The greatest education that is the way we've learned is giving people the transparency and exposure to your own numbers.
Hello and welcome to the Business of Architecture. I am your host Ryan Willard, and today I have the great pleasure of introducing the founding partners of Bluewater, Todd Hoisington and Erebos. Todd serves as the chief strategy officer at Blue Water, bringing with him a wealth of experience and a fervent commitment to innovation in architecture and engineering. In his current capacity, Todd leads Blue Waters investment and growth strategies, capitalizing on his established track record of enhancing operations and achieving substantial growth. Before co founding Bluewater, Todd redefined his skills at the IBI group, now known as Arcadis, where he led a diverse portfolio of projects spanning large transit infrastructure developments, automotive manufacturing facilities, innovative experience centers, and technological solutions. His expertise covers the entire project lifecycle from initial pursuit through to meticulous planning and execution of large scale endeavors. With a proven performance in negotiating and managing projects valued at up to 2 billion in construction, and generating over $100 million in a in the fees towards proficiency in project management and team leadership is highly esteemed within the a community. Erebos assumes the role of chief growth officer at blue water with a focus on shaping the future of architecture and engineering organizations and accolade an architect with an extensive experience across various sectors. Areas dedication to design excellence and exceptional client service epitomizes the ethos of blue water. In his capacity as chief growth officer. Airy directs many of the firm's investments and market focused initiatives. Prior to co founding blue water, Eric held a leadership position at the IBI group now okay, that's where he led the buildings practices. In the US his responsibilities at IBI included Strategic Growth practice leadership design, innovation, client relationship management, and alternative project delivery for significant private and public sector clients. He's a licensed architect in both the US and various provinces in Canada, and Eric is a distinguished member of the RA IC and AIA. He continues to advocate for the transformative potential of design, through his participation in conferences, design competitions, and scholarly contributions. In this episode, we'll be talking about mergers and acquisitions and bluewaters role in acquisitions of architecture firms. We talk about what's needed for a successful acquisition and what kind of architecture practices are suitable to be acquired. And we also look at why architecture firms might want to go through that process, what the founders need to be able to do what the business needs to be able to demonstrate. So this is a really fascinating conversation, a quite a unique and innovative business model that I think will strengthen many, many architectural businesses and strengthen the industry as a whole. So sit back, relax and enjoy Erebos and Todd pleasington. This podcast is produced by Business of Architecture, a leading business consultancy for architects and design professionals. This episode is sponsored by Smart practice, business of architectures flagship program to help you structure your firm for freedom, fulfillment, and financial profit. If you want access for our free training on how to do this, please visit smart practice method.com. Or if you want to speak directly to one of our advisors about how we might be able to help you, please follow the link in the information. Hello, listeners, we hope you're enjoying our show. We love bringing you these insightful conversations, but we couldn't do it without the support of our amazing sponsors. If you're a business owner, or know someone who would be an excellent fit for our audience, we'd love to hear from you. Partnering with us means your brand will reach over 40,000 engaged listeners each month interested in becoming a sponsor, please send us an email at support at business of architecture.com Ra and Todd Welcome to the Business of Architecture. How are you both who? Well,
thank you. Thanks very much. Yes.
Excellent to have you guys on the show. I was very excited to come across what it is that you guys are doing with blue water. You've both had a tremendous amount of experience in the architectural industry. You're both working at Arcadis. That's correct, correct? Yes. And, and over time, your careers have evolved into something quite unique and led you to setting up and founding blue water which is a strategic growth platform for architects and engineers. So why don't we jump in there and perhaps you could tell us a little bit about how would you describe what blue water is and How did your career path unfold into into this pathway? Sure,
yeah, so you talk a little bit about us being in Arcadis. Prior to that we were at a large ad firm 3500 people and then went into a bigger one. So we had a lot of transitions in our career. So we were, we were a group at RIT. And I worked together and we managed a group of companies that then started building a better team, we then got acquired through a lot of that, and we could have longer conversation about it. But through a lot of that we, we saw a lot of the pluses and minuses of how that goes, what it does to teams, how you can create powerful teams or destroy them through wrong actions, we had a acquisition spree of our own in previous times, that didn't go well, we then went through in direction of that, and then we were acquired. So we saw a lot of different angles of it. And we saw a lot of opportunity that aligns with a lot of the stuff you talked about on the podcast about improving business operation in the AI world. And with all that we had a lot of fun with it, we had a lot of fun working together on those things. And we saw the business opportunity with kind of the fractured architecture environment and in North America, and it kind of born an opportunity to take a different role in the industry and but provide a lot of value doing of doing the things we had a lot of fun out.
So it's it's quite interesting, actually, when we talk about acquisitions and mergers in the architectural space, I know a lot of firms would like to be acquired, often, this is a kind of exit strategy for the founders. It doesn't always work out like that, because an architecture firm is not often as as valued as perhaps the partner owns. And also, there's so many kind of cultural complexities that we need to be aware of. Perhaps you could tell us a little bit about, you know, for those who don't know, what is what is mergers and acquisitions, what does it mean?
Yeah, I mean, essentially, our platform is is around, I would say largely acquisitions at this point. There's Welcome once we have developed kind of our I'd say, standalone firms, which then need to grow the mergers will come as opportunities to expand those firms. Acquisitions In our word, basically, the Bluewater word is essentially, we acquire anywhere between 51 to 70%. of organization, because one of the three tenets of our principle is that the existing ownership needs to have skin in the game and continue to grow their value. That's not only just existing leadership, but the opportunity to bring other leaders into the practice. Right. And there's been a lot of changing attitudes around ownership in the industry right now. And a lot of people are finding it hard to transition leadership because certainly, generationally, things are changing around thoughts around ownership and things like that. So yeah, I don't know if I answered your question correctly. But I was trying to answer it through the lens of Bluewater and how we do mergers and acquisition.
Yeah, perhaps we could talk a little bit about what does a good transition look like? Or a good acquisition look like? And what does it look like when it's done badly, and he kind of pointed that, that you've, you've experienced both, and that's part and parcel where the, the the intention for Blue Water has arisen?
Yeah, absolutely. And are is, you know, comment about the ownership percentage is very unique. We don't we don't know anybody else that's doing in exactly that way. There's certainly some others that are starting to add some of those components. But this is a people based business. This is I mean, we have opportunities for technology that we're very optimistic on, but it is a people based business. And that's really important. And so we want people to participate in that ownership. That's not just by accident, some of the key parts of a successful transition, like you said, Ryan, is what's really hard for owners when when you said that they they do look for exit opportunities. You know, you've started the firm, you've gone, maybe it's 15 years, maybe it's 45 years. And it's hard to transition out of that. But they're typically, you know, put to say, do I sell out to a much bigger company, or do I transition to my my team and the values of those will be very different. And it's, it offers them an opportunity to do both a little bit, they can continue the name can continue on, the team can continue on and get the opportunities that they probably always envision coming into a smaller firm, but those those go hand in hand because they participate in the value of it. And when you can do that the key tenant of the success of it is they're engaged. They are part of the team. They are part of the ownership. And where we've seen that transition badly like you said to look at the opposite side of it, is you you take away empowerment you take away authority, because there's some higher power that comes in, and then all of a sudden people are reduced in their roles, they aren't in charge of their teams, they don't have any authority to take out things and run the business, as they see. So that I would say on one side, and the other side, you know, much aligned with the things you talk about on your podcast, on a regular basis, is improving the business is bringing more, you know, we call it kind of Bluewater best practices. But we helped bring that vision to build the people's skill sets. Because that doesn't happen a lot in small firms. Usually the way some firms start, as you start by a few people that are probably really good designers have client relationships, grow work, but they never take a business course along the way, they never get kind of business mentorship along the way. And we bring that to help broaden their careers as well. So not only do we not want them to lose empowerment, when they when they are required, we actually want it to grow and have them develop more skill set and more authority to carry out that skill. So
if I may add to that, you know, there's a couple of things that we I think we recognize a lot through the transitions we have had in other firms is one, you know, these firms are generally architecture firms and this firm sizes we are looking at, it's a legacy, you know, it's somebody's life's work. And even though they want to exit there, there are things that they're struggling with in terms of what's going to happen to my legacy. And so you've got to recognize that. The second thing is you cannot go in on day one and start doing changes. Every firm has its own DNA. And right, we have to understand that DNA so we spend a lot of amount of time trying to understand what is the DNA of the form, what makes them tick. While you know, DOD is talking about the improvement. So how do we start bringing in small step step improvements, but you cannot just go in on day one and think hey, we are going to improve this part we can see there are some issues. But there are other things that makes the firm tick. So you have to understand that that right balance before you can start doing these changes.
And there's bluewaters role than in mergers and acquisitions. Are you acquiring organizations yourself? Or are you more brokering the deals or are you preparing companies to be acquired by other larger organizations?
That's great question. No, we are acquiring them. And we are we we hesitantly say managing them because our intention is to not manage the firm's we we describe our own roles as fractional executives. Because we do come in we we make sure our early we have a 90 day plan that we have in most firms. And our it was kind of a it's not a one size fits all we do it is bespoke to what is where their current situation, what their opportunities are, which are not all created equal. And we we definitely get involved in the strategic planning, help facilitate that. So they can help create what their vision is, if we think it's bigger, will help push up that and then provide the tools and support to then go create that. And in ideal world, we would we would step away a little bit step back a little bit always be there for support. It might be augmenting the team with somebody with a different skill set maybe brings a different market sector, things like that we help facilitate those because those are difficult things in firms a lot of times, but it's not, we're not handing it off as a as a as a broker in any way. It's owned by blue water. Gonna
say okay, so blue water becomes like a large Holdings Company from lots of different architectural firms. And then the and then do you have investors that are investing into the shares of blue water as a total. And then you've got a kind of portfolio of architecture businesses, which are, you're basically improving them, and getting them to operate at a higher level when then there's the dividends share for investors.
That's exactly right. And we have four market areas. So we've talked about that kind of portfolio word for a while we invest in firms in the education, residential, transportation, or industrial and more, more light industrial space. So those are four market areas that have very strong mega trends behind them that we know are probably going to be pretty strong for the next 10 to 15 years at minimum. And so we do look at them a little bit as portfolios and we our goal is to build really strong industry leading brands. Our goal is in each of those four areas is to have an industry leading educational brand, have an industry leading residential brand and transportation brands so on, that's helping innovate those areas. So it's bringing a lot of things today it's
quite, it's quite amazing. Actually, I've never I've never come across maybe CVG is and is the nearest thing that I know that has kind of ownership of lots of different architectural practices. But it's quite a unique proposition. Is it risky? That what and what kind of investors do you like to work with and what sorts of investors like to invest with you? Are they other architects or experts in the industry or completely unrelated fields.
So, so far, we have one principal investor behind us that has is supported our business model enough for what we have envisioned right now, which we've, we've put it out publicly, that is our goal of $100 million in acquisitions to build that. And we think that's what's required to build the scale in each of those portfolios to get that momentum, to the point that we can be the industry leader in those. So that's all that's where our principal investment comes from, right now, but what we do envision as an opportunity is other, you know, owners of firms as well, that you know, may have done really well have built a little bigger company, it's probably not going to happen with a really small company that they can participate as investors to. So we've created our, our business model as the opportunity for that as well.
And when we started at Ryan, we did seed fund ourselves. So the owners, we seed funded this, so we were not dependent on an investor to, to start off, which we thought was really important, because nobody knows this industry. I mean, I shouldn't say nobody knows, but we definitely know this industry, a lot. We're subject matter experts would say in that case, so. So it gives a lot of confidence to other investors to know that the people who started this have invested in themselves. And
I'd say, Ryan, that kind of goes to a different part of your question that you had there is Is it risky? I would say, you know, I had a conversation about this yesterday with somebody and I'd say I don't feel like it's risky, because we're not trying to pull off and a big differentiator for what we were trying to do it and for lots of purpose of where we saw it go poorly in the past, is we're not trying to pull off some big financial miracle, what we're trying to do is find a really solid underlying architecture and engineering businesses. We are architects and engineers, ourselves, the three founders I'm a civil engineer are is an architect or other founder, as a civil engineer. We've been in this industry with varying roles in that. And so the underlying business is something we really understand. Well, we're not trying to pull off some financial complexity here. Well,
I mean, every business is fraught with risk, right? of some kind. So to that extent, yes. You know, every business has some risk in it. But to Doug's point, I think is, you know, this is one of the architecture engineering has one of the oldest professions. And even if you look at kind of everything that's going on in the investment around the world right now, you would start seeing that there's a lot of I would even say private equity and family offices starting to look at architectural firms, because good solid architecture firms are actually really strong cash flow devices, if you if you're looking for something which is solid. So to that extent, I would say we are we are a safe, safer bet as an industry then. But that doesn't mean that we are not presented with challenges. I mean, technology presents probably one of the biggest challenges and risks this industry has ever faced. I would say that over the years, we have coped better over time, but we are still laggard when it comes to technology adoption. And that's one of our main kind of candidates. Bluewater is that in three years or four years when people look at the firm's beyond and invest in, we are not going to go promote blue water. But people are going to know that, hey, they do this thing differently because they are a blue or firm. And that's kind of our grander, larger vision for what blue water looks like that the firm's we kind of invest in, do things differently, especially when it comes to technology adoption.
Could you walk us through what it looks like then? For you to identify a potential candidate for acquisition? What kind of maturity Are you looking for in the business? What kind of I mean, you mentioned there a little bit the sort of sectors that you're that you're keen on, but what does the business need to be doing? And how does it need to be performing? And what sorts of leaders of organizations make for good kind of partners with you?
You just hit all the all the key points. So there's a financial aspect, there's a people aspect, and then there's a market aspect. A lot of other things, obviously, that go into it as is very complex process, no doubt. But those are the key. Those are the key things when we first look at a company we you know, whether we've sought after them or somebody sought after us. There's initial package of financial information and we look at revenue growth. So You can look at it, is it growing? Or is it shrinking and neither there's no, in the things I'll go through, there's not a single thing that would tell us to not go after it. There's a thing that either shows a health and strength or it shows a weakness and an opportunity. So if it, but but primarily we want, you know, businesses that are growing, and that shows a good underlying team and business clients want them market strong, then we look at consistency consistency, when you look at EBITA, or profitability, or simpler word is, is when it's up and down a lot that shows some some some things that need to be looked at further and then business is, is that the way they're operating? Is it the way they're controlling the business? Or is it the cycle of their projects, and I'll tell you that one of the biggest things that we hear is when when people actually are really good designers, and they have a good quality thing, they'll go after it and get big projects, big projects take a lot and they stop, and then that that dips, will there's a balance there of having diversity of project size, having, you know, some large projects, having medium projects and having small projects. And so it's how you, you know, pursue work. So that's a big key factor. Once we get into the actual, you know, getting to know companies, we're interested in kind of where they are in the sector, it's like, it's very important at that point to understand the people who's leaving the company. And really, we do look at the top leadership, but our main interest is the next level of leadership, have they have they empowered people have they have they expose them to things? Have they given them experience? Or have they been a type of a culture that's you know, only if you're in the C suite, you get to see things and so we look at those as what the opportunity or risk is. And then the market sector, of course, you want you want a good brand you need it's very hard to take a team that hasn't have had a good brand and quality of production, and try to turn that around the other things you can fix. But you have to have that core, you know, quality strength,
and yeah, and we're not looking for fixer uppers, right? Firstly, now, it's like it is we do have a belief that, you know, it's really hard to DOD alluded to this is the, like brands organically developing brands, is very different and very difficult. However, architectural firms struggle with this, but other businesses probably in other industries do better, that every brand has a cycle, right. And you have to recognize that and it's better to go once the partnership changes and to look at a rebranding process to look at what what the next 10 years of this brand looks like. And actually go through that. And that may mean, in a rebranding as a whole, that may mean developing a different mission statement. That may mean, hey, maybe two firms come together and form a different brand. These things are positive attributes to looking at Brands rather than getting, you know, like GE is a good example, how many people know GE today was one of the largest brands today. And so look at the brand cycle in what's going on in the industry, it can tell us a lot about what you can do with branding moving forward for these firms.
So it's very interesting, then we know you have a kind of a pool or a portfolio of different architecture businesses that will become kind of acquired by blue water and the leaders of the practices this, they're still maintaining some sort of ownership. So they've still got skin in the game. So they they kind of, you know, they've got an agenda as well. And that kind of helps create the the legacy, what sort of exchange of resources do we see between the businesses that are in the portfolio? And do you ever merge those together, or kind of actually, you know, acquire three businesses that are in the same sector, and then say, let's create a super business, that's an amalgamation of you, you merge them together?
Yeah, and in some parts, it's always tough to describe the the merging part because it can sound like we're saying both things and talking about it both sides of our mouth, because in in the most part, we won't merge but it it kind of depends on the bigger picture. So when we have our say, acquisition, hey, and our strategic for plan for them is to maybe grow in the western part of the country, or maybe grow into the country to the south of the north. In if we go acquire another smaller business that is to meet that goal, we would merge that into that company. And so it's no different than, you know, kind of executing that business plan of what it takes to grow. On the larger Blue Water scale, though, if we wanted to go into the neighboring country and, and find a new education, you know, type of leader we wouldn't mix that with the residential team, just to make a larger picture. So there's a little bit of, you know, kind of what the opportunity is, but it's really focused on what the objective is. So what are we trying to which? Which part of the business model? Are we are we acquiring that business to improve, and that would decide it. So, so is like kind of creating super companies sometimes in in small parts. But the goal is not to merge the big parts.
And we definitely don't want to cannibalize the businesses we write, acquire. That's a big part of what we look at like X, why are we looking at this company? We already have a strong residential firm, let's say, x city, do we need to? And if we do, what does that represent? Do we need to bring in this other firm and have the conversation like, Hey, can this coexist together? Or do they exist separately? So that's one, you mentioned, you brought up the idea of sharing resources. We do think that that part of our business is evolving, we do think that our model allows for more resiliency, meaning you firms can potentially share resources and potentially share revenue so that they don't have to hire because just Todd was saying, you know, sometimes you need to staff up for a short amount of time are limited. And instead you're hiring 30 people, well, maybe there's another part of the practice perhaps with just 10 people available. And so we do believe that our platform will provide the resiliency between the firm's
to do AI. Yeah, I can imagine that being a very valuable kind of resource of strengthening the businesses that, you know, particularly in something like hiring where you know, one businesses perhaps going for a bit of a dip, or there's just, you know, it just becomes, you've got teams that can migrate with much more ease amongst a brother or a sister type of firm. And very,
it builds on a kind of pillar of success that we've seen work really well in the past is, you know, we've never in any of our companies are experienced, we've never believed in hiring and firing. So we don't want to staff up 30 people, and we'll let them go at the end of the project. It it. Again, it's a people based business, it's creates a bad culture, it does not create, you know, strengthening of the overall resume and the experience of the firm. And so we don't want to do that. And so what we've done in the past, when we didn't we, when we're buying different companies, and have the sister companies, as you said, is partner I mean, we're partnering in the industry is really, really strong. And we always believe that two people working together could be better than any one of them individually. And so there's a lot of benefits. And so there's just a stronger connection between that here. But we don't we don't insist on it, we don't force our entities to say you have to go work with our, our sister company, because, you know, we've been there. And that's, you know, one of the tenants that we, I guess we didn't say exactly is we are buying architecture, leading architecture, engineering companies, and we are architects and engineers, we've been there we've pursued the work, we've had the win that the client, we've had to, you know, strategically go after that project. And we know when you have the wrong teammate, when you have the wrong partner, when you have the resume, wrong resume, it's not going to work. And so you have built really strong teams and what we hope that that, you know, naturally becomes that that's more internal than the external but external pardoning is a way through that as well. So we're, we're very agile with all those things. We have some kind of, you know, successful principals that we go by, but we don't force any of them. And
I know we're talking one after the other where there's so many things that we've kind of, I would say in the nascent stage of growing is the partnering that are mentioned, you know, it extends beyond just the firm's partnering, it goes through mentorship. So we have a mentorship program called leap that we want to launch where essentially you could have a mentor in another blue or a firm without actually having because let's assume you're a 3040 person firm and there's you meet with the same leaders over and over and you want to understand something else so maybe there's 150 200 person architecture firms principals really successful different draggy really admired them, can you go get mentored? So that's a big part of our mandate as well as to how do we grow and nurture talent and give them opportunities across the platform?
It's, I think that's similar what you're doing right? You're trying to improve the industry right by exposure and more knowledge and that's built off that kind of same foundation.
So how what kinds of things do you do in terms of of of trainings and and coaching and mentoring? Is this something that you as Bluewater provide in house or do you liaise with other kinds of consultants to you that you bring in and kind of do like an audit of a business and then diagnose and give different bits of training? Yeah.
So we actions, so we believe I mean, we've gotten a lot of formal training ourselves as well, but we believe a lot of on the job training, but the word that I used a second ago, it's exposure. A lot of people don't get the exposure sort of thing. So we had a thing that we said a long time ago is take people to meetings that they don't need to go to meaning they're not required because they're not on the team, they're not going to answer any particular question they're going because they can hear, you know how the CEO is going to handle that issue or how they're going, the business development lead is going to handle the conversation. But they learned from that, bring them into an executive meeting, and when you can cross pollinate, as already said, with the LEAD program is go look at another company. And the benefit of that is because when you do it in your own company, you know, the people, you know, the issues, and you kind of have these, you know, predisposed kind of thoughts on Well, I think what we should do is that, in that, in that problem, when you go into a new company, you're looking at it from a very fresh perspective. And so it gives you exposure in a unique way that isn't, it doesn't exist in other companies. And then, and then you talk about it afterwards, and you see how decisions are made. And so that real life type of exposure is a good training basis.
I mean, we provide like Todd myself, our instructional executives, we we provide business education, honestly, and, and, like even the first firm, you know, we, I handle a lot of the growth side of things, door handles a lot of the operational side of things, but we come together on various aspects. So for example, you know, we go through training, like, you know, what's your gonna go process? And kind of go through actually a training process so that you know, how to proceed rather simple things like going out goals? And then how do you target? What's the strategy? How do you figure out what kind of project what is the diversity and the greatest education that is the way we've learned and is giving people the transparency and exposure to the to your own numbers. So instead of sending them and taking them going, let them have an accounting course, don't worry, but the accounting course, like, just learn how to read your old camera numbers. Yeah. And we do this month over month, every month, we go through them, and now people have it on the, you know, on the tip of the fingers, they know if I'm mentioning AR they know accounts receivable, they know exactly what to do. And that nothing replaces that, I can guarantee you nothing like you can go to an accounting course and learn all the terms and how to read a balance sheet. And if that's something that you want to do, Bluewater supports them to do that. But the big part of our aspect is we we fundamentally want to raise the level of each person's understanding of their own business.
So if it's an absolutely brilliant idea, and what I love about it, as well as that it's, you know, certain we hear so much about the the descent of the architecture industry, and this is a this is a really like confident move in the long term protection of architecture firms and the industry and is and is kind of, you know, very boldly saying, Look, this is actually these are really good businesses to be investing in over a long term cycle. And with a little bit of love and care intention, you know, these these become fantastic assets and, and very kind of good producers of architecture for the city. What kind of timeframe are you looking at? Like, how long does a transition take? Or how long does an acquisition take? If it's, uh, you said, you don't, you're not into kind of finding fixer uppers. You know, if we're using like a property analogy, you want to be finding a business that's kind of solid and mature and has got an has got some good track record to it? What kind of timescale? Are you looking at, in terms of, you know, initial conversations with the business owner, to actually the acquisition to the kind of, you know, what sort of plan might you put in place to see a change in performance if there needs to be one?
Yeah, varying aspects of that, I'd say, since the first part of the question is, the timeframe is, you know, I'd say, probably four to 12 months is the timeframe. And the four is, you know, you have initial conversation, people are really interested and motivated, and you can get going and get through a process really, really quickly, that'd be really fast. Most times, it takes at least kind of four to six months to kind of learn each other. In that happens in higher quality businesses, they're not racing towards any finish line, they're just looking at the opportunity and take some assessment time. So it typically kind of takes six months to kind of have that conversation and say, you know, we're both interested in this, we both see opportunities, and there's value here and then and then on the longer side, it can you know, take time to go through do the due diligence on larger companies in you put those two together, but Oh, always less than a year. And that's if there's a lot of talking time upfront. The on the on the post acquisition side, you know, how fastest see the transition? It depends. You know, there's there's different aspects that firms struggle with some is, you know, business operations and that stuff can happen relatively quickly, assuming they have have a decent system and bases of operations, if that needs to change, then it's a little longer, but you can start to see the changes in three to four months, when it's kind of just simple discipline type of of aspects. But if there's larger, you know, at work acquisition type of problems are, then that can be a little bit different, because you've got to kind of train new people, you have to get a new message out to the client base, you have to maybe add a service sector, bring in a new individual to raise the bar a little bit, and you're into probably a 1218 month type of transition on something like that.
And one of the first things we do is essentially, you know, it starts with once we have finished the acquisition process that Don spoke about, which sometimes varies between six to 12 months, and you know, we're starting to use technology a lot more and try to get some of the stuff short and up. But it starts with kind of, once we've done the acquisition as a State of the Union. So we try to, and what is the practice all about? And go through kind of a strategic planning process, many of these firms, even larger firms sometime haven't actually done a strategic plan. And when we look at some of the strategic plans they have done, you know, I would say they're missing actions, you know, a lot of great plans, people don't know how to follow through, because you may have some gold idea, but you don't know the 10 steps to get there. So how do you refine those? And then along with that, we develop what is called a market plan, which is a budget, like what do three years of revenue look like? Like? How are we going to grow? And it's always stretch? Meaning, if you think we grow, the organic growth rate is somewhere between four to 8%. And you're already been growing between 12%? Can we can we stretch it? Can we do 18%? What are the different organic and inorganic strategies we can look at? Like, is that a small acquisition is that a strategic hire is that team takeout? There's lots of tools, and I'd say strategies, small actions that are available to us that we can. And you know, to be fair, some of these firms never have had the financial wherewithal to even undertake some of this, but now, blue water, we can actually go and buy another smaller firm to act or something in a different city or get a different strategic, kind of like Todd was talking about. So it's just, you know, it's, there is no one simple set formula. And
it certainly depends. Have
you have you considered or in the future thought about buying one of these some of these businesses and kind of flipping them. So I know we're not in the in the game of the kind of fixer uppers. But yeah, there, there might be opportunities where it would make sense that perhaps you you work with them for a period of time, you've got them under your and your ownership, and then it might be appropriate for both parties to part ways and you you sell them,
there may be a time for fixer uppers. You know, at early stages, you know, we're focused on really good brands, where I think you look for fixer, fixer uppers. Again, it's like, what is your objective, you're not going to do that to get into a market because I think the definition of fixer upper would be maybe they're not really strong, and they're worth getting and things like that. But if you have a team that's really, really good at work, acquisition and winning projects, and they need, they need good resources, some of those, those teams have really good dedicated resources. And so you can mix those in. And so there'll be a time and a phase for that. But the flipping, not really, you know, we're looking for businesses that are long term, you know, and we're looking for a longer horizon of, you know, growing, you know, because like I said, it can take, you know, anywhere from kind of six to 18 months, depending on what we're doing. And then you want to kind of see the benefit of that for a long period of time. You know, so that's not on our on our radar is the flipping, we
have been approached by, you know, few firms where they they have identified that they want to go through some activity in five or six years, and whether we would come in as kind of minority investors or whatever, and try to be part of that. But like Todd said, and perhaps it's far because he just really passionate about actually going in and trying to own his businesses and so that's that's not really our motto, but that doesn't mean that in the future, like Todd said, Something might crop up and maybe look at it, but that's not You're not gonna Yeah,
yeah, that makes sense. And one area that we haven't talked about Ryan that is a really core part of Bluewater is technology. So in we didn't talk about kind of our platform services and stuff and maybe a future podcast but one of the core tenants is is the infusion of technology, like ra said. The industry is very challenged with adopting it. We've been through it ourselves. I've led a good group, a good sized group of people You know, through the Revit phase, and a lot of people, you know, going to 3d and BIM modeling, you know, struggled a lot. And it's very easy to see when you look at smaller firms that, you know, have been run by a single owner that started, you know, on the drawing board. And so it's very understandable, but it is changing. So extremely fast now, with the AI adoption and in the opportunities within firms. So we have a lot of, you know, great objectives of what we're trying to achieve, they're confident that we'll achieve them. But there could be something along the way, you know, if I looked at an opportunity to do that is spinning off something that, you know, if we were able to coalesce a good solution of technology, and it became widely adaptable, and was had a lot more value than just the firm's that we owned, you know, something like that could potentially be there someday. But that's a that's a strong core tenet of ours, too, is the technology.
Well, this is quite interesting, actually, the the technology component of it, and certainly when we start looking at architectural businesses, of how sometimes reluctant they've been to adapt and change the PC practices using drawing methods from, you know, 15 years ago, and their workflow remains the same. And, you know, you have people like Sam Altman, talking about the possibility of a billion dollar revenue company operated by one person that has a vision for like, what a business we know where businesses going is just kind of mind boggling to think now as well, what's possible with a very small team of architects utilizing AI, that's only going to get much much grander. The implementation of technology for efficiency is, you know, it's massively it's something that, you know, I think a lot of businesses are actually quite fearful of in many ways, and there are businesses that are kind of proactively looking for new ways of, of dealing with it. I you guys kind of liaising with the the AI world at all or other other even software companies about how to, you know, things like be QE core and monograph these other organizations where they've been producing very good financial management, bits of software, which can really elevate an architecture practice. Do you guys liaise with other sorts of collaborating partners to help businesses integrate technology?
Yeah, so I mean, firstly, on the financial aspect, we do have our own financial platform that we are developing, but it's, I wouldn't say the platform is doing internal mathematics, it's more about dashboarding the information. And so things like what monograph and stuff are doing, we have our own version of that, where we take the information from the ERP systems, and we kind of project them out to the metrics we have, that's one of the tools that every Bluewater firm is going to have access to. So when it comes to that financial piece, we think we're in a very good place. In terms of technology, you know, Todd and I just met, and we have finalized our kind of agreement with an individual who is going to come on and lead our technology solutions for the for the time being, and we were looking at three different buckets. The first bucket is around eternal automation. So workflow automation, whether it's in Python, and Revit, or whatever be the case. And it's not just limited to drawing. So for example, like, you know, timesheets, like if you're creating a software or whatever be the case, like, for example, simple thing, you know, sometimes a project is in the in the sales cycle, and it converts to a project in most firms, once that happens is an email that goes to somebody and the accountant has to say, Yes, I'm going to create this on the ERP system, somebody's gonna go into the server create the same folder structure. That's simple. That's such low hanging fruit, you know. So the way we do it is, we have a bar that pops up on Microsoft Teams that asks you eight questions, you answer the eight questions, this thing goes in the background just automates and does all of that your server. On the server, the folder structure is created the templates already there. The project has been created on the Deltec system or ERP system, or whatever be the case. The second bucket is client facing solutions. And that ranges everything from computational design. And we're not talking about computational design in terms of just creating fancy facades, we're talking about computational design at a more urban level analysis. That's what we write really succeeded in our previous form on really creating different value propositions to computational design, really, really comparing public sources of data or other lots of 2030 sources of data to get to kind of real time analysis and bringing value to the clients. And the third bucket is kind of What is the lower low hanging fruit when it comes to AI right now that could be immediately implemented? So things like copilot like our firms are already starting to use copilot for the proposals process and how can you quickly analyze RFPs and decide whether you go for this or not? And what are the keywords? So we can we are already starting to do a lot of that. But the AI there's a lot of noise around AI right now. And what our strategy to that is a little bit of wait and watch. But let's start to implement the things that are easy that can be implemented into practice.
Right. And I wanted to comment on to pull two words out of your your kind of statement there was efficiency is certainly number one. And I already touched on that a little bit, but the fearfulness. And I think, you know, when you look at adoption, it is fearfulness. Because sometimes it's it's a lot of people that again, if you're looking at a generation and started on drawing board or even started in AutoCAD, it's I don't understand that and, and in my in, it's easy to see my job could go away. And we've had this conversation with firms. As soon as we mentioned AI of saying like, Hey, you can't replace the designer. And we agree with that 100% We don't want it. And we think the more bold you can be on adoption, the more you can, you can highlight the design practice. And what we mean by that is taking away all the things that we don't want to do, nobody wants to spend their time, you know, reviewing specifications to the nth degree, to change the the glue product that we need, you know, for the for the project, and in that, you know, comes more faults and so we can drive higher quality by having those things done, what we want to do is take the time dedicated to a project and put more of it in design, we are actually not working on a lot of generative AI type of things and having a computer create the solutions. And so I think there's a balance to you know, Sam Altman, you know, I believe what he's, I believe a lot in what he's saying the vision is of what is capable for certain types of companies, but we really value the design aspects of the business. And our motivation is to enhance that enrich that make the good designers even better and more powerful designers. But take away the mundane part of the business, nobody went to school to pour through, you know, 3000 pages of specifications for the heck of it. So
I think, you know, the summit of it's like technology should be in the service of humans, not for the sake of technology.
And ours is a people based business. So hand in hand.
Yeah, absolutely. Absolutely. And then it's amazing, though some some of the inefficiency in architecture happens as a result of you've got very intelligent, highly qualified, trained people doing very repetitive, monotonous, you know, data entry types of jobs, absolutely. Which is, which is a real killer. What do you think, as kind of, you know, your, you know, you really put your money where your mouth is here in the investing into the architecture industry? What are some of your challenges, and some of the opportunities that you see long term, perhaps over the next decade, that you as an organization as a kind of company investing and acquiring practices need to be vigilant of and are looking to capitalize on as well?
Yeah, I mean, challenges, there's, there's a lot of challenges in, in the technology portion. So you know, I would, I would describe it as a lot more opportunity than challenges. But there are challenges in that, I think you're gonna find firms, and you got to look at our business too, is, when I talk, what I what we just talked about, in our perspective of how that goes, the clients might have a different perspective, the clients might say, you know, I want to find a firm that can use that AI and, you know, do my whole project for 50 bucks and, you know, save me all this time and have it done by tomorrow and have it be perfect, that would be detrimental to the industry. And I think it's it's not possible, but people following that path and not having a thorough understanding of how it all goes. And that's that's the challenge that's challenge is going to be in every industry as people adopt AI, you grab on to the buzzwords and don't understand it thoroughly. So that's that's going to be a challenge for sure the opportunity is or another challenge is how many people go into the profession and maybe those two things you know, solve solve each other, but the the entire jobs landscape and where people go into education and changing education system, you know, that's an impactful aspect as well. We need we the industry is lacking good people, enough good people right now. We want to maybe merge these concepts so it provides part of the solution but you need that good quality design aspect for sure.
And ultimately, in a dark touched upon this right really early when we were talking about kind of what we are investing in terms of portfolios and stuff right ultimately, we are not following any trendy fashion trends and things unlike that of what's hot right now, really following mega trends, so you know, housing is going to continue to be a challenge. You know, there's a huge migration challenge that's happening all over the world, when it comes to labor, there's attitudes towards homeownership are changing, especially among the elite. These are mega trends onshoring and reshoring, especially when it comes to North America. And you know, going on with wars, these things are mega trends, and they're going to continue to change and redirect our profession. So we are really looking and following you know, you know, when they do housing, your education follows transportation follows. So the core tenets of our thinking and opportunity is, is really still sticking to what we think are global challenges. In our climate, I haven't even touched upon that government spending on infrastructure and how that cycle comes around every 1015 years. So we're really looking at those kinds of mega trends rather than jumping on the bandwagon or buses, something that we somebody, like, you know, generative AI right now doesn't mean that it doesn't have value, we're trying to kind of stick to where we think long term things are going to move in the industry. Yeah.
Amazing. And just to conclude the conversation here, if there are people that are listening to this podcast and feel like they might be a good partner for you guys, or want to find out more about how you guys could collaborate, what would be their best course of action, call up DOD,
reached out to us on blue otter.io is our website. And no E's in that blue water. We have to be unique in our spelling says BL UWA. Tr. But reach out to either of us, and we're happy to we're happy to explore we you probably can tell we love the industry. We love the topic. And and even if, you know we'd like talking to companies that don't work out an acquisition and just talk about, you know, what they're doing, what interesting things they're challenged with. And like I said, Ryan, why we found a great fit with you is trying to improve the industry. There's a lot of opportunities for this industry. And it's a great long term profession, for sure. Absolutely.
Love it. Well, Todd, Ari, thank you so much for your conversation today. Absolutely fascinating, and really exciting to be hearing and talking about business like this. Wonderful, really well. Thank
you for having us. We really enjoyed it, Ryan. Thank you. Thanks,
Ryan. And that's a wrap. And one more thing. If you haven't already, please do head on over to iTunes or Spotify. And leave us a review. We'd love to read your name out here on the show. And we'd love to get your feedback. And we'd love to hear what it is that you'd like to see more of and what you love about the show already. This episode is sponsored by Smart practice, business of architectures flagship program to help you structure your firm for freedom, fulfillment, and financial profit. If you want access for our free training on how to do this, please visit smart practice method.com. Or if you want to speak directly to one of our advisors about how we might be able to help you please follow the link in the inflammation. Hello, listeners. We hope you're enjoying our show. We love bringing you these insightful conversations, but we couldn't do it without the support of our amazing sponsors. If you're a business owner, or know someone who would be an excellent fit for our audience, we'd love to hear from you. Partnering with us means your brand will reach over 40,000 engaged listeners each month interested in becoming a sponsor. Please send us an email at support at business of architecture.com The views expressed on this show by my guests do not represent those of the host and I make no representation promise guarantee pledge warranty, contract, bond or commitment except to help you the unstoppable
