The ESOP Playbook: Brian Allen on Ownership, Quality, and Long-Term Growth Transcript

[00:00:00] Brian Allen: Basically, all that happens is the company stops sending all this
money to the federal government for taxes, and they start paying the shareholders over
an eight to twelve-year timeframe. As the shareholders get paid, the employees end up
with the company for free, creating an incredibly powerful transfer of wealth from one
or two families to fifteen or sixteen hundred people over time.
[00:00:26] Todd Kavanaugh: Hey there, and welcome to Under the Roof, the official
podcast of Baker Roofing Company. I’m Todd Kavanaugh.
[00:00:33] Matthew Elban: And I’m Matt Elban. We’re here to connect the dots
between field and office, leadership and crew, values and action.
[00:00:40] Todd Kavanaugh: In each episode, we dive into the stories, lessons, and
updates that matter to our team.
[00:00:47] Matthew Elban: From safety and career growth to company milestones
and good old-fashioned storytelling, it’s all about living out what makes Baker, Baker.
Let’s get into it.
[00:00:59] Todd Kavanaugh: Hey there, and welcome back to Under the Roof.
[00:01:02] Matthew Elban: I’m Matt Elban.
[00:01:03] Todd Kavanaugh: And I’m Todd Kavanaugh. Today, we’re sitting down with
Brian Allen, President and CEO of Precision Walls.
[00:01:10] Matthew Elban: Brian has a unique perspective on what we’re going
through here at Baker. He’s a second-generation owner who took his family’s
forty-year-old business and made the decision to transition it to 100% employee
ownership back in 2019.
[00:01:24] Todd Kavanaugh: He’s not just someone who has been down this road
before; he’s now serving on Baker’s ESOP board as an independent board member. He
is helping to advise our journey while watching us experience what he’s already lived
through.
[00:01:39] Matthew Elban: We’re going to talk about that family succession, the
decision, what he’s learned in almost six years as an employee-owned company, and

what it’s like to grow and even acquire other companies as an ESOP. Welcome, Brian.
We appreciate you being here with us today.
[00:01:53] Brian Allen: Thank you. I’m glad to be here.
[00:01:54] Matthew Elban: Absolutely. Let’s start with an easy question I always like to
ask: What’s the last book you’ve read, and what did you take away from it?
[00:02:04] Brian Allen: I’m reading one right now called How to Build the Life You
Want. It discusses finding purpose, slowing down your life, and being intentional about
your relationships and what is most important to you.
[00:02:26] Matthew Elban: That sounds like a great one for someone in your role, and
probably a good one for everyone else, too.
[00:02:32] Todd Kavanaugh: Yeah, we’ve received a lot of great recommendations.
We’ve talked about adding a recommended list from the podcast and even sending
some of these books out to people.
[00:02:44] Matthew Elban: I actually just finished the two that Mark Lee said he was
reading. I’ve been listening to them on Audible while driving.
[00:02:54] Todd Kavanaugh: Going back to those recommendations, Crisis in Costa
Rica: The 1948 Revolution was what John Matthews recommended.
[00:03:01] Brian Allen: He did.
[00:03:04] Todd Kavanaugh: That’s right. And the other was regarding the geopolitical
impact of copper, I think.
[00:03:08] Matthew Elban: That was The War Below, rare earth minerals.
[00:03:13] Todd Kavanaugh: Brian, your dad started Precision Walls in 1977. He had a
standard he called “no such thing as good enough”. What was it like growing up in that
family, and how did that shape how you ran your business?
[00:03:31] Brian Allen: It was great. I tell people this all the time: the two greatest
things my parents did for me were, one, they stayed together, which was difficult to do
given that my dad was in a very hard construction business. That was very good for the
three of us; I’m the youngest. Second, he taught us that it was a privilege to work, that
it wasn’t something we had to do, but something we got to do. We’ve never looked at
work as a burden, but as a fortunate opportunity. Every break, we were working,

sweeping floors on a job site, so there wasn’t a lot of free time. He didn’t give us much
free time, which kept us out of trouble.
[00:04:21] Matthew Elban: It’s funny you mention the “get to” vs. “have to” mindset.
I’ve used that with my teams and even when coaching sports. Physically being able to
work or play is a blessing and a major shift in mindset.
[00:04:43] Brian Allen: Absolutely.
[00:04:43] Matthew Elban: For those who don’t know Precision Walls, you guys are
consistently ranked in the top 10 specialty contractors in the country by ENR. Give us
the quick version of what you do and how you got there.
[00:04:56] Brian Allen: We started as a demountable partition company in 1977. For
the first ten or twelve years, we didn’t do much drywall until the mid-nineties. As
partitions fell out of favor, we transitioned more into drywall. After grad school, I
wanted us to become the best drywall company on the planet. We had a great run until
about 2015. At that time, we were roughly the fifth-largest drywall company with
decent margins, but less than 2% of our revenues were outside of drywall.
That wasn’t sustainable, so in 2015 we set a goal to have 15% of our revenues come
from outside drywall by 2019. We actually hit 22%, and today nearly 50% of our
revenue comes from outside the strictly drywall business. I’m proud that our drywall
business has also been growing at over 15% a year since 2012, so we didn’t grow our
percentages against a shrinking base. We are now diversified across Divisions 8, 9, 10,
11, and 12, and we purchased a glass company in 2023 to add to our ESOP for further
diversification.
Regarding the ESOP transition: in 2017, I didn’t know much about it. We were
approached by a private equity (PE) group that wanted to use us as a platform for
national growth. They were very smart, but those sixteen months were the worst of my
life. Their thought process was extremely short-term, quarter-to-quarter profitability,
which was the opposite of how we thought. I walked away from that deal because it
wasn’t good for our culture or our employees long-term.
In 2018, I began researching top ENR companies and found several were ESOPs. I
traveled to meet with three different ESOP companies, talking to owners, executives,
and field employees, and I fell in love with the process. It’s incredible for everyone.
Owners get market value for their shares. Because a 100% employee-owned company
stops paying federal and often state taxes, that money is redirected to pay the
shareholders over an eight to twelve-year timeframe. This creates a powerful transfer

of wealth to the fifteen or sixteen hundred employees. Both political parties support it,
and I’m now working for the retirement of our employees. It gives field employees a
chance to double their 401(k) and retire comfortably.
[00:10:21] Matthew Elban: You mentioned that in 2015, less than 2% of your business
was outside of drywall. You hit 22% in five years and are now at 48%. Was it easier to
grow pre-ESOP or post-ESOP?
[00:10:55] Brian Allen: I’m not sure I can see a big difference in the growth rate itself,
but the real impact is on the employees. When I do orientations, I find it takes about
four years for people to really believe in the ESOP. They’ve worked elsewhere where
promises weren’t kept. Once they see that retirement account balance grow, especially
in our sixth year, the excitement is incredible.
[00:11:57] Matthew Elban: It’s about mental and emotional buy-in.
[00:12:05] Brian Allen: It requires a lot of education to foster an ownership mentality.
We aren’t just working for some company’s profits; we’re working for our own
retirement. I tell new hires that with seventeen hundred people, if someone is taking
advantage of our team, they are taking money directly from you. That mindset reduces
waste. I’ve also noticed people are more open to training others now. Before, there was
a fear that a mentee might take your job; now, the thought is that the better the team
is, the more successful we all are.
[00:13:12] Todd Kavanaugh: We’re coming up on our first statements next month and
are preparing people for the fact that it might not be what they expect initially. It
sounds like year four is when people really catch fire. How was the ESOP idea received
when you first told your siblings and employees?
[00:13:44] Brian Allen: There was initial fear because they didn’t know what it was.
Shareholders worried about losing control. The wonderful thing is that while everyone
becomes an owner, the leadership structure doesn’t change. It actually allows leaders
to think in ten-year cycles rather than quarterly. Your culture, values, and mission stay
the same. In private equity, they often want to flip the company in five years, which
makes long-term equipment investments difficult. Once people understand that it’s
simply an extra retirement benefit and the legacy continues, they get comfortable.
[00:15:16] Todd Kavanaugh: Can you give a concrete example where you saw
someone really embrace ownership thinking?

[00:15:54] Brian Allen: I’ve seen field supervisors make decisions based on our
long-term reputation rather than immediate profit. They’ll choose to redo a job
correctly to keep a customer for life, even if it costs $2,000 in the moment, rather than
worrying only about the current job budget.
[00:16:50] Matthew Elban: Your dad’s “no such thing as good enough” sounds like our
“always good work” motto. Has the ESOP deepened that standard?
[00:17:07] Brian Allen: We push for a personal commitment to quality. I tell them: “If
you’re not willing to sign your name to it, you need to redo it”. Putting your initials on
something creates pride. As employee-owners, we want to do it right the first time for
our legacy. Speed is an epidemic in construction, but we need to slow down and do it
right. Redoing things two or three times looks bad and hurts budgets.
[00:18:39] Matthew Elban: You’re now an independent board member for Baker’s
ESOP. What made you take that on?
[00:19:05] Brian Allen: I believe in the strategy and what it does for employees. If I can
use our six-year jump to help you guys get there faster or avoid mistakes, I want to do
that. ESOPs have many compliance and IRS rules, much like a retirement plan. I can
share our experiences so you can learn from them or even do it better than we did.
[00:19:58] Matthew Elban: We appreciate that help.
[00:20:00] Todd Kavanaugh: Is there a specific key to success in those early ESOP
years?
[00:20:18] Brian Allen: I would have spent even more time on education to connect
the dots between the employee and the company goals. COVID-19 made face-to-face
communication difficult in 2020. I traveled to every location initially, but I should have
kept that up every year. Now that statement balances are higher, there’s more interest
and more healthy questions. We also rewarded employees close to retirement by giving
out more shares in the first five years. However, you have to ensure you have shares for
new employees in twenty-five years, which requires a cycle of people retiring and
selling shares back to the company.
[00:22:58] Matthew Elban: With all the private equity and roll-ups in the news, is
employee ownership a way to compete?
[00:23:21] Brian Allen: It will be hard for those other types to compete with ESOPs. We
keep our culture and values stable while they are constantly converting companies and

dealing with change. Once the initial debt to shareholders is paid off and cash flow
becomes strong, having everyone aligned with core values is extremely powerful.
[00:24:27] Todd Kavanaugh: What vision would you cast for Baker over the next few
years?
[00:25:02] Brian Allen: There is a huge opportunity in service and maintenance. When
you install a roof, the customer wants you to maintain it. An employee with an
ownership mindset says, “This is my roof, and I’m going to make sure it doesn’t leak”.
Service requires fewer people to produce more revenue, making training easier.
Leadership’s job is to share as much information as possible. A superintendent on a
roof with the same information we have would be unstoppable. They aren’t making bad
decisions on purpose; they are doing the best they can with what they know. We must
teach them that safety, quality, and relationships are more important than the budget.
If we treat customers like kings and queens, they will take care of us. Our job is to
create fans who want us on every job.
[00:29:05] Todd Kavanaugh: Everyone benefits when that machine is rolling along
correctly.
[00:29:15] Matthew Elban: It’s about personal commitment and stewarding this for the
next generation.
[00:30:04] Todd Kavanaugh: What’s on heavy rotation for you right now?
[00:30:24] Brian Allen: We’re putting together a new five-year plan. I believe in servant
leadership, our job is to serve the people who work for us and make their jobs easier. If
you have to use your title to get something done, you’ve failed. I tell our leaders to act
like a preacher on Sunday: if people aren’t willing to follow because they believe in the
vision, and you have to use a “stick,” something is wrong. We need to engage people’s
opinions rather than just telling them what to do.
[00:31:34] Matthew Elban: That’s it for this episode. Big thank you to Brian for sharing
your wisdom and experience.
[00:31:52] Todd Kavanaugh: Brian’s story is proof that employee ownership works and
that culture matters as much as structure.
[00:32:13] Matthew Elban: Don’t forget to follow the podcast and share it with your
crews.

[00:32:21] Todd Kavanaugh: Remember: We shall do good work at a profit if we can, at
a loss if we must, but always good work. That wraps up this episode of Under the Roof.
[00:32:52] Matthew Elban: See you next time