas management already had and that we formulated along the way and getting to know that company or that industry and putting them all on a, on a board and creating prioritization, which ones are going to create the biggest bang for the buck, which ones can we execute quickly?
Some of that might be really big opportunities we need to start today, but we might not see that opportunity for two, three years. We start putting them all up there and ranking them and. Go out there and execute and on each of those, you need to have a few key people inside the company that can take care of them, but you're matching them up with people from the outside as well.
Be those are three value creation specialists, the business development folks that we have sourcing deals for us, or somebody else we bring in from the outside, occasionally Sean from your organization as well, that helps us push everything forward.
[00:24:22] Sean Mooney: I really like how you frame this part of our conversation here, James, and that, you know, Anytime you're going to do something, you've got to build a foundation first.
And if anyone's ever tried to build a tall sandcastle, but uh, If you didn't really pack that sand down at the bottom, you weren't going very high. And if you didn't make sure the water wasn't coming around it, the whole thing would collapse on yourself. And, What you're articulating here is this, you gotta get the foundation set before you can grow and create real incremental value.
And that comes from the people. He said, like, who's gonna be in charge? It's failure to plan is planning to fail. If you don't do these things, it's this idea that you're gonna make sure the barbarians at the gates of your sandcastle, From a cyber perspective aren't coming in. It's this whole idea of like having safety.
That's such an important thing in these companies. I grew up in a business that was a manufacturing business and I feel pretty good, too. My specialty was painting things safety yellow. I think somewhere under my nails, there's still lots of, like, yellow paint. I was like, I wasn't trusted with any important jobs.
What you're articulating is so important, like, you gotta get the basics before you can do anything. And then you get the foundation down and then you put together the strategic plan and then it's about execution and hitting the gas, but so many people just want to hit the gas and they go plowing into a tunnel and they don't know if there's a train or a light at the end.
[00:25:52] James Sidwa: I have to give credit for that analogy to Rob Tucker, one of our managing partners here. He's the one who's been using that one since I started here many, many years ago. But it, it resonates well with us, obviously resonated with you and it resonates with a lot of the portfolio companies we're working with as you're sitting there and talking about the improvements that need to be made before you can go tackle some of the, what they often think of as the exciting stuff, but creating that value and that growth.
It's exciting. Probably the most rewarding part of the business is watching some of the companies hit the goals that they had and what that means for the people inside of it in terms of upward mobility for them. We're very proud that most of our companies have significantly more employees when we exit than when we started.
So that means they're growing their employee base and giving opportunity for new people as well.
[00:26:34] Sean Mooney: That's the fun part. And exactly what you're saying there is. As you think about these businesses you're building, they become job creation engines, which is why today from the hundreds of P firms that we're working with and privileged to work with, truly excellent ones like yours.
Nearly half of the, every call we get for a project need and a really, really excellent third party practitioner is for people. It's recruiters, it's interim executives, it's mid level recruiters, it's organizational effectives, people's coaches. And exactly what you've shared time and time, you get the foundation, you get the plan, then you grow.
And then the fun part is now you're bringing all these great people in. And that's when it gets really fun. You know, you're like, Oh, The music gets going, and it's kind of the happy vibes, you know.
[00:27:17] James Sidwa: Yeah. If everything's growing, everyone's happy.
[00:27:20] Sean Mooney: Now, it's not always that way, but
[00:27:23] James Sidwa: When everything's growing, people are usually very happy.
[00:27:25] Sean Mooney: There's a very good reason why the only hair I've left is gray. And so But it's the happy times I remember, so So, it's more of a mindset thing, I think. If we turn the page here, one of the things I'd love to hear is another piece of kind of wisdom that you would have shared with your prior self. And I've been a collector of these things my entire life, because if it were up to me to figure out how the world works, it would have been a very short career and a really tough life.
And so I've kind of Frankensteined myself through the virtue of other people's hard earned lessons and wisdom. And so if you were to go back to 22 year old James, And share a piece of your advice that you think would make a difference. What's one of those pieces of advice that you would share that you wish you knew then?
[00:28:15] James Sidwa: Several of those are probably not appropriate for the podcast, but from a professional perspective, I would certainly remind myself to go after every opportunity that opens additional doors. And I wish I could recall who told me that initially, but it was great advice. And I took that advice and every job I took, I tried to take one that would leave me with as many possible avenues for the future.
Didn't matter whether it was an Accounting and started off as an auditor, went into some of the small business stuff, which I just thought I could fit in better on later on some of the consulting roles, the first PE firm, this one, all of them were just places where I thought I'd have more opportunity coming out of them than the other options that I had at the table at that time.
And it's worked out for me. So I tell that to my kids all the time, if they're struggling with, should I play this sport or that sport, or should I take this class or that class, whatever it may be, it's just about what's going to give you the best options. What's going to teach you the right skills to open more doors for the future and from there have fun
[00:29:13] Sean Mooney: I love that piece of advice and it's in this is great kind of like growth mindset, right if you're saying where am I gonna go?
That's gonna give me the best option to become a better version of myself and you continue do that It's just this iteration that compounds on itself over time and if you have the audacity to kind of look at the doors in the first place a lot of people kind of You Go into a hallway and they just keep on walking, but they're missing all these doors to the left and the right and not even like peering in just cause you just kind of get into this hamster wheel.
How's that for mixing? Like four metaphors. Um,
[00:29:46] James Sidwa: 22, you may have known what you wanted to do. I had it inkling, but I certainly wouldn't have predicted at 22 that I'd be where I am right now. I would have probably said I would be a partner at a public accounting firm or something like that. But when Anderson fell apart, I had options and took care of those and went on to something private equity, which just gave me, in addition to doing some accounting work there, I got to work on deals and got to travel around and work with portfolio companies.
And that opened a lot of doors. And I continue to do that time. And again, it works out.
[00:30:17] Sean Mooney: And it's also such a good lesson because who at 22 knows what they want to be. I had no clue. I got my first job out of college because all my roommates went into that industry. I'm like, all right, I don't know what that is, but I'll go do it.
[00:30:29] James Sidwa: There you go. That worked.
[00:30:30] Sean Mooney: And I don't think I really knew what I wanted to be until I started BluWave. And that was crazy. I worked my whole life for this one other job, and then I go do a crazy startup. And so your path is a much more sane, serendipitous journey.
[00:30:47] James Sidwa: Yeah. I don't know about that, but okay.
We'll go with it.
[00:30:51] Sean Mooney: It's turned out okay, right? It's
[00:30:54] James Sidwa: turned out well, but I mean, I've joined two small private equity firms. I mean, when I joined Heartwood, we were seven people. When I joined Effie Clean Energy back in 2002, I want to say we were six people. So in both cases, it was very small firms. Everyone was rolling up their sleeves and doing everything they could, whatever was critical that day and grew from there.
But we're 28 people today and heck of a lot more assets under management and it's been a great journey here.
[00:31:19] Sean Mooney: It's amazing. And you can see why, as I kind of revisit our conversation here, you do things first with kind of trust and integrity. You're thoughtful about building foundations. And then you're kind of open to the universe of opportunity ahead of you.
Seems like a pretty good recipe.
[00:31:37] James Sidwa: I liked yours a few minutes ago. It was failure to plan is planning to fail. I've heard that one before, but I don't use it. I think I'm going to steal that from you.
[00:31:44] Sean Mooney: I by no means came up with it, but like I said, I'm a liberal borrower of other people's wisdom.
[00:31:50] James Sidwa: Me as well.
Reality in our industry is there's very few truly unique and creative ideas. We're cobbling together lots of great ideas, many of which have been done by others before. Most, if not all, have been done by others before. Private equity started many, many moons ago, longer. Our founder started in private equity in the late seventies, still on IC meetings and such today.
I was born in the late seventies. He hates when I point that out, but anyway,
[00:32:16] Sean Mooney: you're the young kid in the firm now. Yeah, no, I'm not.
[00:32:21] James Sidwa: I was when I joined, but I'm not anymore. But it's been fun.
[00:32:25] Sean Mooney: Well, that's great. Well, James, this has been a really, really great conversation. I appreciate you taking the time to share some of the hard earned wisdom that you've gained on this really kind of spectacular journey that you've been on.
And I've learned all sorts of things that I wish I knew before. So for that, I am extremely appreciative of it. So thank you so much for joining us today.
[00:32:46] James Sidwa: Thank you, Sean. Thank you for all the help you've given us in the past. We have several board members. We source through you guys as well as. A handful of consultants who helped us do a lot of great things, so appreciate all you've done for us as well.
[00:32:57] Sean Mooney: Likewise. And we appreciate the acknowledgement and certainly the opportunity to serve because it is a privilege to watch you all do how you do things. And I try to borrow as much as I can as we do it ourselves. So thanks again.
[00:33:10] James Sidwa: Thank you.
[00:33:20] Sean Mooney: That's all we have for today. Special thanks to James for joining. If you'd like to learn more about James Sidwa and Heartwood Partners, please see the episode notes for links. Please continue to look for the Karma School of Business podcast anywhere you find your favorite podcasts. We truly appreciate your support.
If you like what you hear, please follow 5 Star Rate, review and share. It really helps us when you do this, so thank you in advance. As a measure of gratitude, we're also making a donation to Feeding America and the related associations for each five star review we receive in your podcast platform of choice.
So thanks again. In the meantime, if you want to be connected with the world's best in class, private equity grade, professional service providers, independent consultants, Interim executives that are deployed by the best business builders in the world, including hundreds of the world's top private equity firms.
Give us a call or visit our website at BluWave. net. That's B L U W A V E and we'll support your success. Onward.
THE BUSINESS BUILDER’S PODCAST
Private equity insights for and with top business builders, including investors, operators, executives and industry thought leaders. The Karma School of Business Podcast goes behind the scenes of PE, talking about business best practices and real-time industry trends. You'll learn from leading professionals and visionary business executives who will help you take action and enhance your life, whether you’re at a PE firm, a portco or a private or public company.
BluWave Founder & CEO Sean Mooney hosts the Private Equity Karma School of Business Podcast. BluWave is the business builders’ network for private equity grade due diligence and value creation needs.
BluWave Founder & CEO Sean Mooney hosts the Private Equity Karma School of Business Podcast. BluWave is the business builders’ network for private equity grade due diligence and value creation needs.
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