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Tony Simmons - Part 2: "Sunlight Is an Amazing Disinfectant" · The Twenty One Clear Podcast

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Tony Simmons: One of my cousins who was on the board, had a
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saying I used to like a lot.
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He said, "Sunlight is an amazing disinfectant."
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And it's, it's very, very accurate, especially in a family business.
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A family has to trust the information that's being
0:18
given is accurate and factual.
0:28
Adam Hatcher: Hey there.
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Welcome to the 21Clear podcast.
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I'm your host, Adam Hatcher, the founder of 21Clear, a
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family business consulting firm.
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And with this and all of our other podcasts and newsletters, we want to
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provide resources to you that help you think about your inner family business,
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the unique way your family works in and owns your family company together.
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The voice you just heard is Tony Simmons, and Tony is the former family CEO of
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McIlhenny Company, the makers of Tabasco.
1:01
This is the second of three episodes of a sit-down with Tony.
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So if you missed the first episode, go back and listen to that one first.
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Tony both walks you through the company, its formation, some of the high-level
1:16
details about McIlhenny Company and their corporate structure, and then
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he tells you about his own career.
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And the theme you're gonna hear in that is Tony never set out to run the
1:27
family company, but how did he end up on the board, and then how did he end
1:31
up the CEO, and then how did he go about stepping away and handing the role off?
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So that's the first episode.
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The second episode, we're actually going to get an insight into the way the family
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works in and owns the company together.
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So if the company is McIlhenny Company, and that's who we all buy Tabasco
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products from, their inner family business is the way the family owners, family
1:59
employees, and those around them work in and own these businesses together.
2:07
Tony's gonna give us an insight into their board, some of the evolution of their
2:11
governance structure, and even some of the guiding principles that they use to make
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decisions as a family and as an ownership group and as a board about the company.
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We're gonna pick this episode up.
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McIlhenny Company has been around for over 160 years, and I had asked
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Tony, "How did you all do this?
2:32
Most family companies struggle to make it past the third generation.
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How did you all get to this point?"
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And he gave a simple but challenging answer.
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So that's where we're gonna pick up, and then get into some of
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their governance and the way they run their inner family business.
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So let's start with Tony telling you how they have kept the
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McIlhenny Company both in the family and alive for over 160 years.
3:04
Tony Simmons: So, if you feed the business and starve the family, you
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end up with poor little rich kids.
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On paper, I'm worth a gazillion dollars, but I can't pay my mortgage.
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I need liquidity.
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I need this business to produce for me.
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A lot of family businesses, especially capital-intensive family businesses,
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can't afford to give that liquidity, and if they are forced into it, they're
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probably gonna have to sell the business.
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Conversely, if you feed the family and starve the business, the business
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doesn't grow as it should, and the family looks at what is probably
3:50
their single biggest asset and says, "This asset really isn't doing well.
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Why do I wanna own this?"
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And that can lead to the family saying, "I want out.
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I wanna sell this.
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I don't wanna own it anymore 'cause I don't think it's a good investment.
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I can do better than this."
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The family businesses that make it are the family businesses that can find that
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balance between feed the family and feed the business so that the family says,
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"I wanna own it, and I'm happy with how this business is giving me what I need."
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And the business says, "I'm getting what I need in order to produce a
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better business for you and to continue to grow at an acceptable level, and
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make it something you wanna own."
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But every family's different, and every business is different.
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So it isn't like you can hand someone a formula and say, "Here's the formula.
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Do this, and you get to keep your family business."
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It's a puzzle.
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And you've gotta solve the puzzle, and if you can solve it, you
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can keep your family business.
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If you can't solve the puzzle, you're gonna lose your family business.
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Adam Hatcher: And the solutions, you can't copy and paste anyone else's.
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I remember learning about the HermÃ¨s family, and I think it
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was 10 or 20% of the business for that reason they took public.
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They looked and said, "We're the owners.
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We're the family that owns one of the most valuable luxury brands in the world,
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and we get nothing from this business."
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So their solution was 20% public.
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A lot of family companies probably aren't gonna do that, aren't gonna
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give up 20% of their control.
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But it shows that there are options for you as you find
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whatever the balance is for you.
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Tony Simmons: That's exactly right, Adam.
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And the point is, can the family find a balance that makes the
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family wanna hold onto it?
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Now, in a company like McIlhenny Company, Tabasco, with its now
5:54
seventh generation of shareholders, no shareholder owns enough of the company
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to ever force us to do anything.
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So if we had a shareholder who needed liquidity or desired
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liquidity, we can make that happen.
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If a large group of shareholders got together and said, "We want
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liquidity," then we might have to look at doing something.
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But our stock is spread now so large over so many people that no one owns enough of
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the company to be able to force anything.
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And, you know, we're an S corp.
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When we became an S corp, everyone had to sign a shareholder agreement, and that
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shareholder agreement binds the successors and assigns for those shares of stock.
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And, it does several things.
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One, you cannot move the stock to a non-blood person.
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To own stock in McIlhenny Company, you either have to be a descendant of
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Edmund McIlhenny or a spouse, because we do allow spouses to own stock.
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But if the spouse owns the stock, at their natural death, the shares must move back
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to a qualified shareholder, or the board has the authority to buy the shares back.
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Adam Hatcher: Into the business
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Tony Simmons: Yeah.
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And in addition to that, as part of that shareholder agreement, we set up a
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call price that is done each year by a valuation company to set that call price.
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If the board has to buy the shares back or if someone tries to move
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shares to a non-qualified individual, the board has the right to purchase
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the shares at the call price.
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And that call price is reduced by a lack of marketability and a minority
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interest in a closely held corporation.
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It is not the enterprise value of the shares as if you were
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gonna sell the whole company.
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So there's no argument over how much the board would pay for a share.
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It's already in the shareholder agreement at that call price.
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Adam Hatcher: It's both in the shareholder agreement and it's not Uncle Tony
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who's coming up with the value of it.
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You all have an independent company.
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So I'm curious, 1997 was when you got the call for the board?
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All right.
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This is Tony Simmons, publicly traded executive, international
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business experience, and you come into the family company board.
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How, at that time, because when I hear you talk about call prices and
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independently set, there's governance there, and there's thought, and there's
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formality, and this is something family companies have to grow into.
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How formal or informal when you joined the board was it compared to what you expected
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coming from a publicly traded business?
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Tony Simmons: The governance structure at McIlhenny Company
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was not what it needed to be.
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It definitely wasn't best in class.
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Adam Hatcher: And how old was the business at that point?
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Tony Simmons: 168 to 97.
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So, so what is that?
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Another, 29 years, 129 years at that point.
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Adam Hatcher: Yeah.
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As you tell this story, I hope for anyone who may think our, you know,
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our company's 20 years old or 80 years old, and how do we not have this in
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place or that, here you're talking about your family company over 120
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years old that still had work to do.
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Tony Simmons: And it had work to do that most people would be kind of surprised at.
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Like, they didn't have a formal business plan.
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They, you know, I said, "Well, where's the business plan?"
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"Well, we don't write a business plan.
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We don't need that."
9:54
Okay.
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Well, I disagree.
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Adam Hatcher: Well, 'cause in your world where you came from- you
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couldn't, you couldn't do that.
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In family business, you can, in a successful, well-known brand, people
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probably assume it's there or you've just maybe even been successful.
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I've heard the phrase, "We're successful in spite of ourselves."
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But you came in with that experience and you found that gap.
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Tony Simmons: And, the governance was not where it needed to be.
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And we started with we're gonna write a formal business plan.
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We're gonna have the management team write a formal business
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plan and present it to the board, and the board has to approve it.
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It was our first step for the year, 1998.
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And we're a calendar year, so, it's January of '98 and we got a formal
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written business plan to start, andâ¦
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Adam Hatcher: Is it all family board members at this point?
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Tony Simmons: It was all family board members.
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Yeah.
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And, then the board began to work on trying to do best practices governance.
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One of the first things we did was, we had in groups of twos, we had two
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board members at a time attend a Kellogg School of Management, a week-long seminar
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on governing family businesses to get them familiar with how other family
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businesses were doing things, what are best class practices, you know, what
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are they doing that we're not doing?
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And we put the entire board through that, two at a time, which was beneficial.
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It was a great education and the first actual board education we'd done.
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And Northwestern did a good job for us and it helped us along.
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From that, we recognized that we needed to change our board meetings
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from regurgitating what happened in the last quarter from the management
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team to, "We're gonna get you all of that information in advance.
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We expect you to read it and to have, you know, digested it before you ever
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get to a board meeting, 'cause we don't wanna spend the whole board meeting
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talking about what happened last quarter.
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We wanna talk about things that are important and strategy and
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where this company's going."
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In addition to that, we began to create a much more formalized committee system
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and moving most of the board work into committee, and then having the committee
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report out what was going on with that particular part of our business.
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And created the audit committee, a comp committee, and an investment
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committee, and a corporate governance and nominating committee.
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And those four committees each have written charters which are reviewed
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on a every two years to be sure that they're still what they're supposed
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to be and should be, or if they need to be modified, how they need to be
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modified, and what needs to be in them so that they don't go stale.
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And, McIlhenny Company now has best practice governance
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and it's done very well.
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But, it was a transition from almost real no governance in 1997 to what
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we morphed into as we moved along.
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Adam Hatcher: Some families go to a conference, they hear someone speak,
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they hear about these committees, and they think, "Oh, well, that's big
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folks like big companies like Tabasco, big complicated companies like the
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McIlhenny Company and their well-known brands," or we're here in the South, you
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know, you and I are in the Southeast, the Cathy family or the Cox family.
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Like, it's for folks like them.
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But I'm curious, when you all started doing that, or someone might
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say, "I have no interest in that 'cause I just wanna make money.
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Like, what's that got to do with the company?"
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As you all started to do that, was there a benefit back into McIlhenny Company
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from the ownership board starting to have these more formal rhythms and processes?
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Tony Simmons: Yes, in that because the board was more active in the governance,
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the challenges that the management team was being presented with were much more
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transparent because, those committees were asking questions and wanting to
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understand what was going on in various departments and parts of the company
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where before it was pretty much just, "You don't need to worry about that.
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You, you know, it's, it's okay."
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And one of my cousins who was on the board, had a saying I used to like a lot.
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He said, "Sunlight is an amazing disinfectant."
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And it's very, very accurate, especially in a family business.
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A family has to trust the information that's being given
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is accurate and factual, and that especially, numbers are good.
15:06
You know, we do and have since 1932, an audit with an
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outside audit firm every year.
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As a matter of fact, we're still using the same one.
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Peat Marwick Mitchell was our auditor in 1932.
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KPMG is still our auditor.
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Adam Hatcher: Roots-
15:26
Tony Simmons: Audit partners, okay Right.
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but
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but we've, we've been, Yeah
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Adam Hatcher: Wheel 'em out Yeah Yeah
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Tony Simmons: Our family, we have a quarterly board letter that
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goes out from the chair, on what's happening with the company, with some
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financial statements to back it up.
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And the letter talks about current happenings with the company.
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We have an annual shareholder meeting that's very well attended,
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every year at Avery Island.
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And, the management team goes through the year and, you know, what was good,
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what was bad, where we are, what we're looking at for the coming year, and, you
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know, what growth opportunities and things are happening that they can talk about.
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Sometimes they can't talk about things.
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And then we have a shareholder website, that's, you know, got a
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firewall on it, and we post quite a bit of information to that shareholder
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website so that our shareholders can feel comfortable they have a
16:36
good understanding of their company.
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When I ran the company, my assistant was also in charge of shareholder relations
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because she knew, because I had told her,
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If you're on the phone with a shareholder and something's not
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right, I wanna know right now."
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And she'd poke her head in the door and say, "Tony, I just got off the phone
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with so-and-so," blah, blah, blah.
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No problem.
17:08
"Hey, it's Tony.
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Tell me what's happening.
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What's wrong?"
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Adam Hatcher: Not every family company CEO
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would take that approach.
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Why did that matter to you?
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Why would you stop what you were doing and say, "Bring them to me.
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I need to call them now or pretty soon"?
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Tony Simmons: Especially in a family, you can get rumors and you can get grudges
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that you don't get in corporate world.
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I mean a family will cut you.
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I'll give you an example.
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I had a call, "So-and-so thinks we're keeping two sets of books."
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" Hey, it's Tony.
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I hear you think we're keeping two sets of books."
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"Yeah, that's right."
17:53
"You're right."
17:54
"I knew it.
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I knew I was right."
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I said, "We have a set of books that are based on what is called GAAP.
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And GAAP stands for Generally Accepted Accounting Principles,
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and you are required by law to keep your books in GAAP.
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It isn't optional.
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It has to be done.
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But the tax code is so crazy that you have to keep a separate set of books about what
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the tax laws allow you to do and not do so you don't overpay on your taxes either.
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So there is actually a separate set of books that deal with all the tax
18:34
ramifications of everything you're doing.
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So there are two sets of books.
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Both of them are available to you.
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Neither one of them is anything you need to worry about, but yes, there are.
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Oh, well, that's exactly the kind of rumor that can run rampant through a family
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and create enormous amounts of problems.
18:55
So you wanna, you want to attack that as soon as you can to stop it from
19:01
getting out in the family with something that's just not true, and now you're
19:04
trying to put out a wildfire instead of putting out, you know, a kitchen fire.
19:08
Adam Hatcher: Your journey before the company, how you came into the board,
19:11
how you came into the business, your journey as, part of your journey as CEO.
19:17
But you've now done something that a lot of family leaders fear
19:22
doing, which is stepping away.
19:24
You have stepped out, and you all areâ¦
19:27
Is The McIlhenny Company two CEOs past you now?
19:30
Tony Simmons: Yes
19:31
Adam Hatcher: Two.
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How did you know it was time?
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And then what was it like handing the reins off?
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Tony Simmons: The board, had asked me: "What do you think see, you know, when?"
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And I told them you know I think probably 68 or so is a good time.
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Adam Hatcher: And the board, the last time we talked about it here, the
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board is 1997 and 10 family members.
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The board that you're working with at that time, is it still all family
20:02
or has the composition changed.
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Tony Simmons: It was still all family.
20:06
Now since then it has changed But at that point it was still all family.
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But having said that we were a little different because in that boardroom
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the only two people in that boardroom that were board members that worked
20:24
for the company were myself and Paul.
20:28
I added two sixth-generation members.
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One, had gotten a PhD in chemical engineering from Berkeley and then
20:38
gone to work for Bain & Company.
20:40
I said, "Why do you get a PhD in chemical engineering and go to work for Bain?"
20:44
And he said, "Money."
20:46
He said, "The same math skills you use for chemical engineering
20:51
are the same high-end math skills you use for financial modeling."
20:55
And he said, "Bain wants that technical math expertise, and then
21:02
they train you of what they want."
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So anyway, he was in his early 40s, he was a full partner at Bain, and we
21:09
brought him onto the board as our first sixth-generation family board member.
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The other family member we brought on the board graduated from Harvard,
21:20
worked for McKinsey & Company, went back to Harvard Law, graduated
21:25
second in her class in Harvard Law, and was working in the legal world.
21:30
Very, very smart lady.
21:32
And, brought her in.
21:35
And our feeling was, with family shareholders that are that qualified
21:41
to be board members, do we really need outside directors because they're
21:49
essentially an outside director.
21:50
What they are is a shareholder that has become an outside, you know,
21:54
a director, but they are family.
21:57
What the board finally said was, "The only two people in this room
22:05
who know or, and are in the food business are the family members who
22:10
are actually working in the business.
22:13
We would like to add food professional experience to this board to give the rest
22:21
of the board the assurance that people who know the food business are evaluating this
22:27
management team and giving the board an honest opinion of how well this management
22:33
team is doing, because they know."
22:36
So that was the impetus to start it.
22:39
I think from that, McIlhenny Company has continued to do a board evaluation.
22:47
What skill sets do we have and what skill sets do we need and we don't
22:51
have, and how are we gonna get them?
22:54
And they just added another outside director with a skill set based in
23:00
being a CFO, 'cause they felt like they wanted to have some more high-end
23:05
financial experience on the board.
23:07
Adam Hatcher: It's dynamic.
23:09
What the board needed in 1997 or in 2018 is not gonna be what
23:14
it, they need in 2030 either.
23:16
So the board asked you, so I'm winding back in time a little bit now.
23:19
So the board asked you, "Tony, what is your timeline?"
23:23
It sounded like.
23:24
Which is, by the way, a question that a lot of families are scared to answer.
23:28
Like, I've sat down with families and we've just said, "Well, what's
23:32
the latest you would be gone?"
23:34
And the moment you write that on the board, if they say it's 70 years old
23:37
and they're 63, seven years, or if you turn that into months, it's so hard
23:43
for families to answer that question.
23:44
So they ask you, and you gave them an answer.
23:48
Tony Simmons: Mm-hmm.
23:48
Adam Hatcher: So how did that play out?
23:50
Tony Simmons: It was fine.
23:50
It was an orderly transition and one of our other corporate governance is that a
23:58
CEO cannot be the chair for a minimum of three years after they retire to stop a
24:11
former CEO from lording over the new CEO.
24:18
And, that may be a little tough in some families, but
24:22
it's a good business practice.
24:23
I mean, it's hard for me to think that you could have a hard time arguing against it
24:28
because it's normally hard for a family member to turn over a family business.
24:34
You see it a lot.
24:35
I've seen it a lot where, "Okay, I'm gonna turn it over to you," and then he's in the
24:41
office every day telling him what to do.
24:43
Well, he hadn't turned over anything at that point, you know, if that's
24:46
how he's approaching it, and it can be very destructive to a family.
24:49
Adam Hatcher: And "We miss you" to the person who's left if they're still
24:52
around, "We miss you," or, "You were so fun to work with," can very quickly
24:57
become, "'Cause your cousin drives us crazy, and he's not as good as you were."
25:00
It just, there's such a slippery slope.
25:03
Tony Simmons: Absolutely.
25:03
You gotta make a clean change.
25:05
And, that's what it was.
25:07
And I stayed on the board, but not as chair.
25:10
And, McIlhenny Company's age limit for board members is 73.
25:17
So, I rotated off the board at age 73 because I aged out, you know.
25:23
Now I still run Averill & Inc for my family, and I run another little
25:27
family land business for my family.
25:29
But, I aged out of McIlhenny Company's board at 73.
25:33
Adam Hatcher: So Tabasco's the name of a product.
25:36
Avery Island is the name of a place.
25:39
McIlhenny Company is the company that produces Tabasco at Avery Island.
25:46
Okay.
25:46
Tony Simmons: Yeah.
25:47
And Avery Island is actually McIlhenny Company's landlord because
25:52
Avery Island owns all of the land.
25:54
God bless my ancestors.
25:56
Over 100 years ago, they got together and agreed to give up their fee simple
26:01
interest in Avery Island and put the land into a corporation and take back
26:08
shares of stock in the corporation.
26:11
So no one can sell off a piece of Avery Island because Avery
26:15
Island Incorporated owns the land.
26:19
No shareholder owns the land.
26:21
They're able, like I am, to have a home site lease on Avery Island, and
26:26
I own my improvements on my lease, but I do not own the land underneath me.
26:31
Avery Island Inc.
26:32
owns the land underneath me and leases me that land to have my residence on.
26:38
But my lease restricts ownership of that home to a blood descendant of
26:47
Daniel Avery and Sarah Craig Marsh.
26:51
Adam Hatcher: And the company that owns it, I assume, has a
26:54
board, has people who run it.
26:56
Tony Simmons: Yes.
26:57
So I still run Avery Island Inc.
26:59
for my family, even though I'm retired as former president
27:03
and CEO of McIlhenny Company.
27:05
I still run Avery Island Inc.
27:07
I tell people it's almost like I'm the mayor of Avery Island.
27:10
That's sort of what it's like, you know.
27:12
It's not really a full-time job by any means.
27:15
And I have a full-time manager who is there handling day-to-day stuff.
27:20
And we have a crew that maintains the island.
27:24
It's a gated community and Avery Island Inc.
27:27
controls the gate onto Avery Island.
27:29
So those are our employees that are on the gate 24/7.
27:33
And all of the grounds maintenance, is done by Avery Island Inc.,
27:38
our family company.
27:39
And then McIlhenny Company leases land on Avery Island for its facilities.
27:47
They own their improvements, but they lease the land from us
27:51
to have those improvements on.
27:53
100 years ago, the closest town, New Iberia, is seven miles away.
27:58
Well, it's too far to go to work and back.
28:00
So we built housing on Avery Island so that our employees could live on
28:05
Avery Island and be next to where we needed them to be to make Tabasco.
28:10
We have about 60 houses on Avery Island that we lease to our employees.
28:15
So the population of Avery Island, including family members, is a
28:19
little over 200 people probably.
28:21
Adam Hatcher: I'm trying to think of how many headaches the company and
28:25
the family have avoided because they put the ownership into a business
28:29
versus, as you were saying, having individual shareholders, any of whom
28:33
could have at some point elected to sell their part of the island.
28:37
It's all pulled together versus any one person really being able to
28:41
have leverage over another person or another branch of the family.
28:44
Tony Simmons: Yes, Adam and actually there's another added benefit that I
28:49
interact with a lot of family businesses.
28:52
One of the benefits that we've received from the way we're structured is
28:59
that what I would call our legacy assets, which is Avery Island itself.
29:04
And, we have the family home on Avery Island that, you
29:08
know, is communally owned.
29:10
It's owned by the corporation and is available to family members to use.
29:14
We have various amenities on Avery Island that our family
29:19
can choose to take advantage of.
29:22
Those legacy assets are not part of our business.
29:26
They're not part of McIlhenny Company.
29:29
So, it's much easier to separate legacy assets and business assets, which is as
29:37
you know, where a lot of families get into quarrels and squabbles if it's a
29:43
successful family business and they have villas or they have yachts or they have
29:49
airplanes or they have facilities, how those get used by various family members
29:56
can cause significant issues in a family.
29:59
So, the fact that our legacy assets are separate from our business assets
30:04
makes life a lot simpler for us.
30:06
Adam Hatcher: Are there still distinct branches of the family?
30:08
I find that interesting how families, sometimes it starts to get so
30:11
big that you start to lose those.
30:13
Do you still have distinctive veins in the family?
30:16
Tony Simmons: Yes, you do.
30:17
One of the things that we instituted for McIlhenny Company especially,
30:25
was a shareholder education program where we invited 25 stockholders.
30:33
Originally, it was just stockholders' family.
30:36
We ended up allowing spouses to attend later, but we tried to keep the age
30:45
group as close as we could to each other because even though some of
30:51
my cousins knew who their cousins were, they didn't really know them.
30:56
And by coming into a three-day education session with cousins that were mostly
31:04
in the same age bracket as them, it really, in addition to them learning
31:09
a lot about their family business and having a much better understanding of
31:13
what happened and how it happened at Avery Island, and what the governance
31:17
was because they met with the board, they met with the officers that run the
31:22
company, they toured the facilities.
31:24
But they also, in lunches and dinners with their cousins, became much better
31:31
acquainted with an awful lot of their cousins, which was an extra benefit,
31:35
that we got from trying to educate our younger shareholders especially,
31:41
on what McIlhenny Company was.
31:43
We finally did it enough to get down to about 25 years old and just stop
31:48
there, and now we're waiting until this next group gets sufficiently
31:53
large at 30 to, you know, around 30 years old or so to bring in another
32:00
group and do it all over again.
32:02
Adam Hatcher: We'll wind back to that and the shareholder meetings and the creation
32:06
of those and then how you use them.
32:09
But it's neat to hear that there was a benefit, not just to the company or
32:12
to ownership, but just to the family.
32:14
People that may not have had a reason to see each other have a
32:18
reason to get together and connect.
32:20
Tony Simmons: Right.
32:20
They've been investigating and are just trying to start a
32:24
family council, and we'll see.
32:28
One of the things I question about the family council,
32:32
I'm not questioning the family council, I'm questioning versus a lot
32:38
of families, what I mentioned to you earlier, we've separated our legacy
32:44
assets from our business assets.
32:47
Family councils, to a large extent, tend to deal with non-business family
32:54
issues, not the business issues.
32:58
That's the board's purview.
33:02
Because so much of our legacy assets and non-business issues aren't in
33:09
McIlhenny Company, we'll need to see how effective a family council is.
33:14
Adam Hatcher: Do you mean is there enough meaningful things to do that it's worthâ¦
33:18
'Cause that's a lift.
33:18
Tony Simmons: Yes
33:19
Adam Hatcher: Creating a council's a lift.
33:20
Tony Simmons: Yes.
33:21
Yeah.
33:21
You know, how effective can they be.
33:23
Adam Hatcher: And one thing that's interested me with McIlhenny
33:25
Company is you're still, it appears, still a single product company.
33:34
Now, there are different product lines, but there are other families whose
33:38
companies were started in a similar era.
33:40
Heinz is an example of this.
33:42
Campbell's an example of this.
33:43
They start as a single product family, and then they go out into
33:47
lots of stuff, and they go well beyond that, and they go public.
33:52
But you all have been able to make the decision to stay with a core product
33:59
and make it as great as you can.
34:01
Do you think that is uniquely you or the family orâ¦
34:08
It feels like at some point a different company, a different family could have
34:11
felt tempted to chase, to be considered great, to chase Heinz, to chase Campbell,
34:17
to chase these other companies and try to outgrow them or outdo them.
34:22
But y'all didn't make that choice.
34:24
You defined greatness your own way and have become what you are.
34:29
Is there something about having a family business you feel like lets you
34:33
do that, define it on your own terms, versus having to chase what other people
34:38
would or what a corporate board would've tried to force you to add products
34:42
along the way or diversify lines?
34:45
Tony Simmons: Actually, Adam, the way I think about it is
34:49
what we talked about earlier.
34:51
It's the way we solve the puzzle.
34:55
The family likes owning the business, and the business is
34:58
getting what it needs to grow.
35:01
But we did make a conscious decision to do what we know how to do.
35:09
We're gonna stay with the pepper sauce business.
35:14
In the early '90s, we bought another pepper sauce company.
35:19
Which we sold a few years later.
35:22
The only thing we did worse than buy it was sell it.
35:27
Demonstrating a complete lack of ability to recognize how to do M&A effectively.
35:36
And, we made a conscious decision at that point, you know, to not refuse
35:47
to do M&A, but to put a low priority on it and concentrate on trying to
35:54
do organic growth of our products and expand our product offerings with line
36:01
extensions because we make a premium product that we sell at a premium
36:08
price, and we're not really good at just how to market and sell me-too stuff.
36:15
Mm-hmm.
36:16
So, you know, there is no one, no one that takes five years to make a bottle of
36:23
hot sauce other than McIlhenny Company.
36:27
'Cause seed to table takes us five years to make that little bottle of
36:32
Tabasco that you see on your table.
36:35
Adam Hatcher: At 21Clear, when we work with family companies, one of the
36:40
things we talk about is that when you choose to work with your family, the
36:44
great family companies have two goals.
36:47
The first is to build a great company, and the second is to keep the family
36:52
together as you own and operate it.
36:55
And what I love in family companies about that first point, building
37:00
a great company, is the family gets to decide what greatness is.
37:06
You need to make a decision about what it is, but you get to decide,
37:11
and you heard Tony right there at the end talking about that.
37:16
They didn't have to become a large publicly traded company that got
37:21
into lots of other ancillary business lines and consumer packaged goods.
37:26
They decided they were really good at making pepper hot sauce.
37:34
And there was something about, Tony says it right there at the end,
37:38
there's something that resonates with that extended family about
37:41
a product that takes five years.
37:45
It's not something that you can just quickly do and produce.
37:50
And that's what I love about the stories that Tony has told us so far,
37:56
is you hear some common themes and principles, family meetings, governance
38:01
structure, intentionality, the courage to answer big questions or to pick
38:07
up the phone when someone accuses you of having two sets of books.
38:11
But the way they do it is specific to them.
38:15
So the point is that they lean in on how they work in and
38:18
own the business together.
38:20
But how they do that is theirs, and it may or may not be applicable
38:25
to you, any given answer.
38:27
So this is episode two.
38:30
Episode three, I'm gonna encourage you, if you're an audio listener,
38:34
to go find the YouTube, because Tony has been our guide through company
38:39
history and inner family business work.
38:42
But the third episode, we actually turn the camera on, and Tony takes me through
38:47
a five-bottle Tabasco tasting, and you get to see him go from historian and
38:53
inner family business expert to a man who absolutely loves hot pepper sauce
39:01
and making your food taste better.
39:03
It's fun.
39:04
It gives you a bit more insight into him, and it's a great way
39:07
to end this series together.
39:09
So look for that in the next episode, and I encourage you to pull up
39:12
the YouTube video and watch it, particularly my face when we get to
39:17
habanero and the scorpion bottles.
39:21
There are links in the show notes if you want to follow our newsletter as well.
39:26
You'll always hear about new episodes there and get content
39:29
in between to help you think about your inner family business.
39:32
I look forward to you joining us next time for the third episode.
39:37
And as my grandfather would have said, "Thank you so very,
39:41
very much for listening."