How to Scale Beyond $5M: Scaling With Strategy and Culture | Andrew Gray

Andrew Gray:

That people-centric, people-focused, culture-first mentality is critically important to surround ourselves with the best. And then, with that, we take the same discipline to the financial side. That's just not what we're actively promoting as our mission is to get to 200 million or 300 million or 400 million top line. It's like build great people, build great strategy, and those financial results take care of themselves.

Nick McLean:

I'm your host, Nick McLean, and this is Ambition. My guest today says he's not creative and he's not a risk-taker. He even says he doesn't have an entrepreneurial bone in his body, but he's broken the mold of the stagnant insurance industry and created an agency that serves specific niches within certain industries with a unique integration of technology and people. Andrew Gray is the founder and CEO of Virtus, an insurance brokerage and consulting firm in Overland Park, Kansas.

I met Andrew while trying to place insurance at some of our portfolio companies, where I got the opportunity to get to know him and his whole firm. I was really impressed by his why and how he's grown the brokerage to the successful empire it is today. Despite his humble remarks, Andrew's success speaks for itself. His story is proof that these textbook ideals about being a creative risk-taker with an entrepreneurial spirit are not prerequisites for success. As you'll learn through Andrew's story, starting and growing a business takes guts.

Andrew Gray:

I'm not a super creative person by nature. I [inaudible 00:01:33] this entrepreneurial bone in my body, and we can get to it later, but I'm also not a tremendous risk-taker in general. So what I looked at in the insurance brokerage business, it was the career that I grew up in, and then ultimately, when I looked to start the business, we just thought there was a better way to do insurance, which is a very general concept.

But ultimately, what we've done is we focused on specialization within specific industry verticals and really narrowed our expertise to certain things. So we're not an everything-to-everyone type business. We're very niche and specialized. We've looked at the integration of technology and people, I'll call it, so that technology's not going to solve every problem we have. People aren't going to solve every problem we have. Where can we integrate those two concepts and really be efficient?

And then lastly, as part of that, it's all about the culture and creating great teams and environment to grow, teach, develop people in the business. So if you look at the industry broadly, a lot of firms in our space stall out at 3, 4, $5 million revenue because they're more lifestyle businesses. They're not overly ambitious as to their thinking and the value they can provide to their clients. And so we've taken just a unique and really disciplined approach to what our vision is and then subsequently the execution of it.

Nick McLean:

So it's really interesting, and one of the core themes that we talk about on the show about how certain businesses will reach a certain level and, in particular, based off the industry you're in, that might be three or four or 5 million like you said for insurance or 10 or whatever that number is. And in order to get past that, something needs to be different.

So as you look at some of those smaller operators that are 3, 4, or $5 million, do you really think it's mostly that they just don't have the ambition to grow? Do you think it's that they don't have the capability to grow? Some of both? I mean, probably, the answer is some of both, as it is so often, but can you just talk a little bit about that interplay between the ambition to grow past that 5 million dollar mark in conjunction with the capability to actually create a real enterprise?

Andrew Gray:

Yeah, it's a really good question. When I think about these firms that plateau or areas honestly where we've plateaued in the business and how we break through that metaphorical glass ceiling, a lot of times, it's a variable. And to your earlier point, it's a multitude of factors that contribute to that stalling out or that plateauing. Some of it's ambition, to your point. Some of it's like taking that big next step as far as the risk, getting uncomfortable in what it takes to grow, and that could be a leadership principle.

It could be taking outside capital to scale the business. It could be borrowing money from a bank and taking risk when you're in a really comfortable spot. But the business has to continue to evolve and grow, and you're going to have these micro failures, bigger failures, micro successes, bigger successes, and it's just the balance of trying to assess and understand the business and really be aligned with the vision where you want to go.

I think some people get into businesses and entrepreneur with an idea or to fill a void, and they don't really have the end in mind, or they don't have the big vision in mind. So when they start doing 4 or 5, $6 million in revenue, whatever that plateau might be by industry, they're like, "This is pretty good." And then they don't ever stop work on the business versus working in the business, and that really prohibits in scale.

Nick McLean:

So it's interesting that you bring up risk in that answer because, as you've said, you're not a very risk-oriented person. Maybe a little bit risk-averse if I'm putting words in your mouth. How have you balanced that? If you've known that your business must take risk in order to grow, yet your risk-averse yourself, how do you manage that so that you can make the right decision for the business and get outside of your comfort zone?

Andrew Gray:

Yeah, it's a good question. I think calculated risk-taking is the business that I'm in broadly, right. We're in the insurance and risk management business. But for sure, when I look at the overall business, having a calculated approach to what risks we take, you're never going to have 100% of the information you need to make a good decision. So, at the end, you got 88, 90, 95% of the information you need to make a good decision on an initiative of priority and investment, whatever. That last five to 10% is the risk. And I try and limit that as much as possible to make good, qualified decisions.

And then, again, if you have a vision in mind, like we set out to create a next-generation insurance brokerage of scale. So scale means different things to different people, but it would've a very different approach, and we would've made very different decisions if we said, "Hey, we want to create a nice lifestyle business that generates a couple of million dollars in cash flow or whatever." We've got a bigger vision than that, and it's not all about the dollars, of course, but a bigger vision of that, so that dictates the decisions, right.

I've been very specific about if you have a big goal, a big dream, a big vision, you make different decisions based on where you want to go, whereas if you have a small dream or a small vision, again, you make more calculated decisions to what you want to accomplish. And neither's right or wrong. It's certainly a risk characteristic of the business. It's certainly an ambition. It's certainly what do you sacrifice to get there, but I think that calculus helps make decisions.

Nick McLean:

Well, it's interesting how you answer that because, again, it goes... it points a little bit to how your ambition is part of the reason why you're on the path that you are. If your desire is to set up a lifestyle business and get to that 5 million dollar mark, then you've achieved success.

But it sounds like your goals are much larger than that. As you think about how Virtus continues to evolve, what is the ceiling for you guys? What is maybe not your end goal in terms of finances, but how do you communicate to your team what you want the business to look like, how you want it to continue to evolve?

Andrew Gray:

The evolution of the business, I think, has changed, and my mindset has changed as we've grown. We used to put very financially driven metrics to the business, which obviously we still do to scoreboard the business, financial health, all the things that you would expect. But our goals have evolved from $100 million in top line or $250 million in top line into really focusing on the people and delivering excellence for our client.

And ultimately, we think the byproduct of that, or actually have proven the byproduct of really focusing on building world-class teams, world-class execution, world-class strategy, you get to the financial goals and metrics faster than you do if those are simply the goals. An old coach of mine said something to the extent... I hope I don't butcher it, but something to the extent of, "You can play a terrible football game and still win the game. You can also win the game or lose the game and play a great game."

And so we're trying to play a great game, if you will, and we think the financial metrics will take care of themselves, and that's all part of the bigger strategy. So we look at... we've got benchmarks from a financial perspective that we certainly share with our team just to, again, keep scoreboard. People care about that thing or that type of thing. But most importantly, we're focused really intimately on developing professionals and being able to execute and deliver really high-quality results to our clients, and ultimately, those financial objectives come into sight.

We do think scale on the insurance brokerages is important for various reasons, really focused on our ability to invest in technology and other resources. Scale's a relative term. So that was an ambiguous answer. But we think and to have conviction and built into our culture that doing the right thing by our people, developing teams, people strategy really ultimately achieves the outcome and that financial result that we want.

Nick McLean:

I mean, I know you always have been a people-first person, so I know that starting off, it was never the situation where you didn't care about people or anything. It was all about finances and whatnot.

However, throughout the growth, I just am curious if, at the beginning, it was this desire to focus on the people but also the finances, and then as you grew, you just doubled down on the people and, like you said, just let the finances kind of sort themselves out. Is that a fair representation of how your approach has changed or not necessarily?

Andrew Gray:

Yeah. No, I think you've got to be really good at everything, right. So people drive the business, people drive industry, people drive the world, if you will. So my favorite core value of three core values in the business, my favorite one is One Virtus, and I'll just paint a little picture through a story here. So we're on what I call Virtus 3.0.

Virtus 1.0 is basically the solo entrepreneur journey. It was just Andrew's going to throw this business on his back and get to that first $5 million, and, of course, we had other people contributing and working really hard at the time, but we got to a threshold or a plateau, if you will, that I couldn't take it no further.

I was working a 100-hour weeks. We were, quote, unquote, making progress and being successful, but it was basically the solo journey. Version 2.0, we took in capital investment, which we can get to later, and we said, "This is where we set our ambition to grow a big business." We scaled the business very quickly. We 6x'd the business in about four and a half years, and what helped us survive through that was just energy, excitement, adrenaline, and keep going every day and we started to bring more people around it.

And 3.0 is where we've really started to formalize and professionalize the business, which is to get anywhere, you've got to have world-class people, particularly in the services business that we've got, and with just demographics of the country, certainly demographics in the insurance space, we have to develop and bring in people to the industry, develop them and ultimately give them the opportunity to scale within the business.

So that people-centric, people-focused, culture-first mentality is critically important to surround ourselves with the best. And then, with that, we take the same discipline to the financial side. That's just not what we're actively promoting, as our mission is to get to 200 million or 300 million or 400 million top line. It's like build great people, build great strategy, and those financial results take care of themselves.

Nick McLean:

Great answer. Obviously, I knew you didn't completely disregard the financials, so it's just interesting to hear how you personally approach the need to, like you said, be good at everything.

Andrew Gray:

Let me profile it because I think it was... is part of the question. In the beginning of the business, I'm a finance guy by background, and everything was financially driven, numbers, metrics, so on and so forth, process, procedure, and you realize that you can't accomplish any of that without having the right people in the right seats inspiring and motivating them. So we have promoted goals historically that were revenue-driven or earnings-driven or something like that, and it often would fall on deaf ears.

Certainly, the leadership team cares immensely, things of that nature, and it's not that people don't care. It's just that they don't understand exactly how they can impact that. Whereas, if we pivot to how can we help you be really good at your job so that you go home inspired every day and excited to wake up the next day and bring that same energy and enthusiasm to work, that's really where we've pivoted in our messaging and our narrative and engagement with our teams.

Nick McLean:

Well, it's really interesting. We work with a lot of, for lack of a better term, widget manufacturers, so I hate to put you on the spot here because you're not the president of a widget manufacturer.

But if your team was made up of folks that you run machines and produce parts, I agree that having them motivated and wanting to be there and be excited about their work is still critical. Do you feel like that is... would be a harder proposition for the, quote, unquote, widget manufacturer? Do you feel like you're in an easier position being in insurance to get your team excited? What are your thoughts there?

Andrew Gray:

Well, I'm completely unqualified to answer the question, so I'll answer it anyway. I think, by human nature, Bob Chapman from Barry-Wehmiller wrote this book, Everybody Matters or Everyone Matters, which basically is some of the premise for how we think about the teams and the development strategy that we've put in place for our people.

And so I think it's transferable across industry, if you will. And you've just got to find for the people, whether they're manufacturing widgets, whether they're attorneys, whether they're in the insurance industry like we are, what motivates and excites them to develop and grow. I also think it's important to understand that not every business is for every person, right.

There are certainly businesses, whether they're a large business that's relatively stagnant or an entrepreneurial business that's 2, 3, 4 people, that it's a different profile of person that gets energy from working within those businesses. And so I think there is a way to thread that needle, again, being unqualified to answer the question, but to gamify, motivate, excite, bring enthusiasm to those teams even if they're just pushing a press every day versus the more maybe cerebral work that our team's doing with respect to consulting and brokerage strategy.

Nick McLean:

Very helpful. I appreciate you going out on a limb there speaking about manufacturing firms when you don't have the direct experience, so thank you for that.

Andrew Gray:

You'll always get an opinion. It's just potentially wrong.

Nick McLean:

Well, it's your opinion-

Andrew Gray:

Qualified.

Nick McLean:

... so [inaudible 00:14:32] wrong. One thing I've noticed about the company is that you've decided to focus in on certain industries or even sub-industries. As I look at our company, Four Pillars, we're generally industry agnostic when it comes to the types of companies that we acquire. Part of the reason for that is we like the flexibility to be able to talk to business owner, hear a good story, and really get excited about their business even though it might not be in an industry that we like.

As you think about that, though, if we were to specialize, we could hone our story, but we also lose out on certain opportunities if they aren't down the fairway, so to speak. Whenever you were thinking about the specialization that Virtus... that you wanted Virtus to have, was it a realization early on? Was it part of that calculated risk that you wanted to take, knowing that you couldn't be everything to everyone if you went down this path of specialization?

Andrew Gray:

Yeah, I'll try and simplify it because it's a relatively long story in our thinking and our strategy. So the simplest way to put it is if you've got a heart condition, do you want a generalist doctor working on it, or do you want a heart surgeon? And the answer is obviously you want a heart surgeon. The scale of the insurance business in general and the specific industry verticals that we're in is so massive that it's one of those scenarios if you can get 1% or 2% of the market, you've got a hugely successful business.

And so the approachable or addressable market is huge, and what we found is insurance brokerage or distribution, which we do, has largely been done the same for the last 200 years, and let's take the last 50 years, people would generally sell insurance to their network, their local network, someone they knew from their kid's school, their church, the gym, their country club, and it could be anything from a flower shop to a bank to a construction company.

Basically, back to that doctor analogy. What we did is we said we don't want to be everything to everybody. We want to be incredibly deep in what we do and not only build sales strategy but also client service or client success strategy around how we deliver and execute on our brokerage for these clients. And so it's been tremendously successful.

For those people that follow the insurance market or the insurance... or consumers buyers of insurance, over the last five years, the market's been incredibly difficult and incredibly hard, and so it's elevated us and helped with us scale faster because we know exactly who we are, and we know how to address these specific markets where those generalist brokers are getting run by. So it was a very definitive strategy, huge addressable market, and ultimately, that specialized expertise is helping us win.

Nick McLean:

Thank you for that. Another aspect of growth or challenge to growth that we encounter with a lot of business owners is the lack of understanding that the business is going to get to a certain level with a certain person running it unless that person changes as the company changes or to bring in somebody else.

As you look at your own journey with Virtus, how have you had to change as the company has grown? And also, do you envision a future where you take the company to a certain level? And if you want the company to continue to grow, it needs to be somebody else running the show.

Andrew Gray:

I think all those are really important in the journey of an entrepreneur, right. I mean, the... when I first started the business, even though my title, I was CEO, I was still an insurance salesperson, full stop. I was doing different tasks because I was the only employee at the time, but I was still an insurance salesperson. And then, subsequent from there, we built out the first iteration of our leadership team, which might've been one or two people, probably a controller and an operations executive if I can think back.

And I still just had a list of things that I ticked through every day, but very tactical and very just day-to-day focused. As the business evolved and we really brought in great people to drive different initiatives across the leadership team, my role certainly evolved to being more of the strategist, working on big problems and big opportunities, thinking about the strategic direction of the firm, ensuring we've got the right capital in place to be able to go scale in the direction that we want to.

So that job's really evolved. I think a lot of entrepreneurs are really good at one thing. Maybe they're good at finance, maybe they're good at sales, and they stick to their lane. The important thing, I think, for me, is the self-realization that there are other people out here that can do certain functions of the business better than I can give them the platform and the ability to go execute on it.

To your question on am I always the right guy to be in the seat of CEO, it's TBD. So my question if I'm the right guy to be in the seat today, but jokes aside, that day could come. And I think just a really important thing for I think executives, in general, is realizing their strengths, realizing their limitation, and to continue to be successful, putting the right people around them that lifts the business and lifts them as an individual as well.

Nick McLean:

One thing that excites me about entrepreneurship about running a company is you don't have the bureaucracy, the red tape associated with large companies where it could take a month to have a cross-functional meeting to decide if blue pins are going to be allowed on whenever you fill out certain forms. Now, I say that partially in jest. I hope you realize.

However, as you grow these businesses, my belief is that a byproduct of growth is the need for more processes, more procedures, and with that comes bureaucracy. You talked about your employees getting them excited and whatnot, but at some point, it's going to be a different situation of Virtus. You're not going to be able to continue to grow as fast as you have as you get to larger and larger milestones in terms of revenues or whatever your metric is.

There's going to mean... need to be more processes and procedures, and at least some of the entrepreneurial spirit is probably going to die away. Is that something that you think about how to manage over time to make sure that you continue to keep the spirits of the team up and motivated and whatnot?

Andrew Gray:

Yeah, Nick, we think about that a lot. And when you asked earlier about the plateaus of businesses and the plateaus within Virtus, I mean that was one of them when we had to really look hard in the mirror and say, "We've got to institutionalize some of these process... processes, and we've got to do it in such a way that gives the creative freedom and the flexibility where it's not so defined that step A has to be step B." Now are certain things within the businesses you would expect accounting, and some of these functions where it has to be incredibly detailed and things of that nature.

But if you have really good people and you've got process framework and matrices, if you will, and guardrails and enable them to go be entrepreneurial, take care of the client, take care of their team, do what's right, you can limit some of that bureaucracy. But it is this fine line that we... certainly was a growing, pain or a hurdle for us is that, in the beginning, we were definitely a fire-ready aim business. And I think when you're small, you can do that to a certain degree, and then you plateau. And then, eventually, to your point on evolution of CEO evolution of the business, you have to say, "Okay, so what are the things hindering and holding us back?"

And so to my earlier conversation, 1.0 the solo entrepreneur journey, 2.0 energy, enthusiasm, excitement to get to this what I'm calling Virtus 3.0 for the sake of internal dialogue, we had to do a lot of that hard work to say, "What do we need from a process orientation so that we can be consistent across teams, across platforms and to our clients?" And then ultimately, "Where can we give creative flexibility and freedom to the teams to go take care of their clients in the way that is entrepreneurial and best serves the client?"

Nick McLean:

Interesting. Building on that concept of processes and procedures, what we see in some of our portfolio companies is that whenever we have a client or customer that is vastly different in size than we are, there seems to be a disconnect because our level of processes and procedures is different than their level of processes and procedures.

Have you encountered that, as you... as Virtus has grown, that you seem to be outgrowing some of your clients? Or because you began with the end in mind, were you really trying to set the company up to be that sophisticated provider so that you would grow into those shoes instead of outgrowing them?

Andrew Gray:

I would say some of both. I think when you think about where we sit in the insurance ecosystem, so we're in the distribution or the brokerage world, so we've got insurance carrier partners that are massive that we deal with and bureaucratic, most are some of the time in process and procedure, which has gotten them to where they are. They're, in most cases, successful in large. We sit in the middle of this distribution, and then we have clients.

Largely, we're in the latter of what you described, but we built the business focusing on a client profile in the middle market because we thought it was underserved and where our specialization could add value. But all the time, we're dealing with a confluence of different variables, right. We have clients that were once small and got very big and went through some of the same growth hurdles and opportunities that we went through and are keeping up.

We have clients that got very big without process and orientation, and we've had clients that stay small. So I think it's every client's going to be unique. There certainly... We're at a stage now where, in the beginning, we just needed to make payroll so we would take any and all client. I'd say we've certainly transitioned away from that and have definitive value proposition for the specific group of clientele.

And on the insurance side... on the insurance carrier side, the carriers have been tremendously successful in what they do over long duration for the most part. And so to manage businesses that scale, I don't have experience on, but you do have to have more rigid process and procedure to manage such a huge organization. So that dynamic between client, us, and large corporate insurance carriers is one that we have challenges and create opportunities every day.

Nick McLean:

From the outside looking in, I would say the trajectory of your growth has just looked like a straight lineup or maybe even a hockey stick. Yeah, straight line not being generous enough. However, as we all know, that's the outside looking in, and there's always more struggle when you're trying to grow that business.

As you... In thinking about other business owners that are listening to this that are stuck at that plateau but want to grow and are again struggling, can you share about some of the struggles that you face that you've had to overcome just to highlight the fact that even though it might look easy from the outside, it's really been a heck of a lot of work, a lot of failures, a lot of setbacks, but you powered through those and have continued to grow?

Andrew Gray:

Nick, it's a great question, and I think that, typically, when I talk to people that want to be entrepreneurial, not yet entrepreneurial, it is not a path for most people, I would say, because it's challenging and we get now the commentary that you just said, and obviously, the insight that you have in running some of your own businesses is from the outside looking in, everyone says, "Oh, you're an overnight success. Look how great it is."

We're 10 years into this business, and in 10 years, I've probably had nine years worth of sleepless nights, right. And there are various things that are opportunities. I want to make sure we don't screw this up in such a good spot in the opportunity or in challenges and stresses. I think that the entrepreneurial journey has been glamorized by some of the huge successes that Silicon Valley and otherwise have had.

So you've got to be so disciplined and excited and just stubborn about what you want to accomplish to be able to do it. So I caveat, before I answer your question with, [inaudible 00:26:34] that's kind of my worldview, and I would size it up to this more than a material like fallen on your face story, but it is a game of micro setbacks and micro successes. And then every once in a while, you'll have that pop of great success or that setback of, quote, unquote, failure, but you just got to keep moving and making progress.

So specific to your question, you'll have great people that leave for good reasons or for bad reasons. I'll give you a quick, for instance. The technology within the insurance brokerage community is pretty poor. I mean, not pretty poor. That's simplify. It's very poor. And it's really two systems control, a bulk majority of the ERP for agency management. And we set out to build our own. We invested seven figures to build our own technology platform. We got about 14 months into it and scrapped the deal.

We just couldn't get to the spot where we were in a position that we were providing better technology to our teams than we could buy off the shelf, even with the standard of what the shelf was. So those are things that I think in business, you just have to have a tough gut and stomach because, ultimately, it was sunk cost, not throwing good money after bad.

And we had to make a decision 14 months into it, not only on the money side, but we had spent so much time, we had built huge emotional connection and excitement about building a better technology, and we largely had to table it. Now, it's still an initiative. We think, next go around, we can do it better and smarter, but in the near term, we need to just stabilize our internal strategy.

And so that's a deal that I think if you don't have the gut or the stomach to be an entrepreneur, you just dwell on. You can't dwell on these things. What did we learn? How do we do it better the next time, and you keep moving?

Nick McLean:

It's a great point you bring up. Something I talk about with my wife whenever we're budgeting is sometimes my sense of magnitude of making a poor financial decision is so skewed because whenever you're talking about your household budget, it's probably two digits, three digits, maybe four digits if we're talking about something really expensive. But you just talked about something that seven digits, and it didn't work out. Yet you're still going.

It's this concept that... It's a concept that how do you think about those big expenses knowing that they could be failures versus the desire to be efficient with your capital, knowing that you have some outside investors, because I know most investors are going to want you to spend the money where you need to, but there's still that risk, there's still that challenge, and at the end of the day, the buck stops with you, and if you make a mistake one time, is that going to lead you to not making the step that you need the next time whenever the opportunity presents itself?

Andrew Gray:

Yeah, it's that risk calculus we talked about earlier where you try to garner all the information available on whatever decision it is and understand the competitive dynamics of what's going on given the situation. And then you've got to ultimately have that risk tolerance as an entrepreneur. And most of what I'm trying to do as a manager of this business is to mitigate the risk as much as possible, outsize the return for the investment.

And so you do get a little gun shy, I'd say, and you've got to have the conviction again to reverse engineer, what did we learn? How would we do it differently? How do we think about the world differently now that we had this failure? And it could be in people, it could be in investment in technology, M&A, which we've done a bunch of, and all of those things ultimately help drive your thinking.

And if you're really doing it well, rather than dwell on what went wrong, how do you do it better the next time is really the key learning. And I also think, again, based on what the outcome you want to achieve in the business is that dictates how big a swings you take, right. So a seven-figure miss on technology that could have had a nine-figure impact on the business, I'm making these things up, I'll do again, right.

And the next time I do it, I want to make sure that we're more thoughtful, we know what we missed on the first time, and we can do it better and more efficiently. We partner with the right outside firms and things of that nature. But again, my outcome is not to sell the firm anytime soon. We've got a long, long duration, and we want to build an industry-changing firm. So I'm comfortable with some of those big swings.

Nick McLean:

Yep. Absolutely. We could have a whole episode on taking in outside capital, but there's a specific area that I would like to focus on just to get your input because it's actually part of the strategy of Four Pillars actually, even though this might not benefit me directly because it might lead to other business owners getting it other know... getting to know other private equity firms.

But what I am trying to impart on business owners, at least partly, is that one way that you can ensure a successful transaction whenever you're selling your business is to get to know your potential buyer, not just through a bank process, but over weeks, over months, maybe even over years. As you think about the capital that you brought into Virtus, did you get to know your buyer? How has that relationship been? Can you just opine a little bit on this concept of getting to know your investor?

Andrew Gray:

Yeah, I think it's critically important, and there's some things that I would do differently in the process that I hopefully can educate some of your audience here. So we've got a fantastic partner, which is a family office called Agman out of Chicago. They started as a client, so we had some exposure to them and got to know them because they were a client of ours in our private capital group.

And ultimately, I didn't do enough diligence because I didn't know what I didn't know, but they turned out to be fantastic and probably some of the best partners you could ask for in that they're really investing behind the entrepreneur, right. And so in our vision, in our strategy, and they empower us for growth, they recognize because they've backed a bunch of entrepreneurs that there's going to be setbacks like I just talked on in the technology setback.

And if you're going to take... have a big ambitious vision, you're going to take swings, and the goal is to obviously get it right, but there are circumstances and unforeseen issues that prevent you from doing that. So making sure that you've got a good alignment with your partner is critically important. I also think for the stage of business we were, when they're invested, which is still relatively small, they knew we didn't have all the financial reporting best practices in place, and they gave us, one, some education on that too, which is incredibly helpful.

And two, some leniency where you hear some horror stories where outside investors will come in and want weekly reports and monthly board meetings and things of that nature, which for us would not have worked. It would've performed very poorly. Now, different stages of businesses, maybe that's more important, but certainly where we were and where we're going, having alignment with them in the vision, the big picture, their understanding and recognition that there will be bumps along the road.

It's not the hockey stick all the time. You do plateau and go back up, and things like that has been critically important. So to your audience who might be considering outside capital, very critically important, for my opinion, to understand not only the dynamic of how the capital comes into the business and the complex structures that come with that, but also how they work with their management teams.

What's their strategy, what's their level of risk tolerance, things of that nature to really ensure alignment? And I do think for, maybe, this is a promote for you, but outside capital can be tremendously helpful to scale your business without relinquishing a lot of the ownership one or two management responsibilities. You just have to make sure that you partner with the right people.

Nick McLean:

I completely agree. Just like with insurance brokerages, so much of success or failure, happiness or frustration is finding the right partners to work with. And one thing I would say, my business partner and I talk about different measures of success and one of our measures of success is being able to do business with people that we want to as opposed to being forced to do business with certain people just because you need the revenue. Not being critical at all.

We've all been there. I've been there that you don't want to take on that certain client or whatever because you don't get the right feeling or whatever, but it's getting to the point where you can be more thoughtful and strategic about the type of customer that's not only going to work best for your company, but it's just going to be fun to work with instead of dreading going into the office every day.

Andrew Gray:

Yeah, that's certainly the privilege of really growing high-performing businesses, which familiar with you guys and what you've done and certainly what we've tried to do and believe that we're accomplishing day by day is, it's really a privilege to be able to, dictates the wrong word, but set yourself up to do business with the people that you want to be able to do business with and vice versa, right. And, one, it makes it a lot more fun. And then two, if that alignment's right, it makes business easier. So totally agree.

And I've got some buddies listening. To your point, we've all been in that same spot where when you're first starting, you know payroll's coming in two weeks or end of the month or whatever, and you've got a client that you want to fire, but you know that they're going to pay you the next X amount of dollars to get you through, you take it. But certainly, certainly, as the business evolves and you've got value proposition that's respected and appreciated in the market, you can dictate or at least have a better grasp on the clients you bring on.

Nick McLean:

Mm-hmm. As we draw to a close, I want to give some air time to potential clients of yours out there. To any of the business owners listening, what would you tell them in terms of advice or counsel if they don't feel like their broker is really working for them?

It's more of just a cost on the income statement. What types of situations should serve as not red flags but warnings that perhaps they need to seek out somebody like Virtus to improve their insurance coverage and the relationship they have with their broker?

Andrew Gray:

Yeah. So I'll do a top-level commercial first for what we do, and then I'll talk a little bit about how we do it and how that strategy was formulated. So, as I said earlier, we are very narrowly focused into niche industries. So we're in real estate, we're in private equity, we're in construction, and we're in hospitality. And the best analogy that I use is we're in business to help management teams and leaders make good decisions. Very simply put.

And as we think about the kind of three pillars of a business, one being your banker, your accountant, your lawyer, we like to put insurance in as that fourth pillar and really utilize it as an asset to help, one, protect your business, and then two, grow your business. And I'll give a quick story as to what really formulated my thinking about this. So when I was very new to running Virtus, we had to bring in managed services to run our IT and our technology.

I'm not a technologist by any means, and so I sat through probably three or four pitch meetings, and I just nodded my head, and I had no idea what these people were talking about. Cloud, servers, whatever. I can't even tell you the words. And so, at the end of the last meeting, I don't think I was frustrated, but I was just being a first-time executive, nodding my head, I said, "I got to stop you guys. I have no idea what you're talking about. Can you just simplify this to me in a way which I can understand it and I can make decision?"

And so we've taken that same approach to insurance, right. It's become more and more complex. The world has become more and more litigious. It's become a bigger and bigger line item on the income statement. And so, really, what we want to do is educate the client. And so all we do is we gather all the information as it pertains to their insurance, and we do an assessment that says, "This is what you got, this is what we think about what you got, and this is what we would do differently if we were in your shoes."

And because we have this narrow specialization within these industries, we can solve or bring to light solutions to the problems they haven't even told us yet. And so, really, that's our approach, and our mentality is just to help people make good decisions. And to your earlier commentary around turning away clients or not doing business with people you don't want to do it with, we have huge conviction in our approach in that it's the best approach. And subsequently, there are people that like, "Just bring me a bid," and we're like, "You're not the right type of client for us.

If you want to understand what you're doing and how you can optimize it, we're the right broker for you. If you simply want to try and get the lowest price, I can get you the lowest price, put a million-dollar deductible on there, cut out all the terms, get you the lowest price," which some people might want, but really it's just that education to help them make qualified decisions. So that's my plug. It's pretty conceptual in nature. There's no silver bullet in this industry, so it's really just about consulting and helping guys like yourself make good decisions in what you're doing.

Nick McLean:

I appreciate that. For folks that would like to learn more about Virtus, should they head to your website? And if so, what is that? Should they reach out to someone on your team directly?

Andrew Gray:

Yeah, I think virtusinsurance.com is our website. You can go by industry vertical and identify the right person. I'm on LinkedIn. You can always find me, ping me. We've got an active presence on all social, so any of the Virtus pages, you'll be brought up to speed on what's going on.

But yeah, I mean, I'm super responsive and hope that our teams will be too. So certainly don't hesitate to reach out, and if it's simple as just education on what you're doing and if we can be helpful, we'd be happy to help.

Nick McLean:

Last question, softball, really. If there's anything else that you would like the listeners to hear, now's your opportunity to speak about that.

Andrew Gray:

The only thing I would say is I qualified entrepreneurship is not for everybody earlier, but if it's in your heart and your passion, go take a swing, right. It's been incredibly rewarding for myself, and I just have such passion for what we do every day. And if you're toying with it, I think making sure that you're qualifying the road and how difficult it can be, the reward is just as great on the other side.

Nick McLean:

Andrew created Virtus with drive and passion, keeping it from plateauing and institutionalizing new processes and procedures, and building a strong, loyal team. I loved Andrew's analogy that you can play a terrible football game and still win, or you can lose after playing a great game. His approach to wanting to play a great game and not always worrying about winning is what makes him an excellent leader.

Taking it slow to build the right culture and develop the right teams and strategy can feel challenging, but reframing it as taking your time to achieve the outcome that you want puts it into perspective. If you are inspired by this episode of Ambition, please share it with a friend or colleague. Thanks for listening.