To be or not to be

Kevin Groves faced a dilemma two years ago, when the majority partner at Alpha Video wanted out.

Although Groves could have sold his minority stake, too, for a nice payday at age 54, he decided to instead go for it. So he got a bank loan, bought the company and now is trying to drive it to its highest potential. One key for him: never think you’re the smartest person in the room. Here is an edited version of our conversation, useful to anyone thinking about cashing out or signing up for another round of heavy lifting.

Upsize: Describe your company as it stands today.

Kevin Groves, CEO and owner, Alpha Video & Audio: We’re at 130 people, and I just signed a requisition to hire more. We have 29 percent revenue growth from 2015 to 2016. Unfortunately, we weren’t prepared for that. We engaged subcontractors to do the work, so the bottom line increase wasn’t as big as the top line.

We provide video and audio solutions and digital signage systems across the country. Our biggest markets are sports, casino gaming, corporate communications, city and state government, higher education.

Upsize: What led to the big growth rate last year?

Groves: We decided to go after winning some large projects in the sports environment. They’re so long-acting; you bid and then the winning takes a long time. You don’t always win the perfect number of projects.

Upsize: Sounds like it could be a good problem to have! One of your high-profile projects is for U.S. Bank Stadium in downtown Minneapolis.

Groves: It’s the control room, so all the video and graphic assets that appear on the scoreboard. We have a great relationship with the Vikings. We have a tech expo every year, where we invite clients, and this year it was at U.S. Bank Stadium. We had 350 people this year, a record.

Upsize: Those big-name projects must be kind of a thrill.

Groves: We did Churchill Downs, Lambeau Field, the Atlanta Braves, the Timberwolves at the Target Center. We just completed a three-year project at the state capitol in St. Paul, all of their meeting rooms and video broadcast facilities. We’re one of the top three companies in the country for working on sports venues. In gaming we’re on the upper end.

Upsize: A couple of years ago you made the decision to buy full ownership of the company. What was the lead-up to that decision?

Groves: We bought the company 12 years ago, and I had 45 percent and Stan Stanek, my business partner, had 55 percent. From the start, we had an agreement that we wouldn’t make a decision unless we both agreed.

That tends to slow things down. We bought it from the founders, one was the news director for WCCO in the 1980s. We ran it the way it had always been run.

Upsize: And that worked well for quite a while.

Groves: 10 or so years later, Stan and I decided it was time to change. I’m 56 now; I was 54 when we started to move toward a sale. Any time you have two people who aren’t exactly in the same place trying to go to the same place, your speed is slowed a little bit.

We always were in different places, neither was right or wrong, just different. He said, I know you want to drive this and I don’t think I’m in for that next lift. I said OK, let’s talk about this.

Upsize: Did you consider selling yourself?

Groves: Oh yes. I could have sold and stopped working. We were cash-rich, had no debt. It was pretty solid.

Upsize: Did you think about it?

Groves: Oh yes! Absolutely! But I went through a process, and what it came down to was, I didn’t think we had gotten the company to where it could go. When I’m on a mission, I really struggle to let it go. And if I don’t get there, I kick myself in the ass.

Upsize: So what thought process did you go through to decide?

Groves: It’s the same process every time. You ask and worry, will we be able to do what we need to do? I’m on the board of PSNI, which is for AV integrators and manufacturers.

I talked to members of the board. I asked, is there hope for a guy at 54 to buy a company and take it where we want to go? Also my wife said, you have to do it. It’s part of my makeup and I decided to dive in.

Upsize: What were the financial requirements? You said the company had been debt-free; I’m sure the buyout changed that.

Groves: We had to find a bank. We had to take a loan. The company had cash, and we gave Stan some cash. We were an ESOP, with 30 percent of the company owned by employees, but Stan and I had bought those employees out a couple of years before because it had become almost a disincentive as newer employees came on.

Upsize: So you had done a valuation prior to this latest transaction? Was that helpful?

Groves: There was a starting point. The honest truth is, I was thinking a buck a share or 2 bucks a share in difference, that’s a speed bump.

Upsize: You mean, if you and Stan were just a little bit apart it wasn’t worth arguing over?

Groves: The last thing I wanted to do is put in something contentious and create bad feelings. The whole thing was really easy and positive.

Upsize: I’m sure you know that’s not always the case.

Groves: I’m looking at the delta, not winning or losing. If I believe what I’m going to do with the company…

Upsize: …you’ll make much more in the long run than to quibble over valuation at the time of sale. Do you worry about the debt, since that wasn’t something you used before?

Groves: We had to find the right bank, which accepted that I’m going to facilitate change in the company and that will cause turmoil. We’re dipping into our credit line, and we hadn’t done that for five or six years. But many people say it’s good to use some debt in a company. I’m more willing to take on risk.

Upsize: Your offices are striking. I love the videos running in your lobby, called “power to the innovators” and featuring everyone from Alan Turing to Hedy Lamarr. You’ve also named your conference rooms after famous inventors, like Edison or Tesla.

Groves: We have a content team who created those, and we moved in here in late 2015. It’s an inspiring place, where before we were in a cramped space.

Upsize: Besides being inspired by these famous innovators, you’ve mentioned you talk to board members, consultants, your accountants, all kinds of people to make decisions. Is that accurate to say?

Groves: I call it triangulating. You could ask anyone in the company from the shipper on up. I think about being smart as an owner, and to be smart I’m going to have to get the best information. How can I be as smart at everything as I need to be?

You have to listen really closely to your people. You have to make sure you don’t only have people who have been with your company for years, because they get institutionalized.

Upsize: I wondered about that—what does it mean when the “old guy,” someone who’s been with the company for 12 years like you, becomes the “new guy,” the new sole owner with new ideas? Wouldn’t an outside person have a better chance of putting new ideas forward?

Groves: You can look at that differently. Having an outside person come in, that can be scary for employees. That said, it’s not easy. I have to play multiple roles.

My skills are strategy, vision and sales, but I’m also looking for the integrator, that person that makes the trains run on time, and we haven’t found that person. That’s not my special superpower.

I can do that, but I’m not the best person to do it. I’m also the lead of the sales team right now, because that’s my strength. But I want to move to a higher level.

Upsize: What would it look like if you were doing what you should optimally do?

Groves: The motivation for me is to be a tremendously thriving company that can move in a heavily high-tech world. I want to move very agilely, and strategically take us down a path so we can change when we need to change.

Upsize: Your business has changed dramatically in the past years. How so?

Groves: We’ve been an equipment purchaser, and integrator and a solutions provider for a long time. The world’s changing. What gets me up is when I feel like I have activated that engine. Then maybe I’ll go, now I can take the foot off my personal gas pedal.

Upsize: I’ve got a feeling you’ll never think you’re there.

Groves: I want to get us to where we’re really something. The company has to have that ability so it’s not me that’s driving it, so people are saying, what if I tried to do this or that. Most important: The shift to outcomes of the client is what we have to focus on.

Upsize: Tell me more about the practical changes in the industry.

Groves: Our industry is going from hardware to software to the cloud. What happens inside a client environment is they go from the high-tech people owning it to the business people owning it, because it’s so easy to use.

So we get to, what does alignment mean? You have to connect their success with what you do. You have to focus yourself on client outcomes. So the whole company has to evolve, and that will take a decade to create.

Upsize: So how do you move the company in that direction? Where do you start?

Groves: You have to create trust, so even if it hurts, be direct. Be transparent. What surprises me about ownership is how much more credit I should give my staff than I did in the beginning.

Upsize: So what’s an example of being direct even if it hurts?

Groves: It’s actually one of the worst days ever at the company, which was one of your questions. We laid off six people in October of last year.

It wasn’t a net employee drop; we moved staff numbers from a low-performing area to a high-performing area, and these six people wouldn’t have been able to train for the new area. When you have to make a decision to lay off people who are very good people, it was really a challenge.

Upsize: What did you take away from that experience?

Groves: When problems happen there’s always a positive. In this case I was surprised about the response from the staff. I was worried about fallout but what I got was support, we’re here for you.

There’s always an inherent distrust in management. I’m always being looked at as stupid by someone, and sometimes they’re right.

But I go by the Star Trek line, the needs of the many outweigh the needs of the few. That surprised me, the resiliency of people as long as you’re clear, honest and direct.

Upsize: What’s one thing you wish “they” would have told you, about being an entrepreneur?

Groves: I have two. First, there really is no normal. You never are quite sure how people will react to things you do, and you can’t let that stop you from making decisions. Second, people are the most challenging part. They’re the biggest blessing, and also the most challenging part of being in business.

Upsize: Describe a turning point for your business, when something happened and things began going much better than before.

Groves: I’m somewhat in process. I think we’re in the middle of change. People don’t like change. They say they do, but then, not if it’s going to happen to me. They seem to be riding the change OK and some of them are thriving. I have a management team that is involved in the decisions. It’s about listening and bringing that information up.

Upsize: So as far as a turning point?

Groves: The big moment is in the future yet, but there are small moments.

Upsize: Like what?

Groves: Getting a standing ovation after an all-staff meeting last year, about the direction the company is going. Also, I got a trophy as “captain of the ship” at that event last year.

I think the shine is wearing off now, and we are in the middle of the real work. This year at our all-staff meeting, I didn’t get a trophy I didn’t get a standing ovation, but we had one of the strongest kick-off events ever. That gives me energy.

Upsize: What’s one lesson you’ve learned about building a successful company?

Groves: Triangulate. Listen to your staff and bring in outside influences, because you are thinking yourself way too smart if you’re not doing that. No one is that brilliant.