1. Geoff Hager - Big Elk Energy Systems

Geoff Hager:

What I have found to be successful in life is not necessarily always looking, trying to shore up my weaknesses. There's just areas that are always going to be a struggle, and there's always going to be areas that you have a strength in. I would rather just spend all my time in the areas that are strength and surround myself with people where their strength is my weakness, and then I can be myself. I have found it very satisfying to embrace those people in my life that represent the opposite viewpoint, because if you can get people like that on the same team and rowing in the same direction at the same time, man, it's an unstoppable team.

Robert Wagner:

From Hogan Taylor CPAs and advisors, I'm Robert Wagner, and this is How That Happened. A business and innovation success podcast. Each episode of the show, we sit down with the business and community leaders behind thriving organizations to learn how business and innovation success actually happens. Our guest today is Geoff Hager. Geoff is the owner and CEO of Big Elk Energy Systems. It's based in Tulsa, Oklahoma. In 2018, in just its third year of business, Big Elk landed in the 123rd spot on the Inc. 5000 fastest growing companies list. Big Elk was the fastest growing manufacturing company on the list and the fastest growing company in Oklahoma.

Robert Wagner:

Some tremendous achievements early on in the Big Elk lifespan. This growth was part of Geoff's strategy to assemble a great team, a dream team, as he often calls it, I think, and a go big or go home strategy. Geoff, thank you for being on the podcast and welcome to our podcast.

Geoff Hager:

My pleasure, Robert, and thank you for having me today. Thank you for that wonderful introduction. The nice thing about today is I'll get to tell everyone exactly how easy it was to get from point A to point B, no suffering or tribulation at all getting there.

Robert Wagner:

Okay. We're going to let you unpack that as we go along here, so thanks very much. We do want to focus on Big Elk and what you're doing, what the company does and what you learned over the last past three years or so. But before we go there, tell us about Geoff and where you started, about little Geoff as a kid, and how you grew up and how you got to where you're at.

Geoff Hager:

Sure. I grew up in the Metropolis of Pawhuska, Oklahoma, with a massive population of around 3,500. My parents were pastors growing up. When you're in the ministry in rural Oklahoma, it's oftentimes not a full-time paying job. My dad owned and operated a men's clothing store growing up and then ran for public office. I think from age nine to 19, he was in the state house, and so that was quite a bit different stage of life for me. I felt I had a calling on my life from a young age to do ministry, and I will tell you that the only way I knew to process that was to think that someday maybe I'll be a preacher or a pastor.

Geoff Hager:

What's interesting in the circle of life is looking at how things have transitioned and every time I tried to pursue a ministry path, instead of going to Bible College, I ended up going to engineering school at Oklahoma State University. Every time I would try to pursue that ministry path, I have circumstance or something of that nature, I'd always get diverted back into more of a professional career. What's awesome sitting here today is I look at those years until now and I really see that in a way I am able to fulfill that calling that I felt even as a young person.

Geoff Hager:

It's just instead of a pulpit, it's a podium or a podcast or a TED Talk, and instead of a congregation, it's CEOs and business leaders, and it is very fulfilling for me and a privilege to get to visit with you today.

Robert Wagner:

All right. Thanks so much.

Geoff Hager:

Yeah.

Robert Wagner:

You just said, you, I guess, got your degree in engineering.

Geoff Hager:

That's correct. Yeah.

Robert Wagner:

But I believe you spent most of your career in sales.

Geoff Hager:

That's true.

Robert Wagner:

Yeah. How did that happen? How's that transition?

Geoff Hager:

Yeah, so that is a good question there. I remember being in high school and Pawhuska is close to Bartlesville and Phillips Petroleum was started in Bartlesville and headquartered there while I was growing up. I remember some engineers coming over to give a presentation one day and that's really what caused me to go into engineering. I always enjoyed math and science and technical things, but I also really enjoyed people and just had a natural, outgoing personality. It was easy for me to build relationships. I didn't realize that those were the foundational principles of a good salesperson, but I learned it pretty quick once I started the professional career.

Geoff Hager:

I happened to go work for a company out of college that, while the product that was being represented was very technical in nature, which is why they hired engineers for their applications positions, they also had a number of salespeople. It didn't take long for me to realize that that was a real gift [inaudible 00:05:42], so I quickly moved into the sales role. I don't mind telling you that shortly after that I was at or near the top of the scoreboard most of the time as well.

Robert Wagner:

Sure, yeah. Do you love the chase of the deal? What motivates you from a salesperson's standpoint?

Geoff Hager:

Yeah, I think I'm a natural elephant hunter. I really enjoy the thrill of the chase, so that's a good way to put it. The second thing is, I love people just naturally and I really enjoy building relationships. The great thing about business is when you build genuine relationships, one of the principles I learned very early on is, it's not really companies buying from companies. It's people buying from people, and I believe in that. When you build genuine relationships, the truth is, people want to buy from you because they genuinely believe that you're going to stick with them through the whole process.

Geoff Hager:

That it's not just about an initial purchase order, but it's sticking with them afterwards if there's going to be an issue. If you have a relationship built, people know that you're not going to sacrifice that relationship. You're going to stand behind whatever it is that you're selling. I think that that process always came real natural to me.

Robert Wagner:

Yeah. Do you remember that first sale?

Geoff Hager:

Well, I remember the first big one.

Robert Wagner:

Okay.

Geoff Hager:

I remember I started in a small division of this company. There was only one other person working with me in that division. We had a manager and then an associate that helped us. I remember working on a, had a potential bid project with a client that our company didn't really have any history with, so it was seen as a low probability pursuit from the get go.

Robert Wagner:

Put the new guy on it, right?

Geoff Hager:

Exactly. I just always enjoyed scenarios where the odds were against me, so I got a feeling pretty quick that this gentleman I was dealing with, that we had a connection and I felt good about it. I kept pursuing it and I remember that my boss at that time, after I was on version number eight or version number nine of this proposal and clearly had spent a lot of hours on it, and he was concerned that I would spend a lot of time on something that would never materialize. He had coached me saying, "Maybe let's let this one die." I said, "Just give me a little bit more time." So he did.

Geoff Hager:

Then the president of our company I think somewhere in casual conversation, it got found out, "Hey, yeah, Geoff's been working a lot on this one proposal, and he asked about some details." Then, he thought, "You got to get him off of that thing." I remember finally telling my manager, "Just let me send one more revision, and then if it doesn't come through I'll let it go." Robert, I'm a faith person by nature, by upbringing and whatnot, and so I remember praying over that quote before it would go out, just God give me a favor. I remember making a vow that if we were to get the order on this project, that the first thing I would do, I would give glory to God for winning the order.

Geoff Hager:

I can remember hearing the, I can still hear it now in my mind's eye, the sound of that fax machine as it was rolling off and I go over there to check it. Here it is a purchase order for a few hundred thousand dollars, which was a huge order for us then. I remember looking at it immediately, the words of my vow came to my mind, and so I went into my boss's office and I sat in front of him. He was about to say something and I said, "Al, before you say anything, I've got to do one thing. I've got to give glory to God for this order because it was favors, the reason we got it." Anyway, Al looked at me and he said, "Geoff, I think before we're done here, you're going to make me a religious man."

Geoff Hager:

Anyway, so that was the first project win, and that client went on to become the number one client for our company for the next three years. As life continues to come full circle, I would tell you that that same client who now has himself gone through career changes and worked for a couple of different companies, would you know that he is the same client that was responsible for Big Elk's largest order in 2018?

Robert Wagner:

Oh, wow.

Geoff Hager:

Isn't that amazing?

Robert Wagner:

That is an amazing story.

Geoff Hager:

That is 17, 16 years later.

Robert Wagner:

Wow, that is awesome. As you know, we work with a lot of different companies and oftentimes the owner, the leader of the company is an engineer, or they're a salesperson. You're both, so that's awesome. Was it always in you to own a company, to stand something up and own it, start it?

Geoff Hager:

I've asked myself that many times because with our recent success as a company, I have been invited to speak at various things, and sometimes the event's very entrepreneurial in nature. I get asked this a lot and you'd think I would have a better answer. I really struggle with this one, Robert, because in a lot of ways I don't see myself as a person who just was always an entrepreneur in my heart. Maybe I was and didn't realize it. I don't know. I would tell you that there was probably a couple of ventures that I had thought of along the way.

Geoff Hager:

Maybe if things don't work out with this I'll kick something off over here. But for me, really, with regards to Big Elk, it was more than that. I remember the company that I worked for before starting Big Elk was in a somewhat similar business, but it was owned by a publicly traded corporation. Oftentimes, I was involved in the meetings as a liaison between our business unit and that corporation. It was just a really tough time, tough time for both entities. Our business unit in Tulsa and the corporation, they were going through a lot of turnover and so constantly new leaders coming in. It was just a really frustrating time.

Geoff Hager:

I remember walking down the hallway one day after a particularly bad management meeting and I was just completely overcome, just suddenly, with the thought that what I was supposed to do was start a new business. What's funny is, I could take you to the spot in the hallway where I just felt completely overcome, that that's what I was supposed to do. Really, from that day forward, I set my heart to start a new company and that ended up being Big Elk.

Robert Wagner:

Yeah, so we definitely want to unpack that a little bit more, but just for context for our listeners, tell us about what Big Elk does and where you are in the market and what kind of products you have.

Geoff Hager:

For sure. Yeah, I appreciate that. We're a manufacturer of various types of oil and gas pipeline equipment, predominantly natural gas, but we do some manufacturing for liquids lines as well, like oil or crude oil. My short description would be, most of your listeners will be able to ... that most of their residences probably have natural gas that comes into their home. I usually tell people to envision that gray box that's on the side of their residents, that's there to serve as a cash register between them and the utility company. As they consume natural gas, it turns a dial on that box.

Geoff Hager:

Each month they get an invoice based on how far that dial's turned. Big Elk actually makes, in essence, the exact same thing, just on a much larger scale. We make the cash registers that manage the buy-sale transaction between two pipeline companies. Where a person's residents might flow say $3 to $5 a day worth of natural gas consumption, our cash registers will flow between half a million and $12 million a day worth of commodity resource, and that's about half of our business. The other half is another side of the manufacturing for ... but it's still for pipeline equipments. In general, that would be my answer.

Robert Wagner:

Okay. That's a great description. You started Big Elk and you've already explained this moment in time that it became clear to you this is what you need to be doing. Part of the strategy, at least as I understand it, was to attract some really talented people from the industry that you knew or knew of. Now, talk to us about that process. You're a startup, you're a new business owner, right? You've not owned a business before or run a business before.

Geoff Hager:

Yeah, correct.

Robert Wagner:

You're trying to attract people. They've got good jobs.

Geoff Hager:

It's true.

Robert Wagner:

Tell us about that.

Geoff Hager:

Well, yeah, I appreciate the question. Sometimes it's tough to answer because I want to be care ... I don't want to think of myself more highly than I should. But part of this, it really does go back to culture. I had a leadership position at my previous company and certainly a lot of the people that were on that initial team were people that worked on my team prior to. I had, at one point in time, had made an offer to try to buy that former company from the corporation and was told that they would never sell under any circumstance. It turned out not to be true. One month after I started Big Elk, they actually put that company up for sale.

Geoff Hager:

It's funny how those things work out, but nonetheless, a lot of folks that were a part of my team prior to, ended up making the jump, but really more so than that, I would say we did have a dream team. We had just really leaders in the industry and it became a snowball effect. Once we got the effort started, we had really the cream of the crop from other companies that came as well. The best example I can give you on this, it happened a little bit later after startup, but it's a testament to this team and it being built.

Geoff Hager:

When we had, excuse me, when we had finished our first sizable project and had developed a relationship with a particular end user, the thing about making that cash register equipment is we have to be approved, not only with the client that's buying it from us, but oftentimes the other company that they are buying or selling with. You need to be approved with both of those operating companies. I'm talking about large energy companies like Williams, or Energy Transfer, Kinder Morgan, as an example for some of your listeners. We had just finished a project with one of these users, but we were still very early in our life.

Geoff Hager:

We didn't have a lot of approvals with these other companies. After finishing this project, we had an opportunity to do one of these cash register pieces, and the project manager we were dealing with really wanted to use us, but we were not approved with the company that was on the other side of the transaction. Our client calls over to his counterpart and he's asking for what's called a variance. He's asking for someone to sign a piece of paper that's an exception that says, "Hey, we'll let you use this company called Big Elk because you're saying you have good experience with them." But it didn't go well.

Geoff Hager:

The person that was on the other side was not receptive to that and said, "You really need to use someone that's on our approved list, and we're not going to ... Who is this Big Elk that you're ... We don't know them. That must be some mom pop shop." Well, this project manager was quick on his feet and he said, "You know what? I actually have a copy of your approval list right here. Would you pull it up with me?" I won't mention the names on this broadcast here, I'll just use generic. But he asked the guy, he says, "Who's the first company that's on your list?" The guy says, "Well, it's company XYZ." He said, "Well, who's the contact at XYZ?" He says, "Well, John so-and-so."

Geoff Hager:

Our client said, "Well, John so-and-so is actually the operations manager at Big Elk." He said, "What's the next company on your list?" He said, "Well, company ABC." He said, "Who's your contact at ABC?" "Well, my contact is Dennis so-and-so." He said, "Well, Dennis so-and-so is actually the engineering manager at Big Elk. Who's the next company on your list?" You see the pattern, our client said to the other company, he said, "You may think that you don't know Big Elk, but actually every key person that you're used to dealing with at other companies, they're all on one team now, and that company is Big Elk."

Geoff Hager:

That story really captures the essence of how we were able to rise so quick in the market and gain market share so quickly, because we really do have the best of the best and that shines through.

Robert Wagner:

Yeah, so what's the value proposition that Big Elk put forth? What makes you different? There's a lot of folks fabricating equipment and pipeline type stuff.

Geoff Hager:

Yeah, it's true. Well, I could give you a couple of cliche responses. Become the largest provider of global pipeline equipment or various things like that. At the end of the day, our team is number one. We put our slogan forth for a reason and we narrow it down to this, strong team, strong partner. We have the strongest team. No one beats our team. They're the absolute best. But the second part of that is we have a partner-minded business. We're not just looking for a single transaction. We're looking for partners for a lifetime, and that happens through consistent repeat performance. Our clients have come to understand, first off, we're not perfect.

Geoff Hager:

We occasionally will have a mistake and we got to work through that as any company would. That's when you find out really what people are made of, is how they respond whenever there's an issue. But by and large, we are on time and we have events at the end of our projects called factory acceptance tests, or we call them FATs for short. In general, our FATs are flawless and we're on time. Our clients have come to understand that that really makes a difference for them because as with a lot of industries time is money. People realize that even if we're not the lowest price in a particular proposal, we've become known as credible, reliable, and favored in the industry.

Robert Wagner:

Right. Let's go back. You've mentioned the first sale a few minutes ago. Let's go back to that first sale that Big Elk made. Since your answer to this is going to be, well, the people, my customers already knew our people, so it made that first sale maybe a little more comfortable to get, or for the customer to issue that purchase order. But that first company making the purchase order, they still got to wonder, "Hey, this is a startup company. They've never welded anything before, they've never produced anything."

Robert Wagner:

What did you do to get people over that hump? We have a lot of folks listening who are trying to get a business started, trying to get over that first sale and having that first big win.

Geoff Hager:

Yeah, that's a great question, and let me clarify real quick. The first order I was speaking to earlier was actually one of the first orders of my career, way early on after I came out of college, and different from the one I'll tell you about now. The first order, so first off, Big Elk faced some, not all the extreme circumstances of just trying to get the business started, as you appropriately said earlier, go big or go home strategy. But one month, we started in October of '14, and one month after we start, oil crashed and we went into what is arguably the longest and deepest energy downturn in the generation.

Geoff Hager:

We were also facing that condition immediately after startup. We received our first million plus dollar order around day 40 of existence, and it's a great story. I had gone with one other, a gentleman on our team, down to Houston to see a potential client, and it was a startup midstream company. We go down to visit them because of having had years of relationship with them when they worked for other companies and we worked for other companies. They started out by giving us the pitch about, they're a new company, and it was wonderful because I got to hear them say, "Hey, guys, listen," and I don't want to say the name of their company.

Geoff Hager:

But they say, "Hey, we're now company XYZ Midstream. Even though the name is brand new, all the people on the team are familiar names and you know us when we worked at here, when we worked there, and we've got this project going." Because, see, they were also in an environment where they needed to have some credibility to be able to issue a purchase order of that value and someone would give them the credit.

Robert Wagner:

Yeah.

Geoff Hager:

Right?

Robert Wagner:

Right.

Geoff Hager:

They didn't know that I didn't care about that at the time. They were interviewing as well to say, "Here's who we are as a company." It was just great to hear this pitch about a brand new company, but the leadership team behind it have a lot of experience in the industry because when they got finished, I was able to say ours as the exact same pitch, "Big Elk is a brand new name, but you recognize all the people that you're working with. We have this large facility with no backlog of business." It just so happened that their project was a very quick turnaround project. It was happening over the holidays, so the worst time to have to expedite something through, and we had no business.

Geoff Hager:

It was easy for us to promise a quick lead time. It was the only project we would have to work on. We asked them to give us a shot as well. Next thing you know, here it came about a $1.1 million, $1.2 million purchase order, and that's what got things kicked off. I've got a couple of pictures of the people that were on our team for this very first project. They still wear this project like a badge of honor. I remember because it was going to be our first opportunity to take some product pictures, maybe for the website or for any promotional material. Even though we had had this large facility that we had just closed on, it was an older facility and it didn't have lights that worked.

Geoff Hager:

It had lights, it just didn't work. I remember setting up spotlights so that we could take a picture of this thing that we were working on in the hopes of appearing legitimate to other potential customers, because all of our trade labor guys that were working to put this thing together, they were having to work on it just with local spotlights there on the area they were working on, because the rest of the facility was dark. I've got an epic picture that shows this package unit we're working on with spotlights on it. But the picture's taken from a hundred yards away so that people can see. It was really smoke and mirrors.

Robert Wagner:

It's like the fake moon landing.

Geoff Hager:

Exactly. That's exactly what it was. Yeah.

Robert Wagner:

Okay, so we've talked about you're an engineer, sales guy, you've got your business. What's been the big aha hard thing for you in running a business that maybe you just didn't expect?

Geoff Hager:

My goodness, I've got, I think, I've got too many for this one, Robert. I am a natural risk taker, but I'm also prudent when it comes to finances, or at least try to be. I would tell you that my wife and I, we were good stewards, financial stewards for over 15 years of professional career. We were at the point where we didn't have any debt. We still had a mortgage payment, but no credit cards, no car debt, nothing like that, and a pretty healthy savings and retirement account. I'll sometimes joke that one day we decided to liquidate everything, accumulate debt up to our eyeballs, and come within a hair's breath of bankruptcy.

Geoff Hager:

Then, I followed that up by saying, "Of course, we didn't do that. We decided to start a business. It just turns out those two things are the same thing." In the three years from resigning the previous company and starting Big Elk, two of those years were without pay, one of those years was without medical insurance. My only medical insurance for a year was waking up in the morning and praying that God would keep my family healthy. If anyone had a significant medical incident, it was bankruptcy. If we had virtually any kind of financial incident, bankruptcy.

Geoff Hager:

I have multiple moments of nothing short of divine intervention that allowed us to survive in circumstances we should not have survived. I would tell you that going through that process, people talk about starting a business and taking a risk. I would tell you, there's a difference between taking a risk and going all in. When there's no safety net, it changes you, and it changes the people around you.

Robert Wagner:

Yeah. Thanks for sharing that. I appreciate that transparency. You mentioned a minute ago about working with various customers and I think this comes up a lot with our clients and probably folks who are listening, where you have a company and your customers are behemoths compared to you.

Geoff Hager:

Correct.

Robert Wagner:

It's truly David and Goliath. You're contracting with them, you're working for them producing products and services. How do you manage that relationship? How do you manage the contracting so that your risk cover as you can be and deal with those issues?

Geoff Hager:

Sure. It's a challenge. It's definitely a challenge. When you're dealing with companies of this size, I think there's probably some intention behind the amount of red tape that you have to go through just to even be able to do business with a company like that. The approval process itself serves as a weeding process. Most of these companies, the average time to get through that approval is, oftentimes can be two to three years. First things first, with a lot of those clients, we were able to expedite that approval process, and that was a testament to our team.

Geoff Hager:

I'll go back to my statement of people buy from people, even people that work for large behemoth companies ultimately buy from people. When they have had a relationship that's been forged over a decade or two and that relationship is genuine, then all of a sudden you have someone on the inside who's incentivized to move that process along. Some of those that should have taken a couple of years took us three or four months and was able to provide a resource for us to start doing business as we grew.

Geoff Hager:

But there's just a lot of lessons learned along the way. I have my various areas of expertise, but I also have plenty of areas that even a novice would've been a complimentary statement. I knew nothing of what I was doing in a lot of these areas, and so I just had to build a team where whatever the void was, whether it was legal, or finance, or HR, or things like that, just make sure that we have the right person at the table that can own that particular responsibility. I said for a long time from the get go, if I have to be intelligent or be an expert in these particular areas before I'm willing to take a risk and move out and grow, it's going to take us a long time to grow.

Geoff Hager:

I remember interviewing our first key team members, that I would just wear out the scene. I would tell them, "You're going to have every opportunity to fail." What I meant by that was, we're not hiring you to then tell you what it is that you need to do. We're hiring you because you're the expert in this area and you own it. It's your responsibility. If it craters, it's your baby. We got the right people in the right seats that had the mentality and the fortitude to really take that burden and run with it. Even though we were small, we had a power packed team, and so we were able to forge through those waters.

Geoff Hager:

But it definitely was tough having a primary customer base where they're all these really super large companies, but it's just like anything else, you just take it one step at a time.

Robert Wagner:

Yeah, so would you consider Big Elk a disruptor in your industry?

Geoff Hager:

Well, yes. Listen, I don't know of another business that's primarily energy related that started in 2013 or 2014 that still exists. The ones that still exist were a lot older than that and had the reservoir to weather the storm was the last downturn.

Robert Wagner:

Can I interrupt you there?

Geoff Hager:

Sure.

Robert Wagner:

Just give people context for what you're talking about in terms of this crash that happens, because not everyone's living here in the old patch. Like I said, I think you have to appreciate the severity of this thing.

Geoff Hager:

Okay. Well, so given our customer base, an organization that would be a good representation of our customer base is called INGAA. I-N-G-A-A, and it stands for Interstate Natural Gas Association of America. It's just, I think, the top 30 energy companies in the US. As an organization, they'll pull together a report every year that gives some information to those in the industry to say, "Are we growing or are we contracting as an industry?" As a community, they come together and say how much money are they putting into infrastructure to build out new pipelines in the coming year.

Geoff Hager:

To answer your question and put it in perspective, 2015, 2016 were the first ever in history, since they've been recording it, back to back years, that there was a reduction in infrastructure build out. It is absolutely appropriate to say that this last downturn we went through, it had some qualities that were unprecedented. I remember when we were going after what I would consider the first large project after getting into business, I likened it watching a nature show where you've got that one wounded wildebeest on the Serengeti and it's surrounded by jackals.

Geoff Hager:

Each jackal's at the throat of the other jackal trying to cut its throat to make sure that it gets a piece of the action, so to speak. That's the way it was in our industry. There were no projects to be had, so when one project finally came on, anybody who was in that business that was still alive was slicing the price to cut the throat of the other guy just to try to get a piece of it. I remember going to this bid meeting, there were 15 plus companies at this bid meeting and all of them were older and larger than we were. I'm just thinking, "Do we even have a shot at this project?"

Geoff Hager:

This project was a monster and it was big enough that the end user said, they're actually going to give two awards because they felt it was too large to give to one vendor. We put our best foot forward and we came in third place. I remember afterwards just being dejected, and once again, on the verge of losing everything. I packed up the family to go visit a mentor and one of our board members up in Kansas city. As you can imagine, Robert, any getaway during this time period meant destinations that can be reached on a single tank of gas. While there, out of nowhere, I get a phone call from the project director for this project.

Geoff Hager:

He asked me, he said, "Geoff, are you still interested in this project?" He goes on to tell me that one of the two companies they had awarded was having a hard time passing his company's credit check. I thought, "Dear God, how would we pass a credit check?" I asked him, I said, "Is there any chance that we can just get our CFO to talk directly with your senior credit analyst person and we'll just talk things through, and I think it'll be fine." Even though in the back of my mind I'm thinking, "I don't know if there's any way." But our CFO had a conversation with their credit person and, Robert, here's the deal.

Geoff Hager:

I think it was later that afternoon, here it comes, several emails all carrying purchase orders totalling around six and a half million dollars. I thought that having been through a few downturns, and I knew that this project would be nine to 10 months worth of work, I just knew this is the project that's going to get us to the other side. Because we were already six months into the downturn at this point in time. The only problem was, it turns out that two years is longer than 10 months, and so as this project was coming to an end, I knew we didn't have enough work in the backlog to sustain our personnel level or our production hours.

Geoff Hager:

It was another decision time, because the difference with this dilemma was, now, other people were going to be affected by this and not just me. There was no amount of pay cut that ... I was still not getting paid at this point in time, so I couldn't take any cuts to offset the damage. Everyone's going to be affected by this, so I took a big risk and decided to lead with the transparency I had always promised. I gathered everyone together and I told them, I said, "Hey, we're all doing good, but three months from now this project's going to come to an end, and right now we don't have enough backlog to sustain the levels that we're at."

Geoff Hager:

I told everybody, I said, "I don't want anyone buying any new cars. I don't want anyone moving. Any of your overtime checks, I want you banking them and putting them back so that if I have to come back in a few months and ask for cuts, you're a little bit better prepared to weather the storm." I also said, "I know I'm taking a big risk by sharing this information. I'm just hoping you'll stick with me." Robert, I always claim to have an open door policy. No one ever uses it, just my main guys ever come in to visit. But that day, I gave the same speech each for three months, and when I came in to tell everyone that we were all taking a 10% cut, that day my office was a revolving door as shop guy, after shop guy came in to express gratitude.

Geoff Hager:

I thought it was going to be a horrible day. It ended up being a great day. I remember being told that no one had ever given them a heads up of bad times coming like that. One guy said it would take a grenade to get him out of the position with the company. As great as that was, it was a good moment. Unfortunately, right after that, the market turned worse and my CFO called and said that if we didn't cut another 10%, we wouldn't survive the quarter. I asked him how many people it would be if we didn't do the 10%. He said about 10, and we had about 80 people at that time, so it was a little over 10% of our workforce.

Geoff Hager:

I gathered everyone together again and told them the same thing, I said, "In order to survive, we got to cut another 10% or 10 people, and I'd like to know what everyone thinks about it. Tomorrow, you can sign up, you can come in one-on-one, talk in private and tell us what you think." Over two thirds of our people came in the next day, and of those, over 80% said they wanted staff cuts and not pay cuts. I went back out and I said, "Here's the verdict, we'll start right now. We'll gather back up in about an hour and a half after it's all over with." Robert, I remember walking out of the shop that day thinking, "It was the worst day ever."

Geoff Hager:

To my dismay, there were smiles on people's faces and it's because they felt like they were a part of the big decision and that their voice had been heard. For the next two years after that, not a single person who survived that cut ever left the company, and they knew we were building something special. Everybody dug in. It ended up being a ... of all things, our morale actually went up.

Robert Wagner:

That's an amazing story and an amazing lesson. I think for managers who've been in business for a while and have gone through various economic cycles, we've had that situation where we kept everything to ourselves. Then, you have to make a decision and then you know, you know people have made personal financial decisions that they wouldn't have made if you had trusted them.

Geoff Hager:

That's right. That's right.

Robert Wagner:

That's an amazing story. Look into your crystal ball a little bit, and besides another oil downturn, which we pray doesn't happen, what are the threats to Big Elk from a economic standpoint or industry standpoint?

Geoff Hager:

Sure. Well, I try not to get caught up in all the good news because we have a lot of good news happening. Most of our business is built around natural gas infrastructure development, which is arguably the cleanest of the hydrocarbon forms of energy. We're continuing to see the evolution of coal fired power plants moving to natural gas. That's a good thing for us. Your listeners may or may not be aware, 2018 was a historic year where the US, for the first time ever, was a net exporter of natural gas, and that's because of the modern advent of liquefaction.

Geoff Hager:

The liquefaction process of natural gas has led to more infrastructure. We have a lot of things for our core market that would indicate good times, good times, good times. That being said, I don't want to fall into the trap of just continuing down that road. I don't want to be, as my mentor would often tell me, we don't want to be the world's best manufacturer of stage coaches when the automobile comes up. In spite of the challenges that we've had, we somehow have been able to invest a little bit from a research and development standpoint, and have actually released two IP related items in the last year and a half.

Geoff Hager:

That have really turned out to be game changers from a market standpoint. We're solving real problems in the industry, and so we're continuing to move the needle on that front. We definitely have a culture of innovation to leave the industry better than we came into it. I think that will serve us well. From a crystal ball standpoint, if I would let myself, I could worry myself to death thinking about, "Well, what if this happens from an industry standpoint that could absolutely crater our business?" But I think that because we have a culture around innovation as well, that's a strong value for us, I feel like that we will always be on the forefront of the change that's taking place.

Geoff Hager:

As a result of that, I really don't have much of a fear that any linchpin can come in and seal our fate. Hopefully, that turns out to be true.

Robert Wagner:

Yeah, so you went right to my next question, which was around innovation. I know Big Elk's doing some great things in innovation, so talk to that for a minute.

Geoff Hager:

Sure. Well, I'll mention a large one and give the best description I can to a listener who may not be directly affiliated with natural gas or pipeline industry. If I go back to my cash register analogy, it's a crazy thing. Robert, you and I are on opposite sides of the table here. If we were to pretend to be pipeline companies and you'd be large company A and I'll be large company B and I'm selling and you're buying, okay. Let's say we decide to buy one of these cash registers from Big Elk, and so this piece of equipment sits between us on this table and that is managing our buy-sell transaction.

Geoff Hager:

Every single day, you and I are having a seven figure or seven figure plus transaction, and it's all based on the accuracy of this cash register. Don't you think it'd be logical that you and I might want to check it every now and then to make sure that it's accurate?

Robert Wagner:

I certainly do if I'm buying.

Geoff Hager:

That's right. Here's the crazy thing. If what you and I are transacting is in liquid form, so crude oil or NGLs, it turns out for the last 20 plus years you and I, not only have we had a solution to that, but it's so standard in the industry. You and I would actually write into our contract that with some frequency, minimum once a year, we actually would have what's called a proofer service. Would come out to our site and run a proof on that meter and it would give us third party certified information to let us know how that cash register is running.

Geoff Hager:

Say, if it was for every 99 barrel or for every 100 barrels I'm selling to you, there was actually 99 that were going through well. Then, I might elbow you a little bit and say, "Oh, well, I was getting one on you for the last year." If it was 101, you might say, "Yup." But the point is, we can reset it and we do that every so often to make sure that there's no risk involved. Crazy thing, if what you and I are transacting is natural gas, would you believe that for the last 20 plus years we've never been able to do that?

Geoff Hager:

It would be a longer description for me to describe the technical barrier as to why that has been impossible to do in the natural gas industry versus the oil industry. If you'll just trust me for a minute, just understand that it has to do with the compressibility of gas versus the incompressibility of liquids, and that the nature of the commodity and the way that it's transported, it makes that process impossible using the same methodology. It's been the holy grail for a number of years to figure out how to bring that to the gas industry. Many people have tried, and we just happened to be fortunate or blessed enough to be the ones to figure it out.

Geoff Hager:

This was about a year and a half project. I'll mention Dennis McClintok by name to give honor where it's due. He's our engineering manager, and this has been a project of his for a number of years, to figure this out. He came up with a solution that we believed in, that we thought would work. I proceeded to once again go virtually bankrupt in the process of trying to build one of these units. It took a little over half million dollars to build one just to see if it would work. Fortunately for me, it did work.

Geoff Hager:

I would tell you that ironically, as we sit here on this podcast, that earlier this week, this product's called M3, which stands for Mobile Master Meter. The first time in the history of the industry, a infield meter verification took place in the Northeastern part of the US and was a blazing success.

Robert Wagner:

Wow, that's awesome.

Geoff Hager:

Yeah.

Robert Wagner:

That is cool. That's truly innovation.

Geoff Hager:

Yeah.

Robert Wagner:

You solved a problem that's never been solved.

Geoff Hager:

Yeah. We look forward to the rest of this year in 2020. We think it's going to be a big deal for us.

Robert Wagner:

Yeah, that is awesome. My next question is a personal one. It's a little bit philosophical, I guess. You're known as a really optimistic person, a very positive person. You see the glass half full.

Geoff Hager:

Sure.

Robert Wagner:

Yeah. What's it like dealing with the rest of us who are pragmatist, realist?

Geoff Hager:

Well, it's a joy, really. It's a joy. This is not a scripture, but it should be. It's from Dirty Harry and Clint Eastwood, where he said, "A man's got to know his limitations." What I have found to be successful in life is not necessarily always looking, trying to shore up my weaknesses. There's just areas that are always going to be a struggle and there's always going to be areas that you have a strength in. I would rather just spend all my time in the areas that are strength and surround myself with people where their strength is my weakness and then I can be myself. Robert, you put yourself in that category, so I'm going to follow that thread, okay?

Robert Wagner:

Sure.

Geoff Hager:

I'm going to say, I need people like you in my life, and I would dare to say that you need people like me in your life, because I'm going to push you a little bit. In the same way, you're going to be the appropriate amount of caution that I need in order to be successful. I remember, as you can imagine, there was many financial struggles. We dug a deep hole in the first three years of operation, and I'm glad that we're finally putting dirt back in the hole. But my CFO, through that entire time period, who's become like a blood brother to me, there's times where we might be in ... get a little bit red faced because it was tense times.

Geoff Hager:

He might be talking about how insane it is to even think about putting more money and this thing over here. Here I am thinking, "Well, but that's my role. I'm the visionary of this thing. My role is to push the envelope because I know that that's the future and that's where we're going, and if we don't make an investment here ... " He's over here saying, "Yeah, investment with what dollars? It's on the backs of these areas where we're already deficient." I might yell at him and say, "Well, this is why you'd never start a business." But without him, I would run mine out of business.

Geoff Hager:

I have found it very satisfying to embrace those people in my life that represent the opposite viewpoint, because if you can get people like that on the same team and rowing in the same direction at the same time, man, it's an unstoppable team.

Robert Wagner:

Yeah. I appreciate that answer. I have come to appreciate the roles of both.

Geoff Hager:

Yeah, absolutely.

Robert Wagner:

Because you're absolutely right, those of us who are not the risk takers are not going to put the chips on the table that are required sometimes. I've accepted this belief, that it's really the folks who will put the chips on the table that make this country run. We're working for all those folks, ultimately. We could not do it without them.

Geoff Hager:

One more, real quick one. I remember we had another situation where, boy, in order for us to pay a few critical bills, we had to get these collections and they couldn't be a day late. It was just a really tense time. I remember having a conversation with our CFO and at one point he said, "Well," he said, "I think I'm just going to take a page out of the Geoff Hager book and I think it's going to be all right." I said, "No." I said, "We can't have two of us thinking like that. It's going to be a disaster if we both think like that." I said, "No, please, continue to be anxious and have complete worry about this."

Geoff Hager:

Because I know that that's the only way we were going to get through it, so it does take both. I encourage you, if you happened to be naturally the opposite type, embrace it because we need that as well.

Robert Wagner:

Yeah. Geoff, you're a pretty young leader. What do you do to make yourself sharper, to get better all the time?

Geoff Hager:

Yeah. I love to play golf. I never get to play anymore. I might get out four or five times a year, but there was a time in my life where I wasn't bad, relatively speaking. Maybe normally shoot in the high eighties. Here's what I found. I don't know that this holds true for other people, but if I played golf with people that were a little bit better than me, somehow I tended to play better myself. It was the craziest thing. The best rounds of golf that I've ever played were usually with somebody who, in spite of me playing the best I'd ever played, they still beat me by three or four strokes.

Geoff Hager:

But it was the fact that I was close enough to them, I could almost taste it. Somehow, they brought out the best in me. I get a lot of accolades a lot of times, Robert, just because of the success of Big Elk and whatnot, and one person can't build this. I get a lot of credit for it, but I've got an amazing team of people that are my driving force. They stand behind me and have been with me through thick and thin, and in a lot of areas of life they're better than I am. I would tell you, the way I stay sharp is, one, stay humble.

Geoff Hager:

I don't ever forget the humble beginnings and all of the trials and tribulations we've been through. But the second thing is, I always surround myself with people that I feel are better than I am because it always causes me to look up, and as I look up, it points me in the right direction.

Robert Wagner:

Okay. Well, Geoff, I really appreciate your time today. We have five questions that we ask every guests.

Geoff Hager:

Okay.

Robert Wagner:

Looking forward to your answers to these. What was the first way you made money?

Geoff Hager:

Let's see, I believe that ... I'm wanting to just think for one second, make sure I'm answering this correctly. I mowed lawns, I think probably starting from around age 12, and that's my first recollection of actually making money. I think it was the Geoff Hager lawn service, starting with the aunts and uncles and grandma and grandpa, and then growing from there. Every summer was lawn mowing.

Robert Wagner:

Okay, so if you were not leading Big Elk, what do you think you'd be doing?

Geoff Hager:

I would most likely be an evangelist.

Robert Wagner:

Okay.

Geoff Hager:

Yeah. I was one for a few years, but it was, I served on the weekends while having my full-time job during the week. But I always had a drawing towards that and it's always been an integral part of my life, so most likely that's what I'd be doing.

Robert Wagner:

Okay. What would you tell your 20-year old self?

Geoff Hager:

That's good, I wasn't expecting that question. Robert, I would tell my 20-year old self to embrace the suffering. I would tell my 20-year old self that you're most refined when you're in the furnace of affliction, and without suffering you'll never be molded into the person that you're destined to be. It's been the best teacher for me. I would just tell my younger self to embrace it.

Robert Wagner:

Thank you for that. Geoff, I have this theory that everyone's writing a book in their head about what they believe, what they're doing, what's important to them. What's the title of your book?

Geoff Hager:

No one prays for chicken pox. My 11-year old recently was having a bit of a struggle with the school year. It's very recent, just a few you weeks ago. While I was with him in the evening before we were about to go to bed, I was listening to just some of the things that he was going through. Part of me was feeling for him. As a dad, you'd love to be able to jump in and rescue him, but it's not the end of the world. I'm trying to figure out a way to convey to him that he's going to make it to the other side. All of a sudden the thought came to me, Robert. I asked my son Seth. I said, "Seth, did you know that your mom and I will never get chicken pox ever again?"

Geoff Hager:

He said, "No." I said, "Do you know why?" He said, "No." I said, "It's because we've had it before." I said, "Seth, the crazy thing is, is that when you get the chicken pox your body forms these antibodies using ingredients that were already there in your body, but it needed the disease in order to form those antibodies together. The crazy thing is, once you've fought it off once, if it ever tries to come back, you now have a weapon to fight against it and you'll never get it ever again." I said, "Seth, you're going through some tough times, but I want to tell you're going to make it to the other side. You're going to be stronger as a result because you're forming weapons now that will service you well in the future."

Geoff Hager:

But then I told him, I said, "No one ever prays for the suffering that you go through. No one ever prays to have the struggles. But if we're being honest with ourself, those that have gone through it would say, that is when you develop the things that you need to endure to the end." With all that being said, the title of the book would be No One Prays For Chicken Pox.

Robert Wagner:

Yeah, I hope you write it soon.

Geoff Hager:

I'm working on it.

Robert Wagner:

That is awesome.

Geoff Hager:

Yeah.

Robert Wagner:

Last question, what's the best piece of advice you've ever been given?

Geoff Hager:

Apologies, Robert, your question has invoked a memory I hadn't thought of in a long time. I don't know why it came to me, but my answer is, beware of pride. Pride, it keeps you from greatness and humility drives you there. A very special person in my life, who was a mentor most of my life, I remember even after I would do something great, a great accomplishment, his first words to me would be, beware of pride, stay humble. Then, he might pat me on the back. I found it annoying a lot of my life, and now, sitting where I sit now and thinking back to those moments, it makes me emotional because of how critical it was and how impression ... how much it made an impression on my life at that time. Best advice I've ever been given, beware of pride, stay humble.

Robert Wagner:

That's awesome. Well, Geoff, thank you so much for being a guest with us today. I appreciate your insights and your transparency and your humility. Thanks very much.

Geoff Hager:

Yeah, my pleasure completely. Thank you, Robert.

Robert Wagner:

Thanks. That's all for this episode of How That Happened. Thank you for listening. Be sure to visit howthathappened.com for show notes and additional episodes. You can also subscribe to our show on iTunes, Google Play, or Stitcher. Thanks for listening. This content is for informational purposes only and does not constitute professional advice. Copyright 2019, Hogan Taylor LLP. All rights reserved. To view the Hogan Taylor general terms and conditions, visit www.hogantaylor.com.