Spotlight on an Entrepreneurial CEO Clint Scott with CLS Partners

Spotlight on an Entrepreneurial CEO Clint Scott with CLS Partners

Writer: Casey Troyer

Angela Pierce: For all the people out there in internet land, how would you describe what your company does?

HiRes-Clint-2317-EditClint Scott: We have four business units. We are a financial services business that uses insurance as our platform, so we provide health and welfare consulting, risk management consulting such as D&O, E&O, property casualty, worker’s comp, and EPLI, retirement services consulting such as deferred comp, and 401K plans. We also provide consulting around HRIS, payroll, and technology. Our goal is to help our clients increase their EBITDA number as well as reduce their human capital expenditure by the services that we offer.

Angela Pierce: Awesome. I use a lot of that!

Clint Scott: You should use all of it.

Angela Pierce: Ah, typical sales guy.

[laughs]

Angela Pierce: When I first met you, you were this really cool, slick guy. You didn’t look like you owned a business. I didn’t realize you were the owner at that time. What triggered you to start this business?

Clint Scott: In 2003, I was a limited partner in another firm that we sold. I didn’t want to sell it, but the two general partners wanted to sell. I sold it so they could cash out. For me, it started with a couple different things. 1) I felt like I could build a better mouse trap. 2) The culture of working for a large organization did not fit my personality. I felt like I needed to start an organization that had a better culture.

Angela Pierce: What does that culture look like?

Clint Scott: Our industry, historically, is what I describe as stale, male, and pale.

Angela Pierce: [laughs] I love that!

Clint Scott: It’s a bunch of old, white guys that sell by playing golf or being fraternity brothers. Relationships sell.

Angela Pierce: I agree. Anyone I buy any products like yours from— that’s totally true.

Clint Scott: For us, I wanted a Google type culture, but I wanted everything we did to be data driven and results driven.

Angela Pierce: That’s different than what you did before, right?

Clint Scott: Yes. It’s completely different than the company we sold. The breaking point for me was realizing that a company is only as good as the people they hire, and we couldn’t retain top talent because the organization I was with did not have their clients’ interest first, and they didn’t have the employees interest at heart. So, I left to go build an organization that had the employees first, clients second, and our vendor partners third.

Angela Pierce: I like that. That’s awesome. And you’re right— you are data driven. I just told a friend the other night that you’re my favorite vendor.

Clint Scott: You tell all your vendors that.

Angela Pierce: No, I don’t. I can’t stand most of them, really.

Clint Scott: Everything we do is qualitative.

Angela Pierce: That’s exactly right. You show me the numbers, and I get it. I can logically understand it. Every company should be like that. I think you guys are really skilled. You give me data and I trust it.

Clint Scott: I’m glad.

Angela Pierce: OK, next question. What were some of the obstacles you encountered when you started your business and how did you deal with them?

Clint Scott: Talent.

Angela Pierce: Really…

Clint Scott: Seven years later, that’s my biggest challenge. That’s every organization’s challenge. I don’t have all the great ideas. I had a couple mentors that gave me some advice. They said running a business is like real estate. Instead of “Location, location, location” it’s “Hire the right people, hire the right people, hire the right people.” The second piece of advice they gave was, just because your name’s on the door doesn’t mean you have to be the smartest person in the room.

Angela Pierce: No, you can actually be the dumbest.

[laughs]

Clint Scott: Your goal should be to be the dumbest person in the room.

Angela Pierce: I totally agree with that.

Clint Scott: For me, our business is completely talent driven.

Angela Pierce: That’s interesting. I would not have thought that.

Clint Scott: That’s why we are more successful and why we win. We hire people for what’s upstairs.

Angela Pierce: Good answer, sir. So I’m going to pick your brain for a minute. In the landscape of the products that you service, describe the type of companies that would use you guys versus when they wouldn’t use you. I think a lot of smaller companies don’t know what to do. To the extent that you can sort of explain, how would you say “Hey, in this world, this is the life cycle of when you do what in the world of benefits and healthcare and insurance, etc. “

Clint Scott: Our business units are typically not a huge line item for smaller companies. The cost of insurance, risk, retirement, and smaller companies typically don’t have 401Ks or deferred comp. Some don’t even have payroll companies. They do it in-house. So, some trigger points along the way would be if they scale in size and their company becomes more expensive and they need more expertise. They’ll need sophistication around what they’re going to do to remain in compliance.

Angela Pierce: So, if a company comes to you, do they typically have a person in charge of payroll and HR, or is it sometimes before and you’re helping them bridge that?

Clint Scott: We get all sorts. We get private equity and venture capital groups that are really small which have always been really small. They’ve always been independent and they don’t want to look at a PEO, and they don’t want to do a PEO and want us to help set them up and manage that process. Companies that start off with a PEO and where they outsource everything can be very effective for them, but it’s not cost effective after about 50 employees. That’s a trigger point where they come to us. With healthcare reform, and what’s changing now is we are seeing community rating from employers that are 2-99, so that’s another trigger. Once they get to over 99 employees, and they start being rated on their plan they need somebody that can understand the claims data, provide clinical analysis, etc. Typically, the larger the employer, the bigger the ROI is for our clients. We really focus in the middle market, and that is between 100 and 5000 lives. We have some larger companies. We’re working on a 30,000 life opportunity in Houston right now, and we have the sophistication and the team to do it. Other trigger points are companies looking to exit. We’ve got expertise on our risk management team to help clients make sure they are set up for success and protected when they’re ready to do that.

Angela Pierce: OK, so for a small business owner, give me the bullet point run down of the back office, people, benefits, HR… things they possibly haven’t thought about.

Clint Scott: First, what kind of business do you want to be? Are you a lifestyle business or an enterprise?

Angela Pierce: Hm. Es-esplain…

Clint Scott: A lifestyle business is when you have multiple owners in the business that are trying to extract all the cash out of the business.

Angela Pierce: I want to be that kind of owner.

Clint Scott: See, I don’t.

Angela Pierce: You don’t?

Clint Scott: I want to be an enterprise business. For us, we want to be scalable. We want to be a 100 million dollar company in the next ten years.

Angela Pierce: Can you still extract money out of it?

Clint Scott: You can, but it’s different. And it depends on your business.

Angela Pierce: Is that your goal? 100 million dollar business?

Clint Scott: Absolutely. We think we can do that in the next ten years. We want to be in twelve cities in the next five.

Angela Pierce: Good job. How many are you in now?

Clint Scott: Two. And we could go into any market we wanted to right now, and replicate what we do.

Angela Pierce: So, you’re the kind of company smart enough to replicate over and over in different markets. Did you plan that up front?

Clint Scott: Absolutely. We built the blue print here in Austin, our home office, with the plan of growing to other cities doing the same thing. Again, the challenge is finding the talent in each one of those cities. I’m not moving into a new city without the right people. If you don’t have the right people, you’re not going to succeed.

Angela Pierce: Right.

Clint Scott: Going back to your original question, if you want to be a lifestyle company, that’s great. Take all the money out of the company, pay bonuses to your people, and let them know that. For us, we want an enterprise business, and it’s a challenge for a lot of people. We have to accomplish two things. 1) We want to be like Zappos. We sell a whole lot of insurance and financial services, but at the end of the day, we are a service company. If I’m not passing at 110% on the service, I get fired. I have to be a service company first. Some companies can sell widgets, but people buy Apple because it’s so user friendly, and they have unbelievable customer service. If you have them as a product the first year, you can call their service line and it’s the best experience you’ve ever had. You can buy the extended service plan for three years. They will do anything you want, talk to you any time you want, and they will service that for you.

Angela Pierce: You know, I called your company one time on a Saturday. It was a bit of an emergency. She totally gave me all the answers.

Clint Scott: I’ve had CEOs call me on New Year’s Eve. My cell phone number is on my business card for a reason. We have an acronym UCE: Ultimate Client Experience. Everything we do, we act as servants to our clients. They’re first, above everything else. Now, we have developed our own propriety methodology and our go to sales strategy. There’s no one that can touch us. That’s why we’re going to be a 100 million dollar company in ten years. And that is because we hired the right people.

Angela Pierce: All right, so here is my industry expert question, If someone asks me, “Hey, what should I expect my benefits cost to be?” I get asked this all the time, by the way. And I always tell them it depends, but on average between 15 and 20 percent plus taxes, and that’s If you’re just a small or average size company providing average benefits. So, tell me how you think about cost structure of benefits and how a small company should think about it.

Clint Scott: Well, depending on your size, you may have less control of costs. That’s why it’s insurance. They’re hoping nine out of ten insured run really well, and if one doesn’t, they can offset and spread the cost among the other nine. I would tell clients right now, they should expect rate increases of 8 to 12 percent.

Angela Pierce: Every year?

Clint Scott: That’s about the average. That’s what you should budget for. Depending on how proactive you are, if you have the right strategy in place, and you’re pulling the right levers behind the curtain, you can control that cost up or down depending on where your clients are at. If you get a cancer on your plan, and you’re 100 people, forget it. That’s the challenge around health care reform, but if you want to remain an employer of choice, what are you offering? It can’t just be employee benefits. What are we doing for 401K? What are we doing for time off? What are we doing for student loan payback? What are we doing for all the other things that revolve around people’s lives?

Angela Pierce: Is there one you get the most complaints about?

Clint Scott: The biggest complaint is the cost of the premiums for those who have dependent coverage. We hear statements like, “I’ve got kids, and this is costing me 800 bucks a month.” They expect their employer to pick up more of that cost. That’s the biggest complaint because most of them don’t understand how expensive the coverage is in the first place.

Angela Pierce: Do you think it’s a companies role to show them that?

Clint Scott: I think a company should be as transparent as possible, but the reality is I think most Americans think their insurance should be free, whether it’s through the government or through their employer.

Angela Pierce: Well, there ain’t nothin free in this world.

Clint Scott: I agree, but that doesn’t mean we can change the mentality.

Angela Pierce: OK, big picture question. What are your tips for a small company? What are your mantras to live buy?

Clint Scott: Stay focused on your core product?

Angela Pierce: So can you branch out and try something new?

Clint Scott: Absolutely. Build forward. Don’t be afraid to fail. This one is going to sound redundant, but you’ve got to hire the right talent.

Angela Pierce: No such thing as redundant. If it’s that important, you have to say it.

Clint Scott: You have to hire the right talent. Don’t skip on that. A 50,000 dollar difference in price on another person could make a 10 million dollar impact on your revenue. Every individual is different. I’ll give you an example. We’ve got a CRO, Chief Revenue Officer.

Angela Pierce: I’ve never even heard of that.

Clint Scott: That’s right. We made it up.

Angela Pierce: Badass title.

Clint Scott: This guy had roles and responsibilities of what he did that paid him a great salary. There was an opportunity for me to grab this guy, but it was complicated and I really had to compromise. Guess what? He’s going to come with me. This guy will make a 50 million dollar impact on our organization.

Angela Pierce: Cool. I haven’t met him yet. I bet you keep him in a dark corner.

Clint Scott: No, I have him out everywhere. He’s a visionary, and he’s outside of the industry.

Angela Pierce: So, he’s got fresh eyes. I love fresh eyes. When I came into AirStrip, I asked the dumbest questions. People would look at me like “Huuh…”

[laughs]

Clint Scott: Our COO and CRO are outside the industry.

Angela Pierce: Right. The nuts and bolts people need to have the experience, but the visionary people need to have a vision.

Clint Scott: Right.

Angela Pierce: People tell me, “Oh you’re a CFO. You can’t do this industry you don’t have any experience with it. I say, “If you just give me a balance sheet and about twenty minutes, I can figure out how to run the financials of a company.” Any industry. I can probably just look at the balance sheet and tell you what industry it is.

Clint Scott: That’s right. So, for us it’s understanding the business, how do I increase the EBITDA how do I lower human capital, and how do I disrupt an industry that is stale, male, and pale?

Angela Pierce: Very good.

Clint Scott: I really believe we can revolutionize this industry.

Angela Pierce: Really?

Clint Scott: We’re already doing it. We double revenue in fifteen months, and we’ll double revenue the next fifteen months.

Angela Pierce: Wow.

Clint Scott: We’ve doubled our staff in the last eight months, and we’ll double our staff in the next six months. I can’t hire people fast enough.

Angela Pierce: That is awesome. Good job. That’s inspiring.

Clint Scott: It’s fun is what it is.

Angela Pierce: I like it! Ok, the last question I ask every one. If you couldn’t do what you’re doing now and you could do anything you wanted, what would you do?

Clint Scott: I’d move to Colorado and fly fish, ride my bike, and hike in the summer. And I’d snowboard every day in the winter.

Angela Pierce: That’s all you would do? All day every day?

Clint Scott: That’s it. Well, I’d hunt in the fall.

Angela Pierce: Because there’s stuff to kill… meat to eat!

Clint Scott: God didn’t give me these things (points to his teeth) to eat salad.

[laughs]

Angela Pierce: Amen brotha! That’s good. OK, any final parting words? Any words of wisdom for anyone out there who looks at you and your job and sees you as an idol?

Clint Scott: Disruption.

Angela Pierce: Yeah. That’s what we do. I get it.

Clint Scott: Disrupt. Disrupt. You can build a business doing the same thing as every one else and you can be successful just by elbow grease, but if you really want to make a change, break some shit.

Angela Pierce: Ohhh! Yeah!

Clint Scott: My goal every day is to break some shit.

Angela Pierce: I do that too. I break shit all the time.

Clint Scott: All the time.

Angela Pierce: I’m like a big bull.

Clint Scott: When I hire people, and they’re coming from billion dollar companies…

Angela Pierce: They probably freak out, right?

Clint Scott: They do. I got a guy coming in next week. He works for a two billion dollar company, and he’s looking at our company and he’s like “Why would I come here?” I said, “We’re gonna break some shit.”

Angela Pierce: Yeah, so what do you say? do you want to do that with us? We’re really fun. If you don’t want to, you’re probably not right guy,

Clint Scott: Right. But guess what? He can’t wait to get here.