Steve Morris & Starting a Company

[00:00:00] Adam: welcome to that people helping people podcast where we talk about culture, social change, and entrepreneurship. I am very excited today to be speaking with my father, Steve Morris, who started assets, strategies group or. ASG about 17 years ago. As a quick disclaimer, I do work for my dad. I manage a cloud platform called ASG edge for retail real estate management.
[00:00:36] With that said, let's jump right in. Thanks that for talking to me, and maybe we could kick off with a little bit. What gave you the idea to start your own company?
[00:00:44] Steve: Well, I tell you, when I had a long corporate career and I worked for a number of turnaround situations, and after my last one, which was at the limited, I just started, I had a small nest egg and I started looking around for something I could buy and run.
[00:00:59] I always . Wanted to run my own business, so I ran a small.com and Baltimore for about a year and a half. That didn't pan out. I teamed up with a friend of mine, Rick Warren, and we looked at a number of businesses we invested in, one that was in bankruptcy that unfortunately stayed in bankruptcy, didn't pan out, so I'd been on about a two or a two and a half year quest on kind of startup ideas and things I could get involved in and end up running.
[00:01:27] And controlling, and I was pitching an idea to the CFO of justice, a guy named Kent Berger around a credit card, a proprietary credit card idea and camp. Ask me why I wasn't doing real estate when I was COO of real estate at limited brands. He said, and justice was part of limited brands. They were getting half a million dollars a year in savings through our.
[00:01:53] Various initiatives. And frankly, I was a bit burned out after leaving the limited about real estate and I, I gave them the names of some people I thought would be good for him to contact. And we scheduled a meeting about a month on and at that meeting he again, he set up, talked to all of those people.
[00:02:12] They're not anywhere near. I have the capabilities you had. Think about this again. He said, I'll give you would be all in. I'm giving you a contract and doing our audit work, landlord audit work. So at that point, I've always wanted to do, I've always been a Namor, the idea of having an in business with a partner and the person who worked for me at the limited and was a good friend all and I.
[00:02:36] Kick that idea around and the partnership idea goes back to, you know, Paul Allen, bill Gates, Charlie monger, Warren Buffett, and reflect, or John D Rockefeller. There are a lot of really good entrepreneurs that may be more prominent, but they had a, or have a partner that. We're pretty instrumental in beginning of the business.
[00:02:57] So I kicked this idea around with all Ambien and also cautious. I had a couple of trips scheduled. I was in San Francisco. I met with gap and asked them about if we started this company, what would it look like to them? Would, would it be something they would give us contracts for? And I will say, and they said yes, they're all in.
[00:03:16] They, they used outside auditors, they split the workup. They'd be happy to give us a, a piece of their work. I went to New York and I met with that through a friend of mine. I met with the CFO, Footlocker, and I got the exact same reception. I think there was a big awareness in the industry at that time of the results, limited brands that had on audit landlords.
[00:03:37] Which was well over a hundred million dollars in recoveries. So they also said they give me a contract, and then a Abercrombie and Fitch said they'd give us a contract. So we were going down this path of starting the business, and then rich Menino, who ran the audit practice at limited, heard about it.
[00:03:55] And, uh, said he wanted in. So we actually started the company with the three of us, uh, a third, a third, a third. And our concept was doing audits on a portfolio basis and on a flat fee basis. Everyone in the industry, we're doing audits on a contingency basis, which takes you a long time do, which may be lucrative, but it takes you a long time to see any return on investment because the
[00:04:20] Adam: companies have
[00:04:20] Steve: to execute.
[00:04:21] Yeah. Sometimes it takes a 12 or 18 months to get a settlement, and if we're going to do this in a big way, we knew we hadn't had the hire three to seven people to manage the workload, so it would be out of pocket on payroll and our own payroll and so forth. So we knew we had to get. A flat fee up front and then build the business from there.
[00:04:44] Adam: So when you started, it sounds like you had a few contracts already in hand to
[00:04:49] Steve: basically
[00:04:50] Adam: jump on the road and start running.
[00:04:52] Steve: Yeah, we have promises of a contract. Our first hire was actually a gen Hilger who worked for me at the limit of brands all, and I. Talk to her on a Friday and said, we're thinking of starting this company, would you be interested in working for us?
[00:05:06] When I met with her on Monday, I said, have you thought about this over the weekend? And she said, I quit my job this morning. So we're, we were very fortunate to having a number of people that had worked for us at L brands. Who were available and interested in wanting to work for us again, CRISPR mochano, Holly Harper, Holly Janks.
[00:05:27] So we had a really good meet at workforce that was pretty experienced, and we knew they were going to be pretty good workers. So that was kind of an early startup. And then one of the big conventions in this. A real estate administration world is a national retail tenants association. And that was coming up, I think came up a week after we started the company.
[00:05:48] So we, the three of us, Paul and rich, and I got tickets and went to NRTA rich and Paul had been going to NRTA for seven years. I'd gone sporadically, but we knew a lot of people in the industry. So that was a pretty good launch as well, to talk to people and figure out if we can get contracts. Now that was a scramble.
[00:06:07] We put together our audit work papers, our business plan, our pricing, our first websites, pretty amateurish marketing materials, looking back, but we got a number of commitments also at NRTA. And then limited to an Abercrombie and Footlocker and gap all followed through and gave us some contract work. At that point in time, CBL had, which is a large retailer, had acquired a, another large retailer, Jacobs, Jacobs, and they'd raise the cam charges and the other prorated charges 50% on the malls they acquired.
[00:06:44] So retailers were. I had never really audited CBL in the past. So I think we audited CBL for five different clients the first year, and it was probably 300 different leases and the settlements were probably in the $50 million range across all of those retailers. We were very fortunate in having, Abercrombie is one of our first clients because CBL was very recalcitrant about lending us audit developers put up a lot of obstacles.
[00:07:13] So this business, they'd delay. They want to review lease language. Sometimes they think they have the right to insist you have a CPA on staff, which we did, but we had to had to show that. And fortunately Abercrombie at that point in time, CBL was trying to get Abercrombie into some of their malls. And Jeff.
[00:07:34] Just stonewalled them and said, I'm not talking to you until you let my audit group in. So he was very helpful in getting us in the door at CBL and getting our audit schedule. They were interestingly kept their audit group decentral I mean, their accounting group decentralized, they had about 50 malls.
[00:07:51] Every other reads had centralized, had a shared service group. What the consequences of that was, we had to travel to every one of those 50 miles to collect our artwork papers. So we're all on the road for quite a while. Everyone in the company going in, looking at their backup to all their cabin property tax charges, scanning, everything.
[00:08:14] We bought everyone portable scanners. And coming back and trying to put that into workbooks. Now, at the same time, we had a vision of full service, real estate business practice, which meant we wanted to do real estate strategy, store design, and construction, lease administration, audit work, of course, and tenor, eventually 10 a representation work.
[00:08:35] So the second thing we did, and the second key employee who's now as president, who is now president, was Carrie Barkley. Also worked for me at the limited and Lewis cell who worked for Carrie and we want to do, get in the real estate strategy or predictive analytics business. And we got a contract, I think about three months after we started, four months after we started to put together a strategy framework for New York and company, which had been spun off from the limited and where I knew the head of real estate, John de Wolf,
[00:09:08] Adam: just jumping in.
[00:09:08] Did it take a long time to.
[00:09:11] Steve: Yeah. I think it's interesting cause now we're in five lines of businesses. We're in strategy or predictive analytics. We're in Tena rep or in store design and construction were in the audit business is really transformed into an outsource, at least administration ran accounting practice and each one of those.
[00:09:29] So we've really started five businesses, and each one of those have their own . Unique challenges and and life cycles and good years and bad years. But what's nice about it is we're all selling the one industry verticals. We're all selling the specialty retail. So there's some great academies of that, and when one area is hot, another area might not be as robust in that particular year.
[00:09:52] For example, in 2008 the store design and construction business kind of almost won away where the strategy business became, had a really good year. So. It just says ferried over the air, which of those businesses, and we keep looking for things that we can do that. Selling to that specialty retail industry vertical.
[00:10:11] Do you remember what
[00:10:12] the
[00:10:12] Adam: hardest point was when you were getting started in the first run?
[00:10:16] Steve: Well, the first three years were pretty tough. I think we had the three partners, and I think it was five to seven employees, and we did a million, two 1,000,001, 1,000,003 in revenue. So each of the partners was maybe making 80 or $90,000 which was way below what we could make.
[00:10:36] If we just took a corporate job and I think all three of us had our ears open for that, the right opportunity came along. We might say, Hey, to our other two partners, I'm out. So that was a bit of a struggle. We believed in what we were doing. We enjoyed working with each other, but just there was that constant question Mark, is this a real business or not?
[00:10:57] It's a scale we wanted to do it at. Now the next year, the fourth year, we did 1,000,007 and then the year after that we did 3.5 million. So. If we just gained momentum and we went from a position of having to sell ourselves based on our corporate careers to having real credibility as a company and the company just selling itself.
[00:11:17] Because we've done great work. We've worked with I think, 15 retailers the first year. A lot of those retailers gave us add on work. Sherman jewelers became a, or K jewelers became a really big client. We did all of their audit work, German shops, which we drove through a snow storm from Columbus to Philadelphia to meet with Jarman shots.
[00:11:39] And on the way back they called and said they were going to give us their Mark. And they became a really big client as well. So, and justice was a big client over the year. And so it was interesting how that doing a good job for clients gets you more work with one.
[00:11:53] Adam: No, I, one thing I've always been impressed with is, is you seem to have really strong values over.
[00:11:58] Steve: Over
[00:11:59] Adam: what ASG stands for and represents both to our clients and internally to our employees.
[00:12:05] Steve: Yeah. I think my biggest frustration in my corporate life was building a certain set of values in the people that worked for me and they had to do with customer service and teamwork and working together as a team and leveraging everyone's talents and getting people in the right roles, and then when whatever happened in those corporate jobs, usually a change in ownership.
[00:12:25] New people coming in at the top and wanting to do things a different way. I saw the things I had built in the values I thought, or Orton call away. So one of my motivations for starting this company was build the lasting set of values and cultures and, and we were very clear from the very beginning, we wanted to be a a work life balance company.
[00:12:48] We saw most of our early employees had left the limited because. They were women and the demands that limited wanted to put on them in terms of 50 60 hour work weeks be available on Friday night or Saturday morning. They just wasn't part of their life values. So we thought we could put together a company that respected that work life balance.
[00:13:08] And I think we've been successful doing that. Customer first is just always a really good business strategy. I've always felt, I talked about this in the past. I always admired Honda's. Pricing strategy. They were always best quality, lowest price. There's not a reason you can't give the best product and do it at at the most valuable price to the customer.
[00:13:30] So we thought that was the best way to grow the business as well. As opposed to chasing maybe the highest price consulting contract we could get, like our audit practice, it started out at $2,200 at least. I think when we, towards the end, we were up to $3,000 at least, but that represented about a 10% of the savings, whereas most contingency people were charging 25 or 30% of savings.
[00:13:57] And we were obviously getting money up front and flat fee, but it was a, you know, the clients really recognize that as this different value and was responsible for us getting ongoing work with them. So that pricing was always that way. I think those are the key key things. I don't know if I did, I, you know, I really believe working as a team as your stronger, yeah.
[00:14:18] And people understanding that they are part of a bigger company and contributing to the team and pitching them wherever they need. That gets harder and harder as the company gets bigger and bigger and more and more kind of product areas. People get a little bit siloed, but we'd still try and emphasize that.
[00:14:33] I was
[00:14:34] Adam: going to ask, you know, no. ASGs up to about 40 employees. What some of the growing pains are. Then getting up to that and what
[00:14:42] Steve: changes you've seen while we went through two ownership changes. We all, and I bought rich Menino out after the third year, and then, uh, Paul on the, after that experience, Paul and I negotiated.
[00:14:55] Or set up a buy sell agreement. I was honestly thinking all is about 10 years younger than I am, and it would be buying me out, but it turned out to be the other way. He decided he wanted to have a career in different field. He got a master's in literature and has been trying to write a book, so he exercised his buy sell agreement and I bought Paul out and that was kind of a lengthy process to about a four year transition.
[00:15:22] But that's been a major transition. And then thinking about succession planning and trying to groom internal people to take on more responsibility, more leadership training courses to building those things back into the company where we are today.
[00:15:37] Adam: Did you ever envision that ASD would go to where we are today?
[00:15:41] Steve: It's interesting. I'm not sure I ever have a a business plan that we're going to hit. X revenue or X number of employees. It's, it's all been organic growth and it's, I become. My world's is increasing. It was from the beginning, but it's even increasingly more so the front man, the sales, the customer facing person.
[00:16:02] So I've been 15 years chasing relationships and customers. I'm a great networker. I'm not maybe the greatest salesperson in the world, but what's worked for us is our credibility and our networking ability. So that's, that's just been a constant. And. We'd never knew how far that would take us. So we bootstrapped the company.
[00:16:23] Nobody gave us a million or $2 million to go hire a, you know, a superstar in X, Y, Z kind of a skillset. So it's all internal learning and getting better and better at what we do. We think one of the things we're really smart about, and I think I'm smart about it, and Paul, who founded the company with me, the survey smarter.
[00:16:43] Building, we call technology enabled business processes so we can deliver things. Part of the value we create as we invest in data and technology and spread that across a number of clients. So that's true in our strategy work. It's true in our, at least administration work. It's true in our store design and construction work.
[00:17:02] Some of the backend software and investments we've made in and managing those processes. So we think that's a been a smart, clever way. I'm not sure it's just a tough competitive world out there. I'm sure we give full credit for that one week, which are in price or services,
[00:17:21] Adam: is that retail is a tough competitive world.
[00:17:24] Has it changed a lot in the last 17 years?
[00:17:26] Steve: Oh my gosh. I love retail. It's just such an exciting industry. It's. I think $2 trillion. If you exclude auto sales and gasoline sales, and it's ever changing. There's one of our CEOs whose company eventually went bankrupt. He's a great customer of ours, and he just always called it a dog eat dog world, and he relished it.
[00:17:48] He relished the fight, and it's, you've just seen, you know, Walmart was the big disruptor in the 1990s it became a. Multi-hundred billion dollar retailer, which nobody thought was. Remotely possible decade before that. The real estate then use have just transformed over the last 1520 years from a thousand or 1300 shopping centers to 400 power centers do 150 outlet centers and all these value type of locations.
[00:18:20] You see TJ max now, which an in our. Sweet spot of a customer category is the highest valued stock on retail stock on wall street, excluding Amazon. If you count Amazon as a retailer, obviously you have the Amazon effect, and simultaneously with the Amazon effect, you have e-commerce . Just sweeping the industry and social media and mobile and, and how customers want to engage brands now.
[00:18:46] And that's creating clearly a lot of turmoil with retailers who don't quite get it and have a lot of legacy systems and legacy thought process just losing out. But you see these up and comers. One of the growth part of our businesses right now are eCommerce companies that are building their brand through social media.
[00:19:04] And being very successful as brick and mortar retailer. So vineyard vines, we just built a store for UNTUCKit or now people in that category. And we're seeing a lot of wholesalers who were traditionally. Built their brand by being, uh, a shop in shop in Macy's or product line amazes or the fashion department store now thinking they have to figure out their own brand, figuring out how to go to market with their own brand because they can't rely on the department stores who are losing market share in general.
[00:19:34] The malls are losing traffic. So we're, we're seeing a lot of people in those categories trying to sort out brick and mortar and how to bring their envy commerce and how to bring their brand to market. So that's the growth. But. It's a $2 trillion industry and it's growing, so there's certainly going to be a lot of movement within that, but we think we're well positioned to help retailers and whether they're mature retailers, rethink their strategy, remove retailers.
[00:19:59] We want to get into more rec and mortar retail.
[00:20:03] Adam: Yeah. I see that in the news a lot, that there's so many long established retailers that are. Struggling and going under and a lot of, or quality miles that are just struggling right now.
[00:20:13] Steve: Yeah. Other places, people shop are just going to change and the smart retailers are anticipating that.
[00:20:21] I have lunch last week with a friend who, an ex limited friend and he's very unhappy with the way. He's still got some stock in the limit and he's very unhappy with their. Lack of foresight on this. And his example was brand pink. In his opinion, pink should be in every center where there's a whole foods and instead they're in a thousand centers and a third of those thousand traditional shopping centers and closed shoppings are going to close in the next five or six years.
[00:20:50] And they're just not thinking ahead of where they need to position that brand because they're selling to millennials. Millennials. Shop in their neighborhoods and shop at whole foods shop at Costco and REI. So having your brand, uh, up against the Nordstrom maybe isn't the best thing for that particular brand and given their customer customer focus.
[00:21:11] So you've got, you've got to really think strategically about this. Unfortunately, we're in a a year where a lot of retailers aren't thinking there. We call it deer in the headlights. They're just worried about what's the next chip to fall on their now. Proactive with thinking about how to reposition their brand.
[00:21:26] We think we can help them. So
[00:21:27] Adam: what's been your maybe greatest takeaway from building up a company?
[00:21:32] Steve: All the people, you know, I love building a culture and a, and a group of people and um, you know, I have a high loyalty to the people that work for us. We've, I think we're, we're a high demand employer in terms of what we expect back.
[00:21:45] But seeing people successful in the company. We've had people get promoted and even though we're a small company and people promote and get better, better jobs within the company, we took someone out of an opening, the male job, and now he's a developer experience developer. Working for you, and that's really fun.
[00:22:03] Being able to develop an and have opportunities for people
[00:22:06] Adam: looking at the, the world in general, like, uh, what would an ideal world look like to you?
[00:22:12] Steve: Or give them my, my political insert or on the left side of the spectrum and I champion diversity and we just want to see the world and go more in that direction.
[00:22:23] I think economically. We've tilted too far to this unequal distribution of income and we continue to see politicians favoring capital over demand. So they'll give a tax cut the capital spending, they're anti-union. We're really need as higher minimum wages, higher wages in general, and more demand generated in this economy.
[00:22:47] You'd give bill Gates another $10 million. It's just going to go into whatever trust fund he's got. Not to pick on bill Gates. But it doesn't generate, it's not, there's no multiplier effect. It's not generating spending.
[00:23:01] Adam: You can't go around and shop at all the mall.
[00:23:03] Steve: You can only go out to dinner five nights a week, two weeks.
[00:23:06] It's not going to change his spending, and it's not going to trickle down any place. So I would think we'd have more, you know, a smarter economic platform would champion spending, I
[00:23:17] Adam: saw in Washington state, they raised the minimum wage. And they initially thought it was going to have a negative impact on businesses being able to afford I employees.
[00:23:28] And they found that actually increased spending a lot because now people have more money to go out and spend, and it was a big
[00:23:35] Steve: boost to their economy. Now that just seems so obvious maybe, but people fight it. Um, their scare attack is McDonald's won't be able to hire $7 an hour people and they'll automate the McDonald's and we'll lose.
[00:23:48] We'll have this high unemployment if you raise minimum wage, which just seems like self-interest. Type of argument for people that want to make ever more and more profits as opposed to sharing it. So you see in the countries in Europe that have much more even wealth distribution are certainly happier this country.
[00:24:09] Adam: Certainly a very dynamic
[00:24:11] Steve: country.
[00:24:12] Adam: Well, thank you very much. It's been a real pleasure going in and hearing more about your story of
[00:24:18] Steve: how you got started. Well, thank you. That's been, it's, I never imagined a a, I'd live in Columbus for 20 years, or I'd have a business 2017 15 years on your anniversary this year, so that's been extremely exciting.
[00:24:35] I feel like I've really got a legacy to leave behind. Really appreciate it. Thank you very much. You're welcome. Thank you.